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Penford Reports First Quarter 2014 Financial Results



  Penford Reports First Quarter 2014 Financial Results

  * Quarterly results improved sequentially in both divisions from the fourth
    quarter.
  * Food Ingredients Division achieved record quarterly sales and operating
    income.
  * 40% decline in corn prices reduced Industrial results compared to prior
    year.
  * Debt outstanding declined $13 million in the last twelve months on
    stronger cash flows.

Business Wire

CENTENNIAL, Colo. -- January 9, 2014

Penford Corporation (Nasdaq: PENX), a leader in ingredient systems for
industrial and food applications, today reported first quarter fiscal year
2014 results.

Consolidated sales decreased 7.4% to $109.3 million, primarily caused by the
impact of a 40% year over year decline in market corn prices which lowered
revenue pass through for some customers in the Industrial Business and the
market values of by-products.

The Company reported first quarter net income of $0.5 million, or $0.04 per
diluted share compared with net income of $1.7 million, or $0.14 per diluted
share, a year ago.

A table summarizing quarterly financial results is shown below:

Penford Corporation - Financial Highlights
                                               
(In thousands)            Q1 FY 14   Q4 FY 13   Q1 FY 13
Food Ingredients:
Sales                     $28,651    $28,441    $27,654
Gross Margin              9,274      9,111      8,104
EBITDA (see note below)   7,055      6,678      5,840
Industrial Ingredients:
Sales                     $80,600    $88,986    $90,368
Gross Margin              1,435      (1,515)    5,154
EBITDA (see note below)   647        (2,115)    4,201
Consolidated:
Sales                     $109,251   $117,427   $118,022
Gross Margin              10,709     7,597      13,258
EBITDA (see note below)   4,940      1,784      7,240
Net income (loss)         488        (949)      1,707

Consolidated:             LTM Nov ‘13   LTM Nov ‘12
Sales                     $458,478      $443,006
EBITDA (see note below)   20,506        17,345
Net income (loss)         2,788         (8,450)
Net Debt                  70,144        83,354
                                         

Highlights for the quarter are as follows:

Food Ingredients Division

  * Food Ingredients posted record results on new business growth and lower
    unit costs.
  * New product gains in targeted Health & Wellness segments, Pet and
    specialty starches increased by over 10%, with strong prospects for
    continued growth.
  * First quarter gross margin rose by 14% and operating income improved 22%.

Industrial Ingredients Division

  * Revenue declined $10 million to $81 million as regional prices for corn
    fell to about $4.85 from $7.75 per bushel last year.
  * Sales of Industrial Specialty Products, which include bio-products,
    increased by 8% over last year.
  * Gross margin declined by about $4 million from the prior year period.
    Sharply declining corn costs lagged customer revenue “pass-through”
    concessions on supplies processed throughout the period while premiums
    paid for physical deliveries remained high in the first half of the
    quarter.
  * The Company does not expect these corn harvest conditions to re-occur in
    the foreseeable future. The completion of a historically strong corn
    harvest in 2013 has brought lower input costs and stability to current
    corn pricing.
  * Ethanol crush margins were robust during the quarter, averaging about
    $0.25 per gallon above a year ago. Strong supply/demand fundamentals have
    remained supportive through the end of the calendar year.

Consolidated Results

  * Despite declining corn prices, last twelve month sales increased 3% to
    $458 million and EBITDA rose 18% to $20.5 million.
  * Cash flow from operations improved 25% over the prior year first quarter
    to $8.7 million.
  * Total debt outstanding fell 16% to $70.1 million from the first quarter of
    fiscal 2013.

