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Penford Corporation (Nasdaq: PENX), a global leader in ingredient
systems for food and industrial applications, today reported operating
income for the fourth quarter rose 24% to $4.3 million on record sales
of $84.3 million. The Company also reported that annual revenue grew
7.3% to an all-time high of $318.4 million for the year ended August 31,
2006 and net income was $4.2 million or $0.47 per diluted share,
compared to $0.29 per share last year.
Fourth Quarter Results
Consolidated operating income increased $0.9 million to $4.3 million
from $3.4 million last year. Sales rose to $84.3 million from $79.4
million a year ago on volume and price increases in the Industrial
Ingredients segment as well as volume gains in Australia. Net income for
the quarter ended August 31, 2006 was $2.6 million, or $0.28 per diluted
share, compared to $4.8 million, or $0.54 per share last year. Fourth
quarter 2005 net income included a tax benefit of $2.4 million and a
$1.2 million pre-tax gain on the sale of a land parcel in Australia.
Gross margin as a percent of sales expanded to 16.5% from 16.1% a year
ago due to improvements in unit pricing, energy yields and plant
utilization in the Industrial Ingredients segment. Better plant
performance in Australia also contributed to margin expansion. Interest
expense was comparable to last year at $1.5 million.
Fourth quarter 2006 sales increased 15.7% to $44.4 million at the
Industrial Ingredients business on a volume increase of 9% and higher
unit pricing. Sales of liquid natural additive products rose 89% over
last year. Gross margin as a percent of sales expanded to 16.5% from
13.1% last year on improvements in product mix, higher capacity
utilization, more efficient energy usage and better operating yields.
Quarterly financial results were impacted by $1.1 million of additional
chemical and distribution costs. Operating expenses declined 6% from a
year ago to $3.1 million. Fourth quarter segment operating income more
than doubled over the previous year to $4.2 million from $1.8 million.
Revenues at the Food Ingredients – North
America business were $14.8 million, $0.9 million below last year.
Volumes for the fourth quarter of 2006 declined 4% from 2005, which
included a significant customer order for a low carbohydrate
formulation. Applications for the processed meat, dairy and cheese
markets grew 27% over last year’s fourth
quarter. Gross margin as a percent of sales was 27.3% compared to 32.3%
a year ago due to the shift in product mix replacing “low
carb” shipments and higher potato raw material
costs. Operating expenses decreased by 6.6% on lower labor costs.
Australia/New Zealand 2006 fourth quarter sales were comparable to the
same period last year. Volume growth of 4% was offset by stronger demand
for less profitable starches and lower Australian Dollar exchange rates.
Fourth quarter gross margin as a percent of sales was 10.3% compared to
10.6% last year due to product mix changes. Operating expenses rose to
$1.9 million from $1.5 million last year, reflecting $0.5 million in
charges related to reductions in staffing.
Fiscal 2006 Annual Results
Revenue for the fiscal year ended August 31, 2006 expanded to $318.4
million from $296.8 million last year on record volumes in all three
business segments and increased pricing in the Industrial Ingredients
unit. Net income was $4.2 million, or $0.47 per diluted share, compared
to $2.6 million, or $0.29 per diluted share last year. Net income for
fiscal 2005 included the $2.4 million tax benefit and $1.2 million
pre-tax land sale gain noted above as well as $4.1 million in higher
operating costs in the Industrial Ingredients segment related to a
strike which ended in October 2004. Consolidated gross margin as a
percent of sales increased to 14.1% from 11.2% last year (which included
the strike) due to higher sales, improved manufacturing performance, and
reduced grain raw material costs. During the year, the business absorbed
$0.9 million in severance charges to implement staffing changes in
Australia. Our operations also offset more than $8.0 million in
incremental chemical, energy and distribution costs as average market
prices rose by more than 25% for natural gas and chemicals. Despite
these cost challenges, annual operating income grew by $8.3 million to
$9.3 million.
