Penford Reports Fiscal Year 2012 And Fourth Quarter Financial Results

Penford Corporation (Nasdaq: PENX), a leader in renewable ingredient systems for industrial and food applications, today reported fourth quarter and annual fiscal year 2012 results.

2012 fiscal year consolidated sales rose to $361.4 million and operating income increased to $10.1 million. The Company reported a net loss for the year of $9.6 million, or $0.78 per diluted share, compared with a net loss of $5.1 million, or $0.42 per diluted share, for the preceding year. Included in the Company’s annual results were a pre-tax charge of $6.6 million related to the early redemption of the Company’s 15% Series A Preferred Stock and a non-cash tax valuation allowance of $1.8 million.

For the fourth quarter ended August 31, 2012 consolidated sales increased 9% to $91.5 million from $83.6 million a year ago. The Company reported a fourth quarter net loss of $4.4 million, or $0.35 per diluted share, compared with a net loss of $3.2 million or $0.26 per diluted share last year. Included in the fiscal 2012 fourth quarter loss was a pre-tax charge of $3.8 million related to the early redemption of the Company’s 15% Series A Preferred Stock.

A table summarizing quarterly and annual financial results is shown below:
 
Penford Corporation – Financial Highlights

3 Months Ended August 31
 

Year Ended August 31
(In thousands)

2012
 

2011
 

Incr.

2012
 

2011
 

Incr.
 
Food Ingredients Division:
Sales $ 25,543 $ 22,554 13 % $ 102,544 $ 82,240 25 %
Gross margin 8,098 6,766 20 % 32,165 26,311 22 %
Operating income 5,028 4,135 22 % 21,591 18,037 20 %
Depreciation and amortization 473 486 1,988 2,110
 
Industrial Ingredients Division:
Sales $ 65,963 $ 61,085 8 % $ 258,819 $ 233,201 11 %
Gross margin 3,149 552 470 % 11,745 7,523 56 %
Operating loss (767 ) (3,023 ) 75 % (928 ) (4,718 ) 80 %
Depreciation and amortization 2,781 2,691 10,879 10,812
 
Consolidated:
Sales $ 91,506 $ 83,638 9 % $ 361,363 $ 315,441 15 %
Gross margin 11,247 7,317 54 % 43,910 33,835 30 %
Operating income (loss) 476 (1,518 ) 131 % 10,059 4,445 126 %
Depreciation and amortization 3,409 3,556 14,126 14,415
 

Highlights for the quarter and year are as follows:

Food Ingredients Division
  • Record annual sales of $102.5 million up 25% over last year. Revenue growth was primarily from new products and customer gains.
  • Fourth quarter revenue grew 13% to $25.5 million. Sales of coating applications rose 8% reflecting improved volume and product pricing. Sales of non-coating applications expanded more than 15%, led by double-digit gains in the protein, dairy and pet chews and treats market segments.

Industrial Ingredients Division
  • Full year revenue gained 11% to a record $258.8 million on improved pricing, volume gains in paper and packaging starches and specialty bio-products, partially offset by lower ethanol pricing and volumes.
  • Sales of advanced specialty bio-products expanded over 20% in the fiscal year.
  • Fiscal 2012 gross margins improved by 56% to $11.7 million from gains in starch sales and lower unit costs.
  • Revenue for the fourth quarter increased 8% to $66.0 million on double-digit growth in industrial starch volumes as well as contributions from the Carolina Starches business acquired in January 2012. Revenue gains were partially offset by lower ethanol sales, down 19% from weaker pricing and lower volume. The Industrial Division shifted more of its production to higher margin industrial and food starches.

Refinancing of Preferred Stock and Credit Facility
  • As previously reported, in July 2012, the Company completed the redemption of all of the Series A 15% Preferred Stock at the original issue price of $23.5 million plus $5.4 million of accrued dividends. In April 2012, the Company had redeemed 41,250 shares for $20.0 million, which included $3.5 million of accrued dividends. These redemptions were funded by borrowings on the Company’s credit facility.
  • Also reported previously, in July 2012, the Company entered into an Amended and Restated Credit Agreement which increased the Company’s revolving credit facility to $130 million from $60 million. The new agreement has a five-year term with an optional “accordion” expansion feature which will allow the Company, under the conditions specified in the new agreement, to increase borrowing capacity by an additional $30 million.

Consolidated Results
  • In connection with the redemptions of preferred stock, the Company accelerated the discount accretion related to the shares redeemed and wrote off the remaining issuance costs. The Company recorded charges of $6.6 million in non-operating expense related to these items.
  • The Company recorded $4.8 million of tax expense on a loss before taxes of $4.8 million. The difference between the statutory tax rate of 35% and the effective tax rate is due to (i) approximately $13 million of preferred stock related expenses that are not deductible for tax purposes, and (ii) a $1.8 million tax valuation allowance related to the carryforward of a small ethanol producer tax credit. The valuation allowance may be reversed in future years if the tax credit is utilized.

