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: April 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 APPLICALBE
___________________________________________________________________________
(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 April 28, 1999 of the
Registrant's Class A Convertible Common Stock was 18,091,613 and there were
no shares outstanding of the Class B Common Stock.
<PAGE>
AMERICAN ITALIAN PASTA COMPANY
FORM 10-Q
QUARTER ENDED APRIL 2, 1999
TABLE OF CONTENTS
Part I - Financial Information Page
Item 1. Financial Statements (unaudited)
Balance Sheets at March 31, 1999 and 3
September 30, 1998.
Statements of Income for the three months ended 4
March 31, 1999 and 1998.
Statements of Income for the six months ended 5
March 31, 1999 and 1998.
Statements of Cash Flows for the six months ended 6
March 31, 1999 and 1998.
Notes to Financial Statements 7-8
Item 2. Management s Discussion and Analysis of 9-14
Financial Condition and Results of Operations
Item 3. Quantitative and Qualitative Disclosures About 14
Market Risk
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 15-16
Security Holders
Item 5. Other Information 16
Item 6. Exhibits and Reports on Form 8-K 16
Signature Page 17
<PAGE>
AMERICAN ITALIAN PASTA COMPANY
BALANCE SHEETS
MARCH 31, SEPTEMBER 30,
1999 1998
-------- --------
(IN THOUSANDS)
(UNAUDITED)
ASSETS
Current assets:
Cash and temporary investments $ 2,796 $ 5,442
Trade and other receivables 18,006 16,971
Prepaid expenses and deposits 3,423 1,736
Inventory 26,558 28,051
Deferred income taxes 802 802
-------- --------
Total current assets 51,585 53,002
Property, plant and equipment:
Land and improvements 4,834 4,834
Buildings 60,291 60,196
Plant and mill equipment 158,640 149,027
Furniture, fixtures and equipment 5,602 4,731
-------- --------
229,367 218,788
Accumulated depreciation (44,085) (38,250)
-------- --------
185,282 180,538
Construction in progress 62,880 25,069
-------- --------
Total property, plant and equipment 248,162 205,607
Other assets 656 772
-------- --------
Total assets $300,403 $259,381
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 11,892 $ 14,030
Accrued expenses 9,030 7,225
Advance customer payments 4,820 5,957
Income tax payable 3,109 1,342
Current maturities of long-term debt 1,186 1,206
-------- --------
Total current liabilities 30,037 29,760
Long-term debt 78,978 48,519
Deferred income taxes 4,318 4,318
Commitments and contingencies
Stockholders' equity:
Preferred stock, $.001 par value:
Authorized shares 10,000,000 -- --
Class A common stock, $.001 par value:
Authorized shares 75,000,000 18 18
Class B common stock, $.001 par value:
Authorized shares 25,000,000 -- --
Additional paid-in capital 173,744 173,642
Treasury stock (2) (13)
Notes receivable from officers (84) (124)
Retained earnings 13,394 3,261
-------- --------
Total stockholders' equity 187,070 176,784
-------- --------
Total liabilities and stockholders'
equity $300,403 $259,381
======== ========
See accompanying notes to financial statements.
<PAGE>
AMERICAN ITALIAN PASTA COMPANY
STATEMENTS OF INCOME
THREE MONTHS ENDED
MARCH 31,
1999 1998
-------- --------
(IN THOUSANDS)
(UNAUDITED)
Revenues $55,867 $46,034
Cost of goods sold 41,352 34,506
Plant expansion costs 80 421
------ -------
Gross profit 14,435 11,107
Selling and marketing expense 3,649 3,118
General and administrative expense 1,537 1,185
------ ------
Operating profit 9,249 6,804
Interest expense, net 484 225
------ ------
Income before income tax expense 8,765 6,579
Income tax expense 3,239 2,500
------ ------
Net income $5,526 $4,079
====== ======
Earnings Per Common Share:
Net income per common share $.31 $.24
====== ======
Weighted-average common shares
outstanding 18,091 16,777
====== ======
Earnings Per Common Share -
Assuming Dilution:
Net income per common share
assuming dilution $.30 $.23
====== ======
Weighted-average common shares
outstanding 18,642 17,572
====== ======
See accompanying notes to financial statements.
