American Italian Pasta Company Outlines Strategic Decisions and Asset Divestiture Plans;
14 2월 2006 - 10:34PM
PR Newswire (US)
Liquidity Position Disclosed; KANSAS CITY, Mo., Feb. 14
/PRNewswire-FirstCall/ -- American Italian Pasta Company (NYSE:PLB)
outlined today certain strategic decisions resulting from its
recent business assessment, including plans to divest certain
assets. The Company also disclosed its liquidity position, as well
as reporting that its Form 10-Q was not filed and that the
Company's Annual Meeting of Shareholders has been postponed.
BUSINESS ASSESSMENT AND ASSET DIVESTITURES As announced in
September 2005, the Company retained the management consulting firm
of Alvarez & Marsal (A&M). In conjunction with the
Company's management team, A&M assessed the Company's business
and operating strategies, including an evaluation of the Company's
brand, marketing and sales strategies, capacity utilization, supply
chain and manufacturing initiatives, cost structure and financial
strategies. Jim Fogarty, Chief Executive Officer, stated, "Over the
past few months, we have been assessing key business and operating
strategies, and we are now beginning the implementation of our
initiatives. I would also note that I am impressed by our dedicated
and talented AIPC team which is committed to delivering outstanding
products and services to our customers." The strategic decisions
reached as a result of the assessment include the following: Lines
of Business: The Company will continue operating in its historical
lines of business within the retail and institutional markets. The
Company's focus will continue on the branded, private label, food
service and industrial segments. The Company will also continue new
product innovation, such as the recently announced launch of the
Company's new multi-grain products under the Mueller's, Golden
Grain-Mission and Heartland labels. Divestment of Non-Strategic
Brands: The Company's Eddie's and Mrs. Leeper's pasta brands have
been identified as non-strategic brands due to the sales volume and
complexity of the brands as compared to the Company's other lines
of business. Accordingly, the Company has decided to divest these
brands. The Company will continue to produce specialty products for
its private label customers and continue to support these brands
while it undertakes divestiture efforts. As a result of the
Company's decision to divest the brands, a non-cash impairment
charge on the brands in the range of $4.5 to $5.0 million will be
recorded (in addition to an impairment charge of approximately $4.6
million included in the previously announced brand impairment
charges resulting from declines in projected future sales volume
and related revenues). Manufacturing Footprint Strategy and Plant
Divestment: The Company has completed the evaluation of its
manufacturing footprint and expected future production capacity
requirements. Considering the Company's forecasted capacity
utilization, the Company has determined that its Kenosha, Wisconsin
plant will be permanently closed and divested. Since August 2004,
the Kenosha plant has operated on an as needed basis to meet
ingredient customer demand. The Company will begin efforts to
divest the real estate and separately sell certain of the plant's
manufacturing equipment. The plant closure is scheduled in early
April 2006. In accordance with Statement of Financial Accounting
Standards No. 144 - "Accounting for the Impairment or Disposal of
Long Lived Assets", the Company will record a non-cash asset
impairment charge relating to the disposition of the Kenosha plant
in the second quarter of fiscal year 2006. The impairment charge is
expected to be in the range of $25.0 to $29.0 million (excluding
related selling expenses and contract termination costs that may be
incurred). The Company will continue to operate its three other
domestic manufacturing plants (Excelsior Springs, Missouri;
Columbia, South Carolina; and, Tolleson, Arizona), as well as its
Italian plant. As part of the Kenosha divestment plan, the Company
anticipates relocating certain pasta manufacturing lines from the
Kenosha plant to its Columbia plant to expand the Columbia plant
manufacturing capacity for retail and ingredient products. This
ingredient capacity expansion will allow the Company to continue to
efficiently service its ingredient customers. Other Asset
Divestments: The Company has identified certain other assets that
will be divested, including manufacturing equipment that will no
longer be used in its operations, the Company's fractional aircraft
interest and a parcel of undeveloped land. The Company will record
non-cash asset impairment charges in the second quarter of fiscal
year 2006 relating to the divestment of these assets totaling $3.3
million (in addition to previously announced asset impairment
charges that will be recorded in the third quarter of fiscal 2005).
