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American Italian Pasta Company Provides Certain Liquidity and Revenue Information, Discusses Durum Wheat Market Conditions, Updates Restatement Process, and Announces Resignation of Director Raymond Silcock

Posted on: Thursday, 2 August 2007, 18:16 CDT

KANSAS CITY, Mo., Aug. 2 /PRNewswire-FirstCall/ -- American Italian Pasta Company , the largest producer and marketer of dry pasta in North America, today provided certain liquidity and revenue information. The Company also discussed current durum wheat market conditions, updated the status of the restatement of its historical financial statements and announced the resignation of Raymond Silcock from its Board of Directors.

LIQUIDITY

For the third quarter of fiscal 2007, ending on June 29, 2007, the Company had total liquidity resources of $47.1 million, consisting of cash on hand of $19.6 million and $27.5 million available under the Company's $30.0 million revolving credit facility.

Total debt outstanding on June 29, 2007 was $244.4 million. Total debt, net of cash, was $224.8 million, compared to $239.3 million as of September 29, 2006, the Company's fiscal year end, reflecting a reduction in net debt of $14.5 million in the nine months ended June 29, 2007.

For the nine months ended June 29, 2007, the Company's cash flows included the following items of significance: receipt of $3.0 million in anti-dumping and countervailing duty income from the U.S. government under the Continued Dumping and Subsidy Offset Act of 2000 (which the Company recorded as part of its first fiscal quarter revenue); net cash interest of $21.4 million; cash taxes of $0.2 million; capital expenditures of $6.8 million; net professional fees of $7.0 million relating to the Audit Committee investigation, shareholder litigation and related matters; and management consulting fees of $2.8 million paid to Alvarez & Marsal in connection with interim CEO and related services.

The Company noted that all liquidity amounts outlined above are unaudited and are subject to adjustments.

REVENUE INFORMATION

As previously announced, the Company has changed its reporting of revenues regarding certain promotional expenses, treating them as a reduction in revenue as opposed to selling and marketing expense on the Company's statements of operations. While this reclassification reduces reported revenues, it does not change reported net income (loss). With this reclassification, total revenues for the nine months ended June 29, 2007 were $287.6 million compared to $271.2 million in the nine months ended June 30, 2006, reflecting an increase of 6.5% in revenue compared to the prior fiscal year. Overall volume increased 0.9%, as compared to the prior fiscal year. Excluding liquidation sales of $0.4 million and $1.5 million in the first nine months of fiscal years 2007 and 2006, respectively, revenue increased 6.5% and volume increased 2.4% in the first nine months of fiscal 2007 compared to the previous fiscal year's first nine months. The Company has previously noted that it had significant obsolete inventory from prior periods and believes that providing the revenue and volume information excluding the sale of this inventory provides additional information regarding the Company's ongoing operations.

The Company also noted that all historical revenue amounts outlined above are unaudited and are subject to adjustments, including adjustments related to promotional expenses, accounting period cutoff, and other related revenue recognition issues resulting from the previously announced Audit Committee investigation.

DURUM WHEAT MARKET CONDITIONS

The Company noted that the current market outlook for durum wheat, which is a significant component of its overall production costs, has been negatively impacted by recent adverse crop conditions in Europe, European supply contract defaults, and resulting increased demand from Europeans for North American supplies of durum. In addition, the market outlook has been impacted by low available durum stocks globally. The result has been escalating durum costs for the industry. The magnitude of such escalating costs is more severe than that experienced last year. The Company will be seeking to offset this cost inflation through price increases and improved efficiencies; however, the potential impact on margins and earnings is currently difficult to predict and dependent on, among other things, the competitive market in which the Company operates.

CEO COMMENTS

"We have continued to improve our operations with increased revenue and volume, while also driving cash flow and reducing the Company's net debt," said Jim Fogarty, CEO of AIPC. "While we face challenges in the durum wheat market, we believe our operational improvements provide a solid foundation for us to react to our escalating cost pressures and to continue to move our business forward."

RESTATEMENT UPDATE

The Company anticipates completing its internal preparation of financial statements and annual reports on Form 10-K for its fiscal year ended September 30, 2005 and for its fiscal year ended September 29, 2006 in the last half of August 2007. However, the Company cannot currently predict when the review process by its independent registered public accounting firm will be complete and thereby allow the Company to conclude the process to file audited financial statements and annual reports on Form 10-K for these periods.

The completion and the filing of audited financial statements and annual reports on Form 10-K for fiscal 2005 and fiscal 2006 are subject to a number of factors, including the ongoing investigations in which the Company is cooperating, the review of and continued analysis of issues by the Company's independent registered public accounting firm, and any regulatory review that is necessitated by the Company's restatement process.

RESIGNATION OF DIRECTOR RAYMOND SILCOCK

Raymond Silcock has recently accepted the position of Senior Vice President and Chief Financial Officer of UST, Inc. Mr. Silcock has advised the Board of Directors that with his new position he will not be able to meet the time commitments of the AIPC Board, and therefore, has resigned from the Board effective today.

ABOUT AIPC

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 has four plants that are located in Excelsior Springs, Missouri; Columbia, South Carolina; Tolleson, Arizona and Verolanuova, Italy. The Company has approximately 600 employees located in the United States and Italy.

When used in this release, the words "anticipate,""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 expected liquidity position as of the end of its third fiscal quarter 2007 and fiscal year end 2006, and the expected revenues for its first fiscal three-quarters of 2006 and 2007, the filing of its audited financial statements and annual reports on Form 10-K for fiscal 2005 and fiscal 2006, and the durum wheat costs and pasta price increases are forward-looking. Actual results or events could differ materially. The differences could be caused by a number of factors, including, but not limited to, the findings of the Audit Committee investigation, the Company's review of its financial statements, a review and/or audit of the Company's financial statements by its independent registered public accounting firm, the SEC staff review, and the conclusions reached regarding financial reporting. The Company will not update any forward-looking statements in this press release to reflect future events.

American Italian Pasta Company

CONTACT: Paul Geist, Vice President & Corporate Controller of AIPC,+1-816-584-5611

Web site: http://www.aipc.com/

Source: PRNewswire-FirstCall

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