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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 quarterly period ended June 27, 2008
Or
| | Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
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 Identification No.)
incorporation or organization)
4100 N. Mulberry Drive, Suite 200 64116
Kansas City, Missouri (Zip Code)
(Address of principal executive offices)
Registrant's telephone number, including area code:
(816) 584-5000
NOT APPLICABLE
(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether the registrant (1) has filed all 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 | |
Indicate by check mark whether the registrant is a large accelerated filer,
an accelerated filer, a non-accelerated filer, or a smaller reporting company.
See definitions of "large accelerated filer," "accelerated filer," and "smaller
reporting company" in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filer | | Accelerated filer |X|
Non-accelerated filer | | Smaller reporting company | |
(Do not check if a smaller reporting company)
Indicate by check mark whether the registrant is a shell company (as defined in
Rule 12b-2 of the Exchange Act).
Yes | | No |X|
As of August 1, 2008, the Registrant had 19,357,415 shares of common stock,
par value $0.001 per share, outstanding.
AMERICAN ITALIAN PASTA COMPANY
Form 10-Q
Fiscal Quarter and Nine Months Ended June 27, 2008
Table of Contents
Part I - Financial Information Page
Item 1. Consolidated Financial Statements (unaudited) 1
Consolidated Balance Sheets at June 27, 2008 and September 28, 2007 1
Consolidated Statements of Operations for the three and nine months ended 2
June 27, 2008 and June 29, 2007
Consolidated Statement of Stockholders' Equity for the
nine months ended June 27, 2008 3
Consolidated Statements of Comprehensive Income for the three and
nine months ended June 27, 2008 and June 29, 2007 4
Consolidated Statements of Cash Flows for the nine months ended
June 27, 2008 and June 29, 2007 5
Notes to Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations 13
Item 3. Quantitative and Qualitative Disclosures About Market Risk 20
Item 4. Controls and Procedures 20
Part II - Other Information
Item 1. Legal Proceedings 21
Item 1A. Risk Factors 23
Item 2. Unregistered Sales of Equity Securities and Uses of Proceeds 23
Item 3. Defaults Upon Senior Securities 23
Item 4. Submission of Matters to a Vote of Security Holders 23
Item 5. Other Information 23
Item 6. Exhibits 23
Signature Page
Exhibit Index
PART I. FINANCIAL INFORMATION
ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS
AMERICAN ITALIAN PASTA COMPANY
CONSOLIDATED BALANCE SHEETS
Unaudited
(in thousands, except share amounts)
June 27, 2008 September 28, 2007
ASSETS
Current assets:
Cash and cash equivalents $ 6,398 $ 16,635
Short-term investments 3,406 -
Trade and other receivables, net 52,637 38,279
Inventories 72,367 44,443
Prepaid expenses and other current assets 7,322 7,629
Deferred income taxes 1,952 2,381
------------ ------------
Total current assets 144,082 109,367
Property, plant and equipment, net 311,525 316,109
Brands and trademarks 83,876 83,282
Other assets 18,587 19,205
------------ ------------
Total assets $ 558,070 $ 527,963
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 30,861 $ 19,195
Accrued expenses 31,582 31,523
Current portion of deferred revenues 99 99
Income taxes payable - 1,082
Current maturities of long-term debt 2,174 1,963
------------ ------------
Total current liabilities 64,716 53,862
Long-term debt, less current maturities 239,900 240,000
Income taxes payable 1,858 -
Deferred income taxes 35,078 35,286
Litigation settlement 23,000 26,500
Deferred revenue, less current portion 322 397
------------ ------------
Total liabilities 364,874 356,045
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 22 21
Issued and outstanding shares - 21,550,433 and
19,387,259, respectively, at June 27, 2008;
20,832,627 and 18,674,628, respectively, at September 28, 2007
Class B common stock, par value $.001
Authorized shares - 25,000,000 - -
Issued and outstanding - none
Additional paid-in capital 252,193 247,492
Treasury stock, 2,163,174 shares at June 27, 2008 and (52,059) (52,029)
2,157,999 shares at September 28, 2007, at cost
Accumulated other comprehensive income 20,810 15,352
Accumulated deficit (27,770) (38,918)
------------ ------------
Total stockholders' equity 193,196 171,918
------------ ------------
Total liabilities and stockholders' equity $558,070 $527,963
============ ============
See accompanying notes to the unaudited consolidated financial statements.
1
AMERICAN ITALIAN PASTA COMPANY
CONSOLIDATED STATEMENTS OF OPERATIONS
Unaudited
(in thousands, except per share amounts)
Three Months Ended Nine Months Ended
June 27, 2008 June 29, 2007 June 27, 2008 June 29, 2007
------------- ------------- ------------- -------------
Revenues $ 155,844 $ 97,158 $ 407,135 $ 288,056
Cost of goods sold 130,847 77,441 325,563 222,357
--------- --------- --------- ---------
Gross profit 24,997 19,717 81,572 65,699
Selling and marketing expense 7,112 4,778 19,250 15,337
General and administrative expense 10,331 8,086 29,833 24,918
(Gains) losses related to long-lived assets 109 (23) 344 (68)
--------- --------- --------- ---------
Operating profit 7,445 6,876 32,145 25,512
Interest expense, net 6,662 7,057 20,706 22,215
Other (income) expense, net (190) (57) 224 (195)
--------- --------- --------- ---------
Income (loss) before income taxes 973 (124) 11,215 3,492
Income tax provision (benefit) (5) 108 (601) (3)
--------- --------- --------- ---------
Net income (loss) 978 $ (232) $ 11,816 $ 3,495
========= ========= ========= =========
Net income (loss) per common share (basic) $ 0.05 $ (0.01) $ 0.62 $ 0.19
Weighted-average common shares outstanding
(basic) 19,387 18,437 18,988 18,671
========= ========= ========= =========
Net income (loss) per common share
(diluted) $ 0.05 $ (0.01) $ 0.62 $ 0.18
Weighted-average common shares outstanding
(diluted) 19,644 18,437 19,172 18,958
========= ========= ========= =========
See accompanying notes to the unaudited consolidated financial statements.
2
AMERICAN ITALIAN PASTA COMPANY
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
Unaudited
(in thousands)
Nine Months Ended
June 27, 2008
Class A Common Shares
Balance, beginning 20,833
Issuance of shares of common stock 717
--------
Balance, ending 21,550
========
Class A Common Shares - par value
Balance, beginning $ 21
Issuance of shares of common stock 1
--------
Balance, ending $ 22
========
Additional Paid-in Capital
Balance, beginning $247,492
Issuance of shares of common stock 3,679
Tax impact of expired stock options (1,003)
Stock based compensation 2,025
---------
Balance, ending 252,193
=========
Treasury Stock, at cost
Balance, beginning $(52,029)
Purchases of treasury stock (30)
---------
Balance, ending $(52,059)
=========
Accumulated Other Comprehensive Income
Foreign currency translation adjustment:
Balance, beginning $ 15,352
Change during the period 5,458
---------
Balance, ending $ 20,810
=========
Accumulated Deficit
Balance, beginning $(38,918)
Additional tax related liabilities upon adoption of FIN 48 (668)
Net income 11,816
---------
Balance, ending $(27,770)
=========
Total Stockholders' Equity $ 193,196
=========
See accompanying notes to the unaudited consolidated financial statements
3
AMERICAN ITALIAN PASTA COMPANY
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
Unaudited
(in thousands)
Three Months Ended Nine Months Ended
June 27, 2008 June 29, 2007 June 27, 2008 June 29, 2007
------------- ------------- ------------- -------------
Net income (loss) $ 978 $ (232) $ 11,816 $ 3,495
Other comprehensive income:
Foreign currency translation
adjustments (7) 2,822 5,458 2,300
------------- ------------- ------------- -------------
Comprehensive income $ 971 $ 2,590 $ 17,274 $ 5,795
============= ============= ============= =============
See accompanying notes to the unaudited consolidated financial statements.
4
AMERICAN ITALIAN PASTA COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS
Unaudited
(in thousands)
Nine Months Ended
June 27, 2008 June 29, 2007
------------- -------------
OPERATING ACTIVITIES:
Net income $ 11,816 $ 3,495
Adjustments to reconcile net income to net cash
provided by operations:
Depreciation and amortization 18,040 17,459
Amortization of deferred financing fees 1,512 941
(Gains) losses related to long-lived assets 344 (68)
Unrealized loss on short-term investment 171 -
Provision for doubtful accounts 293 243
Provision for inventory obsolescence 956 709
Stock-based compensation expense 2,100 1,449
Deferred income tax benefit (781) (546)
Changes in operating assets and liabilities:
Trade and other receivables (13,621) (1,098)
Inventories (28,185) (3,552)
Prepaid expenses and other current assets 447 713
Accounts payable and accrued expenses 10,384 2,055
Income taxes (140) 241
Other (1,368) (208)
----------- ------------
Net cash provided by operating activities 1,968 21,833
INVESTING ACTIVITIES:
Redemption of short-term investments 3,802 -
Additions to property, plant and equipment (8,467) (6,816)
Short-term investments under orderly liquidation (7,379) -
Proceeds from disposal of property, plant and equipment 43 111
----------- ------------
Net cash used in investing activities (12,001) (6,705)
FINANCING ACTIVITIES:
Proceeds from issuance of debt 11,147 -
Principal payments on debt (11,247) (18,000)
Purchase of treasury stock (30) (140)
Deferred financing costs (539) (308)
----------- ------------
Net cash used in financing activities (669) (18,448)
Effect of exchange rate changes on cash 465 153
----------- ------------
Net decrease in cash and cash equivalents (10,237) (3,167)
Cash and cash equivalents, beginning of period 16,635 22,805
----------- ------------
Cash and cash equivalents, end of period $ 6,398 $ 19,638
=========== ============
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid for interest $ 19,431 $ 21,382
=========== ============
Cash paid for income taxes $ 198 $ 192
=========== ============
Cash received from income taxes $ 55 $ -
=========== ============
Stock issued in relation to settlement liability $ 3,500 $ -
=========== ============
See accompanying notes to the unaudited consolidated financial statements.
