UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K/A
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
DATE OF REPORT (DATE OF EARLIEST EVENT REPORTED) SEPTEMBER 29, 2000
PENFORD CORPORATION
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(EXACT NAME OF REGISTRANT AS SPECIFIED IN CHARTER)
WASHINGTON
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(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)
EXPLANATORY NOTE
This Amendment No. 2 on Form 8-K/A revises Item 7 of our Current Report on
Form 8-K, originally filed September 29, 2002 and amended December 12, 2000
(together, the "Form 8-K") and includes information in response to comments from
the staff of the Securities and Exchange Commission.
This report continues to speak as of the dates of the original filings of
the Form 8-K, as amended, and we have not updated this disclosure in this report
to speak as of a later date. All information contained in this report, the Form
8-K is subject to updating and supplementing as provided in our periodic reports
filed with the Securities and Exchange Commission.
ITEM 2. ACQUISITION OF ASSETS
This Amendment No. 1 provides Items 7 (a) and 7 (b) of the Current Report on
Form 8-K dated September 29, 2000, relating to Penford Corporation's acquisition
of Starch Australasia Limited, renamed Penford Australia Limited. In accordance
with paragraph 4 of Item 7 (a) of Form 8-K, the required financial statements
and pro forma financial information are being filed with this Amendment No. 1.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS
(a) Financial Statements of Business Acquired
PENFORD AUSTRALIA LIMITED (formerly Starch Australasia Limited)
(i) Independent Audit Report for the year ended 30 June 2000
(ii) Audited Consolidated Profit and Loss Statement for the year
ended 30 June 2000
(iii) Audited Consolidated Balance Sheet as of 30 June 2000
(iv) Audited Consolidated Statement of Cash Flows for the year
ended 30 June 2000
(v) Notes to Consolidated Financial Statements for the year ended
30 June 2000
(b) Pro Forma Financial Information
PENFORD CORPORATION
(i) Unaudited Pro Forma Consolidated Financial Statements
(ii) Unaudited Pro Forma Consolidated Balance Sheet as of August
31, 2000
(iii) Unaudited Pro Forma Consolidated Statement of Income for the
year ended August 31, 2000
(iv) Notes to Unaudited Pro Forma Consolidated Financial Statements
(c) Exhibits
2.1 Starch Australasia Share Sale Agreement completed as of
September 29, 2000 among Penford Holdings Pty Limited, a
wholly owned subsidiary of Registrant, and Goodman Fielder
Limited*
10.1 Amended and Restated Credit Agreement dated as of November 15,
2000 among Penford Corporation and Penford Products Co. as
borrowers, and certain commercial lending institutions as
lenders, and the Bank of Nova Scotia, as agent for the
lenders*
10.2 Debenture Trust Deed dated as of November 15, 2000 among
Penford Holdings Pty Limited as issuer and ANZ Capel Court
Limited as trustee*
10.3 Syndicated Facility Agreement dated as of November 15, 2000
among Penford Australia Limited, a wholly owned subsidiary of
Penford Holdings Pty Limited, as borrowers, and Australia and
New Zealand Banking Group Limited as lender and agent*
10.4 Intercreditor Agreement dated as of November 15, 2000 by and
among The Bank of Nova Scotia, KeyBank National Association,
U.S. National Association and Australia and New Zealand
Banking Group Limited*
23.1 Consent of Ernst & Young LLP, Independent Auditors*
99.1 Press Release dated September 29, 2000**
*Previously filed as an exhibit to the Form 8-K/A of Penford
Corporation (File No. 000-11488) filed with the Commission by
Penford on December 12, 2000
**Previously filed as an exhibit to the Form 8-K of Penford
Corporation (File No. 000-11488) filed with the Commission by
Penford on October 13, 2000.
INDEPENDENT AUDIT REPORT
To the members of Penford Australia Limited (formerly Starch Australasia
Limited)
SCOPE
We have audited the attached financial report, being a special purpose financial
report, of Penford Australia Limited for the financial year ended 30 June 2000,
consisting of the Profit and Loss Statement, Balance Sheet, Statement of Cash
flows and Notes thereon. The company's directors are responsible for the
financial report and have determined that the accounting policies used and
described in Note 1 to the financial statements which form part of the financial
report are appropriate for the purpose for which the financial report is
prepared. We have conducted an independent audit of the financial report in
order to express an opinion on it to the members of the company.
