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Penford Reports Third Quarter Fiscal Year 2013 Financial Results

  Penford Reports Third Quarter Fiscal Year 2013 Financial Results

  *Net earnings improved to $0.16 per diluted share from a loss of $0.44 last
    year.
  *Third quarter revenue increased 9% to $121.7 million from last year.
  *Operating income expanded by 20% to $4.3 million.

Business Wire

CENTENNIAL, Colo. -- July 9, 2013

Penford Corporation (Nasdaq:PENX), a leader in ingredient systems for
industrial and food applications, today reported third quarter and
year-to-date fiscal year 2013 results. Consolidated sales for the quarter
ended May 31, 2013 increased 9% to $121.7 million from $111.3 million a year
ago.

The Company reported third quarter net income of $2.1 million, or $0.16 per
diluted share, compared with a net loss of $5.5 million or $0.44 per diluted
share a year ago.

Consolidated sales for the first nine months of fiscal 2013 rose to $349.8
million and operating income increased to $10.8 million. The Company reported
net income for this period in fiscal 2013 of $5.0 million, or $0.39 per
diluted share, compared with a net loss of $5.2 million, or $0.42 per diluted
share, for the preceding year.

A table summarizing quarterly and year-to-date financial results is shown
below:

Penford Corporation – Financial Highlights
                 Three Months Ended May 31,                  Nine Months Ended May 31,
(In                                             Incr.                                    Incr.
thousands)
                    2013            2012              (Decr)       2013            2012              (Decr)
Food
Ingredients
Division:
Sales               $ 28,535        $ 26,173          9    %       $ 82,793        $ 77,001          8    %
Gross margin          9,056           8,225           10   %         25,288          24,068          5    %
Operating             6,206           5,362           16   %         17,097          16,563          3    %
income
Depreciation
and                   519             512                            1,551           1,515
amortization
                                                                                                     
Industrial
Ingredients
Division:
Sales               $ 93,184        $ 85,110          9    %       $ 267,030       $ 245,927         9    %
Gross margin          4,135           3,229           28   %         12,162          8,595           42   %
Operating             565             75              653  %         1,500           (161    )
income (loss)
Depreciation
and                   2,723           2,772                          8,326           8,098
amortization
                                                                                                     
Consolidated:
Sales               $ 121,719       $ 111,283         9    %       $ 349,823       $ 322,928         8    %
Gross margin          13,191          11,454          15   %         37,450          32,663          15   %
Operating             4,275           3,573           20   %         10,825          9,582           13   %
income
Net income            2,058           (5,452  )                      4,956           (5,200  )
(loss)
Depreciation
and                   3,324           3,632                          10,128          10,718
amortization
                                                                                                     

Highlights for the quarter are as follows:

Food Ingredients Division

  *Food Ingredients reported record quarterly sales, gross margin and
    operating income.
  *Third quarter revenue grew 9% to $28.5 million, with volume gaining 6% and
    average unit pricing up 3%.
  *Sales into the gluten-free, dairy, pet and soups/sauces/gravies segments
    rose by double-digit rates.
  *Gross margin rose 10% in the quarter to $9.1 million and operating income
    increased 16% to $6.2 million, primarily from revenue and volume gains.

Industrial Ingredients Division

  *Revenue for the third quarter grew by 9% to $93.2 million on higher
    ethanol selling prices and industrial specialty starch volumes. Sales for
    the third quarter and year-to-date fiscal 2013 and 2012 include sales of
    co-products from the corn wet milling operations, primarily corn gluten
    meal, corn gluten feed and corn germ.
  *Gross margin expanded 28% to $4.1 million on higher unit pricing of
    industrial starch and ethanol and improved industrial starch mix.
  *Operating income rose in the third quarter of fiscal 2013 to $0.6 million
    from $0.1 million in the prior year. Margin expansion was partially offset
    by additions to the Industrial division’s sales and research and
    development resources.