<PAGE>
AMERICAN ITALIAN PASTA COMPANY
STATEMENTS OF INCOME
SIX MONTHS ENDED
MARCH 31,
1999 1998
-------- --------
(IN THOUSANDS)
(UNAUDITED)
Revenues $103,716 $81,570
Cost of goods sold 77,102 60,266
Plant expansion costs 80 687
------- ------
Gross profit 26,534 20,617
Selling and marketing expense 6,745 5,749
General and administrative expense 2,792 2,373
------- ------
Operating profit 16,997 12,495
Interest expense, net 919 489
------- ------
Income before income tax expense
and extraordinary item 16,078 12,006
Income tax expense 5,945 4,562
------- ------
Income before extraordinary item 10,133 7,444
Extraordinary item:
Loss due to early extinguishment of
long-term debt, net of income taxes -- 2,332
------- ------
Net income $10,133 $5,112
======= ======
Earnings Per Common Share:
Income per common share before
extraordinary item $.56 $.45
Extraordinary item:
Loss per common share due to early
extinguishment of long-term debt,
net of income taxes -- .14
------ ------
Net income per common share $.56 $.31
====== ======
Weighted-average common shares
outstanding 18,089 16,602
====== ======
Earnings Per Common Share - Assuming Dilution:
Income per common share before
extraordinary item $.54 $.43
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 $.54 $.30
====== ======
Weighted-average common shares
outstanding 18,608 17,331
====== ======
See accompanying notes to financial statements.
<PAGE>
AMERICAN ITALIAN PASTA COMPANY
STATEMENTS OF CASH FLOWS
SIX MONTHS ENDED
MARCH 31,
1999 1998
-------- --------
(IN THOUSANDS)
(UNAUDITED)
Operating activities:
Net income $10,133 $ 5,112
Adjustments to reconcile net income
to net cash provided by operations:
Depreciation and amortization 6,223 4,009
Deferred income tax expense -- 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 (1,035) (3,800)
Prepaid expenses and deposits (1,687) (524)
Inventory 1,493 (8,047)
Accounts payable and accrued expenses (4,091) 3,634
Income tax payable 1,767 1,776
Other (272) 52
------- -------
Net cash provided by operating activities 12,531 7,097
Investing activities:
Additions to property, plant and equipment (45,767) (54,340)
------- -------
Net cash used in investing activities (45,767) (54,340)
Financing activities:
Additions to deferred debt issuance costs -- (325)
Proceeds from issuance of debt 31,000 46,842
Principal payments on debt and capital
lease obligations (561) (86,612)
Proceeds from issuance of common stock,
net of issuance costs 140 86,781
Other 11 --
------- -------
Net cash provided by
financing activities 30,590 46,686
------- -------
Net decrease in cash and
temporary investments (2,646) (557)
Cash and temporary investments at
beginning of period 5,442 2,724
------- -------
Cash and temporary investments
at end of period $ 2,796 $ 2,167
======= =======
See accompanying notes to financial statements.
<PAGE>
AMERICAN ITALIAN PASTA COMPANY
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 1999
1. Basis of Presentation
The accompanying unaudited 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 six-month periods ended March 31, 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 second fiscal quarter of fiscal years 1999 and 1998 both
included thirteen weeks of activity and are described as the three month
periods ended March 31, 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 551,000 and 519,000 shares for the three-month and six-
month periods ended March 31, 1999 and 795,000 and 729,000 shares for the
three-month and six-month periods ended March 31, 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 six months ended March 31, 1999 and 1998.
<PAGE>
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. This report 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
Second quarter fiscal 1999 compared to second quarter fiscal 1998.
REVENUES. Total revenues increased $9.8 million, or 21.4%, to $55.9
million for the three-month period ended March 31, 1999, from $46.0 million
for the three-month period ended March 31, 1998. The increase for the
three-month period ended March 31, 1999 was primarily due to volume growth
in the Retail market including Mueller s with some offset from lower durum
wheat costs. Approximately $15.9 million in revenues for the three-month
period ended March 31, 1999 related to shipments of Mueller s brand pasta
for Bestfoods. Total pasta shipments were up over 30% versus the second
quarter of 1998. The lower durum costs along with changes in sales mix
created a 9% reduction in average selling prices relative to 1998 while
still generating targeted profitability. 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 $8.8 million, or 27.5%, to
$40.9 million for the three-month period ended March 31, 1999, from $32.1
million for the three-month period ended March 31, 1998. The increase
primarily reflects gains in Bestfoods and other 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 quarter.
Revenues for the Institutional market increased $1.0 million, or 7.3%,
to $15.0 million for the three-month period ended March 31, 1999, from
$13.9 million for the three-month period ended March 31, 1998. This
increase was primarily a result of increases in Non-contract unit volumes
offset by decreases in average sales prices related to the pass through of
lower durum wheat costs in the current quarter. Contract revenue in the
Institutional market generally remained consistent between the two periods
with higher volumes being offset by lower average sales prices as a result
of lower durum costs.