The financial report has been prepared for inclusion in certain filings under
the laws of the United States. We disclaim any assumption of responsibility for
any reliance on this audit report or on the financial report to which it relates
for any purpose other than that for which it was prepared.
Our audit has been conducted in accordance with United States generally accepted
auditing standards. Our procedures included examination, on a test basis, of
evidence supporting the amounts and other disclosures in the financial report,
and the evaluation of accounting policies and significant accounting estimates.
These procedures have been undertaken to form an opinion as to whether, in all
material respects, the financial report is presented fairly in accordance with
the accounting policies described in Note 1, so as to present a view which is
consistent with our understanding of the company's financial position and
performance as represented by the results of its operations and its cash flows.
The audit opinion expressed in this report has been formed on the above basis.
AUDIT OPINION
In our opinion, the financial report of Penford Australia Limited is in
accordance with:
(a) the Corporations Law including:
(i) giving a true and fair view of the company's financial position as
at 30 June 2000 and of the performance of the company for the year
ended on that date; and
(ii) complying with Accounting Standards to the extent disclosed in Note
1, and the Corporations Regulations; and
(b) other mandatory professional reporting requirements.
Accounting principles generally accepted in Australia vary in certain respects
from accounting principles generally accepted in the United States. The
application of the latter would have affected the determination of consolidated
operating profit for the year ended 30 June 2000 and the determination of
consolidated shareholder's equity of Penford Australia Limited as at 30 June
2000 to the extent indicated in note 29 to the financial statements.
Ernst & Young
/s/ David N. Balcombe
Melbourne
Date: 11 December 2000
PENFORD AUSTRALIA LIMITED
PROFIT AND LOSS STATEMENT
PENFORD AUSTRALIA
YEAR ENDED 30 JUNE 2000 NOTES CONSOLIDATED LIMITED
- ----------------------- ----- ------------ -----------------
$000 $000
OPERATING REVENUE 2 113,771 94,052
======== ========
OPERATING PROFIT BEFORE INCOME TAX 3,604 1,614
INCOME TAX ATTRIBUTABLE TO OPERATING PROFIT 3 (493) 164
-------- --------
OPERATING PROFIT AFTER INCOME TAX 3,111 1,778
-------- --------
RETAINED PROFITS at the beginning of the financial year 3,484 (2,436)
-------- --------
TOTAL AVAILABLE FOR APPROPRIATION 6,595 (658)
-------- --------
DIVIDENDS PROVIDED FOR OR PAID -- --
-------- --------
RETAINED PROFITS at the end of the financial year 6,595 (658)
======== ========
PENFORD AUSTRALIA LIMITED
BALANCE SHEET
PENFORD AUSTRALIA
AT 30 JUNE 2000 NOTES CONSOLIDATED LIMITED
- --------------- ------- ------------ -----------------
$000 $000
CURRENT ASSETS
Cash 16,286 9,795
Receivables 4 17,838 14,636
Inventories 5 24,908 20,894
Other 6 523 345
------- -------
TOTAL CURRENT ASSETS 59,555 45,670
------- -------
NON-CURRENT ASSETS
Investments 7 -- 391
Property, plant and equipment 9 57,268 50,463
Intangibles 10 421 421
Future income tax benefit 342 --
------- -------
TOTAL NON-CURRENT ASSETS 58,031 51,275
------- -------
TOTAL ASSETS 117,586 96,945
------- -------
CURRENT LIABILITIES
Accounts payable 11 12,389 8,918
Borrowings 12 5,885 5,885
Provisions 13 5,335 4,077
------- -------
TOTAL CURRENT LIABILITIES 23,609 18,880
------- -------
NON-CURRENT LIABILITIES
Accounts payable 14 79,827 70,733
Borrowings 15 3,377 3,377
Provisions 16 4,651 4,613
------- -------
TOTAL NON-CURRENT LIABILITIES 87,855 78,723
------- -------
TOTAL LIABILITIES 111,464 97,603
------- -------
NET ASSETS 6,122 (658)
======= =======
SHAREHOLDERS' EQUITY
Share Capital 17 -- --
Reserves 18 (473) --
Retained profits 6,595 (658)
------- -------
TOTAL SHAREHOLDERS' EQUITY 6,122 (658)
======= =======
PENFORD AUSTRALIA LIMITED
STATEMENT OF CASH FLOWS
PENFORD AUSTRALIA
