NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1BUSINESS
Penford Corporation (which, together with its subsidiary companies, is referred to herein as Penford or the
Company) is a developer, manufacturer and marketer of specialty natural-based ingredient systems for food and industrial applications, including fuel grade ethanol. Penfords products provide convenient and cost-effective solutions
derived from renewable sources. Sales of the Companys products are generated using a combination of direct sales and distributor agreements.
The Company has significant research and development capabilities, which are used in applying the complex chemistry of carbohydrate-based materials and in developing applications to address customer
needs. In addition, the Company has specialty processing capabilities for a variety of modified starches.
Penford manages its
business in two segments: Industrial Ingredients and Food Ingredients. These segments are based on broad categories of end-market users. The Industrial Ingredients segment is a supplier of specialty starches to the paper, packaging and other
industries, and is a producer of fuel grade ethanol. The Industrial Ingredients segment also sells the by-products from its corn wet milling manufacturing operations, primarily germ, fiber and gluten, to customers who use these by-products as animal
feed or to produce corn oil. The Companys financial statements included in this Quarterly Report on Form 10-Q/A as of February 28, 2013 have been restated to reclassify the proceeds from the sale of by-products to sales rather than as a
reduction in cost of sales. The Food Ingredients segment is a developer and manufacturer of specialty starches and dextrins for the food manufacturing and food service industries. See Note 11 for financial information regarding the
Companys business segments.
In January 2012, the Company completed the acquisition of the businesses operated by
Carolina Starches, LLC and related entities (Carolina Starches) for $8.5 million in cash. Carolina Starches manufactures and markets cationic starches produced from potato, corn and tapioca. The acquisition of these businesses provided
an important source of raw material to support continued growth in the Food Ingredients business and it broadened the Companys portfolio of specialty modified industrial starches. See Note 11 for information concerning the integration of the
operations of Carolina Starches into the Companys two business segments.
2RESTATEMENT OF PREVIOUSLY ISSUED FINANCIAL STATEMENTS
The Company had previously recorded the proceeds from the sale of by-products from its Cedar Rapids, Iowa,
manufacturing operations as a reduction of cost of sales. The Company believed that this accounting treatment was an acceptable accounting policy under accounting principles generally accepted in the United States. After several months of
consultation and review with the Staff of the Securities and Exchange Commission (SEC), the Company and the Companys Audit Committee concluded that the proceeds from the sale of by-products should be classified as sales rather than
as a reduction of cost of sales in the Condensed Consolidated Statements of Operations.
As a result of the above, the Company
restated the amounts of sales and cost of sales as previously reported.
|
|
|
Condensed Consolidated Statements of Operations increased consolidated sales and increased cost of sales for the three- and six-month periods
ended February 28, 2013 and February 29, 2012
|
|
|
|
Note 11 Segment Reporting increased consolidated and Industrial Ingredients segment sales for the three- and six-month periods ended
February 28, 2013 and February 29, 2012
|
The adjustments to sales and cost of sales shown below
affect the amounts previously reported for the Companys consolidated sales and cost of sales and the sales of the Companys Industrial Ingredients segment as previously reflected in the segment footnote. The following is a reconciliation
of sales and cost of sales as previously reported to the restated amounts. The adjustments do not affect the Companys previously reported gross margin, income (loss) from operations, net income (loss) or earnings (loss) per share in the
Condensed Consolidated Statements of Operations for the three- and six-month periods ended February 28, 2013 and February 29, 2012 or to any items reported in the Condensed Consolidated Balance Sheets or the Condensed Consolidated
Statements of Comprehensive Income (Loss) or Cash Flows.
7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As Previously
Reported
|
|
|
Adjustment
|
|
|
As Restated
|
|
|
|
(Dollars in thousands)
|
|
Quarter Ended February 28, 2013
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated sales
|
|
$
|
89,037
|
|
|
$
|
21,045
|
|
|
$
|
110,082
|
|
Consolidated cost of sales
|
|
|
78,036
|
|
|
|
21,045
|
|
|
|
99,081
|
|
Industrial Ingredient sales
|
|
|
62,433
|
|
|
|
21,045
|
|
|
|
83,478
|
|
Quarter Ended February 29, 2012
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated sales
|
|
$
|
86,188
|
|
|
$
|
17,289
|
|
|
$
|
103,477
|
|
Consolidated cost of sales
|
|
|
76,787
|
|
|
|
17,289
|
|
|
|
94,076
|
|
Industrial Ingredient sales
|
|
|
61,284
|
|
|
|
17,289
|
|
|
|
78,573
|
|
Six Months Ended February 28, 2013
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated sales
|
|
$
|
183,896
|
|
|
$
|
44,208
|
|
|
$
|
228,104
|
|
Consolidated cost of sales
|
|
|
159,637
|
|
|
|
44,208
|
|
|
|
203,845
|
|
Industrial Ingredient sales
|
|
|
129,638
|
|
|
|
44,208
|
|
|
|
173,846
|
|
Six Months Ended February 29, 2012
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated sales
|
|
$
|
176,934
|
|
|
$
|
34,711
|
|
|
$
|
211,645
|
|
Consolidated cost of sales
|
|
|
155,725
|
|
|
|
34,711
|
|
|
|
190,436
|
|
Industrial Ingredient sales
|
|
|
126,106
|
|
|
|
34,711
|
|
|
|
160,817
|
|
In addition to the amounts restated above, the Company has also corrected an error in the consolidated
statements of cash flows to properly classify proceeds and payments related to a short term financing arrangement as a financing activity rather than as an operating activity. The net amount of proceeds and repayments previously reflected as a
Change in operating assets and liabilities accounts payable and accrued liabilities of $(893,000) and $(253,000) for the six months ended February 28, 2013 and February 29, 2012, respectively, have been corrected
within financing activities at their appropriate gross amounts of proceeds and payments for each respective period.
