Exhibit 99.1

 

January 27, 2012

 

Dear fellow Ralcorp Holdings, Inc. shareholder:

 

Last year, we announced our intention to separate our Post^® brand ready-to-eat cereal products business into a new, publicly traded company, which we have named Post Holdings, Inc. As two distinct businesses, we believe Ralcorp and Post will be better positioned to capitalize on significant growth opportunities and provide greater focus on their respective businesses and strategic priorities.

 

Both of these companies have businesses with great assets and industry-leading products. Following the separation, Post will be the third largest seller of ready-to-eat cereal products in the United States based on market share. As an independent, publicly owned company, Post will be able to pursue its own growth strategies and prioritize investment spending and capital allocation accordingly. Ralcorp will continue to be the leading producer of private brand foods and a major supplier of foodservice products in North America. Ralcorp, too, will be able to better focus its capital structure and deployment strategy.

 

The separation will provide current Ralcorp shareholders with ownership interests in both Ralcorp and Post. Over time, we believe that the two companies, each with its own financial characteristics, may appeal to different investor bases. We expect that, for U.S. federal income tax purposes, the distribution of shares of Post common stock in the separation will be tax-free to Ralcorp shareholders, except with respect to cash received in lieu of a fractional share, and have received a ruling from the Internal Revenue Service regarding the tax-free nature of the separation.

 

The separation will be completed by a pro rata distribution of at least 80% of the outstanding shares of Post common stock to holders of Ralcorp common stock. Each Ralcorp shareholder will receive one share of Post common stock for every two shares of Ralcorp common stock held on January 30, 2012, the record date for the distribution. You do not need to take any action to receive shares of Post common stock to which you are entitled as a Ralcorp shareholder. You do not need to pay any consideration or surrender or exchange your Ralcorp common shares.

 

We encourage you to read the attached information statement, which is being provided to Ralcorp shareholders who held shares on January 30, 2012. The information statement describes the separation in detail and contains important business and financial information about Post.

 

We believe the separation meaningfully advances our businesses and interests of our shareholders. We remain committed to working on your behalf to continue to build long-term shareholder value.

 

Sincerely,

 

Kevin J. Hunt

Chief Executive Officer and President

 

January 27, 2012

 

Dear future Post Holdings, Inc. shareholder:

 

On behalf of the entire Post team, I welcome you as a future shareholder. Our company is the third largest seller of ready-to-eat cereals in the United States based on market share. The Post cereals tradition began in 1895, and, since 1897, we have been offering consumers great tasting, high quality and nutritious cereal products. We currently sell cereals under a number of iconic brand names, including Honey Bunches of Oats^®, Pebbles^®, Post Selects^®, Great Grains^®, Spoon Size^® Shredded Wheat, Post^® Raisin Bran, Grape-Nuts^®, and Honeycomb^®.

 

We believe that our brand names, our strength in the marketplace and our financial profile will allow us to excel as a stand-alone entity. As an independent company, we will be able to allocate capital more efficiently and have direct access to debt and equity capital markets. We anticipate that these characteristics will improve our ability to continue to develop innovative new products, pursue acquisitions and other growth opportunities, extend our brands into adjacent categories and increase our ability to motivate employees by providing compensation that is tied directly to our business results.

 

Our focused management team is highly motivated to be a growth-oriented company, making a difference in the branded foods business, and enhancing value for our customers and shareholders.

 

I encourage you to learn more about Post and our strategic initiatives by reading the attached information statement. Subject to the consummation of the spin-off, our common stock has been approved for listing on the New York Stock Exchange under the symbol “POST.”

 

We look forward to serving our customers and consumers and rewarding our shareholders as we begin a new and exciting chapter in our company’s history.

 

Sincerely,

 

William P. Stiritz

Chairman of the Board and

Chief Executive Officer

 

INFORMATION STATEMENT

Post Holdings, Inc.

 

Common Stock
(par value $0.01 per share)

 

This information statement is being furnished in connection with the separation of the Post^® brand ready-to-eat cereal products business from Ralcorp Holdings, Inc. Ralcorp will complete the separation by distributing at least 80% of the outstanding shares of common stock of Post Holdings, Inc., a Missouri corporation formed for the purpose of holding the Post cereals business, to holders of Ralcorp common stock of record as of the close of business, Eastern Time, on January 30, 2012, which will be the record date. Each such holder will receive one share of Post common stock for every two shares of Ralcorp common stock held on the record date. The distribution will be effective at 11:59 p.m., Eastern Time, on February 3, 2012, subject to certain conditions described in this document; provided, that if the conditions have not been satisfied or waived on or before the effective date of the distribution, the distribution date may be extended until the conditions are satisfied or waived. For Ralcorp shareholders who own common stock in registered form, in most cases the transfer agent will credit their shares of Post common stock to book-entry accounts established to hold their Ralcorp common stock. Our distribution agent will mail these shareholders a statement reflecting their Post common stock ownership shortly after February 3, 2012. For shareholders who own Ralcorp common stock through a broker or other nominee, their shares of Post common stock will be credited to their accounts by the broker or other nominee.

 

We expect that, for U.S. federal income tax purposes, the distribution of Post common stock will be tax-free to Ralcorp shareholders, except with respect to cash received in lieu of a fractional share, and have received a ruling from the Internal Revenue Service regarding the tax-free nature of the separation. See “The Separation — Material U.S. Federal Income Tax Consequences of the Distribution.”

 

No shareholder approval of the separation is required or sought. We are not asking you for a proxy and you are requested not to send us a proxy. Ralcorp shareholders will not be required to pay for the shares of Post common stock to be received by them in the separation, or to surrender or to exchange shares of Ralcorp common stock in order to receive Post common stock, or to take any other action in connection with the distribution. There is currently no trading market for Post common stock, although we expect that a limited market, commonly known as a “when issued” trading market, will develop on or shortly before the record date for the distribution, and we expect “regular-way” trading of Post common stock to begin on the first trading day following the completion of the separation. Subject to the consummation of the separation, our common stock has been approved for listing on the New York Stock Exchange under the symbol “POST.”

 

In reviewing this information statement, you should carefully consider the matters described under the caption “Risk Factors” beginning on page 19.

 

 

 

 

Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved these securities or determined if this information statement is truthful or complete. Any representation to the contrary is a criminal offense.

 

This information statement does not constitute an offer to sell, or a solicitation of an offer to buy, any securities.

 

 

 

 

 

The date of this information statement is January 27, 2012.

 

This information statement was first mailed to Ralcorp shareholders on or about January 30, 2012.

 

Table of Contents

 

 

Industry and Market Data

 

This information statement includes industry and trade association data, forecasts and information that we have prepared based, in part, upon data, forecasts and information obtained from independent trade associations, industry publications and surveys and other independent sources available to us. Some data also are based on our good faith estimates, which are derived from management’s knowledge of the industry and from independent sources. These third-party publications and surveys generally state that the information included therein has been obtained from sources believed to be reliable, but that the publications and surveys can give no assurance as to the accuracy or completeness of such information.

 

In this information statement, the market share data (including, for example, our 11.2% market share of the ready-to-eat cereal category for the 52-week period ended November 26, 2011) is based on information from A.C. Nielsen that does not include data from certain retailers, including Wal-Mart Stores, Inc. (“Wal-Mart”). However, the market size data (including, for example, that the ready-to-eat cereal category is a $9 billion market based on retail sales) does include data from certain retailers, including Wal-Mart. The data for Wal-Mart included in the market size data has been compiled by A.C. Nielsen based on A.C. Nielsen’s projections and was not obtained from Wal-Mart. Data for other retailers was obtained by A.C. Nielsen directly from the retailer.

 

Trademarks and Service Marks

 

The logos, trademarks, trade names, and service marks mentioned in this information statement, including Honey Bunches of Oats^®, Pebbles^®, Post Selects^®, Great Grains^®, Spoon Size^® Shredded Wheat, Post^® Raisin Bran, Grape-Nuts^®, and Honeycomb^® are currently the property of, or are used with the permission of, Post or Ralcorp. We own or have rights to use the trademarks, service marks and trade names that we use in conjunction with the operation of our business. Some of the more important trademarks that we own or have rights to use that appear in this information statement may be registered in the United States and other jurisdictions. Each trademark, trade name or service mark of any other company appearing in this information statement is owned by such company.

 

About this Information Statement

 

Except as otherwise indicated or unless the context otherwise requires, all references to “we,” “our,” “us,” “Post” or the “Company” refer to Post Holdings, Inc., a Missouri corporation, together with its consolidated subsidiaries. References in this information statement to “Ralcorp” refer to Ralcorp Holdings, Inc. and its consolidated subsidiaries (other than Post). “Post cereals business” refers to the branded ready-to-eat cereals business of Ralcorp. Post Holdings, Inc. was formed in anticipation of the separation and upon completion of the separation, will own directly or through subsidiaries the Post cereals business. All references to “we,” “our,” “us,” “Post” or the “Company” in the context of historical results refer to the Post

cereals business. Except as otherwise indicated or unless the context otherwise requires, the information included in this information statement, including the combined financial statements of Post, which are comprised of the assets and liabilities of the Post cereals business, assumes the completion of all the transactions referred to in this information statement in connection with the separation of Post from Ralcorp, including the financing transactions involving Post.

 

You should not assume that the information contained in this information statement is accurate as of any date other than the date on the cover. Changes to the information contained in this information statement may occur after that date, and we undertake no obligation to update the information, except in the normal course of our public disclosure obligations and practices.

 

The following is a brief summary of the terms of the separation. Please see “The Separation” for a more detailed description of the matters described below.

 

 

 

 

 

Computershare Trust Company, N.A.
250 Royall Street
Canton, Massachusetts 02021
(877) 498-8861

Before the separation, if you have questions relating to the separation, you should contact:

 

Ralcorp Holdings, Inc.
800 Market Street
St. Louis, Missouri 63101
Attention: Investor Relations

 

After the separation, if you have questions relating to Post, you should contact:

 

Post Holdings, Inc.
2503 S. Hanley Road
St. Louis, MO 63144
Attention: Investor Relations

 

SUMMARY

	•	strengthening our selling approach by upgrading coverage for the largest accounts;

	•	driving merchandising and improving trade spending ROI by more effective use of deployed analytics and more effective programming;

	•	improving the overall value proposition of the Post brands by improving the quality of the products and new pricing strategies;
	•	continuously innovating around relevant themes, gaps in consumer demand and licensing opportunities; and
	•	improving marketing effectiveness by reorganizing the marketing department to put business leaders in charge of all brands, retooling our agency roster, increasing our use of social and digital media, and increasing our use of public relations.

	•	net sales of between $215 million and $225 million;

	•	operating profit of between $29 million and $33 million; and

	•	based on data available from A. C. Nielsen, Post’s monthly market share was 10.7% for October, 11.5% for November and 11.1% for December, after holding at 10.4% for both August and September.

Distributing company		Ralcorp Holdings, Inc.
Distributed company		Post Holdings, Inc. Currently, Post is a Missouri corporation and is a wholly owned subsidiary of Ralcorp that was formed to hold directly or indirectly all of the assets and liabilities of the Post cereals business. After the distribution, Post will be an independent publicly traded company.
Distribution ratio		Each holder of Ralcorp common stock will receive one share of Post common stock for each two shares of Ralcorp common stock held on the record date.
Distributed securities		Ralcorp will distribute at least 80% of the shares of Post common stock immediately prior to the distribution. Based on the approximately 55.2 million shares of Ralcorp common stock outstanding on January 13, 2012, and applying the distribution ratio of one share of Post common stock for two shares of Ralcorp common stock, approximately 27.6 million shares of Post common stock will be distributed to Ralcorp shareholders who hold Ralcorp common stock as of the record date. At the time of the distribution, each share of Post common stock will have attached to it one preferred stock purchase right.
Fractional shares		No fractional shares of Post stock will be issued. The shareholders who would otherwise be entitled to a fractional share will receive a cash payment for the value thereof.
Record date		The record date for the distribution is the close of business on January 30, 2012.
Distribution date		The distribution date is February 3, 2012, subject to certain conditions described in this document; provided, that if the conditions have not been satisfied or waived on or before the distribution date, the distribution date may be extended until the conditions shall be satisfied or waived.
Distribution method		Post common stock will be issued only in book-entry form. No paper stock certificates will be issued.
Conditions to the distribution		The distribution of our common stock is subject to the satisfaction or, if permissible under the Separation and Distribution Agreement, waiver by Ralcorp of the following conditions, among other conditions described in this information statement:
		• Ralcorp’s board of directors shall have duly approved the Separation and Distribution Agreement and the transactions contemplated thereby;
		• Ralcorp, Post and their subsidiaries shall have completed an internal reorganization as contemplated by the agreement;
		• Ralcorp shall have received (i) a private letter ruling from the Internal Revenue Service, or “IRS,” in form and substance satisfactory to Ralcorp, regarding the qualification of the separation and certain related transactions as transactions that are generally

		tax-free for U.S. federal income tax purposes, which ruling shall not have been withdrawn or modified, and (ii) an opinion of counsel, in form and substance satisfactory to Ralcorp to the same effect.
		• an independent firm acceptable to Ralcorp, in its sole and absolute discretion, shall have delivered one or more opinions to Ralcorp’s board of directors confirming the solvency and financial viability of Ralcorp and Post, which opinions shall be in form and substance satisfactory to Ralcorp, in its sole and absolute discretion, and shall not have been withdrawn or rescinded;
		• Ralcorp and Post shall have received all permits, registrations and consents required under the securities or the “blue sky” laws of states or other political subdivisions of the United States or of foreign jurisdictions;
		• our registration statement on Form 10, of which this information statement is a part, and a registration statement related to our equity incentive awards shall have become effective and no stop order shall be in effect or, to Ralcorp’s or our knowledge, threatened relating to such registration statements;
		• prior to the distribution, this information statement shall have been mailed to the holders of Ralcorp common stock as of the record date;
		• the Post common stock shall have been approved for listing on the New York Stock Exchange, subject to official notice of issuance;
		• prior to the distribution, all of Ralcorp’s representatives or designees shall have resigned or been removed as officers and from all boards of directors or similar governing bodies of entities affiliated with Post, and all of Post’s representatives shall have resigned or been removed from all such bodies of Ralcorp;
		• Ralcorp and Post shall have received all governmental approvals and consents and all third party consents necessary to effect the distribution and to permit the operation of the Post cereals business after the distribution date;
		• no order, injunction or decree issued by any court or other governmental authority or other legal restraint preventing consummation of the distribution or any of the transactions contemplated by the Separation and Distribution Agreement or any ancillary agreement, shall have been threatened or be in effect;
		• the financing transactions and other transactions to effect the separation of the businesses of Ralcorp and Post, as described in the Separation and Distribution Agreement, shall have been consummated;
		• Ralcorp and Post shall have each received credit ratings from credit rating agencies that are satisfactory to Ralcorp in its sole and absolute discretion;