YEAR ENDED 30 JUNE 2000 NOTES CONSOLIDATED LIMITED
- ----------------------- -------- ------------ -----------------
$000 $000
CASH FLOWS FROM OPERATING ACTIVITIES
Receipts from customers 84,371 63,812
Sales to group companies 36,570 29,798
Payments to suppliers and employees (109,122) (83,998)
Other operating receipts 217 217
Interest paid (1,248) (475)
Other operating payments (5,700) (5,700)
Income tax paid (1,366) (966)
-------- --------
NET CASH FLOWS FROM OPERATING ACTIVITIES 19 3,722 2,688
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES
Acquisition of property, plant and equipment (5,938) (4,910)
Proceeds from sale of property, plant and equipment 32 24
-------- --------
NET CASH FLOWS USED IN INVESTING ACTIVITIES (5,906) (4,886)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES
Advances - related parties 16,075 15,314
Borrowings - other 2,062 2,062
Exchange rate effect on non trading intercompany balance 158 --
-------- --------
NET CASH FLOWS FROM FINANCING ACTIVITIES 18,295 17,376
NET INCREASE IN CASH HELD 16,111 15,178
Add opening cash brought forward 245 (5,383)
Effect of exchange rate changes on the opening balances of cash held in (106) --
foreign currencies
Effects due to translation of cash flows at transaction date exchange rate 36 --
-------- --------
CLOSING CASH CARRIED FORWARD 19 16,286 9,795
======== ========
PENFORD AUSTRALIA LIMITED
NOTES TO FINANCIAL STATEMENTS
30 JUNE 2000
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(A) BASIS OF ACCOUNTING
The financial report is a special purpose financial report, which has been
prepared in accordance with all the requirements of the Corporations Law, which
includes applicable Accounting Standards other than the inclusion of
comparatives from the prior year, as such comparatives were not required for the
purpose for which the financial report was prepared. Other mandatory
professional reporting requirements (Urgent Issues Group Consensus Views) have
also been complied with.
The financial report has been prepared for inclusion in certain filings under
the laws of the United States.
Accounting principles generally accepted in Australia vary in certain respects
from accounting principles generally accepted in the United States. The
application of the latter would have affected the determination of consolidated
operating profit for the year ended 30 June 2000 and the determination of
consolidated shareholders' equity attributable to shareholders' of Penford
Australia Limited as at 30 June 2000 to the extent indicated in note 29 to the
financial statements.
The financial statements have been prepared in accordance with the historical
cost convention, except for certain assets which are at valuation.
(B) CHANGE IN ACCOUNTING POLICIES
The accounting policies adopted are consistent with those of the previous year.
(C) PRINCIPLES OF CONSOLIDATION
The consolidated financial statements are those of the economic entity,
comprising Penford Australia Limited (the parent company) and all entities,
which Penford Australia Limited controlled from time to time during the year and
at the balance sheet date.
The financial statements of subsidiaries are prepared for the same reporting
period as the parent entity, using consistent accounting policies.
All intercompany balances and transactions, including unrealised profits arising
from intra-group transactions, have been eliminated in full.
(D) FOREIGN CURRENCIES
Translation of foreign currency transactions
Transactions in foreign currencies of entities within the consolidated entity
are converted to local currency at the rate of exchange ruling at the date of
the transaction.
Amounts payable to and by entities within the consolidated entity that are
outstanding at the balance sheet date and are denominated in foreign currencies
have been converted to local currency using rates of exchange ruling at the end
of the financial year.
Except for certain specific hedges, all resulting exchange differences arising
on settlement or re-statement are brought to account in determining the profit
and loss for the financial year.
