Penford Corporation Reports Record First Quarter Fiscal 2007 Sales

  
    
  
  
    
      Penford Corporation (Nasdaq:PENX), a global leader in ingredient systems 
      for food and industrial applications, today reported that consolidated 
      sales for the first quarter of fiscal 2007 rose 10% to a record $85.5 
      million from $77.9 million a year ago. Consolidated gross margin rose to 
      $13.2 million from $10.4 million a year ago. First quarter operating 
      income increased to $4.5 million from $1.2 million in fiscal 2006. Net 
      income for the quarter ended November 30, 2006 was $2.6 million, or 
      $0.28 per diluted share, compared to net income of $0.2 million, or 
      $0.02 per diluted share, for the same quarter last year.
    
    
      Higher volume and unit selling prices contributed equally to the revenue 
      increase. The gross margin increase was driven by sales gains and lower 
      manufacturing costs. Gross margin as a percent of sales expanded to 
      15.4% from 13.3% a year ago as unit costs for energy, labor and 
      maintenance declined. Consolidated operating expenses decreased to $7.1 
      million from $7.7 million last year, reflecting a reduction of $0.6 
      million in employee costs from the prior year.
    
    
      First quarter non-operating income was $0.5 million compared with $0.4 
      million a year ago. Quarterly interest expense of $1.3 million was 
      comparable to last year. The Company will capitalize interest expense 
      associated with the ethanol construction project. Approximately $2 
      million of the $75 million total debt outstanding at November 30, 2006 
      was assigned to the ethanol project.
    
    
      Segment Results
    
    
      First quarter fiscal 2007 sales at the Industrial Ingredients business 
      rose 14% to $44.0 million. Volume expanded 4%, increases in average unit 
      selling prices contributed 3%, and the “pass 
      through” impact from higher corn prices added 
      another 7% to total sales. Quarterly gross margins as a percent of sales 
      increased to 13.6% from 9.3% a year ago on revenue gains, higher plant 
      utilization rates, and reduced production costs. Lower energy costs 
      contributed $1.8 million to the ratio improvement, with natural gas 
      usage per unit of production dropping by 18% as a result of energy 
      improvement projects implemented in the second quarter of fiscal 2006. 
      Natural gas unit costs decreased by 29% from a year ago due to lower 
      market prices and the implementation of land fill gas as an energy 
      source. Operating expenses were $0.2 million below the first quarter of 
      2006. Operating income grew to $3.2 million from $0.6 million last year.
    
    
      The project to invest $42 million at the Cedar Rapids facility to 
      manufacture up to 40 million gallons of ethanol annually is progressing 
      as planned. On October 5, 2006 the Company expanded its credit facility 
      to $145 million to finance construction. Required permits have been 
      issued and ground-breaking occurred on November 28, 2006. Site 
      preparation is underway. Production is expected to begin by the end of 
      calendar 2007.
    
    
      First quarter sales in the Australia/New Zealand business expanded 7.7% 
      over last year to $26.5 million. Volume increased 9%. Gross margin as a 
      percent of sales declined to 9.1% from 10.5% a year ago due to pricing 
      pressure on exported products and a higher proportion of basic starch 
      products in the sales mix. Unit manufacturing costs were comparable to 
      the prior year. Operating expenses as a percent of sales decreased to 
      4.6% from 6.3% last year. Quarterly income from operations rose to $0.8 
      million from $0.7 million a year ago.
    
    
      North American Food Ingredients first quarter fiscal 2007 revenues grew 
      1% over last year to $15.2 million. Volumes and average unit selling 
      prices were comparable to last year. Sales of applications in the 
      protein segment, which includes chicken products, processed meat, and 
      cheese, increased at double-digit rates. Gross margin increased $0.5 
      million to $4.8 million in the first quarter 2007, reflecting changes in 
      product mix, improved plant productivity and lower unit energy costs. 
      Operating income for the first quarter rose to $2.9 million from $2.4 
      million last year.
    
    
      “Fiscal 2007 is off to a strong start. Demand 
      for our higher value applications is growing, and process improvements 
      and investments in operations are showing results,” 
      said Tom Malkoski, Penford Corporation President and Chief Executive 
      Officer. “Our Industrial business has stepped 
      up its performance, and the ethanol expansion project is advancing as 
      planned. We continue to develop and commercialize specialized food 
      products in Australia and North America that should expand sales 
      opportunities and improve returns.”
    
    
      Conference Call
    
    
      Penford will host a conference call to discuss first quarter financial 
      and operational results today, January 8, 2007 at 9:00 a.m. Mountain 
      time (11:00 a.m. Eastern time). Access information for the call and 
      web-cast can be found at www.penx.com. 
      A replay will be available at www.penx.com.
    
