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Penford Reports First Quarter Fiscal 2011 Financial Results

Penford Corporation (Nasdaq: PENX), a leader in renewable ingredient systems for industrial and food applications, today reported that consolidated sales for the quarter ended November 30, 2010 were $72.3 million compared with $67.1 million a year ago. Net income from continuing operations was $0.3 million, or $0.03 per diluted share, for the quarter ended November 30, 2010 compared to net income from continuing operations of $1.1 million, or $0.09 per diluted share last year.

A table summarizing first quarter fiscal 2011 financial results is shown below:

Penford Corporation – Financial Highlights              
(In thousands except per share data)   Q1 FY11       Q1 FY10       4Q FY10
 
Industrial Ingredients:
Sales $ 53,930 $ 50,308 $ 45,633
Gross margin 2,904 4,986 (1,907 )
Operating income (loss) 142 2,154 (5,098 )
 
Food Ingredients:
Sales $ 18,336 $ 16,762 $ 17,369
Gross margin 6,353 5,642 5,406
Operating income 4,808 3,581 3,698
 
Consolidated:
Sales $ 72,266 $ 67,070 $ 63,002
Gross margin 9,257 10,628 3,499
Operating income (loss) 2,969 3,142 (2,796 )
Net income (loss) from continuing operations 336 1,056 (3,126 )
Diluted earnings (loss) per share – continuing operations $ 0.03 $ 0.09 $ (0.26 )
Diluted earnings (loss) per share – discontinued operations   -   0.31   -  
Diluted earnings (loss) per share $ 0.03 $ 0.40 $ (0.26 )
 

Food Ingredients Results

  • Food Ingredients first quarter sales expanded 9% from the prior year on volume gains and product mix improvements. Sales of non-coating applications, which contributed over 50% of first quarter revenues, expanded by 20% from last year.
  • New business in dairy, pet and gluten-free bakery products contributed the majority of revenue growth.
  • Gross margin improved from last year as unit raw material costs fell more than 10% and higher plant throughput reduced manufacturing costs. Operating income increased by 34% from a year ago.

Industrial Ingredients Results

  • Industrial Ingredient first quarter revenue of $53.9 million increased 7% from a year ago despite lower prices for paper starches. Sales of the Company’s specialty Liquid Natural Additive applications grew by over 10% in the quarter.
  • Sales of ethanol in the first quarter of fiscal 2011 increased 37% to $24.6 million from $18.0 million a year ago on double-digit growth in both volume and average unit pricing. Ethanol sales represent 46% of the total industrial segment.
  • Penford continues to introduce new applications that offer sustainable alternatives for petroleum-derived materials. The Company recently announced that is conducting trials with major producers of food packaging materials for a novel technology to replace fluorochemicals used in food wraps and other packaging applications.
  • Gross margin and operating income were $2.0 million below the prior year. Depressed paper starch prices and higher costs for raw materials outpaced sales gains as well as improvements in manufacturing costs and plant efficiencies.
  • Segment operating income increased $5.2 million sequentially from the fourth quarter of fiscal 2010 on improved results from ethanol operations and stronger sales of industrial starches.

Consolidated Financial Results

  • Consolidated operating income of $3.0 million for the first quarter fiscal 2011 rose $5.8 million over the fourth quarter of fiscal 2010 and $7.1 million over the third quarter of fiscal 2010. Consolidated first quarter 2011 sales grew 8% and operating expenses decreased $1.3 million compared with the first quarter of fiscal 2010.
  • Interest expense, which includes dividends on preferred stock, was $2.3 million compared with $1.8 million last year.
  • The effective tax rate for the first quarter was 57%. Dividends on the Company’s preferred stock, which are recorded as interest expense, are not deductible for federal income tax purposes.

Cash and Debt

  • Cash provided by operations in the first quarter of 2011 was $4.7 million.
  • Bank loan facility debt outstanding was reduced by $2.0 to $16.9 million at November 30, 2010.

Conference Call

Penford will host a conference call to discuss fiscal 2011 financial and operational results today, January 6, 2011 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 January 6, 2011, 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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