Consolidated Results

  *Interest expense declined by 57% in the third quarter and year-to-date,
    reflecting lower borrowing costs due to the redemption of the Company’s
    Series A 15% Preferred Stock in the second half of fiscal 2012.
  *The Company’s year-to-date effective tax rate was 37%. Since the
    redemption of the Company’s preferred stock, the Company’s effective tax
    rate has stabilized at a rate approximating the statutory federal and
    state income tax rates.
  *Consolidated cash flow from operations improved by $13.9 million on higher
    earnings and lower working capital.
  *Bank loans were reduced $7.0 million in the third quarter.

Conference Call

Penford will host a conference call to discuss fiscal 2013 third quarter
results today, July 9, 2013 at 8:00 a.m. Mountain Time (10:00 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 9, 2013, please phone
1-877-407-9205 at 7:50 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      Three months ended May 31,          Nine months ended May 31,
Highlights
(In
thousands,
except per         2013            2012                2013            2012
share
data)
                   (unaudited)
                                                                               
Consolidated Results
                                                                               
Sales              $ 121,719           $ 111,283           $ 349,823           $ 322,928
                                                                               
Income
from               $ 4,275             $ 3,573             $ 10,825            $ 9,582
operations
                                                                               
Net income         $ 2,058             $ (5,452  )         $ 4,956             $ (5,200  )
(loss)
                                                                               
Earnings
(loss) per         $ 0.16              $ (0.44   )         $ 0.39              $ (0.42   )
share,
diluted
                                                                               
Cash Flows
                                                                               
Cash flow
provided
by (used
in):
Operating          $ 11,228            $ (2,655  )         $ 14,580            $ 6,634
activities
Investing            (1,211  )           (3,203  )           (6,201  )           (17,578 )
activities
Financing           (9,910  )          5,922             (8,276  )          11,322  
activities
Increase           $ 107               $ 64                $ 103               $ 378
in cash
                                                                                         

Balance Sheets
                                      May 31,      August 31,
                                         2013         2012
                                         (unaudited)
                                                         
Current assets                           $ 95,357        $  91,965
Property, plant and equipment, net         109,035          113,191
Other assets                              27,909          31,023
Total assets                              232,301         236,179
                                                         
Current liabilities                        31,790           36,138
Long-term debt                             78,248           84,004
Other liabilities                          48,321           47,187
Shareholders’ equity                      73,942          68,850
Total liabilities and equity             $ 232,301       $  236,179
                                                            


Penford Corporation
Consolidated Statements of Operations
                 Three months ended May 31,       Nine months ended May 31,
(In
thousands,          2013           2012 (1)          2013           2012 (1)
except per
share data)
                    (unaudited)
                                                                          
Sales               $ 121,719         $ 111,283         $ 349,823         $ 322,928
Cost of sales        108,528         99,829          312,373         290,265 
Gross margin          13,191            11,454            37,450            32,663
                                                                          
Operating             7,326             6,340             22,269            18,883
expenses
Research and
development          1,590           1,541           4,356           4,198   
expenses
                                                                          
Income from           4,275             3,573             10,825            9,582
operations
                                                                          
Interest              (998    )         (2,335  )         (3,062  )         (7,162  )
expense
Other
non-operating
income               146             (2,815  )        68              (2,579  )
(expense),
net
Income (loss)
before income         3,423             (1,577  )         7,831             (159    )
taxes
                                                                          
Income tax           1,365           3,875           2,875           5,041   
expense
Net income          $ 2,058          $ (5,452  )       $ 4,956          $ (5,200  )
(loss)
                                                                          
Weighted
average
common shares
and                   12,670            12,300            12,548            12,292
equivalents
outstanding,
diluted
                                                                          
Earnings
(loss) per          $ 0.16            $ (0.44   )       $ 0.39            $ (0.42   )
common share,
diluted


(1) Previously reported amounts for sales and cost of sales have been restated to
classify proceeds from the sale of co-products as sales rather than as a reduction of
cost of sales.

Contact:

Penford Corporation
Steven O. Cordier
Sr. Vice President and CFO
303-649-1900
scordier@penx.com