Conference Call

Penford will host a conference call to discuss fiscal 2014 first quarter
results today, January 9, 2014 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 January 9, 2014, 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; impairment of the Company’s long-lived assets that could result
in a noncash charge to reported earnings; 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                         Three Months Ended

Financial Highlights                        November 30
(In thousands, except per share data)       2013        2012
Consolidated Results
(unaudited)
                                                         
Sales                                       $ 109,251   $ 118,022
                                                         
Income from operations                      $ 1,641     $ 4,020
                                                         
Net income                                  $ 488       $ 1,707
                                                         
Earnings per share, diluted                 $ 0.04      $ 0.14
                                                         
Cash Flows
(unaudited)
                                                         
Cash flow provided by (used in):
Operating activities                        $ 8,674     $ 6,944
Investing activities                          (2,319)     (3,425)
Financing activities                          (6,379)     (3,552)
Decrease in cash                            $ (24)      $ (33)
                                                           

 
Balance Sheets
(unaudited)
                                     November 30,     August 31,
                                     2013             2013
                                                       
Current assets                       $   86,151       $  90,114
Property, plant and equipment, net       112,059         112,141
Other assets                             22,260          22,363
Total assets                             220,470         224,618
                                                       
Current liabilities                      33,683          35,640
Long-term debt                           69,798          72,739
Other liabilities                        33,256          33,346
Shareholders’ equity                     83,733          82,893
Total liabilities and equity         $   220,470      $  224,618
                                                          

Penford Corporation                                     
Consolidated Statements of Operations                    Three Months Ended
(unaudited)                                              November 30,
                                                          
(In thousands, except per share data)                    2013        2012
                                                                      
                                                                      
Sales                                                    $ 109,251   $ 118,022
Cost of sales                                              98,542      104,764
Gross margin                                               10,709      13,258
                                                                      
Operating expenses                                         7,801       7,773
Research and development expenses                          1,267       1,465
                                                                      
Income from operations                                     1,641       4,020
                                                                      
Interest expense                                           813         1,081
Other non-operating income (expense), net                  8           (163)
Income before income taxes                                 836         2,776
                                                                      
Income tax expense                                         348         1,069
Net income                                               $ 488       $ 1,707
                                                                      
Weighted average common shares and equivalents             12,841      12,372
outstanding, diluted
                                                                      
Earnings per common share, diluted                       $ 0.04      $ 0.14
                                                                        

                             Penford Corporation
                      Reconciliation of Non-GAAP Measure

To supplement the segment and consolidated financial results prepared in
accordance with generally accepted accounting principles (“GAAP”), the Company
utilizes a non-GAAP financial measure, net income (loss), before interest,
taxes, depreciation and amortization expense (“EBITDA”). The Company uses
EBITDA to evaluate performance and establish goals. The Company believes that
this measure is valuable to investors in assessing the Company’s operating
results when viewed in conjunction with GAAP results. This non-GAAP measure is
not a substitute for, or an alternative to, the corresponding measure
calculated in accordance with GAAP.

 
Reconciliation of non-GAAP EBITDA to GAAP Operating Income (Loss)
                                                                                        
                Three months ended November 30, 2013         Three months ended August 31, 2013
                Food          Industrial    Consolidated     Food          Industrial    Consolidated
                Ingredients   Ingredients                    Ingredients   Ingredients
                                                                                          
Operating       $   6,530     $  (2,043)    $    1,641       $   6,168     $  (4,738)    $   (1,421)
income (loss)
                                                                                          
Depreciation
and                 525          2,684           3,291           510          2,607          3,198
amortization
Other
non-operating       -            6               8               -            16             7
income
                                                                                          
EBITDA          $   7,055     $  647        $    4,940       $   6,678     $  (2,115)    $   1,784
                                                                                          
                                                                                          
                                                                                          
                Three months ended November 30, 2012
                Food          Industrial    Consolidated
                Ingredients   Ingredients
                                                                                          
Operating       $   5,355     $  1,387      $    4,020
income (loss)
                                                                                          
Depreciation
and                 485          2,814           3,383
amortization
Other
non-operating       -            -               (163)
income (loss)
                                                                                          
EBITDA          $   5,840     $  4,201      $    7,240
                                                                                          
                                                                                          
                Twelve Months ended
                November 30
                2013          2012
                                                                                          
Operating       $   7,025     $  9,719
income (loss)
                                                                                          
Loss on
redemption of       -            (6,599)
Preferred
Stock
Depreciation
and                 13,235       13,998
amortization
Other
non-operating       246          227
income
                                                                                          
EBITDA          $   20,506    $  17,345
                                                                                          

Contact:

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