“The Company’s
operating performance strengthened in fiscal 2006, particularly in the
second half of the year. Each of our three business units expanded
profits for the year,” said Tom Malkoski,
Penford Corporation President and Chief Executive Officer. “The
expected improvement achieved by our Industrial segment was particularly
encouraging. The division increased its pricing, improved product mix
and expanded its customer base. In addition, this business addressed
energy exposure through process improvements and by investing in
projects that reduced energy usage significantly. These accomplishments
were recognized in September when the Cedar Rapids site earned the
Energy Star designation from the EPA, one of only seventeen operations
in the U.S. to earn that distinction this year. Complementing the strong
gains reported by the Industrial business, the North American Food
Ingredients group registered broad gains in 18 of our top 25 customers
through new applications and customer support.”
Penford will host a conference call to discuss fourth quarter and annual
financial and operational results today, November 7, 2006 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.
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 disclaims any intention or obligation 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 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; 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; the risk that results may be
affected by construction delays, cost overruns, technical difficulties,
nonperformance by contractors or changes in capital improvement project
requirements or specifications; interest rate 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
August 31,
Year ended
August 31,
(In thousands except per share data)
2006
2005
2006
2005
(unaudited)
Consolidated Results
Sales
$ 84,308
$ 79,378
$ 318,419
$ 296,763
Net income
$ 2,553
$ 4,806
$ 4,228
$ 2,574
Earnings per share, diluted
$ 0.28
$ 0.54
$ 0.47
$ 0.29
Results by Segment
Industrial Ingredients:
Sales
$ 44,396
$ 38,388
$ 165,850
$ 147,782
Gross margin
16.5%
13.1%
12.8%
7.9%
Operating income (loss)
4,244
1,797
9,121
(147)
Food Ingredients – North America:
Sales
$ 14,752
$ 15,626
$ 57,156
$ 53,661
Gross margin
27.3%
32.3%
26.6%
27.4%
Operating income
2,183
3,085
7,819
7,404
Australia/New Zealand:
Sales
$ 25,326
$ 25,394
$ 96,121
$ 96,231
Gross margin
10.3%
10.6%
8.9%
7.1%
Operating income
663
1,188
1,735
1,331
August 31,
August 31,
2006
2005
Current assets
$ 90,186
$ 88,937
Property, plant and equipment, net
124,829
125,267
Other assets
35,923
35,713
Total assets
250,938
249,917
Current liabilities
58,113
53,366
Long-term debt
53,171
62,107
Other liabilities
32,202
34,418
Shareholders’ equity
107,452
100,026
Total liabilities and equity
$ 250,938
$ 249,917
Penford Corporation
Consolidated Statements of Income
Three months ended
August 31, (1)
Year ended
August 31, (1)
(In thousands except per share data)
2006
2005
2006
2005
(unaudited)
Sales
$84,308
$79,378
$318,419
$296,763
Cost of sales
70,369
66,586
273,476
263,542
Gross margin
13,939
12,792
44,943
33,221
Operating expenses
8,049
7,837
29,477
26,413
Research and development expenses
1,606
1,506
6,198
5,796
Income from operations
4,284
3,449
9,268
1,012
Non-operating income, net
486
548
1,896
2,209
Interest expense
(1,513)
(1,497)
(5,902)
(5,574)
Income (loss) before income taxes
3,257
2,500
5,262
(2,353)
Income tax expense (benefit)
704
(2,306)
1,034
(4,927)
Net income
$ 2,553
$ 4,806
$ 4,228
$ 2,574
Weighted average common shares and equivalents outstanding, diluted
9,051
8,940
9,004
8,946
Earnings per share, diluted
$ 0.28
$ 0.54
$ 0.47
$ 0.29
Dividends declared per common share
$ 0.06
$ 0.06
$ 0.24
$ 0.24
(1) Results for the three and twelve months ended August 31, 2006
included $0.4 million and $1.3 million, respectively, of pre-tax
stock-based compensation costs due to the adoption of Financial
Accounting Standards Board Statement No. 123R, “Share-Based
Payment,” on September 1, 2005.
