UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the period ended: July 2, 1999
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission file number: 001-13403
AMERICAN ITALIAN PASTA COMPANY
(Exact name of Registrant as specified in its charter)
DELAWARE 84-1032638
State or other jurisdiction of (I.R.S. Employer
incorporation or organization Identification No.)
1000 ITALIAN WAY, EXCELSIOR SPRINGS, MISSOURI 64024
(Address of principal executive office) (Zip Code)
Registrant's telephone number, including area code: (816) 502-6000
NOT APPLICABLE
(Former name, former address and former fiscal year, if
changed since last report)
Indicate by check mark whether the Registrant has (1) filed all
documents and reports required to be filed by Section 13 or 15(d)
of the Securities Exchange Act of 1934 during the preceding 12
months (or for such shorter period that the Registrant was
required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [ ]
The number of shares outstanding as of July 28, 1999 of the
Registrant's Class A Convertible Common Stock was 18,116,397 and
there were no shares outstanding of the Class B Common Stock.
<PAGE>
AMERICAN ITALIAN PASTA COMPANY
FORM 10-Q
QUARTER ENDED JUNE 30, 1999
TABLE OF CONTENTS
Part I - Financial Information Page
Item 1. Financial Statements (unaudited)
Consolidated Balance Sheets at June 30, 1999
and September 30, 1998. 3
Consolidated Statements of Income for the
three months ended June 30, 1999 and 1998. 4
Consolidated Statements of Income for the
nine months ended June 30, 1999 and 1998. 5
Consolidated Statements of Cash Flows for the
nine months ended June 30, 1999 and 1998. 6
Notes to Consolidated Financial Statements. 7-8
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of
Operations 9-14
Item 3. Quantitative and Qualitative Disclosures
About Market Risk 14
Part II - Other Information
Item 1. Legal Proceedings 15
Item 2. Changes in Securities 15
Item 3. Defaults Upon Senior Securities 15
Item 4. Submission of Matters to a Vote of
Security Holders 15
Item 5. Other Information 15
Item 6. Exhibits and Reports on Form 8-K 15
Signature Page 16
<PAGE>
AMERICAN ITALIAN PASTA COMPANY
CONSOLIDATED BALANCE SHEETS
JUNE 30, SEPTEMBER 30,
------- -------------
1999 1998
---- ----
(IN THOUSANDS)
ASSETS (UNAUDITED)
Current assets:
Cash and temporary investments $ 1,433 $ 5,442
Trade and other receivables 18,450 16,971
Prepaid expenses and deposits 4,269 1,736
Inventory 26,368 28,051
Deferred income taxes 980 802
_______ ________
Total current assets 51,500 53,002
Property, plant and equipment:
Land and improvements 6,476 4,834
Buildings 70,870 60,196
Plant and mill equipment 194,874 149,027
Furniture, fixtures and equipment 5,964 4,731
-------- --------
278,184 218,788
Accumulated depreciation (47,240) (38,250)
-------- --------
230,944 180,538
Construction in progress 30,187 25,069
-------- --------
Total property, plant and equipment 261,131 205,607
Other assets 653 772
-------- --------
Total assets $313,284 $259,381
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 13,256 $ 14,030
Accrued expenses 8,136 7,225
Advance customer payments 4,717 5,957
Income tax payable 5,518 1,342
Current maturities of long-term debt 1,113 1,206
-------- --------
Total current liabilities 32,740 29,760
Long-term debt 81,778 48,519
Deferred income taxes 4,894 4,318
Commitments and contingencies
Stockholders' equity:
Preferred stock, $.001 par value:
Authorized shares 10,000,000 -- --
Issued and outstanding shares - none
Class A common stock, $.001 par value:
Authorized shares 75,000,000 18 18
Issued and outstanding shares 18,116,495 and
18,116,397 at June 30, 1999 and 18,086,610 and
18,086,150 at June 30, 1998
Class B common stock, $.001 par value:
Authorized shares 25,000,000 -- --
Issued and outstanding shares - none
Additional paid in capital 174,019 173,642
Treasury stock, at cost, 98 and 460
shares (3) (13)
Notes receivable from officers (63) (124)
Retained earnings 19,901 3,261
-------- --------
Total stockholders' equity 193,872 176,784
Total liabilities and stockholders'
equity $313,284 $259,381
========= ========
See accompanying notes to consolidated financial statements.
