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Penford Reports Second Quarter Fiscal 2012 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 February 29, 2012 increased 16% to $86.2 million from $74.3 million a year ago. Gross margin expanded 37% to $9.4 million. The Company reported a second quarter net loss of $0.3 million or $0.03 per diluted share compared with a net loss of $1.6 million or $0.13 per diluted share last year.

A table summarizing quarterly financial results is shown below:

Penford Corporation – Financial Highlights                        
(In thousands) Q2 FY 12 Q1 FY 12 Q4 FY 11         Q3 FY11         Q2 FY11
 
Food Ingredients:
Sales $ 24,904 $ 25,924 $ 22,554 $ 23,637 $ 17,713
Gross margin 7,626 8,221 6,766 7,808 5,385
Operating income 5,247 5,959 4,135 5,517 3,576
Depreciation and amortization 498 505 486 510 553
 
Industrial Ingredients:
Sales $ 61,284 $ 64,822 $ 61,085 $ 61,596 $ 56,591
Gross margin 1,775 3,586 552 2,609 1,458
Operating income (loss) (985) 743 (3,023) (734) (1,103)
Depreciation and amortization 2,697 2,629 2,691 2,712 2,696
 
Consolidated:
Sales $ 86,188 $ 90,746 $ 83,638 $ 85,233 $ 74,304
Gross margin 9,401 11,808 7,317 10,418 6,843
Operating income (loss) 1,650 4,359 (1,518) 2,506 488
Depreciation and amortization 3,574 3,512 3,556 3,598 3,618
 

Food Ingredients

  • Food Ingredients reported record second quarter sales, gross margin and operating income.
  • Revenue grew more than 40% to $24.9 million. Sales of coating applications expanded over 30% reflecting volume growth and improved pricing. Revenue from applications for protein, bakery, companion pet treats, and gluten free segments expanded at double-digit rates.
  • Gross margin increased over 40% to $7.6 million on higher pricing and volume gains from existing customers and new business.
  • Operating income rose 47% to $5.2 million.

Industrial Ingredients

  • Revenue increased 8% to $61.3 million. The increase includes revenue from the Carolina Starches business, growth in specialty starches, and higher processing fees. Improved revenue was partially offset by a 6% decline in ethanol sales partly due to production downtime to undertake equipment maintenance.
  • Ethanol sales were $24.2 million. Comparable industry crush margins fell by about $0.08 per gallon or 15% from a year ago. Second quarter industry crush margins were about $0.45 per gallon or 50% below the first quarter of fiscal 2012.
  • Sales of specialty bio-products grew over 25% on new business, higher volumes at existing accounts and unit pricing.
  • Gross margin expanded $0.3 million from a year ago, as higher average unit selling prices for industrial starch outpaced rising corn and chemical costs. Lower natural gas costs also contributed to a higher margin.

Consolidated Results

  • Corporate expense rose $0.6 million on higher professional fees, employee costs and acquisition-related charges.
  • Bank debt rose to $30.7 million reflecting the $8.5 million acquisition of Carolina Starches in January 2012.
  • The effective tax rate for the first half was 82%, which reflects non-deductible preferred stock dividends.

Redemption of Preferred Stock

  • The Company intends to provide notice to the holder of its Series A 15% Cumulative Non-Voting Non-Convertible Preferred Stock that approximately $20 million of principal and accrued dividends will be redeemed next month. The stock will be called without premium at issue price.
  • The redemption will be funded by utilizing the Company’s existing revolving debt facility.

Acquisition of Carolina Starches

  • The Company closed on the acquisition of the Carolina Starches business and the integration is proceeding as planned.
  • Revenues, cost of goods sold and a portion of the selling, general and administrative expenses reported by Carolina Starches since the acquisition have been included in the results of operations of the Industrial Ingredients segment.

Conference Call

Penford will host a conference call to discuss second quarter results today, April 9, 2012 at 1:00 p.m. Mountain Time (3:00 p.m. Eastern Time). Access information for the call and webcast can be found at www.penx.com. To participate in the call on April 9, 2012, please phone 1-877-407-9205 at 12:50 p.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 seven manufacturing and/or research locations in the United States.

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