KANSAS CITY, Mo., March 13 /PRNewswire-FirstCall/ -- American Italian Pasta Company (Pink Sheets: AITP), the largest producer of dry pasta in North America, today reported certain preliminary, unaudited financial information for its 2007 fiscal year and for the first quarter (ended December 28, 2007) of its 2008 fiscal year. In addition, the Company provided an update on the durum wheat market outlook and announced the agreement to settle all remaining civil suits arising from the events leading to the Company's anticipated restatement.
"We are pleased to be in a position to provide to our shareholders and the investment community additional preliminary and unaudited data on our business and results of operations for the most recent periods," said Jack Kelly, CEO of AIPC.
FISCAL YEAR 2007 Operating results
Net revenue for the fiscal year ended September 28, 2007 was $397.8 million, including $3.0 million of payments received pursuant to the Continued Dumping and Subsidy Offset Act of 2000 (CDSOA). Revenues were significantly impacted by general price increases implemented in the fourth quarter and also increased due to overall volume growth of 1.9 %, as compared to fiscal year 2006.
Gross profit for the period was $89.1 million, reflecting $308.7 million cost of goods sold. Cost of goods sold included $19.7 million of depreciation and also reflected increased durum costs.
Selling and marketing expenses totaled $21.4 million, general and administrative expenses totaled $33.5 million, and gain on disposition of long-lived assets totaled $0.1 million, for an operating profit of $34.3 million. Selling and marketing expenses included $1.4 million of package design amortization. General and administrative expenses included professional fees related to our restatement (legal, accounting and management consulting) of $13.3 million, and $2.3 million of depreciation and amortization.
Results preliminary
The Company noted that all of the above financial data are unaudited and subject to adjustment, and that its final audited financial statements could differ materially from this preliminary unaudited data. Possible adjustments relate to promotional expenses, accounting period cutoff procedures, equity-based compensation accounting, and other issues resulting from the previously announced Audit Committee investigation.
FIRST QUARTER FISCAL YEAR 2008 Operating results
Net revenue for the period ended December 28, 2007 was $111.7 million, including $4.6 million of payments received pursuant to the CDSOA. Revenues were significantly impacted by general price increases implemented in the period and also increased due to overall volume growth of 0.9%, as compared to the first quarter of fiscal year 2007.
Gross profit for the period was $24.3 million, reflecting $87.4 million cost of goods sold. Cost of goods sold included $5.1 million of depreciation and also reflected increased durum costs.
Selling and marketing expenses totaled $6.1 million and general and administrative expenses totaled $10.2 million, for an operating profit of $8.0 million. Selling and marketing expenses included $0.4 million of package design amortization. General and administrative expenses included professional fees related to the Company's restatement (legal, accounting and management consulting) of $4.0 million, and $0.6 million of depreciation and amortization.
Results preliminary
The Company noted that all of the above financial data are unaudited and subject to adjustment, and that its final audited financial statements could differ materially from this preliminary unaudited data. Possible adjustments relate to promotional expenses, accounting period cutoff procedures, equity-based compensation accounting, and other issues resulting from the previously announced Audit Committee investigation.
DURUM WHEAT AND RELATED COSTS UPDATE
The Company noted that durum wheat prices have continued to rise to historically unprecedented levels. Continuing supply and demand imbalance and lack of inventories on a global level have continued to pressure the durum wheat market in North America. The Company has continued to take a somewhat longer view of its procurement horizon and has adjusted its durum wheat forward buying strategy accordingly. Given the continuing rise in durum wheat prices, the Company has instituted further price increases for its finished pasta products. In addition, the Company noted that it is experiencing increased cost of goods associated with other production inputs, such as eggs and increased transportation costs caused by higher fuel prices. While the Company's pricing actions are expected to help mitigate the impact of the increases in these costs, the Company's cost of goods sold will continue to be adversely affected by the increase in these raw materials and related inputs.
"We recognize that our customers and consumers are also experiencing increased costs in food and other items," added Mr. Kelly. "While our pasta remains a great value and provides a healthy and affordable food staple for all consumers, we are continuing to refine our business strategies and improve our productivity and efficiencies to do whatever possible to offset these historically high wheat prices."
LITIGATION UPDATE
The Company also announced that it has reached an agreement in principle, subject to court approval, to settle two derivative lawsuits filed against current and former officers and directors of the Company. The lawsuits styled Haag v. Webster et al. (Case No. 05-CV-33137), pending in state court in Jackson County, Missouri, and Chaiet v. Allen, et al. (Case No 06-744-CV-W- DW), pending in federal court in Kansas City, alleged, among other things, that the defendants had breached fiduciary duties to the Company in connection with events leading to the Company's anticipated restatement. Under the terms of the proposed settlement, the Company would agree to institute certain governance reforms at the Company, a number of which have already been undertaken, including the review of all board charters and governance principles, the retention of a Compliance Officer, the hiring of additional internal audit personnel, and the adoption of a comprehensive Code of Conduct. In addition, the Company agreed to pay attorney's fees and other costs of $1.5 million in cash to counsel for the plaintiffs, which payment will be made out of the Company's insurance policies. The proposed settlement would also resolve the case captioned, Zaleon v. American Italian Pasta Company (C.A. No. 2775-N), pending in Delaware state court, seeking to require the Company to conduct an annual meeting. The Company noted that it anticipates conducting such meeting upon completion of its restatement, the filing of current audited financial statements and the preparation of its proxy statement under SEC rules.
The proposed settlement terms will involve no admission of fault or wrongdoing by any current or former officer or director. In addition, with the anticipated settlement of these cases and the previously announced court approved settlement of the federal securities class action lawsuit (In re American Italian Pasta Company Securities Litigation, Case No. 05-CV-0725-W- ODS), the Company will have resolved all pending private civil litigation against the Company and its former or current officers and directors arising from the events leading to the Company's anticipated restatement.
"We are pleased to have an agreement in principle to resolve all three lawsuits," said Bob Schuller, General Counsel of AIPC. "We believe the proposed settlement is in the best interest of our shareholders, and allows the Company to move forward without the cost, expense, distraction and uncertainty of continued litigation."
The Company also reported that it was preparing to issue 527,903 common shares later this month in satisfaction of the fee award to class counsel in the previously announced court approved settlement of the federal securities class action lawsuit. The Company also noted that under the settlement, it will be issuing additional shares to the class with the number of shares determined pursuant to the Stipulation of Settlement approved by the Court and previously filed with the SEC.
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 operating results for fiscal year 2007 and the first fiscal quarter of 2008, the durum wheat market and other conditions and litigation regarding the Company or its former or current officers and directors 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 findings of the Audit Committee investigation, the Company's 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, the conclusions reached regarding financial reporting and changes in durum wheat market and other conditions affecting the Company's cost of goods sold. The Company will not update any forward-looking statements in this press release to reflect future events.