3BASIS OF PRESENTATION
Consolidation
The accompanying condensed consolidated financial statements include the accounts of Penford and its wholly owned subsidiaries. All intercompany transactions and balances have been eliminated. The
condensed consolidated balance sheet at February 28, 2013 and the condensed consolidated statements of operations, comprehensive income (loss) and cash flows for the interim periods ended February 28, 2013 and February 29, 2012 have
been prepared by the Company without audit. In the opinion of management, all adjustments, consisting only of normal recurring adjustments, which are necessary to present fairly the financial information, have been made. Certain information and
footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America (U.S. GAAP), have been condensed or omitted pursuant to the rules and
regulations of the SEC. The results of operations for interim periods are not necessarily indicative of the operating results of a full year or of future operations. Certain prior period amounts have been reclassified to conform to the current
period presentation. The accompanying condensed consolidated financial statements should be read in conjunction with the consolidated financial statements included in the Companys Annual Report on Form 10-K/A for the year ended August 31,
2012.
Use of Estimates
The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the
financial statements, and the reported amounts of revenues and expenses during the reporting period. Estimates are used in accounting for, among other things, the allowance for doubtful accounts, accruals, legal contingencies, the determination of
fair value of net assets acquired in a business combination, the determination of assumptions for pension and postretirement employee benefit costs, useful lives of property and equipment, the assessment of a potential impairment of goodwill or
long-lived assets and income taxes including the determination of a need for a valuation allowance for deferred tax assets. Actual results may differ from previously estimated amounts.
8
Recent Accounting Pronouncements
In June 2011, the Financial Accounting Standards Board (FASB) issued guidance requiring entities to present the total of
comprehensive income, the components of net income, and the components of other comprehensive income either in a single continuous statement of comprehensive income or in two separate but consecutive statements. The amendment does not change the
items that must be reported in other comprehensive income or when an item of other comprehensive income must be reclassified to net income under current accounting standards. The guidance was effective for the Companys fiscal year and interim
periods beginning September 1, 2012. The Company adopted this amended guidance in fiscal 2013 and presented the Condensed Consolidated Statements of Comprehensive Income (Loss) immediately following the Condensed Consolidated Statements of
Operations.
In February 2013, the FASB issued guidance requiring entities to provide information about the amounts
reclassified out of accumulated other comprehensive income by component. Entities are required to present, either on the face of the financial statements or in the notes, significant amounts reclassified out of accumulated other comprehensive income
by the respective line items of net income. This guidance, which is effective prospectively for reporting periods beginning after December 15, 2012, does not change the current requirements for reporting net income or other comprehensive
income. The Company is evaluating the impact this guidance will have on its disclosures.
In December 2011, the FASB issued
guidance creating new disclosure requirements about the nature of an entitys rights of setoff and related arrangements associated with its financial instruments and derivative instruments. The disclosure requirements are effective for annual
reporting periods, and interim reporting periods within those years, beginning on or after January 1, 2013 (fiscal 2014 for Penford). The Company is evaluating the impact this update will have on its disclosures.
4BALANCE SHEET DETAILS
The components of inventory are as follows:
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February 28,
2013
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|
|
August 31,
2012
|
|
|
|
(In thousands)
|
|
Raw materials
|
|
$
|
23,924
|
|
|
$
|
19,773
|
|
Work in progress
|
|
|
1,580
|
|
|
|
1,542
|
|
Finished goods
|
|
|
22,009
|
|
|
|
22,357
|
|
|
|
|
|
|
|
|
|
|
Total inventories
|
|
$
|
47,513
|
|
|
$
|
43,672
|
|
|
|
|
|
|
|
|
|
|
The components of property, plant and equipment are as follows:
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|
|
|
|
|
|
|
|
|
February 28,
2013
|
|
|
August 31,
2012
|
|
|
|
(In thousands)
|
|
Land
|
|
$
|
11,624
|
|
|
$
|
11,623
|
|
Plant and equipment
|
|
|
353,565
|
|
|
|
346,087
|
|
Construction in progress
|
|
|
4,468
|
|
|
|
7,679
|
|
|
|
|
|
|
|
|
|
|
|
|
|
369,657
|
|
|
|
365,389
|
|
Accumulated depreciation
|
|
|
(258,709
|
)
|
|
|
(252,198
|
)
|
|
|
|
|
|
|
|
|
|
Net property, plant and equipment
|
|
$
|
110,948
|
|
|
$
|
113,191
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|
|
|
|
|
|
|
|
|
|
At February 28, 2013 and August 31, 2012, the Company had approximately $0.4 million and $1.1
million, respectively, of payables related to property, plant and equipment which have been excluded from acquisitions of property, plant and equipment in the statement of cash flows.
