<PAGE>   1

================================================================================
 
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549
                         ------------------------------
 
                                   FORM 10-K
              [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF
                      THE SECURITIES EXCHANGE ACT OF 1934
                  FOR THE FISCAL YEAR ENDED SEPTEMBER 30, 1996
 
           [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
                        SECURITIES EXCHANGE ACT OF 1934
                          COMMISSION FILE NO. 1-12766
 
                             RALCORP HOLDINGS, INC.
            (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS ARTICLES)
 
                   MISSOURI                                     43-1664297
           (STATE OF INCORPORATION)                          (I.R.S. EMPLOYER
                                                          IDENTIFICATION NUMBER)
 
                               800 MARKET STREET
                                   SUITE 2900
                           ST. LOUIS, MISSOURI 63101
                                 (314) 877-7000
  (ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
                   REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
 
                         ------------------------------
 
          SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:
 
<TABLE>
<CAPTION>
                                                         NAME OF EACH EXCHANGE
                     TITLE OF EACH CLASS                  ON WHICH REGISTERED
            -------------------------------------   -------------------------------
            <S>                                     <C>
            Common Stock, $.01 par value.........    New York Stock Exchange, Inc.
            Common Stock Purchase Rights.........    New York Stock Exchange, Inc.
</TABLE>
 
        SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT: NONE
 
      Registrant has filed all reports required to be filed by Section 13 or
15(d) of the Securities Exchange Act of 1934 during the preceding 12 months and
has been subject to such filing requirements for the past 90 days. Yes X No  _
 
     Indicate by check mark if disclosure of delinquent filers pursuant to item
405 of Regulation S-K is not contained herein and will not be contained, to the
best of Registrant's knowledge, in the definitive proxy statement incorporated
by reference in Part III of this Form 10-K or any amendment of this Form 10-K.
[X]
 
     Aggregate market value of the voting stock held by nonaffiliates of the
registrant $631,597,832 based upon the closing market price on November 29,
1996. Excluded from this figure is the voting stock held by Registrant's
Directors, who are the only persons known to Registrant who may be considered to
be its "affiliates" as defined under Rule 12b-2.
 
     Number of shares of Common Stock, $.01 par value, outstanding as of close
of business on December 27, 1996: 32,894,084.
 
                      DOCUMENTS INCORPORATED BY REFERENCE
================================================================================
<PAGE>   2
 
                                     PART I
 
ITEM 1. BUSINESS
 
     Ralcorp Holdings, Inc. is a Missouri corporation incorporated on January
19, 1994. Its principal executive offices are located at 800 Market Street,
Suite 2900, St. Louis, Missouri 63101. The term "Company" and "Ralcorp" as used
herein refer to Ralcorp Holdings, Inc. and its consolidated subsidiaries.
 
     The Company is primarily engaged in the manufacturing, distribution and
marketing of private label and branded ready-to-eat cereal products and snacks,
branded and private label crackers and cookies, and branded baby food and
juices, and operates the Keystone, Arapahoe Basin and Breckenridge resorts in
Summit County, Colorado.
 
     Information under the following Items in this Report are incorporated into
this Item 1: Item 6; and Item 7.
 
                          RECENT BUSINESS DEVELOPMENTS
 
     The Company is the successor to, and owns and operates substantially all
of, the ready-to-eat cereal and snack business conducted in the Western
Hemisphere (the "Cereal Business"), "BEECH-NUT" baby food business (the "Baby
Food Business"), private label and branded cracker and cookie business (the
"Cracker and Cookie Business") and Keystone, Arapahoe Basin and Breckenridge
resorts (the "Resort Operations"); (collectively, the "Ralcorp Businesses")
formerly operated by Ralston Purina Company ("Ralston"). During the fiscal year,
the Company sold its coupon redemption business (the "Coupon Redemption
Business").
 
     On July 23, 1996, the Company announced that it had reached a definitive
agreement to sell its Resort Operations to Vail Resorts, Inc. ("Vail") for stock
and assumed debt. As of December 26, 1996, the proposed sale is being reviewed
by the United States Department of Justice ("DOJ") under the Hart-Scott-Rodino
Antitrust Improvements Act ("HSR Act"). Unless extended by the parties, the
definitive agreement expires on January 10, 1997. The Company believes the DOJ
will make a decision whether to oppose the transaction or allow the parties to
consummate the transaction prior to that date. The Company values the purchase
price in excess of $310 million. Vail will pay for the ski resorts by assuming
$165 million in Ralcorp debt and issuing Vail common stock to the Company.
 
     On August 14, 1996, the Company announced it reached a definitive agreement
to sell its branded ready-to-eat cereal and snack businesses (the "Branded
Businesses") to General Mills, Inc. for General Mills common stock and the
assumption of Ralcorp debt together valued at $570 million. On August 19, 1996,
General Mills and Ralcorp each filed Premerger Notification and Report Forms
pursuant to the HSR Act with the DOJ and the Federal Trade Commission ("FTC").
On September 18, 1996, Ralcorp and General Mills each received a request for
additional information under the HSR Act from the FTC. On December 9, 1996,
General Mills signed an agreement (the "Consent Agreement") relating to a
proposed consent order with the FTC (the "Proposed FTC Order"). The FTC accepted
the Consent Agreement for public comment on December 24, 1996, at which time the
FTC granted early termination of the required waiting period under the HSR Act
with respect to the Merger.
 
     In order to effectuate the sale of the Branded Business, the Company plans
to spin-off to its shareholders a newly formed company containing all of its
businesses other than the Branded Business. The spin-off will be effectuated
through the distribution of one share of stock in the newly formed company for
each share of Ralcorp common stock owned on the record date for the spin-off.
The Company will distribute an Information Statement describing the newly formed
company. Immediately after the spin-off, the Company will merge with a
subsidiary of General Mills. The merger will be effectuated by exchanging each
share of Ralcorp common stock for a fractional share of General Mills common
stock. The Company will distribute a proxy statement wherein it will request the
Company's shareholders approve the above described spin-off and merger. The
spin-off and merger transactions are conditioned on the receipt of shareholder
approval. The Company anticipates holding a special meeting of shareholders on
January 31, 1997. Documents relating thereto will be mailed to shareholders
beginning on December 30, 1996.
 
                                        1
<PAGE>   3
 
     On September 27, 1996, the Company announced the resignation of Richard A.
Pearce as Co-Chief Executive Officer and President and Director of the Company.
On the same day, the Company announced that Joe R. Micheletto was appointed sole
Chief Executive Officer and President of the Company in addition to his position
as Director. Previously Mr. Micheletto served as the Company's Co-Chief
Executive Officer and Chief Financial Officer and Director.
 
     On October 14, 1996, the Company announced that Susan P. Widham was
appointed Corporate Vice President and President of Beech-Nut Nutrition
Corporation and Ronald D. Wilkinson was appointed Corporate Vice President and
Director, Product Supply for the Ralston Foods cereal business.
 
          OTHER INFORMATION PERTAINING TO THE BUSINESS OF THE COMPANY
 
TRADEMARKS
 
     The Company owns a number of trademarks that it considers substantially
important to its business, including "RALSTON", "CHEX", "CHEX MIX", "COOKIE
CRISP", "BEECH-NUT", "STAGES", "KEYSTONE", "BRECKENRIDGE" and "ARAPAHOE BASIN".
 
SEGMENTS
 
     The Company is presently comprised of the business segments: Consumer Foods
and Resort Operations.
 
CONSUMER FOODS
 
     For each of the last three fiscal years, Consumer Foods has accounted for
approximately 90% of the sales of the Company. Ralcorp's principal products in
its Consumer Foods segment are ready-to-eat cereals under various brand names
including "CHEX" and "COOKIE-CRISP," various private label cereals produced for
grocery retailers, snacks consisting of the cereal based "CHEX MIX" brand,
specialty cracker products under the "RY-KRISP" brand, various private label
crackers and cookies, and prepared baby foods and baby juices under the
"BEECH-NUT" brand. The majority of the sales volume of the Consumer Foods
segment is to supermarkets and other grocery retailers. Sales of the Consumer
Foods segment tend to be somewhat seasonal, with historically strong fall and
winter periods associated with "CHEX" party mix holiday promotions.
 
RESORT OPERATIONS
 
     For each of the last three fiscal years, sales generated by the Resort
Operations have accounted for approximately 10% of the sales of the Company. The
Resort Operations consist of the Keystone, Arapahoe Basin and Breckenridge
resorts located in Summit County, Colorado. Sales of the Resort Operations
segment are highly seasonal, with sales primarily occurring during the winter
ski season, with inconsequential off-season sales. In recent years, however,
management has increased its efforts to increase the number of off-season
visitors, through special promotional activities during the off-season and the
construction of a multi-use convention facility for the attraction of
conventions throughout the year. Performance of the Resort Operations segment is
highly subject to weather conditions, but management, through expansion of snow-
making capabilities and night skiing opportunities, has been able to increase
the number of skier days at the Keystone Resort in recent periods. Ralcorp has
formed a joint venture with Intrawest Corporation to develop the undeveloped
real estate in the Keystone Resort.
 
DISTRIBUTION SYSTEM
 
     Branded cereals, private label cereals and branded snacks are warehoused in
seven independent warehouse facilities and shipped to customers principally via
independent truck lines. These products are marketed primarily through food
brokers to grocery wholesalers, retail chains, mass merchandisers, warehouse
club outlets and other customers.
 
                                        2
<PAGE>   4
 
     Principally, Beech-Nut products are shipped directly to accounts'
warehouses. One independent warehouse facility is used in California. Beech-Nut
products are marketed to retailers by a direct sales force in the metropolitan
New York and Northern New Jersey areas, while a broker network is used in the
remaining markets.
 
     Private label crackers and private label cookies are manufactured in one
location and shipped directly to accounts' warehouses. Branded crackers are
manufactured at another location and distributed through a direct store
distribution network.
 
COMPETITION
 
     The Company's businesses face intense competition from large branded
cereal, cracker and cookie manufacturers, highly competitive private label
cereal, cracker and cookie manufacturers, and large branded baby food
manufacturers. Top branded ready-to-eat cereal competitors include Kellogg,
General Mills, Kraft General Foods and Quaker. In the first half of calendar
year 1996, major branded producers significantly reduced wholesale prices of
many branded ready-to-eat cereal products and began advertising and promotion
spending to publicize such decreases. The result has been a dramatic drop in
earnings of the Cereal Business. The Baby Food Business is believed to currently
rank second in sales for baby food products and its top competitor, Gerber
Products Company, produces about 68% of branded baby foods sold in the United
States. Recently, Gerber announced it intends to alter some of its product
formulations to eliminate or reduce added starch and sugar. The Baby Food
Business advertising has emphasized, for a number of years, the absence of added
sugar and starch in many of its Beech-Nut baby food products. The Cracker and
Cookie Business faces intense competition from large branded manufacturers such
as Nabisco and Keebler/Sunshine who possess approximately 36% and 21%,
respectively, of the branded cracker category and similar shares in the cookie
category (on a volume basis). In addition, private label cracker and cookie
manufacturers such as BakeLine, Wortz and Midwest Baking provide significant
competition in the store brand segment.
 
     The industries in which the Company's businesses compete are highly
sensitive to both pricing and promotion. Competition is based upon product
quality, price, effective promotional activities, and the ability to identify
and satisfy emerging consumer preferences. These industries are expected to
remain highly competitive in the foreseeable future. Future growth opportunities
for the Company's businesses are expected to depend on Ralcorp's ability to
implement strategies for competing effectively in all of its businesses,
primarily the Cereal Business, including strategies relating to enhancing the
performance of its employees, maintaining effective cost control programs,
developing and implementing methods for more efficient manufacturing and
distribution operations, and developing successful new products, while at the
same time maintaining aggressive pricing and promotion of its products.
 
     The ski industry is highly competitive. The Resort Operations compete with
mountain resort areas in the United States, Canada and Europe for destination
guests and with numerous ski areas in Colorado for the day skier. The Company
also competes with other worldwide recreation resorts, including warm weather
resorts, for the vacation guest. The Resort Operations' major U.S. competitors
include the Utah ski areas, the Lake Tahoe ski areas in California and Nevada,
the New England ski areas and the other major Colorado ski areas, including
Copper Mountain, Vail, Telluride, Steamboat Springs, Winter Park, Loveland and
the Aspen resorts. Total skier days generated by all United States ski areas
have increased by a total of only 2% since the 1985-86 ski season which also has
increased competition for the vacation guest. The competitive position of the
Resort Operations is dependent upon many diverse factors such as proximity to
population centers, availability and cost of transportation to the areas,
including direct flight availability by major airlines, pricing, snowmaking
facilities, type and quality of skiing offered, duration of the ski season,
prevailing weather conditions, the number, quality and price of related services
and lodging facilities, and the reputation of the areas. In addition to
competition with other mountain and warm weather resorts for the vacation guest,
the Resort Operations also face competition for day skiers from nearby
population centers from varied alternative leisure activities, such as
attendance at movies, sporting events and participation in alternative indoor
and outdoor recreational activities.
 
                                        3
<PAGE>   5
 
EMPLOYEES
 
     Ralcorp employs approximately 6,400 people in the United States, including
approximately 2,300 seasonal employees utilized primarily in the Resort
Operations segment. Approximately 16% of the Ralcorp personnel are covered by
ten union contracts which terminate at various times from March 2, 1997 to April
5, 1998.
 
POTENTIAL ADVERSE EFFECTS OF ECONOMIC SLOWDOWN
 
     Because the Resort Operations derive a significant portion of its revenues
from the worldwide leisure market, an economic recession or other significant
economic slowdown could adversely affect the Company's business. Although,
historically, economic downturns have not had an adverse impact on the Company's
operating results, there can be no assurance that a decrease in the amount of
discretionary spending by the public in the future would not have an adverse
effect on the Company's business.
 
RAW MATERIALS
 
     The principal raw materials used in the Company's businesses are grain and
grain products, flour, sugar, fruits and vegetables. The Company purchases such
raw materials from local, regional, national and international suppliers. The
cost of raw materials used in the Company's products may fluctuate widely due to
weather conditions, government regulations, economic climate, or other
unforeseen circumstances. During the past fiscal year certain key raw materials
were at historically high prices. Agricultural products represent 30% to 48% of
the Company's cost of goods sold in fiscal 1996. The cost of packaging supplies,
predominately paper based, have increased dramatically over the past two years.
Packaging prices represent 23% to 42% of the Company's cost of goods sold in
fiscal 1996. From time to time the Company will enter into supply contracts for
periods up to twelve months to secure favorable pricing for ingredient and
packaging supplies.
 
GOVERNMENTAL REGULATION; ENVIRONMENTAL MATTERS
 
     The operations of the Ralcorp Businesses are subject to regulation by
various federal, state and local governmental entities and agencies. As a
producer of goods for human consumption, such operations are subject to
stringent production and labeling standards.
 
     The operations of the Ralcorp Businesses, like those of similar businesses,
are subject to various federal, state and local laws and regulations with
respect to environmental matters, including air and water quality, underground
fuel storage tanks, waste handling and disposal and other regulations intended
to protect public health and the environment. Certain Ralcorp Businesses have
received notices from the United States Environmental Protection Agency that
they have been identified as a "potential responsible party" (PRP), under the
Comprehensive Environmental Response, Compensation and Liability Act, as amended
("CERCLA"), and Ralcorp may be required to share in the cost of cleanup with
respect to one disposal site. Under applicable law, Ralcorp's liability, if any,
for the cleanup of the disposal site may be joint and several with all PRPs at
this site. Management reviews a number of items to determine if the remediation
associated with environmental matters is expected to be material to Ralcorp
including, but not limited to, the stage of each proceeding; whether other
parties have been designated as possibly responsible (including other PRPs) and
the financial strength of such other parties; the nature and volume of hazardous
material alleged to be located at a site; Ralcorp's alleged volumetric
contribution to a site; the contemplated remedy for a site; any defenses or
third party claims Ralcorp may have; indemnification arrangements with third
parties; the number of years over which remediation costs will be distributed;
reports of experts (internal or external); and appropriate governmental opinions
on the remediation of a site. While it is difficult to quantify with certainty
the potential financial impact of actions regarding expenditures for
environmental matters, particularly remediation, shared cleanup costs at CERCLA
sites, and future capital expenditures for environmental control equipment, in
the opinion of management, based upon the information currently available, the
ultimate liability arising from such environmental matters, taking into account
established accruals for estimated liabilities, should not have a material
effect on Ralcorp's capital expenditures, earnings and competitive position.
 
                                        4
<PAGE>   6
 
ITEM 2. PROPERTIES.
 
     Ralcorp's principal properties are its manufacturing locations. Shown below
are the locations of the principal properties which will be owned by Ralcorp
following the Distribution. Ralcorp leases its principal executive offices and
research and development facilities in St. Louis, Missouri. The management of
Ralcorp believes its facilities are suitable and adequate for the purposes for
which they are used and are adequately maintained.
 
<TABLE>
<CAPTION>
  CEREAL PLANTS      CRACKER AND COOKIE PLANTS     BABY FOOD PLANTS                SKI RESORTS
-----------------    -------------------------     ----------------     ---------------------------------
<S>                  <C>                           <C>                  <C>
Battle Creek, MI       Minneapolis, MN             Canajoharie, NY      Keystone, Summit County, CO
Cedar Rapids, IA       Princeton, KY               Fort Plain, NY       Breckenridge, Summit County, CO
Lancaster, OH                                                           Arapahoe Basin, Summit County, CO
Sparks, NV
</TABLE>
 
     With respect to the Resort Operations, Ralston Resorts, Inc. has been
granted the right to use approximately 3,156 acres, 5,571 acres and 825 acres of
federal land under the terms of permits with the Forest Service for
Breckenridge, Keystone and Arapahoe Basin, respectively. Both the Breckenridge
permit and the Arapahoe Basin permit expire on December 31, 2029, while the
Keystone permit expires on December 31, 2032. Each of the permits is terminable
by the Forest Service if required for the public interest. While the Company
believes that its relationship with the Forest Service is good, and to the
Company's knowledge no recreational Special Use Permit or Term Special Use
Permit for any major ski resort has ever been terminated by the Forest Service,
a termination of any of the Resort Operations' permits would have a material
adverse effect on the business and operations of the Company.
 
ITEM 3. LEGAL PROCEEDINGS.
 
     Ralcorp is currently a party to a number of legal proceedings in various
state and federal jurisdictions arising out of the operations of its businesses.
These proceedings are in varying stages and some involve highly complex
questions of law and fact.
 
     On January 4, 1993, Ralston Purina, Ralcorp's former parent, was served
with the first of nine substantively identical actions currently pending in the
United States District Court for the District of New Jersey. The suits have been
consolidated and styled In Re Baby Food Antitrust Litigation, No. 92-5495 (NHP).
The consolidated proceeding is a certified class action by and on behalf of all
direct purchasers of baby foods (other than the defendants and governmental
entities), alleging that the Beech-Nut baby food business (and its predecessor,
Nestle Holdings, Inc.) together with Gerber Products Company and H. J. Heinz
Company, conspired to fix, maintain and stabilize the prices of baby foods
during the period January 1, 1975 to August 31, 1992, and seeking treble
damages. On January 19 and 21, 1993, Ralston Purina was served with two class
actions on behalf of indirect purchasers (consumers) of baby food in California,
which contain substantively identical charges. These actions have been
consolidated in the Superior Court for the County of San Francisco and styled
Bruce, et al. v. Gerber Products Company, et al., No. 94-8857. On January 19,
1993, Ralston Purina was served with a similar action filed in Alabama state
court on behalf of indirect purchasers of baby food in Alabama, styled Johnson,
et al. v. Gerber Products Company et al., No. 93-L-0333-NE. Both state actions
allege violations of state antitrust laws and are substantively identical to
each other. Similar state actions may be filed in states having laws permitting
suits by indirect purchasers. Ralston Purina and Ralcorp have agreed in the
reorganization agreement entered into in connection with the 1994 Spin-off of
Ralcorp from Ralston Purina Company (the "Reorganization Agreement") that all
expenses related to the above antitrust matters will be shared equally, but that
Ralcorp's liability for any settlement or judgment will not exceed $5 million.
 
     Except as noted, many of the foregoing matters are in preliminary stages,
involve complex issues of law and fact and may proceed for protracted periods of
time. Based upon a review of the petitions in the above antitrust matters, it
appears that those actions contain questionable allegations and that there are
numerous meritorious defenses. The amount of alleged liability, if any, from
these proceedings cannot be determined with certainty; however, in the opinion
of Ralcorp management, based upon the information presently known,
 
                                        5
<PAGE>   7
 
as well as upon the limitation of its liabilities set forth in the
Reorganization Agreement, the ultimate liability of Ralcorp, if any, arising
from the pending legal proceedings, as well as from asserted legal claims and
known potential legal claims which are probable of assertion, taking into
account established accruals for estimated liabilities, should not be material.
 