		• the distribution shall not violate or result in a breach of applicable law or any material contract of Ralcorp or Post or their subsidiaries; and
		• no other events or developments shall have occurred or shall exist that, in the judgment of Ralcorp’s board of directors, in its sole and absolute discretion, would make it inadvisable to effect the distribution.
		The satisfaction of the foregoing conditions does not create any obligations on Ralcorp’s part to effect the separation, and Ralcorp’s board of directors has reserved the right, in its sole discretion, to abandon, modify or change the terms of the separation, including by accelerating or delaying the timing of the consummation of all or part of the separation, at any time prior to the distribution date.
Stock exchange listing		Subject to the consummation of the separation, our common stock has been approved for listing on the New York Stock Exchange under the symbol “POST.”
Material U.S. federal income tax consequences		Assuming the separation and certain related transactions qualify as transactions that are generally tax-free for U.S. federal income tax purposes, no gain or loss will be recognized by a shareholder, and no amount will be included in the income of a shareholder upon the receipt of shares of our common stock pursuant to the distribution, except with respect to any cash received in lieu of fractional shares.
Certain agreements with Ralcorp		Before the separation, Post will enter into the Separation and Distribution Agreement and several other agreements with Ralcorp to effect the separation and distribution and provide a framework for its relationships with Ralcorp. These agreements will govern the relationships between Ralcorp and Post subsequent to the completion of the separation and provide for the allocation between Ralcorp and Post of Ralcorp’s assets, liabilities and obligations attributable to periods prior to the separation. We will also enter into a Shareholder’s and Registration Rights Agreement with Ralcorp, pursuant to which, among other things, we will agree that, upon the request of Ralcorp, we will use reasonable best efforts to effect the registration under applicable securities law of any shares of our common stock retained by Ralcorp.
		For a discussion of these arrangements, see the section entitled “Arrangements between Ralcorp and Post.”
Financing arrangements		As part of the separation, we expect to incur approximately $950 million of new indebtedness, which we expect to consist of $175 million aggregate principal amount of borrowings under a senior secured term loan facility and $775 million in aggregate principal amount of senior notes. We will not receive any proceeds from the senior notes, which we expect to initially issue to Ralcorp in connection with the separation. We expect that approximately $125 million of the proceeds from the term loan facilities will be transferred to Ralcorp in connection with the separation and to directly or indirectly acquire the assets of the Canadian operations

		of the Post cereals business. Of the remaining $50 million in proceeds, we expect to retain approximately $25 million after payment of fees and expenses relating to the financing transactions. We also expect that Post will have a $175 million revolving credit facility that will be unfunded at the time of the separation.
		We expect that Ralcorp will transfer the senior notes to certain financial institutions, which we refer to as “exchange counterparties,” in order to satisfy certain outstanding 90-day term loan obligations of Ralcorp held by the exchange counterparties. We refer to this transfer as a “debt exchange.” As a result of these financing transactions, Ralcorp will receive in connection with the separation approximately $125 million in cash from us and approximately $775 million in cash from the proceeds of the 90-day term loan. We expect that the exchange counterparties may subsequently transfer our senior notes obtained from Ralcorp in the debt exchange. For a description of the expected terms of the credit facilities and senior notes, see “Description of Financing Transactions and Material Indebtedness.”
Transfer agent		Computershare Trust Company, N.A.

	•	the separation transactions described under “The Separation”;
	•	the incurrence of $950 million of new indebtedness, which is expected to consist of $175 million aggregate principal amount of borrowings under senior credit facilities with lending institutions and $775 million in aggregate principal amount of senior notes;
	•	the distribution of approximately 27.6 million shares of our common stock to holders of Ralcorp common stock, based upon the number of Ralcorp shares outstanding on January 13, 2012 and an additional approximate 6.9 million shares retained by Ralcorp;
	•	our anticipated post-separation capital structure; and
	•	the settlement of intercompany account balances between us and Ralcorp through cash or contribution to equity.

		Year Ended September 30,
		2011				2011				2010				2009
		Pro Forma				Historical				Historical				Historical
		(In millions, except per share amounts)
Statement of Operations Data
Net sales		$	968.2			$	968.2			$	996.7			$	1,072.1
Cost of goods sold(a)			(516.6	)			(516.6	)			(553.7	)			(570.8	)
Gross profit			451.6				451.6				443.0				501.3
Selling, general and administrative expenses(b)			(243.2	)			(239.5	)			(218.8	)			(272.7	)
Amortization of intangible assets			(12.6	)			(12.6	)			(12.7	)			(12.6	)
Impairment of goodwill and other intangible assets(c)			(503.5	)			(503.5	)			(19.4	)			—
Other operating expenses, net			(1.6	)			(1.6	)			(1.3	)			(.8	)
Operating (loss) profit			(309.3	)			(305.6	)			190.8				215.2
Intercompany interest expense(d)			—				(51.5	)			(51.5	)			(58.3	)
Interest expense(d)			(69.9	)			—				—
Other expense			—				(1.7	)
Loss on sale of receivables(e)			—				(13.0	)			—				—
Equity in earnings of partnership			—				4.2				2.2				—
(Loss) earnings before income taxes			(379.2	)			(367.6	)			141.5				156.9
Income taxes			10.3				6.3				(49.5	)			(55.8	)
Net (loss) earnings		$	(368.9	)		$	(361.3	)		$	92.0			$	101.1
Loss per Share
Basic		$	(10.69	)
Diluted		$	(10.69	)
Statement of Cash Flows Data
Depreciation and amortization						$	58.7			$	55.4			$	50.6
Cash provided (used) by:
Operating activities							143.8				135.6				221.1
Investing activities							(14.9	)			(24.3	)			(36.7	)
Financing activities							(132.1	)			(112.4	)			(183.3	)

		September 30,
		2011				2011				2010
		Pro Forma				Historical				Historical
		(In millions)
Balance Sheet Data
Cash and cash equivalents		$	26.7			$	1.7			$	4.8
Working capital (excl. cash and cash equivalents)			66.1				(.7	)			68.0
Total assets			2,768.2				2,786.2				3,348.0
Intercompany debt, including short-term portion			—				784.5				716.5
Long-term debt			950.0				—				—
Other liabilities			104.9				104.9				90.7
Total equity			1,320.8				1,497.7				2,061.7

(a)		In 2011, Post incurred a loss of $7.1 million on economic hedges that did not meet the criteria for cash flow hedge accounting. For more information, see Note 10 of “Notes to Combined Financial Statements.” Post also incurred $1.3 and $2.1 million of costs reported in cost of goods sold related to the transitioning of Post into Ralcorp operations during the years ended September 30, 2010 and 2009, respectively.

(b)		During the year ended September 30, 2011, Post incurred $2.8 million of costs reported in selling, general and administrative expense related to activities associated with the separation of Post from Ralcorp. In addition, Post incurred $6.4 and $29.5 million of costs reported in selling, general and administrative expense, related to the transitioning of Post into Ralcorp operations during the years ended September 30, 2010 and 2009, respectively. For more information, see Note 16 of “Notes to Combined Financial Statements.”
(c)		For information about the impairment of goodwill and other intangible assets see “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Critical Accounting Policies and Estimates” and Notes 2 and 4 of “Notes to Combined Financial Statements.”
(d)		Intercompany interest expense relates to debt obligations assumed by Ralcorp from Kraft in the August 2008 acquisition of Post and other intercompany notes. See Note 12 of “Notes to Combined Financial Statements” for further discussion of intercompany debt. As part of the separation transaction, we expect all intercompany debt to be settled and we expect to incur new indebtedness totaling approximately $950 million. See “Unaudited Pro Forma Condensed Combined Financial Statements” for further discussion.
(e)		In fiscal 2011, Post began selling certain of its receivables to Ralcorp pursuant to a Ralcorp accounts receivable securitization program. For more information, see Note 8 of “Notes to Combined Financial Statements.”

 

You should carefully consider each of the following risk factors and all of the other information set forth in this information statement. The risk factors generally have been separated into three groups: (i) risks related to our business, (ii) risks related to the separation and financing transactions, and (iii) risks related to our common stock. Based on the information currently known to us, we believe that the following risks and uncertainties could have a material adverse effect on our business, financial condition and results of operation. Additional risks and uncertainties not presently known to us or that we currently deem immaterial may also impair our business operation, financial condition or results.

 

Our actual operating results may differ significantly from our preliminary estimated results.

 

In this document under the caption “Summary — Recent Developments — Preliminary Unaudited Selected Financial and Other Data for the First Quarter of 2012,” we present certain preliminary unaudited financial data for the fiscal quarter ended December 31, 2011. This preliminary financial data consists of estimates derived from our internal books and records and has been prepared solely by our management. PricewaterhouseCoopers LLP has not audited, reviewed, compiled or performed any procedures with respect to this preliminary financial data, nor has PricewaterhouseCoopers LLP expressed any opinion or any other form of assurance with respect thereto. Our preliminary results are subject to change during the completion of our financial closing procedures, final adjustments and other developments that may arise between now and the time the financial results for the first quarter are finalized. Therefore, our actual results may differ materially from these estimates. Because our financial closing procedures for the first quarter of 2012 are not yet complete, we have provided a range for certain of the preliminary financial data included in this document. However, it is possible that our final reported results may not be within the ranges we currently estimate, and the difference may be material. In addition, our preliminary results for the first quarter are not necessarily indicative of our operating results for any future quarter or our results for the full fiscal year.

 

We compete in a mature category with strong competition.

 

We compete in the ready-to-eat cereal category with competitors that represent larger shares of category sales. Our products face strong competition from competitors for shelf space and sales. Competition in our product categories is based on product innovation, product quality, price, brand recognition and loyalty, effectiveness of marketing, promotional activity, and the ability to identify and satisfy consumer preferences. Some of our competitors have substantial financial, marketing and other resources, and competition with them in our various markets and product lines could cause us to reduce prices, increase marketing, or lose market share, any of which could have a material adverse effect on our business and financial results. This high level of competition by our competitors could result in a decrease in our sales volumes. In addition, increased trade spending or advertising or reduced prices on our competitors’ products may require us to do the same for our products which could impact our margins and volumes. If we did not do the same, our revenue, profitability, and market share could be adversely affected.

 

We may be unable to anticipate changes in consumer preferences and trends, which could result in decreased demand for our products.

 

Our success depends in part on our ability to anticipate the tastes and eating habits of consumers and to offer products that appeal to their preferences. Consumer preferences change from time to time and can be affected by a number of different and unexpected trends. Our failure to anticipate, identify or react quickly to these changes and trends, and to introduce new and improved products on a timely basis, could result in reduced demand for our products, which would in turn cause our revenues and profitability to suffer. Similarly, demand for our products could be affected by consumer concerns regarding the health effects of nutrients or ingredients such as trans fats, sugar, processed wheat and corn or other product attributes.

A decline in demand for ready-to-eat cereals could adversely affect our financial performance.

 

We focus primarily on producing and selling ready-to-eat cereal products. We expect to continue this primary focus. Because of our product concentration, any decline in consumer demand or preferences, including diet-driven changes, for ready-to-eat cereals or any other factor that adversely affects the ready-to-eat cereal market could have a material adverse effect on our business, financial condition or results of operations. We could also be adversely affected if consumers lose confidence in the healthfulness, safety or quality of ready-to-eat cereals or ingredients. Adverse publicity about these types of concerns, whether or not valid, may discourage consumers from buying our products or cause production and delivery disruptions.

 

Economic downturns could limit consumer demand for our products.

