KANSAS CITY, Mo., Sept. 7 /PRNewswire-FirstCall/ -- American Italian Pasta Company , announced today that the Audit Committee of its Board of Directors has completed its investigation into historical financial and accounting matters. The Company also announced that it will record an additional impairment charge in the fourth quarter of its fiscal year ending September 30, 2005 and will record an impairment charge for its fiscal year ending September 29, 2006 relating to the Company's pasta brands. The Company also provided an update on the status of the restatement of its historical financial statements.
AUDIT COMMITTEE INVESTIGATION COMPLETED
As previously announced, the Audit Committee of the Board of Directors commenced an internal investigation into certain accounting and related matters regarding the Company's financial statements. The Audit Committee retained the law firm of Katten Muchin Rosenman LLP, acting as independent legal counsel, to assist with the investigation and Katten engaged independent forensic accountants, Huron Consulting Services, LLC, to assist in the review and analysis. Counsel to the Audit Committee has now completed its review and on August 31, 2007 provided its report to the Audit Committee, thereby completing the Audit Committee investigation and a significant step in the Company's restatement process.
BRAND IMPAIRMENT CHARGES
As previously reported, the Company performed an impairment analysis of its pasta brands due to certain of the Company's pasta brands having experienced declines in sales volume and related revenues that resulted in corresponding declines in market share and profitability as of the third quarter of fiscal 2005. These indicators of impairment resulted, as previously reported, in a pre-tax impairment charge. In the course of completing its financial statements for its fiscal year ending September 30, 2005, the Company performed its annual impairment analysis of its brands as of the fourth quarter of fiscal 2005. This review showed that (i) certain of the Company's pasta brands continued to experience declines in sales volume and related revenues resulting in corresponding declines in market share and profitability, and (ii) operating trends and the forecasted future performance for these brands differed significantly from the Company's earlier expectations. In accordance with SFAS No. 142 -- "Goodwill and Other Intangible Assets," the recoverability of these intangible assets has been evaluated as of September 30, 2005 and the Company has determined that a total pre-tax impairment charge of $89.2 million will be recorded in fiscal year 2005, which includes the $35.1 million charge previously announced as of the third quarter of fiscal 2005. The Company noted that since the determination of impairment as of the end of fiscal 2005, the expectation of future performance of certain of the Company's pasta brands has improved. The Company also announced a $1.0 million impairment charge related to one of its brands will be recorded in the fiscal 2006 as a result of the Company's impairment analysis as of the fourth quarter of fiscal 2006. The Company further noted that these impairment charges are non-cash items.
COMPLETION OF PREPARATION OF HISTORICAL FINANCIAL STATEMENTS
The Company also announced that it has completed its internal preparation of its restated financial statements for its 2004 fiscal year and earlier periods and of its financial statements and annual report on Form 10-K for its fiscal year ended September 30, 2005 and its fiscal year ended September 29, 2006. The Company has delivered these financial statements and annual reports on Form 10-K to its independent registered public accounting firm, Ernst & Young, for completion of their review and audit. The Company cannot predict when that review will be completed in order to allow the Company to file its delinquent reports on Forms 10-Q and 10-K and to become current in its periodic reporting requirements with the SEC.
The completion and filing of audited financial statements and annual reports on Form 10-K for fiscal 2005 and fiscal 2006 are subject to a number of factors, including regulatory matters and the review of and continued analysis of issues by the Company's independent registered public accounting firm.
ABOUT AIPC
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 has four plants that are located in Excelsior Springs, Missouri; Columbia, South Carolina; Tolleson, Arizona and Verolanuova, Italy. The Company has approximately 600 employees located in the United States and Italy.
When used in this release, the words "anticipate," "believe," "estimate," and "expect" and similar expressions are intended to identify forward-looking statements, but are not the exclusive means of identifying these statements. The statements by the Company regarding the status of the preparation of the Company's historical financial statements and the impairment charges for its fiscal year 2005 and for its fiscal year 2006 are forward-looking. Actual results or events could differ materially. The differences could be caused by a number of factors, including, but not limited to, the review and/or audit of the Company's financial statements by its independent registered public accounting firm, the SEC staff review, and the conclusions reached regarding financial reporting. The Company will not update any forward-looking statements in this press release to reflect future events.
