Penford Corporation (Nasdaq: PENX), a global leader in ingredient
systems for food and industrial applications, today reported record
sales for the quarter ended May 31, 2007. Consolidated sales
increased $16.3 million to $95.4 million from $79.1 million a year
ago and gross margin increased $6.5 million to $18.6 million from
$12.1 million last year. Third quarter operating income grew 145%
to a record $8.5 million from $3.5 million in fiscal 2006. Net
income for the quarter was $5.0 million, or $0.54 per diluted
share, compared to net income of $2.0 million, or $0.22 per diluted
share, for the same quarter last year. Quarterly revenue rose on
higher average unit pricing in all businesses, new product
introductions by the North American Food Ingredients segment, and
product mix improvements. A 10% appreciation in the Australian
Dollar also contributed to the sales increase. Consolidated gross
margin as a percent of sales expanded to 19.5% from 15.2% a year
ago, driven by pricing gains and lower manufacturing costs
worldwide. Consolidated operating expenses as a percent of sales
declined to 10.6% of sales from 10.9% last year. Interest expense
for the quarter was $1.4 million compared to $1.5 million last
year. Interest expense of $0.1 million associated with the
Company�s ethanol construction project was capitalized in the third
quarter. During the third quarter, Penford capitalized $5.3 million
of costs attributable to the ethanol project, for a total of $11.2
million at May 31, 2007. Reported net income for the first nine
months of fiscal 2007 was $9.2 million, or $1.01 per diluted share,
compared to net income of $1.7 million, or $0.19 per diluted share,
a year ago. Consolidated sales for the nine months ended May 31,
2007 grew 13.7% to $266.1 million and operating income expanded to
$16.5 million from $5.0 million last year. Third Quarter Fiscal
2007 Segment Results The Company�s North American Industrial
Ingredients business reported quarterly sales rose 26.7% to $53.0
million from $41.8 million last year. International shipments
expanded 32% and volumes of Specialty Products grew 39%. Higher
unit prices and mix improvements contributed $5.2 million to
revenue. The impact from passing through higher corn prices to
customers added $7.8 million. These gains more than offset 6% lower
volumes as sales of toll manufactured products declined. Quarterly
gross margin improved by $4.3 million, or 66%, on increased revenue
and lower manufacturing expenses. Gross margin as a percent of
sales increased to 20.4% from 15.6% a year ago despite a 3.5%
negative impact on the ratio from the effect of passing through
higher corn costs. Operating income doubled to $7.1 million from
$3.5 million last year. The construction of the ethanol plant
within the Cedar Rapids site is on schedule with production
targeted for the end of this calendar year. The designed output
capacity has been expanded to 45 million gallons with a
proportional cost increase that maintains our $1.00 - $1.05 per
gallon capital investment in this project. Quarterly sales in the
North American Food Ingredients business grew 24.3% to $17.1
million from $13.7 million last year. Volume increases contributed
9% to the gain while higher unit pricing and improved mix added
another 15%. Sales of potato coating and protein applications
expanded at double-digit rates. Products with formulations designed
for the pet chew and treat markets were introduced during the
quarter and this category accounted for one-third of the sales gain
during the quarter. Gross margin increased $1.4 million to $5.1
million, reflecting revenue expansion and higher plant utilization
rates. Operating income for the third quarter rose 67% to $2.9
million from $1.7 million last year. Revenue at the Company�s
Australia/New Zealand business was $25.7 million, up $2.0 million
from last year. Volumes decreased 3.6%, primarily in categories
experiencing competition from products manufactured in countries
with weaker currencies than Australia. Price increases overcame a
$0.9 million increase in grain costs, reflecting the Company�s
program to offset the impact of the recent drought. Improved
manufacturing efficiencies lowered production costs and more than
compensated for slower volumes. Gross margin as a percent of sales
improved to 10.4% from 7.9% last year. Operating income for the
third quarter tripled to $0.9 million from $0.3 million a year ago.
�The third quarter results represent a step-change in performance
for Penford,� said Tom Malkoski, Penford Corporation President and
Chief Executive Officer. �Our Australian business is advancing
programs that align costs and resources with sensible initiatives
for margin improvement. North America Food Ingredients continues to
build its established business while extending technologies into
new applications and markets. The Industrial business is operating
its core business well, continuing the solid pace of growth in high
value Specialty Products and constructing capacity for ethanol
production. I believe these broad-based initiatives will deliver
value for our shareholders into the future.� Conference Call
Penford will host a conference call to discuss third quarter
financial and operational results today, June 28, 2007 at 11:00
a.m. Eastern Daylight time. Access information for the call and
webcast 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
the Company�s 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 May 31 Nine months ended May 31 (In thousands except per
share data) 2007� 2006� 2007� 2006� (unaudited) � Consolidated
Results � Sales $ 95,406� $ 79,130� $ 266,147� $ 234,111� � Net
income $ 4,955� $ 1,991� $ 9,234� $ 1,675� � Earnings per share,
diluted $ 0.54� $ 0.22� $ 1.01� $ 0.19� � � Results by Segment �
Industrial Ingredients: � Sales $ 52,965� $ 41,809� $ 143,650� $
121,454� Gross margin 20.4% 15.6% 16.4% 11.4% Operating income
7,066� 3,521� 13,896� 4,877� � Food Ingredients � North America: �
Sales $ 17,091� $ 13,747� $ 46,892� $ 42,404� Gross margin 29.6%
26.8% 29.6% 26.4% Operating income 2,918� 1,750� 7,931� 5,636� �
Australia/New Zealand: � Sales $ 25,668� $ 23,718� $ 76,296� $
70,795� Gross margin 10.4% 7.9% 8.7% 8.4% Operating income 856�
276� 1,607� 1,071� May 31, August 31, 2007� 2006� (unaudited) �
Current assets $ 105,157� $ 89,916� Property, plant and equipment,
net 138,173� 124,829� Other assets 38,279� 35,923� Total assets
281,609� 250,668� � Current liabilities 59,100� 57,843� Long-term
debt 67,589� 53,171� Other liabilities 32,429� 32,202�
Shareholders� equity 122,491� 107,452� Total liabilities and equity
$ 281,609� $ 250,668� Penford Corporation Consolidated Statements
of Income (unaudited) Three months ended May 31 Nine months ended
May 31 (In thousands except per share data) 2007� 2006� 2007� 2006�
(unaudited) � Sales $95,406� $79,130� $266,147� $234,111� � Cost of
sales 76,838� 67,070� 221,983� 203,107� Gross margin 18,568�
12,060� 44,164� 31,004� � Operating expenses 8,375� 7,020� 22,808�
21,429� Research and development expenses 1,737� 1,584� 4,886�
4,592� � Income from operations 8,456� 3,456� 16,470� 4,983� �
Non-operating income, net 344� 563� 1,095� 1,410� Interest expense
1,443� 1,522� 4,437� 4,388� � Income before income taxes 7,357�
2,497� 13,128� 2,005� � Income tax expense 2,402� 506� 3,894� 330�
� Net income $ 4,955� $ 1,991� $ 9,234� $ 1,675� � Weighted average
common shares and equivalents outstanding, diluted 9,258� 9,050�
9,159� 8,978� � Earnings per share, diluted $ 0.54� $ 0.22� $ 1.01�
$ 0.19� � Dividends declared per common share $ 0.06� $ 0.06� $
0.18� $ 0.18�
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