5
AMERICAN ITALIAN PASTA COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
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 months ended June 27,
2008 are not necessarily indicative of the results that may be expected for the
fiscal year ended September 26, 2008. For further information, refer to the
consolidated financial statements and footnotes thereto included in the
Company's Annual Report on Form 10-K for the fiscal year ended September 28,
2007.
American Italian Pasta Company (the "Company" or "AIPC") uses a 52/53 week
financial reporting cycle with a fiscal year that 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, all
fiscal quarters presented included 13 weeks of activity.
2. SHORT-TERM INVESTMENTS
As of September 28, 2007, the Company had $9.2 million invested in the Columbia
Strategic Cash Portfolio Fund (Columbia Fund), administered by a subsidiary of
Bank of America, which is an enhanced money fund that allowed immediate
withdrawal of funds. On December 10, 2007, when the investment balance was $7.4
million, Columbia determined that the underlying securities had liquidity issues
and notified the Company that the fund would begin an orderly liquidation and
dissolution of assets to its investors. The balance in the Columbia Fund at June
27, 2008 was $3.4 million. The underlying assets are valued at fair value and as
of June 27, 2008 the Company has recorded valuation losses on this investment of
$0.2 million. Through June 27, 2008, the Company has recovered approximately
$3.8 million of the pre-liquidation investment balance. The remaining investment
of $3.6 million is to be recovered as the liquidation progresses. The Company
believes that the entire balance will be recovered. During the nine-month period
ended June 27, 2008, the Company has received $0.3 million of interest income
from the Columbia Fund.
3. INVENTORIES
Inventories are carried at standard costs adjusted for capitalized variances,
which approximate the lower of cost, determined on a first-in, first-out (FIFO)
basis, or market. The Company periodically reviews its inventory for
slow-moving, damaged or discontinued items and provides reserves to reduce such
items identified to their recoverable amount.
Inventories consist of the following (in thousands):
June 27, 2008 September 28, 2007
Finished goods $ 51,906 $ 30,713
Raw materials, additives, packaging materials and work-in-process 21,686 14,373
Reserves for slow-moving, damaged and discontinued inventory (1,225) (643)
-------- --------
$ 72,367 $ 44,443
========= ========
4. PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment consist of the following (in thousands):
6
June 27, 2008 September 28, 2007
Land and improvements $ 12,176 $ 11,867
Buildings 114,219 112,434
Plant and mill equipment 358,163 348,617
Furniture, fixtures and equipment 32,131 30,848
-------- --------
516,689 503,766
Accumulated depreciation (217,952) (199,369)
-------- --------
298,737 304,397
Spare parts, net of reserve 8,264 8,154
Construction in progress 4,524 3,558
-------- --------
$311,525 $316,109
========= ========
5. SHORT TERM DEBT
As of June 27, 2008, the Company had short-term debt comprised of two revolving
credit facilities at its Italian subsidiary totaling $2.2 million. These credit
facilities bear interest at an average rate of 5.6% and mature in September
2008. These revolving credit facilities are secured by Italian accounts
receivables and other assets. The Company's U.S. credit facility (see note 6)
limits the outstanding debt owed by its Italian subsidiary to $5.0 million in
the aggregate. The Company is in compliance with this limitation as of June 27,
2008.
6. LONG-TERM DEBT
As of June 27, 2008, the balance of the term loan was $239.9 million and its
revolving credit facility had no outstanding balance (the U.S. credit facility).
The U.S. credit facility, as amended, is comprised of term loan and a $30
million revolving U.S. credit facility. The Company had outstanding letters of
credit under its revolving credit facility totaling approximately $3.0 million
and $2.3 million as of June 27, 2008 and September 28, 2007, respectively.
Accordingly, under the U.S. credit facility the Company had additional borrowing
capacity of $27.0 million and $27.7 million as of June 27, 2007 and September
28, 2007, respectively. The U.S. credit facility is secured by substantially all
of our assets and provides for interest at either LIBOR rate plus 600 basis
points or at an alternate base rate calculated as prime rate plus 500 basis
points. The interest rate in effect at June 27, 2008 was 9.6% on the U.S.
facility. Under the amended U.S. credit facility, we were required to deliver
our fiscal year 2005, 2006 and 2007 audited financial statements to our lenders
by June 30, 2008 at which time the interest rate would decrease to 550 points
over LIBOR. During June 2008, the Company delivered the financial statements to
its lenders in accordance with the amended facility and, effective July 3, 2008,
the interest rate was decreased to 550 points over LIBOR.
The U.S. facility has a five-year term expiring in March 2011 and does not
require any scheduled principal payments. Principal pre-payments are required if
certain events occur in the future, including the sale of certain assets,
issuance of equity and the generation of "excess cash flow" (as defined in the
credit agreement).
Our U.S. credit facility contains restrictive covenants which include, among
other things, financial covenants requiring minimum and cumulative earnings
levels and limitations on the payment of dividends, stock purchases and our
ability to enter into certain contractual arrangements. The Company was in
compliance with these financial covenants as of June 27, 2008 and September 28,
2007.
7. CONTINUED DUMPING AND SUBSIDY OFFSET ACT OF 2000
On October 28, 2000, the U.S. government enacted the "Continued Dumping and
Subsidy Offset Act of 2000" (the "Act"), commonly known as the Byrd Amendment,
which provided that assessed anti-dumping and subsidy duties liquidated by the
Department of Commerce on Italian and Turkish imported pasta after October 1,
2000 would be distributed to affected domestic producers. The legislation
creating the dumping and subsidy offset payment provides for annual payments
from the U.S. government. The Company records the Byrd Amendment payment as
revenue in the quarter in which the amount, and the right to receive the
payment, can be reasonably determined.
During the nine-month periods ended June 27, 2008 and June 29, 2007, the Company
received and recognized as revenue $4,640,000 and $2,959,000, all of which was
recorded in the first quarter of fiscal years 2008 and 2007, respectively.
Effective October 1, 2007, the Act was repealed, resulting in the
discontinuation of future distributions
7
to affected domestic producers for duties assessed after such date. It is not
possible to reasonably estimate amounts, if any, to be received in the future on
duties assessed prior to October 1, 2007.
8. INCOME TAXES
In June 2006, the Financial Accounting Standard Board ("FASB") issued FASB
Interpretation No 48 ("FIN 48"), Accounting for Uncertainty in Income Taxes - an
interpretation of FASB Statement No. 109, Accounting for Income Taxes. FIN 48
clarifies the accounting for uncertainty in income taxes in an enterprise's
financial statements in accordance with SFAS No. 109 Accounting for Income
Taxes. This interpretation prescribes a recognition threshold and measurement
attribute for the financial statement recognition and measurement of a tax
position taken or expected to be taken in a tax return. FIN 48 also provides
guidance on derecognition of tax benefits, classification on the balance sheet,
interest and penalties, accounting in interim periods, disclosures, and
transition.
The Company adopted FIN 48 effective September 29, 2007. As a result of the
adoption, the Company recognized additional tax related liabilities of
approximately $0.7 million resulting in a reduction to beginning retained
earnings. In addition, the Company reclassified approximately $1.2 million of
income tax liabilities from a current liability classification to a current
receivable and a non-current liability classification, as payment of the
liability is not anticipated within one year of the balance sheet date. The
Company also recorded approximately $0.2 million of deferred tax assets relating
to the tax benefits associated with interest expense and federal benefits
associated with state tax expenses. As of September 29, 2007, the gross amount
of unrecognized tax benefits, including penalty and interest was approximately
$2.3 million. If recognized, approximately $2.1 million would affect the
Company's effective tax rate. As of June 27, 2008, the gross amount of
unrecognized tax benefits, including penalty and interest was approximately $2.4
million. If recognized, approximately $2.2 million would affect the Company's
effective tax rate.
The Company files income tax returns in the U.S. federal jurisdiction, the
United Kingdom, the Netherlands, Italy and various state jurisdictions. The
Company has also made an evaluation of the potential impact of assessments by
state jurisdictions in which it has not filed tax returns. The Internal Revenue
Service has examined and proposed adjustments to the tax returns for the fiscal
years ended 2002 through 2004. This examination was concluded in the third
quarter of this fiscal year with no material change from the amounts
anticipated.