ITEM 4. SUBMISSION OF MATTERS TO VOTE OF SECURITY HOLDERS
 
     There were no matters submitted to the security holders during the fourth
quarter of fiscal year 1996.
 
ITEM 4(A). EXECUTIVE OFFICERS OF THE REGISTRANT.
 
<TABLE>
<S>                             <C>    <C>
Joe R. Micheletto.............    60   Chief Executive Officer and President of Ralcorp since
                                       September, 1996. Previously he was named Co-Chief
                                       Executive Officer and Chief Financial Officer of Ralcorp
                                       in 1994. He served as Vice President and Controller of
                                       Ralston Purina Company from 1985 to 1994, and as Chief
                                       Executive Officer of Ralston Purina's Keystone Resorts
                                       from 1991 to 1994.
Kevin J. Hunt.................    45   Corporate Vice President and President of Bremner since
                                       October 1995. Previously, he was named Executive Vice
                                       President and President of Bremner, Inc. in 1994. Mr.
                                       Hunt joined Ralston Purina in 1985. He was named
                                       Director of Marketing for Continental Baking Company in
                                       1988. In 1992, he was named Director of Planning,
                                       Corporate for Ralston Purina and was named President of
                                       Bremner, Inc. for Ralston Purina in 1993.
Robert W. Lockwood............    52   Corporate Vice President, General Counsel and Secretary
                                       of Ralcorp since 1994. Mr. Lockwood joined Ralston
                                       Purina in 1976. In 1981, he was named Associate Counsel
                                       and Assistant Secretary of Ralston Purina Company and in
                                       1989, he was named Vice President, Senior Counsel and
                                       Assistant Secretary of Ralston.
James A. Nichols..............    47   Corporate Vice President and President of Ralston Foods
                                       since December 1995. Previously, he was named Corporate
                                       Vice President of Ralcorp and President, Beech-Nut
                                       Nutrition Corporation in 1994. Mr. Nichols joined
                                       Ralston Purina in 1975. In 1985, he was named Vice
                                       President and Director of Marketing -- Cereal of Ralston
                                       Purina. In 1989, he was named President, Beech-Nut
                                       Nutrition Corporation of Ralston.
David P. Skarie...............    49   Corporate Vice President and Director of Customer
                                       Development of Ralcorp since 1994. Mr. Skarie joined
                                       Ralston Purina in 1986. In 1988, he was named National
                                       Sales Director, General Merchandise of Ralston Purina
                                       Company; in 1990, he was named Vice President, Eastern
                                       Division Sales of Ralston; in 1991, he was named Vice
                                       President, Field Sales of Ralston; and in 1993, he was
                                       named Vice President -- Director, Customer Development,
                                       Human Foods of Ralston.
</TABLE>
 
                                        6
<PAGE>   8
 
<TABLE>
<S>                             <C>    <C>
Susan P. Widham...............    39   Corporate Vice President and President, Beech-Nut
                                       Nutrition Corporation since 1996. Ms. Widham joined
                                       Ralston Purina in 1985. In 1991, she was named Group
                                       Director, Marketing for Beech-Nut Nutrition Corporation;
                                       and in 1992, was named Director of Marketing for
                                       Beech-Nut. In 1994, she was named Vice President,
                                       Director of Marketing for Beech-Nut; and in 1995, was
                                       named Executive Vice President, Director of Marketing
                                       for Beech- Nut. In December, 1995, she was named
                                       Executive Vice President and Director of Branded Foods
                                       Marketing for Ralston Foods.
Ronald D. Wilkinson...........    46   Corporate Vice President and Director, Product Supply of
                                       Ralston Foods since 1996. Mr. Wilkinson joined Ralcorp
                                       in November, 1995. In 1991, he was named Director,
                                       Engineering U.S. Cereals for The Quaker Oats Company;
                                       and in 1992, was named Vice President, Supply Chain U.S.
                                       Cereals for The Quaker Oats Company. In November, 1995,
                                       Mr. Wilkinson joined Ralcorp as Executive Vice President
                                       and Director, Manufacturing for Ralston Foods; and in
                                       June, 1996, was named Executive Vice President and
                                       Director, Product Supply for Ralston Foods.
</TABLE>
 
(Ages are as of December 31, 1996)
 
                                    PART II
 
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED MATTERS.
 
     The Company's common stock (RAH) is traded on the New York Stock Exchange.
There were 20,462 common shareholders of record on December 3, 1996. The Company
does not intend to begin paying cash dividends in fiscal 1997.
 
     The following table sets forth, for the fiscal quarters indicated (ended
December 31, March 31, June 30 and September 30), the range of high and low sale
prices of Ralcorp Common Stock as reported on the NYSE Composite Tape.
 
<TABLE>
<CAPTION>
                                                                            RALCORP COMMON STOCK
                                                                      --------------------------------
                          FISCAL QUARTER                                HIGH        LOW      DIVIDENDS
------------------------------------------------------------------    --------    --------   ---------
<S>                                                                   <C>         <C>        <C>
1995
  1st Quarter.....................................................     $23  5/8    $18  5/8    $  --
  2nd Quarter.....................................................      25  1/4     21  5/8       --
  3rd Quarter.....................................................      25          21  1/2       --
  4th Quarter.....................................................      24  3/4     21  7/8       --
1996
  1st Quarter.....................................................     $27  3/8    $22  5/8    $  --
  2nd Quarter.....................................................      28  1/4     23  3/8       --
  3rd Quarter.....................................................      25          20  3/8       --
  4th Quarter.....................................................      22  1/2     19  3/4       --
</TABLE>
 
                                        7
<PAGE>   9
 
ITEM 6. SELECTED FINANCIAL DATA.
 
                             RALCORP HOLDINGS, INC.
 
                          FIVE YEAR FINANCIAL SUMMARY
                           STATEMENT OF EARNINGS DATA
 
<TABLE>
<CAPTION>
                                                             FOR THE YEAR ENDED SEPTEMBER 30,
                                                    --------------------------------------------------
                                                      1996        1995       1994      1993      1992
                                                    --------    --------    ------    ------    ------
                                                    (IN MILLIONS, EXCEPT PERCENTAGE DATA)
<S>                                                 <C>         <C>         <C>       <C>       <C>
Net Sales.......................................... $1,027.4    $1,013.4    $987.0    $902.8    $870.6
Depreciation and Amortization......................     46.4        46.7      44.2      35.3      29.2
(Loss) Earnings before Income Taxes,
  Interest Expense and Cumulative Effect of
  Accounting Changes...............................   (46.3)        83.0     100.2      87.7      63.5
  As a Percent of Sales............................    (4.5)%        8.2%     10.2%      9.7%      7.3%
(Loss) Earnings before Income Taxes and Cumulative
  Effect of Accounting Changes..................... $ (73.1)    $   54.8    $ 87.9    $ 85.1    $ 61.2
Income Taxes.......................................   (26.3)        21.4      34.3      33.2      23.0
(Loss) Earnings before Cumulative Effect of
  Accounting Changes...............................   (46.8)        33.4      53.6      51.9      38.2
Net (Loss) Earnings(a,b,c,d).......................   (46.8)        33.4      53.6      42.6      38.2
</TABLE>
 
                               BALANCE SHEET DATA
 
<TABLE>
<CAPTION>
                                                                      SEPTEMBER 30,
                                                    --------------------------------------------------
                                                      1996        1995       1994      1993      1992
                                                    --------    --------    ------    ------    ------
<S>                                                 <C>         <C>         <C>       <C>       <C>
Working Capital(e)................................. $   92.4    $  104.7    $ 81.8    $ 54.8    $ 57.2
Property at Cost, Net..............................    322.6       417.1     416.2     412.6     352.2
  Additions (during the period)....................     60.2        59.3      38.2      50.8      64.3
  Depreciation (during the period).................     43.5        44.1      41.7      34.0      28.5
Total Assets.......................................    627.1       716.2     700.1     626.4     519.9
Long-Term Debt.....................................    376.6       395.4     389.4      30.3      27.9
Shareholders' Equity...............................    107.4       162.4     141.2
Ralston Equity Investment..........................                                    474.4     380.0
</TABLE>
 
-------------------------
(a) Includes, in 1996, a $109.5 pre-tax impairment charge ($68.8 after taxes)
    related to its private label ready-to-eat cereal and consumer hot cereal
    operations.
 
(b) Includes, in 1996, a $16.5 pre-tax restructuring charge ($10.4 after taxes)
    to recognize the costs related to the restructuring of its ready-to-eat
    cereal subsidiary, Ralston Foods, Inc. The original charge of $20.7 was
    taken in the third quarter of 1996. In the fourth quarter of 1996, Ralcorp
    reversed $4.2 of that original amount. This reversal was offset by $4.0
    ($2.5 after taxes) of transaction fees related to the proposed sale of the
    Resort Operations.
 
(c) Includes, in 1995, $21.9 pre-tax nonrecurring charges ($13.6 after taxes)
    related to exit of industrial oats and oats milling operations and
    impairment of the consumer hot cereal business.
 
(d) The cumulative effect of accounting changes for postretirement benefits
    other than pensions and for income taxes reduced earnings by $9.3, after
    taxes, in the year ended September 30, 1993.
 
(e) Excludes cash and current maturities of long-term debt, where applicable.
 
                                        8
<PAGE>   10
 
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
 
                             RALCORP HOLDINGS, INC.
          MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
                           AND RESULTS OF OPERATIONS
 
     This discussion summarizes the significant factors affecting the
consolidated operating results, financial condition and liquidity and capital
resources of Ralcorp Holdings, Inc. (Company). This discussion should be read in
conjunction with the Business Segment Information, Consolidated Financial
Statements and Notes to Consolidated Financial Statements.
 
     The Company operates in two business segments, the "Consumer Foods"
segment, comprised of the cereals and snacks, baby food and crackers and cookies
businesses, and the "Resort Operations" segment, consisting of the Keystone,
Breckenridge and Arapahoe Basin ski resorts.
 
OVERVIEW
 
     Fiscal 1996 proved to be a year in which the Company's businesses achieved
varying performance levels. The Beech-Nut baby food business performed well in
the first half of the fiscal year, but increased competitive pressure in the
third and fourth quarters slowed Beech-Nut's operating profit growth. The
Bremner cracker and cookie business recorded significant growth through new
product sales and by adding new accounts throughout the year. A good winter ski
season provided the ski resorts business with favorable year to year profit
comparisons. Dramatic changes throughout the ready-to-eat cereal category and
especially in the category's pricing structure had a significant negative impact
on the operating results of the Ralston Foods cereal business. Cereal volume,
both branded and private label, declined significantly for the year. The branded
decline occurred primarily in the minor branded cereal products, a consistent
negative trend, while the larger mainline Chex franchise performed reasonably
well in a declining category, with only a slight year to year volume decline.
Private label cereal volume was hurt most by the difficult pricing environment
within the cereal category, as the price gap between private label products and
their branded counterparts significantly narrowed. Mitigating some of the
unfavorable results of cereal operations was the continued growth experienced by
the Ralston Foods' Chex Mix snack product.
 
     On August 14, 1996, the Company announced an agreement to sell its branded
cereal and snack business to General Mills for General Mills common stock and
the assumption of debt and accrued interest not to exceed $300 million, together
valued at $570 million. Currently, the Company estimates that the debt assumed
will be between $210 and $240 million. The transaction will be accomplished
through a tax-free merger of the Company's branded cereal and snack business
with a subsidiary of General Mills (the Merger) and the spin-off of the
Company's remaining businesses to the Company's shareholders (the Distribution).
Subsequent to the close of the transaction, shareholders of the Company will
hold shares of General Mills common stock and shares of the spun-off company.
 
     On December 9, 1996, General Mills signed the Consent Agreement relating to
the Proposed United States Federal Trade Commission (FTC) Order. The FTC
accepted the Consent Agreement for public comment on December 24, 1996, at which
time the FTC granted early termination of the required waiting period under the
Hart-Scott-Rodino Antitrust Improvements Act (HSR Act) with respect to the
Merger. The Proposed FTC Order will become final if the FTC enters the Proposed
FTC Order after a 60-day public comment period. Pending entry of the Proposed
FTC Order, General Mills has agreed to comply with it (but General Mills will no
longer be bound by the Proposed FTC Order if the FTC withdraws its acceptance of
the Consent Agreement). Under the Proposed FTC Order, General Mills would permit
the newly spun-off company to compete against General Mills by producing and
selling a Chex-type private label cereal as soon as the Merger is completed, and
would permit a successor to acquire this right. General Mills and Ralcorp had
originally agreed that the newly spun-off company would not produce and sell a
Chex-type private label cereal for 18 months after the Merger. The parties
intend to complete the Merger as soon as they satisfy all the conditions to the
Merger, even if the public comment period has not expired and the Proposed FTC
Order is not final.
 
                                        9
<PAGE>   11
 
     The completion of the transaction is subject to approval by the Company's
shareholders. It is possible that such approval may not be received. The Company
anticipates holding a special meeting of shareholders on January 31, 1997.
Documents relating thereto will be mailed to shareholders beginning on December
30, 1996.
 
     On July 23, 1996, the Company announced an agreement to sell its Resort
Operations to Vail in a transaction valued in excess of $310 million. The sale
would allow the Company to significantly reduce its debt by $165 million and
also retain an approximate 22% ownership interest in a newly combined company
that would feature five of the premier ski resorts in North America. The
completion of the transaction is subject to various government approvals, which
may or may not be received.
 
     The sale of the Resort Operations is being investigated by the United
States Department of Justice (DOJ). The Company and Vail have complied with the
request for additional information issued by the DOJ pursuant to the HSR Act.
The Company and Vail have agreed to extend the time in which the DOJ has to
review the proposed sale. Management believes a decision by the DOJ regarding
whether the DOJ will challenge the proposed sale will be made prior to the end
of December. Unless extended by the parties, the contract for the sale of Resort
Operations to Vail terminates on January 10, 1997. If the Resort Operations are
not sold to Vail, management will review whether to retain the Resort Operations
and operate them as a core business or explore other strategic alternatives with
respect to the Resort Operations.
 
OPERATING RESULTS
 
     Operating results for fiscal 1996 and fiscal 1995 were impacted by certain
significant one-time charges, which make year to year comparisons difficult. In
fiscal 1996, the Company recorded a $109.5 million pre-tax impairment charge
($68.8 million after taxes or $2.09 per share) related to its private label
cereal and consumer hot cereal operations. This charge was recorded under the
provisions of Statement of Financial Accounting Standards No. 121 "Accounting
for the Impairment of Long-Lived Assets and Long-Lived Assets to be Disposed Of"
("FAS 121"); see the "Nonrecurring Charges" footnote in the Notes to
Consolidated Financial Statements. Also, in fiscal 1996, the Company recorded a
pre-tax charge of $16.5 million ($10.4 million after taxes or $.31 per share) to
recognize the costs related to the restructuring of its ready-to-eat cereal
operations; see the "Restructuring Charge" footnote in the Notes to Consolidated
Financial Statements. In fiscal 1995, the Company recorded pre-tax nonrecurring
charges totaling $21.9 million ($13.6 million after taxes or $.41 per share)
related to management's decision to exit the industrial oats business, close
oats milling operations and impair certain long-lived assets related to the
remaining consumer hot cereal business; see the "Nonrecurring Charges" footnote
in the Notes to Consolidated Financial Statements. The fiscal 1995 nonrecurring
charges were also determined under the provisions of FAS 121.
 
     Including the above referenced charges, the Company recorded a net loss of
$46.8 million or $1.42 per share for fiscal 1996, compared to net earnings of
$33.4 million or $1.00 per share for fiscal 1995. Exclusive of the charges,
fiscal 1996 resulted in net earnings of $32.4 million or $.98 per share compared
to fiscal 1995 net earnings of $47.0 million or $1.41 per share. Net sales in
fiscal 1996 were $1,027.4 million compared to $1,013.4 million in fiscal 1995,
an improvement of $14.0 million or 1.4%. This slight increase is attributable
primarily to Chex Mix and the Resort Operations, as well as favorable volume
gains in both the cracker and cookie and baby food businesses, which were
substantially offset by the significant cereal volume declines.
 
FISCAL 1996 COMPARED TO FISCAL 1995
 
     Consumer Foods
 
     Consumer Foods sales were essentially flat from 1995 to 1996, as segment
sales went from $886.0 million in fiscal 1995 to $892.0 million in fiscal 1996.
This slight increase was driven by significantly higher Chex Mix snack volume
(which continued to realize the positive effects of a successful restage),
increased cereal prices taken in advance of the category-wide pricing declines,
higher baby food prices and volume, and improved cracker and cookie volumes.
Substantially offsetting these positive factors were the significantly lower
branded and private label cereal volumes. Dramatic price decreases coupled with
promotional activities during fiscal
 
                                       10
<PAGE>   12
 
1996, directly and negatively effected the Company's cereal volumes. Branded
cereal volume declined approximately 10% in the year and private label cereal
volume declined approximately 4%. Although minor branded cereal products volumes
were down significantly, the mainline CHEX franchise continued to perform
reasonably well, down only slightly from a year ago. Sales of branded cereal is
somewhat seasonal because the Company's Chex Party Mix holiday promotion.
Management believes that erosion of a portion of the price gap between branded
and private label cereal products, occurring primarily in the third and fourth
quarters of fiscal 1996, resulted in the Company's first private label cereal
volume decline.
 
     As referred to earlier, Consumer Foods operating results for both fiscal
1996 and 1995 included certain significant one-time charges that make year to
year comparisons difficult. Therefore, in an effort to present an analysis of
the most comparable operating results, the following discussion of Consumer
Foods operating profit excludes those charges.
 
     Operating profit for the segment decreased 29.5% in 1996 to $67.3 million
compared to $95.5 million in the previous year. The significant decline is due
primarily to lower cereal results partially offset by improvements in Chex Mix
and the baby food and cracker and cookie businesses. In the cereal and snack
business, operating profit declined as a result of higher advertising and
promotion expense, the continued negative impact of increased ingredient costs
and higher information systems costs, partially offset by the strong performance
of Chex Mix snacks and cereal pricing increases taken in advance of the
category-wide pricing decline. Spider-Man cereal, introduced in fiscal 1995's
fourth quarter, was an earnings disappointment with volumes significantly below
expectations. Production of Spider-Man cereal has been discontinued. The
Beech-Nut baby food business results improved primarily on strong domestic
volume gains and favorable pricing, partially offset by higher ingredient costs.
In addition, baby food operations were slowed in the second half of fiscal 1996
due to increased competitive pressures. The Bremner cracker and cookie business
increased its operating results in fiscal 1996 by adding new product sales and
new accounts, resulting in additional volume, and by continuing to lower
production costs.
 
  Resort Operations
 
     Resort Operations sales improved 6.3% in fiscal 1996 to $135.4 million
compared to $127.4 million in 1995. The sales increase resulted primarily from a
5% improvement in skier visits, as well as an approximate 3% increase in room
nights. Total skier visits for fiscal 1996 were 2.7 million. These improvements
were the direct result of good ski conditions during the key winter months. As a
result of these factors, Resort Operations recorded a record $23.0 million
operating profit in fiscal 1996 compared to $17.1 million in the prior year, or
an improvement of 34.5%
 
     The skiing industry is mature, with slow overall growth, and is highly
competitive. The Company's ski resorts compete with all types of recreation and
vacation alternatives for the consumers' discretionary spending. In order to
compete successfully, the resorts must aggressively promote in order to attract
more skiers while implementing substantial cost reductions.
 
     Operating results for this segment are highly seasonal. Historically, the
resorts have earned more than the entire fiscal year's operating profit during
the fiscal second quarter, which contains the peak of the ski season.
 
  Consolidated
 
     Consolidated net sales increased 1.4% in fiscal 1996 to $1,027.4 million
due to improved revenues of Chex Mix and the Resort Operations, as well as
favorable volume gains in both the cracker and cookie and baby food businesses.
Cost of products sold as a percentage of sales was 52.3% in both fiscal 1996 and
1995 as increased Resort Operations revenues offset the increase in ingredient
costs that affected the Company's other businesses. Selling, general and
administrative expenses increased to 17.3% of sales in 1996 compared to 16.3% of
sales in 1995 due to higher information systems costs and the inclusion, in
fiscal 1996, of approximately $4.0 million of transaction costs related to the
Company's proposed sale of its Resort Operations. Advertising and promotion
expense as a percentage of sales increased to 22.7% of sales in fiscal 1996 from
21.0% in fiscal 1995. A significant portion of this increase is due to spending
associated with Spider-Man, a new branded cereal in fiscal 1996, which has been
discontinued, and stepped up promotional spending
 
                                       11
<PAGE>   13
 
necessary to protect the Company's mainline Chex franchise and its declining
private label cereal business. Advertising and promotion spending in support of
the very successful Chex Mix restage was also higher in fiscal 1996. Income
taxes, which include federal and state taxes, were 36.0% of pre-tax losses in
fiscal 1996 compared to 39.1% of pre-tax earnings in fiscal 1995. This decline
in the effective tax rate is primarily due to the Company recording significant
one-time charges in fiscal 1996. Tax provisions on earnings generally reflect
statutory tax rates.
 