 

The willingness of consumers to purchase our products depends in part on general or local economic conditions. In periods of economic uncertainty, consumers may purchase more generic, private brand or value brands and may forego certain purchases altogether. In those circumstances, we could experience a reduction in sales of our products. In addition, as a result of economic conditions or competitive actions, we may be unable to raise our prices sufficiently to protect profit margins. Any of these events could have an adverse effect on our results of operations.

 

Commodity price volatility and higher energy costs could negatively impact profits.

 

The primary commodities used by our businesses include wheat, nuts (including almonds), sugar, edible oils, corn, oats, cocoa, and our primary packaging includes linerboard cartons and corrugated boxes. In addition, our manufacturing operations use large quantities of natural gas and electricity. The cost of such commodities may fluctuate widely and we may experience shortages in commodity items as a result of commodity market fluctuations, availability, increased demand, weather conditions, and natural disasters as well as other factors outside of our control. Higher prices for natural gas, electricity and fuel may also increase our production and delivery costs. Changes in the prices charged for our products may lag behind changes in our energy and commodity costs. Accordingly, changes in commodity or energy costs may limit our ability to maintain existing margins and have a material adverse effect on our operating profits.

 

Ralcorp generally uses commodity futures and options to reduce the price volatility associated with anticipated raw material purchases associated with the Post cereals business. Additionally, Ralcorp has a hedging program for diesel fuel prices (using market traded heating oil as an effective proxy), natural gas, and corrugated paper products. Prior to the separation, Ralcorp plans to settle all open commodity contract positions applicable to Post and has no plans to convey derivative contracts to Post. The extent of these hedges at any given time depends upon Ralcorp’s assessment of the markets for these commodities, including assumptions for future prices. For example, if Ralcorp believes that market prices for the commodities we use are unusually high, Ralcorp may choose to hedge less, or possibly not hedge any, of our future requirements. If Ralcorp fails to hedge and prices subsequently increase, or if Ralcorp institutes a hedge and prices subsequently decrease, our costs may be greater than anticipated or greater than our competitors’ costs and our financial results could be adversely affected.

 

If we pursue strategic acquisitions, divestitures or joint ventures, we may not be able to successfully consummate favorable transactions or successfully integrate acquired businesses.

 

From time to time, we may evaluate potential acquisitions, divestitures or joint ventures that would further our strategic objectives. With respect to acquisitions, we may not be able to identify suitable candidates, consummate a transaction on terms that are favorable to us, or achieve expected returns and other benefits as a result of integration challenges. With respect to proposed divestitures of assets or businesses, we may encounter difficulty in finding acquirers or alternative exit strategies on terms that are favorable to us, which could delay the accomplishment of our strategic objectives, or our divestiture activities may require us to recognize impairment charges. Companies or operations acquired or joint ventures created may not be profitable or may not achieve sales levels and profitability that justify the investments made. Our corporate development activities may present financial and operational risks, including diversion of management

attention from existing core businesses, integrating or separating personnel and financial and other systems, and adverse effects on existing business relationships with suppliers and customers. Future acquisitions could also result in potentially dilutive issuances of equity securities, the incurrence of debt, contingent liabilities and/or amortization expenses related to certain intangible assets and increased operating expenses, which could adversely affect our results of operations and financial condition.

 

Unsuccessful implementation of business strategies to reduce costs may adversely affect our results of operations.

 

Many of our costs, such as raw materials, energy and freight, are outside our control. Therefore, we must seek to reduce costs in other areas, such as operating efficiency. If we are not able to complete projects which are designed to reduce costs and increase operating efficiency on time or within budget, our operating profits may be adversely impacted. In addition, if the cost-saving initiatives we have implemented or any future cost-saving initiatives do not generate the expected cost savings and synergies, our results of operations may be adversely affected.

 

Our inability to raise prices may adversely affect our results of operations.

 

Our ability to raise prices for our products may be adversely affected by a number of factors, including but not limited to industry supply, market demand, and promotional activity by competitors. If we are unable to increase prices for our products as may be necessary to cover cost increases, our results of operations could be adversely affected. In addition, price increases typically generate lower volumes as customers then purchase fewer units. If these losses are greater than expected or if we lose distribution as a result of a price increase, our results of operations could be adversely affected.

 

Loss of a significant customer may adversely affect our results of operations.

 

A limited number of customer accounts represent a large percentage of our consolidated net sales. Our top ten customers represent approximately 56% of our net sales for fiscal year 2011, and our largest customer, Wal-Mart Stores, Inc., accounted for approximately 21% of our net sales in each of fiscal 2011, 2010 and 2009. The success of our business depends, in part, on our ability to maintain our level of sales and product distribution through high-volume food retailers, super centers and mass merchandisers. The competition to supply products to these high-volume stores is intense. Currently, we do not have long-term supply agreements with a substantial number of our customers, including our largest customers. These high-volume stores and mass merchandisers frequently reevaluate the products they carry. If a major customer elected to stop carrying one of our products, our sales may be adversely affected.

 

Consolidation among the retail grocery and foodservice industries may hurt profit margins.

 

Over the past several years, the retail grocery and foodservice industries have undergone significant consolidations and mass merchandisers are gaining market share. As this trend continues and such customers grow larger, they may seek to use their position to improve their profitability through improved efficiency, lower pricing, increased reliance on their own brand name products, increased emphasis on generic and other value brands, and increased promotional programs. If we are unable to respond to these requirements, our profitability or volume growth could be negatively impacted. Additionally, if the surviving entity is not a customer, we may lose significant business once held with the acquired retailer.

 

If our food products become adulterated, misbranded, or mislabeled, we might need to recall those items and may experience product liability claims if consumers are injured.

 

Selling food products involves a number of legal and other risks, including product contamination, spoilage, product tampering, allergens, or other adulteration. We may need to recall some or all of our products if they become adulterated, mislabeled or misbranded. This could result in destruction of product inventory, negative publicity, temporary plant closings, and substantial costs of compliance or remediation. Should consumption of any product cause injury, we may be liable for monetary damages as a result of a

judgment against us. In addition, adverse publicity, including claims, whether or not valid, that our products or ingredients are unsafe or of poor quality may discourage consumers from buying our products or cause production and delivery disruptions. Any of these events, including a significant product liability judgment against us, could result in a loss of consumer confidence in our food products. This could have an adverse affect on our financial condition, results of operations or cash flows.

 

Disruption of our supply chain could have an adverse effect on our business, financial condition and results of operations.

 

Our ability, including manufacturing or distribution capabilities, and that of our suppliers, business partners and contract manufacturers, to make, move and sell products is critical to our success. Damage or disruption to our or their manufacturing or distribution capabilities due to weather, including any potential effects of climate change, natural disaster, fire or explosion, terrorism, pandemics, strikes, repairs or enhancements at our facilities, or other reasons, could impair our ability to manufacture or sell our products. Failure to take adequate steps to mitigate the likelihood or potential impact of such events, or to effectively manage such events if they occur, could adversely affect our business, financial condition and results of operations, as well as require additional resources to restore our supply chain.

 

Termination of our material licenses would have a material adverse effect on our business.

 

We manufacture and market our Pebbles^® products in the United States, Canada and several other locations pursuant to a long-term intellectual property license agreement. This license gives us the exclusive right (subject only to an exception regarding the sale of similar products in amusement and theme parks) to use The Flintstones characters in connection with breakfast cereal and to sell all Pebbles^® branded cereal products in those regions. If we were to breach any material term of this license agreement and not timely cure the breach, the licensor could terminate the agreement. If the licensor were to terminate our rights to use the Flintstones characters or the Pebbles^® brand for this or any other reason, the loss of such rights could have a material adverse effect on our business.

 

Global capital and credit market issues could negatively affect our liquidity, increase our costs of borrowing, and disrupt the operations of our suppliers and customers.

 

U.S. and global credit markets have, from time to time, experienced significant dislocations and liquidity disruptions which caused the spreads on prospective debt financings to widen considerably. These circumstances materially impacted liquidity in the debt markets, making financing terms for borrowers less attractive, and in certain cases resulted in the unavailability of certain types of debt financing. Events affecting the credit markets have also had an adverse effect on other financial markets in the U.S., which may make it more difficult or costly for us to raise capital through the issuance of common stock or other equity securities or refinance our existing debt, sell our assets or borrow more money if necessary. Our business could also be negatively impacted if our suppliers or customers experience disruptions resulting from tighter capital and credit markets or a slowdown in the general economy. Any of these risks could impair our ability to fund our operations or limit our ability to expand our business or increase our interest expense, which could have a material adverse effect on our financial results.

 

Changing currency exchange rates may adversely affect our earnings and financial position.

 

We have operations and assets in the United States and Canada. Our consolidated financial statements are presented in U.S. dollars; therefore, we must translate our foreign assets, liabilities, revenue and expenses into U.S. dollars at applicable exchange rates. Consequently, fluctuations in the value of the Canadian dollar may negatively affect the value of these items in our consolidated financial statements. To the extent we fail to manage our foreign currency exposure adequately, we may suffer losses in value of our net foreign currency investment, and our consolidated results of operations and financial position may be negatively affected.

Violations of laws or regulations, as well as new laws or regulations or changes to existing laws or regulations, could adversely affect our business.

 

The food production and marketing industry is subject to a variety of federal, state, local and foreign laws and regulations, including food safety requirements related to the ingredients, manufacture, processing, storage, marketing, advertising, labeling, and distribution of our products as well as those related to worker health and workplace safety. Our activities, both in and outside of the United States, are subject to extensive regulation. In the U.S. we are regulated by, among other federal and state authorities, the U.S. Food and Drug Administration, U.S. Federal Trade Commission, the U.S. Departments of Commerce and Labor as well as by similar authorities abroad. Governmental regulations also affect taxes and levies, healthcare costs, energy usage, immigration and other labor issues, all of which may have a direct or indirect effect on our business or those of our customers or suppliers. In addition, we market and advertise our products and could be the target of claims relating to alleged false or deceptive advertising under federal, state, and foreign laws and regulations and may be subject to initiatives to limit or prohibit the marketing and advertising of our products to children. Changes in these laws or regulations or the introduction of new laws or regulations could increase the costs of doing business for us or our customers or suppliers or restrict our actions, causing our results of operations to be adversely affected. Further, if we are found to be out of compliance with applicable laws and regulations in these areas, we could be subject to civil remedies, including fines, injunctions, or recalls, as well as potential criminal sanctions, any of which could have a material adverse effect on our business.

 

As a publicly traded company, we will be subject to changing rules and regulations of federal and state government as well as the stock exchange on which our common stock is expected to be listed. These entities, including the Public Company Accounting Oversight Board, the SEC and the New York Stock Exchange, have issued a significant number of new and increasingly complex requirements and regulations over the course of the last several years and continue to develop additional regulations and requirements in response to laws enacted by Congress. Our efforts to comply with these requirements may result in an increase in expenses and a diversion of management’s time from other business activities.

 

We may not be able to operate successfully if we lose key personnel, are unable to hire qualified additional personnel, or experience turnover of our management team.

 

We are highly dependent on our ability to attract and retain qualified personnel to operate and expand our business. If we lose one or more members of our senior management team, or if we fail to attract new employees, our business and financial position, results of operations or cash flows could be harmed.

 

Labor strikes or work stoppages by our employees could harm our business.

 

Currently, a significant number of our full-time production and maintenance employees are covered by collective bargaining agreements. A dispute with a union or employees represented by a union could result in production interruptions caused by work stoppages. If a strike or work stoppage were to occur, our results of operations could be adversely affected. The labor contract for our Niagara Falls, Ontario location expired in early January 2012 and we are currently in ongoing negotiations with respect to this contract.

 

Changes in weather conditions, natural disasters and other events beyond our control can adversely affect our results of operations.

 

Changes in weather conditions and natural disasters such as floods, droughts, frosts, earthquakes, hurricane, fires or pestilence, may affect the cost and supply of commodities and raw materials, including tree nuts, corn syrup, sugar and wheat. Additionally, these events can result in reduced supplies of raw materials and longer recoveries of usable raw materials. Competing manufacturers can be affected differently by weather conditions and natural disasters depending on the location of their suppliers and operations. Failure to take adequate steps to reduce the likelihood or mitigate the potential impact of such events, or to effectively manage such events if they occur, particularly when a product is sourced from a single location, could adversely affect our business and results of operations, as well as require additional resources to restore our supply chain.

We are a holding company with no substantial independent operations, and therefore we rely on dividends, interest and other payments, advances and transfers of funds from our subsidiaries to meet our debt service and other obligations.

 

Following the separation, we will be a holding company and will conduct substantially all of our operations through our subsidiaries. As a result, we will rely on dividends, loans and other payments or distributions from our subsidiaries to meet our debt service obligations and enable us to pay interest and dividends, if any. The ability of our subsidiaries to pay dividends and make other payments or distributions to us will depend substantially on their respective operating results and will be subject to restrictions under, among other things, the laws of their jurisdiction of organization (which may limit the amount of funds available for the payment of dividends), agreements of those subsidiaries, the terms of our financing arrangements and the terms of any future financing arrangements of our subsidiaries.

 

We may experience losses or be subject to increased funding and expenses to our qualified pension plan, which could negatively impact profits.

