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.
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