Penford Earnings Rise to $0.19 per Share

  
    
  
  
    
      Penford Corporation (Nasdaq: PENX), a global leader in ingredient 
      systems for food and industrial applications, today reported that 
      consolidated sales for its second quarter of fiscal 2007, which ended on 
      February 28, 2007, rose 11% to $85.2 million from $77.1 million a year 
      ago. Consolidated gross margin increased to $12.4 million from $8.5 
      million last year and second quarter operating income grew to $3.5 
      million from $0.3 million in fiscal 2006. Net income for the quarter was 
      $1.7 million, or $0.19 per diluted share, compared to a net loss of $0.5 
      million, or $0.06 per diluted share, for the same quarter in fiscal 2006.
    
    
      Quarterly revenue increased on improved average unit pricing worldwide, 
      new business gains in North America, and higher Australian Dollar 
      exchange rates. Consolidated gross margin as a percent of sales expanded 
      to 14.5% from 11.1% a year ago, driven by revenue gains and lower 
      manufacturing costs in the U.S. Consolidated operating expenses as a 
      percent of sales were comparable to last year at 8.6%.
    
    
      Second quarter non-operating income was $0.2 million, compared with $0.5 
      million a year ago. Interest expense increased $0.2 million to $1.7 
      million on higher debt balances to fund working capital requirements. 
      Interest expense of $0.1 million associated with the Company’s 
      ethanol construction project was capitalized in the second quarter. 
      Approximately $5.5 million of the $85.7 million total debt outstanding 
      at February 28, 2007 is attributable to the ethanol project.
    
    
      Reported net income for the first half of fiscal 2007 was $4.3 million, 
      or $0.47 per diluted share, compared to a net loss of $0.3 million, or 
      $0.04 per diluted share, a year ago. Consolidated sales for the six 
      months ended February 28, 2007 grew 10% to $170.7 million and operating 
      income expanded to $8.0 million from $1.5 million the prior year.
    
    
      Second Quarter Fiscal 2007 Segment Results
    
    
      The Company’s North American Industrial 
      Ingredients business sales rose 13.5% to $46.7 million. Higher unit 
      prices and mix improvements increased revenue by $3.2 million. The 
      impact from passing through higher corn prices to customers added $6.8 
      million. These gains more than offset the effect from lower volumes as 
      paper industry customers adjusted inventories to maintain supply and 
      demand balances in the end markets. Shipments to new customers 
      contributed to a 27% gain in international revenues. Accelerating new 
      business activity and strong demand for adhesive formulations 
      contributed to a 32% increase in the specialty products segment, which 
      includes the Company’s Liquid Natural 
      Additives product line. Quarterly gross margin improved by $3.0 million 
      on revenue gains and lower manufacturing costs. Gross margin as a 
      percent of sales increased to 14.5% despite a 2.5% negative impact on 
      the ratio from the effect of passing through higher corn costs to 
      customers. Operating income grew to $3.6 million from $0.8 million last 
      year. The construction of the 40 million gallon ethanol plant within the 
      Cedar Rapids site remains on plan for spending and schedule, with 
      production targeted for later this calendar year.
    
    
      In the North American Food Ingredients business, introductions of new 
      products, led by protein applications for food service customers, as 
      well as higher unit prices and mix improvements, contributed to revenue 
      gains. Quarterly sales grew 7.3% over last year to $14.6 million. Gross 
      margin increased $0.8 million to $4.0 million, reflecting revenue 
      expansion and higher plant utilization rates. Additional spending for 
      research and technical programs increased administrative expenses by 7% 
      over last year. Operating income for the second quarter rose 46% to $2.2 
      million from $1.5 million last year.
    
    
      Revenue at the Company’s Australia/New Zealand 
      business grew 7.4% over last year to $24.1 million on higher average 
      unit pricing and stronger foreign currency exchange rates. Sales in 
      local currency increased 2%. The second quarter of the fiscal year is 
      historically the slowest for this business, reflecting holiday and 
      seasonal production curtailments by customers in that region. Gross 
      margin as a percent of sales was comparable to the prior year at 6.6%, 
      as stronger pricing was offset by higher raw material costs. Operating 
      expenses increased 18% over the prior year as the business upgraded its 
      commercial team capabilities. The business reported a second quarter 
      loss from operations of $0.1 million compared to operating income of 
      $0.1 million last year.
    