Penford Corporation (Nasdaq: PENX), a global leader in ingredient
systems for food and industrial applications, today reported operating
income for the fourth quarter rose 24% to $4.3 million on record sales
of $84.3 million. The Company also reported that annual revenue grew
7.3% to an all-time high of $318.4 million for the year ended August
31, 2006 and net income was $4.2 million or $0.47 per diluted share,
compared to $0.29 per share last year.
Fourth Quarter Results
Consolidated operating income increased $0.9 million to $4.3
million from $3.4 million last year. Sales rose to $84.3 million from
$79.4 million a year ago on volume and price increases in the
Industrial Ingredients segment as well as volume gains in Australia.
Net income for the quarter ended August 31, 2006 was $2.6 million, or
$0.28 per diluted share, compared to $4.8 million, or $0.54 per share
last year. Fourth quarter 2005 net income included a tax benefit of
$2.4 million and a $1.2 million pre-tax gain on the sale of a land
parcel in Australia. Gross margin as a percent of sales expanded to
16.5% from 16.1% a year ago due to improvements in unit pricing,
energy yields and plant utilization in the Industrial Ingredients
segment. Better plant performance in Australia also contributed to
margin expansion. Interest expense was comparable to last year at $1.5
million.
Fourth quarter 2006 sales increased 15.7% to $44.4 million at the
Industrial Ingredients business on a volume increase of 9% and higher
unit pricing. Sales of liquid natural additive products rose 89% over
last year. Gross margin as a percent of sales expanded to 16.5% from
13.1% last year on improvements in product mix, higher capacity
utilization, more efficient energy usage and better operating yields.
Quarterly financial results were impacted by $1.1 million of
additional chemical and distribution costs. Operating expenses
declined 6% from a year ago to $3.1 million. Fourth quarter segment
operating income more than doubled over the previous year to $4.2
million from $1.8 million. Revenues at the Food Ingredients - North
America business were $14.8 million, $0.9 million below last year.
Volumes for the fourth quarter of 2006 declined 4% from 2005, which
included a significant customer order for a low carbohydrate
formulation. Applications for the processed meat, dairy and cheese
markets grew 27% over last year's fourth quarter. Gross margin as a
percent of sales was 27.3% compared to 32.3% a year ago due to the
shift in product mix replacing "low carb" shipments and higher potato
raw material costs. Operating expenses decreased by 6.6% on lower
labor costs.
Australia/New Zealand 2006 fourth quarter sales were comparable to
the same period last year. Volume growth of 4% was offset by stronger
demand for less profitable starches and lower Australian Dollar
exchange rates. Fourth quarter gross margin as a percent of sales was
10.3% compared to 10.6% last year due to product mix changes.
Operating expenses rose to $1.9 million from $1.5 million last year,
reflecting $0.5 million in charges related to reductions in staffing.
Fiscal 2006 Annual Results
Revenue for the fiscal year ended August 31, 2006 expanded to
$318.4 million from $296.8 million last year on record volumes in all
three business segments and increased pricing in the Industrial
Ingredients unit. Net income was $4.2 million, or $0.47 per diluted
share, compared to $2.6 million, or $0.29 per diluted share last year.
Net income for fiscal 2005 included the $2.4 million tax benefit and
$1.2 million pre-tax land sale gain noted above as well as $4.1
million in higher operating costs in the Industrial Ingredients
segment related to a strike which ended in October 2004. Consolidated
gross margin as a percent of sales increased to 14.1% from 11.2% last
year (which included the strike) due to higher sales, improved
manufacturing performance, and reduced grain raw material costs.
During the year, the business absorbed $0.9 million in severance
charges to implement staffing changes in Australia. Our operations
also offset more than $8.0 million in incremental chemical, energy and
distribution costs as average market prices rose by more than 25% for
natural gas and chemicals. Despite these cost challenges, annual
operating income grew by $8.3 million to $9.3 million.