<PAGE>
AMERICAN ITALIAN PASTA COMPANY
CONSOLIDATED STATEMENTS OF INCOME
THREE MONTHS ENDED
JUNE 30,
1999 1998
---- ----
(IN THOUSANDS)
(UNAUDITED)
Revenues $55,278 $53,785
Cost of goods sold 39,368 39,929
Plant expansion costs 34 865
------- -------
Gross profit 15,876 12,991
Selling and marketing expense 4,076 3,396
General and administrative expense 1,433 1,257
------- -------
Operating profit 10,367 8,338
Interest expense, net 326 415
------- -------
Income before income tax expense 10,041 7,923
Income tax expense 3,534 2,971
------- -------
Net income $6,507 $4,952
======= =======
Earnings Per Common Share:
Net income per common
share $.36 $.28
======= =======
Weighted average common
shares outstanding 18,099 17,569
======= =======
Earnings Per Common Share - Assuming Dilution:
Net income per common share
assuming dilution $.35 $.27
======= =======
Weighted average common
shares outstanding 18,675 18,305
======= =======
See accompanying notes to consolidated financial statements.
<PAGE>
AMERICAN ITALIAN PASTA COMPANY
CONSOLIDATED STATEMENTS OF INCOME
NINE MONTHS ENDED
JUNE 30,
1999 1998
---- ----
(IN THOUSANDS)
(UNAUDITED)
Revenues $158,994 $135,355
Cost of goods sold 116,470 100,195
Plant expansion costs 114 1,552
-------- --------
Gross profit 42,410 33,608
Selling and marketing expense 10,821 9,145
General and administrative expense 4,225 3,630
-------- --------
Operating profit 27,364 20,833
Interest expense, net 1,245 904
-------- --------
Income before income tax expense
and extraordinary item 26,119 19,929
Income tax expense 9,479 7,533
-------- --------
Income before extraordinary item 16,640 12,396
Extraordinary item:
Loss due to early extinguishment of
long term debt, net of income taxes -- 2,332
-------- --------
Net income $16,640 $10,064
======== ========
Earnings Per Common Share:
Income per common share before
extraordinary item $.92 $.73
Extraordinary item:
Loss per common share due to early
extinguishment of long-term debt,
net of income taxes -- .14
-------- --------
Net income per common share $.92 $.59
======== ========
Weighted average common shares
outstanding 18,090 16,943
======== ========
Earnings Per Common Share - Assuming Dilution:
Income per common share before
extraordinary item $.90 $.70
Extraordinary item:
Loss per common share due to
early extinguishment of
long-term debt, net of income
taxes -- .13
-------- --------
Net income per common share
assuming dilution $.90 $.57
======== ========
Weighted average common shares
outstanding 18,587 17,680
======== ========
See accompanying notes to consolidated financial statements.