FISCAL 1995 COMPARED TO FISCAL 1994
 
     Consumer Foods
 
     Consumer Foods sales increased 3.7% in fiscal 1995 to $886.0 million due to
higher sales in all businesses. The increase was driven by significantly higher
Chex Mix snack volume following a successful restage, higher branded cereal
prices and higher private label cereal volumes at Ralston Foods, higher baby
food prices and an improvement in cracker and cookie volumes which were
partially offset by lower branded cereal volumes. In cereals, volumes in
mainline Chex again increased compared to the prior year while sales of Cookie
Crisp dropped after a strong fiscal 1994 increase and minor share brands
continued to decline. Sales of the Consumer Foods segment tend to be somewhat
seasonal due to strong first quarter performance associated with the Chex Party
Mix holiday promotion.
 
     During fiscal 1995, the Company made a decision to close its industrial
oats and oats milling operations in Cedar Rapids, Iowa. As a result of this
decision, the Company recorded nonrecurring pre-tax charges totaling $21.9
million, comprised of a $10.1 million charge to cover the costs of exit,
primarily for the write-down of related fixed assets, and $11.8 million
representing the impairment of the remaining intangible and fixed assets related
to the consumer hot cereal business. The decision to exit the industrial
business and close milling operations was reached due to excess industry
capacity which depressed selling prices despite significantly higher raw
ingredient costs and the location of the milling operations which placed the
Company at a competitive disadvantage due to higher freight costs. Operating
loss in the fiscal year ended September 30, 1995 for the operations affected by
the exit decision was approximately $3.7 million. See the "Nonrecurring Charges"
footnote, in the Notes to Consolidated Financial Statements, for further
discussion of these charges.
 
     Excluding the oats-related charges, operating profit for the segment
increased 15% in fiscal 1995 to $95.5 million compared to $82.9 million in the
previous year. The most significant factor behind the increase was the return to
profitability of the Company's Bremner operation in fiscal 1995 after a
significant fiscal 1994 loss. Compared to fiscal 1994, which was adversely
affected by the forced relocation of Bremner's only facility, fiscal 1995
benefited from significantly lower production costs and higher volumes. Baby
Food results increased on improved pricing partially offset by lower volume and
higher advertising and promotion expenses. Operating profit for Ralston Foods
declined moderately reflecting higher expenses related to the Company's
accelerated cost reduction program and higher administrative expenses, primarily
for information systems, partially offset by higher branded cereal prices and
higher private label cereal volume.
 
     Resort Operations
 
     Resort sales fell 4% in fiscal 1995 to $127.4 million compared to $132.6
million in 1994. The sales decline resulted from a drop in skier visits
associated with unfavorable weather conditions during the most important period
of the ski season which was only partially offset by more favorable pricing.
Poor winter results were partially offset by unexpected late season snowfalls
which allowed the Company's Arapahoe Basin resort to remain open through early
August 1995, and by increased summer conference business. As a result of these
factors, operating profit declined to $17.1 million in fiscal 1995 compared to
$20.5 million in the prior year.
 
     In fiscal 1994, the Company formed a joint venture with Intrawest
Corporation of Canada, a leading mountain resort operator and developer, to
develop the Company's real estate holdings at the Keystone Resort. The Company
contributed land to the joint venture at book value and will realize the market
value of these holdings over time as land is sold or projects are completed and
sold, in addition to sharing in any development profits with Intrawest.
 
                                       12
<PAGE>   14
 
     Operating results for this segment are highly seasonal. Historically, the
resorts have earned more than the entire fiscal year's operating profit during
the second quarter, which contains the peak of the ski season.
 
     Consolidated
 
     Consolidated net sales increased 2.7% in fiscal 1995 to $1,013.4 million
due to higher Consumer Foods sales partially offset by lower Resort revenues.
The cost of products sold as a percentage of sales declined to 52.3% in fiscal
1995 compared to 53.1% in 1994 due to significantly improved efficiency at
Bremner during 1995 compared to the move-affected prior year and due to improved
margins in Baby Food. Selling, general and administrative expenses increased to
16.3% of sales in 1995 compared to 15.0% of sales in 1994 due primarily to
higher information systems costs in fiscal 1995 and the increased costs
associated with becoming a stand-alone company. Advertising and promotion
expense as a percentage of sales declined slightly to 21.0% in the current year
due to higher sales of private label products requiring lower levels of
promotional support. Income taxes, which include federal and state taxes, were
39.1% in fiscal 1995 compared to 39.0% in 1994. Tax provisions generally reflect
statutory tax rates.
 
LIQUIDITY AND CAPITAL RESOURCES
 
     Cash Flow from Operations
 
     The Company's primary source of liquidity is cash flow from operations,
which increased to $91.8 million in 1996 compared to $80.4 million in 1995 due
primarily to reduced working capital needs. The $9.6 million decline in
operating cash flow in 1995 compared to 1994 was due primarily to heavier
investments in inventories and higher 1995 year end receivables associated with
new product introductions. Working capital, excluding cash and current
maturities of long-term debt, was $92.4 million at September 30, 1996 compared
to $104.7 million and $81.8 million at September 30, 1995 and 1994,
respectively. The Company had no cash balances at September 30, 1996 and 1995.
 
     The Company's businesses have historically focused on generating positive
cash flows through operations. For the three years ended September 30, 1996, the
Company was able to generate $262.2 million of cash from operations. Management
believes that the Company will continue to generate operating cash flow through
its mix of businesses and expects that future liquidity requirements will be met
through a combination of operating cash flow and strategic use of borrowings
available under existing bank credit agreements. Upon completion of either or
both of the proposed sale transactions, management anticipates that the
remaining businesses would continue to generate positive, but significantly
lower, operating cash flows. If the proposed sale of Resort Operations is
consummated prior to the consummation of the Merger, the Company will fund its
borrowing needs through its existing credit arrangements. However, if the sale
of Resort Operations is not completed prior to the Merger, then upon the
consummation of the Merger, the Company expects to enter into a twelve to
thirty-six month $200 million bridge credit facility with several lenders. It is
likely the terms of such a facility will be more restrictive upon the Company's
remaining business operations and will be at significantly higher interest rates
than the Company's existing credit arrangements.
 
     Investing Activities
 
     Capital expenditures were $66.7 million, $66.1 million and $38.2 million in
fiscal years 1996, 1995 and 1994, respectively. Capital expenditures for fiscal
1997 are expected to be approximately $35-$40 million. These fiscal 1997
projected expenditures include the Company's branded cereal and snack business
and Resort Operations for only a portion of fiscal 1997, due to the anticipated
completion of their respective sale transactions. If either or both transactions
are not completed, capital expenditures for fiscal 1997 may be higher. During
fiscal 1994, the Company disposed of two closed production facilities, the
proceeds of which were $19.2 million.
 
     Investing activities in 1994 also include the November 1993 purchase, for
$39.2 million, of the oats processing and packaging and cereal-making operations
of the National Oats Company division of Curtice Burns Foods, Inc., along with
related manufacturing assets.
 
                                       13
<PAGE>   15
 
     Financing Activities
 
     In connection with the spinoff from Ralston Purina Company (Ralston), the
Company assumed from Ralston $370 million of debt in a long-term bank credit
agreement comprised of $120 million outstanding under a $200 million revolving
credit arrangement and a $250 million term loan facility. During fiscal 1994,
the Company issued $150 million in 8 3/4% notes due 2004, the proceeds of which
were used to reduce borrowings under the credit agreement. During fiscal 1995,
the Company amended the credit agreement, eliminating the term loan and placing
the reduced $300 million total amount available under the credit agreement in
the revolving credit facility. The amendment also resulted in a lower borrowing
rate and reduced restrictions on stock repurchases and dividend payments,
provided the Company maintains certain financial ratios and a minimum level of
shareholders' equity. Through an additional amendment, in March 1996, the amount
available under the revolving credit facility was further reduced to $275
million, comprised of a $100 million 364-day revolving facility and a $175
million five year revolving facility, and the related maturity date was moved to
March 12, 2001. The March 1996 amendment retained many of the provisions
negotiated through the 1995 amendment, again, provided the Company maintains
certain financial ratios and a minimum level of shareholders' equity. In June
1996, Company management, realizing the potential negative impact of increased
competitive pressures, sought and received less stringent debt and interest
coverage ratios from the credit facility lenders for the third and fourth
quarters of fiscal 1996. The Company met the amended ratios for each of these
quarters. In September 1996, in contemplation of the sale of Resort Operations,
the existing $275 million credit facility agreement was split into two separate
agreements comprised, first, of a $140 million credit facility that was borrowed
directly by the Company's Resort Operations, and fully guaranteed by the
Company, and, second, a continuing revolving credit facility with $135 million
in available borrowings. Interest under both agreements is based on LIBOR and
will vary based on the achievement of certain financial ratios.
 
     As mentioned earlier, due to the unfavorable earnings expectations the
Company secured less stringent levels for the interest and debt coverage ratios
associated with its bank credit agreements. The ratios were scheduled to return
to the original levels for the quarter ended December 31, 1996. On or about
December 18, 1996, lenders under the Company's bank credit agreements reduced
the interest and debt coverage ratios until March 31, 1997. Management believes
that prior to any violation of such ratios, the Company will be able to
renegotiate its bank credit agreements, obtain further waiver of the pertinent
ratios, or obtain alternative financing at rates that may be higher than those
existing through the current bank credit agreements.
 
     In November 1995, in order to hedge its exposure to interest rate
fluctuations on $100 million of existing floating-rate borrowings under the
credit agreement, the Company entered into two interest rate swap transactions
under which the Company will pay interest based on a fixed rate while receiving
a LIBOR-based floating rate. Notional amounts under both transactions are $50
million and have terms that expire in November of calendar years 1997 and 1998.
 
     During fiscal 1996, the Company repurchased $8.6 million of its Common
Stock compared to $13.5 million in the prior year. As a result of activity
during fiscal 1996 total debt declined $18.8 million to $376.6 million compared
to $395.4 million at September 30, 1995. Despite the decline in outstanding
long-term debt, total debt as a percentage of total capitalization rose to 77.9%
at September 30, 1996 compared to 70.9% at September 30, 1995. This increase is
attributable to the sharp decline in the retained earnings of the Company, a
result of the substantial net loss, including significant one-time charges,
recorded in fiscal 1996.
 
     Prior to the spinoff from Ralston, Ralston sold certain of its trade
accounts receivable, including amounts attributable to the Company's cereal
business, to third party purchasers, subject to defined limited recourse
provisions. During fiscal 1994, this program was discontinued, which had the
effect of reducing cash flow from financing activities by $16.6 million.
 
     On May 25, 1995, the Company's Board of Directors authorized management to
repurchase up to one million shares of the Company's Common Stock from time to
time as management determines. As of December 3, 1996, the Company had
repurchased approximately 371,000 shares for $9.1 million pursuant to such
authorization. A previous Board-approved authorization to repurchase $15.0
million worth of Company Common Stock was completed during fiscal 1995.
 
                                       14
<PAGE>   16
 
OUTLOOK
 
     The difficult pricing environment in the ready-to-eat cereal category will
continue to put pressure on the Company's private label cereal business. The
Company has worked to regain a portion of the private label price gap lost to
branded competitors, but near term private label cereal volume growth, if any,
is expected to be modest, and most likely will come at the expense of any
meaningful profit margin. In the near term, the combination of an unfavorable
outlook for private label cereal profit and the continued declining performance
by several of the Company's minor branded cereal products, while still a part of
the Company's operations, creates an adverse financial outlook for the Company's
cereal business. In baby foods, despite a declining birth rate in the United
States, Beech-Nut has been able to record volume increases by continuing to
focus on the production of high quality baby food products. The production of
quality products, maintaining its presence in key regional areas and continued
emphasis on controlling and cutting costs, create a positive outlook for
Beech-Nut. The baby food business does, however, face significant competitive
pressures, principally from the baby food market leader, Gerber Products
Company. The outlook for the Bremner cracker and cookie business is also
positive, as Bremner has been able to add volume through new products and new
customers. In addition, a major capital project at the Bremner manufacturing
plant was completed during the fourth quarter of fiscal 1996 which should allow
the production and shipping of private label shredded wheat cereals and crackers
to begin in early fiscal 1997.
 
     Cost of products sold in the Consumer Foods segment depends to a
significant extent on commodity prices which may fluctuate widely due to weather
conditions, government regulations, economic climate or other unforeseen
circumstances. The Company attempts to minimize its exposure to unexpected cost
increases related to these factors primarily through advance commitments and,
from time to time, by taking positions in futures markets.
 
     If the sale of Resort Operations is not completed, then the operating
results of the Company will be highly dependent on the results of operations of
the Resort Operations. The Resort Operations have been profitable during the
past three fiscal years. However, the Resort Operations' results are highly
seasonal and dependent on weather conditions and consumers' discretionary
spending trends, both of which are out of the control of management.
 
ENVIRONMENTAL MATTERS
 
     The operations of the Company, like those of similar businesses, are
subject to various federal, state and local laws and regulations with respect to
environmental matters, including air and water quality, underground fuel storage
tanks, waste handling and disposal and other regulations intended to protect
public health and the environment. The Company has received notices from the
U.S. Environmental Protection Agency, state agencies, and/or private parties
seeking contribution, that it has been identified as a "potential responsible
party" ("PRP") at one cleanup site, under the Comprehensive Environmental
Response, Compensation and Liability Act, as amended ("CERCLA"), and the Company
may be required to share in the cost of cleanup with respect to the one cleanup
site. Under applicable law, the Company's liability, if any, for the cleanup of
the disposal site may be joint and several with all PRPs at this site.
Management reviews a number of items to determine if the remediation associated
with environmental matters is expected to be material to the Company including,
but not limited to, the stage of each proceeding; whether other parties have
been designated as possibly responsible (including other PRPs) and the financial
strength of such other parties; the nature and volume of hazardous material
alleged to be located at a site; the Company's alleged volumetric contribution
to a site; the contemplated remedy for a site; any defenses or third party
claims the Company may have; indemnification arrangements with third parties;
the number of years over which remediation costs will be distributed; reports of
experts (internal or external); and appropriate governmental opinions on the
remediation of a site. While it is difficult to quantify with certainty the
potential financial impact of actions regarding expenditures for environmental
matters, particularly remediation, shared cleanup costs at CERCLA sites, and
future capital expenditures for environmental control equipment, in the opinion
of management, based upon the information currently available, the ultimate
liability arising from such environmental matters should not have a material
effect on the Company's financial position and results of operations.
 
                                       15
<PAGE>   17
 
ACCOUNTING PRONOUNCEMENTS
 
     In March 1995, the Financial Accounting Standards Board (the "FASB") issued
FAS 121 which established accounting standards for recognizing the impairment of
long-lived assets, identifiable intangibles and goodwill, whether to be disposed
of or to be held and used. In general, FAS 121 requires recognition of an
impairment loss when the sum of undiscounted expected future cash flows is less
than the carrying amount of such assets. The Company applied the provisions of
FAS 121 in recognition of the components of the previously discussed $109.5
million and $21.9 million pre-tax nonrecurring charges recorded in fiscal years
1996 and 1995, respectively. The Company will continue to evaluate the
recoverability of the carrying value of all long-lived assets, as events or
circumstances warrant.
 
     In October 1995, the FASB issued Statement of Financial Accounting
Standards No. 123 "Accounting for Stock-Based Compensation" ("FAS 123"). This
statement established financial accounting and reporting standards for
stock-based employee compensation plans. The accounting and disclosure
requirements of FAS 123 are effective during the Company's fiscal year ended
September 30, 1997. The Company will adopt the disclosure provisions of FAS 123,
but will continue to account for compensation costs based on the provisions of
Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to
Employees". Therefore, there will be no impact on the Company's financial
condition or results of operations as a result of adopting FAS 123.
 
INFLATION
 
     Management recognizes that inflationary pressures may have an adverse
effect on the Company through higher asset replacement costs, related
depreciation and higher material costs. The Company tries to minimize these
effects through cost reductions and productivity improvements as well as price
increases to maintain reasonable profit margins. It is management's view,
however, that inflation has not had a significant impact on operations in the
three years ended September 30, 1996.
 
CAUTIONARY STATEMENT ON FORWARD-LOOKING STATEMENTS
 
     Forward-looking statements, within the meaning of Section 21E of the
Exchange Act are made throughout this document and include information under the
section titled "MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS," and are preceded by, followed by or include the words
"believes," "expects," "anticipates" or similar expressions elsewhere in this
document. The Company's results of operations and liquidity status 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. For example, any of the
following factors cumulatively or individually may impact expected results:
 
          (i) Key ingredients were at historically high prices during fiscal
     1996 and while prices have moderated, similar cost increases in future
     periods would negatively impact earnings;
 
          (ii) During fiscal 1996 the Company faced significant price discount
     promotions and price cutting by the largest branded cereal manufacturers
     and the same or similar promotions or continued price cutting in the future
     may negatively impact earnings;
 
          (iii) If Ralcorp violates its interest or debt coverage ratios
     discussed in the Outlook section above and Ralcorp is unable to secure
     waivers of the ratios or amendments to its bank credit agreements, or
     obtain alternate sources of debt financing, then Ralcorp could be in
     default of its bank credit agreements (and its 8 3/4% $150 million Notes
     due September 15, 2004 by virtue of cross-default provisions therein). In
     such event, the lenders under the bank agreements (and the holders of the
     Notes) could accelerate repayment of the full amount of the debt and
     interest outstanding thereunder;
 
          (iv) If the Company renegotiates its bank credit agreements or obtains
     alternate sources of financing, (a) the Company could face additional or
     more restrictive covenants preventing the Company from engaging in certain
     actions such as, but not limited to, payment of dividends, repurchases of
     stock,
 
                                       16
<PAGE>   18
 
     making acquisitions and incurring additional indebtedness; and (b) the
     interest rates under such alternative financing may be significantly higher
     than under existing bank credit agreements; and
 
          (v) The Company's businesses compete in mature segments and profit
     growth depends largely on the ability to successfully introduce new
     products and manage costs across all parts of the Company.
 
           [The remainder of this page was intentionally left blank]
 
                                       17
<PAGE>   19
 
                             RALCORP HOLDINGS, INC.
 
                          BUSINESS SEGMENT INFORMATION
 
     Summarized financial information by business segment for the three years
ended September 30, 1996 is set forth below. During these years the segments
consisted of the following:
     Consumer Foods
       Cereals and Snacks
       Baby Food
       Crackers and Cookies
     Resort Operations
 
     The Consumer Foods segment consists of cereals, baby food products and
other specialty grocery products, primarily crackers, cookies, and snacks, and
the coupon redemption business through January 31, 1996, the effective sale date
of this business. The Resort Operations segment consists of the Keystone,
Arapahoe Basin and Breckenridge resorts.
 
     Sales between business segments were immaterial. No single customer
accounted for 10% or more of sales.
 
<TABLE>
<CAPTION>
                                                                    1996         1995        1994
                                                                  --------     --------     ------
                                                                       (DOLLARS IN MILLIONS)
<S>                                                               <C>          <C>          <C>
Sales by Product Lines and Segments
  Consumer Foods
     Cereals and Snacks........................................   $  661.4     $  670.1     $646.4
     Baby Foods................................................      152.8        147.2      142.9
     Crackers and Cookies......................................       77.8         68.7       65.1
                                                                  --------       ------     ------
       Subtotal................................................   $  892.0     $  886.0     $854.4
  Resort Operations............................................      135.4        127.4      132.6
                                                                  --------       ------     ------
       Total...................................................   $1,027.4     $1,013.4     $987.0
                                                                  ========       ======     ======
Operating Profit
  Consumer Foods(a)............................................   $  (58.7)    $   73.6     $ 82.9
  Resort Operations............................................       23.0         17.1       20.5
                                                                  --------       ------     ------
       Total...................................................   $  (35.7)    $   90.7     $103.4
  Unallocated Corporate and Miscellaneous Expense(b)...........      (10.6)        (7.7)      (3.2)
  Interest Expense.............................................      (26.8)       (28.2)     (12.3)
                                                                  --------       ------     ------
       (Loss) Earnings before Income Taxes.....................   $  (73.1)    $   54.8     $ 87.9
                                                                  ========       ======     ======
Assets at Year End
  Consumer Foods(c)............................................   $  342.5     $  472.9     $445.5
  Resort Operations............................................      236.2        226.4      230.9
  Corporate....................................................       48.4         16.9       23.7
                                                                  --------       ------     ------
       Total...................................................   $  627.1     $  716.2     $700.1
                                                                  ========       ======     ======
Depreciation Expense
  Consumer Foods...............................................   $   29.8     $   31.3     $ 29.5
  Resort Operations............................................       13.7         12.8       12.2
Property Additions
  Consumer Foods...............................................   $   42.3     $   49.7     $ 27.8
  Resort Operations............................................       17.9          9.6       10.4
</TABLE>
 
-------------------------
(a) Includes the pre-tax impairment charge of $109.5 and the pre-tax
    restructuring charge $20.7 less the $4.2 reversal of that charge in 1996.
    Includes the pre-tax nonrecurring charges of $21.9 in 1995.
 