GROSS PROFIT. Gross profit increased $3.3 million, or 30.0%, to $14.4
million for the three-month period ended March 31, 1999, from $11.1 million
for the three-month period ended March 31, 1998. This increase is generally
related to both the revenue growth and lower per unit costs. Gross profit
as a percentage of revenues increased to 25.8% for the three-month period
ended March 31, 1999 from 24.1% for the three-month period ended March 31,
1998. The increase in gross profit relates to favorable changes in sales
mix, lower raw material costs, lower operating costs per unit, and lower
plant expansion costs in the current quarter compared to the prior quarter
offset by increased Bestfoods volumes, which have a lower gross margin.
Management expects continued increases in gross profit as a result of
continued revenue increases.
SELLING AND MARKETING EXPENSE. Selling and marketing expense
increased $0.5 million, or 17.0%, to $3.6 million for the three-month
period ended March 31, 1999, from $3.1 million for the three-month period
ended March 31, 1998. Selling and marketing expense as a percentage of
revenues decreased to 6.5% for the three-month period ended March 31, 1999,
from 6.8% for the comparable prior year period. The decrease in selling and
marketing expenses as a percentage of revenues relates to the higher volume
of Bestfoods in which no selling and marketing costs are incurred. The
increase in selling and marketing expense relates to the growth in Retail
market revenues.
GENERAL AND ADMINISTRATIVE EXPENSE. General and administrative
expense increased $0.3 million, or 29.7%, to $1.5 million for the three-
month period ended March 31, 1999, from $1.2 million for the comparable
prior period. General and administrative expense as a percentage of
revenues increased to 2.8% from 2.6%. 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 communications expenses and other incremental costs related to
being a public company.
OPERATING PROFIT. Operating profit for the three-month period ended
March 31, 1999, was $9.2 million, an increase of $2.4 million or 35.9% over
the $6.8 million reported for the three-month period ended March 31, 1998,
and increased as a percentage of revenues to 16.6% for the three-month
period ended March 31, 1999, from 14.8% for the three-month period ended
March 31, 1998 as a result of the factors discussed above.
INTEREST EXPENSE. Interest expense for the three-month period ended
March 31, 1999, was $0.5 million, increasing $0.3 million or 115% from the
$0.2 million reported for the three-month period ended March 31, 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 three-month period ended March
31, 1999, was $3.2 million, increasing $0.7 million from the $2.5 million
reported for the three-month period ended March 31, 1998, and reflects an
effective income tax rate of approximately 37% and 38% respectively.
NET INCOME. Net income for the three-month period ended March 31,
1999, was $5.5 million, increasing $1.4 million or 35.5% from the $4.1
million reported for the three-month period ended March 31, 1998. Diluted
earnings per share was $0.30 per share for the three-month period ended
March 31, 1999 compared to $0.23 per share in the comparable prior period.
Six months fiscal 1999 compared to six months fiscal 1998.
REVENUES. Revenues increased $22.1 million, or 27.1%, to $103.7
million for six-month period ended March 31, 1999, from $81.6 million for
the six-month period ended March 31, 1998. The increase for the six-month
period ended March 31, 1999 was primarily due to volume growth in the
Retail market including Mueller s with some offset from lower durum wheat
costs. Approximately $29.2 million in revenues related to initial shipments
of Mueller s brand pasta for Bestfoods. 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 $20.5 million, or 37.6%, to
$75.1 million for the six-month period ended March 31, 1999, from $54.6
million for the six-month period ended March 31, 1998. The increase
primarily reflects gains in Bestfoods and other 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 $1.6 million, or 6.0%,
to $28.6 million for the six-month period ended March 31, 1999, from $27.0
million for the six-month period ended March 31, 1998. This increase was
primarily a result of increases in Non-contract unit volumes offset by
decreases in average sales prices related to the pass through of lower
durum wheat costs in the current quarter. Contract revenue in the
Institutional market generally remained consistent between periods.
GROSS PROFIT. Gross profit increased $5.9 million, or 28.7%, to $26.5
million for the six-month period ended March 31, 1999, from $20.6 million
for the six-month period ended March 31, 1998. This increase is generally
related to the revenue growth. Gross profit as a percentage of revenues
increased to 25.6% for the six-month period ended March 31, 1999 from 25.3%
for the six-month period ended March 31, 1998. The increase in gross profit
as a percentage of revenues relates to favorable changes in sales mix,
lower raw material costs, lower operating costs per unit, and lower plant
expansion costs in the current six month period compared to the prior
period offset by increased Bestfoods volumes, which have a lower gross
margin. Management expects continued increases in gross profit as a result
of continued revenue increases.