"The Company's operating performance strengthened in fiscal 2006,
particularly in the second half of the year. Each of our three
business units expanded profits for the year," said Tom Malkoski,
Penford Corporation President and Chief Executive Officer. "The
expected improvement achieved by our Industrial segment was
particularly encouraging. The division increased its pricing, improved
product mix and expanded its customer base. In addition, this business
addressed energy exposure through process improvements and by
investing in projects that reduced energy usage significantly. These
accomplishments were recognized in September when the Cedar Rapids
site earned the Energy Star designation from the EPA, one of only
seventeen operations in the U.S. to earn that distinction this year.
Complementing the strong gains reported by the Industrial business,
the North American Food Ingredients group registered broad gains in 18
of our top 25 customers through new applications and customer
support."
Penford will host a conference call to discuss fourth quarter and
annual financial and operational results today, November 7, 2006 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.
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
disclaims any intention or obligation 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 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; 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; the risk that results may be affected by
construction delays, cost overruns, technical difficulties,
nonperformance by contractors or changes in capital improvement
project requirements or specifications; interest rate 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.
-0-
*T
Penford Corporation Three months ended Year ended
Financial Highlights August 31, August 31,
-------------------- -------------------
(In thousands except per
share data) 2006 2005 2006 2005
----------------------------- -------------------- -------------------
(unaudited)
Consolidated Results
Sales $84,308 $79,378 $318,419 $296,763
Net income $2,553 $4,806 $4,228 $2,574
Earnings per share, diluted $0.28 $0.54 $0.47 $0.29
Results by Segment
Industrial Ingredients:
Sales $44,396 $38,388 $165,850 $147,782
Gross margin 16.5% 13.1% 12.8% 7.9%
Operating income (loss) 4,244 1,797 9,121 (147)
Food Ingredients - North
America:
Sales $14,752 $15,626 $57,156 $53,661
Gross margin 27.3% 32.3% 26.6% 27.4%
Operating income 2,183 3,085 7,819 7,404
Australia/New Zealand:
Sales $25,326 $25,394 $96,121 $96,231
Gross margin 10.3% 10.6% 8.9% 7.1%
Operating income 663 1,188 1,735 1,331
*T
-0-
*T
August 31, August 31,
2006 2005
---------- -----------
Current assets $90,186 $88,937
Property, plant and equipment, net 124,829 125,267
Other assets 35,923 35,713
---------- -----------
Total assets 250,938 249,917
========== ===========
Current liabilities 58,113 53,366
Long-term debt 53,171 62,107
Other liabilities 32,202 34,418
Shareholders' equity 107,452 100,026
---------- -----------
Total liabilities and equity $250,938 $249,917
========== ===========
*T
-0-
*T
Penford Corporation
Consolidated Statements of Three months ended Year ended
Income August 31, (1) August 31, (1)
------------------ -------------------
(In thousands except per share
data) 2006 2005 2006 2005
------------------------------- ------------------ -------------------
(unaudited)
Sales $84,308 $79,378 $318,419 $296,763
Cost of sales 70,369 66,586 273,476 263,542
--------- -------- --------- ---------
Gross margin 13,939 12,792 44,943 33,221
Operating expenses 8,049 7,837 29,477 26,413
Research and development
expenses 1,606 1,506 6,198 5,796
--------- -------- --------- ---------
Income from operations 4,284 3,449 9,268 1,012
Non-operating income, net 486 548 1,896 2,209
Interest expense (1,513) (1,497) (5,902) (5,574)
--------- -------- --------- ---------
Income (loss) before income
taxes 3,257 2,500 5,262 (2,353)
Income tax expense (benefit) 704 (2,306) 1,034 (4,927)
--------- -------- --------- ---------
Net income $2,553 $4,806 $4,228 $2,574
========= ======== ========= =========
Weighted average common shares
and equivalents outstanding,
diluted 9,051 8,940 9,004 8,946
Earnings per share, diluted $0.28 $0.54 $0.47 $0.29
Dividends declared per common
share $0.06 $0.06 $0.24 $0.24
*T
(1) Results for the three and twelve months ended August 31, 2006
included $0.4 million and $1.3 million, respectively, of pre-tax
stock-based compensation costs due to the adoption of Financial
Accounting Standards Board Statement No. 123R, "Share-Based Payment,"
on September 1, 2005.