(b) Includes the $4.0 transaction fees related to the proposed sale of the
    Company's Resort Operations in 1996. Reflects the corporate expense incurred
    for periods subsequent to the spinoff from Ralston Purina.
 
(c) Includes the asset impairment charge of $109.5 and the asset writedown of
    $7.3 relating to the restructuring charge in 1996. Includes the asset
    writedown portion of the nonrecurring charges related to National Oats of
    $20.5 in 1995. Includes acquisition of National Oats in 1994.
 
                                       18
<PAGE>   20
 
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
 
                       REPORT OF INDEPENDENT ACCOUNTANTS
 
To the Shareholders and
Board of Directors of
Ralcorp Holdings, Inc.
 
     In our opinion, the accompanying consolidated balance sheets and the
related consolidated statements of earnings, of shareholders' equity and of cash
flows present fairly, in all material respects, the financial position of
Ralcorp Holdings, Inc. and its subsidiaries at September 30, 1996 and 1995, and
the results of their operations and their cash flows for each of the three years
in the period ended September 30, 1996, in conformity with generally accepted
accounting principles. These financial statements are the responsibility of the
Company's management; our responsibility is to express an opinion on these
financial statements based on our audits. We conducted our audits of these
statements in accordance with generally accepted auditing standards which
require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for the opinion expressed above.
 
Price Waterhouse LLP
St. Louis, Missouri
October 30, 1996
 
                                       19
<PAGE>   21
 
                             RALCORP HOLDINGS, INC.
 
                       CONSOLIDATED STATEMENT OF EARNINGS
                  (DOLLARS IN MILLIONS EXCEPT PER SHARE DATA)
 
<TABLE>
<CAPTION>
                                                                    YEAR ENDED SEPTEMBER 30
                                                                      1996        1995       1994
                                                                    --------    --------    ------
<S>                                                                 <C>         <C>         <C>
Net Sales.........................................................  $1,027.4    $1,013.4    $987.0
Costs and Expenses
  Cost of products sold...........................................     536.8       530.4     524.2
  Selling, general and administrative.............................     177.6       164.9     148.3
  Advertising and promotion.......................................     233.3       213.2     214.2
  Interest........................................................      26.8        28.2      12.3
  Nonrecurring charges............................................     109.5        21.9
  Restructuring charge............................................      16.5
  Other (income)/expense, net.....................................        --          --       0.1
                                                                    --------      ------    ------
                                                                     1,100.5       958.6     899.1
                                                                    --------      ------    ------
(Loss) Earnings before Income Taxes...............................     (73.1)       54.8      87.9
Income Taxes......................................................     (26.3)       21.4      34.3
                                                                    --------      ------    ------
Net (Loss) Earnings...............................................  $  (46.8)   $   33.4    $ 53.6
                                                                    ========      ======    ======
(Loss) Earnings per Common Share--
  (based on pro forma average shares for all periods prior to
  April 1, 1994)..................................................  $  (1.42)   $   1.00    $ 1.59
                                                                    ========      ======    ======
</TABLE>
 
          The above financial statement should be read in conjunction
              with the Notes to Consolidated Financial Statements.
 
                                       20
<PAGE>   22
 
                             RALCORP HOLDINGS, INC.
 
                           CONSOLIDATED BALANCE SHEET
 
<TABLE>
<CAPTION>
                                                                                SEPTEMBER 30,
                                                                               ----------------
                                                                                1996      1995
                                                                               ------    ------
                                                                                 (IN MILLIONS
                                                                                 EXCEPT SHARE
                                                                               DATA)
<S>                                                                            <C>       <C>
                                   ASSETS
Current Assets
  Cash......................................................................
  Receivables, less allowance for doubtful accounts.........................   $ 75.5    $ 86.3
  Inventories...............................................................    103.3     110.1
  Prepaid expenses..........................................................     14.2      11.1
                                                                               ------    ------
     Total Current Assets...................................................    193.0     207.5
Investments and Other Assets................................................     88.1      91.6
Deferred Income Taxes.......................................................     23.4
Property at Cost
  Land......................................................................     27.9      22.9
  Buildings.................................................................    112.6     134.1
  Machinery and equipment...................................................    370.4     469.9
  Construction in progress..................................................     26.1      42.4
                                                                               ------    ------
                                                                                537.0     669.3
Accumulated depreciation....................................................    214.4     252.2
                                                                               ------    ------
                                                                                322.6     417.1
                                                                               ------    ------
       Total................................................................   $627.1    $716.2
                                                                               ======    ======
                    LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
  Current maturities of long-term debt......................................   $  1.8    $  1.8
  Accounts payable and accrued liabilities..................................    100.6     102.8
                                                                               ------    ------
     Total Current Liabilities..............................................    102.4     104.6
Long-Term Debt..............................................................    376.6     395.4
Deferred Income Taxes.......................................................               20.2
Other Liabilities...........................................................     40.7      33.6
Commitments and Contingencies
Shareholders' Equity
  Common stock -- $.01 par value, issued shares: 1996 and 1995 --
     33,924,848.............................................................       .3        .3
  Capital in excess of par value............................................    130.9     131.0
  Retained (deficit) earnings...............................................      (.2)     46.6
  Common stock in treasury, at cost, 1,007,932 shares in 1996 and 658,522
     shares in 1995.........................................................    (22.7)    (13.8)
  Unearned portion of restricted stock......................................      (.9)     (1.7)
                                                                               ------    ------
     Total Shareholders' Equity.............................................    107.4     162.4
                                                                               ------    ------
       Total................................................................   $627.1    $716.2
                                                                               ======    ======
</TABLE>
 
          The above financial statement should be read in conjunction
              with the Notes to Consolidated Financial Statements.
 
                                       21
<PAGE>   23
 
                             RALCORP HOLDINGS, INC.
 
                      CONSOLIDATED STATEMENT OF CASH FLOWS
 
<TABLE>
<CAPTION>
                                                                           FOR THE YEAR ENDED
                                                                             SEPTEMBER 30,
                                                                       --------------------------
                                                                        1996      1995      1994
                                                                       ------    ------    ------
                                                                             (IN MILLIONS)
<S>                                                                    <C>       <C>       <C>
Cash Flow from Operations
  Net (loss) earnings...............................................   $(46.8)   $ 33.4    $ 53.6
  Adjustments to reconcile earnings to net cash flow provided by
     operations:
     Depreciation and amortization..................................     46.4      46.7      44.2
     Nonrecurring charges...........................................    109.5      21.9
     Restructuring charge, $16.5 less cash payments of $5.5.........     11.0
     Deferred income taxes..........................................    (45.8)     (8.4)     (2.0)
     Changes in assets and liabilities used in operations:
       Decrease (increase) in accounts receivable...................     10.8      (8.6)    (15.0)
       Decrease (increase) in inventories...........................      6.9     (16.0)     (4.1)
       (Increase) decrease in other current assets..................      (.9)     (1.0)      1.2
       Decrease (increase) in long-term receivables.................                5.7      (4.2)
       (Decrease) increase in accounts payable and accrued
        liabilities.................................................     (5.9)      (.4)     19.5
       (Decrease) increase in other current liabilities.............                          (.7)
       Other, net...................................................      6.6       7.1      (2.5)
                                                                       ------    ------    ------
     Net cash flow from operations..................................     91.8      80.4      90.0
                                                                       ------    ------    ------
Cash Flow from Investing Activities
  Acquisition.......................................................                        (39.2)
  Additions to property and intangible assets.......................    (66.7)    (66.1)    (38.2)
  Proceeds from the sale of property................................      6.0       4.3      19.2
  Other, net........................................................     (3.7)     (2.7)      (.4)
                                                                       ------    ------    ------
     Net cash used by investing activities..........................    (64.4)    (64.5)    (58.6)
                                                                       ------    ------    ------
Cash Flow from Financing Activities
  Discontinued sale of trade receivables............................                        (16.6)
  Net repayments under credit agreement.............................    (17.0)     (2.2)   (150.7)
  Proceeds from long-term debt......................................                        150.0
  Repayments of long-term debt, including current maturities........     (1.8)      (.2)      (.2)
  Repurchase of common stock........................................     (8.6)    (13.5)     (2.0)
  Net transactions with Ralston.....................................                        (12.7)
  Other, net........................................................                           .6
                                                                       ------    ------    ------
     Net cash (used) provided by financing activities...............    (27.4)    (15.9)    (31.6)
                                                                       ------    ------    ------
Net Decrease in Cash and Cash Equivalents...........................       --        --       (.2)
Cash and Cash Equivalents, Beginning of Year........................                           .2
                                                                       ------    ------    ------
Cash and Cash Equivalents, End of Year..............................   $   --    $   --    $   --
                                                                       ======    ======    ======
</TABLE>
 
          The above financial statement should be read in conjunction
              with the Notes to Consolidated Financial Statements.
 
                                       22
<PAGE>   24
 
                             RALCORP HOLDINGS, INC.
 
                 CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
 
<TABLE>
<CAPTION>
                                                   FOR THE THREE YEARS ENDED SEPTEMBER 30, 1996
                                  -------------------------------------------------------------------------------
                                                                            COMMON STOCK
                                                                CAPITAL     IN TREASURY,               UNEARNED
                                   RALSTON      COMMON STOCK      IN           AT COST                PORTION OF
                                    EQUITY     --------------  EXCESS OF   ---------------  RETAINED  RESTRICTED
                                  INVESTMENT   SHARES  AMOUNT  PAR VALUE   SHARES   AMOUNT  EARNINGS     STOCK
                                  ----------   ------  ------  ---------   ------   ------  --------  -----------
                                                    (DOLLARS IN MILLIONS, SHARES IN THOUSANDS)
<S>                               <C>          <C>     <C>     <C>         <C>      <C>     <C>       <C>
Balance, September 30, 1993......  $  474.4
  Net earnings...................      40.4
  Net transfer of
     assets/liabilities from
     Ralston.....................    (372.1)
  Net transactions with
     Ralston.....................     (12.7)
  Stock distribution to holders
     of RPG Stock................    (130.0)   33,878   $ .3    $ 129.8                                  $ (.1)
                                    -------    ------    ---     ------      ----    -----    -----       ----
Balance, March 31, 1994..........        --    33,878     .3      129.8                                    (.1)
  Net earnings...................                                                            $ 13.2
  Treasury stock purchased.......                                            (126)  $ (2.0)
  Activity under stock plans.....                  44               1.1       126      2.0                (3.1)
                                    -------    ------    ---     ------      ----    -----    -----       ----
Balance, September 30, 1994......        --    33,922     .3      130.9        --       --     13.2       (3.2)
  Net earnings...................                                                              33.4
  Treasury stock purchased.......                                            (633)   (13.5)
  Activity under stock plans.....                   3                .1       (26)     (.3)
  Amortization of restricted
     stock.......................                                                                          1.5
                                    -------    ------    ---     ------      ----    -----    -----       ----
Balance, September 30, 1995......        --    33,925     .3      131.0      (659)   (13.8)    46.6       (1.7)
                                    -------    ------    ---     ------      ----    -----    -----       ----
  Net earnings...................                                                             (46.8)
  Treasury stock purchased.......                                            (349)    (8.6)
  Activity under stock plans.....                                   (.1)               (.3)
  Amortization of restricted
     stock.......................                                                                           .8
                                    -------    ------    ---     ------      ----    -----    -----       ----
Balance, September 30, 1996......  $     --    33,925   $ .3    $ 130.9    (1,008)  $(22.7)  $  (.2)     $ (.9)
                                    =======    ======    ===     ======      ====    =====    =====       ====
</TABLE>
 
          The above financial statement should be read in conjunction
              with the Notes to Consolidated Financial Statements.
 
                                       23
<PAGE>   25
 
                             RALCORP HOLDINGS, INC.
 
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                  (DOLLARS IN MILLIONS, EXCEPT PER SHARE DATA)
 
NOTE 1: GENERAL INFORMATION
 
     Effective at the close of business on March 31, 1994 (the 1994 Spin-off
Date) Ralcorp Holdings, Inc. (the Company) became an independent, publicly owned
company as a result of the distribution by Ralston Purina Company (Ralston) of
the Company's $.01 par value Common Stock (Ralcorp Stock) to holders of
Ralston-Ralston Purina Group $.10 par value Common Stock (RPG Stock), at a
distribution ratio of one for three (the 1994 Spin-off). Prior to the 1994
Spin-off, the Company was formed as a wholly owned subsidiary of Ralston for the
purpose of effecting the 1994 Spin-off. Included in this transaction was the
transfer of substantially all of the assets and liabilities related to the
branded and private label cereal business (excluding cereal products
manufactured in Korea and France), baby food business, branded and private label
crackers and cookies business, coupon redemption business and the ski operations
business (collectively, the Ralcorp Businesses), all of which were previously
owned by Ralston. Ralston did not retain any ownership interest in the Company.
 
     For the purpose of governing certain of the relationships between Ralston
and the Company, as well as providing an orderly transition to the status of two
separate companies, Ralston and the Company entered into various agreements,
including the Agreement and Plan of Reorganization (the Reorganization
Agreement), Tax Sharing Agreement, Bridging Agreement, Trademark Agreement and
other agreements.
 
     These agreements deal with many operational issues, including (a) the
separation of the Company from Ralston; (b) transitional services provided by
Ralston to the Company, which included certain administrative, data processing
and technical services and office facilities for use as the Company's
headquarters; (c) certain research and other services provided by the Company to
Ralston; (d) use of certain trademarks by the Company; and (e) the allocation of
certain tax and other liabilities among the Company and Ralston.
 
     Charges for any services rendered between the Company and Ralston were
determined on an arms' length basis. As of September 30, 1995 most of these
arrangements had ended.
 
NOTE 2: BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
 
     BASIS OF PRESENTATION -- The financial statements as of, and for the years
ended September 30, 1996 and 1995 are presented on a consolidated basis. The
Statement of Earnings for the year ended September 30, 1994 includes the
combined results of operations of the Ralcorp Businesses under Ralston for the
six months prior to the 1994 Spin-off Date and the consolidated results of
operations of the Company for the six month period ended September 30, 1994. All
significant intercompany transactions have been eliminated. The combined
financial statements include assets, liabilities, revenues and expenses that are
directly related to the Ralcorp Businesses.
 
     These financial statements include the accounts of Ralcorp and its
majority-owned subsidiaries. All significant intercompany transactions are
eliminated. Investments in affiliated companies, 20% through 50%-owned, are
carried at equity.
 
     CASH EQUIVALENTS for purposes of the Statement of Cash Flows are considered
to be all highly liquid investments with an original maturity of three months or
less.
 
     FINANCIAL INSTRUMENTS -- The Company has a policy which allows the use of
various derivative financial instruments to manage the Company's financial risk
that exists as part of conducting business. Under the policy, the Company is not
permitted to engage in speculative or leveraged transactions that have the
potential for a disproportionate ratio between the change in value of the
liability being hedged and the expected change in value of the related
derivative instrument. The Company will not hold or issue financial instruments
for trading purposes. As of September 30, 1996, the Company had two interest
rate swap agreements outstanding, each with a notional principal amount of $50.
The differential to be paid or received, with regard to these swap agreements,
is accrued as interest rates change and is recognized over the life of the
agreements.
 
                                       24
<PAGE>   26
 
                             RALCORP HOLDINGS, INC.
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
                  (DOLLARS IN MILLIONS, EXCEPT PER SHARE DATA)
 
     INVENTORIES are valued generally at the lower of average cost or market. In
connection with purchasing key raw ingredient materials, the Company follows a
policy of from time to time using commodities futures contracts to minimize the
risk associated with market price fluctuations. Such contracts are accounted for
as hedges, with related gains and losses ultimately included as part of the cost
of products sold. The effect of any realized or deferred gains or losses is
immaterial to the financial condition and results of operations of the Company.
 
     PROPERTY AT COST -- Expenditures for new facilities and those which
substantially increase the useful lives of the property, including interest
during construction, are capitalized. Maintenance, repairs and minor renewals
are expensed as incurred. When properties are retired or otherwise disposed of,
the related cost and accumulated depreciation are removed from the accounts and
gains or losses on the disposition are reflected in earnings.
 
     DEPRECIATION is generally provided on the straight-line basis by charges to
costs or expenses at rates based on the estimated useful lives of the
properties. Estimated useful lives range from 3 to 25 years for machinery and
equipment and 10 to 50 years for buildings.
 
     INTANGIBLE ASSETS include the excess of cost over the net tangible assets
of acquired businesses and are amortized over estimated periods of related
benefit ranging from 4 to 40 years. The Company also defers systems development
costs when they reach technological feasibility. Amounts deferred are amortized
over estimated periods of related benefit not to exceed 5 years. Intangible
assets are included in Investments and Other Assets.
 
     IMPAIRMENT -- The Company continually evaluates whether events or
circumstances have occurred which might impair the recoverability of the
carrying value of its long-lived assets, identifiable intangibles and goodwill.
 
     PROPERTY HELD FOR DEVELOPMENT is recorded at cost and is included in
Investments and Other Assets.
 
     INCOME TAXES -- In accordance with the Tax Sharing Agreement, the Company
is liable for federal, state and local tax liabilities for taxable periods
beginning after the Distribution Date. Accordingly, the Ralcorp Businesses were
included in the consolidated federal, state and local income tax returns filed
by Ralston for periods ending on or before the 1994 Spin-off Date.
 
     Income taxes have been provided in accordance with Statement of Financial
Accounting Standards No. 109, "Accounting for Income Taxes" (FAS 109). FAS 109
requires the liability method of income tax accounting, accordingly, a deferred
tax liability or asset is recognized for the effect of temporary differences
between financial and tax reporting.
 
     EARNINGS PER SHARE -- The computation of earnings per common share for the
years ended September 30, 1996 and 1995 are based on the weighted average number
of shares of Ralcorp Stock outstanding for the years then ended. Earnings per
common share for the year ended September 30, 1994 is computed using a
combination of the average number of RPG Stock shares outstanding for the six
months ended March 31, 1994, adjusted for the 1 for 3 distribution ratio, and
the weighted average number of Ralcorp shares outstanding for the six months
ended September 30, 1994.
 
     ADVERTISING COSTS are expensed in the year in which the costs are incurred.
 
     ESTIMATES -- The preparation of financial statements in conformity with
Generally Accepted Accounting Principles requires management to make estimates
and assumptions that affect the reported amounts of assets, liabilities,
revenues and expenses and the disclosure of contingent assets and liabilities.
Actual results could differ from those estimates.
 
                                       25
<PAGE>   27
 
                             RALCORP HOLDINGS, INC.
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
                  (DOLLARS IN MILLIONS, EXCEPT PER SHARE DATA)
 
     RECLASSIFICATIONS -- Certain reclassifications of the prior year's amounts
have been made to conform with the current year presentation.
 
NOTE 3: BUSINESS SEGMENT INFORMATION
 
     The Business Segment Information section is an integral part of these
financial statements. The related discussion of the Business Segments financial
condition and results of operations is incorporated from "MANAGEMENT'S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS."
 
NOTE 4: NONRECURRING CHARGES
 
     In September 1996, the Company recorded a $109.5 pre-tax impairment charge
related to its private label ready-to-eat cereal and consumer hot cereal
operations. Recent and dramatic changes in the pricing and promotion environment
of the ready-to-eat cereal category and the effect these changes have had and
will continue to have on the Company's private label cereal business, caused the
Company to record this charge. The charge was determined under the provisions of
Statement of Financial Accounting Standards No. 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of,"
(FAS 121) which was issued by the Financial Accounting Standards Board in March
1995. FAS 121 established accounting standards for recognizing the impairment of
long-lived assets, identifiable intangibles and goodwill, whether to be disposed
of or to be held and used. In general, FAS 121 requires recognition of an
impairment loss when the sum of undiscounted expected future cash flows is less
than the carrying amount of such assets. Ultimately, it was determined that the
projection of future cash flows generated by the private label cereal operations
would not be sufficient to recover the carrying value of assets associated with
such operations. The amount of the September 1996 impairment loss was recognized
by the Company as a write-down of fixed assets to fair value.
 