As of the September 29, 2007 adoption date of FIN 48, the federal tax returns
for fiscal years ended 2004 through 2007 remain open, although the IRS completed
an examination for the fiscal year ended 2004 during 2008. In addition, state
and foreign tax returns for the fiscal years ended 2003 through 2007 are open to
audit under the statute of limitations. As of the end of each quarter of the
current fiscal year, it is not anticipated that any of the net unrecognized tax
benefits will be recognized in the next twelve months.
As permitted by FIN 48, the Company has classified interest and penalties as a
component of income tax expense. Estimated interest and penalties classified as
a component of income tax expense totaled approximately $0.1 million for the
quarter ended June 27, 2008. Accrued interest and penalties were $0.7 million
and $0.6 million as of June 27, 2008 and September 29, 2007, respectively.
The Company recorded an income tax benefit of $0.6 million for the nine months
ended June 27, 2008. The benefit is attributable primarily to a reduction in
valuation allowance during the current year against deducible temporary
differences related to stock options as well as a tax benefit from foreign
operations.
The Company also reduced the deferred tax assets recorded for equity based
compensation programs by approximately $1.0 million relating to stock options
that expired unexercised. This was recorded as a debit to additional paid in
capital and is not a component of the Company's total income tax expense or its
effective tax rate.
9. EQUITY INCENTIVE PLANS
Effective October 1, 2005, the Company adopted Statement of Financial Accounting
Standard No. 123 (revised 2004), "Share Based Payment" (SFAS No. 123R) using the
modified prospective method. Under SFAS No. 123R, the Company is required to
recognize, as expense, the estimated fair value of all share based payments to
employees.
8
Under SFAS No. 123R, the Company recognized compensation expense related to
stock option awards and stock appreciation rights of $1,218,000 and $692,000
during the nine month period ending June 27, 2008 and the comparable period in
fiscal 2007, respectively.
A summary of the Company's stock option activity, and related information, is as
follows:
Weighted
Average
Remaining
Weighted Contractual
Number of Average Term
Shares Exercise Price (in years)
Outstanding at September 28, 2007 940,164 $ 30.19 4.3
Cancelled/Expired (159,903) $ 26.77
-----------
Outstanding at June 27, 2008 780,261 $ 30.89 4.0
===========
Vested or expected to vest at June 27, 2008 772,419 $ 30.91 4.0
Exercisable at June 27, 2008 718,996 $ 31.06 3.8
A summary of the Company's stock appreciation rights activity, and related
information, is as follows:
Weighted
Average
Remaining
Weighted Aggregate Contractual Number of Average Intrinsic Term
Shares Exercise Price Value (in years)
Outstanding at September 28, 2007 1,230,783 $7.00 $ 1,894,000 5.8
Granted 954,868 $7.43
-----------
Outstanding at June 27, 2008 2,185,651 $7.19 $ 9,416,672 5.7
===========
Vested or expected to vest at 1,943,526 $7.19 $ 7,430,050 5.6
June 27, 2008
Exercisable at June 27, 2008 294,047 $6.94 $ 1,339,780 5.0
As of June 27, 2008, the Company had $3,561,000 of future unrecognized
compensation costs related to stock options and stock appreciation rights. These
costs are expected to be recognized over a weighted average period of 2.7 years.
10. RESTRICTED STOCK
During the nine months ended June 27, 2008, the Company issued 154,263 shares of
restricted stock to employees of the Company with a weighted-average grant date
values of $7.73 under the Company's 2000 Equity Incentive Plan, as amended (the
"2000 Plan"). The Company has recorded expense on the restricted stock as it
vests equal to the fair value at the end of each reporting period, in accordance
with SFAS No. 123R. The Company maintains certain restricted stock compensation
plans for which employees are allowed to elect to have taxes withheld at amounts
greater than minimum required amounts triggering variable accounting treatment
in fiscal 2007 and prior. The awards contained either a cliff or straight line
vesting provision and, therefore, expense is recognized over the vesting period.
The compensation expense is calculated under an accelerated vesting method in
accordance with FASB Interpretation 28, "Accounting for Stock Appreciation
Rights and Other Variable Stock Option or Award Plans". The compensation cost
recognized was $807,000 and $647,000 during the nine months ended June 27, 2008
9
and June 29, 2007, respectively. At June 27, 2008, unrecognized cost related to
restricted stock awards total approximately $2,012,000. These costs will be
recognized over a weighted average period of 2.4 years.
The Company's restricted stock activity is as follows:
Weighted Average
Grant Date
Number of Shares Fair Value
Outstanding at September 28, 2007 226,326 $ 7.77
Granted 154,263 7.73
Vested (34,562) 7.30
Forfeited (266) 36.56
------------ ------------
Balance at June 27, 2008 345,761 $ 7.77
============ ============
11. EARNINGS PER SHARE
Basic earnings per share is computed by dividing net income available to common
shareholders by the weighted average number of common shares outstanding for the
period. Diluted earnings per share is computed by dividing net income available
to common shareholders, increased by the weighted average number of outstanding
common shares and incremental shares that may be issued in future periods
related to outstanding stock options and stock appreciation rights, if dilutive.
When calculating incremental shares related to outstanding share options, we
apply the treasury stock method. The treasury stock method assumes that
proceeds, consisting of the amount the employee must pay on exercise,
compensation cost attributed to future services and not yet recognized, and
excess tax benefits that would be credited to additional paid-in capital on
exercise of the share options, are used to repurchase outstanding shares at the
average market price for the period. The treasury stock method is applied only
to share grants for which the effect is dilutive.
The computations of basic and diluted earnings per share are as follows (in
thousands, except share and per share data):
Three Months Ended
June 27, 2008 June 29, 2007
------------------------------------- ------------------------------------
Weighted Weighted
Average Per Average
Net Shares Share Shares Per Share
Income Outstanding Amount Net Loss Outstanding Amount
Basic earnings per share $978 19,387 $0.05 $ (232) 18,437 $ (0.01)
==== ===== ======= ========
Effect of dilutive securities:
Stock options and stock appreciation
rights 257 -
------ ------
Diluted earnings per share $ 978 19,644 $0.05 $ (232) 18,437 $ (0.01)
===== ====== ===== ======= ====== ========
Nine Months Ended
June 27, 2008 June 29, 2007
------------------------------------- ------------------------------------
Weighted Weighted
Average Per Average
Net Shares Share Net Shares Per Share
Income Outstanding Amount Income Outstanding Amount
Basic earnings per share $11,816 18,988 $0.62 $ 3,495 18,671 $ 0.19
======= ===== ======= ======
Effect of dilutive securities:
Stock options and stock appreciation
rights 184 287
------ ------
Diluted earnings per share $11,816 19,172 $0.62 $ 3,495 18,958 $ 0.18
======= ===== ======= ======
10
Anti-dilutive securities consisting of options to purchase the Company's Class A
common stock accounting for 2,257,380 and shares for the nine-month periods
ended June 27, 2008, and 1,484,308 shares for the nine-month period ended June
29, 2007, were excluded from the calculation of diluted weighted average common
shares as the effect.
12. LAWSUITS AND CONTINGENCIES
Governmental Investigations and Other Matters:
• Beginning in the late summer of 2005, the Company received document
requests and formal subpoenas from the Enforcement Division of the SEC
relating to its accounting practices, financial reporting, proxy
solicitation and other matters in connection with a formal, non-public
investigation by the SEC staff of the Company and certain persons and
entities employed by or associated with the Company. The United States
Attorney's Office for the Western District of Missouri ("DOJ") has also
been investigating these matters and has been coordinating with the SEC
staff. The Company has had, and is continuing to have, discussions with the
SEC staff, and separately with the DOJ, regarding the conclusion of their
investigation activities and of their respective views of appropriate bases
on which to reach mutually acceptable settlements. Such settlements could
result in a Deferred Prosecution Agreement, which could include the
assignment of a corporate monitor, continued cooperation with any ongoing
investigations and/or a monetary fine. Due to the status of ongoing
discussions with the DOJ and SEC staff, the Company cannot estimate a range
of possible loss that could result from a monetary fine, if any. There can
be no assurance that any settlement would not have a material adverse
effect on our business, financial condition, results of operations or cash
flows. The Company is cooperating with these investigations.
• On October 28, 2005, the Company received notice from the Employee Benefit
Security Administration of the U.S. Department of Labor ("EBSA") that the
EBSA was commencing an investigation regarding its 401(k) plan. The EBSA
visited the Company's offices on January 18, 2006 to review requested
information and interview its Director of Human Resources regarding the
401(k) plan. The Company is cooperating with the EBSA and has provided the
EBSA with all requested information.
• During the Company's ongoing analysis of financial matters, it reviewed
transactions reported to the U.S. Department of Commerce (the "DOC") for
the period July 1, 2002 through June 30, 2003 in the antidumping proceeding
on pasta imported from Italy. Based on the data reported by the Company and
its Italian subsidiary, Pasta Lensi, S.r.l., the DOC revoked the
Anti-Dumping Order ("AD Order") with respect to Pasta Lensi. During its
investigation, information came to the Company's attention that certain
data reported to the DOC was incorrect and as a result, Pasta Lensi may not
have been eligible for revocation of the AD Order. The Company disclosed
the issue to the DOC. Simultaneously, the Company provided this information
to the DOJ, which requested further information on this matter. As a result
of the Company's disclosure to the DOC, it published notice on February 22,
2008 in the Federal Register of its preliminary determination to reinstate
Pasta Lensi in the existing antidumping duty order at a cash deposit rate
of 45.6%. The preliminary determination applies, on a prospective basis, to
all imports of subject products from and after February 22, 2008. A cash
deposit rate of 45.6% would have a significant adverse impact to our
working capital position. The Company has appealed this determination. The
Company has substantially mitigated the impact of this order by changing
its ingredient to organic semolina in March 2008, thereby manufacturing
products for import into the U.S. that are exempt from the antidumping duty
order. Based on the Company's review, the Company does not believe this
order will have a material effect on its financial condition.
