Penford Corporation (Nasdaq: PENX), a leader in renewable
ingredient systems for industrial and food applications, today
reported that consolidated sales for the quarter ended May 31, 2012
increased 9% to $92.9 million from $85.2 million a year ago. Gross
margin expanded 10% to $11.5 million. The Company reported a third
quarter net loss of $5.5 million or $0.44 per diluted share
compared with a net loss of $0.7 million or $0.06 per diluted share
last year. Included in the fiscal 2012 third quarter loss were a
non-cash pre-tax charge of $2.8 million related to the redemption
of the Company’s 15% Series A Preferred Stock and a non-cash tax
valuation allowance of $1.8 million.
A table summarizing quarterly financial results is shown
below:
Penford
Corporation – Financial Highlights (In thousands)
Q3 FY
12 Q2 FY 12 Q1 FY 12
Q4 FY 11 Q3 FY 11
Food Ingredients: Sales $ 26,173 $ 24,904 $ 25,924 $ 22,554
$ 23,637 Gross margin 8,225 7,626 8,221 6,766 7,808 Operating
income 5,362 5,247 5,959 4,135 5,517 Depreciation and amortization
512 498 505 486 510
Industrial Ingredients: Sales $
66,751 $ 61,284 $ 64,822 $ 61,085 $ 61,596 Gross margin 3,229 1,775
3,586 552 2,609 Operating income (loss) 75 (985 ) 743 (3,023 ) (734
) Depreciation and amortization 2,772 2,697 2,629 2,691 2,712
Consolidated: Sales $ 92,924 $ 86,188 $ 90,746 $
83,638 $ 85,233 Gross margin 11,454 9,401 11,808 7,317 10,418
Operating income (loss) 3,573 1,650 4,359 (1,518 ) 2,506
Depreciation and amortization 3,632 3,574 3,512 3,556 3,598
Food Ingredients
- Food Ingredients reported record
quarterly sales and gross margin.
- Revenue grew 11% to $26.2 million.
Sales to the coating, protein, dairy and gluten-free segments rose
at double-digit rates.
- Quarterly gross margin increased to
$8.2 million on favorable product mix changes, new business wins
and better pricing.
- Lower operating income of $0.2 million
reflects increased spending on new product development and
marketing.
- Fiscal year-to-date sales rose 29% and
gross margins increased 23%. Higher prices, new product
commercialization and mix improvements supported the results.
Industrial Ingredients
- Revenue for the quarter increased over
8% to $66.8 million on stronger volumes as well as contributions
from the Carolina Starches business acquired last January. Sales of
modified ethylated starches increased more than 15%, and
bio-product revenues grew over 20% from last year.
- Income from operations expanded $0.8
million from a year ago, on better starch operating results and
lower unit costs.
- Revenue for the first nine months of
fiscal 2012 gained 12% and gross margin rose 23% on increased
selling prices in every category, a higher proportion of
bio-products sales and lower manufacturing costs.
- Ethanol sales for the quarter were
$23.1 million. Robust industry supplies led to record inventory
levels that have pressured industry margins. Third quarter market
pricing of ethanol was about 15% lower than a year ago. Comparable
industry crush margins fell by about $0.15 per gallon or 30% from a
year ago. The combination of weak crush margins along with stronger
starch and bio-product shipments led to a 3% reduction in ethanol
volume for the quarter.
- The premium required to procure
physical corn increased significantly compared with the same period
a year ago, thus reducing margins in all product categories. Low
carry-out stock levels have recently pushed the premium to more
than $0.70 per bushel above the five year average.
Redemption of Preferred Stock
- On July 9, 2012, the Company completed
the redemption of the outstanding 58,750 shares Series A 15%
Preferred Stock at the original issue price of $23.5 million plus
$5.4 million of accrued dividends. In April 2012, the Company
redeemed 41,250 shares for $20.0 million which included $3.5
million of accrued dividends.
- In connection with the redemption in
the third quarter, the Company accelerated the discount accretion
and amortization of issuance costs related to the shares redeemed.
The non-cash charge of $2.8 million was recorded as non-operating
expense. The Company expects to record additional accelerated
discount accretion and amortization of issuance costs in the fourth
quarter of $3.8 million.