 

Following the separation, we will maintain a separate qualified defined benefit plan and we will be obligated to ensure that the plan is funded in accordance with applicable regulations. In the event the stock market deteriorates, the funds in which we plan to invest do not perform according to expectations, or the valuation of the projected benefit obligation increases due to changes in interest rates or other factors, we may be required to make significant cash contributions to the pension plan and recognize increased expense within our financial statements.

 

Impairment in the carrying value of intangible assets could negatively impact our net worth. If our goodwill, indefinite-lived intangible assets, or other long-term assets become impaired, we will be required to record additional impairment charges, which may be significant.

 

The carrying value of intangible assets represents the fair value of goodwill, trademarks, trade names, and other acquired intangibles. Intangibles and goodwill expected to contribute indefinitely to our cash flows are not amortized, but our management reviews them for impairment on an annual basis or whenever events or changes in circumstances indicate that their carrying value may not be recoverable. Impairments to intangible assets may be caused by factors outside our control, such as increasing competitive pricing pressures, lower than expected revenue and profit growth rates, changes in industry EBITDA and revenue multiples, changes in discount rates based on changes in cost of capital (interest rates, etc.), or the bankruptcy of a significant customer. These factors, along with other internal and external factors, could negatively impact our net worth and could have a significant impact on our fair valuation determination, which could then result in a material impairment charge in our results of operations. During fiscal years 2011 and 2010 we have incurred impairment losses related to goodwill and trademark intangible assets, and we could have additional impairments in the future. See further discussion of these impairment losses in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and Notes 2 and 4 of “Notes to Combined Financial Statements.”

 

Technology failures could disrupt our operations and negatively impact our business.

 

We increasingly rely on information technology systems to process, transmit, and store electronic information. For example, our production and distribution facilities and inventory management utilize information technology to increase efficiencies and limit costs. Furthermore, a significant portion of the communications between our personnel, customers, and suppliers depends on information technology. Our information technology systems may be vulnerable to a variety of interruptions due to events beyond our control, including, but not limited to, natural disasters, terrorist attacks, telecommunications failures, computer viruses, hackers, and other security issues. Such interruptions could negatively impact our business.

Our intellectual property rights are valuable, and any inability to protect them could reduce the value of our products and brands.

 

We consider our intellectual property rights, particularly our trademarks, but also our patents, trade secrets, copyrights and licenses, to be a significant and valuable aspect of our business. We attempt to protect our intellectual property rights through a combination of patent, trademark, copyright and trade secret laws, as well as licensing agreements, third party nondisclosure and assignment agreements and the policing of third party misuses of our intellectual property. Our failure to obtain or maintain adequate protection of our intellectual property rights, or any change in law or other changes that serve to lessen or remove the current legal protections for intellectual property, may diminish our competitiveness and could materially harm our business.

 

We face the risk of claims that we have infringed third parties’ intellectual property rights. Any claims of intellectual property infringement, even those without merit, could be expensive and time consuming to defend; cause us to cease making, licensing or using products that incorporate the challenged intellectual property; require us to redesign or rebrand our products or packaging, if feasible; divert management’s attention and resources; or require us to enter into royalty or licensing agreements in order to obtain the right to use a third party’s intellectual property. Any royalty or licensing agreements, if required, may not be available to us on acceptable terms or at all. Additionally, a successful claim of infringement against us could result in our being required to pay significant damages, enter into costly license or royalty agreements, or stop the sale of certain products, any of which could have a negative impact on our operating profits and harm our future prospects.

 

We are subject to environmental laws and regulations that can impose significant costs and expose us to potential financial liabilities.

 

We are subject to extensive and frequently changing federal, state, local and foreign laws and regulations relating to the protection of human health and the environment, including those limiting the discharge and release of pollutants into the environment and those regulating the transport, storage, use, treatment, storage, disposal and remediation of, and exposure to, solid and hazardous wastes and materials. Certain environmental laws and regulations can impose joint and several liability without regard to fault on responsible parties, including past and present owners and operators of sites, related to cleaning up sites at which hazardous wastes or materials were disposed or released. Failure to comply with environmental laws and regulations could result in severe fines and penalties by governments or courts of law. In addition, various current and likely future federal, state, local and foreign laws and regulations could regulate the emission of greenhouse gases, particularly carbon dioxide and methane. We cannot predict the impact that such regulation may have, or that climate change may otherwise have, on our business.

 

Future events, such as new or more stringent environmental laws and regulations, any new environmental claims, the discovery of currently unknown environmental conditions requiring response action, or more vigorous enforcement or a new interpretation of existing environmental laws and regulations, might require us to incur additional costs that could have a material adverse effect on our financial results.

 

Pending and future litigation may lead us to incur significant costs.

 

We are, or may become, party to various lawsuits and claims arising in the normal course of business, which may include lawsuits or claims relating to contracts, intellectual property, product recalls, product liability, employment matters, environmental matters or other aspects of our business. The defense of these lawsuits may divert our management’s attention, and we may incur significant expenses in defending these lawsuits. In addition, we may be required to pay damage awards or settlements, or become subject to injunctions or other equitable remedies, that could have a material adverse effect on our financial position, cash flows or results of operations. The outcome of litigation is often difficult to predict, and the outcome of pending or future litigation may have a material adverse effect on our financial position, cash flows, or results of operations.

 

Following the separation, we will have substantial debt and high leverage, which could adversely affect our business.

 

Since August 2008, we have relied upon Ralcorp for working capital requirements on a short-term basis and for other financial support. Following the separation, we will have a significant amount of debt. On a pro forma basis as described under “Unaudited Pro Forma Condensed Combined Financial Statements,” assuming we had completed the separation and the financing transactions described in this information statement (including the borrowings under the senior credit facilities and the issuance of the senior notes), we would have had $950 million of total debt as of September 30, 2011. Given the smaller relative size of our company as compared to Ralcorp, we expect to incur higher debt servicing costs on the new indebtedness than we would have otherwise incurred previously as a subsidiary of Ralcorp.

 

Our overall leverage and the terms of our financing arrangements could:

 

 

In addition, as described under “Description of Financing Transactions and Material Indebtedness,” we will incur, in connection with the separation, a significant amount of debt for which we will not receive any cash proceeds, but which will instead be issued to Ralcorp. We will also make a cash payment to Ralcorp in the amount of $125 million. As a result of the indebtedness we expect to incur in connection with the separation, the amount of leverage in our business will significantly increase. This will increase the riskiness of our business and of an investment in our common stock.

 

Our ability to meet expenses and debt service obligations will depend on our future performance, which will be affected by financial, business, economic and other factors, including potential changes in consumer preferences, the success of product and marketing innovation and pressure from competitors. If we do not generate enough cash to pay our debt service obligations, we may be required to refinance all or part of our existing debt, sell our assets, borrow more money or raise equity.

 

Our senior credit facilities will bear interest at variable rates. If market interest rates increase, variable rate debt will create higher debt service requirements, which could adversely affect our cash flow.

We expect the agreements governing our debt, including our new credit facilities and the indenture governing our senior notes, will contain various covenants that impose restrictions on us that may affect our ability to operate our business.

 

The agreements governing our new senior credit facilities and our senior notes are expected to contain covenants that, among other things, limit our ability to:

 

 

These restrictions on our ability to operate our business could harm our business by, among other things, limiting our ability to take advantage of financing, merger and acquisition and other corporate opportunities.

 

Various risks, uncertainties and events beyond our control could affect our ability to comply with these covenants. Failure to comply with any of the covenants in our existing or future financing agreements could result in a default under those agreements and under other agreements containing cross-default provisions.

 

A default would permit lenders to accelerate the maturity of the debt under these agreements and to foreclose upon any collateral securing the debt. Under these circumstances, we might not have sufficient funds or other resources to satisfy all of our obligations, including our obligations under the senior notes. In addition, the limitations imposed by financing agreements on our ability to incur additional debt and to take other actions might significantly impair our ability to obtain other financing.

 

Our historical financial results as a business segment of Ralcorp and our unaudited pro forma condensed combined financial statements may not be representative of our results as a separate, stand-alone company.

 

The historical financial information we have included in this information statement has been derived from the consolidated financial statements and accounting records of Ralcorp (and, for periods before August 4, 2008, of Kraft). Accordingly, the historical and pro forma financial information does not necessarily reflect what our financial position, results of operations or cash flows would have been had we operated as a separate, stand-alone company during the periods presented or those that we may achieve in the future primarily as a result of the following factors:

 

 

 

We may be unable to achieve some or all of the benefits that we expect to achieve from our separation from Ralcorp.

 

By separating from Ralcorp there is a risk that our company may be more susceptible to market fluctuations and other adverse events than we would have been if we were still a part of Ralcorp. As part of Ralcorp we were able to enjoy certain benefits from Ralcorp’s operating diversity and purchasing and borrowing leverage. We may not be able to achieve some or all of the benefits that we expect to achieve as a stand-alone, independent company.

 

The combined post-separation value of Ralcorp and Post shares may not equal or exceed the pre-separation value of Ralcorp shares.

 

After the separation, Ralcorp’s common stock will continue to be listed and traded on the New York Stock Exchange under the symbol “RAH.” Subject to the consummation of the separation, our common stock has been approved for listing on the New York Stock Exchange under the symbol “POST.” The combined trading prices of Ralcorp common stock and Post common stock after the separation, as adjusted for any changes in the combined capitalization of these companies, may not be equal to or greater than the trading price of Ralcorp common stock prior to the separation. Until the market has fully evaluated the business of Ralcorp without the Post cereals business, the price at which Ralcorp common stock trade may fluctuate significantly. Similarly, until the market has fully evaluated our company, the price at which shares of Post common stock trade may fluctuate significantly.

 

Potential liabilities may arise due to fraudulent transfer considerations, which would adversely affect our financial condition and our results of operations.

 

In connection with the separation, Ralcorp intends to undertake financing transactions which, along with the separation and the financing transactions involving us, may be subject to federal and state fraudulent conveyance and transfer laws. If a court were to determine under these laws that, at the time of the separation, any entity involved in these transactions or the separation:

 

 

the court could void the separation, in whole or in part, as a fraudulent conveyance or transfer. The court could then require our shareholders to return to Ralcorp some or all of the shares of our common stock issued pursuant to the separation, or require Ralcorp or us, as the case may be, to fund liabilities of the other company for the benefit of creditors. The measure of insolvency will vary depending upon the jurisdiction whose law is being applied. Generally, however, an entity would be considered insolvent if the fair value of its

assets were less than the amount of its liabilities or if it incurred debt beyond its ability to repay the debt as it matures.

 

We may have a significant indemnity obligation to Ralcorp if the separation and/or certain related transactions are treated as a taxable transaction.

 

We expect to enter into the Tax Allocation Agreement with Ralcorp, which sets out each party’s rights and obligations with respect to federal, state, local and foreign taxes for periods before and after the separation (including taxes that may arise if the separation and/or certain related transactions do not qualify for tax-free treatment under the Internal Revenue Code of 1986, as amended, or the “Code”) and related matters such as the filing of tax returns and the conduct of the parties in IRS and other audits.

 

Ralcorp received a private letter ruling from the IRS to the effect that, among other things, the separation and certain related transactions will qualify for tax-free treatment under the Code. In addition, Ralcorp expects to obtain an opinion from its legal counsel substantially to the effect that, among other things, the separation and certain related transactions will qualify for tax-free treatment under the Code. The private letter ruling from the IRS is not binding on the IRS if the factual representations or assumptions made in the letter ruling request are untrue or incomplete in any material respect. Furthermore, the IRS will not rule on whether a distribution satisfies certain requirements necessary to obtain tax-free treatment under the Code. Rather, the ruling is based upon representations by Ralcorp that these conditions have been satisfied, and any inaccuracy in such representations could invalidate the ruling. The opinion referred to above will address all of the requirements necessary for the separation and certain related transactions to obtain tax-free treatment under the Code, will rely on the IRS private letter ruling as to matters covered by the ruling, and will be based on, among other things, certain assumptions and representations made by Ralcorp and us, which if incorrect or inaccurate in any material respect would jeopardize the conclusions reached by counsel in such opinion. The opinion will not be binding on the IRS or the courts and the IRS or the courts may not agree with the opinion.

 

Notwithstanding receipt by Ralcorp of the private letter ruling and opinion of counsel, the IRS could determine that the separation and/or certain related transactions should be treated as taxable transactions if it determines that any of the representations, assumptions or undertakings that were included in the request for the private letter ruling is false or has been violated or if it disagrees with the conclusions in the opinion that are not covered by the IRS ruling. Furthermore, events subsequent to the distribution could cause Ralcorp to recognize gain on the separation, including as a result of Section 355(e) of the Code.

 

Pursuant to the Tax Allocation Agreement, in certain cases, we will be required to indemnify Ralcorp for taxes resulting from the separation and/or certain related transactions not qualifying for tax-free treatment for United States federal income tax purposes. Pursuant to the Tax Allocation Agreement, we will be required to indemnify Ralcorp for losses and taxes of Ralcorp resulting from the breach of certain covenants made by us and for certain taxable gain that could be recognized by Ralcorp, including as a result of certain acquisitions of our stock or assets. If we are required to indemnify Ralcorp under the circumstances set forth in the Tax Allocation Agreement, we may be subject to substantial liabilities, which could materially adversely affect our financial position. Our indemnification obligations to Ralcorp are not limited by any maximum amount. See “The Separation — Material U.S. Federal Income Tax Consequences of the Distribution.”

