Penford Operating Income Rises 27% in FY 08 First Quarter
09 January 2008 - 10:00PM
Business Wire
Penford Corporation (Nasdaq: PENX), a global leader in renewable,
natural-based ingredient systems for industrial and food
applications, today reported that consolidated sales for its first
quarter of fiscal 2008, which ended on November 30, 2007, rose 11%
to $94.9 million from $85.5 million a year ago. Higher unit selling
prices in all of the Company�s businesses, new product
introductions, favorable mix changes in North America and stronger
Australian Dollar exchange rates contributed to the sales gain. In
addition, first quarter operating income increased 27% to $5.8
million from $4.5 million in the same period during fiscal 2007.
Net income for the quarter rose 23% to $3.2 million from $2.6
million for the same quarter last year. Earnings per diluted share
increased 18% to $0.33 from $0.28 a year ago despite severance
costs of $1.2 million or $0.09 per share related to repositioning
the Company�s Australian business. Consolidated gross margin
expanded to $16.3 million from $13.2 million a year ago. Gross
margin as a percent of sales expanded to 17.1% from 15.4% on
revenue increases and product mix improvements. Consolidated
operating expenses were $7.2 million versus $7.1 million last year
and declined as a percent of sales to 7.6% from 8.3% a year ago.
Research and development expenses rose 29% to $2.0 million as the
Company continues to invest in projects and technologies that
deliver differentiated, high performance solutions to customers and
enhance the Company�s product offerings. First quarter
non-operating income of $0.5 million and interest expense of $1.3
million were comparable to last year. Income tax expense increased
$0.6 million to $1.8 million as earnings rose in higher tax rate
jurisdictions. The effective tax rate was 36.2% compared with 31.2%
a year ago. Interest expense of $0.3 million associated with the
expansion of the Company�s wet milling operations to produce up to
45 million gallons of ethanol annually was capitalized during the
first quarter of fiscal 2008. Construction costs are estimated at
$1.00 to $1.05 per gallon. Capital expenditures attributable to
this Cedar Rapids, Iowa construction project were $32.7 million as
of November 30, 2007. The new facility should be operational during
the second half of fiscal 2008. In December 2007, the Company sold
2,000,000 shares of its common stock with net proceeds to Penford
of $47.2 million, which was used to repay amounts outstanding under
the Company�s credit facility. Segment Results First quarter fiscal
2008 sales at the Industrial Ingredients business rose 12% to $49.2
million. Higher unit pricing in all major product categories, mix
improvements and the impact from passing through higher corn prices
to customers contributed to the gain. Quarterly sales of specialty
products expanded 38%. Specialty products include the Company�s
proprietary line of Liquid Natural Additives products, which can be
an excellent substitute for petroleum-based products. Gross margin
as a percent of sales increased to 17.4% from 13.6% a year ago on
improved pricing and expansion of the high margin Specialty
category. Operating expenses decreased $0.2 million to $1.9 million
and as a percent of sales declined to 3.9% from 4.7% last year.
Operating income grew 79% to $5.7 million from $3.2 million last
year. North American Food Ingredients first quarter fiscal 2008
revenues grew 6% over last year to $16.1 million on higher selling
prices, continuing ramp-up of products in the pet category and
improved product mix. Revenue from coating applications were
comparable to a year ago while non-coating applications expanded by
12%. Gross margin decreased $0.2 million to $4.6 million in the
first quarter 2008, reflecting increased costs for raw materials,
maintenance and expenditures for new product trials. Improved
pricing realized with the annual renewal of customer contracts
beginning in January should mitigate the impact of higher costs.
First quarter operating expenses decreased to $1.4 million or 8.4%
of sales from 9.9% a year ago. Income from operations was $2.7
million compared with $2.9 million a year ago. First quarter sales
in the Australia/New Zealand business expanded 13% to $29.9 million
from $26.5 million a year ago. Higher average selling prices
increased revenue by $2.1 million while stronger foreign currency
exchange rates added $4.0 million. Gross margin as a percent of
sales rose to 10.5% from 9.1% a year ago as stronger pricing more
than offset $1.8 million in higher quarterly grain costs caused by
a continuing drought in the region. In addition to price increases,
the Australia/New Zealand business is shifting production among its
three plants, sourcing from alternate suppliers and reducing its
workforce to address escalating grain costs. The first quarter
operating loss of $0.1 million included $1.2 million in severance
costs for employees in the two Australian operating facilities. The
business reported operating income of $0.8 million last year.
