KANSAS CITY, Mo., Dec. 28 /PRNewswire-FirstCall/ -- American Italian Pasta Company (Pink Sheets: AITP), the largest producer of dry pasta in North America, today provided an update on developments regarding its credit facility and also discussed durum wheat market conditions.
CREDIT FACILITY AMENDMENT
As previously reported, the Company operates with a senior credit facility with Bank of America serving as administrative agent and a lender under the facility, with other institutional lenders participating in the credit. The credit facility is comprised of a term loan and a revolving loan, with a five-year term expiring in March 2011, and it does not require any scheduled principal payments until maturity. The facility was entered into on March 13, 2006 and was comprised of a $265 million term loan and a $30 million revolving loan. As of December 27, 2007, the principal balance of the term loan was $239.9 million reflecting a reduction or pay down of $25.1 million from the original loan balance. The Company's $30 million revolving loan, as reduced by $4.8 million of outstanding letters of credit, allows for available liquidity of $25.2 million.
The Company and its lenders have agreed to an amendment to the credit facility. The amendment provides for, among other things, the extension of certain financial reporting covenants. Under the facility, the Company was required to deliver its fiscal 2005, fiscal 2006, and fiscal 2007 audited financial statements by December 31, 2007. Under the amendment to the credit facility, the Company is required to deliver its audited financial statements for these periods to the lenders by June 30, 2008. If the Company were not to file its statements by June 30, 2008, it could be in default of this covenant and could be subject to default interest.
The amendment also lowers the interest rate the Company pays from LIBOR plus 600 basis points to LIBOR plus 550 basis points upon delivery of the Company's audited financial statements for fiscal years 2005, 2006 and 2007. In addition, the amendment addresses certain covenant calculations.
"We are pleased to have the continuing support of our lenders as evidenced by this amendment," said Jim Fogarty, Chief Executive Officer. "Our previously reported revenue and liquidity results, including our pay down of $25.1 million of debt, support the progress we are making," added Fogarty.
DURUM WHEAT MARKET CONDITIONS
As the Company previously noted, the outlook for durum wheat, which is a significant component of its overall production cost, has been negatively impacted by a number of factors in the global durum market. Supply constraints in European and North African markets continue to pressure supplies in the U.S. and Canada, leaving projected ending stocks of durum wheat in the U.S. at record lows. In anticipation of this continuing trend, over the last several months the Company has taken a longer view of its procurement horizon and has extended forward buying protection of durum supply for its manufacturing facilities.
In light of the continuing global supply pressure, durum wheat costs have continued at levels not previously experienced. The Company has sought to offset this cost inflation by instituting price increases for its finished pasta products in all of its business segments. The Company noted that the potential impact on margins and earnings of the durum cost inflation and pricing action is difficult to predict and dependant on, among other things, the competitive environment in which the Company operates. "We recognize that the inflationary environment in durum wheat and other commodities has had a significant impact on customers and consumers," said Jack Kelly, Chief Operating Officer. "AIPC is well positioned to address these market conditions, and even with these inflationary pressures, we believe our high quality pasta products still provide a value solution for our customers and consumers."
ABOUT AIPC
Founded in 1988 and based in Kansas City, Missouri, American Italian Pasta Company is the largest producer 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 its credit facility, liquidity, and durum wheat market conditions 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 of its financial statements, a 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 and continuing compliance with the credit facility as amended. The Company will not update any forward-looking statements in this press release to reflect future events.
