1.
Summary of Significant Accounting Policies
Nature of Business
American Italian Pasta Company (the Company) is a Delaware corporation
which began operations in 1988. The Company is the largest producer
and marketer of pasta products in the United States and has manufacturing
and distribution facilities located in Excelsior Springs, Missouri,
Columbia, South Carolina, Kenosha, Wisconsin, and Verolanuova, Italy.
Principles
of Consolidation
The consolidated financial statements include the accounts of the Company
and all majority owned subsidiaries.
Fiscal
Year End
The Company’s fiscal year ends on the last Friday of September
or the first Friday of October, resulting in a 52- or 53-week year depending
on the calendar. The Company’s first three quarters end on the
Friday last preceding December 31, March 31 and June 30 or the first
Friday of the following month of each quarter. For purposes of the financial
statements and notes thereto, the Company’s fiscal year is described
as having ended on September 30.
Revenue
Recognition
Sales of the Company’s products, including pricing terms, are final
upon shipment of the goods, except for certain supply contracts where
the requirements have been met for recognizing revenue upon completion
of production.
Foreign
Currency
The Company’s functional currency is the U.S. dollar. Accordingly,
assets and liabilities of the Company’s foreign operations are
remeasured at year-end or historical rates depending on their nature;
income and expenses are remeasured at
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the
weighted-average exchange rates for the year. Foreign currency gains and
losses resulting from transactions are included in consolidated operations
in the year of occurrence.
Use
of Estimates
The preparation of financial statements in conformity with accounting
principles generally accepted in the United States requires management
to make estimates and assumptions that affect the amounts reported in
the financial statements and accompanying notes. Actual results could
differ from those estimates.
Risks
and Uncertainties
The Company grants credit to certain customers who meet the Company’s
pre-established credit requirements. Generally, the Company does not require
collateral security when trade credit is granted to customers. Credit
losses are provided for in the financial statements and consistently have
been within management’s expectations. The allowance for doubtful
accounts at September 30, 2001 and 2000 was $847,000 and $178,000, respectively.
At September 30, 2001 and 2000, approximately 16% and 43%, respectively,
of accounts receivable were due from three customers.
Pasta
is made from semolina milled from durum wheat, a class of hard amber wheat
purchased by the Company from certain parts of the world. The Company
mills the wheat into semolina at both the Excelsior Springs and Columbia
plants. Durum wheat is a narrowly traded commodity crop. The Company attempts
to minimize the effect of durum wheat cost fluctuations through forward
purchase contracts and raw material cost-based pricing agreements with
many of its customers.
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