9
Components of accrued liabilities are as follows:
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|
|
|
|
|
|
|
|
February 28,
2013
|
|
|
August 31,
2012
|
|
|
|
(In thousands)
|
|
Employee-related costs
|
|
$
|
3,434
|
|
|
$
|
4,837
|
|
Other accrued liabilities
|
|
|
3,869
|
|
|
|
4,305
|
|
|
|
|
|
|
|
|
|
|
Total accrued liabilities
|
|
$
|
7,303
|
|
|
$
|
9,142
|
|
|
|
|
|
|
|
|
|
|
Employee-related costs include accrued payroll, compensated absences, payroll taxes, benefits and
incentives.
5DEBT
As of February 28, 2013, the Company had $84.0 million outstanding on its $130 million secured revolving credit
facility (the 2012 Agreement) with a syndicate of banks. The lenders loan commitment may be increased under certain circumstances.
The maturity date for the revolving loans under the 2012 Agreement is July 9, 2017. Interest rates under the 2012 Agreement are based on either the London Interbank Offered Rate (LIBOR)
or the prime rate, depending on the selection of available borrowing options under the 2012 Agreement. Pursuant to the 2012 Agreement, the interest rate margin over LIBOR can range between 2% and 4%, depending upon the ratio of the Companys
funded debt to earnings before interest, taxes, depreciation and amortization (defined in the 2012 Agreement as the Total Leverage Ratio).
The 2012 Agreement provides that the Total Leverage Ratio shall not exceed 3.50 through November 30, 2013; 3.25 through May 31, 2014; and 3.0 thereafter. In addition, the Company must maintain a
Fixed Charge Coverage Ratio, as defined in the 2012 Agreement, of not less than 1.35. Annual capital expenditures will be restricted to $15 million if the Total Leverage Ratio is greater than 2.50 for two consecutive fiscal quarters. The
Companys obligations under the 2012 Agreement are secured by substantially all of the Companys assets.
At
February 28, 2013, the Company also had two non interest bearing loans from the Iowa Department of Economic Development (IDED). The IDED provided two five-year non interest bearing loans as follows: (1) a $1.0 million loan to
be repaid in 60 equal monthly payments of $16,667 beginning December 1, 2009, and (2) a $1.0 million loan which is forgivable if the Company maintains certain levels of employment at the Cedar Rapids plant. At February 28, 2013, the
Company had $1.3 million outstanding related to the IDED loans.
Pursuant to the 2012 Agreement, the Company may declare and
pay dividends on its common stock in an amount not to exceed, in any consecutive four quarters, the lesser of $10 million or 50% of Free Cash Flow, as defined in the 2012 Agreement. As of February 28, 2013, the Company was not permitted to pay
dividends.
6INCOME TAXES
Effective Tax Rates
The Companys effective tax rates for the three- and six-month periods ended February 28, 2013 were 27% and 34%, respectively. The difference between the effective tax rates and the U.S. federal
statutory tax rate was primarily due to state income taxes, offset by the tax benefit associated with the research and development tax credit. On January 2, 2013, the American Taxpayer Relief Act of 2012 was enacted, which retroactively
reinstated, to January 1, 2012, several corporate tax provisions that had expired, including the research and development tax credit. The Company recorded $0.15 million in the second quarter of fiscal 2013 related to this tax credit for
research and development activities in fiscal 2012, which reduced the effective tax rates by 9% and 3%, respectively, for the three- and six-month periods ended February 28, 2013.
The Companys effective tax rate for the first half of fiscal 2012 was 82%. The difference between the effective tax rate and the
U.S. federal statutory tax rate was primarily due to state income taxes and dividends and accretion of discount on the Companys 15% Series A Preferred Stock. The dividends and accretion of discount were reported as interest expense in the
Condensed Consolidated Statements of Operations but were not deductible for tax return purposes. The Series A Preferred Stock was redeemed in the third and fourth quarters of fiscal 2012.
10
Valuation Allowance
In fiscal 2012, the Company recorded a $1.8 million valuation allowance primarily related to small ethanol producer tax credit
carryforwards which expire in fiscal 2014. Tax laws require that any net operating loss carryforwards be utilized before the Company can utilize the small ethanol producer tax credit carryforwards. Due to the near-term expiration of the small
ethanol producer tax credit carryforward period, the Company does not believe it has sufficient positive evidence to substantiate that the small ethanol tax credit carryforwards are realizable at a more-likely-than-not level of assurance and
recorded a $1.8 million valuation allowance. The valuation allowance will be reversed in future periods if these tax credit carryforwards are utilized.
At February 28, 2013, the Company had $12.7 million of net deferred tax assets. Other than for the ethanol tax credit carryforwards discussed above, a valuation allowance has not been provided on the
net U.S. deferred tax assets as of February 28, 2013. The determination of the need for a valuation allowance requires significant judgment and estimates. The Company evaluates the requirement for a valuation allowance each quarter. The
Company believes that it is more likely than not that future operations and the reversal of existing taxable temporary differences will generate sufficient taxable income to realize its deferred tax assets, except for the small ethanol producer tax
credit carryforwards, for which a valuation allowance has been provided.
Uncertain Tax Positions
In the three- and six month periods ended February 28, 2013, the amount of unrecognized tax benefits increased by approximately
$20,000 and $63,000, respectively. The total amount of unrecognized tax benefits at February 28, 2013 was $1.1 million, all of which, if recognized, would favorably impact the effective tax rate. At February 28, 2013, the Company had $0.2
million of accrued interest and penalties included in Other liabilities in the Condensed Consolidated Balance Sheets.