 

The tax rules applicable to the separation and the covenants contained in the Tax Allocation Agreement may restrict us from taking certain actions, engaging in certain corporate transactions or from raising equity capital beyond certain thresholds for a period of time after the separation.

 

The distribution of Post would be taxable to Ralcorp if such distribution is part of a “plan or series of related transactions” pursuant to which one or more persons acquire directly or indirectly stock representing a 50% or greater interest (by vote or value) in Ralcorp or Post. Under current U.S. federal income tax law, acquisitions that occur during the four-year period that begins two years before the date of the distribution are presumed to occur pursuant to a plan or series of related transactions, unless it is established that the acquisition is not pursuant to a plan or series of transactions that includes the distribution. U.S. Treasury regulations currently in effect generally provide that whether an acquisition and a distribution are part of a

plan is determined based on all of the facts and circumstances, including, but not limited to, specific factors described in the U.S. Treasury regulations. In addition, the U.S. Treasury regulations provide several “safe harbors” for acquisitions that are not considered to be part of a plan.

 

These rules, and the covenants expected to be contained in the Tax Allocation Agreement as a result of these rules will limit our ability during the two-year period following the distribution to enter into certain transactions that may be advantageous to us and our shareholders, particularly issuing equity securities to satisfy financing needs, repurchasing equity securities, disposing of certain assets, engaging in mergers and acquisitions and, under certain circumstances, acquiring businesses or assets with equity securities or agreeing to be acquired.

 

In addition, the covenants in, and our indemnity obligations under, the Tax Allocation Agreement may limit our ability to take certain actions, pursue strategic transactions or engage in new business or other transactions that may maximize the value of our business. The Tax Allocation Agreement is also expected to contain covenants that restrict us from taking any action which could be reasonably expected to cause the separation and certain related transactions not to be tax-free.

 

Our ability to operate our business effectively may suffer if we do not establish our own financial, administrative and other support functions in order to operate as a separate, stand-alone company, and the transition services Ralcorp has agreed to provide may not be sufficient for our needs.

 

Historically, we have relied on financial, administrative and other resources, including the business relationships, of Ralcorp to support the operation of our business. In conjunction with our separation from Ralcorp, we will need to expand our financial, administrative and other support systems or contract with third parties to replace certain of Ralcorp’s systems. We will also need to maintain our own credit and banking relationships and perform our own financial and operational functions. We have entered into separation-related agreements with Ralcorp, and Ralcorp has agreed to provide transition services for up to 24 months following the separation, but we may not be able to adequately replace those resources or replace them at the same cost. We may not be able to successfully put in place the financial, operational and managerial resources necessary to operate as a public company or that we will be able to be profitable doing so. Any failure or significant downtime in our own financial or administrative systems or in Ralcorp’s financial or administrative systems during the transition period could impact our results or prevent us from performing other administrative services and financial reporting on a timely basis and could materially harm our business, financial condition and results of operations.

 

The agreements we have entered into or will enter into with Ralcorp involve conflicts of interest and therefore may have materially disadvantageous terms to us.

 

We expect to enter into certain agreements with Ralcorp, including the Separation and Distribution Agreement, Tax Allocation Agreement, Employee Matters Agreement and the Shareholder’s and Registration Rights Agreement which will set forth the main terms of the separation and will provide a framework for our initial relationship with Ralcorp following the separation. The terms of these agreements and the separation are being determined at a time when we are still part of Ralcorp and therefore involve conflicts of interest. Accordingly, such agreements may not reflect terms that could be reached on an arm’s-length basis between unaffiliated parties, which could be materially more favorable to us.

 

We may incur material costs and expenses as a result of our separation from Ralcorp, which could adversely affect our profitability.

 

We may incur costs and expenses greater than those we currently incur as a result of our separation from Ralcorp. These increased costs and expenses may arise from various factors, including financial reporting, costs associated with complying with federal securities laws (including compliance with the Sarbanes-Oxley Act of 2002), tax administration, and legal and human resources related functions, and it is possible that these costs will be material to our business.

Our business, financial condition and results of operations may be adversely affected following the separation if we are unable to negotiate terms that are as favorable as those Ralcorp has received when we replace contracts after the separation.

 

Prior to completion of the separation, certain functions (such as purchasing, information systems, customer service, logistics and distribution) for our business have generally been performed under Ralcorp’s centralized systems and, in some cases, under contracts that are also used for Ralcorp’s other businesses and which are not intended to be assigned to us. In addition, some other contracts require consents of third parties to assign them to us, or in connection with a change of our control. We may not be able to negotiate terms that are as favorable as those Ralcorp received when we replace these contracts with our own agreements.

 

If, following the separation, we are unable to satisfy the requirements of Section 404 of the Sarbanes-Oxley Act of 2002, or our internal control over financial reporting is not effective, the reliability of our financial statements may be questioned and our stock price may suffer.

 

Section 404 of the Sarbanes-Oxley Act of 2002 requires any company subject to the reporting requirements of the U.S. securities laws to do a comprehensive evaluation of its and its consolidated subsidiaries’ internal control over financial reporting. To comply with this statute, we will eventually be required to document and test our internal control procedures, our management will be required to assess and issue a report concerning our internal control over financial reporting, and our independent auditors will be required to issue an opinion on their audit of our internal control over financial reporting. The rules governing the standards that must be met for management to assess our internal control over financial reporting are complex and require significant documentation, testing and possible remediation to meet the detailed standards under the rules. During the course of its testing, our management may identify material weaknesses or deficiencies which may not be remedied in time to meet the deadline imposed by the Sarbanes-Oxley Act of 2002. If our management cannot favorably assess the effectiveness of our internal control over financial reporting or our auditors identify material weaknesses in our internal controls, investor confidence in our financial results may weaken, and our stock price may suffer.

 

Because there has not been any public market for our common stock, the market price and trading volume of our common stock may be volatile and you may not be able to resell your shares at or above the initial market price of our stock following the separation.

 

Prior to the separation, there will have been no trading market for our common stock. We cannot predict the extent to which investors’ interest will lead to a liquid trading market or whether the market price of our common stock will be volatile. The market price of our common stock could fluctuate significantly for many reasons, including in response to the risk factors listed in this information statement or for reasons unrelated to our specific performance, such as reports by industry analysts, investor perceptions, or negative developments relating to our customers, competitors or suppliers, as well as general economic and industry conditions. In addition, as set forth in the next paragraph, any dispositions by Ralcorp, or any significant Ralcorp shareholder, of our common stock in the public market, or the perception that such dispositions could occur, could adversely affect prevailing market prices for our common stock.

 

Future stock sales could adversely affect the trading price of our common stock following the separation.

 

All of the shares of Post common stock will be freely tradable without restriction or further registration under the Securities Act unless the shares are owned by our “affiliates” as that term is defined in the rules under the Securities Act. Shares held by “affiliates” may be sold in the public market if registered or if they qualify for an exemption from registration under Rule 144 which is summarized under “Listing and Trading of Our Common Stock.” Further, we plan to file a registration statement to cover the shares issuable under our equity-based benefit plans. It is possible that some Ralcorp shareholders, including possibly some of Ralcorp’s large shareholders, will sell Post common stock received in the distribution for various reasons, for example, if

our business profile or market capitalization as an independent company does not fit their investment objectives.

 

In addition, after completion of the separation, Ralcorp will retain up to 20% of our total shares outstanding for a limited period of time. Ralcorp will dispose of such shares of our common stock that it owns as soon as practicable and consistent with the business reasons for retaining such shares, but in no event later than five years after the distribution. We will agree that, upon the request of Ralcorp, we will use our reasonable best efforts to effect a registration under applicable federal and state securities laws of any shares of our common stock retained by Ralcorp. The sales of significant amounts of our common stock or the perception in the market that this will occur may result in the lowering of the market price of our common stock.

 

Your percentage ownership in Post may be diluted in the future.

 

As with any publicly traded company, your percentage ownership in Post may be diluted in the future because of equity issuances for the acquisitions, capital market transactions or otherwise, including equity awards that we expect will be granted to our directors, officers and employees and the accelerated vesting of other equity awards. For a more detailed description of the stock incentive plan, see “Executive Compensation.”

 

Provisions in our articles of incorporation and bylaws, provisions of Missouri law, and our shareholder protection rights agreement may prevent or delay an acquisition of our company, which could decrease the trading price of our common stock.

 

Our articles of incorporation, bylaws and Missouri law contain provisions that are intended to deter coercive takeover practices and inadequate takeover bids by making such practices or bids unacceptably expensive and to encourage prospective acquirers to negotiate with our board of directors rather than to attempt a hostile takeover. These provisions include, among others:

 

 

In connection with the separation, we will also enter into a shareholder protection rights agreement which gives our shareholders certain rights that could deter a change of control of us in a transaction not approved by our board of directors.

 

Forward-looking statements are made throughout this information statement. These forward-looking statements are sometimes identified by the use of terms and phrases such as “believe,” “should,” “expect,” “project,” “estimate,” “anticipate,” “intend,” “plan,” “will,” “can,” “may,” or similar expressions elsewhere in this report. Our results of operations and financial condition may differ materially from those in the forward-looking statements. Such statements are based on management’s current views and assumptions, and involve risks and uncertainties that could affect expected results. Those risks and uncertainties include but are not limited to the following:

 

 

 

 

 

 

 

You should not rely upon forward-looking statements as predictions of future events. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee that the future results, levels of activity, performance or events and circumstances reflected in the forward-looking statements will be achieved or occur. Moreover, we undertake no obligation to update publicly any forward-looking statements for any reason after the date of this document to conform these statements to actual results or to changes in our expectations.

 

On July 14, 2011, Ralcorp announced that its board of directors had unanimously agreed in principle to separate Ralcorp and its Post cereals business in a tax-free spin-off to Ralcorp shareholders, resulting in two independent, publicly traded companies.

 

To complete the separation, on January 16, 2012, the Ralcorp board of directors approved the distribution of at least 80% of the shares of our common stock held by Ralcorp to holders of Ralcorp common stock. On February 3, 2012, the distribution date, subject to certain customary conditions, each Ralcorp shareholder will receive one share of our common stock for two shares of Ralcorp common stock held at the close of business on the record date, as described below, subject to certain conditions described in this document; provided, that if the conditions have not been satisfied or waived on or before the distribution date, the distribution date may be extended until the conditions shall be satisfied or waived. Following the distribution, Ralcorp shareholders will own at least 80% of our common stock.

 

Ralcorp’s board of directors believes that separation of our business from Ralcorp’s other businesses is in the best interests of Ralcorp and its shareholders and that the separation will provide each separated company with certain opportunities and benefits. The potential opportunities and benefits considered by Ralcorp’s board of directors in approving the separation included the following:

 

 

 

In view of the wide variety of factors considered in connection with the evaluation of the separation and the complexity of these matters, Ralcorp’s board of directors did not find it useful to, and did not attempt to, quantify, rank or otherwise assign relative weights to the factors considered. The individual members of Ralcorp’s board of directors likely may have given different weights to different factors.

 

Ralcorp’s board of directors also considered several factors that might have a negative effect on Ralcorp as a result of the separation. Such factors include:

 

 

Moreover, the separation would separate from Ralcorp the Post cereals business, which represents significant value, in a transaction that produces no direct economic consideration for Ralcorp, other than cash proceeds of the financing transactions and the retained shares of Post common stock. Because Post will no longer be a wholly owned subsidiary of Ralcorp, the separation also will affect the terms of, or limit the incentive for, or the ability of Ralcorp to pursue, cross-company business transactions and initiatives with Post since, as separate public companies, such transactions and initiatives will need to be assessed by each company from its own business perspective. Finally, following the separation, Ralcorp and its remaining businesses will need to absorb corporate and administrative costs previously allocated to the Post cereals business.

 

Since the second half of 2010, the Ralcorp board of directors has evaluated various strategic alternatives for the Post business for the benefit of Ralcorp and its shareholders. In July 2011, the Ralcorp board of directors determined in principle to separate Post from the remaining Ralcorp businesses for the reasons described above. The Ralcorp board of directors continues to believe that the Post separation is in the best interests of Ralcorp’s shareholders. In making such determination, the Ralcorp board of directors considered

the acquisition proposals made by ConAgra Foods, Inc., including its proposal to acquire Ralcorp for $94 per share in cash and, after consultation with financial and legal advisors, rejected such proposal, which was subsequently withdrawn on September 19, 2011. The Ralcorp board of directors believes that the potential to unlock value for Ralcorp’s shareholders by separating Post and allowing each of Ralcorp and Post to reach its full growth potential makes the separation advisable and in the best interests of Ralcorp shareholders, and believes these factors further support its determination to reject the ConAgra proposals.

 

Ralcorp’s board of directors considered certain aspects of the separation that may be adverse to Post. Post’s common stock may come under initial selling pressure as certain Ralcorp shareholders sell their shares in Post because they are not interested in holding an investment in Post’s business. Moreover, certain factors such as a lack of historical financial and performance data as an independent company may limit investors’ ability to appropriately value Post’s common stock. Furthermore, because Post will no longer be a wholly owned subsidiary of Ralcorp, the separation also could increase the costs of managing Post’s business and will limit the ability of Post to pursue cross-company business transactions and initiatives with other businesses of Ralcorp.