     In September 1995, the Company decided to exit the industrial oats business
and close oats milling operations at its Cedar Rapids, Iowa facility. This
decision did not affect the Company's branded and private label consumer hot
cereal business which will continue to operate at the Cedar Rapids location. The
consumer and industrial oats businesses were acquired in November 1993 as part
of the acquisition of the National Oats Company from Curtice Burns Foods, Inc.
 
     The decision to exit the industrial business and close milling operations
was reached due to excess industry capacity which depressed selling prices
despite significantly higher raw ingredient costs. In addition, the location of
the milling operations placed the Company at a competitive disadvantage due to
higher freight costs. As a result, the Company recorded, in fiscal 1995, a
nonrecurring pre-tax charge of $10.1 to cover the costs of exit, consisting
primarily of the write-down of the carrying value of related fixed assets, or
$9.8, to fair value less related disposition costs. The fiscal 1995 operating
loss, for the operations affected by the exit decision, was approximately $3.7.
 
     In addition to the exit-related charge, the Company also recorded a
non-recurring pre-tax charge of $11.8 in fiscal 1995 representing the impairment
of the remaining fixed and intangible assets related to the consumer hot cereal
business. (A portion of the fiscal 1996 impairment charge also pertained to
these assets). The entry of a significant new competitor into the private label
hot cereal category adversely affected the price structure of the category and
precipitated the impairment charge. Like the fiscal 1996 charge, this charge and
the previously mentioned exit charge, were determined under the provisions FAS
121. The amount of the September 1995 impairment loss was recognized by the
Company as a write-down of goodwill and fixed assets to fair value.
 
                                       26
<PAGE>   28
 
                             RALCORP HOLDINGS, INC.
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
                  (DOLLARS IN MILLIONS, EXCEPT PER SHARE DATA)
 
     With regard to all the above referenced charges, fair value was determined
as the present value of estimated expected future cash flows using a discount
rate commensurate with the risks involved.
 
NOTE 5: RESTRUCTURING CHARGE
 
     For the year ended September 30, 1996, the Company recorded a pre-tax
charge of $16.5 ($10.4 after taxes or $.31 per common share) to recognize the
costs related to the restructuring of its ready-to-eat cereal subsidiary,
Ralston Foods. As a result of this restructuring plan, approximately 100
positions have been eliminated from the Ralston Foods subsidiary and corporate
support groups, primarily at the Company's headquarters in St. Louis. In
addition, the restructuring plan includes the partial closing of the Ralston
Foods production facility in Battle Creek, MI, thereby reducing excess
production capacity in the Ralston Foods system and eliminating approximately
190 jobs from the production and administrative staffs at that facility.
 
     The components of the restructuring charge and utilization to date were as
follows:
 
<TABLE>
<CAPTION>
                                                                                         AS OF
                                                                                  SEPTEMBER 30, 1996
                                                                                  -------------------
                                                                       AMOUNTS     AMOUNT
                                                                       CHARGED    UTILIZED    BALANCE
                                                                       -------    --------    -------
<S>                                                                    <C>        <C>         <C>
Salaries, severance and benefits....................................    $ 8.0      $  5.0      $ 3.0
Fixed asset writedowns..............................................      7.3         7.3         --
Other...............................................................      1.2          .5         .7
                                                                        -----       -----       ----
     Total..........................................................    $16.5      $ 12.8      $ 3.7
                                                                        =====       =====       ====
</TABLE>
 
NOTE 6: TRANSACTIONS WITH RALSTON
 
     The Company and Ralston entered into a Bridging Agreement under which
Ralston will continue to provide certain administrative, data processing and
technical services and office facilities for the Company's headquarters. As of
September 30, 1995 most of these arrangements had ended. Prior to the 1994
Spin-off Date the expenses related to these services were allocated to the
Company based on utilization or other methods deemed reasonable by management.
These allocations were $18.1 and $37.8 for the six months ended March 31, 1994,
and year ended September 30, 1993, respectively. Actual expenses paid by the
Company to Ralston for such services had declined to $1.7 for the year ended
September 30, 1996 from $19.2 for the year ended September 30, 1995 and $10.3
for the six months ended September 30, 1994.
 
     In addition, the Company sells certain goods for resale outside the United
States to Ralston. These transactions were at negotiated prices. Included in the
Statement of Earnings are sales to Ralston of $17.7 for the year ended September
30, 1994.
 
     The Company also provides certain coupon and promotional materials
processing services to Ralston. Terms and conditions for such services are
similar to those negotiated by unrelated parties at arm's length, and the
Company's charges to Ralston for these services were $7.7 for the year ended
September 30, 1994.
 
NOTE 7: ACQUISITIONS
 
     In November 1993, the Company purchased the oats processing and packaging
and cereal making operations of the National Oats Company division of Curtice
Burns Foods, Inc., along with certain related manufacturing assets for $39.2.
 
     This acquisition was accounted for using the purchase method of accounting,
and accordingly, the results of operations are included in the Consolidated
Statement of Earnings from the date of acquisition.
 
                                       27
<PAGE>   29
 
                             RALCORP HOLDINGS, INC.
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
                  (DOLLARS IN MILLIONS, EXCEPT PER SHARE DATA)
 
NOTE 8: INCOME TAXES
 
     The provisions for income taxes consisted of the following:
 
<TABLE>
<CAPTION>
                                                                          1996     1995     1994
                                                                         ------    -----    -----
<S>                                                                      <C>       <C>      <C>
Current:
  United States.......................................................   $ 17.9    $26.2    $27.0
  State...............................................................      1.6      3.6      4.1
                                                                         ------    -----    -----
       Total current..................................................     19.5     29.8     31.1
                                                                         ------    -----    -----
Deferred:
  United States.......................................................    (42.1)    (7.9)     3.1
  State...............................................................     (3.7)     (.5)      .1
                                                                         ------    -----    -----
       Total deferred.................................................    (45.8)    (8.4)     3.2
                                                                         ------    -----    -----
Income taxes before cumulative effect of accounting changes...........   $(26.3)   $21.4    $34.3
                                                                         ======    =====    =====
</TABLE>
 
     Income taxes were 36.0%, 39.1% and 39.0% of pre-tax earnings in 1996, 1995
and 1994, respectively. A reconciliation of income taxes with the amounts
computed at the statutory federal rate follows:
 
<TABLE>
<CAPTION>
                                                                          1996     1995     1994
                                                                         ------    -----    -----
<S>                                                                      <C>       <C>      <C>
Computed tax at federal statutory rate (35.0% for all years)..........   $(25.6)   $19.2    $30.8
State income taxes, net of federal tax benefit........................     (2.3)     2.0      2.7
Other, net............................................................      1.6       .2       .8
                                                                         ------    -----    -----
                                                                         $(26.3)   $21.4    $34.3
                                                                         ======    =====    =====
</TABLE>
 
     The deferred tax assets and deferred tax liabilities as set forth on the
consolidated balance sheet at September 30, 1996 and 1995 are as follows:
 
<TABLE>
<CAPTION>
                                                                    DEFERRED TAX      DEFERRED TAX
                                                                       ASSETS         LIABILITIES
                                                                   --------------    --------------
                                                                   1996     1995     1996     1995
                                                                   -----    -----    -----    -----
<S>                                                                <C>      <C>      <C>      <C>
Current:
  Accrued liabilities...........................................   $ 5.4    $ 4.4
  Inventories...................................................     3.0      1.9
  Other items...................................................      .4       .3
                                                                   -----    -----
       Total current............................................     8.8      6.6
                                                                   -----    -----
Noncurrent:
  Property basis differences....................................     4.0                      $35.4
  Postretirement benefits.......................................     5.9      5.5
  Intangible assets.............................................     7.0      3.9
  Workers' compensation.........................................     3.0      2.1
  Deferred compensation.........................................     1.7      2.4
  Other items...................................................     1.8      2.3
                                                                   -----    -----    -----    -----
       Total noncurrent.........................................    23.4     15.2              35.4
                                                                   -----    -----    -----    -----
Total deferred taxes............................................   $32.2    $21.8       --    $35.4
                                                                   =====    =====    =====    =====
</TABLE>
 
     The significant change in property basis differences and intangible assets
from September 30, 1995 to September 30, 1996 is directly attributable to the
asset writedowns taken in conjunction with the impairment
 
                                       28
<PAGE>   30
 
                             RALCORP HOLDINGS, INC.
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
                  (DOLLARS IN MILLIONS, EXCEPT PER SHARE DATA)
 
of certain operating assets. See the "Nonrecurring Charges" footnote, found
elsewhere in these Notes to Consolidated Financial Statements, for further
information and details.
 
     Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes. The Company believes it
is probable that the net deferred tax assets, reflected above, will be realized
on future tax returns, primarily from the generation of future taxable income.
 
     Total income tax payments made by the Company were $25.9 and $29.7 for the
years ended September 30, 1996 and 1995, respectively. Tax payments due on
income earned prior to the 1994 Spin-off Date are the responsibility of Ralston.
 
NOTE 9: PENSION PLAN
 
     The Company sponsors a noncontributory defined benefit pension plan which
covers substantially all regular employees in the United States. The plan
provides retirement benefits based on years of service and final-average or
career-average earnings. It is the Company's practice to fund pension
liabilities in accordance with the minimum and maximum limits imposed by the
Employee Retirement Income Security Act of 1974 (ERISA) and federal income tax
laws. Plan assets consist primarily of investments in commingled employee
benefit trusts consisting of marketable equity securities, corporate and
government debt securities and real estate.
 
     Prior to the spin-off from Ralston, the Company participated in Ralston's
defined benefit pension plans and certain jointly-administered multi-employer
defined benefit plans and recorded pension costs as allocated by Ralston. The
amount of such costs were $2.1 for the six months ended March 31, 1994, which
includes the Company's expenses related to the multi-employer plans. The
components of net pension costs for the periods subsequent to the spin-off
include the following:
 
<TABLE>
<CAPTION>
                                                         YEAR ENDED        YEAR ENDED      SIX MONTHS ENDED
                                                       SEPT. 30, 1996    SEPT. 30, 1995     SEPT. 30, 1994
                                                       --------------    --------------    ----------------
<S>                                                    <C>               <C>               <C>
DEFINED BENEFIT PLAN
Service cost (benefits earned during the period)....       $  4.3            $  4.0             $  1.9
Interest cost on projected benefit obligation.......          5.6               4.8                2.4
Return on plan assets...............................        (10.7)             (8.3)              (2.9)
Net amortization and deferral.......................          4.8               3.1                 .4
                                                           ------             -----              -----
     Total..........................................       $  4.0            $  3.6             $  1.8
                                                           ======             =====              =====
</TABLE>
 
                                       29
<PAGE>   31
 
                             RALCORP HOLDINGS, INC.
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
                  (DOLLARS IN MILLIONS, EXCEPT PER SHARE DATA)
 
     The following table presents the funded status of the Company's defined
benefit plan and amounts recognized in the balance sheet at September 30, 1996
and 1995:
 
<TABLE>
<CAPTION>
                                                                                1996      1995
                                                                               ------    ------
<S>                                                                            <C>       <C>
Actuarial present value of:
  Vested benefits...........................................................   $(54.6)   $(48.1)
  Nonvested benefits........................................................     (7.5)     (6.4)
                                                                               ------    ------
  Accumulated benefit obligation............................................    (62.1)    (54.5)
  Effect of projected future salary increases...............................    (17.3)    (18.1)
                                                                               ------    ------
  Projected benefit obligation..............................................    (79.4)    (72.6)
Plan assets at fair value...................................................     86.3      77.5
                                                                               ------    ------
Plan assets in excess of projected benefit obligation.......................      6.9       4.9
Unrecognized net gain.......................................................    (16.7)    (12.7)
Unrecognized prior service cost.............................................      3.9       5.0
Unrecognized net asset at transition........................................      (.6)      (.6)
                                                                               ------    ------
Accrued pension costs included in Consolidated Balance Sheet................   $ (6.5)   $ (3.4)
                                                                               ======    ======
</TABLE>
 
     As a result of the elimination of a significant number of jobs through the
restructuring initiatives taken in the third quarter of fiscal 1996, see the
"Restructuring Charge" footnote, the Company recognized a curtailment gain of
$.7 to the pension plan.
 
     The key actuarial assumptions used in determining net pension costs and the
projected benefit obligation were as follows:
 
<TABLE>
<CAPTION>
                                                                                    1996       1995
                                                                                  --------   --------
<S>                                                                               <C> <C>    <C> <C>
Discount rate..................................................................     7  5/8%    7  5/8%
Rate of future compensation increases..........................................     5  1/4%    5  1/4%
Long-term rate of return on plan assets........................................     9  1/2%    9  1/2%
</TABLE>
 
     In addition, the Company sponsors a defined contribution plan covering a
substantial majority of its employees under which the Company makes matching
contributions of up to 100% of employee contributions depending on years of
service. The Company matching contribution is capped at a certain percentage of
employee earnings. Prior to the spin-off from Ralston, most employees of the
Company participated in Ralston's defined contribution plan which provided
benefits on the same basis. The cost of the Company's defined contribution plan
for the years ended September 30, 1996 and 1995 and six months ended September
30, 1994 were $5.2, $5.7 and $3.0, respectively. The costs allocated to the
Company related to its participation in Ralston's defined contribution plan
prior to the spin-off totaled $3.1 for the six months ended March 31, 1994.
 
NOTE 10: POSTRETIREMENT BENEFITS OTHER THAN PENSIONS AND POSTEMPLOYMENT BENEFITS
 
     The Company provides health care and life insurance benefits for certain
groups of retired employees who meet specified age and years of service
requirements. The Company is, however, phasing out its subsidy of medical
benefits for a substantial majority of its future retirees. Retiree
contributions are adjusted periodically in order to share increases in the costs
of providing medical benefits.
 
     Prior to the spin-off from Ralston, Ralston allocated the cost of these
benefits to the Company. The costs of retiree health and life insurance benefits
allocated to the Company by Ralston prior to the spin-off were $.7 for the six
months ended March 31, 1994.
 
                                       30
<PAGE>   32
 
                             RALCORP HOLDINGS, INC.
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
                  (DOLLARS IN MILLIONS, EXCEPT PER SHARE DATA)
 
     The net periodic cost of postretirement benefits for the period subsequent
to the spin-off includes the following components:
 
<TABLE>
<CAPTION>
                                                         YEAR ENDED        YEAR ENDED      SIX MONTHS ENDED
                                                       SEPT. 30, 1996    SEPT. 30, 1995     SEPT. 30, 1994
                                                       --------------    --------------    ----------------
<S>                                                    <C>               <C>               <C>
Service cost........................................        $ .3             $   .3             $   .2
Interest cost.......................................         1.0                 .9                 .5
Amortization of unrecognized prior service cost.....          .1                (.1)
                                                            ----             ------             ------
Net periodic postretirement benefit costs...........        $1.4             $  1.1             $   .7
                                                            ====             ======             ======
</TABLE>
 
     The following table sets forth the status of the Company's postretirement
benefit plans at September 30, 1996 and 1995:
 
<TABLE>
<CAPTION>
                                                                        1996               1995
                                                                   --------------    ----------------
<S>                                                                <C>               <C>
Accumulated postretirement benefit obligation:
  Retirees......................................................       $  3.4             $  2.1
  Fully eligible active plan participants.......................          6.5                6.8
  Other active plan participants................................          4.4                4.6
                                                                       ------             ------
Total accumulated postretirement benefit obligation.............         14.3               13.5
Unrecognized net gain...........................................          1.8                1.8
Unrecognized prior service cost.................................          (.7)               (.8)
                                                                       ------             ------
Accrued postretirement benefit costs included in Consolidated
  Balance Sheet.................................................       $ 15.4             $ 14.5
                                                                       ======             ======
</TABLE>
 
     As a result of the elimination of a significant number of jobs through the
restructuring initiatives taken in the third quarter of fiscal 1996, see the
"Restructuring Charge" footnote, the Company recognized a curtailment gain of
$.2 to the postretirement medical and life insurance plan.
 
     Actuarial assumptions used to determine the accumulated postretirement
benefit obligation include a discount rate of 7 5/8% in 1996 and 1995. In 1996
and 1995, the annual increase in per capita costs of covered health care
benefits is assumed to be 6% for all years. If the health care trend rates were
increased one percentage point, the current year postretirement benefit costs
would have increased $.2 and the accumulated postretirement benefit obligation
as of September 30, 1996 would have increased $2.1.
 
     In 1995, the Company adopted Statement of Financial Accounting Standards
No. 112 (FAS 112), "Employers' Accounting for Postemployment Benefits." FAS 112
requires recognition of benefits provided by an employer to former or inactive
employees after employment but prior to such employees' retirement. The effect
of the adoption of this standard did not have a material impact on the Company's
financial position or results of operations.
 
NOTE 11: LONG TERM DEBT
 
     The Company has available certain borrowings under credit agreements with a
number of banks (Bank Credit Agreements). Provisions of the Bank Credit
Agreements require that the Company maintain certain financial ratios and a
minimum level of shareholders' equity. There was $300.0 available under the Bank
Credit Agreements at September 30, 1995 and through an amendment, in March 1996,
the funds available under the Bank Credit Agreements were reduced to $275.0. The
March 1996 amendment also revised the Bank Credit Agreements maturity date to
March 12, 2001.
 
                                       31
<PAGE>   33
 
                             RALCORP HOLDINGS, INC.
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
                  (DOLLARS IN MILLIONS, EXCEPT PER SHARE DATA)
 
     At September 30, 1996 and 1995, long-term debt associated with the
Company's businesses consisted of the following:
 
<TABLE>
<CAPTION>
                                                                         1996      1995
                                                                        ------    ------
        <S>                                                             <C>       <C>
        8.75% Notes due 2004.........................................   $150.0    $150.0
        Bank Credit Agreements.......................................    200.1     217.1
        10.85% and 11.15% Notes due 9/30/97 and 9/30/98..............      3.0       4.5
        Refunding Revenue Bonds Series 90
          7.20%-7.875% due 9/2/98, 9/1/06 and 9/1/08.................     20.4      20.4
        Refunding Revenue Bonds Series 91
          7.125% and 7.375% due 9/1/02 and 9/1/10....................      3.0       3.0
        Other........................................................      1.9       2.2
                                                                        ------    ------
                                                                         378.4     397.2
        Less Current Portion.........................................     (1.8)     (1.8)
                                                                        ------    ------
                                                                        $376.6    $395.4
                                                                        ======    ======
</TABLE>
 
     Included in the Bank Credit Agreements line item, at September 30, 1996, is
$140.0 of bank debt that has been borrowed directly by the Company's Resort
Operations and is fully guaranteed by the Company. Also included in the Bank
Credit Agreements line item are short term notes which have maturities ranging
from one day to one month and have been classified as long term debt based on
the Company's intent and ability to renew the obligations on a long-term basis.
 
     Scheduled aggregate maturities on all long-term debt outstanding as of
September 30, 1996 are $3.2, $.3, $.3 and $200.5 for the years ending September
30, 1998 through 2001. These aggregate maturities include outstanding
commitments at September 30, 1996 under the Bank Credit Agreements, which expire
on March 12, 2001. The Company is subject to the payment of commitment fees
based on a fraction of a percentage on the unused portion of the revolving
credit facility included in the Bank Credit Agreements.
 
NOTE 12: FINANCIAL INSTRUMENTS AND RISK MANAGEMENT
 
Fair Values
 
     The Company's financial instruments primarily include certain short-term
instruments and short and long-term debt. As of September 30, 1996 and 1995, the
fair value of long-term debt, including current maturities, was $391.6 and
$414.2, respectively, compared to the carrying value of $378.4 and $397.2,
respectively. The fair value of the Company's long-term debt has been estimated
using primarily quoted market prices obtained through independent pricing
sources for the same or similar types of borrowing arrangements, taking into
consideration the underlying terms of the debt, such as the coupon rate, term to
maturity, tax impact to investors and imbedded call options, if any.
 
     Due to their nature, the carrying amounts of short-term financial
instruments, such as receivables and accounts payable, reported on the
Consolidated Balance Sheet approximate fair value.
 
Interest Rate Swap Agreements
 
     In November 1995, in order to hedge its exposure to interest rate
fluctuations on $100 of existing floating rate borrowings under the bank credit
agreements, the Company entered into two interest rate swap transactions.
Notional amounts under both transactions are $50 and have terms that expire in
November 1997 and November 1998. Through these interest rate swaps, the Company
pays interest based on fixed rates of 5.575 percent, for the swap expiring in
November 1997, and 5.682 percent, for the swap expiring November
 
                                       32
<PAGE>   34
 
                             RALCORP HOLDINGS, INC.
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
                  (DOLLARS IN MILLIONS, EXCEPT PER SHARE DATA)
 
1998, while receiving a LIBOR-based floating rate. The Company is exposed to
credit loss in the event of nonperformance by the other parties to the interest
rate swap agreements. However, management does not anticipate such
nonperformance. The impact of these interest rate swaps on fiscal 1996 interest
expense was immaterial to the Company's results of operations.
 
