Penford Corporation (Nasdaq: PENX), a global leader in
renewable, natural-based ingredient systems for industrial and food
applications, today reported that consolidated sales for the
quarter ended November 30, 2009 were $67.1 million compared with
$59.6 million a year ago. Net income from continuing operations was
$1.1 million, or $0.09 per diluted share, compared to net income of
$0.6 million, or $0.05 per diluted share last year. A table
summarizing first quarter results from continuing operations is
shown below:
Penford Corporation – Financial Highlights Quarter
Ended (In thousands except per share data) 11/30/09 11/30/08
% Change
Industrial Ingredients: Sales $
50,308 $ 41,841 20 % Gross margin 4,986 128 - Operating income (1)
2,154 1,799 20 %
Food Ingredients: Sales $ 16,762 $
17,742 (5 )% Gross margin 5,642 5,276 7 % Operating income 3,581
3,398 5 %
Consolidated: Sales $ 67,070 $ 59,584 13 %
Gross margin 10,628 5,405 97 % Operating income (1) 3,142 2,473 27
% Income from continuing operations 1,056 563 88 % Diluted earnings
per share – continuing operations $ 0.09 $ 0.05 80 % (1)
Includes $4.2 million of net insurance recoveries in the quarter
ended 11/30/08
Industrial Ingredients
- Revenue grew 20% with industrial
starch sales comparable to prior year and biofuels increasing from
a year ago. Sales of Liquid Natural Additive applications grew as
the business added new end-markets and customers.
- Domestic industrial starch
demand remains below pre-recession levels. Sales to the
international markets improved, while sales to North American
customers producing printing and writing papers were below prior
year.
- Positive margins from ethanol
operations on higher throughput rates contributed to the
improvement in segment financial results for the first quarter.
Ethanol volume represented 48% of the Industrial product mix for
the quarter.
- First quarter fiscal 2010 gross
margin and operating income expanded on higher capacity utilization
rates, revenue gains and a 25% decrease in unit manufacturing
costs. Cost reduction programs addressing employee costs, raw
materials and processing improvements contributed to lowering
production expenditures by $3.6 million in the first quarter of
fiscal 2010. Fiscal 2009 first quarter operating income included
$4.2 million of net insurance recoveries. No additional insurance
recoveries have been recorded since May 2009.
Food Ingredients
- First quarter fiscal 2010 sales
decreased entirely due to the sale of the dextrose business in the
second quarter of fiscal 2009. The Company divested the dextrose
business after determining that it was not part of the Company’s
core strategic focus.
- Sales of coating applications,
which contributed about 50% of revenues, declined 4% as potato
processing customers adjusted inventories to historical levels.
Sales of other food ingredients, excluding dextrose, offset the
coatings decline, with protein, bakery and pet chews applications
improving at double-digit rates from the prior year quarter.
- Gross margin and operating
income improved as first quarter unit raw material costs fell 29%
and unit production costs fell 12% from a year ago. Cost savings
and efficiencies contributed $0.5 million to operating income in
the first quarter.
Discontinued Operations
- The divestiture of the New
Zealand business was completed during September 2009 with net
proceeds totaling $4.8 million.
- The sale of the Australian
operating assets was completed on November 27, 2009. The assets of
the two Australian plants were sold to separate purchasers in two
transactions. The Company realized approximately $12.0 million from
these sales (after estimated costs of sale). An additional $2.0
million of proceeds has been placed in escrow and may be collected
as post-closing conditions are fulfilled over approximately the
next 30 months. Penford also retained the trade receivables and
payables at the completion date and is currently settling the
remaining financial assets and liabilities.
- The net cash proceeds from these
three transactions were used to reduce outstanding bank debt.
- First quarter loss from
discontinued operations before income taxes was $1.4 million. A
U.S. tax benefit of $4.9 million, resulting from the partial write
off of an intercompany loan to the Australian operations, was
recorded in the first quarter and classified to discontinued
operations.
Cash Flows and Debt
- Cash flow from continuing
operations improved by $29.1 million on reductions in working
capital and the sale of the Company’s operating assets in
Australia.
- At the end of the first quarter
of fiscal 2010, the Company had $25.9 million in cash on hand. The
Company has not drawn against its revolving credit agreement since
May 2009 and reduced outstanding bank debt by $7.8 million in the
quarter ended November 30, 2009.
