Penford Corporation (Nasdaq: PENX), a global leader in ingredient
systems for food and industrial applications, today reported that
consolidated sales for its second quarter of fiscal 2007, which
ended on February 28, 2007, rose 11% to $85.2 million from $77.1
million a year ago. Consolidated gross margin increased to $12.4
million from $8.5 million last year and second quarter operating
income grew to $3.5 million from $0.3 million in fiscal 2006. Net
income for the quarter was $1.7 million, or $0.19 per diluted
share, compared to a net loss of $0.5 million, or $0.06 per diluted
share, for the same quarter in fiscal 2006. Quarterly revenue
increased on improved average unit pricing worldwide, new business
gains in North America, and higher Australian Dollar exchange
rates. Consolidated gross margin as a percent of sales expanded to
14.5% from 11.1% a year ago, driven by revenue gains and lower
manufacturing costs in the U.S. Consolidated operating expenses as
a percent of sales were comparable to last year at 8.6%. Second
quarter non-operating income was $0.2 million, compared with $0.5
million a year ago. Interest expense increased $0.2 million to $1.7
million on higher debt balances to fund working capital
requirements. Interest expense of $0.1 million associated with the
Company�s ethanol construction project was capitalized in the
second quarter. Approximately $5.5 million of the $85.7 million
total debt outstanding at February 28, 2007 is attributable to the
ethanol project. Reported net income for the first half of fiscal
2007 was $4.3 million, or $0.47 per diluted share, compared to a
net loss of $0.3 million, or $0.04 per diluted share, a year ago.
Consolidated sales for the six months ended February 28, 2007 grew
10% to $170.7 million and operating income expanded to $8.0 million
from $1.5 million the prior year. Second Quarter Fiscal 2007
Segment Results The Company�s North American Industrial Ingredients
business sales rose 13.5% to $46.7 million. Higher unit prices and
mix improvements increased revenue by $3.2 million. The impact from
passing through higher corn prices to customers added $6.8 million.
These gains more than offset the effect from lower volumes as paper
industry customers adjusted inventories to maintain supply and
demand balances in the end markets. Shipments to new customers
contributed to a 27% gain in international revenues. Accelerating
new business activity and strong demand for adhesive formulations
contributed to a 32% increase in the specialty products segment,
which includes the Company�s Liquid Natural Additives product line.
Quarterly gross margin improved by $3.0 million on revenue gains
and lower manufacturing costs. Gross margin as a percent of sales
increased to 14.5% despite a 2.5% negative impact on the ratio from
the effect of passing through higher corn costs to customers.
Operating income grew to $3.6 million from $0.8 million last year.
The construction of the 40 million gallon ethanol plant within the
Cedar Rapids site remains on plan for spending and schedule, with
production targeted for later this calendar year. In the North
American Food Ingredients business, introductions of new products,
led by protein applications for food service customers, as well as
higher unit prices and mix improvements, contributed to revenue
gains. Quarterly sales grew 7.3% over last year to $14.6 million.
Gross margin increased $0.8 million to $4.0 million, reflecting
revenue expansion and higher plant utilization rates. Additional
spending for research and technical programs increased
administrative expenses by 7% over last year. Operating income for
the second quarter rose 46% to $2.2 million from $1.5 million last
year. Revenue at the Company�s Australia/New Zealand business grew
7.4% over last year to $24.1 million on higher average unit pricing
and stronger foreign currency exchange rates. Sales in local
currency increased 2%. The second quarter of the fiscal year is
historically the slowest for this business, reflecting holiday and
seasonal production curtailments by customers in that region. Gross
margin as a percent of sales was comparable to the prior year at
6.6%, as stronger pricing was offset by higher raw material costs.
