(MM) (NASDAQ:PENX)
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Penford Corporation (Nasdaq: PENX), a global leader in ingredient
systems for food and industrial applications, today reported record
sales for the quarter ended May 31, 2007. Consolidated sales increased
$16.3 million to $95.4 million from $79.1 million a year ago and gross
margin increased $6.5 million to $18.6 million from $12.1 million last
year. Third quarter operating income grew 145% to a record $8.5 million
from $3.5 million in fiscal 2006. Net income for the quarter was $5.0
million, or $0.54 per diluted share, compared to net income of $2.0
million, or $0.22 per diluted share, for the same quarter last year.
Quarterly revenue rose on higher average unit pricing in all businesses,
new product introductions by the North American Food Ingredients
segment, and product mix improvements. A 10% appreciation in the
Australian Dollar also contributed to the sales increase. Consolidated
gross margin as a percent of sales expanded to 19.5% from 15.2% a year
ago, driven by pricing gains and lower manufacturing costs worldwide.
Consolidated operating expenses as a percent of sales declined to 10.6%
of sales from 10.9% last year.
Interest expense for the quarter was $1.4 million compared to $1.5
million last year. Interest expense of $0.1 million associated with the
Company’s ethanol construction project was
capitalized in the third quarter. During the third quarter, Penford
capitalized $5.3 million of costs attributable to the ethanol project,
for a total of $11.2 million at May 31, 2007.
Reported net income for the first nine months of fiscal 2007 was $9.2
million, or $1.01 per diluted share, compared to net income of $1.7
million, or $0.19 per diluted share, a year ago. Consolidated sales for
the nine months ended May 31, 2007 grew 13.7% to $266.1 million and
operating income expanded to $16.5 million from $5.0 million last year.
Third Quarter Fiscal 2007 Segment Results
The Company’s North American Industrial
Ingredients business reported quarterly sales rose 26.7% to $53.0
million from $41.8 million last year. International shipments expanded
32% and volumes of Specialty Products grew 39%. Higher unit prices and
mix improvements contributed $5.2 million to revenue. The impact from
passing through higher corn prices to customers added $7.8 million.
These gains more than offset 6% lower volumes as sales of toll
manufactured products declined. Quarterly gross margin improved by $4.3
million, or 66%, on increased revenue and lower manufacturing expenses.
Gross margin as a percent of sales increased to 20.4% from 15.6% a year
ago despite a 3.5% negative impact on the ratio from the effect of
passing through higher corn costs. Operating income doubled to $7.1
million from $3.5 million last year. The construction of the ethanol
plant within the Cedar Rapids site is on schedule with production
targeted for the end of this calendar year. The designed output capacity
has been expanded to 45 million gallons with a proportional cost
increase that maintains our $1.00 - $1.05 per gallon capital investment
in this project.
Quarterly sales in the North American Food Ingredients business grew
24.3% to $17.1 million from $13.7 million last year. Volume increases
contributed 9% to the gain while higher unit pricing and improved mix
added another 15%. Sales of potato coating and protein applications
expanded at double-digit rates. Products with formulations designed for
the pet chew and treat markets were introduced during the quarter and
this category accounted for one-third of the sales gain during the
quarter. Gross margin increased $1.4 million to $5.1 million, reflecting
revenue expansion and higher plant utilization rates. Operating income
for the third quarter rose 67% to $2.9 million from $1.7 million last
year.
Revenue at the Company’s Australia/New Zealand
business was $25.7 million, up $2.0 million from last year. Volumes
decreased 3.6%, primarily in categories experiencing competition from
products manufactured in countries with weaker currencies than
Australia. Price increases overcame a $0.9 million increase in grain
costs, reflecting the Company’s program to
offset the impact of the recent drought. Improved manufacturing
efficiencies lowered production costs and more than compensated for
slower volumes. Gross margin as a percent of sales improved to 10.4%
from 7.9% last year. Operating income for the third quarter tripled to
$0.9 million from $0.3 million a year ago.
“The third quarter results represent a
step-change in performance for Penford,” said
Tom Malkoski, Penford Corporation President and Chief Executive Officer. “Our
Australian business is advancing programs that align costs and resources
with sensible initiatives for margin improvement. North America Food
Ingredients continues to build its established business while extending
technologies into new applications and markets. The Industrial business
is operating its core business well, continuing the solid pace of growth
in high value Specialty Products and constructing capacity for ethanol
production. I believe these broad-based initiatives will deliver value
for our shareholders into the future.”
Conference Call
Penford will host a conference call to discuss third quarter financial
and operational results today, June 28, 2007 at 11:00 a.m. Eastern
Daylight time. Access information for the call and webcast 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 the
Company’s 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
May 31
Nine months ended
May 31
(In thousands except per share data)
2007
2006
2007
2006
(unaudited)
Consolidated Results
Sales
$ 95,406
$ 79,130
$ 266,147
$ 234,111
Net income
$ 4,955
$ 1,991
$ 9,234
$ 1,675
Earnings per share, diluted
$ 0.54
$ 0.22
$ 1.01
$ 0.19
Results by Segment
Industrial Ingredients:
Sales
$ 52,965
$ 41,809
$ 143,650
$ 121,454
Gross margin
20.4%
15.6%
16.4%
11.4%
Operating income
7,066
3,521
13,896
4,877
Food Ingredients – North America:
Sales
$ 17,091
$ 13,747
$ 46,892
$ 42,404
Gross margin
29.6%
26.8%
29.6%
26.4%
Operating income
2,918
1,750
7,931
5,636
Australia/New Zealand:
Sales
$ 25,668
$ 23,718
$ 76,296
$ 70,795
Gross margin
10.4%
7.9%
8.7%
8.4%
Operating income
856
276
1,607
1,071
May 31,
August 31,
2007
2006
(unaudited)
Current assets
$ 105,157
$ 89,916
Property, plant and equipment, net
138,173
124,829
Other assets
38,279
35,923
Total assets
281,609
250,668
Current liabilities
59,100
57,843
Long-term debt
67,589
53,171
Other liabilities
32,429
32,202
Shareholders’ equity
122,491
107,452
Total liabilities and equity
$ 281,609
$ 250,668
Penford Corporation
Consolidated Statements of Income (unaudited)
Three months ended
May 31
Nine months ended
May 31
(In thousands except per share data)
2007
2006
2007
2006
(unaudited)
Sales
$95,406
$79,130
$266,147
$234,111
Cost of sales
76,838
67,070
221,983
203,107
Gross margin
18,568
12,060
44,164
31,004
Operating expenses
8,375
7,020
22,808
21,429
Research and development expenses
1,737
1,584
4,886
4,592
Income from operations
8,456
3,456
16,470
4,983
Non-operating income, net
344
563
1,095
1,410
Interest expense
1,443
1,522
4,437
4,388
Income before income taxes
7,357
2,497
13,128
2,005
Income tax expense
2,402
506
3,894
330
Net income
$ 4,955
$ 1,991
$ 9,234
$ 1,675
Weighted average common shares and equivalents outstanding, diluted
9,258
9,050
9,159
8,978
Earnings per share, diluted
$ 0.54
$ 0.22
$ 1.01
$ 0.19
Dividends declared per common share
$ 0.06
$ 0.06
$ 0.18
$ 0.18