     At September 30, 1996, the fair value of the outstanding interest rate
swaps was approximately $.7 of income. This fair value is the estimated amount
the Company would receive to unwind the interest rate swap agreements, taking
into account current interest rates and the credit risk of the counterparties.
 
Concentration of Credit Risk
 
     The Company's primary concentration of credit risk is related to certain
trade accounts receivable due from several highly leveraged or "at risk"
customers. At September 30, 1996 and 1995 the amount of such receivables was
$3.1 and $4.0, respectively. Consideration was given to the financial position
of these customers when determining the appropriate allowance for doubtful
accounts.
 
NOTE 13: SHAREHOLDERS' EQUITY
 
     The Company's Restated Articles of Incorporation authorize the issuance of
up to 300,000,000 shares of Common Stock, par value $.01, and 10,000,000 shares
of Preferred Stock, par value $.01. As of September 30, 1996, the Company had
approximately 32,917,000 shares of Common Stock issued and outstanding. The
Company has not issued any shares of Preferred Stock. The terms of any series of
Preferred Stock (including but not limited to the dividend rate, voting rights,
convertibility into other Company securities and redemption) may be set by the
Company's Board of Directors.
 
     On March 24, 1994 the Ralston Board of Directors declared a dividend
distribution of one share purchase right (Right) for each outstanding share of
the Company's Common Stock. Each Right entitles a shareholder to purchase from
the Company one common share at an exercise price of $75 per share subject to
antidilution adjustments. The Rights, however, become exercisable only at the
time a person or group acquires or commences a public tender offer for 20% or
more of the Company's Common Stock. If an acquiring person or group acquires 20%
or more of the Company's Common Stock, the price will be further adjusted so
that holders of Rights (other than the acquiring person or group) may purchase
Common Stock at one-third of its then market price. In the event that the
Company merges with, or transfers 50% or more of its assets or earning power to,
any person or group after the Rights become exercisable, holders of the Rights
may purchase, at the exercise price, Common Stock of the acquiring entity having
a value equal to twice the exercise price. The Rights can be redeemed by the
Board of Directors at $.05 per Right only up to the date a person or group
acquires 20% or more of the Company's Common Stock. Also, following the
acquisition by a person or group of beneficial ownership of at least 20% but
less than 50% of the Company's Common Stock, the Board may exchange the Rights
for Common Stock at a ratio of one share of Common Stock per Right. The Rights
expire on March 31, 2004.
 
     On May 25, 1995, the Company's Board of Directors authorized the repurchase
of up to one million shares of the Company's Common Stock. This authorization
allows the Company's management to make purchases from time to time at
prevailing market prices. The previous year's Board-approved repurchase
authorization of $15.0 worth of the Company's Common Stock was completed during
the current fiscal year. For the year ended September 30, 1996, the Company
repurchased approximately 349,000 shares for $8.6, for the year ended September
30, 1995, the Company repurchased approximately 633,000 shares for $13.5 and for
the six month period ended September 30, 1994 the Company repurchased
approximately 126,000 shares for $2.0, pursuant to such authorizations.
 
                                       33
<PAGE>   35
 
                             RALCORP HOLDINGS, INC.
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
                  (DOLLARS IN MILLIONS, EXCEPT PER SHARE DATA)
 
     On September 23, 1994, the Company's Board of Directors approved the grant
of 170,000 shares of Common Stock for restricted stock awards. All of the
previously repurchased treasury shares during the six months ended September 30,
1994, along with approximately 44,000 new shares, were issued under the
restricted stock award.
 
     At September 30, 1996, there were 2,665,304 shares of Company Common Stock
reserved under various employee incentive compensation and benefit plans.
 
NOTE 14: INCENTIVE COMPENSATION
 
     The Company's Incentive Stock Plan (Plan), adopted in March 1994, reserves
shares which will be used for various stock based compensation awards. The Plan
provides that eligible employees may receive stock option awards and other stock
awards payable in whole or part by the issuance of stock. During 1995, the
Company issued performance-based stock option awards at an option price equal to
the fair market value of the shares at grant date. These awards would vest and
become exercisable only upon achievement of certain share price growth targets.
Compensation expense was recognized throughout the first six months of fiscal
1996 for these awards based on the difference between the share price at grant
date and the share price when the required growth targets are achieved. The
recognition of compensation expense was discontinued, however, upon the
determination that the share price growth targets would not be met. At spin-off
from Ralston, stock option awards relating to shares of RPG Stock held by
employees of the Company were replaced with awards based on the Company's Common
Stock according to a formula which maintained the then current relationship
between the option price and the market value of the shares. During 1994,
subsequent to the spin-off from Ralston, additional stock option awards were
issued at an option price equal to the fair market value of the shares at grant
date and, accordingly, no charge against earnings was made. Proceeds from the
exercise of stock options are credited to the appropriate capital accounts.
 
     Changes in incentive and nonqualified stock options outstanding are
summarized as follows:
 
<TABLE>
<CAPTION>
                                                                              SHARES UNDER OPTION
                                                                              -------------------
<S>                                                                           <C>
Outstanding at September 30, 1994 ($13.23 to $26.14 per share).............          994,842
Granted ($23.63 per share).................................................          318,800
Exercised ($13.23 per share)...............................................           (3,576)
Canceled...................................................................           (7,439)
                                                                                   ---------
Outstanding at September 30, 1995 ($13.23 to $26.14 per share).............        1,302,627
                                                                                   ---------
Granted....................................................................               --
Exercised ($13.23 to $24.08 per share).....................................          (13,555)
Canceled...................................................................          (63,191)
                                                                                   ---------
Outstanding at September 30, 1996 ($13.23 to $26.14 per share).............        1,225,881
                                                                                   =========
Shares exercisable at:
  September 30, 1995.......................................................          175,815
                                                                                   ---------
  September 30, 1996.......................................................          245,019
                                                                                   ---------
</TABLE>
 
     At September 30, 1996 and 1995 there were 1,386,803 and 1,381,081 shares,
respectively, available for future awards. In addition, at September 30, 1996
and 1995, 98,122 and 140,482 shares, respectively, of restricted stock awards
were outstanding. Restrictions on shares of restricted stock issued to eligible
employees lapse over periods ranging up to 36 months provided continued
employment and, in certain cases, minimum stock price requirements are met.
Compensation cost is recognized over this vesting period.
 
                                       34
<PAGE>   36
 
                             RALCORP HOLDINGS, INC.
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
                  (DOLLARS IN MILLIONS, EXCEPT PER SHARE DATA)
 
     The Ralcorp Board has determined that immediately prior to the
Distribution, the value of stock options in Ralcorp Common Stock held by
employees will be paid to the recipient in cash. Stock options that have an
exercise price higher than the current price of Ralcorp Common Stock will be
valued at $0.50 per share. The Company estimates that total payments related to
the cash settlement of stock options will be $4.7, which will be recognized as
additional compensation expense in fiscal 1997.
 
NOTE 15: COMMITMENTS AND CONTINGENCIES
 
     The Company is a party to a number of legal proceedings in various state
and federal jurisdictions. These proceedings are in varying stages and many may
proceed for protracted periods of time. Some proceedings involve highly complex
questions of fact and law.
 
     On January 4, 1993, Ralston was served with the first of nine substantively
identical actions currently pending in the United States District Court for the
District of New Jersey. The suits have been consolidated and styled In Re Baby
Food Antitrust Litigation, No. 92-5495 (NHP). The consolidated proceeding is a
certified class action by and on behalf of all direct purchasers of baby foods
(other than the defendants and governmental entities), alleging that the
Beech-Nut baby food business (and its predecessor Nestle Holdings, Inc.)
together with Gerber Products Company and H. J. Heinz Company, conspired to fix,
maintain and stabilize the prices of baby foods during the period January 1,
1975 to August 31, 1992, and seeking treble damages.
 
     On January 19 and 21, 1993, Ralston was served with two class actions on
behalf of indirect purchasers (consumers) of baby food in California, which
contain substantially identical charges. These actions have been consolidated in
the Superior Court for the County of San Francisco and styled Bruce, et al. v.
Gerber Products Company, et al., No. 94-8857. On January 19, 1993, Ralston was
served with a similar action filed in Alabama state court on behalf of indirect
purchasers of baby food in Alabama, styled Johnson, et al. v. Gerber Products
Company, et al., No. 93-L-0333-NE. Both state actions allege violations of state
antitrust laws and are substantively identical to each other. Similar state
actions may be filed in states having laws permitting suits by indirect
purchasers. Ralston and the Company have agreed in the Reorganization Agreement
that all expenses related to the above antitrust matters will be shared equally,
but that Ralcorp's liability for any settlement or judgment will not exceed $5
million. Expenses and liability with respect to certain other lawsuits which are
not believed by the Company to be material, either individually or in the
aggregate, will also be shared pursuant to the Reorganization Agreement.
 
     The operations of the Company, like those of similar businesses, are
subject to various federal, state, and local laws and regulations intended to
protect public health and the environment, including air and water quality and
waste handling and disposal. Certain Company businesses have received notices
from the U.S. Environmental Protection Agency, state agencies, and /or private
parties seeking contribution, that they have been identified as a "potentially
responsible party" (PRP) under the Comprehensive Environmental Response,
Compensation and Liability Act, and the Company may be required to share in the
cost of cleanup with respect to three waste disposal sites. The Company's
ultimate liability in connection with environmental matters may depend on many
factors including, but not limited to, the volume of material contributed to a
site, the existence of other parties responsible for remediation and their
financial viability, reports of experts (internal or external), and the
remediation methods and technology to be used.
 
     Except as noted, many of the foregoing matters are in preliminary stages,
involve complex issues of law and fact and may proceed for protracted periods of
time. The amount of alleged liability, if any, from these proceedings cannot be
determined with certainty; however, in the opinion of Company management, based
upon the information presently known as well as upon the limitation of its
liabilities set forth in the Reorganization Agreement, the ultimate liability of
the Company, if any, arising from the pending legal proceedings, as well as from
asserted legal claims and known potential legal clams which are probable of
 
                                       35
<PAGE>   37
 
                             RALCORP HOLDINGS, INC.
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
                  (DOLLARS IN MILLIONS, EXCEPT PER SHARE DATA)
 
assertion, taking into account established accruals for estimated liabilities,
should not be material to the Company's consolidated financial position or
results of operations. In addition, while it is difficult to quantify with
certainty the potential financial impact of actions regarding expenditures for
environmental matters, in the opinion of management, based upon the information
currently available, the ultimate liability arising from such environmental
matters should not be material to the Company's consolidated financial position
or results of operations.
 
LEASE COMMITMENTS
 
     Future minimum rental commitments under noncancelable operating leases in
effect as of September 30, 1996 were: 1997 - $3.8, 1998 - $3.5, 1999 - $3.1,
2000 - $2.3, 2001 - $1.0, thereafter - $0.8.
 
     Total rental expense for all operating leases was $5.3 in 1996, $4.1 in
1995 and $4.2 in 1994.
 
NOTE 16: SUPPLEMENTAL EARNINGS STATEMENT INFORMATION
 
<TABLE>
<CAPTION>
                                                                          1996     1995     1994
                                                                          -----    -----    -----
<S>                                                                       <C>      <C>      <C>
Maintenance and repairs................................................   $32.5    $29.7    $29.3
Research and development...............................................     6.5      7.4      6.7
</TABLE>
 
NOTE 17: SUPPLEMENTAL CASH FLOW STATEMENT INFORMATION
 
<TABLE>
<CAPTION>
                                                                          1996     1995     1994
                                                                          -----    -----    -----
<S>                                                                       <C>      <C>      <C>
Interest paid..........................................................   $27.6    $27.9    $11.3
Income taxes paid......................................................    25.9     29.7     38.5
</TABLE>
 
     Interest paid by the Company during the six month period ended September
30, 1994 was $10.2. Interest payments for the six month period ended March 31,
1994 and prior years were the responsibility of Ralston. Total income tax
payments made by the Company after the 1994 Spin-off Date were $14.5. Tax
payments due on income earned prior to the 1994 Spin-off Date are the
responsibility of Ralston.
 
                                       36
<PAGE>   38
 
                             RALCORP HOLDINGS, INC.
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
                  (DOLLARS IN MILLIONS, EXCEPT PER SHARE DATA)
 
NOTE 18: SUPPLEMENTAL BALANCE SHEET INFORMATION
 
<TABLE>
<CAPTION>
                                                                                1996      1995
                                                                               ------    ------
<S>                                                                            <C>       <C>
Receivables (current) --
  Trade.....................................................................   $ 63.3    $ 77.9
  Income taxes..............................................................      6.6       4.4
  Other.....................................................................      6.6       4.8
  Allowance for doubtful accounts...........................................     (1.0)      (.8)
                                                                               ------    ------
                                                                               $ 75.5    $ 86.3
                                                                               ======    ======
Inventories --
  Raw materials and supplies................................................   $ 26.5    $ 33.4
  Finished products.........................................................     76.8      76.7
                                                                               ------    ------
                                                                               $103.3    $110.1
                                                                               ======    ======
Prepaid Expenses --
  Deferred income tax benefits..............................................   $  8.8    $  6.6
  Prepaid expenses..........................................................      5.4       4.5
                                                                               ------    ------
                                                                               $ 14.2    $ 11.1
                                                                               ======    ======
Investments and Other Assets --
  Intangible assets (net of accumulated amortization:
     1996 -- $10.4 and 1995 -- $7.5(a)).....................................   $ 43.2    $ 45.3
  Property held for development.............................................     12.4      17.3
  Investments in affiliated companies.......................................     29.1      25.3
  Deferred charges and other assets.........................................      3.4       3.7
                                                                               ------    ------
                                                                               $ 88.1    $ 91.6
                                                                               ======    ======
Accounts Payable and Accrued Liabilities --
  Trade accounts payable....................................................   $ 54.7    $ 66.1
  Incentive compensation, salaries and vacations............................      7.0       6.6
  Property taxes............................................................      5.3       4.6
  Shutdown reserves.........................................................      7.6       5.8
  Advertising...............................................................      9.6       6.4
  Other items...............................................................     16.4      13.3
                                                                               ------    ------
                                                                               $100.6    $102.8
                                                                               ======    ======
</TABLE>
 
-------------------------
(a) Excludes $.8 of amortization related to National Oats goodwill, all of which
    was eliminated through the September 1995 nonrecurring charges.
 
NOTE 19: ANALYSIS OF BALANCE SHEET CHANGES
 
<TABLE>
<CAPTION>
                                                                   1996         1995         1994
                                                                   ----         ----         ----
<S>                                                                <C>          <C>          <C>
Allowance for Doubtful Accounts --
  Balance, beginning of year....................................   $ .8         $ .7         $ .9
  Provision charged to expense..................................     .8           .4           .3
  Writeoffs, less recoveries....................................    (.6)         (.3)         (.5)*
                                                                   ----         ----         ----
Balance, end of year............................................   $1.0         $ .8         $ .7
                                                                   ====         ====         ====
</TABLE>
 
-------------------------
* Includes $.4 adjustment to beginning allocated balance, actual writeoffs were
$.1.
 
                                       37
<PAGE>   39
 
                             RALCORP HOLDINGS, INC.
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
                  (DOLLARS IN MILLIONS, EXCEPT PER SHARE DATA)
 
<TABLE>
<CAPTION>
                                                       1996           1995           1994
                                                      ------         ------         ------
<S>                                                   <C>            <C>            <C>
Property at Cost --
  Balance, beginning of year.......................   $669.3         $634.9         $590.5
  Additions........................................     60.2           59.3           62.0(d,e)
  Acquisitions(f)..................................                                   22.4
  Disposals........................................   (192.5)(a)      (24.9)(c)      (40.0)(g)
                                                      ------         ------         ------
Balance, end of year...............................   $537.0         $669.3         $634.9
                                                      ======         ======         ======
Accumulated Depreciation --
  Balance, beginning of year.......................   $252.2         $218.7         $177.9
  Depreciation provision...........................     43.5           44.1           60.6(d,e)
  Disposals........................................    (81.3)(b)      (10.6)(c)      (19.8)(g)
                                                      ------         ------         ------
Balance, end of year...............................   $214.4         $252.2         $218.7
                                                      ======         ======         ======
</TABLE>
 
-------------------------
(a) Includes the impairment of assets related to the private label ready-to-eat
    cereal and consumer hot cereal operations (decrease of $178.6).
 
(b) Includes the impairment of assets related to the private label ready-to-eat
    cereal and consumer hot cereal operations (decrease of $78.0). Also,
    includes asset writedown related to the third quarter fiscal 1996
    restructuring charge, which increased accumulated depreciation $5.8.
 
(c) Includes write-down of fixed assets related to exit of industrial oats and
    oats milling operations and impairment of the consumer hot cereal business
    (decreases of $13.1 in property and $3.1 in accumulated depreciation).
 
(d) Includes valuation adjustment related to Keystone Resort ($13.9 addition to
    property and accumulated depreciation).
 
(e) Includes asset transfers from Ralston at spin-off of $9.9, and related
    accumulated depreciation of $5.0.
 
(f) Includes acquisition of National Oats in 1994.
 
(g) Represents net book value of property disposals. Actual proceeds from the
    sale of the related property were $19.2.
 
                                       38
<PAGE>   40
 
                             RALCORP HOLDINGS, INC.
 
                  QUARTERLY FINANCIAL INFORMATION (UNAUDITED)
                  (DOLLARS IN MILLIONS, EXCEPT PER SHARE DATA)
 
     The results of any single quarter are not necessarily indicative of the
Company's results for the full year. Net earnings of the Company are highly
seasonal, primarily due to resort operations which earn more than the entire
year's operating profit during the second fiscal quarter. Cereal operations are
also affected by seasonal CHEX party mix promotions which increase sales volume
during the first fiscal quarter of the year.
 
<TABLE>
<CAPTION>
                 FISCAL 1996                     FIRST      SECOND   THIRD        FOURTH
----------------------------------------------   ------     ------  --------      -------
<S>                                              <C>        <C>     <C>           <C>
Net sales.....................................   $295.3     $277.4   $ 230.1      $ 224.6
Gross profit..................................    153.0      138.0     103.5         96.1
Net earnings (loss)...........................     14.7       21.2     (16.3)(a)    (66.4)(b)(c)
Net earnings per common share(e)(f)...........      .44        .64      (.50)(a)    (2.02)(b)(c)
</TABLE>
 
<TABLE>
<CAPTION>
                 FISCAL 1995                     FIRST      SECOND     THIRD        FOURTH
----------------------------------------------   ------     ------     ------       ------
<S>                                              <C>        <C>        <C>          <C>
Net sales.....................................   $278.4     $258.3     $231.5       $245.2
Gross profit..................................    146.0      123.4      105.4        108.2
Net earnings..................................     17.1       21.9        5.1        (10.7)(d)
Net earnings per common share(e)(f)...........      .51        .65        .15         (.32)(d)
</TABLE>
 
-------------------------
(a) Net earnings (loss) and earnings (loss) per share were negatively affected
    by the inclusion of pre-tax restructuring charge of $20.7 ($12.7 after
    taxes, or $.39 per share).
 
(b) Net earnings (loss) and earnings (loss) per share were negatively affected
    by the inclusion of pre-tax nonrecurring charges of $109.5 ($68.8 after
    taxes, or $2.09 per share) and the recording of certain transaction costs
    related to the Company's proposed resorts sale totaling $4.0, pre-tax ($2.5
    after taxes, or $.08 per share). Partially offsetting these negative factors
    was a pre-tax adjustment to the third quarter restructuring charge of $4.2
    ($2.6 after taxes, or $.08 per share).
 
(c) Net earnings were favorably impacted by adjustments to advertising and
    promotion accruals recorded earlier in the year. Advertising and promotion
    expense for the fiscal 1996 fourth quarter was $44.1 compared to fiscal 1995
    fourth quarter expense of $52.1, despite full fiscal 1996 advertising and
    promotion expense being $20.1 higher than fiscal 1995. This adjustment
    became necessary when it was determined that redemption levels for in-ad
    coupon programs and cereal sales volumes were below the expectations used to
    record advertising and promotion expense in the previous fiscal 1996
    quarters.
 
(d) Net earnings (loss) and earnings (loss) per share for the fourth quarter of
    1995 were negatively affected by the inclusion of pre-tax nonrecurring
    charges of $21.9 ($13.6 after taxes, or $.41 per share) and by the write-off
    of small dollar accounts receivable of $2.4, pre-tax ($1.5, after taxes, or
    $.045 per share).
 
