American Italian Pasta Company to divest certain assets
Outlines certain strategic decisions resulting from its recent business assessment.
16/02/06 American Italian Pasta Company has outlined certain strategic decisions resulting from its recent business assessment, including plans to divest certain assets. The Company also disclosed its liquidity position, as well as reporting that its Form 10-Q was not filed and that the Company's Annual Meeting of Shareholders has been postponed.
As announced in September 2005, the Company retained the management consulting firm of Alvarez & Marsal (A&M). In conjunction with the Company's management team, A&M assessed the Company's business and operating strategies, including an evaluation of the Company's brand, marketing and sales strategies, capacity utilization, supply chain and manufacturing initiatives, cost structure and financial strategies.
Jim Fogarty, Chief Executive Officer, stated, "Over the past few months, we have been assessing key business and operating strategies, and we are now beginning the implementation of our initiatives. I would also note that I am impressed by our dedicated and talented AIPC team which is committed to delivering outstanding products and services to our customers."
The strategic decisions reached as a result of the assessment include the following:
The Company will continue operating in its historical lines of business within the retail and institutional markets. The Company's focus will continue on the branded, private label, food service and industrial segments.
The Company will also continue new product innovation, such as the recently announced launch of the Company's new multi-grain products under the Mueller's, Golden Grain-Mission and Heartland labels.
The Company's Eddie's and Mrs. Leeper's pasta brands have been identified as non-strategic brands due to the sales volume and complexity of the brands as compared to the Company's other lines of business. Accordingly, the Company has decided to divest these brands. The Company will continue to produce specialty products for its private label customers and continue to support these brands while it undertakes divestiture efforts.
As a result of the Company's decision to divest the brands, a non-cash impairment charge on the brands in the range of $4.5 to $5.0 million will be recorded (in addition to an impairment charge of approximately $4.6 million included in the previously announced brand impairment charges resulting from declines in projected future sales volume and related revenues).
The Company has completed the evaluation of its manufacturing footprint and expected future production capacity requirements. Considering the Company's forecasted capacity utilization, the Company has determined that its Kenosha, Wisconsin plant will be permanently closed and divested. Since August 2004, the Kenosha plant has operated on an as needed basis to meet ingredient customer demand. The Company will begin efforts to divest the real estate and separately sell certain of the plant's manufacturing equipment. The plant closure is scheduled in early April 2006.
In accordance with Statement of Financial Accounting Standards No. 144 - "Accounting for the Impairment or Disposal of Long Lived Assets", the Company will record a non-cash asset impairment charge relating to the disposition of the Kenosha plant in the second quarter of fiscal year 2006. The impairment charge is expected to be in the range of $25.0 to $29.0 million (excluding related selling expenses and contract termination costs that may be incurred).
The Company will continue to operate its three other domestic manufacturing plants (Excelsior Springs, Missouri; Columbia, South Carolina; and, Tolleson, Arizona), as well as its Italian plant. As part of the Kenosha divestment plan, the Company anticipates relocating certain pasta manufacturing lines from the Kenosha plant to its Columbia plant to expand the Columbia plant manufacturing capacity for retail and ingredient products. This ingredient capacity expansion will allow the Company to continue to efficiently service its ingredient customers.
Other Asset Divestments: The Company has identified certain other assets that will be divested, including manufacturing equipment that will no longer be used in its operations, the Company's fractional aircraft interest and a parcel of undeveloped land. The Company will record non-cash asset impairment charges in the second quarter of fiscal year 2006 relating to the divestment of these assets totaling $3.3 million (in addition to previously announced asset impairment charges that will be recorded in the third quarter of fiscal 2005).
The dispositions of the non-strategic brands, Kenosha plant and the other asset divestments outlined above result in additional asset impairment charges totaling $32.8 to $37.3 million and are expected to generate net cash proceeds in the range of $7.5 to $11.0 million (excluding selling expenses and contract termination costs that may be incurred relating to the Kenosha plant divestiture).
The Company did not file its Form 10-Q for the first fiscal quarter ended December 30, 2005 on the due date of February 8, 2006. As previously disclosed, the Company has also not filed its Form 10-Q for the third fiscal quarter of fiscal 2005 and its Form 10-K for the fiscal year ended September 30, 2005. In addition, the Company announced that its Annual Meeting of Shareholders, normally scheduled for February, has been postponed indefinitely pending the Company's completion of its previously announced restatement of certain historical financial statements.
Founded in 1988 and based in Kansas City, Missouri, American Italian Pasta Company is the largest producer and marketer of dry pasta in North America. The Company currently has five plants that are located in Excelsior Springs, Missouri; Columbia, South Carolina; Tolleson, Arizona; Kenosha, Wisconsin and Verolanuova, Italy. The Company has approximately 600 employees located in the United States and Italy.