<PAGE>
AMERICAN ITALIAN PASTA COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS
NINE MONTHS ENDED
JUNE 30,
1999 1998
---- ----
(IN THOUSANDS)
(UNAUDITED)
Operating activities:
Net income $16,640 $10,064
Adjustments to reconcile net income
to net cash provided by operations:
Depreciation and amortization 9,581 6,598
Deferred income tax expense 398 2,553
Extraordinary loss due to early
extinguishment of long-term debt, net -- 2,332
Changes in operating assets and liabilities:
Trade and other receivables (1,480) (7,993)
Prepaid expenses and deposits (2,533) (1,392)
Inventory 1,683 (10,842)
Accounts payable and accrued
expenses (2,156) 6,621
Income tax payable 4,178 4,498
Other (472) 29
------- ------
Net cash provided by operating activities 25,839 12,468
Investing activities:
Additions to property, plant and
equipment (63,461) (71,526)
-------- --------
Net cash used in investing activities (63,461) (71,526)
Financing activities:
Additions to deferred debt issuance costs -- (325)
Proceeds from issuance of debt 34,000 59,842
Principal payments on debt and capital
lease obligations (834) (116,877)
Proceeds from issuance of common
stock, net of issuance costs 438 115,503
Other 9 --
------- -------
Net cash provided by financing activities 33,613 58,143
------- -------
Net decrease in cash and temporary
investments (4,009) (915)
Cash and temporary investments at
beginning of period 5,442 2,724
------- -------
Cash and temporary investments at
end of period $1,433 $1,809
======= =======
See accompanying notes to consolidated financial statements.
<PAGE>
AMERICAN ITALIAN PASTA COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1999
1. Basis of Presentation
The accompanying unaudited consolidated financial statements have
been prepared in accordance with generally accepted accounting
principles for interim financial information and with the
instructions to Form 10-Q and Article 10 of Regulation S-X.
Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles
for complete financial statements. In the opinion of management,
all adjustments (consisting of normal recurring accruals)
considered necessary for a fair presentation have been included.
Operating results for the three and nine-month periods ended June
30, 1999 are not necessarily indicative of the results that may
be expected for the year ended September 30, 1999. These
financial statements should be read in conjunction with the
financial statements and footnotes thereto and management s
discussion and analysis thereof included in the Company s Annual
Report on Form 10-K for the year ended October 2, 1998 and
management s discussion and analysis included in Item 2 hereof.
American Italian Pasta Company (the Company or AIPC ) uses a
52/53 week financial reporting cycle with a fiscal year which
ends on the last Friday of September or the first Friday of
October. The Company s first three fiscal quarters end on the
Friday last preceding December 31, March 31, and June 30 or the
first Friday of the following month. For purposes of this Form
10-Q, the third fiscal quarter of fiscal years 1999 and 1998 both
included thirteen weeks of activity and are described as the
three month periods ended June 30, 1999 and 1998.
2. Stockholder Rights Plan
On December 3, 1998, the Company's Board of Directors adopted a
Stockholder Rights Plan. Under the Plan, each common stockholder
at the close of business on December 16, 1998 received a dividend
of one right for each share of Class A Common Stock held. Each
right entitles the holder to purchase from the Company one
one-hundredth of a share of a new series of participating
Preferred Stock at an initial purchase price of $110.00. The
rights will become exercisable and will detach from the Common
Stock a specified period of time after any person has become the
beneficial owner of 15% or more of the Company s Common Stock or
commenced a tender or exchange offer which, if consummated, would
result in any person becoming the beneficial owner of 15% or more
of the Common Stock. When exercisable, each right will entitle
the holder, other than the acquiring person, to purchase for the
purchase price the Company's Common Stock having a value of twice
the purchase price.
If, following an acquisition of 15% or more of the Company's
Common Stock, the Company is involved in certain mergers or other
business combinations or sells or transfers more than 50% of its
assets or earning power, each right will entitle the holder to
purchase for the purchase price common stock of the other party
to such transaction having a value of twice the purchase price.
At any time after a person has acquired 15% or more (but before
any person has acquired more than 50%) of the Company s Common
Stock, the Company may exchange all or part of the rights for
shares of Common Stock at an exchange ratio of one share of
Common Stock per right.
The Company may redeem the rights at a price of $.01 per right at
any time prior to a specified period of time after a person has
become the beneficial owner of 15% or more of its Common Stock.
The rights will expire on December 16, 2008, unless earlier
exchanged or redeemed.