SELLING AND MARKETING EXPENSE. Selling and marketing expense
increased $1.0 million, or 17.3%, to $6.7 million for the six-month period
ended March 31, 1999, from $5.7 million for the six-month period ended
March 31, 1998. Selling and marketing expense as a percentage of revenues
decreased to 6.5% for the six-month period ended March 31, 1999, from 7.0%
for the comparable prior year period. The increase in selling and
marketing expense relates to the growth in Retail market revenues.
GENERAL AND ADMINISTRATIVE EXPENSE. General and administrative
expense increased $0.4 million, or 17.7%, to $2.8 million for the six-month
period ended March 31, 1999, from $2.4 million for the comparable prior
period, but decreased as a percentage of revenues from 2.9% to 2.7%. The
increase in administrative costs relates to increases in 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 six-month period ended
March 31, 1999, was $17.0 million, an increase of $4.5 million or 36.0%
over the $12.5 million reported for the six-month period ended March 31,
1998, and increased as a percentage of revenues to 16.4% for the six-month
period ended March 31, 1999, from 15.3% for the six-month period ended
March 31, 1998 as a result of the factors discussed above.
INTEREST EXPENSE. Interest expense for the six-month period ended
March 31, 1999, was $0.9 million, increasing $0.4 million or 87.9% from the
$0.5 million reported for the six-month period ended March 31, 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 six-month period ended March
31, 1999, was $5.9 million, increasing $1.4 million from the $4.6 million
reported for the six-month period ended March 31, 1998, and reflects an
effective income tax rate of approximately 37% and 38%, respectively.
EXTRAORDINARY ITEM. During the six-month period ended March 31, 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 six-month period ended March 31,
1999.
NET INCOME. Net income for the six-month period ended March 31, 1999,
was $10.1 million, increasing $5.0 million or 98.2% from the $5.1 million
reported for the six-month period ended March 31, 1998. Diluted earnings
per common share was $0.56 per share for the six-month period ended March
31, 1999 compared to $0.43 per share before the extraordinary item and
$0.30 per share after the extraordinary item for the six-month period ended
March 31, 1998.
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 $2.8 million, and working capital totaled $21.5 million
at March 31, 1999.
The Company s net cash provided by operating activities totaled $12.5
million for the six-month period ended March 31, 1999 compared to $7.1
million for the six-month period ended March 31, 1998. The increase in the
net cash provided by operations is due to higher operating income in the
current period.
Cash used in investing activities principally relates to the Company s
investments in manufacturing, distribution and milling assets. Capital
expenditures were $45.8 million for the six-month period ended March 31,
1999 compared to $54.3 million in the comparable prior fiscal year period.
The decrease in spending for the six-month period ended March 31, 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. Currently, the Company is in the process of completing a
third plant in Kenosha, Wisconsin and plans to spend approximately $35
million, of which approximately $28.2 million has been spent to date.
Additionally, the Company plans to spend approximately $40 million to again
expand the Columbia, South Carolina and Excelsior Springs, Missouri
facilities, of which approximately $26.4 million has been spent to date.
The Company anticipates completion of these projects in the third quarter
of the fiscal year ending September 30, 1999.
Net cash provided by financing activities was $30.6 million for the
six-month period ended March 31, 1999 compared to net cash used of $46.7
million for the six-month period ended March 31, 1998. The $30.6 million
in 1999 is the result of borrowings to fund the capital expansion programs.
The 1998 amount reflects the proceeds from the issuance of Common Stock of
$86.8 million offset by net payments on long-term debt and capital lease
obligations.
The Company currently uses cash and proceeds from long-term borrowings
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 $16.8 million in raw material
purchases for fiscal year 1999 and has approximately $15.0 million in
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 do not 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 substantially completed the assessment of its computer
hardware and software systems and has upgraded or is replacing those
systems that were identified as not being year 2000 compliant. The Company
has completed conversion of all critical systems to year 2000 compliant
status during the second fiscal 1999 quarter and anticipates completing the
conversion of all non-critical systems by the end of the third fiscal 1999
quarter.
Although the Company is not aware of any material operational
impediments associated with upgrading its computer hardware and software
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 causing complications
of, or otherwise affecting, the operations of any one or more of the
Company s suppliers and customers. The Company continues the process of
contacting its significant suppliers and customers in 1999 in an attempt to
identify any potential year 2000 compliance issues with them. The Company
is currently unable to anticipate the magnitude of the operational or
financial impact on the Company of year 2000 compliance issues with its
suppliers and customers.