Other
The Company files tax returns in the U.S. federal jurisdiction and various U.S. state jurisdictions, and is subject to examination by
taxing authorities in all of those jurisdictions. From time to time, the Companys tax returns are reviewed or audited by U.S. federal and various U.S. state taxing authorities. The Company believes that adjustments, if any, resulting from
these reviews or audits would not be material, individually or in the aggregate, to the Companys financial position, results of operations or liquidity. It is reasonably possible that the amount of unrecognized tax benefits related to certain
of the Companys tax positions will increase or decrease in the next twelve months as audits or reviews are initiated and settled. At this time, an estimate of the range of a reasonably possible change cannot be made. The Company is not subject
to income tax examinations by U.S. federal or state jurisdictions for fiscal years prior to 2007.
7OTHER COMPREHENSIVE INCOME (LOSS) (OCI)
The components of accumulated other comprehensive loss and other comprehensive income (loss) are summarized as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
(In thousands)
|
|
Net Unrealized
Gains (Losses)
on Cash Flow
Hedging
Instruments
|
|
|
Gains (Losses)
on
Postretirement
Obligations
|
|
|
Accumulated
Other
Comprehensive
Loss
|
|
Balance at August 31, 2012
|
|
$
|
1,638
|
|
|
$
|
(17,231
|
)
|
|
$
|
(15,593
|
)
|
Other comprehensive income (loss), net of taxes
|
|
|
(2,085
|
)
|
|
|
710
|
|
|
|
(1,375
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at February 28, 2013
|
|
$
|
(447
|
)
|
|
$
|
(16,521
|
)
|
|
$
|
(16,968
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(In thousands)
|
|
Net Unrealized
Gains (Losses)
on Cash Flow
Hedging
Instruments
|
|
|
Postretirement
Obligations
|
|
|
Accumulated
Other
Comprehensive
Loss
|
|
Balance at August 31, 2011
|
|
$
|
731
|
|
|
$
|
(8,290
|
)
|
|
$
|
(7,559
|
)
|
Other comprehensive income (loss), net of taxes
|
|
|
(713
|
)
|
|
|
|
|
|
|
(713
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at February 29, 2012
|
|
$
|
18
|
|
|
$
|
(8,290
|
)
|
|
$
|
(8,272
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
11
8STOCK-BASED COMPENSATION
Stock Compensation Plans
Penford maintains the 2006 Long-Term Incentive Plan, as amended, (the 2006 Incentive Plan) pursuant to which various stock-based awards may be granted to employees, directors and consultants.
As of February 28, 2013, the aggregate number of shares of the Companys common stock that were available to be issued as awards under the 2006 Incentive Plan was 311,116. In addition, any shares previously granted under the 1994 Stock
Option Plan which are subsequently forfeited or not exercised will be available for future grants under the 2006 Incentive Plan. Non-qualified stock options and restricted stock awards granted under the 2006 Incentive Plan generally vest ratably
over one to four years and expire seven years from the date of grant.
General Option Information
A summary of the stock option activity for the six months ended February 28, 2013, is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of
Shares
|
|
|
Weighted
Average
Exercise Price
|
|
|
Weighted
Average
Remaining
Term (in years)
|
|
|
Aggregate
Intrinsic Value
|
|
Outstanding Balance, August 31, 2012
|
|
|
1,824,916
|
|
|
$
|
10.94
|
|
|
|
|
|
|
|
|
|
Granted
|
|
|
100,000
|
|
|
|
7.97
|
|
|
|
|
|
|
|
|
|
Exercised
|
|
|
(35,500
|
)
|
|
|
5.65
|
|
|
|
|
|
|
|
|
|
Cancelled
|
|
|
(69,964
|
)
|
|
|
13.43
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding Balance, February 28, 2013
|
|
|
1,819,452
|
|
|
|
10.79
|
|
|
|
3.76
|
|
|
$
|
3,841,500
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options Exercisable at February 28, 2013
|
|
|
1,216,453
|
|
|
$
|
13.16
|
|
|
|
2.63
|
|
|
$
|
1,341,700
|
|
The aggregate intrinsic value disclosed in the table above represents the total pretax intrinsic value,
based on the Companys closing stock price of $10.15 as of February 28, 2013 that would have been received by the option holders had all option holders exercised on that date.
The Company estimated the fair value of stock options granted during the first six months of fiscal 2013 using the following
weighted-average assumptions and resulting in the following weighted-average grant date fair values:
|
|
|
Expected volatility
|
|
68%
|
Expected life (years)
|
|
4.6
|
Interest rate
|
|
0.6-1.0%
|
Weighted-average fair values
|
|
$4.30
|
As of February 28, 2013, the Company had $1.2 million of unrecognized compensation cost related to
non-vested stock option awards that is expected to be recognized over a weighted average period of 1.3 years.
Restricted
Stock Awards
The grant date fair value of each share of the Companys restricted stock awards is equal to the fair
value of Penfords common stock at the grant date. The following table summarizes the restricted stock award activity for the six months ended February 28, 2013 as follows:
|
|
|
|
|
|
|
|
|
|
|
Number of
Shares
|
|
|
Weighted
Average
Grant Date
Fair Value
|
|
Nonvested at August 31, 2012
|
|
|
61,716
|
|
|
$
|
5.94
|
|
Granted
|
|
|
24,489
|
|
|
|
7.35
|
|
Vested
|
|
|
(61,716
|
)
|
|
|
5.94
|
|
Cancelled
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nonvested at February 28, 2013
|
|
|
24,489
|
|
|
$
|
7.35
|
|
|
|
|
|
|
|
|
|
|
On January 1, 2013, each non-employee director received an award of 2,721 shares of restricted stock
under the 2006 Incentive Plan at the closing stock price on December 31, 2012. The shares vest one year from the grant date of the award. The Company recognizes compensation cost for restricted stock ratably over the vesting period.
