| American Italian Pasta Company | |||
| Ticker: | PLB | 1000 Italian Way | |
| Exchange: | New York Stock Exchange | Excelsior Springs, MO 64024 | |
| Industry: | Manufacturing (SIC Code 2099) | (816) 502-6000 | |
| # of Employees: | 287 | ||
| Type of Shares: | Class A Common Shares | Filing Date: | 8/5/97 | |
| U.S. Shares: | 7,900,000 | Offer Date: | 10/8/97 | |
| Non-U.S. Shares: | 0 | Filing Range: | $15.00 - $17.00 | |
| Primary Shares: | 7,900,000 | Offer Price: | $18.00 | |
| Secondary Shares: | 0 | Gross Spread: | $1.24 | |
| Offering Amount: | $126,400,000 | Selling: | $0.78 | |
| Expenses: | - | Reallowance: | $0.10 | |
| Shares Out After: | - |
| Manager | Tier | Phone |
| Morgan Stanley Dean Witter Discover & Co. | Lead Manager | (212) 761-5900 |
| Alex. Brown & Sons Incorporated | Co-manager | (410) 895-2700 |
| George K. Baum & Company | Co-manager | (816) 283-5332 |
| Goldman, Sachs & Co. | Co-manager | (212) 902-5959 |
| Issuer's Law Firm: | Sonnenschein Nath & Rosenthal |
| Bank's Law Firm: | Davis, Polk & Wardwell |
| Auditor: | Ernst & Young |
| Registrar/Transfer Agent: | UMB Bank N.A. MO |
Dollar amounts in U.S. millions except for per share data | |||||
| 9 Month Ending Financials | |||||
| Full Year Audited Income | Latest Unaudited Income | Prior Unaudited Income | Balance Sheet | ||
| 12/31/96 | 6/30/97 | 6/30/96 | 6/30/97 | ||
| Revenue: | $121.62 | $93.62 | $86.51 | Assets: | $146.11 |
| Net Income: | -$2.16 | $2.23 | -$1.71 | Curr Assets: | $28.26 |
| EPS: | Liabilities: | $104.49 | |||
| Prior EPS: | $14.08 | -$4.16 | Curr Liabilities: | $14.98 | |
| Cash Flow/Oper: | -$1.82 | $11.72 | Equity: | $41.63 | |
| Cash Flow/Fin: | -$11.46 | -$6.05 | Cash: | $2.61 | |
| Cash Flow/Inv: | -$11.46 | Working Cap: | $13.28 | ||
| Business Description |
| The company is the third largest and one of the fastest-growing producers and marketers of pasta in North America. The company commenced operations with the introduction of new, highly-efficient durum wheat milling and pasta production technology. Management believes that the Company's singular focus on pasta, vertically-integrated facilities, continued technology leadership and development of a highly-skilled workforce enable AIPC to produce high-quality pasta at costs significantly below those of most of its competitors. Management believes that the combination of the Company's favorable cost structure, the higher average age of its competitors' North American pasta production equipment and the growing pasta consumption in North America creates significant opportunities for continued growth. The Company's revenue and operating income before product introduction costs were $121.6 million and $16.7 million, respectively, for the calendar year ended December 31, 1996, and grew at compound annual growth rates ("CAGR") of 33% and 33%, respectively, over the five-year period ended December 31, 1996. During the nine-month period ended June 30, 1997, the Company had revenue of $93.6 million and an operating margin before product introduction costs of 15.9%. The Company has rapidly established a significant market presence in North America by developing strategic customer relationships with food industry leaders that have substantial pasta requirements. |
| Competition |
| The Company operates in a highly-competitive environment against numerous well-established national, regional and foreign companies, and many smaller companies in the procurement of raw materials, the development of new pasta products and product lines, the improvement and expansion of previously introduced pasta products and product lines and the production, marketing and distribution of pasta products. Several of these companies have longer operating histories, broader product lines, significantly greater brand recognition and greater production capacity and financial and other resources than the Company. The Company's direct competitors include large multi-national companies such as food industry leader Hershey with brands such as San Giorgio(R) and Ronzoni(R), and Borden with brands such as Prince(R) and Creamette(R), regional U.S. producers of retail and institutional pasta such as Dakota Growers Pasta Company ("Dakota Growers"), a farmer-owned cooperative in North Dakota, Philadelphia Macaroni Co. Inc. ("Philadelphia Macaroni") and A. Zerega's Sons, Inc. ("Zerega's"), each an independent producer, and foreign companies such as Italian pasta producers De Cecco ("De Cecco") and Barilla. The Company's competitive environment depends to a significant extent on the aggregate industry capacity relative to aggregate demand for pasta products. Several domestic pasta producers have recently completed production facility additions or announced their intention to increase domestic production capacity. In addition to AIPC's planned capital expansion, management believes that these capacity additions represent more than 200 million pounds in aggregate. Dakota Growers recently increased the capacity of its durum wheat mill and has announced plans to complete a pasta production capacity expansion in excess ofmillion pounds by the end of 1997. Hershey recently added approximately 50 million pounds of pasta capacity to its facility in Winchester, Virginia. Two major pasta producers have also recently announced planned reductions in pasta production capacity. Borden announced that it will close or sell five of its ten North American pasta plants by the end of 1997, and CPC intends to eliminate its capacity of approximately 180 million pounds by the end of 1997. Increases in industry capacity levels above demand for pasta products could have a material adverse effect on the Company's business, financial condition and results of operations. Several foreign producers, based principally in Italy and Turkey, have aggressively targeted the U.S. pasta market in recent years. In 1996, a U.S. Department of Commerce investigation revealed that several Italian and Turkish producers were engaging in unfair trade practices by selling pasta at less than fair value in the U.S. markets and benefitting from subsidies from their respective governments. Effective July 1996, the U.S. International Trade Commission ("ITC"), imposed anti-dumping and countervailing duties on Italian and Turkish imports. While such duties may enable the Company and its domestic competitors to compete more favorably against Italian and Turkish producers in the U.S. pasta market, there can be no assurance that the duties will be maintained for any length of time, or that these or other foreign producers will not sell competing products in the United States at prices less than those of the Company. Such practices, if continued or increased, could have a material adverse effect on the Company's business, financial condition and results of operations. Bulk imported pasta is not subject to such anti-dumping and countervailing duties. A leading branded Italian producer, Barilla, opened a repackaging and distribution facility in Syracuse, New York in 1996 for bulk imported pasta. |
| Business Plan |
| The company continues to implement its growth strategy, which builds on the company's operating strategy and industry trends. Key elements of the company's growth strategy are: (I) Successfully Implement CPC Business Expansion, (ii) Pursue Strategic Alliances, (iii) Secure Additional Private Label Customers and (iv) Continue Product Innovation. |
| Use of Proceeds |
| The proceeds from the proposed offering will be used to repay existing indebtedness, fund expansion of the company facilities and for general corporate purposes. |
| Name of Shareholder | % Owned Before | % Owned After |
| The Morgan Stanley Leveraged Equity Fund, II, L.P. | 34.40% | |
| Citicorp Venture Capital, Ltd. | 18.60% | |
| Richard C. Thompson | 17.10% | |
| Morgan Stanley Capital Partners III, L.P. | 14.60% | |
| Jonathan E. Baum | 9.10% | |
| Horst W. Schroeder | 7.50% | |
| Timothy S. Webster | 5.80% |
| Officer Name | Title | Age |
| Horst W. Schroeder | Chairman of the Board of Directors | 56 |
| Norman F. Abreo | Executive Vice President -- Operations | 47 |
| David E. Watson | Executive Vice President and Chief Financial Officer | 41 |
| Timothy S. Webster | President and Chief Executive Officer; Director | 35 |
| David B. Potter | Senior Vice President -- Procurement | 38 |
| Daniel M. Keller | Senior Vice President -- Sales and Marketing | 42 |