Penford Corporation (Nasdaq: PENX), a leader in renewable ingredient systems for industrial and food applications, today reported that consolidated sales for the quarter ended August 31, 2011 increased 33% to a record fourth quarter level of $83.6 million from $63.0 million a year ago. Gross margin rose $3.8 million from last year. The Food business achieved a record fourth quarter operating profit. Quarterly Industrial Ingredients results reflect an increase in accounts receivable reserve of $0.6 million for a paper industry customer that filed for bankruptcy protection. Consolidated loss from continuing operations was comparable to last year at $0.26 per diluted share.
A table summarizing quarterly financial results is shown below:
|Penford Corporation – Financial Highlights|
|(In thousands)||Q4 FY 11||Q3 FY11||Q2 FY11||Q1 FY11||Q4 FY10|
|Sales||$||22,554||$ 23,637||$ 17,713||$||18,336||$||17,369|
|Depreciation and amortization||486||510||553||561||555|
|Sales||$||61,085||$ 61,596||$ 56,591||$||53,930||$||45,633|
|Operating income (loss)||(3,023)||(734)||(1,103)||142||(5,098)|
|Depreciation and amortization||2,691||2,712||2,696||2,713||2,716|
|Sales||$||83,638||$ 85,233||$ 74,304||$||72,266||$||63,002|
|Operating income (loss)||(1,518)||2,506||488||2,969||(2,796)|
|Depreciation and amortization||3,556||3,598||3,618||3,643||3,642|
Food Ingredients Fourth Quarter Fiscal 2011 Results
- Food Ingredients reported sales of $22.6 million, up 30% from the prior year. Revenue growth was driven primarily by new business gains with applications based on corn substrates as well as companion pet and gluten free products. Sales in all three categories more than doubled from last year.
- Gross margin improved 25% on volume growth, better plant utilization rates, lower unit processing costs and favorable product mix from increased sales of value-added specialty formulations.
- Operating income improved 12% over the prior year to a record fourth quarter level of $4.1 million.
Industrial Ingredients Fourth Quarter Fiscal 2011 Results
- Revenue increased 34% to $61.1 million reflecting higher corn prices that were passed through to customers, increased processing and manufacturing fees, improved ethanol pricing and growth of specialty starch-based additives.
- Ethanol sales grew 55% to $27.3 million. Market prices for ethanol rose 67% over the last 12 months while comparable industry crush margins improved by $0.15 per gallon or about 30% from last year.
- Specialty industrial starches sales expanded by 11% from a year ago on higher volumes and average unit prices.
- Gross margin rose $2.5 million from a year ago as higher average unit selling prices for industrial starch and ethanol and lower unit manufacturing costs outpaced rapidly rising raw material costs. Industry net corn costs increased more than 90% as projections of wider physical corn supply/demand imbalances impacted fully delivered costs.
- Quarterly operating results decreased sequentially from the third quarter of fiscal 2011 as: (1) the Cedar Rapids plant experienced several unplanned interruptions of electrical power supply that penalized results by about $1.4 million, (2) regional costs for physical corn (basis) rose sharply from historical levels and net corn costs rose by about $1.4 million, (3) a reserve of $0.6 million was established after a customer that filed for bankruptcy protection.
- Food and Industrial Ingredients businesses reported record revenues.
- Cash flow from operations was $2.9 million despite the impact of higher corn costs on working capital and $6.4 million in pension contributions.
- Interest expense was $9.4 million, including dividends on preferred stock, which are non-deductible from taxable income.
- Outstanding bank debt on the Company’s $60 million revolving credit facility was $22.1 million at August 31, 2011.
- The Company executed a definitive agreement on November 9, 2011 to purchase the stock and certain assets of the business currently operated by Carolina Starches for approximately $9.5 million in cash, including $3.5 million of assumed debt that will be retired upon closing. As an inducement to employment with the Company, the Company at closing will grant up to 315,000 options on Penford common stock to sellers. Issuance of approximately 47% of the options is dependent upon the satisfaction of certain earn-out conditions. The Charleston S.C. based business is a leading provider of advanced cationic starches for industrial applications primarily using potato based raw materials. The business generates approximately $25 million in annual revenues. The transaction is projected to be accretive to earnings within a year. The acquisition is strategic to both Penford’s Food and Industrial Ingredients businesses and closing is expected in early December. A separate announcement was released today.
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