(e) Based on actual weighted average outstanding shares of Ralcorp Stock for all
    periods presented.
 
(f) Earnings (loss) per common share is computed independently for each of the
    periods presented, therefore, the sum of the earnings per common share
    amounts for the quarters may not equal the total for the year.
 
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
 
     Not applicable.
 
                                    PART III
 
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
 
     Pursuant to the Ralcorp Restated Articles of Incorporation and Bylaws, the
Board of Directors of Ralcorp (the "Ralcorp Board") consists of from five to
twelve individuals, divided into three approximately equal
 
                                       39
<PAGE>   41
 
classes with each class serving a three-year term. The Ralcorp Board has set the
number of directors as six. The following table sets forth information as to
each member of the Ralcorp Board (the directors' ages are as of December 31,
1996). Ralcorp's Bylaws provide that no person may stand for election or
re-election as a director after having attained the age of 70. Mr. Stiritz
serves as the Chairman of the Ralcorp Board.
 
<TABLE>
<CAPTION>
                                         TERM
             NAME                AGE    EXPIRES                      INFORMATION
------------------------------   ---    -------    -----------------------------------------------
<S>                              <C>    <C>        <C>
William H. Danforth...........   70      1999      Dr. Danforth has been a director of Ralcorp
                                                   since March, 1994. He is Chairman of the Board
                                                   of Trustees of Washington University and has
                                                   served in that capacity since July, 1995. He
                                                   retired as Chancellor of Washington University
                                                   in June, 1995, a position he held since 1971.
                                                   He is also a director of McDonnell Douglas
                                                   Corporation and Ralston Purina Company.
William D. George, Jr. .......   64      1998      Mr. George has been a director of Ralcorp since
                                                   March, 1994. He is President and Chief
                                                   Executive Officer and a member of the Board of
                                                   Directors of S. C. Johnson & Son, Inc. and has
                                                   served in that capacity since 1993. He served
                                                   as S. C. Johnson's President and Chief
                                                   Operating Officer, Worldwide Consumer Products
                                                   from 1990 to 1993. He is also a director of
                                                   Arvin Industries, Inc. and Moorman
                                                   Manufacturing Company.
Jack W. Goodall...............   58      1997      Mr. Goodall has been a director of Ralcorp
                                                   since March, 1994. He is Chairman of the Board
                                                   of Foodmaker, Inc. and has served in that
                                                   capacity since April, 1996. He served as
                                                   Chairman, President and Chief Executive Officer
                                                   of Foodmaker, Inc. from 1985 to 1996. He is
                                                   also a director of Thrifty PayLess, Inc. and
                                                   Van Camp Seafood Co., Inc.
David W. Kemper...............   46      1998      Mr. Kemper has been a director of Ralcorp since
                                                   October, 1994. He is Chairman, President and
                                                   Chief Executive Officer of Commerce Bancshares,
                                                   Inc. and has served in that capacity since
                                                   1991. He served as Commerce Bancshares' Chief
                                                   Executive Officer and President from 1986 to
                                                   1991. He is also a director of Seafield Capital
                                                   Corporation, Tower Properties Company and Wave
                                                   Technologies International, Inc.
Joe R. Micheletto.............   60      1997      Mr. Micheletto has been a director of Ralcorp
                                                   since January, 1994. See additional information
                                                   under Item 4(a).
William P. Stiritz............   62      1998      Mr. Stiritz has been a director and the
                                                   Chairman of the Board of Ralcorp since January,
                                                   1994. He is Chairman of the Board, Chief
                                                   Executive Officer and President of Ralston
                                                   Purina Company and has served in that capacity
                                                   since 1982. He is also a director of Angelica
                                                   Corporation, Ball Corporation, Boatmen's
                                                   Bancshares, Inc., Interstate Bakeries
                                                   Corporation, Reinsurance Group of America,
                                                   Incorporated and The May Department Stores
                                                   Company.
</TABLE>
 
                                       40
<PAGE>   42
 
DIRECTORS' MEETINGS, FEES AND COMMITTEES
 
     The Ralcorp Board has five regularly scheduled meetings per year, and holds
such special meetings as deemed advisable, to review significant matters
affecting the Company and to act upon matters requiring Board approval. During
fiscal year 1996, five regular meetings, two special telephonic meetings and one
consent of Board of Directors in lieu of special meeting were held.
Non-management directors receive an annual retainer of $20,000, and are also
paid $2,500 for attending each regular or special Board meeting and $1,000 for
attending each standing committee meeting and for each telephonic meeting and
consent to action without a meeting. The Company also pays the premiums on
Directors' and Officers' Liability, and travel accident insurance policies
insuring directors. A director who is also an employee (Mr. Micheletto) receives
no renumeration for service as a Director.
 
     The Company has a Deferred Compensation Plan for Non-Management Directors
(the "DCP"). Under this plan, any non-management director may elect to defer,
with certain limitations, all retainers and fees until retirement or other
termination of his directorship. Deferrals may be made in Common Stock
equivalents in an Equity Option (stock equivalents) or may be made in cash under
a Variable Interest Option (interest at prime rate). Deferrals in the Equity
Option receive a 33 1/3% Company matching contribution which will also be in
Common Stock equivalents. All Stock equivalents credited to a recipient will
also be credited with dividend equivalents at any time that cash dividends are
declared and paid on Common Stock; when sufficient in amount, such equivalents
will be converted into additional Common Stock equivalents. Deferrals and
related earnings will be paid out in a lump sum in cash to the Director at the
Director's termination of service, or total disability or to the Director's
estate or beneficiary upon the Director's death.
 
     The Ralcorp Board has established and designated specific functions and
areas of oversight to a Nominating and Compensation Committee and an Audit
Committee. A description of these standing committees and their membership as of
December 30, 1996 follows:
 
     Audit Committee -- D. W. Kemper (Chairman); W. H. Danforth; W. D. George,
Jr.; J. W. Goodall; W. P. Stiritz
 
     The Audit Committee consists entirely of non-management Directors. It is
responsible for matters relating to accounting policies and practices, financial
reporting, and internal controls. Each year it recommends to the Ralcorp Board
the appointment of a firm of independent accountants to examine the financial
statements of Ralcorp, and reviews with representatives of the independent
accountants the scope of the examination of Ralcorp financial statements,
results of audits, audit costs, and recommendations with respect to internal
controls and financial matters. It also reviews nonaudit services rendered by
Ralcorp's independent accountants and periodically meets with or receive reports
from principal corporate officers. The Audit Committee met twice in fiscal year
1996.
 
     Nominating and Compensation Committee -- J. W. Goodall (Chairman); W. H.
Danforth; W. D. George, Jr.; D. W. Kemper; W. P. Stiritz
 
     The Nominating and Compensation Committee consists entirely of
non-management Directors free from interlocking or other relationships that
might be considered a conflict of interest. It recommends to the Ralcorp Board
nominees for election as Directors and Executive Officers of the Company.
Additionally, it makes recommendations to the Ralcorp Board regarding election
of Directors to positions on committees of the Ralcorp Board and compensation
and benefits for Directors. The Nominating and Compensation Committee also
considers suggestions from shareholders regarding possible Director candidates.
Such suggestions, together with appropriate biographical information, should be
submitted to the Secretary of the Company. This Committee also sets the
compensation of all Executive Officers and administers Ralcorp's Deferred
Compensation Plan for Key Employees and Incentive Stock Plan, including the
granting of awards under the latter plan, other than to Directors on this
Committee. It also reviews the competitiveness of management compensation and
benefit programs, and principal employee relations policies and procedures. The
Nominating and Compensation Committee met twice in fiscal year 1996.
 
                                       41
<PAGE>   43
 
ITEM 11. EXECUTIVE COMPENSATION.
 
                             EXECUTIVE COMPENSATION
 
INTRODUCTION AND SUMMARY
 
     The following tables and narrative text discuss the compensation paid in
fiscal year 1996 to the Named Executive Officers, i.e., the Company's current
Chief Executive Officer and President, its former Chief Executive Officer and
President and the Company's three other most highly compensated executive
officers (collectively, the "Named Executive Officers").
 
     The Summary Compensation Table set forth below also summarizes compensation
received by the Named Executive Officers from the date of the spin-off of the
Company by Ralston Purina Company on March 31, 1994 through the end of fiscal
year 1994, that is, for six months rather than for a full fiscal year.
Annualized salaries, i.e., the salary amounts which would have been paid to the
Named Executive Officers had they been paid for the full 1994 fiscal year at the
rates in effect from the spin-off date through the end of the 1994 fiscal year
are as follows: Micheletto -- $210,000; Bresler -- $130,000; Lockwood --
$160,000; Nichols -- $135,000; and Pearce -- $300,000.
 
     The full amount of bonuses paid by the Company at the end of fiscal year
1994 are reflected in the "Bonus" column. No attempt has been made to pro rate
bonuses based on the relationship between the period before the spin-off and the
period after the spin-off.
 
                           SUMMARY COMPENSATION TABLE
 
<TABLE>
<CAPTION>
                                                                            LONG-TERM COMPENSATION
                                                                                   (AWARDS)
                                            ANNUAL COMPENSATION           ---------------------------
                                     ----------------------------------                    SECURITIES
                                                           OTHER ANNUAL     RESTRICTED     UNDERLYING    ALL OTHER
                                      SALARY               COMPENSATION   STOCK AWARD(S)    OPTIONS     COMPENSATION
NAME & PRINCIPAL POSITION(1)  YEAR    ($)(2)    BONUS($)       ($)            ($)(3)          (#)          ($)(4)
----------------------------  ----   --------   --------   ------------   --------------   ----------   ------------
<S>                           <C>    <C>        <C>        <C>            <C>              <C>          <C>
J. R. Micheletto............  1996   $210,000   $100,000     $ 19,481               0              0     $   46,733
Chief Executive Officer       1995   $210,000   $100,000     $ 13,169               0         20,000     $   41,497
and President                 1994   $105,000   $100,000     $  6,361        $638,750        156,746     $   26,940
A. R. Bresler...............  1996   $152,000   $ 55,010            0               0              0     $1,396,165
Vice President; and
  President                   1995   $135,000   $ 55,010     $ 12,676               0         12,000     $   35,795
Beech-Nut Nutrition           1994   $ 65,000   $ 57,000     $  6,000        $182,500        131,014     $   29,242
Corporation
R. W. Lockwood..............  1996   $182,000   $ 43,000     $      0               0              0     $   21,863
Vice President, General       1995   $165,000   $ 43,000     $ 12,815               0         12,000     $   20,900
Counsel and Secretary         1994   $ 80,000   $ 38,000     $  6,239        $182,500         32,256     $    9,800
J. A. Nichols...............  1996   $157,000   $ 60,000     $    596               0              0     $   42,080
Vice President; and           1995   $140,000   $ 60,000     $ 12,286               0         15,000     $   38,904
President, Ralston Foods      1994   $ 67,500   $ 46,000     $  6,000        $146,000        112,781     $   26,227
R. A. Pearce................  1996   $300,000   $150,000     $ 22,473               0              0     $1,418,685
Chief Executive Officer       1995   $300,000   $150,000     $ 15,848               0         20,000     $   41,560
and President                 1994   $150,000   $150,000     $  7,920        $638,750        141,552     $   27,614
</TABLE>
 
---------------
1. Mr. Pearce, Chief Executive Officer and President, resigned this position on
   September 27, 1996. Mr. Bresler, Vice President; and President, Beech-Nut
   Nutrition Corporation, resigned this position on October 14, 1996.
 
2. In fiscal year 1996, car allowances for Messrs. Bresler, Lockwood and Nichols
   were rolled into their salaries. Prior to that time, car allowances were
   included in the column "Other Annual Compensation."
 
3. The aggregate restricted stock holdings and value at September 30, 1996 for
   the Named Executive Officers were as follows: Micheletto -- 21,000 shares
   ($435,750); Bresler -- 6,000 shares ($124,500); Lockwood -- 6,000 shares
   ($124,500); Nichols -- 4,800 shares ($99,600); and Pearce -- 21,000 shares
   ($435,750).
 
                                       42
<PAGE>   44
 
   Under the terms of the grant, restricted shares reflected in this column
   vested or will vest as follows: 20% of the total award on September 23 of
   each of the years 1995, 1996, 1997, and 1998 and on March 30, 1999.
 
   The Company does not currently pay dividends on its Common Stock. If it does
   so in the future, dividends on restricted stock will be retained by the
   Company until the restrictions on the underlying shares lapse, at which time
   the dividends, with interest at the prime rate, will be distributed. If the
   shares are forfeited, accrued dividends and interest would also be forfeited.
 
4. The amounts shown in this column consist of the following: (i) Company
   matching contributions or accruals to Ralcorp's Savings Investment Plan and
   Executive Savings Investment Plan. Such amounts are $19,600, $9,120, $11,113,
   $9,513, and $28,500, respectively, for Messrs. Micheletto, Bresler, Lockwood,
   Nichols and Pearce; (ii) Amounts attributable to the portion of split-dollar
   life insurance premiums paid by Ralcorp. These amounts will be repaid on a
   specified future date. Amounts included are equal to the premiums outstanding
   during fiscal year 1996 multiplied by the Company's approximate borrowing
   rate for money borrowed for comparable periods. Such amounts are $27,133,
   $16,645, $17,567 and $4,458, respectively, for Messrs. Micheletto, Bresler,
   Nichols and Pearce; (iii) Company 25% matching contributions on deferrals
   under the Equity Option of the Deferred Compensation Plan for Key Employees.
   Such amounts are $5,000, $10,750 and $15,000, respectively, for Messrs.
   Bresler, Lockwood and Nichols; and, (iv) For Messrs. Bresler and Pearce,
   $1,365,400 and $1,385,727 respectively to be paid in cash pursuant to
   severance arrangements described on page 44 (pursuant to such severance
   arrangements). Mr. Bresler's restricted stock and Mr. Pearce's restricted
   stock and stock options also vested.
 
STOCK OPTIONS
 
     The following table sets forth fiscal year end option values. No options
were exercised by any of the Named Executive Officers during fiscal year 1996.
The Company has never granted Stock Appreciation Rights.
 
                         FISCAL YEAR END OPTION VALUES
 
<TABLE>
<CAPTION>
                                                      NUMBER OF SECURITIES            VALUE OF UNEXERCISED
                                                     UNDERLYING UNEXERCISED               IN-THE-MONEY
                                                      OPTIONS AT FY-END(#)            OPTIONS AT FY-END($)
                                                  ----------------------------    ----------------------------
                     NAME                         EXERCISABLE    UNEXERCISABLE    EXERCISABLE    UNEXERCISABLE
-----------------------------------------------   -----------    -------------    -----------    -------------
<S>                                               <C>            <C>              <C>            <C>
J. R. Micheletto...............................      15,194         161,552        $  56,031       $ 646,288
A. R. Bresler..................................      30,389         112,625        $ 178,072       $ 460,330
R. W. Lockwood.................................      13,679          30,577        $  96,404       $  69,139
J. A. Nichols..................................      64,424          63,357        $ 462,318       $ 244,557
R. A. Pearce...................................      42,544         119,008        $ 266,904       $ 415,381
</TABLE>
 
COMPENSATION PURSUANT TO PLANS
 
     During fiscal year 1996, the Company maintained certain plans that provided
benefits to executive officers and other employees of the Company. Descriptions
of some of these plans follow. The descriptions provided are in summary form and
are contained in this Form 10-K solely in order to meet SEC requirements
regarding disclosure of the compensation of the Named Executive Officers and
should not be used for any other purpose.
 
  SEVERANCE AGREEMENTS
 
     The Company has management continuity agreements with the Named Executive
Officers. The purpose of the agreements is to provide severance compensation to
each covered executive officer in the event of the officer's voluntary or
involuntary termination after a change in control of the Company. The
compensation provided would be in the form of a lump sum payment equal to the
present value of continuing the executive officer's salary and bonus for a
specified period following the executive officer's termination of employment,
 
                                       43
<PAGE>   45
 
the continuation of other executive benefits for the same applicable period and
certain pension bridging payments. The initial applicable period is three years
in the event of an involuntary termination of employment (including a
constructive termination) and one year, in the event of a voluntary termination
of employment, which periods are subject to reduction for each complete year the
executive officer remains employed following the change in control. No payments
would be made in the event the executive officer's termination is due to death,
disability or normal retirement, or is for cause, nor would any payments
continue beyond the executive officer's normal retirement date. Contracts
governing options and restricted stock awards to executive officers provide that
upon a change in control of the Company: all terms, conditions, restrictions and
limitations in effect with respect to any unexercised award lapse and no other
terms and conditions will be applied; any unexercised, unvested, unearned or
unpaid shares become 100% vested; and stock awards with performance conditions
will be treated as if the performance objectives had been obtained at a level of
100%.
 
     Two of the Named Executive Officers have resigned as employees of the
Company effective, in the case of Mr. Pearce, on December 31, 1996, and, in the
case of Mr. Bresler, on November 30, 1996. Their resignations as officers were
effective as reflected in note 1 to the Summary Compensation Table on page 42.
In light of their past service and their agreement to meet certain conditions in
the future, the Company has entered into separation agreements with each of
these Named Executive Officers.
 
     Pursuant to Mr. Pearce's agreement, he will receive a cash payment of
$1,385,727, the vesting of all restricted stock held by him and of the Company
match on his deferred compensation, the transfer to him of ownership of his
Company-provided automobile, outplacement assistance, the crediting of three
additional years of service and earnings for retirement plan purposes and the
vesting of his nonvested options (or payment of their value in cash).
 
     Mr. Bresler will receive a cash payment of $1,365,400, the vesting of his
restricted stock and deferred compensation Company match and outplacement
assistance.
 
RETIREMENT PLAN
 
     The Ralcorp Retirement Plan for Sales, Administrative and Clerical
Employees (the "Retirement Plan") may provide pension benefits in the future to
the Named Executive Officers. Substantially all regular U.S. sales,
administrative, clerical and production employees having one year of service
with the Company or certain of its majority-owned subsidiaries are eligible to
participate in the Retirement Plan. Employees become vested after five years of
service. Normal retirement is at age 65; however, employees who work beyond age
65 may continue to accrue benefits.
 
     Annual benefits are computed by multiplying the participant's Final Average
Earnings (average of participant's five highest consecutive annual earnings
during the ten years of service prior to retirement or earlier termination) by
the product of 1.5% times the participant's years of service (to a maximum of 40
years) and by subtracting from that amount up to one-half of the participant's
primary social security benefit at retirement (with the actual amount of offset
determined by age and years of service at retirement).
 
     The following table shows the estimated annual retirement benefits that
would be payable from the Retirement Plan to salaried employees, including the
Named Executive Officers, assuming age 65 retirement on the basis of a
straight-life annuity. To the extent an employee's compensation or benefits
exceed certain limits imposed by the Code, the table also includes benefits
payable from an unfunded supplemental retirement plan. The table reflects
benefits prior to the subtraction of social security benefits as described
above.
 
                                       44
<PAGE>   46
 
                               PENSION PLAN TABLE
 
<TABLE>
<CAPTION>
     REMUNERATION                                        YEARS OF SERVICE
    (FINAL AVERAGE        -------------------------------------------------------------------------------
       EARNINGS)            10          15          20          25          30          35          40
-----------------------   -------    --------    --------    --------    --------    --------    --------
<S>                       <C>        <C>         <C>         <C>         <C>         <C>         <C>
  $100,000.............   $15,000    $ 22,500    $ 30,000    $ 37,500    $ 45,000    $ 52,500    $ 60,000
  $200,000.............   $30,000    $ 45,000    $ 60,000    $ 75,000    $ 90,000    $105,000    $120,000
  $300,000.............   $45,000    $ 67,500    $ 90,000    $112,500    $135,000    $157,500    $180,000
  $400,000.............   $60,000    $ 90,000    $120,000    $150,000    $180,000    $210,000    $240,000
  $500,000.............   $75,000    $112,500    $150,000    $187,500    $225,000    $262,500    $300,000
  $600,000.............   $90,000    $135,000    $180,000    $225,000    $270,000    $315,000    $360,000
</TABLE>
 
     For the purpose of calculating retirement benefits, the Named Executive
Officers had, as of September 30, 1996, the following years of credited service,
calculated to the nearest year: Messrs. Micheletto -- 34 years; Bresler -- 18
years; Lockwood -- 20 years; Nichols -- 21 years; and Pearce -- 24 years.
Credited service includes service with Ralston Purina Company, the Company's
former parent corporation. Earnings used in calculating benefits under the
Retirement Plan and any unfunded supplemental retirement plan previously
described are approximately equal to amounts included in the Salary and Bonus
columns in the Summary Compensation Table on page 42.
 