3. Earnings Per Share
Dilutive securities, consisting of options to purchase the
Company s Class A common stock, included in the calculation of
diluted weighted average common shares were 576,000 and 497,000
shares for the three-month and nine-month periods ended June 30,
1999 and 736,000 and 737,000 shares for the three-month and
nine-month periods ended June 30, 1998.
4. New Accounting Pronouncement
The Company adopted Statement of Financial Accounting Standards
(SFAS) No. 130, Reporting Comprehensive Income during the
quarter ended December 31, 1998. SFAS 130 establishes standards
for the reporting and display of comprehensive income and its
components. Comprehensive income includes all changes in equity
during a period except those due to owner investments and
distributions. It includes items such as foreign currency
translation adjustments, and unrealized gains and losses on
available-for-sale securities. This standard does not change the
display or components of present-day net income; rather,
comprehensive income would be displayed as a separate statement.
Total comprehensive income was not materially different from net
income for the three or nine months ended June 30, 1999 and 1998.
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
The discussion set forth below, as well as other portions of this
Quarterly Report, contains statements concerning potential future
events. Such forward-looking statements are based upon
assumptions by the Company's management, as of the date of this
Quarterly Report, including assumptions about risks and
uncertainties faced by the Company. Readers can identify these
forward-looking statements by their use of such verbs as expects,
anticipates, believes or similar verbs or conjugations of such
verbs. If any management assumptions prove incorrect or should
unanticipated circumstances arise, the Company's actual results
could materially differ from those anticipated by such
forward-looking statements. The differences could be caused by a
number of factors or combination of factors including, but not
limited to, those factors identified in the Company's Current
Report on Form 8-K dated October 29, 1997, which is hereby
incorporated by reference and, any amendments thereto and other
matters disclosed in the Company s public filings. This Form 8-K
has been filed with the Securities and Exchange Commission (the
SEC or the Commission ) in Washington, D.C. and can be
obtained by contacting the SEC's public reference operations or
obtaining it through the SEC s web site on the World Wide Web at
http://www.sec.gov. Readers are strongly encouraged to consider
those factors when evaluating any such forward-looking statement.
The Company will not update any forward-looking statements in
this Quarterly Report to reflect future events or developments.
Results of Operations
Third quarter fiscal 1999 compared to third quarter fiscal 1998.
REVENUES. Total revenues increased $1.5 million, or 2.8%,
to $55.3 million for the three-month period ended June 30, 1999,
from $53.8 million for the three-month period ended June 30,
1998. The increase for the three-month period ended June 30, 1999
was primarily due to increases in unit volume offset by lower
durum wheat costs. Approximately $15.7 million in revenues for
the three month period ended June 30, 1999 related to shipments
of Mueller s brand pasta for Bestfoods. Total pasta shipments
were up 11.5% versus the third quarter of 1998, while Bestfoods
shipments were down 13.7%. The lower durum wheat costs along
with changes in sales mix created an 8.2% reduction in average
selling prices relative to 1998. Management expects continued
increases in revenues as a result of both increasing Retail
volumes and Institutional volumes; however, management expects
such volume increases to be partially offset by decreases in
average sales prices related to the pass through of lower durum
wheat costs.
Revenues for the Retail market were $39.6 million in the
current period, compared to $39.5 million for the three-month
period ended June 30, 1998. Total Retail pasta shipments were up
2.1% versus the prior period, Private Label volume was up 24.1%
offset by the reduction in Bestfoods shipments down 13.7% from
the prior year period. Bestfoods shipments in the prior year
were greater than consumer demand due to strong prior year
shipments which were required to re-establish retail and
warehouse inventions after the transition to AIPC production in
the second quarter of fiscal 1998. The lower relative revenue
growth is attributable to the pass through of lower durum wheat
costs.