�Improved pricing, particularly for our higher value products, led
to record first quarter sales and profits. We are on track with the
execution of our business plans at this stage of the fiscal year.
The Industrial business mix will be shifting towards a higher
proportion of specialized industrial starches concurrent with the
build-out of the Cedar Rapids facility designed to expand our
finished product output choices,� said Tom Malkoski, Penford
Corporation President and Chief Executive Officer. �The North
American Food Ingredients business continues to accelerate the
growth of attractive opportunities like pet, dairy and protein
applications. The execution of our restructuring program to
strengthen the Australian business is well underway. Price
increases were implemented, manufacturing has been rationalized,
and headcount reduced. New product initiatives are advancing
through trial stages as expected. Overall, the Company continues to
be well positioned for strong business performance during fiscal
2008.� Conference Call Penford will host a conference call to
discuss first quarter financial and operational results today,
January 9, 2008 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. To participate in the call on January 9, 2007, please
phone 1-877-407-9205 at 8:50 a.m. Mountain Time. A replay will be
available at www.penx.com. About Penford Corporation Penford
Corporation develops, manufactures and markets specialty,
natural-based ingredient systems for a variety of industrial and
food applications. Penford has nine manufacturing and/or research
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; expectations regarding the construction cost of the
ethanol facility and the timing of ethanol production; 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, chemical and energy cost volatility; foreign
currency exchange rate fluctuations; changes in assumptions used
for determining employee benefit expense and obligations; other
unforeseen developments in the industries in which Penford
operates; and other factors described in the �Risk Factors� section
in reports filed by the Company with the Securities and Exchange
Commission. Penford Corporation Financial Highlights � Three months
ended November 30, � (In thousands except per share data) 2007 �
2006 (unaudited) � Consolidated Results � Sales $ 94,861 $ 85,500 �
Net income $ 3,162 $ 2,573 � Earnings per share, diluted $ 0.33 $
0.28 � � Results by Segment � Industrial Ingredients: � Sales $
49,209 $ 43,972 Gross margin 17.4% 13.6% Operating income 5,696
3,182 � Food Ingredients � North America: � Sales $ 16,076 $ 15,240
Gross margin 28.3% 31.4% Operating income 2,652 2,853 �
Australia/New Zealand: � Sales $ 29,944 $ 26,524 Gross margin 10.5%
9.1% Operating income (loss) (75) 808 � November 30, � August 31,
2007 2007 (unaudited) � Current assets $ 103,533 $ 105,279
Property, plant and equipment, net 163,596 146,663 Other assets
38,375 36,446 Total assets 305,504 288,388 � Current liabilities
62,585 66,246 Long-term debt 75,287 63,403 Other liabilities 33,512
33,063 Shareholders� equity 134,120 125,676 Total liabilities and
equity $ 305,504 $ 288,388 Penford Corporation Consolidated
Statements of Income (unaudited) � Three months ended November 30,
� (In thousands except share and per share data) 2007 � 2006 � �
Sales $ 94,861 $ 85,500 � Cost of sales 78,608 72,306 Gross margin
16,253 13,194 � Operating expenses 7,240 7,100 Research and
development expenses 2,022 1,571 Restructure costs 1,235 - � Income
from operations 5,756 4,523 � Non-operating income, net 464 521
Interest expense 1,266 1,304 � Income before income taxes 4,954
3,740 � Income tax expense 1,792 1,167 � Net income $ 3,162 $ 2,573
� Weighted average common shares and equivalents outstanding,
diluted 9,548,803 9,071,719 � Earnings per share, diluted $ 0.33 $
0.28 � Dividends declared per common share $ 0.06 $ 0.06
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