- In April 2012, the holder of the
Company’s Series B Voting Convertible Preferred Stock converted all
of these shares into 1,000,000 shares of the Company’s common
stock, as permitted by the terms of the preferred shares.
Expanded Credit Facility
- On July 9, 2012, the Company entered
into an Amended and Restated its Credit Agreement which increased
the Company’s revolving credit facility to $130 million from $60
million. The new agreement has a five year term with an optional
“accordion” expansion feature which will allow the Company, under
the conditions specified in the new agreement, to increase
borrowing capacity by an additional $30 million.
- The eight lenders in the new credit
facility were led by Bank of Montreal and Rabobank. Other
participating banks include JPMorgan Chase, KeyBank, First Midwest,
Bank of America, Greenstone Farm Credit and Private Bank and
Trust.
Consolidated Results
- Bank loans rose to $48.2 million
reflecting debt applied to redeem the Series A Preferred Stock in
April 2012.
- At May 31, 2012, the Company recorded a
$1.8 million valuation allowance against a deferred tax asset
related to the carryforward of the small ethanol producer tax
credit due to the uncertainty of utilizing the credit prior to its
expiration in fiscal 2014. The valuation allowance will be reversed
in future years if the tax credit is utilized.
Conference Call
Penford will host a conference call to discuss third quarter
results today, July 10, 2012 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 July 10, 2012, 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 seven 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 Company’s inability to comply with the terms of
instruments governing the Company’s debt instruments; 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; interest rate,
chemical and energy cost volatility; 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 with the Securities
and Exchange Commission.
Penford
Corporation
Financial Highlights
Three months ended May 31
Nine months ended May 31
(In thousands except per share data)
2012
2011
2012
2011
(unaudited) (unaudited)
Consolidated Results
Sales $ 92,924 $ 85,233 $ 269,858 $ 231,802 Income from
operations $ 3,573 $ 2,506 $ 9,582 $ 5,962 Net loss $ (5,452
) $ (709 ) $ (5,200 ) $ (1,948 ) Loss per share, diluted $
(0.44 ) $ (0.06 ) $ (0.42 ) $ (0.16 )
Cash Flows
Cash flow provided by (used in) operations: Operating
activities $ (1,446 ) $ 1,741 $ 7,590 $ (219 ) Investing activities
(3,203 ) (2,237 ) (17,578 ) (5,640 ) Financing activities
4,713 432
10,366 5,771
Total cash provided by (used in)
operations
$ 64 $ (64 ) $ 378 $ (88 )
Balance Sheets
May 31, August 31, 2012 2011
(unaudited) Current assets $ 83,722 $ 74,077 Property, plant
and equipment, net 111,155 107,372 Other assets 25,598 30,965 Total
assets 220,475 212,414 Current liabilities 33,071 30,155
Long-term debt 49,598 23,802 Redeemable preferred stock 25,201
38,982 Other liabilities 33,245 34,010 Shareholders’ equity 79,360
85,465 Total liabilities and equity $ 220,475 $ 212,414
Penford CorporationConsolidated
Statements of Operations
Three months ended May 31, Nine months ended May 31,
(In thousands,
except per share data)
2012 2011 2012
2011 Sales $
92,924 $ 85,233 $ 269,858 $ 231,802 Cost of sales 81,470
74,815 237,195 205,285
Gross margin 11,454 10,418 32,663 26,517
Operating expenses 6,340 6,664 18,883 17,093 Research and
development expenses 1,541 1,248
4,198 3,462 Income from operations
3,573 2,506 9,582 5,962 Interest expense 2,335 2,380 7,162
6,953 Other non-operating income (expense), net (2,815 )
(12 ) (2,579 ) 77 Income (loss) before
income taxes (1,577 ) 114 (159 ) (914 ) Income tax expense
3,875 823 5,041
1,034 Net loss $ (5,452 ) $ (709 ) $ (5,200 ) $ (1,948 )
Weighted average common shares and
equivalentsoutstanding, basic and diluted
12,300 12,262 12,292 12,247 Loss per common share, diluted $
(0.44 ) $ (0.06 ) $ (0.42 ) $ (0.16 )
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