 

Ralcorp’s board of directors, however, concluded that the anticipated long-term benefits of the separation outweighed these factors, and that separating Post from Ralcorp in the form of a tax-free distribution is appropriate and advisable.

 

The general terms and conditions relating to the separation will be set forth in the Separation and Distribution Agreement between Ralcorp and Post.

 

Internal Reorganization

 

Prior to the separation, Ralcorp will complete a corporate reorganization of the operating subsidiaries related to the Post cereals business, which we refer to as the “internal reorganization.” The internal reorganization will be completed in the following steps:

 

 

The diagram below shows the structure of Ralcorp prior to the internal reorganization:

 

 

The diagram below shows the structure, simplified for illustrative purposes only, of Post and Ralcorp after completion of the separation and disposition by Ralcorp of all shares of Post common stock that it retained after the separation:

 

Distribution of Shares of Our Common Stock

 

Under the Separation and Distribution Agreement, the distribution of at least 80% of the Post common stock to Ralcorp shareholders will be effective at 11:59 p.m. on February 3, 2012, subject to certain conditions described in this document; provided, that if the conditions have not been satisfied or waived on or before the distribution date, the distribution date may be extended until the conditions shall be satisfied or waived. For Ralcorp shareholders who own Ralcorp’s common stock in registered form on the record date, Computershare, our transfer agent, will credit their shares of Post common stock to book entry accounts established to hold these shares. Computershare will send these shareholders a statement reflecting their ownership of our common stock. Book entry refers to a method of recording stock ownership in our records, and no physical certificates are used. For shareholders who own Ralcorp common stock through a broker or other nominee, their shares of Post common stock will be credited to these shareholders’ accounts by the broker or other nominee. As further discussed below, fractional shares will not be distributed. Following the separation, shareholders whose shares are held in book entry form may request that their shares of our common stock be transferred to a brokerage or other account at any time without charge.

 

Ralcorp’s shareholders will not be required to pay for shares of Post common stock received in the distribution, or to surrender or exchange shares of Ralcorp common stock in order to receive Post common stock, or to take any other action in connection with the separation. No vote of Ralcorp shareholders is required or sought in connection with the separation, and Ralcorp shareholders have no appraisal rights in connection with the separation.

 

In order to be entitled to receive shares of our common stock in the separation, Ralcorp shareholders must own Ralcorp common stock at the close of business, Eastern Time, on the record date, January 30, 2012.

 

No later than five years following the separation, Ralcorp will dispose of remaining shares of Post common stock that it retained after the separation.

 

Fractional shares of our common stock will not be issued to Ralcorp shareholders as part of the separation or credited to book entry accounts. Instead of distributing fractional shares, the distribution agent will, as soon as practicable after the distribution date, aggregate fractional shares of our common stock into whole shares and sell them in the open market at the prevailing market prices and distribute the aggregate proceeds, net of brokerage fees, ratably to holders of Ralcorp common stock otherwise entitled to fractional interests in our common stock. The amount of such payments will depend on the prices at which the aggregated fractional shares are sold by the distribution agent in the open market shortly after the distribution date. It is expected that all fractional shares held in street name will be aggregated and sold by brokers or other nominees according to their standard procedures and that brokers or other nominees may request the transfer agent to sell the fractional shares on their behalf. You should contact your broker or other nominee for additional details. None of Ralcorp, Post, or the transfer agent will guarantee any minimum sale price for the fractional shares of our common stock. Neither we nor Ralcorp will pay any interest on the proceeds from the sale of fractional shares.

 

The distribution of our common stock is subject to the satisfaction or, if permissible under the Separation and Distribution Agreement, waiver by Ralcorp of the following conditions, among other conditions described in this information statement:

 

 

 

The satisfaction of the foregoing conditions does not create any obligations on Ralcorp’s part to effect the separation, and Ralcorp’s board of directors has reserved the right, in its sole discretion, to abandon, modify or change the terms of the separation, including by accelerating or delaying the timing of the consummation of all or part of the separation, at any time prior to the distribution date.

 

After the separation, we will be a public company owning and operating the Post cereals business. Immediately after the distribution, we expect to have approximately 8,400 holders of record of our common stock and approximately 34.5 million shares of common stock outstanding, based on the number of record shareholders and outstanding shares of Ralcorp common stock on January 13, 2012 and after giving effect to Ralcorp retaining

up to 20% of Post shares and the delivery to shareholders of cash in lieu of fractional shares of our common stock. The actual number of shares to be distributed will be determined on the record date. You can find information regarding options to purchase our common stock that will be outstanding after the separation under “— Treatment of Stock Options and Other Equity Awards.”

 

Prior to the completion of the separation, we will enter into several agreements with Ralcorp in connection with, among other things, employee matters, tax, transition services and a number of ongoing commercial relationships. See “Arrangements between Ralcorp and Post.”

 

The distribution will not affect the number of outstanding shares of Ralcorp common stock or any rights of Ralcorp’s shareholders.

 

The following is a summary of the material U.S. federal income tax consequences of the distribution to U.S. holders (as defined below). This summary is based on the Code, the U.S. Treasury regulations promulgated thereunder, and judicial and administrative interpretations thereof, all as in effect on the date of this summary and all of which are subject to change (possibly on a retroactive basis).

 

This summary does not address tax consequences for any holder other than a U.S. holder. For purposes of this summary, a “U.S. holder” is a beneficial owner of Ralcorp common stock for U.S. federal income tax purposes that is, for U.S. federal income tax purposes:

 

 

In addition, this summary is limited to U.S. holders that hold their Ralcorp common stock as a capital asset. This summary also does not address any U.S. federal tax consequences other than the U.S. federal income tax consequences, nor any state, local or foreign tax consequences. Further, this summary does not discuss all of the tax considerations that may be relevant to U.S. holders in light of their particular circumstances or to U.S. holders subject to special provisions of the U.S. federal income tax law, including:

 

 

 

If a partnership holds Ralcorp’s shares, the tax treatment of a partner will generally depend upon the status of the partner and the activities of the partnership. If you are a partnership holding Ralcorp’s shares, you should consult your own tax advisers.

 

This summary is not intended to be, and it should not be construed to be, legal or tax advice to any particular shareholder. Each shareholder should consult the shareholder’s tax advisor as to the specific tax consequences of the distribution to that shareholder, including the effect of any U.S. federal, state or local or foreign tax laws and of changes in applicable tax laws.

 

The distribution is conditioned upon, among other things, Ralcorp having received (i) a private letter ruling from the IRS, in form and substance satisfactory to the Ralcorp board of directors, regarding the qualification of the separation and certain related transactions as transactions that are generally tax-free for U.S. federal income tax purposes, and (ii) to the extent such qualification is not addressed by such ruling, an opinion of counsel, in form and substance satisfactory to the Ralcorp board of directors to the same effect, which ruling and opinion shall not have been withdrawn or modified. Such ruling is, and opinion will be, based on, among other things, certain assumptions as well as on the accuracy and completeness of certain representations and statements that Ralcorp and we made to the IRS and will make to counsel.

 

Assuming the distribution qualifies as a transaction that is generally tax-free for U.S. federal income tax purposes, as the IRS has ruled and Ralcorp expects counsel to opine, as discussed above: (i) the distribution generally will not result in any taxable income, gain or loss to Ralcorp, provided Ralcorp disposes of the cash, the Post senior notes and retained shares of Post common stock in the manner required by the IRS ruling; (ii) no gain or loss will be recognized by (and no amount will be included in the income of) U.S. holders of Ralcorp common stock upon their receipt of our shares of common stock in the distribution (except to the extent of any cash received in lieu of fractional shares); (iii) the aggregate basis of the shares of Ralcorp common stock and our shares of common stock (including any fractional share interests in our shares of common stock for which cash is received) in the hands of each U.S. holder of Ralcorp common stock after the distribution will equal the aggregate basis of the shares of Ralcorp common stock held by the U.S. holder immediately before the distribution, allocated between the shares of Ralcorp common stock and the shares of our common stock (including any fractional share interests in our shares of common stock for which cash is received) in proportion to the relative fair market value of each on the date of the distribution; and (iv) the holding period of our shares of common stock received in the distribution by each U.S. holder of Ralcorp common stock will include the holding period at the time of the distribution for the shares of Ralcorp common stock on which the distribution is made, provided that the Ralcorp common stock is held as a capital asset on the distribution date. Whether or not the distribution so qualifies, Ralcorp may incur some tax cost in connection with the distribution (as a result of certain intercompany transactions or as a result of certain differences between U.S. federal, on the one hand, and state, local and foreign tax rules, on the other).

 

U.S. Treasury regulations require certain stockholders that receive stock in a distribution to attach to their U.S. federal income tax return for the year in which the distribution occurs a detailed statement setting forth certain information relating to the tax-free nature of the distribution. U.S. Treasury regulations also generally provide that if a U.S. holder of Ralcorp common stock holds different blocks of Ralcorp common stock (generally shares of Ralcorp common stock purchased or acquired on different dates or at different prices), the aggregate basis for each block of Ralcorp common stock purchased or acquired on the same date and at the same price will be allocated, to the greatest extent possible, between the shares of our common stock received in the distribution in respect of such block of Ralcorp common stock and such block of Ralcorp common stock, in proportion to their respective fair market values, and the holding period of the shares of our common stock received in the distribution in respect of such block of Ralcorp common stock will include the holding period of such block of Ralcorp common stock, provided that such block of Ralcorp common stock was held as a capital asset on the distribution date. If a U.S. holder of Ralcorp common stock is not able to identify which particular shares of our common stock are received in the distribution with respect to a particular block of Ralcorp common stock, for purposes of applying the rules described above, the U.S. holder may designate

which shares of our common stock are received in the distribution in respect of a particular block of Ralcorp common stock, provided that such designation is consistent with the terms of the distribution. Holders of Ralcorp common stock should consult their own tax advisors regarding the application of these rules to their particular circumstances.

 

Although a private letter ruling from the IRS is generally binding on the IRS, if any of the assumptions, representations or statements that Ralcorp and we made are, or become, inaccurate or incomplete, or if Ralcorp or we breach any of our covenants, the separation and certain related transactions might not qualify for tax-free treatment under the Code. In addition, if any of the assumptions, representations or statements that Ralcorp and we make are, or become, inaccurate or incomplete, or if Ralcorp or we breach any of our covenants, the conclusions reached in the opinion of counsel might no longer be valid. The opinions will not be binding on the IRS or the courts. For these reasons, notwithstanding receipt by Ralcorp of the private letter ruling and opinion of counsel, the IRS could assert successfully that the separation and certain related transactions were taxable. In that event the above consequences would not apply and both Ralcorp and holders of Ralcorp common shares who received shares of our common stock in the distribution could be subject to significant U.S. federal income tax liability.

 

In general, Ralcorp would be subject to tax as if it had sold our shares of common stock and Post senior notes in a taxable sale for their fair market value and U.S. holders of shares of Ralcorp common stock who receive our commons stock in the distribution would be subject to tax as if they had received a taxable distribution equal to the fair market value of our common stock that was distributed to them. In addition, even if the distribution were otherwise to qualify under Section 355 of the Code, it may be taxable to Ralcorp (but not to U.S. holders of Ralcorp common stock who receive our shares of common stock in the distribution) under Section 355(e) of the Code, if the distribution were later deemed to be part of a plan (or series of related transactions) pursuant to which one or more persons acquire, directly or indirectly, stock representing a 50% or greater interest in Ralcorp or us. For this purpose, any acquisitions of Ralcorp common stock or of our common stock within the period beginning two years before the distribution and ending two years after the distribution are presumed to be part of such a plan, although we or Ralcorp may be able to rebut that presumption.

 

In connection with the distribution, we and Ralcorp will enter into the Tax Allocation Agreement pursuant to which we will agree to be responsible for certain tax liabilities and obligations following the distribution. For a description of the Tax Allocation Agreement, see “Arrangements between Ralcorp and Post — Tax Allocation Agreement.”

 

Each Ralcorp shareholder should consult his or her tax advisor about the particular consequences of the distribution to such shareholder, including the application of state, local and foreign tax laws, and possible changes in tax law that may affect the tax consequences described above.

 

Accounts of current and former Post and Ralcorp employees that hold Ralcorp stock in the Ralcorp stock fund in the Ralcorp SIP as of the record date will receive in the distribution shares of Post common stock. Such Post shares will be included in a new, temporary Post stock fund under the Ralcorp SIP. In conformity with the fiduciary responsibility requirements of ERISA, the shares of Post common stock held in the temporary Post stock fund following the distribution will be disposed of and allocated to another investment alternative available under the Ralcorp SIP as directed by participants until such date as shall be determined by the Employee Benefit Trustees Committee, after which date the remaining Post shares will be disposed of, and the proceeds will be invested in another investment alternative to be determined by the Employee Benefit Trustees Committee. Post employees may elect to rollover their account balances from the Ralcorp SIP to the Post SIP, if elected in accordance with applicable law and the terms of the plans. Such rollover distributions will be in the form of cash and, as applicable, promissory notes with respect to loans.