    
      Drought conditions in Australia increased grain costs by $0.5 million in 
      the second quarter. Projected grain requirements through the next 
      harvest have been secured at current market prices and the Company 
      expects these grain costs to exceed prior year comparisons in each of 
      the next three quarters. Pricing programs have been implemented to 
      recover these input cost increases. The Company is also monitoring 
      progress with cost containment programs designed to mitigate these 
      cyclical cost changes.
    
    
      “The Company’s 
      second quarter results were strong during a period of slower seasonality 
      for our businesses,” said Tom Malkoski, 
      Penford Corporation President and Chief Executive Officer. “While 
      improvement in results in our Australian segment has yet to materialize, 
      performance in our North American Industrial and Food segments is on 
      track, and reflects good implementation of our strategies and business 
      plans. Initiatives in place should position the Company well to continue 
      this progress in the second half of our fiscal year.”
    
    
      Conference Call
    
    
      Penford will host a conference call to discuss second quarter financial 
      and operational results today, April 9, 2007 at 11:00 a.m. Eastern 
      Standard 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, markets or customers which affect 
      demand for the Company’s products, including 
      unfavorable shifts in product mix; adverse litigation results or 
      unanticipated 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 February 28
          
        
        
        
        
          
            Six months ended February 28
          
        
      
      
        
          (In thousands except per share data)
        
        
        
        
          2007 
        
        
        
        
          2006 
        
        
        
        
          2007 
        
        
        
        
          2006 
        
      
      
        
        
        
        
        
          (unaudited)
        
      
      
        
           
        
      
      
        
          Consolidated Results
        
      
      
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
           
        
      
      
        
          Sales
        
        
        
        
          $ 85,241 
        
        
        
        
          $ 77,078 
        
        
        
        
          $ 170,741 
        
        
        
        
          $ 154,981 
        
      
      
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
           
        
      
      
        
          Net income (loss)
        
        
        
        
          $ 1,706 
        
        
        
        
          $ (511)
        
        
        
        
          $ 4,279 
        
        
        
        
          $ (316)
        
      
      
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
           
        
      
      
        
          Earnings (loss) per share, diluted
        
        
        
        
          $ 0.19 
        
        
        
        
          $ (0.06)
        
        
        
        
          $ 0.47 
        
        
        
        
          $ (0.04)
        
      
      
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
           
        
      
      
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
           
        
      
      
        
          Results by Segment
        
      
      
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
           
        
      
      
        
          Industrial Ingredients:
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
      
      
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
           
        
      
      
        
          Sales
        
        
        
        
          $ 46,713 
        
        
        
        
          $ 41,165 
        
        
        
        
          $ 90,685 
        
        
        
        
          $ 79,646 
        
      
      
        
          Gross margin
        
        
        
        
          14.5%
        
        
        
        
          9.3%
        
        
        
        
          14.1%
        
        
        
        
          9.3%
        
      
      
        
          Operating income
        
        
        
        
          3,649 
        
        
        
        
          781 
        
        
        
        
          6,830 
        
        
        
        
          1,355 
        
      
      
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
           
        
      
      
        
          Food Ingredients – North America:
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
      
      
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
           
        
      
      
        
          Sales
        
        
        
        
          $ 14,561 
        
        
        
        
          $ 13,567 
        
        
        
        
          $ 29,801 
        
        
        
        
          $ 28,657 
        
      
      
        
          Gross margin
        
        
        
        
          27.8%
        
        
        
        
          23.9%
        
        
        
        
          29.7%
        
        
        
        
          26.1%
        
      
      
        
          Operating income
        
        
        
        
          2,160 
        
        
        
        
          1,485 
        
        
        
        
          5,013 
        
        
        
        
          3,886 
        
      
      
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
           
        
      
      
        
          Australia/New Zealand:
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
      
      
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
           
        
      
      
        
          Sales
        
        
        
        
          $ 24,104 
        
        
        
        
          $ 22,442 
        
        
        
        
          $ 50,628 
        
        
        
        
          $ 47,077 
        
      
      
        
          Gross margin
        
        
        
        
          6.6%
        
        
        
        
          6.6%
        
        
        
        
          7.9%
        
        
        
        
          8.7%
        
      
      
        
          Operating income (loss)
        
        
        
        
          (57)
        
        
        
        
          98 
        
        
        
        
          751 
        
        
        
        
          795 
        
      
    
    
      
        
        
        
        
        
          February 28,
        
        
        
        
          August 31,
        
      
      
        
        
        
        
        
          2007 
        
        
        
        
          2006 
        
      
      
        
        
        
        
        
          (unaudited)
        
        
        
        
        
      
      
        
        
        
        
        
        
        
        
        
           
        
      
      
        
