1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 8-K CURRENT REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 DATE OF REPORT (DATE OF EARLIEST EVENT REPORTED) AUGUST 31, 1998 PENFORD CORPORATION -------------------------------------------------- (EXACT NAME OF REGISTRANT AS SPECIFIED IN CHARTER) WASHINGTON --------------------------------------------------- (STATE OR OTHER JURISDICTION OF INCORPORATION) 0-11488 91-1221360 ------------------------ -------------------- (COMMISSION FILE NUMBER) (IRS EMPLOYER IDENTIFICATION NO.) 777-108TH AVENUE N.E., SUITE 2390 BELLEVUE, WASHINGTON 98004-5193 - ----------------------------------------- -------------------- (ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE) REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE (425) 462-6000 --------------- --------------------------------- (FORMER NAME OR FORMER ADDRESS, IF CHANGED SINCE LAST REPORT) 2 ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS On September 1, 1998 Penford Corporation announced that on August 31, 1998, it distributed to Penford Corporation stockholders of record on August 10, 1998, approximately 11 million shares of common stock of Penwest Pharmaceuticals Co. (PPC). Certificates for shares of PPC were mailed to Penford Corporation stockholders on August 31, 1998 by ChaseMellon Shareholder Services, the distribution agent for the spin-off. This distribution completes Penford Corporation's previously announced spin-off of PPC, its wholly-owned subsidiary engaged in the research, development and commercialization of novel drug delivery technologies and an established manufacturer and distributor of excipients used in binding, disintegrating and lubricating tableted pharmaceutical and nutritional products. Reference is made to PPC's registration statement on From 10 under the Securities Act of 1933 and Item 1 of Penford Corporation's report on Form 10-K for the year ended August 31, 1997 for a description of PPC's drug delivery technologies and excipients business. ITEM 5. OTHER EVENTS Item 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS (a) FINANCIAL STATEMENTS OF BUSINESSES ACQUIRED Not Applicable (b) PRO FORMA FINANCIAL INFORMATION UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS The following Pro Forma Consolidated Financial Statements as of May 31, 1998, for the year ended August 31, 1997 and for the nine months ended May 31, 1998 are unaudited. The unaudited Pro Forma Consolidated Balance Sheet was prepared as if the spin off of Penwest Pharmaceuticals Co. was effective at May 31, 1998. The unaudited Pro Forma Consolidated Statement of Income for the year ended August 31, 1997 was prepared as if the spin off of Penwest Pharmaceuticals Co. was effective as of September 1, 1996. The unaudited Pro Forma Consolidated Statement of Income for the nine months ended May 31, 1998 was prepared as if the spin off of Penwest Pharmaceuticals Co., was effective as of September 1, 1997. The unaudited Pro Forma Consolidated Financial Statements do not purport to represent what the Company's financial position or results of operations would actually have been if the spin off had in fact occurred on such dates or to project the Company's financial position or results of operations as of any future date or for any future period. The unaudited Pro Forma Consolidated Financial Statements are based on the historical financial statements of the Company and its subsidiary Penwest Pharmaceuticals Co., which reflected the spin off of Penwest Pharmaceuticals Co. as a discontinued operation in accordance with APB No. 30, in the Company's filing on Form 10-Q for the period ended May 31, 1998. The unaudited Pro Forma Consolidated Balance Sheet, as adjusted reflects the distribution of all of the common stock of Penwest Pharmaceuticals Co. and the related forgiveness of intercompany indebtedness. The unaudited Pro Forma Consolidated Statements of Income, as adjusted reflect the elimination of Penwest Pharmaceuticals Co. from the consolidated operations of Penford Corporation. The unaudited Pro Forma Consolidated Financial Statements should be read in conjunction with the Penford Corporation audited financial statements appearing in the Company's 1997 Annual Report on Form 10-K and Quarterly Report on Form 10-Q as of May 31, 1998, filed with the Securities and Exchange Commission. 3 PENFORD CORPORATION AND SUBSIDIARIES PRO-FORMA CONSOLIDATED BALANCE SHEET (Dollars in Thousands) May 31, 1998 ------------ ASSETS Current assets $ 45,532 Net property, plant and equipment 106,869 Deferred income taxes 13,073 Restricted cash value of life insurance 12,048 Other assets 5,071 -------- Total assets $182,593 ======== LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities $ 32,994 Long-term debt 57,460 Other postretirement benefits 10,360 Deferred income taxes 24,109 Other liabilities 7,036 Shareholders' equity 50,634 -------- Total liabilities and shareholders' equity $182,593 ======== 4 PENFORD CORPORATION AND SUBSIDIARIES PRO-FORMA CONSOLIDATED STATEMENTS OF INCOME (Dollars in thousands except per share data) Year Ended August 31 Nine Months Ended May 31 -------------------- ------------------------ 1997 1998 ----------- ----------- Sales $ 170,105 $ 122,773 Cost of sales 127,531 88,634 ----------- ----------- Gross margin 42,574 34,139 Operating expenses 25,105 19,354 ----------- ----------- Income from operations 17,469 14,785 Other income 1,200 Interest expense, net (5,251) (4,350) ----------- ----------- Income before income taxes 13,418 10,435 Income taxes 4,484 3,652 ----------- ----------- Net income $ 8,934 $ 6,783 =========== =========== Weighted average common shares assuming dilution 7,131,725 7,534,001 Earnings per share, diluted $ 1.25 $ 0.90 =========== =========== NOTES TO PRO-FORMA CONSOLIDATED FINANCIAL STATEMENTS Footnote 1 The pro forma consolidated Balance Sheet, as adjusted reflects the forgiveness of intercompany debt of approximately $46.4 million and related reduction in shareholders equity of approximately $37.5 million to reflect the distribution of 100% of the common stock in Penwest Pharmaceuticals Co. Footnote 2 The pro forma consolidated statements of income, as adjusted reflect the elimination of the operations of Penwest Pharmaceuticals Co. which also includes the allocation of certain corporate office expenses to Penwest Pharmaceuticals Co., and the elimination of the previously reported loss on disposal including direct transaction costs. In addition, the pro-forma income statement for the nine months ended May 31, 1998 eliminates the effects of $1.9 million of non-recurring restructure costs incurred in the period, and reflected in the Company's filing on Form 10-Q for the period ended May 31, 1998 which were related to the spin-off plan. 5 (c) EXHIBITS 10.1 Separation and Distribution Agreement dated as of July 31, 1998 between Registrant and Penwest Pharmaceuticals Co. 10.2 Services Agreement dated as of July 31, 1998 between Registrant and Penwest Pharmaceuticals Co. 10.3 Employee Benefits Agreement dated as of July 31, 1998 between Registrant and Penwest Pharmaceuticals Co. 10.4 Tax Allocation Agreement dated as of July 31, 1998 between Registrant and Penwest Pharmaceuticals Co. 10.5 Excipient Supply Agreement dated as of July 31, 1998 between Registrant and Penwest Pharmaceuticals Co. 99.1 Press release dated September 1, 1998 6 SIGNATURES: Pursuant to the requirements of the Securities Exchange Act of 1934,the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized. PENFORD CORPORATION September 14, 1998 By /s/ Jeffrey T. Cook ------------------ ---------------------- Date Jeffrey T. Cook President and Chief Executive Officer