Revenues for the Institutional market increased $1.4
million, or 10.0%, to $15.7 million for the three-month period
ended June 30, 1999, from $14.3 million for the three-month
period ended June 30, 1998. This increase was primarily a result
of increases in volumes of 37.3% offset by lower average selling
prices of 20.9% due to changes in sales mix and lower durum wheat
costs. The Ingredient business volume growth was 47.0%, much of
the growth is due to the ramp up of the Company's ingredient
focused plant in Kenosha.
GROSS PROFIT. Gross profit increased $2.9 million, or
22.2%, to $15.9 million for the three-month period ended June 30,
1999, from $13.0 million for the three-month period ended June
30, 1998. This increase is generally related to the revenue
growth and lower per unit costs because of volume, mix, and raw
material costs. This resulted in gross profit as a percentage of
revenues increasing to 28.7% for the three-month period ended
June 30, 1999 from 24.2% for the three-month period ended June
30, 1998. The increase in gross profit as a percentage of
revenues relates to lower raw material costs, lower operating
costs per unit, and lower plant expansion costs in the current
quarter compared to the prior year quarter. Management expects
continued increases in gross profit as a result of continued
revenue increases, while gross profit as a percentage of revenues
is expected to remain relatively the same as a result of changes
in sales mix.
SELLING AND MARKETING EXPENSE. Selling and marketing
expense increased $0.7 million, or 20.0%, to $4.1 million for the
three-month period ended June 30, 1999, from $3.4 million for the
three-month period ended June 30, 1998. Selling and marketing
expense as a percentage of revenues increased to 7.4% for the
three-month period ended June 30, 1999, from 6.3% for the
comparable prior year period. The increase in selling and
marketing expense relates to the growth in Retail market
revenues, other than Bestfoods, which require higher selling and
marketing costs.
GENERAL AND ADMINISTRATIVE EXPENSE. General and
administrative expense increased $0.2 million, or 14.0%, to $1.4
million for the three-month period ended June 30, 1999, from $1.2
million for the comparable prior year period. General and
administrative expense as a percentage of revenues increased to
2.6% from 2.3%. The majority of the increase in general and
administrative expense relates to higher administrative costs
relating to legal and accounting fees, board of director
expenses, shareholder communication expenses and other
incremental costs related to being a public company.
OPERATING PROFIT. Operating profit for the three-month
period ended June 30, 1999, was $10.4 million, an increase of
$2.0 million or 24.3% over the $8.3 million reported for the
three-month period ended June 30, 1998, and increased as a
percentage of revenues to 18.8% for the three-month period ended
June 30, 1999, from 15.5% for the three-month period ended June
30, 1998 as a result of the factors discussed above.
INTEREST EXPENSE. Interest expense for the three-month
period ended June 30, 1999, was $0.3 million, decreasing $0.1
million or 21.4% from the $0.4 million reported for the
three-month period ended June 30, 1998.
INCOME TAX. Income tax expense for the three-month period
ended June 30, 1999, was $3.5 million, increasing $0.5 million
from the $3.0 million reported for the three-month period ended
June 30, 1998, and reflects an effective income tax rate of
approximately 35.2% and 37.5% respectively. Profits for the
quarter also benefited from a one-time adjustment to deferred
taxes of $180,000. This adjustment is attributable to the
Company's recent reduction in effective income tax rates.
NET INCOME. Net income for the three-month period ended
June 30, 1999, was $6.5 million, increasing $1.6 million or 31.4%
from the $5.0 million reported for the three-month period ended
June 30, 1998. Net income as a percentage of revenues was 11.8%
compared with 9.2% for the same period of 1998. Diluted earnings
per share were $0.35 per share for the three-month period ended
June 30, 1999 compared to $0.27 per share in the comparable prior
year period.
Nine months fiscal 1999 compared to nine months fiscal 1998.
REVENUES. Revenues increased $23.6 million, or 17.5%, to
$159.0 million for nine-month period ended June 30, 1999, from
$135.3 million for the nine-month period ended June 30, 1998. The
increase for the nine-month period ended June 30, 1999 was
primarily due to volume growth in both the Retail and
Institutional markets with some offset from lower durum wheat
costs. Management expects continued increases in revenues as a
result of both increasing Retail volumes and Institutional
volumes, however, volume increases will be partially offset by
decreases in average sales prices related to the pass through of
lower durum wheat costs.