Each of these matters is ongoing and involves various risks and uncertainties
that could have a material adverse effect on our business, results of operations
and financial condition.
Litigation Claims and Disputes:
• Beginning in August, 2005, seven lawsuits containing similar allegations of
misrepresentations and omissions concerning the Company's financial
statements and asserting both derivative and direct claims were filed in
the United States District Court for the Western District of Missouri
against the Company, certain of its current and former directors and
officers, and its former independent registered public accounting firm,
Ernst & Young,
11
LLP. These lawsuits were consolidated into a single lawsuit asserting both
derivative and direct claims. On June 16, 2006, the Court dismissed the
derivative claims because the plaintiffs failed to make a required demand
on the Company's Board of Directors. By stipulation of settlement filed
with the Court on October 29, 2007, the Company agreed to settle all claims
alleged in the lawsuit, including those alleging violations of the
Securities Exchange Act of 1934 and Rule 10b-5 thereunder. On February 12,
2008, the Court granted final approval of the settlement. The settlement of
the federal securities class action lawsuit was for $25 million, comprised
of $11 million in cash, to be provided by the Company's insurers, and $14
million in the Company's common shares. Under the terms of the settlement,
on March 27, 2008, class counsel received 527,903 common shares in
satisfaction of the Court approved fee award. The class will receive
approximately 930,000 common shares, subject to adjustment upward or
downward, based upon the Company's stock price as provided in the
stipulation of settlement. The settlement was recorded in the fourth
quarter of fiscal year 2005.
• In November 2005, a shareholder derivative action was filed in the Circuit
Court of Jackson County, Missouri. The plaintiff alleges that certain of
the Company's former officers and directors are liable to the Company for
breaches of fiduciary duties and aiding and abetting such breaches,
corporate waste, gross mismanagement, unjust enrichment, abuse of control
based upon the Company's accounting practices and financial reporting,
insider selling and misappropriation of information, and that its former
independent registered public accounting firm, Ernst & Young LLP, is liable
for professional negligence and accounting malpractice, aiding and abetting
breaches of fiduciary duties and breach of contract. The Company is named
as a nominal defendant in this matter. The plaintiff seeks equitable relief
and unspecified compensatory and punitive damages. On March 13, 2008, the
Company reached an agreement in principle, subject to court approval, to
settle this action. The proposed settlement requires the adoption of
certain governance reforms by the Company and payment of $1.5 million in
attorney's fees and costs to counsel for the plaintiff, which payment will
be made under our insurance policies. The settlement was recorded in the
first quarter of fiscal year 2006.
• In September 2006, another action was filed in the United States District
Court for the Western District of Missouri. The plaintiff asserts
derivative claims against certain of the Company's former and current
officers and directors for breaches of their fiduciary duties relating to
the Company's accounting practices and financial reporting. Plaintiff also
asserts claims on behalf of a putative class against the Company's current
directors for failing to schedule or hold an annual meeting for 2006. The
Company is named as a nominal defendant. The plaintiff seeks unspecified
monetary damages on the Company's behalf and an order requiring that an
annual meeting be scheduled and held. On February 12, 2007, the Court
stayed all further proceedings in the suit until forty-five days after the
Company's issuance of restated financial results, and required the Company
to provide monthly reports regarding the status of its restatement process.
On March 13, 2008, the Company reached an agreement in principle, subject
to court approval, to settle this action on a consolidated basis with the
November 2005 shareholders derivative action described above.
• On March 7, 2007, a lawsuit was filed in the Delaware Chancery Court
against the Company alleging that no annual meeting of shareholders had
been held since February 7, 2005, and requesting that the Company be
compelled to convene an annual meeting. Proceedings in that matter are
currently stayed by agreement of the parties. On March 13, 2008, the
Company reached an agreement in principle, subject to court approval, to
settle this action as part of the resolution of the other two derivative
actions.
Each of these actions is ongoing, and the Company continues to defend them
vigorously. Although the Company cannot predict the outcome of any of these
actions, an adverse result in one or more of them could have a material adverse
effect on its business, results of operations and financial condition.
From time to time and in the ordinary course of its business, the Company is
named as a defendant in legal proceedings related to various issues, including
worker's compensation claims, tort claims and contractual disputes. While the
resolution of such matters may have an impact on the Company's financial results
for the period in which they are resolved, the Company believes that the
ultimate disposition of these matters will not, individually or in the
aggregate, have a material adverse effect upon its business or consolidated
financial statements.
Indemnification and Pending Litigation Obligations:
The Company has incurred and will continue to incur significant expense on
behalf of the Company and on behalf of the several individuals to whom the
Company has indemnification obligations related to certain claims and
12
investigations involving the Company and these individuals. In addition, the
Company continues to incur significant expense related to the completion of its
historical audits and SEC reporting requirements. The expenses the Company has
incurred through the June 27, 2008, in connection with all of these matters,
including those associated with its restatement and pending legal matters, net
of insurance proceeds, were $41.8 million, which includes $9.8 million incurred
during the nine-month period ending June 27, 2008.
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 on Form 10-Q ("Quarterly Report"), contains statements concerning
potential future events. Such forward-looking statements are based upon
assumptions by our management, as of the date of this Quarterly Report,
including assumptions about risks and uncertainties faced by AIPC. 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 of
our assumptions prove incorrect or should unanticipated circumstances arise, our
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 our Annual Report on Form 10-K for our fiscal year ended September
28, 2007. That 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 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 statements. We
will not update any forward-looking statements in this Quarterly Report to
reflect future events or developments.
The following table sets forth certain data from our Consolidated Statements of
Operations, expressed as a percentage of revenues, for each of the periods
presented.
Three Months Ended Nine Months Ended
---------------------------------- ----------------------------------
June 27, 2008 June 29, 2007 June 27, 2008 June 29, 2007
------------- ------------- ------------- -------------
Revenues:
Retail 70.5% 75.0% 74.4% 76.4%
Institutional 29.5 25.0 25.6 23.6
----------- ------------ ------------ -----------
Total revenues 100.0 100.0 100.0 100.0
Cost of goods sold 84.0 79.7 80.0 77.2
----------- ------------ ------------ -----------
Gross profit 16.0 20.3 20.0 22.8
Selling and marketing expense 4.6 4.9 4.7 5.3
General and administrative expense 6.6 8.3 7.3 8.7
(Gains) losses related to long-lived assets - - 0.1 -
----------- ------------ ------------ -----------
Operating profit 4.8 7.1 7.9 8.8
Interest expense, net 4.3 7.3 5.1 7.7
Other (income) expense (0.1) (0.1) - (0.1)
----------- ------------ ------------ -----------
Income (loss) before income taxes 0.6 (0.1) 2.8 1.2
Income tax provision (benefit) - 0.1 (0.1) -
----------- ------------ ------------ -----------
Net income (loss) 0.6% (0.2)% 2.9% 1.2%
============ ============ ============ ===========
Overview
We are a Delaware Corporation and we were incorporated and commenced operations
in 1988. We believe we are the largest producer and marketer of dry pasta in
North America, by volume, based on data available from A.C. Nielsen, published
competitor financial information, industry sources such as the National Pasta
Association, suppliers, trade magazines and our own market research. We believe
our vertically-integrated facilities and highly efficient production facilities
focused primarily on specific market segments and our highly skilled workforce
make us an efficient company and enable us to produce high-quality pasta at
competitive costs. We believe that our
13
product strategy of offering branded, private label, imported and specialty
products, our scalable production facilities and our key customer relationships
create competitive advantages.
We generate revenues in two customer markets: retail and institutional. Retail
market revenues include the sales of our pasta products to customers who resell
the pasta in retail channels (including sales to grocery retailers, club stores,
mass merchant, drug and discount stores) and encompasses sales of our branded,
private label and imported products. These revenues represented 70.5% and 75.0%
and 74.4% and 76.4% of our total revenue for the three month and nine month
periods ended June 27, 2008 and June 29, 2007, respectively. The Institutional
market includes both food service distributors that supply restaurants, hotels,
schools and hospitals, as well as food processors that use pasta as a food
ingredient. Food service customers include businesses and organizations that
sell products to restaurants, healthcare facilities, schools, hotels and
industrial caterers and multi-unit restaurant chains that procure directly. The
institutional market represented 29.5% and 25.0% and 25.6% and 23.6% of our
total revenue for the three month and nine month periods ended June 27, 2008 and
June 29, 2007, respectively.
Average sales prices for our non-branded products vary depending on
customer-specific packaging and raw material requirements, product manufacturing
complexity and other service requirements. Average prices for our branded
products are also based on competitive market factors. Average retail and
institutional prices will also vary due to changes in the relative share of
customer revenues and item specific sales volumes (i.e., product sales mix).