The dispositions of the non-strategic brands, Kenosha plant and the
other asset divestments outlined above result in additional asset
impairment charges totaling $32.8 to $37.3 million and are expected
to generate net cash proceeds in the range of $7.5 to $11.0 million
(excluding selling expenses and contract termination costs that may
be incurred relating to the Kenosha plant divestiture). Inventory
Management: The Company disclosed in August 2005 that non-cash
charges would be recorded in the third fiscal quarter of 2005 to
increase reserves for slow moving, damaged and obsolete inventories
and for other inventory write-downs. Since that time, the Company
has continued to review its inventory composition, required
inventory levels and related disposition strategies and has now
determined that additional non-cash charges of approximately $4.0
million are necessary to reflect the anticipated recoverability of
certain inventories. The Company is reducing its current level of
slow moving, damaged and obsolete inventories and expects to
generate approximately $2.0 million of cash in the 2006 fiscal year
from such sales. OVERVIEW OF COMPANY LIQUIDITY As of February 13,
2006, the Company's total debt was approximately $280.0 million,
including $278.0 million under its bank credit facility. Total
debt, less cash, stood at $256.0 million. As of February 13, 2006,
the Company had liquidity resources totaling approximately $34.0
million, reflecting availability of approximately $10.0 million
under its revolving credit agreement and cash of approximately
$24.0 million (reflecting the reduction resulting from scheduled
debt payments of $1.9 million in January 2006). In addition, the
Company continues to expect that net cash flow to be generated from
operations will be sufficient to meet its expected operating needs
for the current fiscal year. The Company also noted that amounts
owed to its suppliers and vendors are currently within established
credit terms. As reported earlier, in December 2005 the Company
received a third waiver from its bank group for non-compliance with
certain covenants contained in its bank credit agreement. During
the waiver period, which expires on March 16, 2006, the Company is
pursuing refinancing alternatives for its bank credit facility,
which expires on October 2, 2006. LATE FILING OF FORM 10-Q AND
POSTPONEMENT OF ANNUAL MEETING The Company did not file its Form
10-Q for the first fiscal quarter ended December 30, 2005 on the
due date of February 8, 2006. As previously disclosed, the Company
has also not filed its Form 10-Q for the third fiscal quarter of
fiscal 2005 and its Form 10-K for the fiscal year ended September
30, 2005. In addition, the Company announced that its Annual
Meeting of Shareholders, normally scheduled for February, has been
postponed indefinitely pending the Company's completion of its
previously announced restatement of certain historical financial
statements. Founded in 1988 and based in Kansas City, Missouri,
American Italian Pasta Company is the largest producer and marketer
of dry pasta in North America. The Company currently has five
plants that are located in Excelsior Springs, Missouri; Columbia,
South Carolina; Tolleson, Arizona; Kenosha, Wisconsin and
Verolanuova, Italy. The Company has approximately 600 employees
located in the United States and Italy. The statements made above
in "Business Assessment and Asset Divestitures" and "Overview of
Company Liquidity" are forward-looking and are based on current
expectations. Actual future results or events could differ
materially from those anticipated by such forward-looking
statements. The differences could be caused by a number of factors,
including, but not limited to, the completion and findings of the
investigation being conducted by the Company's Audit Committee, the
Company's performance and the availability of financing
alternatives to provide refinancing of the Company's indebtedness.
In addition, future operating results are impacted by a number of
factors, including but not limited to, our dependence on a limited
number of customers for a substantial portion of our revenue, our
ability to obtain necessary raw materials and minimize fluctuations
in raw material prices, the impact of the highly competitive
environment in which we operate, our reliance exclusively on a
single product category, our ability to attract and retain key
personnel, and our ability to cost-effectively transport our
products. For additional discussion of the principal factors that
could cause actual results to be materially different, refer to
Item 7, Risk Factors, in our report on Form 10- K dated December
10, 2004 filed by the Company with the Securities and Exchange
Commission. The Company will not update any forward-looking
statements in this press release to reflect future events. First
Call Analyst: FCMN Contact: DATASOURCE: American Italian Pasta
Company CONTACT: George Shadid, EVP & Chief Financial Officer
of American Italian Pasta Company, +1-816-584-5621, Web site:
http://www.aipc.com/
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