Penford Corporation (Nasdaq:PENX), a global leader in ingredient
systems for food and industrial applications, today reported
financial results for the third quarter and first nine months of
fiscal 2005. Penford's net income for the quarter ended May 31,
2005, was $2.6 million, or $0.29 per diluted share, compared with
net income of $2.3 million, or $0.26 per diluted share for the same
period last year. In the third quarter of fiscal 2005, the Company
monetized its investment in a small Australian start-up company and
recognized a pre-tax gain of $0.7 million on the transaction. In
addition, the Company recognized an income tax benefit in the third
quarter of $1.0 million on $1.6 million of pre-tax income. Based on
a revised estimate of its applicable effective income tax rate for
fiscal 2005, the Company recorded a third quarter adjustment
increasing the tax benefit related to its first half pre-tax loss
by $1.9 million. Third quarter 2004 net income included a $0.4
million pre-tax charge related to restructuring costs in the
Australian business segment. Year-to-date fiscal 2005 reported net
loss was $2.2 million, or $0.25 per diluted share, compared to net
income of $4.2 million or $0.48 per diluted share, in 2004.
Consolidated year-to-date results for fiscal 2005 include
approximately $4.1 million in operating costs directly attributable
to the labor strike which was settled in the middle of the first
quarter, and incremental costs of $0.2 million related to the
initial assessment of internal controls pursuant to the
Sarbanes-Oxley Act. Year-to-date fiscal 2004 results include $1.1
million in pre-tax restructuring costs in the Australian and
Industrial Ingredients businesses and a $0.7 million pre-tax,
non-operating expense related to unamortized transaction fees
associated with the Company's prior credit agreement. Third quarter
consolidated sales rose to $76.1 million, up 5% over the same
period last year. Higher volumes in the Food Ingredients and
Australian operations, improved pricing in the Industrial
Ingredients business and stronger Australian Dollar currency
exchange rates contributed to the gain. Consolidated gross margin
as a percent of sales declined to 13.2% from 16.6% in the prior
year due to increased energy and chemical costs that are tracking
the rising price of oil as well as higher manufacturing expense in
Australia. Operating expenses for the third quarter of fiscal 2005
increased to 8.9% of sales from 8.5% last year primarily due to
employee costs. Interest expense for the third quarter rose to $1.5
million from $1.1 million last year on higher short-term interest
rates in the United States. Programs to optimize working capital
and improve asset returns increased third quarter operating cash
flow to $12.0 million from $7.1 million a year ago. The balance
sheet remains strong with total debt outstanding declining by $12.3
million from the beginning of the fiscal year to $68.0 million.
Segment Results Third quarter fiscal 2005 sales grew 22% to a
record level of $13.9 million at the Food Ingredients - North
America business. Quarterly volumes improved in the core potato
coatings product category and in applications used in the meat,
dairy and "low-carbohydrate" markets. Volumes into the "low-carb"
market meet outstanding orders that are expected to be fulfilled by
the end of fiscal 2005. Revenues from formulations developed for
markets that represent entirely new business have more than doubled
from the third quarter last year. Gross margin as a percent of
sales increased to 27.4% from 24.8% for the same period a year ago
as sales of higher margin products accelerated. Australia/New
Zealand sales for the third quarter rose 5% over the same period a
year ago on increased volumes and appreciating foreign exchange
rates. Gross margin as a percent of sales for the third quarter was
5.1% compared to 15% for the third quarter in the prior year.
Higher chemical and fuel costs accounted for approximately half of
the decline. Reduced production yields and throughput associated
primarily with transitioning manufacturing processes to more
value-added product lines contributed to the balance of the
decrease. Fiscal 2005 third quarter revenues at the Industrial
Ingredients - North America business were comparable to the same
period last year. Pricing has improved in core, international and
specialty products categories. Higher average selling prices have
offset rising utility and chemical expenses as well as a 17%
increase in natural gas costs. Sales of higher margin specialty
starches rose 10% in the third quarter and 35% year-to-date. Total
volume decreased 6% with lower margin starches declining from peaks
achieved in the third quarter of fiscal 2004. Third quarter gross
margin as a percent of sales declined to 13% from 15% last year.
Key productivity and manufacturing unit cost benchmarks recovered
to prior year levels during the quarter, reversing the impact of
the strike that ended last October. President and CEO Thomas
Malkoski said: "Performance in our North American Industrial and
Food businesses is stepping up, with Industrial Ingredients
production metrics back on track and Food Ingredients
commercializing several new product opportunities. We continue to
focus on programs in Australia that will improve our product mix,
operating efficiencies and returns." Penford will host a conference
call to discuss third quarter financial and operational results
today, June 21, 2005, 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. 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
Financial Highlights Three months ended Nine months ended May 31,
May 31, (In thousands except per ------------------
----------------- share data) 2005 2004 2005 2004 -------- --------
------- ------- Consolidated Results Sales $76,101 $72,484 $217,385
$207,136 Net income (loss) $2,585 $2,319 $(2,233) $4,199 Earnings
(loss) per share, diluted $0.29 $0.26 $(0.25) $0.48 Results by
Segment Industrial Ingredients: Sales $38,625 $38,679 $109,394
$107,006 Gross margin 13.0% 15.0% 6.1% 14.1% Operating income
(loss) 1,842 2,964 (1,944) 6,079 Food Ingredients - North America:
Sales $13,911 $11,417 $38,035 $34,283 Gross margin 27.4% 24.8%
25.4% 25.4% Operating income 1,825 1,096 4,320 3,714 Australia/New
Zealand: Sales $23,728 $22,580 $70,837 $66,306 Gross margin 5.1%
15.0% 5.9% 12.0% Operating income (loss) (105) 1,692 143 3,500 May
31, August 31, 2005 2004 --------- --------- Current assets $83,579
$83,580 Property, plant and equipment, net 127,896 130,392 Other
assets 50,776 51,824 --------- --------- Total assets 262,251
265,796 ========= ========= Current liabilities 53,328 43,295
Long-term debt 62,421 75,551 Other liabilities 49,721 51,231
Shareholders' equity 96,781 95,719 --------- --------- Total
liabilities and equity $262,251 $265,796 ========= ========= *T -0-
*T Penford Corporation Consolidated Statements of Income
(unaudited) Three months ended Nine months ended May 31, May 31,
(In thousands except share ------------------ ----------------- and
per share data) 2005 2004 2005 2004 -------- -------- -------
------- Sales $76,101 $72,484 $217,385 $207,136 Cost of sales
66,061 60,461 196,956 175,393 ------- ------- ------- ------- Gross
margin 10,040 12,023 20,429 31,743 Operating expenses 6,783 6,156
18,576 17,330 Research and development expenses 1,447 1,595 4,290
4,551 Restructuring costs, net - 384 - 1,125 ------- -------
------- ------- Income (loss) from operations 1,810 3,888 (2,437)
8,737 Non-operating income, net 1,209 505 1,661 1,010 Interest
expense (1,457) (1,060) (4,077) (3,352) ------- ------- -------
------- Income (loss) before income taxes 1,562 3,333 (4,853) 6,395
Income tax expense (benefit) (1,023) 1,014 (2,620) 2,196 -------
------- ------- ------- Net income (loss) $2,585 $2,319 $(2,233)
$4,199 ======= ======= ======= ======= Weighted average common
shares and equivalents outstanding, diluted 8,936,822 8,933,302
8,822,262 8,835,097 Earnings (loss) per share, diluted $0.29 $0.26
$(0.25) $0.48 Dividends declared per common share $0.06 $0.06 $0.18
$0.18 *T
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