Specific Hedges
Where a purchase or sale is specifically hedged, exchange gains or losses on the
hedging transaction arising up to the date of purchase or sale are included with
the purchase or sale. Exchange gains and losses arising on the hedge transaction
after that date are taken to the profit and loss statement.
Translation of financial reports of overseas operations
All overseas operations are deemed self-sustaining, as each is financially and
operationally independent of Penford Australia Limited. The financial reports of
overseas operations are translated using the current rate method and any
exchange differences are taken directly to the foreign exchange translation
reserve.
PENFORD AUSTRALIA LIMITED
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(E) CASH
For the purposes of the statement of cash flows, cash includes cash on hand and
in banks, and money market investments readily convertible to cash within 2
working days, net of outstanding bank overdrafts.
(F) TRADE RECEIVABLES
Trade receivables are carried at nominal amounts due less any provision for
doubtful debts. A provision for doubtful debts is recognised when collection of
the full nominal amount is no longer probable.
(G) RECEIVABLES - RELATED PARTIES
Amounts (other than trade debts) receivable from related parties are carried at
nominal amounts due.
(H) INVENTORIES
Inventories are valued at the lower of cost and net realisable value.
Costs incurred in bringing each product to its present location and condition
are accounted for as follows:
[ ] Raw materials - weighted average cost basis
[ ] Finished goods and work-in-progress - cost of direct material and labour
and a proportion of manufacturing overheads based on normal operating
capacity.
(I) RECOVERABLE AMOUNT
Non-current assets are not revalued to an amount above their recoverable amount,
and where carrying values exceed this recoverable amount assets are written
down. In determining recoverable amount the expected net cash flows have been
discounted to their present value using a market determined risk adjusted
discount rate.
(J) PROPERTY, PLANT AND EQUIPMENT
Cost and valuation
Items of property, plant and equipment comprising a class of non-current asset
are revalued at the same date on a consistent basis.
Where assets have been revalued, the potential effect of the capital gains tax
on disposal has not been taken into account in the determination of the revalued
carrying amount. Where it is expected that a liability for capital gains tax
will arise, this expected amount is disclosed by way of note.
Depreciation
Depreciation is provided on a straight line basis on all property, plant and
equipment, other than freehold land.
Major depreciation periods are: 2000
Freehold buildings: 25 to 40 years
Plant and equipment: 5 to 20 years
PENFORD AUSTRALIA LIMITED
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(K) LEASES
Leases are classified at their inception as either operating or finance leases
based on the economic substance of the agreement so as to reflect the risks and
benefits incidental to ownership.
Operating leases
The minimum lease payments of operating leases, where the lessor effectively
retains substantially all of the risks and benefits of ownership of the leased
item, are recognised as an expense on a straight line basis.
Finance leases
Leases which effectively transfer substantially all the risks and benefits
incidental to ownership of the leased item to the company are capitalised at the
present value of the minimum lease payments and disclosed as property, plant and
equipment under lease. A lease liability of equal value is also recognised.
Capitalised lease assets are depreciated over the shorter of the estimated
useful life of the assets and the lease term. Minimum lease payments are
allocated between interest expense and reduction of the lease liability with the
interest expense calculated using the interest rate implicit in the lease and
charged directly to profit and loss.
(L) INTANGIBLES
Goodwill
Goodwill is amortised by the straight line method over the period during which
benefits are expected to be received. This is taken as being 10 years.
Patents
The costs of obtaining patents has been capitalised and is being amortised over
a ten year period.
(M) TRADE PAYABLES
Liabilities are recognised for amounts to be paid in the future for goods and
services received, whether or not billed to the company.
(N) LOANS AND BORROWINGS
All borrowings are carried at the principal amount. Interest is charged as an
expense as it accrues.
(O) PROVISIONS
Dividends payable are recognised when a legal obligation to pay the dividend
arises, typically following approval of the dividend at a meeting of
shareholders.
(P) SHARE CAPITAL
Ordinary share capital is recognised at the fair value of the consideration
received by the company.