Revenues for the Retail market increased $20.6 million, or
21.9%, to $114.7 million for the nine-month period ended June 30,
1999, from $94.1 million for the nine-month period ended June 30,
1998. The increase primarily reflects gains in Bestfoods and
private label volumes which are partially offset by decreases in
average sales prices related to the pass through of lower durum
wheat costs in the current period.
Revenues for the Institutional market increased $3.0
million, or 7.3%, to $44.3 million for the nine-month period
ended June 30, 1999, from $41.3 million for the nine-month period
ended June 30, 1998. This increase was primarily a result of
increases in Ingredient unit volumes offset by decreases in
average sales prices related to the pass through of durum wheat
costs.
GROSS PROFIT. Gross profit increased $8.8 million, or
26.2%, to $42.4 million for the nine-month period ended June 30,
1999, from $33.6 million for the nine-month period ended June 30,
1998. This increase is generally related to the revenue growth.
Gross profit as a percentage of revenues increased to 26.7% for
the nine-month period ended June 30, 1999 from 24.8% for the
nine-month period ended June 30, 1998. The increase in gross
profit as a percentage of revenues relates to lower raw material
costs, lower operating costs per unit, and lower plant expansion
costs in the current nine month period compared to the prior
period.
SELLING AND MARKETING EXPENSE. Selling and marketing
expense increased $1.7 million, or 18.3%, to $10.8 million for
the nine-month period ended June 30, 1999, from $9.1 million for
the nine-month period ended June 30, 1998. Selling and marketing
expense as a percentage of revenues were 6.8% for the nine-month
period ended June 30, 1999, unchanged from 6.8% for the
comparable prior year period.
GENERAL AND ADMINISTRATIVE EXPENSE. General and
administrative expense increased $0.6 million, or 16.4%, to $4.2
million for the nine-month period ended June 30, 1999, from $3.6
million for the comparable prior period. General and
administrative expense as a percentage of revenues were 2.7%,
unchanged from the prior period. The increase in administrative
costs relates primarily to increases in legal and accounting
fees, shareholder communication expenses and other incremental
costs related to being a public company.
OPERATING PROFIT. Operating profit for the nine-month
period ended June 30, 1999, was $27.4 million, an increase of
$6.5 million or 31.3% over the $20.8 million reported for the
nine-month period ended June 30, 1998, and increased as a
percentage of revenues to 17.2% for the nine-month period ended
June 30, 1999, from 15.4% for the nine-month period ended June
30, 1998 as a result of the factors discussed above.
INTEREST EXPENSE. Interest expense for the nine-month
period ended June 30, 1999, was $1.2 million, increasing $0.3
million or 37.7% from the $0.9 million reported for the
nine-month period ended June 30, 1998. The increase is primarily
a result of increased borrowing for the Company s expansion
programs, net of capitalized interest.
INCOME TAX. Income tax expense for the nine-month period
ended June 30, 1999, was $9.5 million, increasing $2.0 million
from the $7.5 million reported for the nine-month period ended
June 30, 1998, and reflects an effective income tax rate of
approximately 36.3% and 37.8%, respectively. Profits for the
nine-month period also benefited from a one-time adjustment to
deferred taxes of $180,000. This adjustment is attributable to
the Company's recent reduction in effective income tax rates.
EXTRAORDINARY ITEM. During the nine-month period ended June
30, 1998, the Company incurred a $2.3 million (net of tax)
extraordinary loss due to the write-off of deferred debt issuance
costs in conjunction with the extinguishment and restructuring of
the Company s principal bank credit agreement. There was no such
item for the nine-month period ended June 30, 1999.