 

At the time of the distribution, the outstanding options to purchase Ralcorp stock, as well as any stock appreciation rights, restricted stock equivalent awards or other Ralcorp equity awards, held by current Post employees who remain Post employees after the distribution date will be converted to equity awards that relate solely to Post common stock in a manner designed to reflect the intrinsic value of such awards at the time of separation. At the time of the distribution, the terms of the outstanding options, stock appreciation rights, restricted stock equivalent awards, and other Ralcorp equity awards held by the current employees who remain Ralcorp’s employees after the distribution date, former Post employees, and Ralcorp’s former employees, will be appropriately adjusted to reflect the intrinsic value of such awards at the time of separation. Each person who holds Ralcorp restricted stock or stock-settled restricted stock units after the distribution date will receive the same number of shares of Post for the shares of Ralcorp underlying the restricted stock or stock-settled restricted stock units as a shareholder would receive in the distribution, subject to the same terms, conditions, and restrictions as the underlying restricted stock or restricted stock unit award.

 

The number of shares of Post common stock issuable upon the exercise or settlement, as applicable, of a stock-settled award converted from a corresponding Ralcorp award will generally be the number of shares of Ralcorp common stock that would have been provided upon the exercise or settlement of the corresponding Ralcorp award multiplied by a fraction, the numerator of which is the closing price, on the “regular-way” market, of Ralcorp common stock on the last trading day prior to the distribution date, and the denominator of which is the volume weighted average price of Post common stock during the 15 calendar day period following the distribution date. The exercise price, if any, for such converted award is the exercise price of the corresponding Ralcorp award divided by the same fraction.

 

As part of the separation, we expect to incur approximately $950 million of new indebtedness, which we expect to consist of $175 million aggregate principal amount of borrowings under a senior secured term loan facility and $775 million in aggregate principal amount of senior notes. We will not receive any proceeds from the senior notes, which we expect to initially issue to Ralcorp in connection with the separation. We expect that approximately $125 million of the proceeds from the term loan facilities will be transferred to Ralcorp in connection with the separation and to directly or indirectly acquire the assets of the Canadian operations of the Post cereals business. Of the remaining $50 million in proceeds, we expect to retain approximately $25 million after payment of fees and expenses relating to the financing transactions. We also expect that Post will have a $175 million revolving credit facility that will be unfunded at the time of the separation.

 

We expect that Ralcorp will transfer the senior notes to certain financial institutions, which we refer to as “exchange counterparties,” in order to satisfy certain outstanding 90-day term loan obligations of Ralcorp held by the exchange counterparties. We refer to this transfer as a “debt exchange.” As a result of these financing transactions, Ralcorp will receive in connection with the separation approximately $125 million in cash from us and approximately $775 million in cash from the proceeds of the 90-day term loan. We expect that the exchange counterparties may subsequently transfer our senior notes obtained from Ralcorp in the debt exchange. For a description of the expected terms of the credit facilities and senior notes, see “Description of Financing Transactions and Material Indebtedness.”

 

Post Common Stock

 

Beginning on, or shortly before, the record date and continuing up to and including through the distribution date, we expect that there will be a “when-issued” market in Post common stock. “When-issued” trading refers to a sale or purchase made conditionally because the security has been authorized but not yet issued. These transactions are conditional, with settlement to occur if and when the security is actually issued and the New York Stock Exchange determines transactions are to be settled.

The “when-issued” trading market will be a market for shares of Post common stock that will be distributed to Ralcorp shareholders on the distribution date. If you will own shares of Ralcorp common stock at the close of business on the record date, you will be entitled to shares of our common stock distributed pursuant to the distribution. You may trade this entitlement to shares of Post common stock, without the shares of Ralcorp common stock you own, on the “when-issued” market. On the first trading day following the distribution date, “when-issued” trading with respect to Post common stock will end and “regular-way” trading will begin. “Regular-way” trading transactions are settled by delivery of the securities against payment on the third business day after the transaction.

 

Ralcorp Common Stock

 

Beginning on or shortly before the record date and continuing up to and including through the distribution date, we expect that there will be two markets in Ralcorp common stock: a “regular-way” market and an “ex-dividend” market. Shares of Ralcorp common stock that trade on the “regular-way” market will trade with an entitlement to shares of Post common stock distributed pursuant to the distribution. Shares that trade on the ‘‘ex-dividend” market will trade without an entitlement to shares of Post common stock distributed pursuant to the distribution. Therefore, if you sell shares of Ralcorp common stock in the “regular-way” market up to and including through the distribution date, you will be selling your right to receive shares of Post common stock in the distribution. If you sell shares of Ralcorp common stock on the “ex-dividend” market, up to and including through the distribution date, you will still receive the shares of Post common stock that you would be entitled to receive pursuant to your ownership of the shares of Ralcorp common stock.

 

This information statement is being furnished by Ralcorp solely to provide information to shareholders of Ralcorp who will receive shares of Post common stock in the separation. It is not, and is not to be construed as, an inducement or encouragement to buy or sell any of our securities. We will not update the information in this information statement except in the normal course of our respective public disclosure obligations and practices.

 

Following the separation, we will be a separate, stand-alone public company and Ralcorp will own no more than 20% of our common stock. See “Unaudited Pro Forma Condensed Combined Financial Statements” and Note 16 of “Notes to Combined Financial Statements” for information concerning historical intercompany payments between us and Ralcorp.

 

For purposes of governing the ongoing relationships between Ralcorp and us after the separation and to provide for an orderly transition, Ralcorp and we have entered, or will enter prior to the separation into the agreements described in this section. Certain of the agreements summarized in this section have been included as exhibits to the registration statement of which this information statement forms a part, and the following summaries of those agreements are qualified in their entirety by reference to the agreements.

 

We intend to enter into a Separation and Distribution Agreement with Ralcorp before the distribution. The Separation and Distribution Agreement will set forth our agreements with Ralcorp regarding the principal actions needed to be taken in connection with our separation from Ralcorp. It will also set forth other agreements that govern certain aspects of our relationship with Ralcorp following the separation.

 

Business Separation and Internal Reorganization

 

The Separation and Distribution Agreement will provide that, on or prior to the distribution date:

 

 

The Separation and Distribution Agreement will also govern the ownership of intellectual property between us and Ralcorp as of the distribution date.

 

Representations and Warranties

 

In general, neither we nor Ralcorp expect to make any representations or warranties with respect to any of the transactions contemplated by the Separation and Distribution Agreement, including, with respect to Ralcorp’s representations and warranties, as to the value, condition, prospects or freedom from encumbrance of, or any other matter concerning any of our subsidiaries or the Post cereals business, the legal sufficiency of any instruments to convey title or assets, or the amount or nature of, or any other matter concerning the liabilities of the Post cereals business. Except as expressly set forth in the Separation and Distribution Agreement, all assets will be transferred on an “as is,” “where is” and “with all faults” basis.

 

The Distribution

 

The Separation and Distribution Agreement will govern the rights and obligations of us and Ralcorp regarding the proposed distribution, including with respect to the record date and distribution date, appropriate procedures in connection with the distribution and treatment of fractional shares. Ralcorp will cause the

distribution agent to distribute at least 80% of the issued and outstanding shares of our common stock to Ralcorp’s shareholders who hold Ralcorp shares as of the record date.

 

Conditions

 

The Separation and Distribution Agreement will provide that the distribution is subject to a number of conditions that must be satisfied or waived by Ralcorp in its sole discretion, as described in “The Separation — Conditions to the Distribution,” Ralcorp may, in its sole discretion, determine the distribution date and the terms of the distribution and may at any time prior to the completion of the distribution decide to abandon or modify the distribution.

 

Termination

 

The Separation and Distribution Agreement will provide that it may be terminated by and in the sole discretion of Ralcorp at any time prior to the effective time of the distribution.

 

Release of Claims

 

We and Ralcorp will agree to broad releases pursuant to which we will each release the other party, each subsidiary of the other party and their respective successors and assigns, and all persons who at any time prior to the distribution date have been directors, officers or employees of such other party and their respective heirs, executors, administrators, successors and assigns from any claims against any of them that exist or arise from any acts or events occurring or failing to occur or alleged to have occurred or to have failed to occur or any conditions existing on or alleged to have existed on or before the distribution date, including in connection with the transactions and all other activities to implement the distribution. These releases will be subject to certain exceptions set forth in the Separation and Distribution Agreement.

 

Indemnification

 

We will agree to indemnify Ralcorp and its subsidiaries and each of their respective affiliates, directors, officers, employees and agents and each of their heirs, executors, successors and assigns from any expenses and losses relating to, arising out of or due to:

 

 

Ralcorp will indemnify us and our subsidiaries and each of our and our subsidiaries’ respective affiliates, directors, officers, employees and agents and each of our and our subsidiaries’ heirs, executors, successors and assigns from any expenses and losses relating to, arising out of or due to:

 

 

The amount of any party’s indemnification obligations will be subject to reduction by any insurance proceeds received by the party being indemnified. The Separation and Distribution Agreement will also specify procedures with respect to claims subject to indemnification and related matters.

 

Business Opportunities

 

The Separation and Distribution Agreement will provide that neither we nor Ralcorp nor our respective affiliates will have any duty to refrain from engaging in the same or similar activities or lines of business as the other party or doing business with suppliers or customers of the other party, and both we and Ralcorp acknowledge that neither of us will have any duty to communicate or offer any business opportunities to the other.

 

Exchange of Information

 

The Separation and Distribution Agreement will provide that we and Ralcorp will exchange certain information reasonably required to comply with reporting, filing, audit, litigation, tax, regulatory and other obligations, subject to certain exceptions.

 

Dispute Resolution

 

As a general rule, we and Ralcorp will agree to arbitration in the event of a dispute, controversy or claim arising out of the Separation and Distribution Agreement, any related ancillary agreements or the transactions contemplated by these agreements.

 

Further Assurances

 

We and Ralcorp will agree to use commercially reasonable efforts to take all actions reasonably necessary or advisable to consummate and make effective the transactions contemplated by the Separation and Distribution Agreement, provided that neither party shall be obligated to pay any consideration or out-of-pocket expenses (other than de minimis fees), grant any concession or incur any liability to any third party.

 

Prior to the separation, we and Ralcorp will enter into a Shareholder’s and Registration Rights Agreement pursuant to which we will agree that, upon the request of Ralcorp, we will use our reasonable best efforts to effect the registration under applicable federal and state securities laws of any shares of our common stock retained by Ralcorp. In addition, Ralcorp will agree to vote any shares of our common stock that it retains immediately after the separation in proportion to the votes cast by our other shareholders. In connection with such agreement, Ralcorp will grant us a proxy to vote its shares of our common stock in such proportion. This proxy, however, will be automatically revoked as to a particular share upon any sale or transfer of such share from Ralcorp to a person other than Ralcorp, and neither the Shareholder’s and Registration Rights Agreement nor proxy will limit or prohibit any such sale or transfer.

 

Allocation of Taxes

 

We and Ralcorp will enter into a tax allocation agreement that will govern the parties’ respective rights, responsibilities and obligations with respect to tax liabilities and benefits, tax attributes, the preparation and filing of tax returns, the control of audits and other tax proceedings and other matters regarding taxes.

 

In general, under the Tax Allocation Agreement, except as described below, we will be responsible for:

 

 

Under the Tax Allocation Agreement, Ralcorp generally will be responsible for all other taxes of Ralcorp and its subsidiaries (including any taxes of Post and any of its subsidiaries for any tax period (or the portion thereof) that ends on or before the date of the distribution) to the extent that we are not responsible for such taxes under the Tax Allocation Agreement, as summarized above.

 

Our obligations under the Tax Allocation Agreement are not expected to be limited in amount or subject to any cap. Further, even if we will not be responsible for tax liabilities of Ralcorp and its subsidiaries under the Tax Allocation Agreement, we nonetheless could be liable under applicable tax law for such liabilities.

The Tax Allocation Agreement also will assign responsibilities for administrative matters, such as the filing of returns, payment of taxes due, retention of records and conduct of audits, examinations or similar proceedings. In addition, the Tax Allocation Agreement is expected to provide for cooperation and information sharing with respect to tax matters.

 

Preservation of the Tax-free Status of the Distribution

 

Ralcorp and we intend the separation and certain related transactions to qualify as tax-free transactions pursuant to which no gain or loss is recognized by Ralcorp or its shareholders for U.S. federal income tax purposes except to the extent of cash received in lieu of fractional shares. Ralcorp has received a private letter ruling from the IRS and expects to receive an opinion from its outside tax advisor to such effect. In connection with the ruling and the opinion, we made or will make, respectively, certain representations regarding our company and our business and Ralcorp made or will make, respectively, certain representations regarding it and its business.

 

We also will agree to certain restrictions that are intended to preserve the tax-free status of the separation and certain related transactions. We may take certain actions otherwise prohibited by these covenants if Ralcorp receives a private letter ruling from the IRS or if we obtain, and provide to Ralcorp, an opinion from a U.S. tax counsel or accountant of recognized national standing, in either case, acceptable to Ralcorp in its sole and absolute discretion to the effect that such action would not jeopardize the tax-free status of the separation and certain related transactions.