PENFORD AUSTRALIA LIMITED
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(Q) REVENUE RECOGNITION
Revenue is recognised to the extent that it is probable that the economic
benefits will flow to the entity and the revenue can be reliably measured. The
following specific recognition criteria must also be met before revenue is
recognised:
Sale of Goods
Control of the goods has passed to the buyer.
Interest
Control of a right to receive consideration for the provision of, or investment
in, assets has been attained.
Dividends
Control of a right to receive consideration for the investment in assets is
attained, usually evidenced by approval of the dividend at a meeting of
shareholders.
(R) EMPLOYEE ENTITLEMENTS
Provision is made for employee entitlement benefits accumulated as a result of
employees rendering services up to the reporting date. These benefits include
wages and salaries, annual leave, sick leave and long service leave.
Liabilities arising in respect of wages and salaries, annual leave, sick leave
and any other employee entitlements expected to be settled within twelve months
of the reporting date are measured at their nominal amounts. All other employee
entitlement liabilities are measured at the present value of the estimated
future cash outflow to be made in respect of services provided by employees up
to the reporting date.
Employee entitlements expenses and revenues arising in respect of the following
categories:
- - Wages and salaries, non-monetary benefits, annual leave, long service
leave, sick leave and other leave entitlements; and
- - Other types of employee entitlements
Are charged against profits on a net basis in their respective categories.
(S) INCOME TAX
Tax-effect accounting is applied using the liability method whereby income tax
is regarded as an expense and is calculated on the accounting profit after
allowing for permanent differences. To the extent timing differences occur
between the time items are recognised in the financial statements and when items
are taken into account in determining taxable income, the net related taxation
benefit or liability, calculated at current rates, is disclosed as a future
income tax benefit or a provision for deferred income tax. The net future income
tax benefit relating to tax losses and timing differences is not carried forward
as an asset unless the benefit is virtually certain of being realised.
Where assets are revalued no provision for potential capital gains tax has been
made.
The income tax expense for the year is calculated using the 36% tax rate,
however the deferred tax balances have been adjusted for the decreased corporate
tax rate of 34% for the tax year 2000-01 and 30% thereafter. The adjustment
recognises that reversal of timing differences will occur within the 2000-01 or
later income tax year, at which time tax will be attributed at a lower rate. The
corresponding adjustment has been charged to income tax expense.
PENFORD AUSTRALIA LIMITED
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTES CONSOLIDATED PENFORD AUSTRALIA
30 JUNE 2000 LIMITED
$000 $000
2. OPERATING PROFIT
The operating profit before income tax is arrived at after
charging/(crediting) the following items:
Amortisation of non-current assets
Goodwill 55 55
Patents 72 72
------------ ------------
127 127
Depreciation of non-current assets
Plant and equipment 5,140 4,532
Buildings 324 228
------------ ------------
5,464 4,760
Borrowing costs expensed
Interest expense - Other related parties 1,248 475
------------ ------------
Bad and doubtful debts - Trade debtors 16 16
Net loss on disposal of property, plant and equipment 91 90
Operating leases - minimum lease payments 1,210 1,178
Other provisions
Provision for employee entitlements 1,337 1,273
Research and development costs 1,584 1,584
Included in the operating profit are the following revenues arising
from operating activities:
Sales revenue 113,648 94,036
------------ ------------
Other revenue 123 16
------------ ------------
Operating revenue 113,771 94,052