Generally, average retail sales prices are higher than institutional sales
prices. Selling prices of our branded products are higher than selling prices in
our other business units, including private label. Revenues are reported net of
cash discounts, product returns, and promotional and slotting allowances.
We have several arrangements with institutional customers that provide for the
"pass-through" of direct material cost and certain other cost changes as pricing
adjustments. The pass-throughs are generally limited to actual changes in cost
and, as a result, impact margins in periods of changing costs and prices. The
pass-throughs are generally effective 30 to 90 days following such cost changes
and thereby reduce the long-term exposure of our operating results to the
volatility of raw material costs. These pass-through arrangements also require
us to pass on the benefits of any price decreases in raw material costs.
Our cost of goods sold consists primarily of raw materials, packaging,
manufacturing costs (including depreciation) and distribution (including
transportation) costs. A significant portion of our cost of goods sold is durum
wheat. We purchase durum wheat on the open market and, consequently, those
purchases are subject to fluctuations in cost. Since mid-2006, durum prices have
increased substantially and we anticipate these costs to remain at or above
these historically high levels throughout fiscal 2008. We manage some of our
durum wheat cost risk through cost "pass-through" arrangements in long-term
contracts, as discussed above, and advance purchase contracts for durum wheat
which are generally a few months. For our non pass-through customers, we seek
price increases to cover our costs.
We seek to achieve low-cost production through vertical integration and
investment in the most current pasta-making assets and technologies. The
manufacturing- and distribution-related capital assets that have been or will be
acquired to support this strategy are depreciated over their respective economic
lives. Depreciation expense is a component of inventory cost and cost of goods
sold.
Critical Accounting Policies
This discussion and analysis encompass our results of operations and financial
condition as reflected in our consolidated financial statements, which have been
prepared in accordance with accounting principles generally accepted in the
United States. The preparation of financial statements in conformity with
accounting principles generally accepted in the United States requires our
management to make estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent assets and liabilities at
the date of the financial statements and reported amounts of revenues and
expenses during the reporting periods. On an ongoing basis, our management
evaluates its estimates and judgments, including those related to the impairment
of long-lived and intangible assets, the method of accounting for share-based
compensation, and the estimates used to record allowances for doubtful accounts,
reserves for slow-moving, damaged and discontinued inventory, reserves for
obsolete spare parts, promotional allowances, income tax accruals and
derivatives. Our management bases its estimates and judgments on relevant
factors, the results of which form the basis for making judgments about the
carrying values of assets and liabilities that are not readily apparent from
other sources. See the critical accounting policies section in our Annual Report
on Form 10-K for the fiscal year ended September 28, 2007 for a complete
14
listing of our significant accounting policies. In addition to those critical
accounting policies, we adopted the following new critical accounting policy.
Income Taxes: Effective September 29, 2007, we adopted the Financial Accounting
Standard Board (FASB) Interpretation No. 48 (FIN 48), Accounting for Uncertainty
in Income Taxes - an interpretation of FASB Statement No. 109, Accounting for
Income Taxes. FIN 48 prescribes a comprehensive model for how companies should
recognize, measure, present, and disclose in their financial statements
uncertain tax positions taken or expected to be taken on a tax return. Under FIN
48, tax positions are initially recognized in the financial statements when it
is more likely than not the position will be sustained upon examination by the
tax authorities. Such tax positions are initially and subsequently measured as
the largest amount of tax benefit that is greater than 50% likely of being
realized upon ultimate settlement with the tax authority assuming full knowledge
of the position and all relevant facts. Application of FIN 48 requires numerous
estimates based on available information. We consider many factors when
evaluating and estimating our tax positions and tax benefits, which may require
periodic adjustments and which may not accurately anticipate actual outcomes.
The cumulative effect of applying the provisions of FIN 48 was reported as an
adjustment to the opening balance of retained earnings. The cumulative effect
adjustment does not include items that would not be recognized in earnings, such
as the effect on tax positions related to business combinations. For additional
information related to our adoption of FIN 48, see note 8 of these consolidated
financial statements.
QUARTER ENDED JUNE 27, 2008 COMPARED TO QUARTER ENDED JUNE 29, 2007
Revenues: Revenues increased $58.7 million, or 60.5%, to $155.8 million for the
three months ended June 27, 2008, from $97.1 million for three months ended June
29, 2007. Revenues increased $4.2 million, or 4.3%, due to volume increases, and
increased $54.5 million, or 56.1%, due to higher average selling prices.
Revenues for the Retail market increased $36.9 million, or 50.7%, to $109.8
million for the three months ended June 27, 2008, from $72.9 million for the
three months ended June 29, 2007. Revenues increased $2.6 million, or 3.5%, due
to volume increases, and increased $34.4 million or 47.2% due to higher average
selling prices.
Revenues for the Institutional market increased $21.8 million or 89.7% to $46.0
million the three months ended June 27, 2008, from $24.3 million for the three
months ended June 29, 2007. Revenues increased $1.4 million, or 5.9% due to
volume increases and increased $20.3 million, or 83.7% due to higher average
selling prices and changes in sales mix.
Cost of goods sold: Cost of goods sold increased $53.4 million or 69.0% to
$130.8 million for the three months ended June 27, 2008 from $77.4 million for
the three months ended June 29, 2007. As a percentage of revenues, cost of goods
sold increased to 84.0% for the three-month period ended June 27, 2008, from
79.7% for the three-month period ended June 29, 2007. The increase was primarily
due to significantly higher durum prices and higher commodity and transportation
costs.
Gross profit: Gross profit increased $5.3 million, or 26.9%, to $25.0 million
for the three month period ended June 27, 2008, from $19.7 million for three
month period ended June 29, 2007. Gross profit as a percentage of revenues
decreased to 16.0% for the three month period ended June 27, 2008 from 20.3% for
the three month period ended June 29, 2007. The decrease in gross profit as a
percent of revenue is directly related to increases in durum, commodities and
transportation costs that were not offset by higher selling prices.
Selling and marketing expense: Selling and marketing expense increased $2.3
million, or 47.9%, to $7.1 million for the three-month period ended June 27,
2008, from $4.8 million for three-month period ended June 29, 2007. The change
is primarily due to an increase in consulting expenses of $0.9 million,
brokerage commission costs of $0.8 million, and stock based compensation charges
of $0.3 million. The consulting expenses relate primarily to an analysis of the
pasta category and our market placement, the increased broker costs are due to
higher commissions due to increased selling prices, and the increase in
stock-based compensation is due principally to fluctuations in the value of the
Company's stock. Those increases were offset by a decrease in consumer spending
due to timing. Selling and marketing expense, as a percentage of revenue,
decreased to 4.6% for the three-month period ended June 27, 2008, from 4.9% for
the comparable prior year period. This decrease in expense as a percent of
revenue reflects the impact of higher product selling prices during the three
month period ended June 27, 2008 versus the comparable period of the prior
fiscal year.
15
General and administrative expense: General and administrative expense increased
$2.2 million, or 27.2%, to $10.3 million for the three month period ended June
27, 2008, from $8.1 million for the comparable period last year. General and
administrative expenses as a percentage of revenues decreased to 6.6% for the
three-month period ended June 27, 2008, from 8.3% for the three-month period
ended June 29, 2007. The change in general and administrative expense was due
primarily to an increase of non-investigation related professional fees and
consulting services of $1.7 million and an increase in compensation and benefits
of $0.5 million, and an increase in stock-based compensation costs of $0.6
million due to variable accounting on restricted stock. The increase in
professional and consulting services includes an initiative to review the
Company's supply chain and operations. The increase in stock-based compensation
is due principally to fluctuations in the value of the Company's stock. During
the three-month periods ending June 27, 2008 and June 29, 2007, the Company was
continuing to undergo the investigation process and restatement of its
historical financial statements. As a result of this process, the Company
incurred certain professional fees including legal, forensic accounting,
independent registered public accounting firm fees, public relations and Alvarez
& Marsal fees. During the three month period ended June 27, 2008, $2.4 million
of professional fees related to the restatement and pending legal matters were
recorded compared to $3.3 million during the comparable period of fiscal 2007, a
decrease of $0.9 million. The increase in compensation expense and decrease in
investigation related costs is due, in part, to the addition of the Company's
new CEO in January 2008 and the conclusion of the agreement with Alverez and
Marsal.
Operating profit: Operating profit for the three-month period ended June 27,
2008, was $7.4 million, an increase of $0.5 million as compared to $6.9 million
reported for the three-month period ended June 29, 2007. Operating profit
decreased as a percentage of revenues to 4.8% for three-month period ended June
27, 2008, from 7.1% for the three-month period ended June 29, 2007, as a result
of the factors discussed above.
Interest expense, net: Interest expense for the three-month period ended June
27, 2008, was $6.7 million, decreasing 5.6% from the $7.1 million reported for
the three-month period ended June 29, 2007. The decrease is attributable to
lower average borrowings outstanding and by lower interest rates. The average
interest rate in effect during three-month period ended June 27, 2008 and the
three-month period ended June 29, 2007 was 10.2% and 11.4%, respectively.