 

Under the Tax Allocation Agreement, we will be prohibited from taking or failing to take any action that prevents the distribution and certain related transactions from being tax-free, and for the two-year period following the separation, we will be subject to restrictions with respect to:

 

 

We will agree to indemnify Ralcorp and its affiliates against any and all tax-related liabilities incurred by them relating to the distribution to the extent caused by an acquisition of our stock or assets, or other actions of ours as summarized above. This indemnification applies even if Ralcorp has permitted us to take an action that would otherwise have been prohibited under the tax-related restrictions as described above.

 

We intend to enter into an Employee Matters Agreement with Ralcorp that will set forth our agreements with Ralcorp as to certain employment, compensation, labor and benefits matters.

 

The Employee Matters Agreement will provide for the allocation and treatment of assets and liabilities arising out of Ralcorp’s employee compensation and benefit programs in which our employees participated prior to the distribution. Following the separation, we will provide benefit plans and arrangements in which our employees will participate going forward. Generally, we will assume or retain sponsorship of, and liabilities relating to, employee compensation and benefit programs relating to our current and former employees and all employees who will be transferred to us from Ralcorp in connection with the separation.

Pursuant to the Employee Matters Agreement, we will generally recognize and credit service with us and Ralcorp for all employees who will become our employees following the separation. The employee savings investment plan (“SIP”) that will be maintained by us will accept eligible rollover distributions, including participant loans, from the Ralcorp SIP representing account balances of individuals who are our employees immediately on or after the separation, if elected by such employees in accordance with applicable law and the terms of the plans. Such rollover distributions will be in the form of cash and, as applicable, promissory notes with respect to loans. In general, pursuant to the Employee Matters Agreement, all liabilities relating to health and welfare coverage or claims and workers compensation claims submitted by (or, in the case such coverage is fully insured, incurred by) or on behalf of our employees or their covered dependents under the Ralcorp health and welfare plans on or before the distribution date will remain liabilities of Ralcorp, and all liabilities relating to health and welfare coverage or claims incurred by or on behalf of our employees or their covered dependents after the distribution date will be our liabilities.

 

The Employee Matters Agreement will provide for the treatment of Ralcorp equity awards. We expect that at the time of the distribution, the outstanding options to purchase Ralcorp stock, as well as any stock appreciation rights, restricted stock equivalent awards or other Ralcorp equity awards, held by Post’s current employees who remain Post employees after the distribution date, will be converted to equity awards that relate solely to Post common stock in a manner designed to reflect the intrinsic value of such awards at the time of separation. At the time of the distribution, the terms of the outstanding options, stock appreciation rights, restricted stock equivalent awards, and other Ralcorp equity award held by the current employees who remain Ralcorp’s employees after the distribution date, former Post employees, and Ralcorp’s former employees, will be appropriately adjusted to reflect the intrinsic value of such awards at the time of separation. In addition, existing performance criteria applicable to performance-based awards will be modified appropriately to reflect the separation.

 

 

We intend to enter into a Transition Services Agreement with Ralcorp, under which Ralcorp or certain of its subsidiaries will provide us with certain services for a limited time to help ensure an orderly transition following the separation.

 

We anticipate that under the Transition Services Agreement, Ralcorp will provide certain corporate and administrative services, including:

 

 

We expect that these services will be provided at cost, as determined by Ralcorp in a manner consistent with its cost accounting practices. We estimate the current cost will be approximately $20 million annually, with information technology representing approximately one-half of that amount. We expect to transition away from a majority of Ralcorp services within the first year after the distribution.

 

Under the planned Transition Services Agreement, we will release and indemnify Ralcorp and its affiliates for losses arising from or relating to the provision or use of any service or product provided under the Transition Services Agreement. We expect that the Transition Services Agreement will become effective on

the distribution date, and will remain in effect until the expiration of the last time period for the performance of services thereunder, which we expect generally to be no longer than 24 months from the distribution date.

 

We expect that both we and Ralcorp will be permitted to terminate the Transition Services Agreement if the other party breaches any of its significant obligations under the agreement and does not cure such breach within 30 days of receiving written notice from the other party.

 

We and Ralcorp will enter into certain manufacturing agreements, pursuant to which one party will manufacture certain products for the other party or for use by the other party as a component of its own products. These agreements will cover a range of products, and are intended to have arm’s-length terms. In addition, Ralcorp will act as our broker for international sales following the separation.

 

The following table sets forth our cash and cash equivalents and capitalization as of September 30, 2011:

 

 

The information below is not necessarily indicative of what our cash and cash equivalents and capitalization would have been had the separation, distribution and related financing transactions been completed as of September 30, 2011. In addition, it is not necessarily indicative of our future cash and cash equivalents and capitalization. This table should be read in conjunction with “Unaudited Pro Forma Condensed Combined Financial Statements,” “Selected Historical Condensed Combined Financial Data,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” and our audited combined financial statements and the notes thereto included elsewhere in this information statement.

 

 

 

 

There is currently no public market for our common stock. Subject to the consummation of the separation, our common stock has been approved for listing on the New York Stock Exchange under the symbol “POST.” We cannot assure you as to the price at which our common will trade after the separation (or, on a “when-issued” basis, before the separation). Until our common stock is fully distributed and an orderly market develops in our common stock, the price at which such stock trades may fluctuate significantly. In addition, the combined trading prices of our common stock and Ralcorp common stock held by shareholders after the separation may be less than, equal to or greater than the trading price of the Ralcorp common stock prior to the separation.

 

The shares of our common stock that will be distributed to Ralcorp’s shareholders will be freely transferable, unless the holder is considered an “affiliate” of ours under Rule 144 under the Securities Act. Persons who can be considered our affiliates after the separation generally include individuals or entities that directly, or indirectly through one or more intermediaries, control, are controlled by, or are under common control with, us, and may include certain of our officers and directors. As of January 13, 2012, after giving effect to the distribution, we estimate that our directors and executive officers will beneficially own 0.5 million shares of our common stock. See “Security Ownership of Certain Beneficial Owners and Management.” In addition, individuals who are affiliates of Ralcorp on the distribution date may be deemed to be affiliates of ours. Our affiliates may sell shares of our common stock received in the distribution only:

 

 

In general, under Rule 144 as currently in effect, an affiliate will be entitled to sell, within any three-month period commencing 90 days after the date the registration statement, of which this information statement is a part, is declared effective, a number of shares of our common stock that does not exceed the greater of:

 

 

Sales under Rule 144 are also subject to restrictions relating to manner of sale and the availability of current public information about us.

 

We will file registration statements on Form S-8 under the Securities Act to register 6.5 million shares of common stock issuable under our incentive stock plan, 3 million shares under our savings investment plan, and 1 million shares under each of the deferred compensation plan for key employees and executive savings investment plan, thus permitting the resale of such shares by non-affiliates in the public market without restriction under the Securities Act. The shares covered by the S-8 registration statements will include common stock underlying outstanding stock appreciation rights, as well as shares issuable for the current balances in the savings investment plan, deferred compensation plan and executive savings investment plan. Such registration statements become effective immediately upon filing.

 

In the future, we may adopt new stock option and other equity-based award plans and issue options to purchase shares of our common stock and other stock-based awards. We currently expect to file a registration statement under the Securities Act to register shares to be issued under these stock plans, and may also register additional shares under our savings investment plan from time to time. Shares issued pursuant to awards after the effective date of the registration statement, other than shares issued to affiliates, generally will be freely tradable without further registration under the Securities Act.

 

Except for our common stock distributed in the distribution, none of our equity securities will be outstanding on or immediately after the separation. See “Arrangements between Ralcorp and Post — Shareholder’s and Registration Rights Agreement” for a discussion of certain registration rights with respect to our common shares.

 

Post is a newly formed entity and, therefore, has not paid dividends in the past.

 

Currently, we do not expect to pay any cash dividends on our common stock for the foreseeable future. Moreover, if we determine to pay any dividend in the future, there can be no assurance that we will continue to pay such dividends.

 

The terms of our senior credit facilities and senior notes are expected to contain certain restrictions on our ability to declare or pay cash dividends, as discussed in “Description of Financing Transactions and Material Indebtedness.”

 

The following table presents our selected historical condensed combined financial data. The statement of operations data and statement of cash flows data for the fiscal years ended September 30, 2011, 2010 and 2009 and the balance sheet data as of September 30, 2011 and 2010 are derived from our audited combined financial statements included elsewhere in this information statement. The statement of operations data for the two months ended September 30, 2008 and the seven months ended August 4, 2008 and the balance sheet data as of September 30, 2009 and September 30, 2008 are derived from our unaudited combined financial statements that are not included in this information statement. The statement of operations data and statement of cash flows data for the years ended December 29, 2007 and December 30, 2006 and the balance sheet data as of December 29, 2007 and December 30, 2006 are derived from our audited combined financial statements that are not included in this information statement.

 

The selected historical condensed combined financial and other operating data presented below should be read in conjunction with our audited combined financial statements and accompanying notes and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included elsewhere in this information statement. Our combined financial information may not be indicative of our future performance and does not necessarily reflect what our financial position and results of operations would have been had we operated as an independent, publicly traded company during the periods presented, including changes that will occur in our operations and capitalization as a result of the separation from Ralcorp and the distribution. For more information regarding these anticipated changes, see “Unaudited Pro Forma Condensed Combined Financial Statements” included elsewhere in this information statement.

 

 

 

 

The following unaudited pro forma condensed combined financial statements should be read in conjunction with the section entitled “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our historical financial statements and accompanying notes included in this information statement.

 

The following unaudited pro forma condensed combined financial statements are based upon the historical combined financial information of the Post cereals business. The unaudited pro forma condensed combined statement of operations for the fiscal year ended September 30, 2011, and the unaudited pro forma condensed combined balance sheet as of September 30, 2011 have been derived from the audited historical consolidated financial statements of the Post cereals business, which are included elsewhere in this information statement. Our historical financial statements include allocations of certain expenses from Ralcorp, which may not be representative of the costs we will incur in the future as an independent, publicly traded company.

 

The unaudited pro forma condensed combined statement of operations for the year ended September 30, 2011 reflects our results as if the separation and related transactions described below had occurred as of October 1, 2010. The unaudited pro forma condensed combined balance sheet as of September 30, 2011 reflects our financial position as if the separation and related transactions described below had occurred on that date. The unaudited pro forma condensed consolidated financial statements have been prepared to reflect the separation and other transaction related items, including:

 

 

No pro forma adjustments have been included for the Transition Services Agreement, as we expect that the costs for the Transition Services Agreement will be comparable to those included in our historical financial statements. Likewise, no pro forma adjustments have been included related to the Tax Allocation Agreement, the Employee Matters Agreement or certain commercial agreements between us and Ralcorp because we do not expect those adjustments to have a significant effect on our financial statements. Earnings (loss) per share calculations are based on the pro forma weighted-average shares that would have been outstanding during the year ended September 30, 2011 (34.5 million shares) determined by applying the one-for-two distribution ratio to Ralcorp’s basic weighted-average shares outstanding for the corresponding periods. The assumptions used and pro forma adjustments derived from such assumptions are based on currently available information and we believe such assumptions are reasonable under the circumstances.

 

The operating expenses reported in our carve-out historical statements of operations include allocations of certain Ralcorp costs. These costs include allocation of Ralcorp corporate costs, including information technology, procurement, credit, treasury, legal, finance and other functions. We estimate that our corporate general and administrative expenses will increase annually by approximately $15 million, excluding non-cash expenses, as a result of additional costs required to function as an independent publicly traded company. In addition, we estimate we will incur non-recurring costs of approximately $15.0 to $20.0 million associated with the transition to an independent public company during the 24-month period beginning on the distribution date. We have not adjusted the accompanying unaudited pro forma condensed combined statements of operations to reflect these costs and expenses.

As of September 30, 2011, Post participated in Ralcorp’s derivative instrument program involving commodity contracts (options, futures, and swaps) used as cash flow or economic hedges on raw material and fuel purchases. The fair value of the derivative instruments have not been reflected in Post’s historical balance sheet because Post is not legally a party to the underlying derivative instruments and because there are no significant instruments that are allocable only to Post. As of September 30, 2011, the amount of Ralcorp’s net derivative liability that was related to Post was approximately $10 million. If this amount, together with net deferred gains on closed derivatives, had been settled with Ralcorp as of September 30, 2011, Post would have paid approximately $5.6 million. That amount consists of $7.1 million of losses related to economic hedges already reflected in Post’s statement of operations and approximately $1.5 million of deferred gains related to cash flow hedges not yet reflected in Post’s statement of operations. No adjustments related to such hypothetical settlement have been reflected in the unaudited pro forma condensed combined financial statements.

 

The unaudited pro forma condensed combined financial statements are not necessarily indicative of our results of operations or financial condition had the distribution and our anticipated post-separation capital structure been completed on the dates assumed. Also, they may not reflect the results of operations or financial condition which would have resulted had we been operating as an independent, publicly owned company during such periods.

 

Unaudited Pro Forma Condensed Combined Statement of Operations

 

 

See accompanying Notes to Unaudited Pro Forma Condensed Combined Financial Information.

Unaudited Pro Forma Condensed Combined Balance Sheet