12
As of February 28, 2013, the Company had $0.2 million of unrecognized compensation cost
related to non-vested restricted stock awards that is expected to be recognized over a weighted average period of 0.8 years.
Compensation Expense
The Company recognizes stock-based compensation expense utilizing the accelerated multiple option approach over the requisite service period, which equals the vesting period. The following table
summarizes the total stock-based compensation cost and the effect on the Companys Condensed Consolidated Statements of Operations (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended
|
|
|
Six months ended
|
|
|
|
February 28,
2013
|
|
|
February 29,
2012
|
|
|
February 28,
2013
|
|
|
February 29,
2012
|
|
Cost of sales
|
|
$
|
|
|
|
$
|
6
|
|
|
$
|
|
|
|
$
|
32
|
|
Operating expenses
|
|
|
395
|
|
|
|
200
|
|
|
|
812
|
|
|
|
403
|
|
Research and development expenses
|
|
|
|
|
|
|
2
|
|
|
|
|
|
|
|
11
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total stock-based compensation expense
|
|
$
|
395
|
|
|
$
|
208
|
|
|
$
|
812
|
|
|
$
|
446
|
|
Income tax benefit
|
|
|
150
|
|
|
|
79
|
|
|
|
309
|
|
|
|
169
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total stock-based compensation expense, net of tax
|
|
$
|
245
|
|
|
$
|
129
|
|
|
$
|
503
|
|
|
$
|
277
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
9PENSION AND POST-RETIREMENT BENEFIT PLANS
The components of the net periodic pension and post-retirement benefit costs are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Defined benefit pension plans
|
|
Three months ended
|
|
|
Six months ended
|
|
|
|
February 28,
2013
|
|
|
February 29,
2012
|
|
|
February 28,
2013
|
|
|
February 29,
2012
|
|
|
|
(In thousands)
|
|
Service cost
|
|
$
|
486
|
|
|
$
|
380
|
|
|
$
|
972
|
|
|
$
|
760
|
|
Interest cost
|
|
|
662
|
|
|
|
682
|
|
|
|
1,324
|
|
|
|
1,364
|
|
Expected return on plan assets
|
|
|
(717
|
)
|
|
|
(729
|
)
|
|
|
(1,434
|
)
|
|
|
(1,458
|
)
|
Amortization of prior service cost
|
|
|
60
|
|
|
|
57
|
|
|
|
120
|
|
|
|
114
|
|
Amortization of actuarial losses
|
|
|
483
|
|
|
|
193
|
|
|
|
966
|
|
|
|
386
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net periodic benefit cost
|
|
$
|
974
|
|
|
$
|
583
|
|
|
$
|
1,948
|
|
|
$
|
1,166
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Post-retirement health care plans
|
|
Three months ended
|
|
|
Six months ended
|
|
|
|
February 28,
2013
|
|
|
February 29,
2012
|
|
|
February 28,
2013
|
|
|
February 29,
2012
|
|
|
|
(In thousands)
|
|
Service cost
|
|
$
|
59
|
|
|
$
|
57
|
|
|
$
|
118
|
|
|
$
|
114
|
|
Interest cost
|
|
|
215
|
|
|
|
243
|
|
|
|
430
|
|
|
|
486
|
|
Amortization of prior service cost
|
|
|
(38
|
)
|
|
|
(38
|
)
|
|
|
(76
|
)
|
|
|
(76
|
)
|
Amortization of actuarial losses
|
|
|
67
|
|
|
|
|
|
|
|
134
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net periodic benefit cost
|
|
$
|
303
|
|
|
$
|
262
|
|
|
$
|
606
|
|
|
$
|
524
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10FAIR VALUE MEASUREMENTS AND DERIVATIVE INSTRUMENTS
Fair Value Measurements
Presented below are the fair values of the Companys derivatives as of February 28, 2013 and August 31, 2012:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of February 28, 2013
|
|
(Level 1)
|
|
|
(Level 2)
|
|
|
(Level 3)
|
|
|
Total
|
|
|
|
(in thousands)
|
|
Current assets (Other Current Assets):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commodity derivatives
(1)
|
|
$
|
(419
|
)
|
|
$
|
|
|
|
$
|
|
|
|
$
|
(419
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
13
(1)
|
On the condensed consolidated balance sheet, commodity derivative assets and liabilities have been offset by cash collateral due and paid under master netting
arrangements which are recorded together in Other Current Assets. The cash collateral offset was $1.1 million at February 28, 2013.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of August 31, 2012
|
|
(Level 1)
|
|
|
(Level 2)
|
|
|
(Level 3)
|
|
|
Total
|
|
|
|
(in thousands)
|
|
Current assets (Other Current Assets):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commodity derivatives
(1)
|
|
$
|
(1,422
|
)
|
|
$
|
|
|
|
$
|
|
|
|
$
|
(1,422
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
On the condensed consolidated balance sheet, commodity derivative assets and liabilities have been offset by cash collateral due and paid under master netting
arrangements which are recorded together in Other Current Assets. The cash collateral offset was $2.6 million at August 31, 2012.
|
The three levels of inputs that may be used to measure fair value are:
|
|
|
Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities that the entity has the ability to access at the
measurement date.
|
|
|
|
Level 2 inputs are other than quoted prices included within Level 1 that are observable for assets and liabilities such as (1) quoted prices for
similar assets or liabilities in active markets, (2) quoted prices for identical or similar assets or liabilities in markets that are not active, or (3) inputs that are derived principally or corroborated by observable market data by
correlation or other means.
|
|
|
|
Level 3 inputs are unobservable inputs to the valuation methodology for the assets or liabilities.
|
Other Financial Instruments
The carrying value of cash and cash equivalents, receivables and payables approximates fair value because of their short maturities. The Companys bank debt reprices with changes in market interest
rates and, accordingly, the carrying amount of such debt approximates fair value.
