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Penford Reports Financial Results

Penford Corporation (Nasdaq:PENX), a leader in renewable, natural-based ingredient systems for industrial and food applications, today reported that consolidated sales for the quarter ended May 31, 2010 were $61.9 million compared with $61.3 million a year ago. Diluted loss per share, including discontinued operations, was $0.51. Net loss from continuing operations was $5.8 million, or $0.49 per diluted share, compared to a net loss of $4.3 million, or $0.39 per diluted share last year. A table summarizing third quarter results from continuing operations is shown below:

   
Penford Corporation – Financial Highlights Quarter Ended
(In thousands except per share data)   5/31/10         5/31/09           % Change  
 
Industrial Ingredients:
Sales $ 42,010 $ 44,670 (6 )%
Gross margin (3,847 ) (5,558 ) 31 %
Operating loss (6,847 ) (7,047 )

(1)

3 %
 
Food Ingredients:
Sales $ 19,899 $ 16,606 20 %
Gross margin 7,112 5,573 28 %
Operating income 5,018 3,365 49 %
 
Consolidated:
Sales $ 61,909 $ 61,276 1 %
Gross margin 3,265 14 NA
Operating loss (4,091 ) (6,036 ) (1) 32 %
Net Loss from continuing operations (5,758 ) (4,343 ) (33 )%
Diluted loss per share – continuing operations $ (0.49 ) $ (0.39 ) 26 %
Diluted loss per share – discontinued operations $ (0.02 ) $ (0.27 ) 93 %
Diluted loss per share $ (0.51 ) $ (0.66 ) 23 %
 
(1) Includes $1.1 million of net insurance recoveries in the quarter ended 5/31/09
 

Third Fiscal Quarter Consolidated Financial Results

  • Consolidated sales were comparable to last year at $61.9 million. Higher volume offset lower selling prices.
  • Lower costs and higher productivity improved results. Gross margin expanded $3.3 million and unit costs declined by 11%.
  • Quarterly operating losses were $4.1 million compared with a loss of $7.1 million last year, excluding net insurance recoveries of $1.1 million in fiscal 2009.
  • Net loss from continuing operations for the third quarter includes a $1.0 million pre-tax non-cash charge related to unamortized transaction costs from the Company’s prior credit facility, and a $1.6 million pre-tax interest rate swap termination expense.

Food Ingredients Third Quarter Results

  • The Food Ingredients business reported record sales of $19.9 million for the quarter, increasing 20% over last year.
  • Revenue grew by 20% in the quarter from a combination of stronger sales of established products and gains in new business in several areas.
  • Gross margin and operating income increased as unit costs fell 9%. Cost savings programs and higher plant throughput contributed $1.3 million to higher quarter profits.

Industrial Ingredients Third Quarter Results

  • Sales of specialty products grew 15%.
  • Industrial starch volumes expanded by more than 10% as paper end-market fundamentals improved. Higher volumes offset approximately half of the impact of lower average unit selling prices.
  • Ethanol volume represented just under half of the Industrial product mix. Revenues and volume for the third quarter of fiscal 2010 were comparable to a year ago.
  • Cost reduction program effects, higher throughput rates, improved yields and lower raw material costs impacted results by $7.2 million in the quarter.

Cash and Debt

  • As previously announced, on April 7, 2010, the Company issued $40 million of preferred stock, which is mandatorily redeemable in seven years. The dividend rate on the preferred stock is 15%, with 6% payable in cash quarterly. The Company also entered into a five-year, $60 million, secured revolving line of credit with a syndicate of banks that includes the Bank of Montreal, Bank of America and Rabobank Nederland.
  • The Company reduced debt levels from $95.7 million at August 31, 2009 to $60.3 million, including $40 million of preferred stock, at May 31, 2010.
  • Year-to-date cash provided by operations was $9.8 million compared to cash used in operations of $12.3 million for the first nine months of fiscal 2009. Improvements in working capital contributed $5.2 million to cash in fiscal 2010.

Conference Call

Penford will host a conference call to discuss third quarter financial and operational results today, July 8, 2010 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 8, 2010, 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 five manufacturing and/or research locations in the United States.

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