Income tax expense/benefit: Income tax benefit was less than $0.1 million for
the three month period ending June 27, 2008, and the income tax expense for the
three month period ending June 29, 2007 was $0.1 million, and reflects effective
income tax rates of (0.0)% and 0.1%, respectively. The effective rate is
substantially below statutory rates primarily due to a reduction in valuation
allowance during the current year against deducible temporary differences
related to stock options as well as a tax benefit from foreign operations.
Net income: Net income for the three-month period ended June 27, 2008, was $1.0
million, an increase of $1.2 million from the $0.2 million loss for the
three-month period ended June 29, 2007, as a result of the factors discussed
above. Net income as a percentage of net revenues was 0.6% versus (0.2)% in the
prior year.
Diluted income per common share was $0.05 for the three-month period ended June
27, 2008, compared to a loss of $(0.01) for the three-month period ended June
29, 2007.
NINE MONTHS ENDED JUNE 27, 2008 COMPARED TO NINE MONTHS ENDED JUNE 29, 2007
Revenues: Revenues increased $119.0 million, or 41.3%, to $407.1 million for the
nine-months ended June 27, 2008, from $288.1 million for nine-months ended June
29, 2007. Revenues increased $3.6 million, or 1.3%, due to volume increases, and
increased $113.7 million, or 39.5%, due to higher average selling prices.
Revenues increased by $1.7 million due to an increase in payments received from
the U.S. government under the Continued Dumping and Subsidy Offset Act of 2000.
Revenues for the Retail market increased $82.9, or 37.7%, to $302.8 million for
the nine-months ended June 27, 2008, from $219.9 million for the nine-months
ended June 29, 2007. Revenues increased $3.8 million, or 1.8%, due to volume
increases and $77.4 million or 29.1% due to higher average selling prices.
Revenues increased by $1.7 million due to an increase in payments received from
the U.S. government under the Continued Dumping and Subsidy Offset Act of 2000.
16
Revenues for the Institutional market increased $36.2 million or 53.2% to $104.3
million the nine-months ended June 27, 2008, from $68.1 million for the
nine-months ended June 29, 2007. There was a negligible increase due to volume,
with increases in higher average selling prices and changes in sales mix
accounting for the change.
Cost of goods sold: Cost of goods sold increased $103.2 million or 46.4% to
$325.6 million for the nine months ended June 27, 2008 from $222.4 million for
the nine months ended June 29, 2007. As a percentage of revenues, cost of goods
sold increased to 80.0% for the nine-month period ended June 27, 2008, from
77.2% for the nine-month period ended June 29, 2007. The increase was primarily
due to significantly higher durum prices and higher commodity and transportation
costs.
Gross profit: Gross profit increased $15.9 million, or 24.2%, to $81.6 million
for the nine month period ended June 27, 2008, from $65.7 million for nine month
period ended June 29, 2007. Gross profit as a percentage of revenues decreased
to 20.0% for the nine month period ended June 27, 2008 from 22.8% for the nine
month period ended June 29, 2007. The decrease in gross profit as a percent of
revenue is directly related to increases in durum, commodities and
transportation costs that were not offset by higher selling prices.
Selling and marketing expense: Selling and marketing expense increased $3.9
million, or 25.5%, to $19.2 million for the nine-month period ended June 27,
2008, from $15.3 million for nine-month period ended June 29, 2007. The change
is primarily due to an increase in consulting expenses of $.9, brokerage
commission costs of $1.8 million, compensation and benefits of $0.3 million, and
an increase of travel of $0.2 million. Selling and marketing expense, as a
percentage of revenue, decreased to 4.7% for the nine month period ended June
27, 2008, from 5.3% for the comparable prior year period. This decrease in
expense as a percent of revenue reflects the impact of higher product selling
prices during the first nine months of the current fiscal year versus the
comparable period of the prior fiscal year.
General and administrative expense: General and administrative expense increased
$4.9 million, or 19.7%, to $29.8 million for the nine month period ended June
27, 2008, from $24.9 million for the comparable period last year. General and
administrative expenses as a percentage of revenues decreased to 7.3% for the
nine-month period ended June 27, 2008, from 8.7% for the nine-month period ended
June 29, 2007. The change was due primarily to an increase of non-investigation
related professional fees and consulting services of $2.8 million, an increase
in compensation and benefits of $0.7 million, and compensation costs under SFAS
123R of $0.5 million. During the nine-month periods ending June 27, 2008 and
June 29, 2007, the Company was continuing to undergo the investigation process
and restatement of its historical financial statements. As a result of this
process, the Company incurred certain professional fees including legal,
forensic accounting, independent registered public accounting firm fees, public
relations and Alvarez & Marsal fees. During the nine month period ended June 27,
2008, $9.6 million of professional fees related to the restatement and pending
legal matters were recorded compared to $9.8 million during the comparable
period of fiscal 2007, a decrease of $0.2 million.
Operating profit: Operating profit for the nine-month period ended June 27,
2008, was $32.1 million, an increase of $6.6 million as compared to $25.5
million reported for the nine-month period ended June 29, 2007 as a result of
the factors discussed above. Operating profit as a percentage of revenues was
7.9% for the nine-month period ended June 27, 2008 and 8.8% for the nine-month
period ended June 29, 2007.
Interest expense, net: Interest expense for the nine-month period ended June 27,
2008, was $20.7 million, decreasing 6.8% from the $22.2 million reported for the
nine-month period ended June 29, 2007. The decrease is attributable to lower
average borrowings outstanding and by lower interest rates. The average interest
rate in effect during nine-month period ended June 27, 2008 and the nine-month
period ended June 29, 2007 was 10.7% and 11.4%, respectively.
Income tax benefit: Income tax benefit for each of the nine-month period ended
June 27, 2008 and June 29, 2007 was $0.6 million and less than $0.1 million,
respectively, and reflects effective income tax rates of (5.4)% and (0.1)%,
respectively. The effective rate is substantially below statutory rates
primarily due to a reduction in valuation allowance during the current year
against deducible temporary differences related to stock options as well as a
tax benefit from foreign operations.
17
Net income: Net income for the nine-month period ended June 27, 2008, was $11.8
million, an increase of $8.3 million from the $3.5 million for the nine-month
period ended June 29, 2007, as a result of the factors discussed above. Net
income as a percentage of net revenues was 2.9% versus 1.2% in the prior year.
Diluted income per common share was $0.62 for the nine-month period ended June
27, 2008, compared to $0.18 for the nine-month period ended June 29, 2007.
Liquidity and Capital Resources
Our primary sources of liquidity are cash provided by operations and borrowings
under our credit facility. Cash and cash equivalents totaled $6.4 million and
net working capital totaled $80.4 million at June 27, 2008.
As of September 28, 2007, we had $9.2 million invested in the Columbia Strategic
Cash Portfolio Fund (Columbia Fund), administered by a subsidiary of Bank of
America, which is an enhanced money fund that allowed immediate withdrawal of
funds. On December 10, 2007, when the investment balance was $7.4 million,
Columbia determined that the underlying securities had liquidity issues and
notified us that the fund would begin an orderly liquidation and dissolution of
assets to its investors. The balance in the Columbia Fund at June 27, 2008 was
$3.4 million. The underlying assets are valued at fair value and as of June 27,
2008 we have recorded valuation losses on this investment of $0.2 million.
Through June 27, 2008, we have recovered approximately $3.8 million of the
pre-liquidation investment balance. The remaining investment of $3.6 million is
to be recovered as the liquidation progresses. We believe that the entire
balance will be recovered. During the nine-month period ended June 27, 2008, we
have received $0.3 million of interest income from the Columbia Fund.
As of June 27, 2008, we had a $239.9 million term loan facility that matures in
March 2011. In addition, we had a $30 million revolving credit facility. During
the nine month period ending June 27, 2008, we borrowed and repaid $10 million
under the revolving credit facility to take advantage of favorable grain and
commodity purchases and delivery opportunities. There was no balance outstanding
on the revolving facility as of June 27, 2008. However, we had outstanding
letters of credit totaling approximately $3.0 million. Both facilities are
secured by substantially all of our assets.
Our credit facility contains restrictive covenants which include, among other
things, financial covenants requiring minimum and cumulative earnings levels and
limitations on the payment of dividends, stock purchases and our ability to
enter into certain contractual arrangements. We do not currently expect these
limitations to have a material effect on business or results of operations. We
were in compliance with the restrictive covenants at June 27, 2008.
At this time, the current and projected borrowings under our credit facility do
not exceed the facility's available commitment. Absent any significant increases
in our historical levels of professional fees and indemnification obligations
expenditures, we believe that net cash expected to be provided by operating
activities and the cash available through our existing credit facility will be
sufficient to meet our expected capital and liquidity needs for the foreseeable
future.
During the nine months ended June 27, 2008, our net cash provided by operating
activities totaled $1.9 million compared $21.8 million for the nine months ended
June 29, 2007, a decrease of $19.9 million. This decrease is due principally to
an increase in our investment in inventory of $24.7 million due to higher raw
material costs and increased production. The increase in these inventories is
offset by higher accounts payable and accrued expenses of $8.2 million. The
increase in sales prices and volume resulted in an increase in accounts
receivable of $12.5 million.
Cash used in investing activities principally relates to investments in
production and distribution, milling and management information system assets.
Capital expenditures were $8.5 million and $6.8 million for the nine months
ended June 27, 2008 and June 29, 2007, respectively.
