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 AMERICAN ITALIAN PASTA COMPANY
NEWS
RELEASE
 
Contact:
 
Paul R. Geist
EVP & Chief Financial Officer
 816-584-5228
pgeist@aipc.com
 
For Immediate Release
 
 
AMERICAN ITALIAN PASTA COMPANY REPORTS FIRST QUARTER 2010 RESULTS
 
TOTAL REVENUE OF $148.9 MILLION
 
QUARTERLY EPS OF $0.95 PER DILUTED SHARE
 
KANSAS CITY, MO., February 4, 2010 -- American Italian Pasta Company (NASDAQ:AIPC), the largest producer of dry pasta in North America, today announced results for its first quarter of fiscal year 2010, which ended January 1, 2010.
 
The first quarter of fiscal year 2010 contained 13 weeks, one week less than the Company’s comparative first quarter of fiscal year 2009 which contained 14 weeks.  Thus, all year-over-year comparisons reflect a 13-week first quarter for fiscal year 2010 and a 14-week first quarter for fiscal year 2009.  The Company reports on a 52/53 week basis with the extra week occurring approximately every six years.  Fiscal year 2009 was a 53-week fiscal year and ended on October 2, 2009.  Fiscal year 2010 is a 52-week year ending on October 1, 2010.
 
FIRST QUARTER FINANCIAL HIGHLIGHTS
 
"We are very pleased with these results," said Jack Kelly, CEO of AIPC. "Even as we implemented our strategy to extract our proprietary brands from underperforming markets, we were able to increase our penetration of proprietary and customer brands in strategic markets.  As a result, on a weekly average basis, to adjust for the difference in weeks contained in the periods, we were able to increase our volume by 2%."
 
The Company noted gross profit increased to 33.5% of revenue, or nearly $50 million, for the 13-week first quarter of 2010 compared with 28.5% of revenue, or $48.8 million, for the 14-week first quarter of 2009.
 
Income before taxes increased $5.7 million to $32.2 million, or 21.6% of revenue, for the 13-week first quarter of 2010 compared with $26.5 million, or 15.5% of revenue, for the 14-week first quarter of 2009.
 
Tax expense increased $11 million as the Company’s sustained profitability returned it to a normal effective tax rate.  During the first quarter of 2009, the Company’s tax expense was reduced due to the release of valuation reserves related to net operating loss carryforwards.
 
Net income decreased $5.3 million to $20.7 million and earnings per diluted share decreased to $0.95 per diluted share from $1.23 per diluted share as the Company’s favorable results at the income before taxes level were offset by the $11 million ($0.50 per diluted share) increase in tax expense.
 

 
 
 
American Italian Pasta Co.,
February 4, 2010
Page 2
 

"Our strategy, which we implemented during 2009, to focus on our proprietary and customer brands in those strategic markets in which we are strongest, and to extract our proprietary brands from underperforming markets, continues to pay dividends. We increased volume in our strategic markets and improved our gross profit to 33.5% of revenue while also growing our operating profit and pre-tax income," said Mr. Kelly.  "I’m particularly pleased that, on an average weekly basis, we were able to grow total volume, excluding our non-strategic brands in those markets that we are exiting, by over 6%.  This volume growth was well ahead of the overall market volume growth of 2.2%."
 
Operational Highlights
 
 
·
Total Revenues: Total revenue was $148.9 million for the 13-week quarter ended January 1, 2010, a $22.3 million decrease compared with total revenue of $171.2 million for the 14-week 2009 quarter.  On a weekly average adjusted basis, our total volume increased 2%.
 
 
·
Retail Revenues:  Retail revenue was $121.6 million for the 13-week 2010 quarter, a $14.5 million decrease compared with retail revenue of $136.1 million for the 14-week 2009 quarter.  The decrease resulted from the combination of a $7.5 million decrease in revenue related to the Company’s strategic proprietary and customer brands and a $7.6 million decrease in revenue related to proprietary brands the Company is extracting from underperforming markets, partly offset by the $0.7 million increase in payments received from the U.S. government under the Continued Dumping and Subsidy Offset Act of 2000.  The $7.5 million decrease in revenue related to  strategic proprietary and customer brands was comprised of a $9.6 million decrease due to lower pricing partly offset by a $2.1 million increase due to increased volume during the 13-week first fiscal quarter of 2010 compared to the 14-week first fiscal quarter of 2009.  On a weekly average basis, to adjust for the difference in weeks contained in the periods, strategic proprietary and customer brand volume increased approximately 10%.
 
 
·
Institutional Revenues:  Institutional revenue was $27.3 million for the 13-week 2010 quarter, a $7.8 million decrease compared with institutional revenue of $35.1 million for the 14-week 2009 quarter.  Revenues decreased $4.2 million, or 12%, due to lower average selling prices and $3.6 million, or 10%, due to lower volume.  On a weekly average basis, to adjust for the difference in weeks contained in the periods, institutional market volume decreased approximately 3%.
 
 
·
Cost of Goods Sold:  Cost of goods sold decreased $23.4 million, or 19%, to $99.0 million for the 13-week first quarter of 2010, from $122.4 million for the 14-week first quarter of 2009.  As a percentage of revenues, cost of goods sold for the first quarter of 2010 decreased to 66.5%, from 71.5% for the first quarter of 2009.
 
 
·
Gross profit: Gross profit increased $1.1 million to $49.9 million for the 13-week first quarter of 2010, from $48.8 million for the 14-week first quarter of 2009.  Gross profit, as a percentage of revenues, increased to 33.5% during the first quarter of 2010, compared to 28.5% during the first quarter of 2009.
 