    
      About Penford Corporation
    
    
      Penford Corporation develops, manufactures and markets specialty 
      natural-based ingredient systems for various applications, including 
      papermaking, textiles and food products. Penford has nine locations in 
      the United States, Australia and New Zealand.
    
    
      The statements contained in this release that are not historical 
      facts are forward-looking statements that represent management’s 
      beliefs and assumptions based on currently available information. Forward-looking 
      statements can be identified by the use of words such as “believes,” 
      “may,” “will,” 
      “looks,” “should,” 
      “could,” “anticipates,” 
      “expects,” or 
      comparable terminology or by discussions of strategies or trends. Although 
      the Company believes that the expectations reflected in such 
      forward-looking statements are reasonable, it cannot give any assurances 
      that these expectations will prove to be correct. Such statements 
      by their nature involve substantial risks and uncertainties that could 
      significantly affect expected results. Actual future results 
      could differ materially from those described in such forward-looking 
      statements, and the Company does not intend to update or revise any 
      forward-looking statements, whether as a result of new information, 
      future events or otherwise. Among the factors that could cause 
      actual results to differ materially are the risks and uncertainties 
      discussed in this release and those described from time to time in other 
      filings with the Securities and Exchange Commission which include, but 
      are not limited to, competition; the possibility of interruption of 
      business activities due to equipment problems, accidents, strikes, 
      weather or other factors; product development risk; changes in corn and 
      other raw material prices and availability; unanticipated ethanol 
      facility construction or procurement delays that could result in 
      delay in the timing of the commencement of ethanol production; 
      unexpected cost overruns; technical difficulties, nonperformance by 
      contractors or mandated changes in project requirements or 
      specifications; changes in general economic conditions or developments 
      with respect to specific industries or customers affecting demand for 
      the Company’s products, including unfavorable 
      shifts in product mix; unanticipated costs, expenses or third party 
      claims; interest rate, chemical and energy cost volatility; foreign 
      currency exchange rate fluctuations; changes in assumptions used for 
      determining employee benefit expense and obligations; or other 
      unforeseen developments in the industries in which Penford operates.
    
    
      
        
          Penford Corporation

          
            Financial Highlights
          
        
        
        
        
        
        
          
            Three months ended
          
          
            November 30,
          
        
      
      
        
          (In thousands except per share data)
        
        
        
        
        
        
        
        
        
        
          2006 
        
        
           
        
        
          2005 
        
      
      
        
        
        
        
        
        
        
        
        
        
        
          (unaudited)
        
      
      
        
          Consolidated Results
        
      
      
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
           
        
      
      
        
          Sales
        
        
        
        
        
        
        
        
        
        
          
            $ 85,500 
          
        
        
        
        
          $ 77,903 
        
      
      
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
           
        
      
      
        
          Net income
        
        
        
        
        
        
        
        
        
        
          $ 2,573 
        
        
        
        
          $ 196 
        
      
      
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
           
        
      
      
        
          Earnings per share, diluted
        
        
        
        
        
        
        
        
        
        
          $ 0.28 
        
        
        
        
          $ 0.02 
        
      
      
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
           
        
      
      
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
           
        
      
      
        
          Results by Segment
        
      
      
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
           
        
      
      
        
          Industrial Ingredients:
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
      
      
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
           
        
      
      
        
          Sales
        
        
        
        
        
        
        
        
        
        
          $ 43,972 
        
        
        
        
          $ 38,480 
        
      
      
        
          Gross margin
        
        
        
        
        
        
        
        
        
        
          13.6%
        
        
        
        
          9.3%
        
      
      
        
          Operating income
        
        
        
        
        
        
        
        
        
        
          3,182 
        
        
        
        
          574 
        
      
      
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
           
        
      
      
        
          Food Ingredients – North America:
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
      
      
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
           
        
      
      
        
          Sales
        
        
        
        
        
        
        
        
        
        
          $ 15,240 
        
        
        
        
          $ 15,090 
        
      
      
        
          Gross margin
        
        
        
        
        
        
        
        
        
        
          31.4%
        
        
        
        
          28.1%
        
      
      
        
          Operating income
        
        
        
        
        
        
        
        
        
        
          2,853 
        
        
        
        
          2,401 
        
      
      
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
           
        
      
      
        
          Australia/New Zealand:
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
      
      
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
           
        
      
      
        
          Sales
        
        
        
        
        
        
        
        
        
        
          $ 26,524 
        
        
        
        
          $ 24,635 
        
      
      
        
          Gross margin
        
        
        
        
        
        
        
        
        
        
          9.1%
        
        
        
        
          10.5%
        
      
      
        
          Operating income
        
        
        
        
        
        
        
        
        
        
          808 
        
        
        
        
          697 
        
      
    
    
      
        
        
        
        