During the nine months ended June 27, 2008, our net cash used by financing
activities amounted to $0.7 million, which included the payment of $.5 million
of financing costs to our bank related to the December 27, 2007 amendment and a
$0.1 million mandatory principal payment under the provisions of our U.S. credit
facility. In addition, during the nine month period ended June 27, 2008 the
Company drew $10.0 million on its line of credit to finance inventory purchases
and advance payments, which was repaid during the period. Our Italian subsidiary
18
drew $1.1 million under revolving credit facilities during the nine month period
ended June 27, 2008, which was repaid during the period.
During the nine months ended June 29, 2007, our net cash used in financing
activities amounted to $18.4 million, which is primarily a result of a $8.0
million voluntary principal payment on our term loan from excess cash reserves
and a one-time $10.0 million voluntary pre-payment of the term loan without
incurring a pre-payment penalty, as permitted under the March 2007 amendment of
our U.S. credit facility.
We currently use cash generated from operations to fund capital expenditures,
repayment of debt and working capital requirements.
Impact of Recent Accounting Pronouncements
In September 2006, the FASB issued SFAS No. 157, "Fair Value Measurements." SFAS
No. 157 defines fair value, establishes a framework for measuring fair value in
generally accepted accounting principles ("GAAP"), and expands disclosures about
fair value measurements. SFAS No. 157 does not require any new fair value
measurements in financial statements, but standardizes its definitions and
guidance in GAAP. Thus, for some entities, the application of this statement may
change current practice. SFAS No. 157 will be effective beginning January 1,
2008. Management believes the adoption of this pronouncement will not have a
material impact on its consolidated financial statements.
In February 2007, the FASB issued SFAS No. 159, "The Fair Value Option for
Financial Assets and Financial Liabilities". SFAS No. 159 permits entities to
choose to measure many financial instruments, and certain other items, at fair
value. SFAS No. 159 applies to reporting periods beginning after November 15,
2007. Management believes the adoption of this pronouncement will not have a
material impact on its consolidated financial statements.
In December 2007, the FASB issued SFAS No. 141R, "Business Combinations". This
statement establishes a framework to disclose and account for business
combinations. The adoption of the requirements of SFAS No. 141R applies
prospectively to business combinations for which the acquisition date is on or
after fiscal years beginning after December 15, 2008 and may not be early
adopted. Management believes the adoption of this pronouncement will not have a
material impact on its consolidated financial statements.
In March 2008, the FASB issued SFAS No. 161, "Disclosures about Derivative
Instruments and Hedging Activities - An Amendment of SFAS No. 133". SFAS No. 161
requires enhanced disclosures about an entity's derivative and hedging
activities, including how an entity uses derivative instruments, how derivative
instruments and related hedged items are accounted for under SFAS No. 133,
"Accounting for Derivative Instruments and Hedging Activities", and how
derivative instruments and related hedged items affect an entity's financial
position, financial performance, and cash flows. The provisions of SFAS No. 161
are effective for financial statements issued for fiscal years beginning after
November 15, 2008, and interim periods within those fiscal years. We do not
expect the adoption of SFAS No. 161 to have a material impact on its
consolidated financial statements.
In December 2007, the SEC issued the Staff Accounting Bulletin ("SAB") No. 110,
which amends SAB No. 107 by extending the usage of a "simplified" method, as
discussed in SAB No. 107, in developing an estimate of expected term of "plain
vanilla" share options in accordance with SFAS No. 123 (revised 2004),
Share-Based Payment. This simplified method continues to be permitted, under
certain circumstances, for companies that do not have access to adequate
historical data about employee exercise behavior to estimate expense on stock
options. Management believes that it has sufficient historical exercise data and
has historically recorded expenses based on expectations of future behavior.
Accordingly, Management does not believe SAB 110 will have an impact on its
financial statements.
In May 2008, the Financial Accounting Standards Board ("FASB") issued FASB
Statement No. 162, "The Hierarchy of Generally Accepted Accounting Principles."
This statement identifies the sources of accounting principles and the framework
for selecting the principles used in the preparation of financial statements of
nongovernmental entities that are presented in conformity with generally
accepted accounting principles ("GAAP") in the United States. This statement
will be effective 60 days following the SEC's approval of the Public Company
Accounting Oversight Board ("PCAOB") amendments to AU Section 411, "The Meaning
of Present Fairly in
19
Conformity with Generally Accepted Accounting Principles." We do not expect the
adoption of this statement to have a material impact on its financial
statements.
In April 2008, the FASB issued FASB Staff Position ("FSP") FAS 142-3,
"Determination of the Useful Life of Intangible Assets." This FSP amends the
factors that should be considered in developing renewal or extension assumptions
used to determine the useful life of a recognized intangible asset under FASB
Statement No. 142, "Goodwill and Other Intangible Assets." The intent of this
FSP is to improve the consistency between the useful life of a recognized
intangible asset under Statement 142 and the period of expected cash flows used
to measure the fair value of the asset under FASB Statement No. 141R, and other
U.S. generally accepted accounting principles. This FSP is effective for our
interim and annual financial statements beginning in fiscal 2010. The Company is
in the process of evaluating the impact, if any, that the adoption of FSP No.
FAS 142-3 will have on its financial statements
Effect of Inflation
We continued to experience inflationary cost increases in certain operating
costs, including raw materials, utilities, freight, insurance and benefit costs
during the three month period ended June 27, 2008.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
For quantitative and qualitative disclosures about market risk, see Item 7A,
"Quantitative and Qualitative Disclosures About Market Risk," of our Annual
Report on Form 10-K for the year ended September 28, 2007. Our exposures to
market risk have not changed materially since September 28, 2007.
ITEM 4. CONTROLS AND PROCEDURES
(a) Disclosure Controls and Procedures
We maintain disclosure controls and procedures (as such term is defined
in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) that are
designed to provide reasonable assurance that information required to
be disclosed in the reports we file or submit under the Exchange Act is
recorded, processed, summarized and reported within the time periods
specified in the SEC's rules and forms, and that such information is
accumulated and communicated to our management, including our Chief
Executive Officer and our Chief Financial Officer, as appropriate, to
allow timely decisions regarding required disclosure. In designing and
evaluating the disclosure controls and procedures, management
recognized that any controls and procedures, no matter how well
designed and operated, can provide only reasonable assurance of
achieving the desired control objectives, and management necessarily
was required to apply its judgment in evaluating the cost-benefit
relationship of possible controls and procedures.
Our management, with the participation of our Chief Executive Officer
and Chief Financial Officer, has evaluated the effectiveness of our
disclosure controls and procedures as of June 27, 2008. Based on that
evaluation and due to the existence of material weaknesses in our
internal control over financial reporting, our Chief Executive Officer
and Chief Financial Officer have concluded that our disclosure controls
and procedures were not effective as of June 27, 2008.
Management believes that all of the material weaknesses, except for
internal audit, described under the caption "Item 9A -- Controls and
Procedures" in the Company's Annual Report on Form 10-K for the fiscal
year ended September 28, 2007 existed as of June 27, 2008, and we are
continuing to address deficiencies in the Company's internal controls.
Certain of these remediation actions are described under the caption
"Item 9A -- Controls and Procedures" in the Company's Annual Report on
Form 10-K for the fiscal year ended September 28, 2007. Efforts to
remediate and test our internal control over financial reporting are
continuing and are expected to continue throughout fiscal 2008 and
beyond.
(b) Changes in Internal Control Over Financial Reporting
During the third quarter of fiscal 2008, the Company has become current
in its filing requirements of the SEC through the submission of its
Annual Report on Form 10-K for fiscal years 2005, 2006 and 2007.
20
With this filing, the Company's quarterly reporting requirements are
also met. The Company has formed an effective Disclosure Committee for
the review of its Form 10-K and Form 10-Q's.
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
Pending Litigation; Indemnification Obligations
Since August, 2005, a number of substantially similar class action lawsuits have
been filed and consolidated into a single action in the United States District
Court for the Western District of Missouri styled In re American Italian Pasta
Company Securities Litigation (Case No. 05-CV-0725-W-ODS). The consolidated
amended complaint names us as a defendant and certain of our former and current
officers and directors, and our former independent registered public accounting
firm, Ernst & Young LLP. It generally alleges that the defendants made public
statements concerning our financial results that were false and misleading. The
plaintiffs seek unspecified monetary damages for alleged violations of Section
10(b) of the Securities Exchange Act of 1934, Rule 10b-5 promulgated thereunder,
and alleged violations of Section 20(a) of the Securities Exchange Act of 1934.
The consolidated amended complaint also asserted purported shareholder
derivative claims against various of our current and former officers and
directors for breaches of their fiduciary duties and unjust enrichment, against
certain of our former officers for violation of the Sarbanes-Oxley Act, and
against Ernst & Young LLP for professional negligence, accounting malpractice,
and aiding and abetting breaches of fiduciary duty. These allegations generally
related to our accounting practices and financial reporting, as well as claimed
improper insider trading and the claimed improper award of bonuses to certain of
our officers and directors. The court subsequently dismissed the derivative
claims. The case has been certified as a class action on behalf of all
purchasers of our common stock on or after January 23, 2002, and who held shares
on August 9, 2005.
