UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 OR 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) February 8, 2006
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AMERICAN ITALIAN PASTA COMPANY
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(Exact name of registrant as specified in its charter)
Delaware 001-13403 84-1032638
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(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification No.)
4100 N. Mulberry Drive, Suite 200, Kansas City, Missouri 64116
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (816) 584-5000
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Not Applicable
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(Former name or former address, if changed since last report.)
Check the appropriate box below if the Form 8-K filing is intended to
simultaneously satisfy the filing obligation of the registrant under any of the
following provisions:
[ ] Written communications pursuant to Rule 425 under the Securities Act (17
CFR 230.425)
[ ] Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR
240.14a-12)
[ ] Pre-commencement communications pursuant to Rule 14d-2(b) under the
Exchange Act (17 CFR 240.14d-2(b))
[ ] Pre-commencement communications pursuant to Rule 13e-4(c) under the
Exchange Act (17 CFR 240.13e-4(c))
Item 2.05 Costs Associated with Exit or Disposal Activities.
On February 8, 2006, the Board of Directors of American Italian Pasta
Company (the "Company") approved plans for (1) the divestiture of the Company's
Eddie's and Mrs. Leeper's pasta brands, (2) the permanent closure and
divestiture of the Kenosha, Wisconsin plant and (3) certain other asset
divestments.
Brand Divestitures
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).
Kenosha Closure and Divestiture
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. The Company
anticipates incurring certain additional related selling expenses and contract
termination costs which cannot be estimated at this time. The Company cannot
currently estimate the total amount or range of amounts expected to be incurred
or charges that will result in future cash expenditures.
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
of $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).
Item 2.06 Material Impairments.
The information set forth under Item 2.05 above is incorporated by
reference into this Item 2.06.
Also on February 8, 2006, the Board of Directors determined that additional
inventory impairment charges were necessary. The Company disclosed in August
2005 that non-cash charges would be recorded in the third fiscal quarter of 2005
to increase reserves for slow moving, damaged and obsolete inventories and for
other inventory write-downs. Since that time, the Company has continued to
review its inventory composition, required inventory levels and related
disposition strategies and has now determined that additional non-cash charges
of approximately $4.0 million are necessary to reflect the anticipated
recoverability of certain inventories. The Company is reducing its current level
of slow moving, damaged and obsolete inventories and expects to generate
approximately $2.0 million of cash in the 2006 fiscal year from such sales.
A copy of the press release issued on February 14, 2006 announcing these
matters is attached hereto as Exhibit 99.1 and incorporated herein by reference.
Item 8.01 Other Events.
The Company also announced that as of February 13, 2006, the Company's
total debt was approximately $280.0 million, including $278.0 million under its
bank credit facility. Total debt, less cash, stood at $256.0 million. As of
February 13, 2006, the Company had liquidity resources totaling approximately
$34.0 million, reflecting
availability of approximately $10.0 million under its revolving credit agreement
and cash of approximately $24.0 million (reflecting the reduction resulting from
scheduled debt payments of $1.9 million in January 2006). In addition, the
Company continues to expect that net cash flow to be generated from operations
will be sufficient to meet its expected operating needs for the current fiscal
year. The Company also noted that amounts owed to its suppliers and vendors are
currently within established credit terms.
As reported earlier, in December 2005 the Company received a third waiver
from its bank group for non-compliance with certain covenants contained in its
bank credit agreement. During the waiver period, which expires on March 16,
2006, the Company is pursuing refinancing alternatives for its bank credit
facility, which expires on October 2, 2006.
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.
"Safe Harbor" Statement Under the Private Securities Litigation Reform Act of
1995.
The statements made above in this Report on Form 8-K are forward-looking
and are based on current expectations. Actual future results or events could
differ materially from those anticipated by such forward-looking statements. The
differences could be caused by a number of factors, including, but not limited
to, the completion and findings of the investigation being conducted by the
Company's Audit Committee, the Company's performance and the availability of
financing alternatives to provide refinancing of the Company's indebtedness. In
addition, future operating results are impacted by a number of factors,
including but not limited to, the Company's dependence on a limited number of
customers for a substantial portion of its revenue, the Company's ability to
obtain necessary raw materials and minimize fluctuations in raw material prices,
the impact of the highly competitive environment in which the Company operates,
the Company's reliance exclusively on a single product category, the Company's
ability to attract and retain key personnel, and the Company's ability to
cost-effectively transport its products. For additional discussion of the
principal factors that could cause actual results to be materially different,
refer to Item 7, Risk Factors, in the Company's report on Form 10-K dated
December 10, 2004 filed by the Company with the Securities and Exchange
Commission. The Company will not update any forward-looking statements in this
Form 8-K to reflect future events.
Item 9.01 Financial Statements and Exhibits.
(c) Exhibits.
99.1 Press release dated February 14, 2006.
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 hereunto duly authorized.
Date: February 14, 2006 AMERICAN ITALIAN PASTA COMPANY
By: /s/ George D. Shadid
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George D. Shadid
Chief Financial Officer
EXHIBIT INDEX
Exhibit Number Description
99.1 Press release dated February 14, 2006.