The Company has two non-interest bearing
loans from the State of Iowa. The carrying value of the debt at February 28, 2013 was $1.3 million and the fair value of the debt was estimated to be $1.2 million. See Note 5. The fair values of these loans were calculated utilizing Level 2
inputs to a discounted cash flow model. The most significant input is the discount rate which was determined by comparing yields on corporate debentures for debt issuers with financial characteristics similar to Penfords non-interest bearing
loans.
Commodity Contracts
The Company uses forward contracts and readily marketable exchange-traded futures on corn and natural gas to manage the price risk of these inputs to its manufacturing process. The Company also uses
futures contracts to manage the variability of the cash flows from the forecasted sales of ethanol. The Company has designated the derivative instruments on corn and the forecasted sales of ethanol as hedges.
For derivative instruments designated as fair value hedges, the gain or loss on the derivative instruments as well as the offsetting gain
or loss on the hedged firm commitments and/or inventory are recognized in current earnings as a component of cost of sales. For derivative instruments designated as cash flow hedges, the effective portion of the gain or loss on the derivative
instruments is reported as a component of other comprehensive income (loss), net of applicable income taxes, and recognized in earnings when the hedged exposure affects earnings. The Company recognizes the gain or loss on the derivative instrument
as a component of cost of sales in the period when the finished goods produced from the hedged item are sold. If it is determined that the derivative instruments used are no longer effective at offsetting changes in the price of the hedged item,
future changes in fair value would be recognized in current earnings as a component of cost of goods sold.
To reduce the
price volatility of corn used in fulfilling some of its starch sales contracts, Penford uses readily marketable exchange-traded futures as well as forward cash corn purchases. The exchange-traded futures are not purchased or sold for trading or
speculative purposes and are designated as hedges. Penford also uses exchange-traded futures to hedge corn inventories and firm corn purchase contracts. Hedged transactions are generally expected to occur within 12 months of the time the hedge is
established. The deferred loss, net of tax, recorded in other comprehensive income at February 28, 2013 that is expected to be reclassified into income within 12 months is $0.4 million.
As of February 28, 2013, Penford had purchased corn positions of 4.9 million bushels, of which 2.5 million bushels
represented equivalent firm priced starch and ethanol sales contract volume, resulting in an open position of 2.4 million bushels.
14
Prices for natural gas fluctuate due to anticipated changes in supply and demand and
movement of prices of related or alternative fuels. To reduce the price risk caused by market fluctuations, Penford generally enters into short-term purchase contracts or uses exchange-traded futures contracts to hedge exposure to natural gas price
fluctuations. In September 2011, the Company discontinued hedge accounting treatment for natural gas futures as the hedging relationship no longer met the requirements for hedge accounting. Gains and losses on natural gas futures contracts are
recognized in current earnings in cost of sales.
As of February 28, 2013, the Company had the following outstanding
futures contracts:
|
|
|
|
|
|
|
|
|
|
|
Corn Futures
|
|
5,170,000
|
|
Bushels
|
|
|
|
|
Natural Gas Futures
|
|
720,000
|
|
mmbtu (millions of British thermal units)
|
|
|
|
|
Ethanol Futures
|
|
290,000
|
|
Gallons
|
|
|
The following tables provide information about the fair values of the Companys derivatives, by
contract type, as of February 28, 2013 and August 31, 2012.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Assets
|
|
|
Liabilities
|
|
In thousands
|
|
|
|
|
Fair Value
|
|
|
|
|
|
Fair Value
|
|
|
|
Balance Sheet
Location
|
|
|
Feb 28
|
|
|
Aug 31
|
|
|
Balance Sheet
Location
|
|
|
Feb 28
|
|
|
Aug 31
|
|
|
|
|
2013
|
|
|
2012
|
|
|
|
2013
|
|
|
2012
|
|
Derivatives designated as hedging instruments:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash Flow Hedges:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Corn Futures
|
|
|
Other Current Assets
|
|
|
$
|
|
|
|
$
|
12
|
|
|
|
Other Current Assets
|
|
|
$
|
451
|
|
|
$
|
126
|
|
Ethanol Futures
|
|
|
Other Current Assets
|
|
|
|
|
|
|
|
|
|
|
|
Other Current Assets
|
|
|
|
4
|
|
|
|
706
|
|
Fair Value Hedges:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Corn Futures
|
|
|
Other Current Assets
|
|
|
|
173
|
|
|
|
|
|
|
|
Other Current Assets
|
|
|
|
44
|
|
|
|
602
|
|
Derivatives not designated as hedging instruments:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Natural Gas Futures
|
|
|
Other Current Assets
|
|
|
|
|
|
|
|
|
|
|
|
Other Current Assets
|
|
|
|
93
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
173
|
|
|
$
|
12
|
|
|
|
|
|
|
$
|
592
|
|
|
$
|
1,434
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The following tables provide information about the effect of derivative instruments on the financial
performance of the Company for the three- and six- month periods ended February 28, 2013 and February 29, 2012.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
In thousands
|
|
Amount of Gain (Loss)
Recognized in OCI
|
|
|
Amount of Gain (Loss)
Reclassified from
AOCI into Income
|
|
|
Amount of Gain (Loss)
Recognized in Income
|
|
|
|
3 Months Ended
|
|
|
3 Months Ended
|
|
|
3 Months Ended
|
|
|
|
Feb 28, 2013
|
|
|
Feb 29, 2012
|
|
|
Feb 28, 2013
|
|
|
Feb 29, 2012
|
|
|
Feb 28, 2013
|
|
|
Feb 29, 2012
|
|
Derivatives designated as hedging instruments:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash Flow Hedges:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Corn Futures