============ ============
PENFORD AUSTRALIA LIMITED
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
30 JUNE 2000 NOTES CONSOLIDATED PENFORD AUSTRALIA
LIMITED
$000 $000
3. INCOME TAX
The prima facie tax on operating profit differs from the income tax
provided in the financial statements as follows:
Prima facie tax on operating profit 1,240 581
Tax effect of permanent differences
Depreciation of buildings 82 82
Depreciation of plant & equipment 127 127
Amortisation of intangible assets 20 20
Non-deductible expenses 22 20
Research and Development incentive (242) (242)
Other permanent decreases (141) (141)
Over provision of previous year (151) (147)
Net loss attributable to change in income tax rate (464) (464)
------------ ------------
Total income tax provided on operating profit 493 (164)
============ ============
4. RECEIVABLES (CURRENT)
Trade debtors 17,412 14,184
Provision for doubtful debts (97) (66)
------------ ------------
17,315 14,118
Other debtors 523 518
------------ ------------
17,838 14,636
============ ============
(a) Aggregate amounts receivable from related parties:
Wholly-owned group
- companies under common control 3,265 2,770
============ ============
(b) Movement in provision for doubtful debts
- balance at beginning of year 135 86
- bad and doubtful debts provided for during the year (38) (20)
------------ ------------
- balance at end of year 97 66
============ ============
PENFORD AUSTRALIA LIMITED
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
30 JUNE 2000 NOTES CONSOLIDATED PENFORD AUSTRALIA
LIMITED
$000 $000
5. INVENTORIES (CURRENT)
Raw materials and stores -
at cost 16,181 14,316
Work-in-progress - at cost 196 196
Finished goods 8,350 6,382
Other inventory 181 --
------------ ------------
Total inventories at lower of
cost and net realisable value 24,908 20,894
============ ============
6. OTHER CURRENT ASSETS
Prepayments 523 345
============ ============
7. INVESTMENTS (NON-CURRENT)
INVESTMENTS AT COST COMPRISE:
Controlled entities
Unlisted shares -- 391
============ ============
8. INTERESTS IN SUBSIDIARIES
Name Country of Percentage of equity
incorporation interest held by the
consolidated entity
%
Penford New Zealand Limited
(formerly Starch New Zealand
Limited) NZ 100
- ordinary shares -- 391
============ ============
PENFORD AUSTRALIA LIMITED
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
30 JUNE 2000 NOTES CONSOLIDATED PENFORD AUSTRALIA
LIMITED
$000 $000
9. PROPERTY, PLANT AND EQUIPMENT
Freehold land:
At cost 12,445 12,445
At independent valuation 1998 9(a) 1,372 --
------------ ------------
13,817 12,445
------------ ------------
Buildings on freehold land
At cost 5,831 5,831
Provision for depreciation (446) (446)
------------ ------------
5,385 5,385
------------ ------------
At independent valuation 1998 9(a) 2,107 --
Provision for depreciation (145) --
------------ ------------
1,962 --
------------ ------------
TOTAL LAND AND BUILDINGS 21,164 17,830
------------ ------------
Plant and equipment
At cost 82,248 70,083
Provision for depreciation (48,861) (39,532)
------------ ------------
33,388 30,551
------------ ------------
Plant and equipment under construction
At cost 2,716 2,082
Provision for depreciation -- -
------------ ------------
2,716 2,082
------------ ------------
TOTAL PLANT AND EQUIPMENT 36,104 32,633
------------ ------------
TOTAL PROPERTY, PLANT AND EQUIPMENT 57,268 50,463
============ ============
Cost 103,426 90,441
Independent valuation 1998 3,293 --
------------ ------------
106,719 90,441
Provision for depreciation (49,451) (39,978)
------------ ------------
TOTAL WRITTEN DOWN AMOUNT 57,268 50,463
============ ============
(a) Valuations
All valuations are estimates of the amounts for which the assets could be
exchanged between a knowledgeable willing buyer and a knowledgeable willing
seller in an arm's length transaction at the valuation date. The company has a
policy of revaluing assets every 3 years.
The valuation of the New Zealand Land and Buildings was carried out by National
Portfolio Strategies.