NET INCOME. Net income for the nine-month period ended June
30, 1999, was $16.6 million, increasing $6.6 million or 65.3%
from the $10.1 million reported for the nine-month period ended
June 30, 1998. Diluted earnings per common share before the
extraordinary item were $0.90 per share for the nine-month period
ended June 30, 1999 compared to $0.70 per share for the
nine-month period ended June 30, 1998. Diluted earnings per
share after the extraordinary item were $0.90 per share for the
nine-month period ended June 30, 1999 compared to $0.57 per share
in the comparable prior year period.
Financial Condition and Liquidity
The Company's primary sources of liquidity are cash provided
by operations and borrowings under its credit facility. Cash and
temporary investments totaled $1.4 million, and net working
capital totaled $18.8 million at June 30, 1999.
The Company's net cash provided by operating activities
totaled $25.8 million for the nine-month period ended June 30,
1999 compared to $12.5 million for the nine-month period ended
June 30, 1998. The increase in the net cash provided by
operations was due primarily to higher operating income in the
current period.
Cash used in investing activities principally relates to the
Company's investments in pasta production, distribution and
milling assets. Capital expenditures were $63.5 million for the
nine-month period ended June 30, 1999 compared to $71.5 million
in the comparable prior fiscal year period. The decrease in
spending for the nine-month period ended June 30, 1999 was a
result of the Company's completion of its $86.0 million South
Carolina and Missouri capital expansion programs, which the
Company completed during fiscal year 1998. The Company completed
in the third quarter of 1999 a third plant in Kenosha, Wisconsin
costing approximately $35 million. Additionally, the Company
plans to spend approximately $40 million to again expand the
Columbia, South Carolina and Excelsior Springs, Missouri
facilities, of which approximately $32.6 million has been spent
to date. The Company anticipates completion of these projects
prior to fiscal year ending September 30, 1999.
Net cash provided by financing activities was $33.6 million
for the nine-month period ended June 30, 1999 compared to net
cash provided of $58.1 million for the nine-month period ended
June 30, 1998. The $33.6 million in 1999 is the result of
borrowings to fund the capital expansion programs. The 1998
amount reflects the $115.5 million in net proceeds from the
October 1997 initial public offering and the May 1998 secondary
offering, $59.8 million proceeds from issuance of debt (net of
$0.3 million deferred debt issuance costs) offset by $116.9
million of debt repayment.
The Company currently uses cash to fund capital
expenditures, repayments of debt and working capital
requirements. The Company expects that future cash requirements
will continue to be principally for capital expenditures,
repayments of indebtedness and working capital requirements.
The Company has current commitments for $13.6 million in raw
material purchases for fiscal year 1999 and has approximately
$7.4 million in capital expenditures remaining under the above
referenced capital expansion programs. The Company anticipates
the capital expansion programs will be fully funded by the end of
fiscal year 1999. The credit facility currently has a credit
commitment of $150 million and has scheduled commitment
reductions which begin at the end of fiscal year 1999. At this
time, the current and projected borrowings under the credit
facility are not expected to exceed the facility s available
commitment. The facility matures at the end of fiscal year 2002.
The Company anticipates that any borrowing outstanding at that
time will be satisfied with funds from operations or will be
refinanced. The Company currently has no other material
commitments.
Management believes that net cash provided by operating and
financing activities will be sufficient to meet the Company's
expected capital and liquidity needs for the foreseeable future.
YEAR 2000 COMPLIANCE
--------------------
Many computer software and hardware systems currently are
not, or will or may not be, able to read, calculate or output
correctly using dates after 1999, and such systems will require
significant modifications in order to be "year 2000 compliant."
This issue may adversely affect the operations and financial
performance of the Company because its computer and other
technology-based systems are an integral part of the Company's
manufacturing and distribution activities as well as its
accounting and other information systems and because the Company
will have to divert financial resources and personnel to address
this issue.
The Company has completed conversion of all computer
hardware and software systems to "year 2000 compliant" status.