(1)
|
|
$
|
(318
|
)
|
|
$
|
858
|
|
|
$
|
59
|
|
|
$
|
(130
|
)
|
|
$
|
(312
|
)
|
|
$
|
132
|
|
Natural Gas Futures
(1)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(181
|
)
|
|
|
|
|
|
|
|
|
Ethanol Futures
(1)
|
|
|
233
|
|
|
|
(18
|
)
|
|
|
191
|
|
|
|
892
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
(85
|
)
|
|
$
|
840
|
|
|
$
|
250
|
|
|
$
|
581
|
|
|
$
|
(312
|
)
|
|
$
|
132
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair Value Hedges:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Corn Futures
(1) (2)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
(31
|
)
|
|
$
|
(21
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivatives not designated as hedging instruments:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Natural Gas Futures
(1)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
89
|
|
|
$
|
(336
|
)
|
FX Contracts
(1)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
9
|
|
Soybean Oil Futures
(1)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
12
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
89
|
|
|
$
|
(315
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
Gains and losses reported in cost of sales
|
(2)
|
Hedged items are firm commitments and inventory
|
15
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
In thousands
|
|
Amount of Gain (Loss)
Recognized in OCI
|
|
|
Amount of Gain (Loss)
Reclassified from
AOCI into Income
|
|
|
Amount of Gain (Loss)
Recognized in Income
|
|
|
|
6 Months Ended
|
|
|
6 Months Ended
|
|
|
6 Months Ended
|
|
|
|
Feb 28, 2013
|
|
|
Feb 29, 2012
|
|
|
Feb 28, 2013
|
|
|
Feb 29, 2012
|
|
|
Feb 28, 2013
|
|
|
Feb 29, 2012
|
|
Derivatives designated as hedging instruments:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash Flow Hedges:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Corn Futures
(1)
|
|
$
|
(573
|
)
|
|
$
|
(750
|
)
|
|
$
|
3,491
|
|
|
$
|
1,944
|
|
|
$
|
(115
|
)
|
|
$
|
(179
|
)
|
Natural Gas Futures
(1)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(453
|
)
|
|
|
|
|
|
|
|
|
Ethanol Futures
(1)
|
|
|
986
|
|
|
|
1,150
|
|
|
|
284
|
|
|
|
58
|
|
|
|
(11
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
413
|
|
|
$
|
400
|
|
|
$
|
3,775
|
|
|
$
|
1,549
|
|
|
$
|
(126
|
)
|
|
$
|
(179
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair Value Hedges:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Corn Futures
(1) (2)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
(16
|
)
|
|
$
|
78
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivatives not designated as hedging instruments:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Natural Gas Futures
(1)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
(82
|
)
|
|
$
|
(1,048
|
)
|
FX Contracts
(1)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
9
|
|
Soybean Oil Futures
(1)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
12
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
(82
|
)
|
|
$
|
(1,027
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
Gains and losses reported in cost of sales
|
(2)
|
Hedged items are firm commitments and inventory
|
11SEGMENT REPORTING (Restated)
Financial information for the Companys two segments, Industrial Ingredients and Food Ingredients, is presented
below. These segments serve broad categories of end-market users. The Industrial Ingredients segment provides carbohydrate-based starches for industrial applications, primarily paper and packaging products and fuel grade ethanol. The Food
Ingredients segment produces specialty starches for food applications. A third item for corporate and other activity has been presented to provide reconciliation to amounts reported in the consolidated financial statements. Corporate and
other represents the activities related to the corporate headquarters such as public company reporting, personnel costs of the executive management team, corporate-wide professional services and consolidation entries.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended
|
|
|
Six months ended
|
|
|
|
February 28,
2013
|
|
|
February 29,
2012
|
|
|
February 28,
2013
|
|
|
February 29,
2012
|
|
|
|
(As restated, see Note 2)
|
|
|
|
(In thousands)
|
|
Sales:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Industrial Ingredients
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Industrial Starch
|
|
$
|
44,237
|
|
|
$
|
37,052
|
|
|
$
|
88,039
|
|
|
$
|
69,438
|
|
Ethanol
|
|
|
18,196
|
|
|
|
24,232
|
|
|
|
41,599
|
|
|
|
56,668
|
|
By-products
|
|
|
21,045
|
|
|
|
17,289
|
|
|
|
44,208
|
|
|
|
34,711
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
83,478
|
|
|
|
78,573
|
|
|
|
173,846
|
|
|
|
160,817
|
|
Food Ingredients
|
|
|
26,604
|
|
|
|
24,904
|
|
|
|
54,258
|
|
|
|
50,828
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
110,082
|
|
|
$
|
103,477
|
|
|
$
|
228,104
|
|
|
$
|
211,645
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from operations:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Industrial Ingredients
|
|
$
|
(452
|
)
|
|
$
|
(985
|
)
|
|
$
|
935
|
|
|
$
|
(242
|
)
|
Food Ingredients
|
|
|
5,535
|
|
|
|
5,247
|
|
|
|
10,891
|
|
|
|
11,206
|
|
Corporate and other
|
|
|
(2,553
|
)
|
|
|
(2,612
|
)
|
|
|
(5,276
|
)
|
|
|
(4,955
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
2,530
|
|
|
$
|
1,650
|
|
|
$
|
6,550
|
|
|
$
|
6,009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
In January 2012, the Company acquired, through purchase or capital lease, the net assets and operations
of the business generally known as Carolina Starches, which manufactures and markets industrial potato starch based products for the paper and packaging industries. The acquisition of this business provided an important source of raw material to
support continued growth in the Food Ingredients business and it broadened the Companys portfolio of specialty modified industrial starches.