PENFORD AUSTRALIA LIMITED
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
30 JUNE 2000 NOTES CONSOLIDATED PENFORD AUSTRALIA
LIMITED
$000 $000
10. INTANGIBLES
Goodwill 275 275
Provision for amortisation (275) (275)
------------ ------------
-- --
------------ ------------
Patents 493 493
Provision for amortisation (72) (72)
------------ ------------
421 421
------------ ------------
421 421
============ ============
11. ACCOUNTS PAYABLE (CURRENT)
Trade creditors 8,189 5,434
Other creditors 4,200 3,484
------------ ------------
12,389 8,918
============ ============
Aggregate amounts payable to related parties
Wholly owned group
- companies under common control 1,817 1,662
============ ============
12. BORROWINGS (CURRENT)
Loan - other 15(a) 5,885 5,885
============ ============
13. PROVISIONS (CURRENT)
Taxation 3,535 2,558
Employee entitlements 21 1,800 1,519
------------ ------------
5,335 4,077
============ ============
PENFORD AUSTRALIA LIMITED
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
30 JUNE 2000 NOTES CONSOLIDATED PENFORD AUSTRALIA
LIMITED
$000 $000
14. ACCOUNTS PAYABLE (NON-CURRENT)
Amounts payable to companies under common control 79,827 70,733
============ ============
15. BORROWINGS (NON-CURRENT)
Loan - other 3,377 3,377
============ ============
a) Loans-other relate to loans from unrelated parties. Interest
is charged monthly at a rate of 0.475% p.a. above the base
rate. The base rate is based on either LIBOR of BBSY.
The loan is secured against raw materials inventory to the
same value
16. PROVISIONS (NON-CURRENT)
Employee entitlements 21 2,072 2,035
Deferred income tax liability 2,579 2,578
------------ ------------
4,651 4,613
============ ============
17. SHARE CAPITAL
ISSUED AND PAID UP CAPITAL
- - 2 ordinary shares each fully paid -- --
============ ============
18. RESERVES
Foreign exchange fluctuation reserve (473) --
------------ ------------
(473) --
============ ============
PENFORD AUSTRALIA LIMITED
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
30 JUNE 2000 NOTES CONSOLIDATED PENFORD AUSTRALIA
LIMITED
$000 $000
19. STATEMENT OF CASH FLOWS
(a) Reconciliation of the operating profit after tax to the net
cash flows from operations
Operating profit after tax 3,111 1,778
Depreciation of non-current assets 5,464 4,760
Amortisation of non-current assets 127 127
Net (profit)/loss on disposal of property, plant and equipment 91 90
CHANGES IN ASSETS AND LIABILITIES
Trade receivables (1,822) (915)
Inventory (2,690) (1,845)
Other assets (22) 29
Trade creditors 1 (487)
Tax provision (1,677) (1,908)
Deferred income tax liability 778 778
Future income tax benefit 26 --
Other provisions 335 281
------------ ------------
Net cash flow from (used in) operating activities 3,722 2,688
============ ============
(b) Reconciliation of cash
Cash balance comprises:
- cash 16,286 9,795
------------ ------------
Closing cash balance 16,286 9,795
============ ============
(c) Bank Overdraft Facility
The company is part of a set off group containing Goodman Fielder companies.
PENFORD AUSTRALIA LIMITED
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
30 JUNE 2000 NOTES CONSOLIDATED PENFORD AUSTRALIA
LIMITED
$000 $000
20. EXPENDITURE COMMITMENTS
(a)Capital expenditure commitments
Estimated capital expenditure contracted for at balance date
but not provided for
- payable not later than one year 1,380 1,314
============ ============
(b) Lease expenditure commitments
Operating leases (non-cancelable)
Minimum lease payments
- not later than one year 938 906
- later than one year and not later than five years 2,326 2,322
------------ ------------
- aggregate lease expenditure contracted for at balance date 3,264 3,228
============ ============
21. EMPLOYEE ENTITLEMENTS AND SUPERANNUATION COMMITMENTS
EMPLOYEE ENTITLEMENTS
The aggregate employee entitlement liability is comprised of:
Accrued wages, salaries and on costs
Provisions (current) 13 1,800 1,519
Provisions (non-current) 16 2,072 2,035
------------ ------------
3,872 3,554
============ ============
22. CONTINGENT LIABILITIES
The company is part of a group guarantee secured in favour of Goodman Fielder.
PENFORD AUSTRALIA LIMITED
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
23. SUBSEQUENT EVENTS
On 29 September 2000, Penford Corporation completed its acquisition of Penford
Australia Limited from Goodman Fielder Limited for $98 million in cash. No
significant changes are anticipated to the company's management team or
principal activities. The sale of Penford Australia Limited provides Penford
with new opportunities to develop, manufacture and market specialty
carbohydrate-based ingredients for food and paper applications in expanded
markets.
