AIPC looks to regain footing

by Eric Schroeder
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KANSAS CITY — Saying the company is the process of "building a solid re-emergent story," Jack Kelly, president and chief executive officer of American Italian Pasta Co., on Friday briefed financial analysts on the challenges AIPC has had to overcome and pointed to a new day at the pasta maker that, among other things, will include a more open line of communication with the investment community.

"Suffice it to say, we have been focusing on putting our historical issues firmly behind us and shifting our focus to building the enterprise value of our company with what we believe to be strong growth potential and solid fundamentals," Mr. Kelly said. "Obviously, work remains to be done."

AIPC in mid-June filed its first financial report in more than three years by restating previously filed financials for the period of 2000 to 2005. The filing followed a three-year internal investigation into accounting problems that led the Kansas City-based pasta maker to reduce earnings for fiscal years 2004, 2003 and earlier years by a combined $63.2 million.

According to its June 16 filing with the Securities and Exchange Commission, AIPC said investigators found many problems with how the company handled its financials during the period in question.

Going forward, Mr. Kelly said in the Sept. 5 conference call that AIPC would be more forthright in regards to the company’s operations.

"We have more robust controls and processes, including new corporate and board governance, a new internal audit department, and additional accounting and finance staff," he said. "Following a completion of our financial restatement process, we are now current with all of our S.E.C. filings and we have settled all civil actions against the company. As a result of the tough times we have been through, I believe we have emerged a far stronger company."

Despite the challenges in correcting its financial reporting from earlier years, Mr. Kelly said AIPC has continued to deliver strong results, citing a 40% improvement in sales in the nine-month period ended June 27 compared with the same period a year earlier. Net income in the period has increased more than threefold, he added.

"We continue to perform well, despite industry-wide cost installation not only on the raw materials front, but also related to energy and fuel costs," Mr. Kelly said. "Our service levels, again, are at our historical standards of excellence."

He also noted the company is excited about growth prospects for the pasta category.

"The dry pasta market is dynamic and we are fine-tuning our strategic focus to capture new growth opportunities and build on our category leadership," he said. "We are in the final stages of our long-range strategic planning process and have initially identified opportunities for accelerated growth in private label pasta, which now represents the industry’s fastest growing market segment at retail.

"AIPC is by far the market leader in private label pasta and we intend to leverage that scale, expertise, knowledge and market strength to capture even more volume in what we see as the emerging battleground between brands and private label. This dynamic matches our core competitive strength. Clearly, an increasing number of the nation’s largest retailers are looking to build their own private label brands to capitalize on shifting consumer demand.

"We intend to compete aggressively on this front as it relates to food products, positioning AIPC as the pasta retail partner of choice. While our regional brands are under pressure on several fronts, they remain a valuable part of our portfolio."

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