Conference Call

Penford will host a conference call to discuss fiscal 2012 fourth quarter and annual results today, November 8, 2012 at 9:00 a.m. Mountain Time (11:00 a.m. Eastern Time). Access information for the call and webcast can be found at www.penx.com. To participate in the call on November 8, 2012, 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 seven manufacturing and/or research locations in the United States.

The statements contained in this release that are not historical facts are forward-looking statements that represent management’s beliefs and assumptions based on currently available information. Forward-looking statements can be identified by the use of words such as “believes,” “may,” “will,” “looks,” “should,” “could,” “anticipates,” “expects,” or comparable terminology or by discussions of strategies or trends. Although the Company believes that the expectations reflected in such forward-looking statements are reasonable, it cannot give any assurances that these expectations will prove to be correct. Such statements by their nature involve substantial risks and uncertainties that could significantly affect expected results. Actual future results could differ materially from those described in such forward-looking statements, and the Company does not intend to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. Among the factors that could cause actual results to differ materially are the risks and uncertainties discussed in this release and those described from time to time in other filings with the Securities and Exchange Commission which include, but are not limited to: competition; the possibility of interruption of business activities due to equipment problems, accidents, strikes, weather or other factors; product development risk; changes in corn and other raw material prices and availability; the Company’s inability to comply with the terms of instruments governing the Company’s debt; changes in general economic conditions or developments with respect to specific industries or customers affecting demand for the Company’s products, including changes in government rules or incentives affecting ethanol consumption, unfavorable shifts in product mix; unanticipated costs, expenses or third party claims; interest rate, chemical and energy cost volatility; changes in returns on pension plan assets and/or assumptions used for determining employee benefit expense and obligations; unforeseen developments in the industries in which Penford operates; and other factors described in the “Risk Factors” section in reports filed with the Securities and Exchange Commission.

       
Penford Corporation

Financial Highlights

Three months endedAugust 31

 

Year ended August 31
(In thousands except per share data)

2012

2011
 

2012
 

2011
(unaudited)
 
Consolidated Results
 
Sales $ 91,505 $ 83,638 $ 361,363 $ 315,441
 
Income (loss) from operations $ 476 $ (1,518 ) $ 10,059 $ 4,445
 
Net loss $ (4,366 ) $ (3,169 ) $ (9,566 ) $ (5,117 )
 
Loss per share, diluted $ (0.35 ) $ (0.26 ) $ (0.78 ) $ (0.42 )
 
Cash Flows
 
Cash flow provided by (used in) operations:
Operating activities $ (4,824 ) $ 3,135 $ 2,765 $ 2,915
Investing activities (4,840 ) (2,613 ) (22,418 ) (8,253 )
Financing activities   9,159     (469 )   19,526     5,304  
Total cash provided by (used in ) operations $ (505 ) $ 53 $ (127 ) $ (34 )
 
 
 
 
Balance Sheets
August 31, August 31,
2012 2011
 
 
Current assets $ 91,965 $ 74,077
Property, plant and equipment, net 113,191 107,372
Other assets   31,023     30,965  
Total assets   236,179     212,414  
 
Current liabilities 36,138 30,155
Long-term debt 84,004 23,802
Redeemable preferred stock - 38,982
Other liabilities 47,187 34,010
Shareholders’ equity   68,850     85,465  
Total liabilities and equity $ 236,179   $ 212,414  
 

Penford CorporationConsolidated Statements of Operations
  Three months ended August 31,   Year ended August 31,

(Unaudited)
(In thousands, except per share data) 2012   2011 2012   2011
 
 
Sales $ 91,505 $ 83,638 $ 361,363 $ 315,441
Cost of sales   80,258     76,321     317,453     281,606  
Gross margin 11,247 7,317 43,910 33,835
 
Operating expenses 9,131 7,525 28,013 24,618
Research and development expenses   1,640     1,310     5,838     4,772  
 
Income (loss) from operations 476 (1,518 ) 10,059 4,445
 
Interest expense 1,471 2,411 8,633 9,364
Other non-operating income (expense), net   (3,606 )   38     (6,186 )   115  
Income (loss) before income taxes (4,601 ) (3,891 ) (4,760 ) (4,804 )
 
Income tax expense (benefit)   (235 )   (722 )   4,806     313  
Net loss $ (4,366 ) $ (3,169 ) $ (9,566 ) $ (5,117 )
 

Weighted average common shares and equivalentsoutstanding, basic and diluted
12,300 12,262 12,294 12,251
 
Loss per common share, diluted $ (0.35 ) $ (0.26 ) $ (0.78 ) $ (0.42 )
 

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