By a stipulation of settlement with us and our named former and current officers
and directors ("settling defendants"), executed on October 26, 2007 and filed
with the Court on October 29, 2007, lead counsel for plaintiffs and settling
defendants agreed to settle the consolidated action. On February 12, 2008, the
Court gave final approval to the settlement. The settlement of the federal
securities class action lawsuit was for $25 million, comprised of $11 million in
cash, to be provided by our insurers, and $14 million in our common shares.
Under the terms of the settlement, on March 27, 2008, class counsel received
527,903 common shares in satisfaction of the Court approved fee award. The class
will receive approximately 930,000 common shares, subject to adjustment upward
or downward, based upon the Company's stock price as provided in the stipulation
of settlement. The settlement was recorded in the fourth quarter of fiscal year
2005.
In November 2005, a shareholder derivative action styled Haag v. Webster, et al.
(Case No. 05-CV-33137) was filed in the Circuit Court of Jackson County,
Missouri. The petition names as defendants certain of our former officers and
directors and our former independent registered public accounting firm, Ernst &
Young LLP. We are named as a nominal defendant. The petition alleges that the
defendants are liable to us for breaches of fiduciary duties and aiding and
abetting such breaches, corporate waste, gross mismanagement, unjust enrichment,
and abuse of control based upon our accounting practices and financial
reporting; that certain former and current officers and directors are liable for
breaches of fiduciary duties for insider selling and misappropriation of
information; and that Ernst & Young is liable for professional negligence and
accounting malpractice, aiding and abetting breaches of fiduciary duty, and
breach of contract. The petition seeks equitable relief and unspecified
compensatory and punitive damages. The proposed settlement requires the adoption
of certain governance reforms by the Company and payment of $1.5 million in
attorney's fees and costs to counsel for the plaintiff, which payment will be
made under our insurance policies. The settlement was recorded in the first
quarter of fiscal year 2006.
On September 6, 2006, an action styled Chaiet v. Allen, et al. (Case No.
06-744-CV-W-DW) was filed in the United States District Court for the Western
District of Missouri. The complaint asserts claims against certain of our former
and current officers and directors for breaches of their fiduciary duties
relating to our accounting practices and financial reporting. Plaintiff also
asserts claims on behalf of a putative class against our current directors for
failing to schedule or hold an annual meeting for 2006. We are named as a
nominal defendant. The complaint seeks unspecified monetary damages on our
behalf and an order requiring that an annual meeting be scheduled and held. The
defendants have moved to dismiss this lawsuit as well. On February 12, 2007, the
court stayed all future
21
proceedings in the matter until forty-five days after we issue restated
financial results, and required us to provide monthly reports regarding the
status of its restatement process. On March 13, 2008, we reached an agreement,
in principle, subject to court approval, to settle this action on a consolidated
basis with the Haag action.
On March 7, 2007, a suit styled Zaleon v. American Italian Pasta Company (C.A.
No. 2775-N) was filed in the Delaware Chancery Court against us alleging that no
annual meeting of shareholders had been held since February 7, 2005, and
requesting that we be compelled to convene an annual meeting. Proceedings in
that matter are currently stayed by agreement of the parties. The agreement, in
principle, to settle the other two derivative actions will resolve this action.
SEC and DOJ Investigations
Since July 2005, we have been in communication with the staff of the Enforcement
Division of the SEC about the matters under investigation by our Audit
Committee. In late July 2005, the SEC staff issued a voluntary request to us for
a wide range of documents relating to, among other things, our accounting
practices, financial reporting and other public disclosures, 2004 restructuring
program, internal control weaknesses identified in our prior SEC filings, and
compensation and benefits information for certain persons employed by or
associated with us during the time period under investigation by the Audit
Committee.
On January 31, 2006, as part of a formal, non-public investigation, the SEC
staff issued a subpoena to us, expressly incorporating its earlier document
requests and requesting additional documents and information concerning, among
other things, actual or potential errors in our financial statements, budgeting
process, communications with investors, and compensation for and securities
transactions by certain persons employed by or associated with us during the
time period under investigation by the Audit Committee. Since that time, the SEC
staff has issued additional subpoenas to us, seeking additional documents,
testimony, and information relating to the same or similar subject matters.
Representatives of the DOJ have been coordinating with the SEC staff in this
investigation.
We are cooperating with these investigations and have provided information to
the SEC staff and the DOJ in response to the subpoenas and requests. We have
had, and are continuing to have, discussions with the SEC staff, and separately
with the DOJ, regarding the conclusion of their investigation activities and of
their respective views of appropriate bases on which to reach mutually
acceptable settlements. Such settlements could result in a Deferred Prosecution
Agreement, which could include the assignment of a corporate monitor, continued
cooperation with any ongoing investigations and/or a monetary fine. Due to the
status of ongoing discussions with the DOJ and SEC staff, the Company cannot
estimate a range of possible loss that could result from a monetary fine, if
any. There can be no assurance that any settlement would not have a material
adverse effect on our business, financial condition, results of operations or
cash flows. We have been cooperating with these investigations.
Department of Commerce Matter
In 1996, an investigation by the International Trade Administration of the DOC
revealed that Italian and Turkish producers were engaging in unfair trade
practices by selling pasta at less than fair value in the U.S. markets and
benefiting from subsidies from their respective governments. The International
Trade Commission ("ITC") subsequently determined that the unfair trade practices
caused or would cause material injury to U.S. manufacturers. As a result, the
ITC imposed anti-dumping duties (the "AD Order") and countervailing duties (the
"CV Order") on certain imported pasta from Italy and Turkey (collectively, the
"AD/CV Orders"). In 2001, the AD/CV Orders were extended five years through
2006. In September 2007, the ITC extended the AD/CV Orders for another five
years through 2011. Under the AD/CV Orders, U.S. importers of certain pasta from
Italian and Turkish producers are assessed anti-dumping and countervailing
duties at rates determined by the DOC for the relevant foreign producer. Each
foreign producer may undergo an annual administrative review which may result in
an increase or decrease of the producer's rate.
During its ongoing analysis of financial matters, we reviewed transactions
reported to the DOC for the period July 1, 2002 through June 30, 2003 in the
antidumping proceeding on pasta imported from Italy. Based on the data reported
by us and our Italian subsidiary, Pasta Lensi, S.r.l., the DOC revoked the AD
Order with respect to Pasta Lensi. During our investigation, information came to
our attention that certain data reported to the DOC was incorrect and as a
result, Pasta Lensi may not have been eligible for revocation of the AD Order.
We disclosed the issue to the DOC and simultaneously, we provided this
information to the DOJ, which requested further information on this
22
matter. As a result of our disclosure to the DOC, it published notice on
February 22, 2008 in the Federal Register of its preliminary determination to
reinstate Pasta Lensi in the existing antidumping duty order at a cash deposit
rate of 45.6%. The preliminary determination applies, on a prospective basis, to
all imports of subject products from and after February 22, 2008. A cash deposit
rate of 45.6% would have a significant adverse impact to our working capital
position. We have appealed this determination. We have substantially mitigated
the impact of this order by changing our ingredient to organic semolina in March
2008, thereby manufacturing products for import into the U.S. that are exempt
from the antidumping duty order. Based on our review, we do not believe this
order will have a material adverse effect on our financial condition.
ITEM 1A. RISK FACTORS
There have been no material changes from the risk factors disclosed in Part I,
Item 1A, of the company's Annual Report on Form 10-K for the fiscal year ended
September 28, 2007.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
The following table provides the information with respect to purchases made by
the Company of shares of its common stock during the third fiscal quarter of
2008:
Total Number of
Total Number of Shares Purchased
Shares Average Price as Part of
Period Purchased(1) Paid per Share Plan Publicly Announced
- ------ ------------ ------------------- -------------------
March 29 - April 25 - $ - -
April 26 - May 23 - - -
May 24 - June 27 195 9.21 -
------------ -------------- ------------
Total 195 $ 9.21 -
============ ============== ============
(1) Shares received as payment for taxes related to vesting of restricted stock.
On October 4, 2002 the Company's Board of Directors authorized up to $20 million
to implement a common stock repurchase plan. There were no purchases under the
plan during the second fiscal quarter of 2008. There is $7,881,000 available
under the Common Stock repurchase plan.
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
- ------- --------------------------------------------------------
31.1 Certification of CEO Pursuant to Section 302 of the Sarbanes-Oxley Act
of 2002.
31.2 Certification of CFO Pursuant to Section 302 of the Sarbanes-Oxley Act
of 2002.
32. Certification of the CEO and CFO Pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.
23
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
Date: August 6, 2008 /s/ John P. Kelly
------------------------------------------
John P. Kelly
President and Chief Executive Officer
Date: August 6, 2008 /s/ Paul R. Geist
-----------------------------------------
Paul R. Geist
Executive Vice President and
Chief Financial Officer
AMERICAN ITALIAN PASTA COMPANY
EXHIBIT INDEX
Exhibit
Number Description of Exhibit
- ------- -----------------------------------------------------------------------
31.2 Certification of CEO Pursuant to Section 302 of the Sarbanes-Oxley Act
of 2002.
31.2 Certification of CFO Pursuant to Section 302 of the Sarbanes-Oxley Act
of 2002.
32. Certification of the CEO and CFO Pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.