Operating expenses increased 18% over the prior year as the
business upgraded its commercial team capabilities. The business
reported a second quarter loss from operations of $0.1 million
compared to operating income of $0.1 million last year. Drought
conditions in Australia increased grain costs by $0.5 million in
the second quarter. Projected grain requirements through the next
harvest have been secured at current market prices and the Company
expects these grain costs to exceed prior year comparisons in each
of the next three quarters. Pricing programs have been implemented
to recover these input cost increases. The Company is also
monitoring progress with cost containment programs designed to
mitigate these cyclical cost changes. �The Company�s second quarter
results were strong during a period of slower seasonality for our
businesses,� said Tom Malkoski, Penford Corporation President and
Chief Executive Officer. �While improvement in results in our
Australian segment has yet to materialize, performance in our North
American Industrial and Food segments is on track, and reflects
good implementation of our strategies and business plans.
Initiatives in place should position the Company well to continue
this progress in the second half of our fiscal year.� Conference
Call Penford will host a conference call to discuss second quarter
financial and operational results today, April 9, 2007 at 11:00
a.m. Eastern Standard 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. About Penford Corporation 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 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; unanticipated ethanol facility construction or
procurement delays that could result in delay in the timing of the
commencement of ethanol production; unexpected cost overruns;
technical difficulties, nonperformance by contractors or mandated
changes in project requirements or specifications; changes in
general economic conditions or developments with respect to
specific industries, markets or customers which affect demand for
the Company�s products, including unfavorable shifts in product
mix; adverse litigation results or unanticipated third party
claims; interest rate, chemical 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 February 28 Six months ended February 28 (In thousands except
per share data) 2007� 2006� 2007� 2006� (unaudited) � Consolidated
Results � Sales $ 85,241� $ 77,078� $ 170,741� $ 154,981� � Net
income (loss) $ 1,706� $ (511) $ 4,279� $ (316) � Earnings (loss)
per share, diluted $ 0.19� $ (0.06) $ 0.47� $ (0.04) � � Results by
Segment � Industrial Ingredients: � Sales $ 46,713� $ 41,165� $
90,685� $ 79,646� Gross margin 14.5% 9.3% 14.1% 9.3% Operating
income 3,649� 781� 6,830� 1,355� � Food Ingredients � North
America: � Sales $ 14,561� $ 13,567� $ 29,801� $ 28,657� Gross
margin 27.8% 23.9% 29.7% 26.1% Operating income 2,160� 1,485�
5,013� 3,886� � Australia/New Zealand: � Sales $ 24,104� $ 22,442�
$ 50,628� $ 47,077� Gross margin 6.6% 6.6% 7.9% 8.7% Operating
income (loss) (57) 98� 751� 795� February 28, August 31, 2007�
2006� (unaudited) � Current assets $ 102,571� $ 89,916� Property,
plant and equipment, net 133,641� 124,829� Other assets 37,514�
35,923� Total assets 273,726� 250,668� � Current liabilities
53,460� 57,843� Long-term debt 74,239� 53,171� Other liabilities
32,600� 32,202� Shareholders� equity 113,427� 107,452� Total
liabilities and equity $ 273,726� $ 250,668� Penford Corporation
Consolidated Statements of Income (unaudited) Three months ended
February 28 Six months ended February 28 (In thousands except per
share data) 2007� 2006� 2007� 2006� (unaudited) � Sales $85,241�
$77,078� $170,741� $154,981� � Cost of sales 72,839� 68,534�
145,145� 136,037� Gross margin 12,402� 8,544� 25,596� 18,944� �
Operating expenses 7,333� 6,671� 14,433� 14,408� Research and
development expenses 1,578� 1,571� 3,150� 3,008� � Income from
operations 3,491� 302� 8,013� 1,528� � Non-operating income, net
229� 486� 751� 847� Interest expense (1,689) (1,534) (2,993)
(2,867) � Income (loss) before income taxes 2,031� (746) 5,771�
(492) � Income tax expense (benefit) 325� (235) 1,492� (176) � Net
income (loss) $ 1,706� $ (511) $ 4,279� $ (316) � Weighted average
common shares and equivalents outstanding, diluted 9,152� 8,881�
9,103� 8,879� � Earnings (loss) per share, diluted $ 0.19� $ (0.06)
$ 0.47� $ (0.04) � Dividends declared per common share $ 0.06� $
0.06� $ 0.12� $ 0.12�
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