OTHER BENEFIT PLANS
 
     The Company has an Executive Life Plan, under which, following retirement,
beneficiaries of eligible executive officers or other eligible employees will be
provided a death benefit in an amount equal to 50% of the earnings recognized
under the Company's benefit plans for the executive officer or other eligible
employee during the last full year of employment. This benefit is not presently
insured or funded.
 
     The Company's Executive Health Plan is a hospital and medical reimbursement
plan covering active key management employees, including certain executive
officers, and their dependents. Employees eligible for this plan must
participate in the Company's Comprehensive Health Plan, which is available to
certain employees at their own expense. The Executive Health Plan provides
coverage, at no cost to the participant, for 100% of medical expenses incurred,
up to $35,000 per year, provided such expenses constitute deductible medical
expenses for federal income tax purposes and provided that the expenses are not
payable by the Comprehensive Health Plan.
 
     The Company has also adopted an Executive Long-Term Disability Plan which
provides benefits to its corporate officers, including certain executive
officers, in the event they become disabled. The Long-Term Disability Plan,
which is available to certain regular employees of the Company and in which
officers must participate at their own expense in order to be eligible for the
Executive Long-Term Disability Plan. The Plan imposes a limit of $5,000 per
month (60% of a maximum annual salary of $100,000) on the amount paid to a
disabled employee. The Executive Long-Term Disability Plan will provide a
supplemental benefit equal to 60% of the difference between the executive
officer's previous year's earnings recognized under the Company's benefit plans
and $100,000, with appropriate taxes withheld.
 
                           INDEBTEDNESS OF MANAGEMENT
 
     Immediately prior to the spin-off, Ralston Purina Company loaned money to
certain executive officers of the Company to pay income taxes on the vesting of
Ralston restricted stock awards. The vesting of such awards was accelerated and
such executive officers were required to exchange the Ralston stock for Ralcorp
Common Stock immediately prior to the spin-off. Pursuant to certain securities
regulations and the IRS ruling concerning the federal tax treatment of the
spin-off, such executive officers are prohibited from selling the Common Stock
received pursuant to such exchange to pay taxes until certain events take place.
Ralston assigned the promissory notes governing the loans to the Company.
Subsequent to the spin-off it was determined that the amounts of the loans were
inadequate to cover the taxes and additional loans were made by the Company.
Interest on the loans has been forgiven. The loans are required to be repaid
once such
 
                                       45
<PAGE>   47
 
executive officers are free to sell the Common Stock received in the exchange.
The principal amounts outstanding under the loans for such Named Executive
Officers are: Micheletto -- $236,760; Lockwood -- $18,769; and
Pearce -- $383,090. Amounts attributable to the forgiven interest are not
included in the Summary Compensation Table on page 42 because the loans are not
intended to be compensatory.
 
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
 
                         SECURITY OWNERSHIP OF CERTAIN
                       BENEFICIAL OWNERS OF COMMON STOCK
 
     The following table sets forth Ralcorp Common Stock ownership information
with respect to each of Ralcorp's Directors, five highest paid Executive
Officers (the "Named Executive Officers"), and all Directors and Executive
Officers as a group and with respect to each person who owns more than 5% of
Ralcorp Common Stock. Ownership information for 5% holders is as of October 31,
1996. Ownership information for Directors, Named Executive Officers and all
Directors and Executive Officers as a group is as of November 30, 1996. Except
as noted, all such parties possess sole voting and investment powers with
respect to the shares noted. An asterisk in the column listing the percentage of
shares beneficially owned indicates the person owns less than 1% of the Ralcorp
Common Stock as of November 30, 1996.
 
<TABLE>
<CAPTION>
                                                      NUMBER OF SHARES      % OF SHARES      EXPLANATORY
                  NAME AND ADDRESS                   BENEFICIALLY OWNED    OUTSTANDING(A)       NOTES
---------------------------------------------------- ------------------    --------------    -----------
<S>                                                  <C>                   <C>               <C>
Boatmen's Bancshares, Inc. .........................      1,785,459              5.4%            (B)
One Boatmen's Plaza
St. Louis, MO 63101
FMR Corp. ..........................................      2,825,317              8.6%            (C)
82 Devonshire Street
Boston, MA 02109
William H. Danforth.................................        307,417            *              (D)(E)(F)
William D. George, Jr. .............................          1,000            *
Jack W. Goodall.....................................         35,100            *
David W. Kemper.....................................          1,000            *                 (E)
Joe R. Micheletto...................................         71,084            *                 (G)
William P. Stiritz..................................        281,959            *               (E)(H)
Andrew R. Bresler...................................          7,255            *                 (I)
Robert W. Lockwood..................................         31,070            *                 (J)
James A. Nichols....................................         96,182            *                 (K)
Richard A. Pearce...................................        162,100            *                 (L)
All Directors and Executive Officers as a group (15
  persons)..........................................      1,045,673              3.2%            (M)
</TABLE>
 
---------------
(A) For purposes of calculating the percentage of Shares Outstanding owned by
    each individual or the group, Shares Outstanding were deemed to be (i)
    shares actually outstanding on November 30, 1996, plus, in the case of each
    Named Executive Officer and of the group, (ii) shares attributable to stock
    options held by the officer or members of the group which could be exercised
    for Common Stock within 60 days after December 3, 1996.
 
(B)  This amount consists of shares of Common Stock owned by the following
     subsidiaries of Boatmen's Bancshares, Inc: Boatmen's Trust Company --
     1,783,259 shares and other Boatmen's Bancshares subsidiaries -- 2,200
     shares. Of such shares, Boatmen's has voting and investment powers as
     follows: sole voting -- 390,459 shares; shared voting -- 1,393,920 shares;
     sole investment -- 87,934 shares; and shared investment -- 1,637,280
     shares. Of such shares, voting and investment powers for 254,922 shares are
     shared with Dr. Danforth who is a director of the Company.
 
                                       46
<PAGE>   48
 
(C) Includes 1,979,132 shares beneficially owned by Fidelity Management &
    Research Company, as a result of its serving as investment adviser to
    various investment companies registered under Section 8 of the Investment
    Company Act of 1940 and its serving as investment adviser to certain other
    funds which are generally offered to limited groups of investors; 838,685
    shares beneficially owned by Fidelity Management Trust Company, as a result
    of its serving as trustee or managing agent for various private investment
    accounts, primarily employee benefit plans and its serving as investment
    adviser to certain other funds which are generally offered to limited groups
    of investors; and 7,500 shares beneficially owned by Fidelity International
    Limited, as a result of its serving as investment adviser to various
    non-U.S. investment companies. FMR Corp. has sole voting power with respect
    to 651,293 shares and sole investment power with respect to 2,817,817
    shares. Fidelity International Limited has sole voting and investment powers
    with respect to all the shares it beneficially owns.
 
(D) Excludes 1,100,000 shares, or 3.3% of the outstanding Common Stock, held by
    The Danforth Foundation, St. Louis, Missouri. Dr. Danforth is one of the ten
    trustees of the Foundation. Dr. Danforth disclaims beneficial ownership of
    such shares.
 
(E) Excludes 841,870 shares, or 2.6% of the outstanding Common Stock, held by
    Washington University, St. Louis, Missouri. Dr. Danforth is Chairman of the
    Board of Trustees of the University and Messrs. Stiritz and Kemper serve on
    the University's Board of Trustees, which consists of 49 members.
 
(F) Dr. Danforth has sole voting and investment powers respecting 22,648
    shares. He shares voting and investment powers respecting 284,769 shares,
    and disclaims beneficial ownership of 29,847 of such shares.
 
(G) Includes 21,000 restricted shares of Common Stock as to which Mr. Micheletto
    presently has only voting power and 30,388 shares of Common Stock which are
    not presently owned but could be acquired within 60 days by the exercise of
    stock options. Also includes 9,381 shares of Common Stock held under the
    Company's Savings Investment Plan. Mr. Micheletto has only voting power with
    respect to 1,279 of these shares.
 
(H) Includes 3,333 shares of Common Stock owned by Mr. Stiritz's wife.
 
(I) Includes 1,699 shares of Common Stock held under the Company's Savings
    Investment Plan. Mr. Bresler has only voting power with respect to these
    shares.
 
(J) Includes 6,000 restricted shares of Common Stock as to which Mr. Lockwood
    presently has only voting power, 216 shares of Common Stock as to which he
    shares voting and investment powers, and 14,443 shares of Common Stock
    which are not presently owned but could be acquired within 60 days by the
    exercise of stock options. Also includes 2,085 shares of Common Stock held
    under the Company's Savings Investment Plan. Mr. Lockwood has only voting
    power with respect to 2,081 of these shares.
 
(K) Includes 4,800 restricted shares of Common Stock as to which Mr. Nichols
    presently has only voting power and 64,424 shares of Common Stock which are
    not presently owned but could be acquired within 60 days by the exercise of
    stock options. Also includes 3,866 shares of Common Stock held under the
    Company's Savings Investment Plan. Mr. Nichols has only voting power with
    respect to 1,778 of these shares.
 
(L) Includes 21,000 shares of Common Stock as to which Mr. Pearce presently has
    only voting power and 54,699 shares of Common Stock which are not presently
    owned but could be acquired within 60 days by the exercise of stock
    options. Also includes 14,898 shares of Common Stock held under the
    Company's Savings Investment Plan. Mr. Pearce has only voting power with
    respect to 1,166 of these shares.
 
(M) With respect to all Executive Officers except those named in the above
    Table: includes 10,827 shares of Common Stock held under the Company's
    Savings Investment Plan (the Executive Officers have only voting power with
    respect to 6,607 of these shares); 14,237 restricted shares of Common Stock
    as to which such officers presently have only voting power; and 12,774
    shares of Common Stock which are not presently owned but could be acquired
    within 60 days by the exercise of stock options.
 
                                       47
<PAGE>   49
 
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
 
          COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
 
     Mr. Stiritz is the Chairman of the Ralcorp Board and is on the Company's
Nominating and Compensation Committee and is Chairman of the Board, Chief
Executive Officer and President of Ralston Purina. Since its spin-off from
Ralston Purina in 1994, Ralcorp has engaged in several transactions with Ralston
Purina. During fiscal 1996, Ralston Purina paid Ralcorp approximately $1.35
million for coupon and promotional processing services; such services have been
discontinued. Also, during fiscal 1996, Ralston Purina purchased approximately
$10.55 million of Ralcorp products for distribution outside of the United
States. Both arrangements were conducted in the ordinary course of business at
competitive prices and terms. During fiscal 1996, Ralcorp paid Ralston Purina
approximately $1.67 million for various services including, advertising creative
assistance, the leasing of research and development space, insurance
administration, and other administrative services. Ralcorp expects the majority
of these services will continue to be used by Ralcorp.
 
                                    PART IV
 
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K.
 
     (a) Documents filed with this report:
 
          (1) Financial statements previously incorporated by reference under
              Item 8 hereinabove.
 
              All financial statements of the registrant are set forth under
              Items 6, 7 and 8 of this Report.
 
          (2) Financial Statement Schedules--None.
 
          (3) Exhibits. See the Index to Exhibits that appears at the end of
              this document and which is incorporated by reference herein.
              Exhibits 10.06 to 10.22 are management compensation plans or
              arrangements.
 
     (b) Reports on Form 8-K. The Registrant filed the following reports on Form
         8-K during the last quarter of the period covered by this report:
 
          July 23, 1996; August 1, 1996; September 10, 1996; September 27, 1996;
     and October 31, 1996.
 
                                       48
<PAGE>   50
 
                                   SIGNATURES
 
     Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, as amended, Ralcorp Holdings, Inc. has duly caused this
report to be signed on its behalf by the undersigned, thereunto duly authorized.
 
RALCORP HOLDINGS, INC.
 
By:              JOE R. MICHELETTO
     -----------------------------------------
                 Joe R. Micheletto
       Chief Executive Officer and President
December 30, 1996
 
     KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints R. W. Lockwood and J. R. Micheletto and each of
them, his true and lawful attorney-in-fact and agent, with full power of
substitution and resolution, for him and in his name, place, and stead, in any
and all capacities, to sign any and all amendments to this report, and to file
the same, with all exhibits thereto, and other documents in connection
therewith, with the Securities and Exchange Commission, granting unto said
attorneys-in-fact and agents full power and authority to do and perform each and
every act and thing requisite and necessary to be done in and about the
premises, as fully and to all intents and purposes as he might or could do in
person, hereby ratifying and confirming all that said attorneys-in-fact and
agents or their substitute or substitutes, may lawfully do or cause to be done
by virtue hereof.
 
     Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, this report has been signed by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
 
<TABLE>
<CAPTION>
                SIGNATURE                                TITLE                       DATE
------------------------------------------   ------------------------------   ------------------
<C>                                          <S>                              <C>
            JOE R. MICHELETTO                Chief Executive Officer,         December 30, 1996
------------------------------------------     President and Director (Also
            Joe R. Micheletto                  Principal Executive Officer
                                               and Principal Financial
                                               Officer)
           THOMAS G. GRANNEMAN               Controller                       December 30, 1996
------------------------------------------
           Thomas G. Granneman

           WILLIAM H. DANFORTH               Director                         December 30, 1996
------------------------------------------
           William H. Danforth

          WILLIAM D. GEORGE, JR.             Director                         December 30, 1996
------------------------------------------
          William D. George, Jr.

             JACK W. GOODALL                 Director                         December 30, 1996
------------------------------------------
             Jack W. Goodall

             DAVID W. KEMPER                 Director                         December 30, 1996
------------------------------------------
             David W. Kemper

            WILLIAM P. STIRITZ               Director                         December 30, 1996
------------------------------------------
            William P. Stiritz
</TABLE>
 
                                       49
<PAGE>   51
 
                             RALCORP HOLDINGS, INC.
 
                           ANNUAL REPORT ON FORM 10-K
                     FOR THE YEAR ENDED SEPTEMBER 30, 1996
 
                               INDEX TO EXHIBITS
 
<TABLE>
<CAPTION>
EXHIBIT
NUMBER                                   DESCRIPTION OF EXHIBIT
-------   ------------------------------------------------------------------------------------
<C>       <S>
  *2.01   Agreement and Plan of Reorganization (Filed as Exhibit 10.01 to the Company's 10-Q
          filed for the Quarter Ending March 31, 1994)
  *3.01   Restated Articles of Incorporation of Ralcorp Holdings, Inc. (Filed as Exhibit 2.1
          to the Company's Registration Statement on Form 10 dated March 24, 1994, Reg. No.
          1-12766)
  *3.02   Bylaws of Ralcorp Holdings, Inc. (Filed as Exhibit 3.2 to the Company's Registration
          Statement on Form 10 dated March 24, 1994, Reg. No. 1-12766)
  *4.01   Rights Agreement (Filed as Exhibit 4 to the Company's Form 10-Q for the Period
          Ending June 30, 1994)
  *4.02   Form of Indenture between Ralcorp Holdings, Inc. and The First National Bank of
          Chicago (Filed as Exhibit 4.01 to the Company's Amendment No. 2 to Form S-1
          Registration Statement dated September 10, 1994)
  *4.03   Form of Note (Filed as Exhibit 4.02 to the Company's Amendment No. 2 to Form S-1
          Registration Statement dated September 10, 1994)
   4.04   The Company will furnish to the SEC, upon its request, a copy of any instruments
          defining the rights of holders of long-term debt of the Company and its consolidated
          subsidiaries for which financial statements are required to be filed
 *10.01   Tax Sharing Agreement (Filed as Exhibit 10.02 to the Company's Form 10-Q for the
          Period Ending March 31, 1994)
 *10.02   Bridging Agreement (Filed as Exhibit 10.03 to the Company's Form 10-Q for the Period
          Ending March 31, 1994)
 *10.03   Technology Agreement (Filed as Exhibit 10.04 to the Company's Form 10-Q for the
          Period Ending March 31, 1994)
 *10.04   Trademark Agreement (Filed as Exhibit 10.05 to the Company's Form 10-Q for the
          Period Ending March 31, 1994)
 *10.05   Credit Agreement (Filed as Exhibit 10.1 to the Company's Form 10-K for the Period
          Ending December 31, 1994)
 *10.06   Incentive Stock Plan (Filed as Exhibit 10.07 to the Company's Form 10-Q for the
          Period Ending March 31, 1994)
 *10.07   Form of Stock Option Award Contract (Filed as Exhibit 10.08 to Company's Form 10-Q
          for the Period Ending March 31, 1994)
 *10.08   Form of Restricted Stock Award Contract (Filed as Exhibit 10.09 to the Company's
          Form 10-Q for the Period Ending March 31, 1994)
 *10.09   Form of Management Continuity Agreement (Filed as Exhibit 10.1 to the Company's Form
          10-Q for the Period Ending June 30, 1994)
 *10.10   Split Dollar Second to Die Life Insurance Arrangement (Filed as Exhibit 10.10 to the
          Company's Form 10-K for the Period Ending September 30, 1994)
 *10.11   Change in Control Severance Compensation Plan (Filed as Exhibit 10.11 to the
          Company's Form 10-K for the Period Ending September 30, 1995)
 *10.12   Form of Agreement for Deferral of Annual or Special Cash Bonus (Filed as Exhibit
          10.11 to the Company's Form 10-K for the Period Ending September 30, 1994)
 *10.13   Deferred Compensation Plan for Non-Management Directors (Filed as Exhibit 10.13 to
          the Company's Form 10-K for the Period Ending September 30, 1995)
</TABLE>
 
                                       50
<PAGE>   52
 
<TABLE>
<CAPTION>
EXHIBIT
NUMBER                                   DESCRIPTION OF EXHIBIT
-------   ------------------------------------------------------------------------------------
<C>       <S>
 *10.14   Deferred Compensation Plan for Key Employees (Filed as Exhibit 10.14 to the
          Company's Form 10-K for the Period Ending September 30, 1995)
 *10.15   Retirement Plan for Non-Management Directors (Filed as Exhibit 10.15 to the
          Company's Form 10-K for the Period Ending September 30, 1995)
 *10.16   Executive Life Insurance Plan (Filed as Exhibit 10.16 to the Company's Form 10-K for
          the Period Ending September 30, 1994)
 *10.17   Executive Health Plan (Filed as Exhibit 10.17 to the Company's Form 10-K for the
          Period Ending September 30, 1994)
 *10.18   Executive Long Term Disability Plan (Filed as Exhibit 10.18 to the Company's Form
          10-K for the Period Ending September 30, 1994)
 *10.19   Form of Indemnity Agreement
 *10.20   Supplemental Retirement Plan (Filed as Exhibit 10.12 to the Company's Form S-1
          Registration Statement dated July 8, 1994)
 *10.21   Executive Savings Investment Plan (Filed as Exhibit 10.13 to the Company's Form S-1
          Registration Statement dated July 8, 1994)
 *10.22   Form of 1995 Non-qualified Stock Option Performance Award Contract (Filed as Exhibit
          10.1 to the Company's Form 10-K for the Period Ending December 31, 1995)
 *10.23   Leases with United States Forest Service relating to the Resort Operations (Filed as
          Exhibit 10.22 to the Company's Form 10-K for the Period Ending September 30, 1994)
 *10.24   Stock Purchase Agreement By and Among Vail Resorts, Inc., Ralston Foods, Inc. and
          Ralston Resorts, Inc. dated July 22, 1996 (Filed as Exhibit 10.3 to the Company's
          Form 10-Q for the Period Ending June 30, 1996)
  10.25   First Amendment to Stock Purchase Agreement By and Among Vail Resorts, Inc., Ralston
          Foods, Inc. and Ralston Resorts, Inc., dated July 22, 1996
  10.26   Agreement and Plan of Merger By and Among Ralcorp Holdings, Inc., General Mills,
          Inc. and General Mills Missouri, Inc.
 *10.27   Amended and Restated Credit Agreement (5-year) dated as of March 12, 1996 (Filed as
          Exhibit 10.1 to the Company's Form 10-Q for the Period Ending March 31, 1996)
 *10.28   Amended and Restated Credit Agreement (364 day) dated as of March 12, 1996 (Filed as
          Exhibit 10.2 to the Company's Form 10-Q for the Period Ending March 31, 1996)
  10.29   Bridge Loan Facility By and Among Ralston Resorts, Inc. and NationsBank, N.A. (as
          agent) dated as of September 30, 1996
  10.30   Agreement By and Among Ralcorp Holdings, Inc. the Lenders and NationsBank, N.A., as
          Agent for the Lenders with respect to the Credit Agreements dated as of September
          30, 1996
  10.31   First Amendment to Bridge Loan Facility dated as of December 20, 1996
  10.32   Second Amendment to Credit Amended and Restated Credit Agreement dated as of
          December 20, 1996.
     21   Subsidiaries of the Company
     23   Consent of Independent Accountants
    *24   Power of Attorney (Included in Part II)
     27   Financial Data Schedule
</TABLE>
 
---------
* Incorporated by reference
 
                                       51