 
·
Other operating expenses: Other operating expenses totaled $16.0 million for the 13-week 2010 quarter, a $0.4 million decrease compared with other operating expense of $16.4 million for the 14-week 2009 quarter.
 
 
·
Operating profit:  Operating profit for the 13-week first quarter of 2010 was $33.9 million, an increase of $1.4 million, as compared to $32.5 million for the 14-week first quarter of 2009.  Operating profit increased, as a percentage of revenues, to 22.8% for the first quarter of 2010, from 19.0% for the first quarter of 2009.
 
ABOUT AIPC
 
Founded in 1988 and based in Kansas City, Missouri, American Italian Pasta Company is the largest producer of dry pasta in North America.  The Company has four plants that are located in Excelsior Springs, Missouri; Columbia, South Carolina;
 

 
 
 
American Italian Pasta Co.,
February 4, 2010
Page 3
 

Tolleson, Arizona and Verolanuova, Italy.  The Company has approximately 675 employees located in the United States and Italy.  For more information, visit www.aipc.com.
 
When used in this release, the words "anticipate," "projected," "believe," "estimate," and "expect" and similar expressions are intended to identify forward-looking statements, but are not the exclusive means of identifying these statements.  The statements by the Company regarding the pasta market and financial performance are forward looking. There are numerous risks and uncertainties that could cause actual future results to differ materially from those anticipated by such forward-looking statements. The risks and uncertainties could be caused by a number of factors, including, but not limited to: (1) our dependence on a limited number of customers for a substantial portion of our revenue; (2) our ability to obtain necessary raw materials and minimize fluctuations in raw material prices; (3) the potential adverse impact on revenue and margins of the highly competitive environment in which we operate; (4) our reliance exclusively on a single product category; (5) our ability to cost-effectively transport our products; (6) consumption trends for our product; (7) the status of production capacity in the U.S. and the level of imports from foreign producers; (8) our ability to sustain quality and service requirements for our customers; and (9) our ability to attract and retain key personnel.  For a discussion of factors that could cause actual results to materially differ from those anticipated, see the risk factors set forth in item 1A of the Company’s Form 10-K for the fiscal year ended October 2, 2009.  The Company will not update any forward-looking statements in this press release to reflect future events.

# # #

 
 
 
American Italian Pasta Co.,
February 4, 2010
Page 4
 

AMERICAN ITALIAN PASTA COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
Unaudited
 (in thousands, except per share amounts)



   
Quarter Ended
  
   
January 1, 2010
(Thirteen Weeks)
    
January 2, 2009
(Fourteen Weeks)
  
       
Revenues
   $ 148,946     $ 171,206  
Cost of goods sold
     98,982       122,362  
    Gross profit
     49,964       48,844  
                 
Selling and marketing expense
     7,248       7,364  
General and administrative expense
     8,683       8,653  
Loss related to long-lived assets
     103       347  
    Operating profit
     33,930       32,480  
                 
Interest expense, net
     1,776       5,878  
Other (income) expense, net
     (10 )     95  
    Income before income taxes
     32,164       26,507  
                 
Income tax expense
     11,465       479  
    Net income
   $ 20,699     $ 26,028  
                 
                 
Net income per common share (basic)
   $ 0.98     $ 1.28  
                 
Weighted-average common shares outstanding (basic)
     21,047       20,257  
                 
Net income per common share (diluted)
   $ 0.95     $ 1.23  
                 
Weighted-average common shares outstanding  (diluted)
     21,833       21,078  


 
 
 
American Italian Pasta Co.,
February 4, 2010
Page 5
 

AMERICAN ITALIAN PASTA COMPANY
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except share amounts)

   
January 1, 2010
    
October 2, 2009
  
ASSETS
            
Current assets:
            
Cash and cash equivalents
   $ 31,871     $ 30,959  
Trade and other receivables, net
     46,901       45,828  
Inventories
     45,454       50,996  
Other current assets
     6,740       6,372  
Deferred income taxes
     16,793       22,202  
    Total current assets
     147,759       156,357  
Property, plant and equipment, net
     286,103       291,212  
Brands
     78,733       79,074  
Other assets
     3,032       3,420  
Total assets
   $ 515,627     $ 530,063  
LIABILITIES AND STOCKHOLDERS’ EQUITY
                
Current liabilities:
                
Accounts payable
   $ 22,162     $ 29,852  
Accrued expenses
     20,657       24,147  
Income tax payable
     3,460       -  
Current maturities of long term debt
     -       5,900  
    Total current liabilities
     46,279       59,899  
Long term debt, less current maturities
     80,000       104,100  
Deferred income taxes
     54,157       52,972  
Other long term liabilities
     6,184       5,676  
Total liabilities
     186,620       222,647  
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; Issued and outstanding shares – 23,357,185 and 21,129,627, respectively, at January 1, 2010; 23,198,013 and 20,981,913, respectively, at October 2, 2009
     23       23  
Class B common stock, par value $.001
                
Authorized shares – 25,000,000; Issued and outstanding – none
     -       -  
Additional paid-in capital
     276,677       274,142  
Treasury stock 2,227,558 shares at January 1, 2010 and 2,216,100 shares at
                
October 2, 2009, at cost
     (52,903 )     (52,519 )
Accumulated other comprehensive income
     16,698       17,957  
Retained earnings
     88,512       67,813  
Total stockholders’ equity
     329,007       307,416  
Total liabilities and stockholders’ equity
   $ 515,627     $ 530,063