          Current assets
        
        
        
        
          $ 102,571 
        
        
        
        
          $ 89,916 
        
      
      
        
          Property, plant and equipment, net
        
        
        
        
          133,641 
        
        
        
        
          124,829 
        
      
      
        
          Other assets
        
        
        
        
          37,514 
        
        
        
        
          35,923 
        
      
      
        
          Total assets
        
        
        
        
          273,726 
        
        
        
        
          250,668 
        
      
      
        
        
        
        
        
        
        
        
        
           
        
      
      
        
          Current liabilities
        
        
        
        
          53,460 
        
        
        
        
          57,843 
        
      
      
        
          Long-term debt
        
        
        
        
          74,239 
        
        
        
        
          53,171 
        
      
      
        
          Other liabilities
        
        
        
        
          32,600 
        
        
        
        
          32,202 
        
      
      
        
          Shareholders’ equity
        
        
        
        
          113,427 
        
        
        
        
          107,452 
        
      
      
        
          Total liabilities and equity
        
        
        
        
          $ 273,726 
        
        
        
        
          $ 250,668 
        
      
    
    
      
        
          Penford Corporation

          
            Consolidated Statements of Income (unaudited)
          
        
        
        
        
          
            Three months ended
          
          
            February 28
          
        
        
        
        
          
            Six months ended
          
          
            February 28
          
        
      
      
        
          (In thousands except per share data)
        
        
        
        
          2007 
        
        
        
        
          2006 
        
        
        
        
          2007 
        
        
        
        
          2006 
        
      
      
        
        
        
        
        
          (unaudited)
        
      
      
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
           
        
      
      
        
          Sales
        
        
        
        
          $85,241 
        
        
        
        
          $77,078 
        
        
        
        
          $170,741 
        
        
        
        
          $154,981 
        
      
      
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
           
        
      
      
        
          Cost of sales
        
        
        
        
          72,839 
        
        
        
        
          68,534 
        
        
        
        
          145,145 
        
        
        
        
          136,037 
        
      
      
        
          Gross margin
        
        
        
        
          12,402 
        
        
        
        
          8,544 
        
        
        
        
          25,596 
        
        
        
        
          18,944 
        
      
      
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
           
        
      
      
        
          Operating expenses
        
        
        
        
          7,333 
        
        
        
        
          6,671 
        
        
        
        
          14,433 
        
        
        
        
          14,408 
        
      
      
        
          Research and development expenses
        
        
        
        
          1,578 
        
        
        
        
          1,571 
        
        
        
        
          3,150 
        
        
        
        
          3,008 
        
      
      
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
           
        
      
      
        
          Income from operations
        
        
        
        
          3,491 
        
        
        
        
          302 
        
        
        
        
          8,013 
        
        
        
        
          1,528 
        
      
      
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
           
        
      
      
        
          Non-operating income, net
        
        
        
        
          229 
        
        
        
        
          486 
        
        
        
        
          751 
        
        
        
        
          847 
        
      
      
        
          Interest expense
        
        
        
        
          (1,689)
        
        
        
        
          (1,534)
        
        
        
        
          (2,993)
        
        
        
        
          (2,867)
        
      
      
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
           
        
      
      
        
          Income (loss) before income taxes
        
        
        
        
          2,031 
        
        
        
        
          (746)
        
        
        
        
          5,771 
        
        
        
        
          (492)
        
      
      
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
           
        
      
      
        
          Income tax expense (benefit)
        
        
        
        
          325 
        
        
        
        
          (235)
        
        
        
        
          1,492 
        
        
        
        
          (176)
        
      
      
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
           
        
      
      
        
          Net income (loss)
        
        
        
        
          $ 1,706 
        
        
        
        
          $ (511)
        
        
        
        
          $ 4,279 
        
        
        
        
          $ (316)
        
      
      
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
           
        
      
      
        
          
            Weighted average common shares and equivalents outstanding, diluted
          
        
        
        
        
          9,152 
        
        
        
        
          8,881 
        
        
        
        
          9,103 
        
        
        
        
          8,879 
        
      
      
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
           
        
      
      
        
          Earnings (loss) per share, diluted
        
        
        
        
          $ 0.19 
        
        
        
        
          $ (0.06)
        
        
        
        
          $ 0.47 
        
        
        
        
          $ (0.04)
        
      
      
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
           
        
      
      
        
          Dividends declared per common share
        
        
        
        
          $ 0.06 
        
        
        
        
          $ 0.06 
        
        
        
        
          $ 0.12 
        
        
        
        
          $ 0.12