        
          November 30,
        
        
        
        
          August 31,
        
      
      
        
        
        
        
        
          2006 
        
        
        
        
          2006 
        
      
      
        
        
        
        
        
          (unaudited)
        
        
        
        
        
      
      
        
        
        
        
        
        
        
        
        
           
        
      
      
        
          Current assets
        
        
        
        
          $ 95,258 
        
        
        
        
          $ 89,916 
        
      
      
        
          Property, plant and equipment, net
        
        
        
        
          129,387 
        
        
        
        
          124,829 
        
      
      
        
          Other assets
        
        
        
        
          37,313 
        
        
        
        
          35,923 
        
      
      
        
          Total assets
        
        
        
        
          261,958 
        
        
        
        
          250,668 
        
      
      
        
        
        
        
        
        
        
        
        
           
        
      
      
        
          Current liabilities
        
        
        
        
          58,864 
        
        
        
        
          57,843 
        
      
      
        
          Long-term debt
        
        
        
        
          61,005 
        
        
        
        
          53,171 
        
      
      
        
          Other liabilities
        
        
        
        
          31,087 
        
        
        
        
          32,202 
        
      
      
        
          Shareholders’ equity
        
        
        
        
          111,002 
        
        
        
        
          107,452 
        
      
      
        
          Total liabilities and equity
        
        
        
        
          $ 261,958 
        
        
        
        
          $ 250,668 
        
      
    
    
      
        
          Penford Corporation

          
            Consolidated Statements of Income (unaudited)
          
        
        
        
        
        
        
        
        
          
            Three months ended
          
          
            November 30,
          
        
      
      
        
          (In thousands except share and per share data)
        
        
        
        
        
        
        
        
          2006 
        
        
        
        
          2005 
        
      
      
        
        
        
        
        
        
        
        
        
        
        
        
        
           
        
      
      
        
        
        
        
        
        
        
        
        
        
        
        
        
           
        
      
      
        
          Sales
        
        
        
        
        
        
        
        
          $ 85,500 
        
        
        
        
          $ 77,903 
        
      
      
        
        
        
        
        
        
        
        
        
        
        
        
        
           
        
      
      
        
          Cost of sales
        
        
        
        
        
        
        
        
          72,306 
        
        
        
        
          67,503 
        
      
      
        
          Gross margin
        
        
        
        
        
        
        
        
          13,194 
        
        
        
        
          10,400 
        
      
      
        
        
        
        
        
        
        
        
        
        
        
        
        
           
        
      
      
        
          Operating expenses
        
        
        
        
        
        
        
        
          7,100 
        
        
        
        
          7,738 
        
      
      
        
          Research and development expenses
        
        
        
        
        
        
        
        
          1,571 
        
        
        
        
          1,437 
        
      
      
        
        
        
        
        
        
        
        
        
        
        
        
        
           
        
      
      
        
          Income from operations
        
        
        
        
        
        
        
        
          4,523 
        
        
        
        
          1,225 
        
      
      
        
        
        
        
        
        
        
        
        
        
        
        
        
           
        
      
      
        
          Non-operating income, net
        
        
        
        
        
        
        
        
          521 
        
        
        
        
          362 
        
      
      
        
          Interest expense
        
        
        
        
        
        
        
        
          1,304 
        
        
        
        
          1,333 
        
      
      
        
        
        
        
        
        
        
        
        
        
        
        
        
           
        
      
      
        
          Income before income taxes
        
        
        
        
        
        
        
        
          3,740 
        
        
        
        
          254 
        
      
      
        
        
        
        
        
        
        
        
        
        
        
        
        
           
        
      
      
        
          Income tax expense
        
        
        
        
        
        
        
        
          1,167 
        
        
        
        
          58 
        
      
      
        
        
        
        
        
        
        
        
        
        
        
        
        
           
        
      
      
        
          Net income
        
        
        
        
        
        
        
        
          $ 2,573 
        
        
        
        
          $ 196 
        
      
      
        
        
        
        
        
        
        
        
        
        
        
        
        
           
        
      
      
        
          Weighted average common shares and equivalents outstanding, diluted
        
        
        
        
        
        
        
        
        
        
        
        
        
      
      
        
        
        
        
        
        
        
          9,071,719 
        
        
        
        
          8,923,457 
        
      
      
        
        
        
        
        
        
        
        
        
        
        
        
        
           
        
      
      
        
          Earnings per share, diluted
        
        
        
        
        
        
        
        
          $ 0.28 
        
        
        
        
          $ 0.02 
        
      
      
        
        
        
        
        
        
        
        
        
        
        
        
        
           
        
      
      
        
          Dividends declared per common share
        
        
        
        
        
        
        
        
          $ 0.06 
        
        
        
        
          $ 0.06