16
The net assets and results of operations since acquisition have been integrated into the
Companys existing business segments. The acquired net assets, consisting primarily of property, plant and equipment and working capital, are being managed by and included in the reported balance sheet amounts of the Companys Food
Ingredients business, which has experience, expertise and technologies related to the manufacture of potato starch products. Consolidated assets at February 28, 2013 included $11.5 million of assets related to the acquisition. Since the primary
end markets for Carolina Starches products are the paper and packaging industries, the sales and marketing functions of the acquired operations are being managed by the Industrial Ingredients business. Therefore, the sales, cost of sales and a
majority of the operating expenses are included in the Industrial Ingredients segments results of operations. Included in Industrial Ingredients sales is $6.5 million and $11.8 million for the three and six months ended February 28, 2013,
respectively, and $3.6 million for both the three- and six-month periods ended February 29, 2012 arising from the acquired operations.
|
|
|
|
|
|
|
|
|
|
|
February 28,
2013
|
|
|
August 31,
2012
|
|
|
|
(In thousands)
|
|
Total assets:
|
|
|
|
|
|
|
|
|
Industrial Ingredients
|
|
$
|
146,814
|
|
|
$
|
143,039
|
|
Food Ingredients
|
|
|
64,253
|
|
|
|
63,949
|
|
Corporate and other
|
|
|
26,447
|
|
|
|
29,191
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
237,514
|
|
|
$
|
236,179
|
|
|
|
|
|
|
|
|
|
|
12EARNINGS (LOSS) PER SHARE
All outstanding unvested share-based payment awards that contain rights to non-forfeitable dividends participate in
undistributed earnings with common shareholders and, therefore, are included in computing earnings per share under the two-class method. Under the two-class method, net earnings are reduced by the amount of dividends declared in the period for
each class of common stock and participating security. The remaining undistributed earnings are then allocated to common stock and participating securities, based on their respective rights to receive dividends. Restricted stock awards granted
to certain employees and directors under the Companys 2006 Incentive Plan, which contain non-forfeitable rights to dividends at the same rate as common stock, are considered participating securities.
Basic earnings (loss) per share reflect only the weighted average common shares outstanding during the period. Diluted earnings (loss)
per share reflect weighted average common shares outstanding and the effect of any dilutive common stock equivalent shares
.
Diluted earnings (loss) per share is calculated by dividing net income (loss) by the average common shares outstanding
plus additional common shares that would have been outstanding assuming the exercise of in-the-money stock options, using the treasury stock method. The following table presents the reconciliation of income from operations to income from operations
applicable to common shares and the computation of diluted weighted average shares outstanding.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended
|
|
|
Six months ended
|
|
|
|
February 28,
2013
|
|
|
February 29,
2012
|
|
|
February 28,
2013
|
|
|
February 29,
2012
|
|
|
|
(In thousands)
|
|
|
(In thousands)
|
|
Numerator:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
$
|
1,191
|
|
|
$
|
(340
|
)
|
|
$
|
2,897
|
|
|
$
|
252
|
|
Less: Allocation to participating securities
|
|
|
(4
|
)
|
|
|
|
|
|
|
(10
|
)
|
|
|
(1
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) applicable to common shares
|
|
$
|
1,187
|
|
|
$
|
(340
|
)
|
|
$
|
2,887
|
|
|
$
|
251
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Denominator:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average common shares outstanding, basic
|
|
|
12,343
|
|
|
|
12,300
|
|
|
|
12,325
|
|
|
|
12,288
|
|
Dilutive stock options and awards
|
|
|
160
|
|
|
|
|
|
|
|
114
|
|
|
|
39
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average common shares outstanding, diluted
|
|
|
12,503
|
|
|
|
12,300
|
|
|
|
12,439
|
|
|
|
12,327
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the three months ended February 29, 2012, there were 42,115 weighted-average restricted stock
awards excluded from the calculation of diluted earnings (loss) per share because they were antidilutive.
Weighted-average
stock options to purchase 987,885 and 972,581 shares of common stock for the three and six months ended February 28, 2013, were excluded from the calculation of diluted earnings (loss) per share because they were antidilutive. Weighted-average
stock options to purchase 1,528,779 and 1,414,139 shares of common stock for the three and six months ended February 29, 2012, were excluded from the calculation of diluted earnings (loss) per share because they were antidilutive.
17