- The Company’s bank credit
facility expires November 30, 2010 and, accordingly, all of the
outstanding bank debt of $84.5 million has been classified as a
current liability at November 30, 2009. During December 2009, the
Company further reduced its debt by $11.9 million. The Company
plans to replace or renew its bank credit agreement prior to final
maturity.
Consolidated Financial Results
- Consolidated sales improved 13%
to $67.1 million while gross margin, operating income and net
income from continuing operations expanded at double-digit
rates.
- The Company’s cost reduction
programs, implemented as responses to the Cedar Rapids flood and
the global recession, contributed to improved first quarter
results. Unit costs for raw materials and manufacturing declined in
both North American businesses. Operating income for the first
quarter of fiscal 2010 of $3.1 million increased by $0.7 million
over the prior year.
- Interest expense increased $0.5
million in the quarter due to higher debt balances and an increase
in amortization of deferred debt costs.
Conference Call
Penford will host a conference call to discuss first quarter
financial and operational results today, January 8, 2010 at 9:00
a.m. Mountain Time (11:00 a.m. Eastern Time). Access information
for the call and webcast can be found at www.penx.com. To participate in
the call on January 8, 2010, 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 five manufacturing
and/or research locations in the United States.
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; the amount and timing of flood insurance recoveries;
the Company’s inability to comply with the terms of instruments
governing the Company’s debt; the effects of the current economic
recession as well as other 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; Company’s ability to renew or replace its bank credit
agreement for periods beyond the agreement’s current expiration
date; interest rate, chemical and energy cost volatility; foreign
currency exchange rate fluctuations; changes in returns on pension
plan assets and/or assumptions used for determining employee
benefit expense and obligations; 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
CorporationFinancial Highlights
Three months endedNovember 30,
(In thousands except per share data) 2009 2008 (unaudited)
Consolidated Results Sales $ 67,070 $ 59,584
Income from continuing operations $ 1,056 $ 563 Income (loss) from
discontinued operations $ 3,482 $ (932 ) Net income (loss) $
4,538 $ (369 ) Earnings per share, diluted –
continuing operations $ 0.09 $ 0.05
Earnings (loss) per share, diluted
– discontinued operations
$ 0.31 $ (0.08 ) Earnings (loss) per share, diluted $ 0.40 $
(0.03 )
Cash Flows Cash flow provided
by (used in) continuing operations: Operating activities $ 20,834 $
(8,218 ) Investing activities (1,078 ) (1,298 ) Financing
activities (5,919 ) 9,516 13,837 - Net cash
flow provided by discontinued operations 5,870
1,154 Total cash provided $ 19,707 $ 1,154
November 30, August 31, 2009 2009 (unaudited)
Current assets $ 78,818 $ 68,336 Property, plant and equipment, net
116,778 119,049 Other assets 32,818 28,147 Assets of discontinued
operations 22,291 42,713 Total assets
250,705 258,245 Current liabilities 110,060
44,958 Long-term debt 2,442 71,141 Other liabilities 44,397 43,908
Liabilities of discontinued operations 7,084 18,879 Shareholders’
equity 86,722 79,359 Total liabilities and
equity $ 250,705 $ 258,245
Penford
CorporationConsolidated Statements of Income
(unaudited)
Three months endedNovember 30,
(In thousands except per share data) 2009 2008
Sales $ 67,070 $ 59,584 Cost of sales 56,442
54,179 Gross margin 10,628 5,405 Operating expenses
6,488 6,043 Research and development expenses 998 1,123 Flood
costs, net of insurance proceeds - (4,234 )
Income from operations 3,142 2,473 Other non-operating
income (expense), net 636 (606 ) Interest expense 1,798
1,270 Income from continuing operations before
income taxes 1,980 597 Income tax expense 924
34 Income from continuing operations 1,056 563 Income (loss)
from discontinued operations, net of tax 3,482 (932 )
Net income (loss) $ 4,538 $ (369 )
Weighted average common shares and
equivalents outstanding, diluted
11,266 11,299 Diluted earnings (loss) per share $ 0.09 $
0.05 Continuing operations 0.31 (0.08 ) Discontinued
operations $ 0.40 $ (0.03 ) Total Dividends declared per
common share $ - $ 0.06
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