Because of this uncertainty with respect to suppliers and customers,
the Company has identified mission critical suppliers and has determined
various contingency alternatives to support business operations. These
alternatives may require the diversion of financial resources to fund
execution of retainers, storage, transportation and inventory solutions.
The Company will continue its communication with suppliers and customers in
assessing the risk and financial requirements of the various contingency
alternatives.
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 $150,000 was incurred in the six months ended March 31, 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
The Company s exposure to market risk through financial instruments
such as long-term debt is not material.
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
-------------------------------
The Annual Meeting of Shareholders was held on February 4, 1999.
There were six matters submitted to a vote of security holders. The
first matter was for the election of directors. Each of the persons
named in the Proxy Statement as a nominee for director was elected.
Following are the voting results on each of the nominees for director:
Election of Directors Votes For Votes Withheld
Jonathon E. Baum 13,940,682 1,998,552
Robert H. Niehaus 13,942,357 1,996,877
Richard C. Thompson 13,920,973 2,018,261
The following directors continued in office:
Serving Until 2000 Serving Until 2001
Horst W. Schroeder David Y. Howe
Mark C. Demetree John P. O Brien
Timothy S. Webster William R. Patterson
The second matter was for the ratification of the Board of Directors
selection of Ernst & Young LLP to serve as the Company s independent
auditors for the fiscal year 1999. The shareholders cast 15,930,444
votes in the affirmative and 6,940 votes in the negative and
shareholders holding 1,850 votes abstained from voting on the
ratification of Ernst & Young LLP as the Company s independent
auditors for the fiscal year 1999.
The third matter was for the approval of the American Italian Pasta
Company Employee Stock Purchase Plan. The shareholders cast
15,670,755 votes in the affirmative and 260,030 votes in the negative
and shareholders holding 8,449 votes abstained from voting on the
approval of the AIPC Employee Stock Purchase Plan.
The fourth matter was for the approval of the American Italian Pasta
Company 1992 Stock Option Plan. The shareholders cast 14,229,104
votes in the affirmative and 1,697,687 votes in the negative and
shareholders holding 12,443 votes abstained from voting on the
approval of the AIPC 1992 Stock Option Plan.
The fifth matter was for the approval of the American Italian Pasta
Company 1993 Nonqualified Stock Option Plan. The shareholders cast
14,634,815 votes in the affirmative and 1,289,210 votes in the
negative and shareholders holding 15,209 votes abstained from voting
on the approval of the AIPC 1993 Nonqualified Stock Option Plan.
The sixth matter was for the approval of the American Italian Pasta
Company 1997 Equity Incentive Plan. The shareholders cast 11,658,782
votes in the affirmative and 4,267,577 votes in the negative and
shareholders holding 12,175 votes abstained from voting on the
approval of the AIPC 1997 Equity Incentive Plan.
Item 5. Other Information
-------------------------------
Not applicable
Item 6. Exhibits and Reports on Form 8-K
-------------------------------
Exhibits.
Ex-27 Financial Data Schedule
Reports on Form 8-K.
None
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
April 28, 1999 /S/ Timothy S. Webster
------------------------ ----------------------------------------
Date Timothy S. Webster
President and Chief Executive Officer
(Principal Executive Officer)
April 28, 1999 /S/ Warren B. Schmidgall
------------------------ ----------------------------------------
Date Warren B. Schmidgall
Senior Vice President and Chief Financial
Officer
(Principal Financial and
Accounting 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 March
31, 1999; Statements of Operations for the six
months ended March 31, 1999; the Statements of
Cash Flows for the six months ended March 31, 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> 6-MOS
<FISCAL-YEAR-END> OCT-01-1999
<PERIOD-END> APR-02-1999
<CASH> 2796
<SECURITIES> 0
<RECEIVABLES> 18146
<ALLOWANCES> 140
<INVENTORY> 26558
<CURRENT-ASSETS> 51585
<PP&E> 229367
<DEPRECIATION> 44085
<TOTAL-ASSETS> 300403
<CURRENT-LIABILITIES> 30037
<BONDS> 0
0
0
<COMMON> 18
<OTHER-SE> 187052
<TOTAL-LIABILITY-AND-EQUITY> 300403
<SALES> 103716
<TOTAL-REVENUES> 103716
<CGS> 77182
<TOTAL-COSTS> 83927
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 919
<INCOME-PRETAX> 16078
<INCOME-TAX> 5945
<INCOME-CONTINUING> 10133
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 10133
<EPS-PRIMARY> 0.56
<EPS-DILUTED> 0.54
</TABLE>