Although the Company is not aware of any material operational
impediments associated with upgrading its technology based
systems to be year 2000 compliant, the Company cannot make any
assurances that the upgrade of the Company s computer systems
will be free of defects. If any such risks materialize, the
Company could experience material adverse consequences to the
Company s operations and financial performance, material costs or
both.
Year 2000 compliance may also adversely affect the
operations and financial performance of the Company indirectly by
complicating, or otherwise affecting, the operations of any one
or more of the Company's suppliers and customers. The Company
has contacted its significant suppliers and customers in an
attempt to identify any potential year 2000 compliance issues
with them. The Company anticipates limited operational or
financial impact on the Company related to year 2000 compliance
issues with its suppliers and customers.
Because of uncertainty outside the scope of suppliers and
customers with respect to Year 2000 compliance issues, the
Company has various contingency alternatives to support business
operations. These alternatives may require the diversion of
financial and other resources to fund execution of retainers,
storage, transportation and inventory solutions. The Company is
unable to determine the amount of these financial and other
resources. The Company will also continue its communication with
customers with respect to their contingency plans and initiatives
such as changes to their year-end inventory position.
The Company incurred approximately $330,000 in fiscal year
1998 and expects to incur approximately $250,000 in the fiscal
year of 1999, of which $221,000 was incurred in the nine months
ended June 30, 1999, to resolve the Company s year 2000
compliance issues. All expenses incurred in connection with year
2000 compliance are being expensed as incurred, other than
acquisitions of new software or hardware, which are capitalized.
Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET
RISK
Not Applicable
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
-------------------------------
Not applicable
Item 2. Changes in Securities
-------------------------------
Not applicable
Item 3. Defaults Upon Senior Securities
-------------------------------
Not applicable
Item 4. Submission of Matters to a Vote of Security Holders
-------------------------------
Not applicable
Item 5. Other Information
-------------------------------
Not applicable
Item 6. Exhibits and Reports on Form 8-K
-------------------------------
a) Exhibits.
27. Financial Data Schedule.
b) Reports on Form 8-K.
None
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned thereunto duly authorized.
American Italian Pasta Company
July 28, 1999 /S/ Timothy S. Webster
------------- ----------------------
Date Timothy S. Webster
President and Chief
Executive Officer
(Principal Executive Officer)
July 28, 1999 /S/ Warren B. Schmidgall
------------- ------------------------
Date Warren B. Schmidgall
Senior Vice President and
Chief Financial Officer
<PAGE>
EXHIBIT INDEX
Exhibit No. Description
---------- -----------
27. Financial Data Schedule.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND> THIS SCHEDULE CONTAINS SUMMARY FINANCIAL
INFORMATION EXTRACTED FROM Balance Sheets at
June 30, 1999; Statements of Operations for
the nine months ended June 30, 1999; the
Statements of Cash Flows for the nine months
ended June 30, 1999 AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS AND THE NOTES THERETO
<MULTIPLIER> 1000
<PERIOD-START> OCT-03-1998
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> OCT-01-1999
<PERIOD-END> JUL-02-1999
<CASH> 1433
<SECURITIES> 0
<RECEIVABLES> 18609
<ALLOWANCES> 159
<INVENTORY> 26368
<CURRENT-ASSETS> 51500
<PP&E> 278184
<DEPRECIATION> 47240
<TOTAL-ASSETS> 313284
<CURRENT-LIABILITIES> 32740
<BONDS> 0
0
0
<COMMON> 18
<OTHER-SE> 174019
<TOTAL-LIABILITY-AND-EQUITY> 313284
<SALES> 158994
<TOTAL-REVENUES> 158994
<CGS> 116584
<TOTAL-COSTS> 131630
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1245
<INCOME-PRETAX> 26119
<INCOME-TAX> 9479
<INCOME-CONTINUING> 16640
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 16640
<EPS-BASIC> 0.92
<EPS-DILUTED> 0.90
</TABLE>