On 1st November 2000, Starch Australasia Limited changed its name to Penford
Australia Limited.
30 JUNE 2000 NOTES CONSOLIDATED PENFORD AUSTRALIA
LIMITED
24. REMUNERATION OF DIRECTORS
Directors' remuneration
Income paid or payable, or otherwise made available, in respect of
the financial year, to all directors of Penford Australia Limited,
directly or indirectly, from the entity or any related party: -- --
============ ============
The number of directors of Penford Australia Limited whose income
(including superannuation contributions) falls within the following
bands is:
2000
$0 -- $9,999 3
25. AUDITORS' REMUNERATION
Amounts received or due and receivable by the auditors of Penford
Australia Limited for:
- - an audit or review of the financial statements 19,797 11,000
- - other services -- --
------------ ------------
19,797 11,000
============ ============
PENFORD AUSTRALIA LIMITED
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
26. RELATED PARTY DISCLOSURES
All related party disclosures relate to those parties that were related at 30
June 2000 or during the year then ended.
(a) The directors of Penford Australia Limited during the financial year were:
Geoffrey Stephenson (resigned 29 September 2000)
Ian Glasson (resigned 29 September 2000)
Ian Gilmour (resigned 29 September 2000)
(b) The following related party transactions occurred during the financial year:
(i) Transactions with related parties in wholly-owned group
1. SALES MADE UNDER NORMAL COMMERCIAL TERMS AND CONDITIONS TO COMPANIES
UNDER COMMON CONTROL
2. PURCHASES MADE UNDER NORMAL COMMERCIAL TERMS AND CONDITIONS FROM
COMPANIES UNDER COMMON CONTROL
(ii) Transactions with other related parties
NONE
(iii) Transactions with the directors of Penford Australia Limited
NONE
(iv) Transactions with director-related entities
NONE
(c) The ultimate parent entity of the wholly owned group was Goodman Fielder
Limited at 30 June 2000 and Penford Corporation at the date of this report.
(d) Equity instruments of directors
NONE
PENFORD AUSTRALIA LIMITED
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
27. SEGMENT INFORMATION
a) The consolidated entity operates predominantly in one industry -
manufacturing of starch products.
B) GEOGRAPHICAL SEGMENTS
AUSTRALIA NEW ZEALAND ELIMINATION CONSOLIDATED
Operating revenue
Sales to customers 94,052 25,041 (5,322) 113,771
outside the
consolidated entity ------ ------ ------ -------
Total revenue 94,052 25,041 (5,322) 113,771
====== ====== ====== =======
Segment result 1,614 2,071 (81) 3,604
====== ====== ======
Unallocated expenses --
-------
Consolidated entity 3,604
operating profit
before income tax
=======
Segment assets 96,945 20,725 (84) 117,586
====== ====== ====== =======
28. FINANCIAL INSTRUMENTS
28(A) TERMS, CONDITIONS AND ACCOUNTING POLICIES
The company's accounting policies, including the terms and conditions of each
class of financial asset, financial liability and equity instrument, both
recognised and unrecognised at the balance date, are as follows:
RECOGNISED BALANCE ACCOUNTING POLICIES TERMS AND CONDITIONS
FINANCIAL SHEET
INSTRUMENTS NOTES
(I) FINANCIAL ASSETS
Receivables - 4 Trade receivables are Credit sales are on 30 days terms.
trade carried at nominal
amounts due less any
provision for doubtful
debts. A provision for
doubtful debts is
recognised when
collection of the
full nominal amount
is no longer probable.
Receivables - 4 Amounts (other than As above
related trade debts)
parties receivable from
related parties are
carried at nominal
amounts due.
(II) FINANCIAL
LIABILITIES
Bank Bank overdrafts are Penford Australia Limited is included
overdrafts carried at the in the Goodman Fielder set off
principal amount. facility. As such it is only charged
interest on the basis of the overall
group expense.
PENFORD AUSTRALIA LIMITED
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
28. FINANCIAL INSTRUMENTS (CONT'D)
(II) FINANCIAL LIABILITIES
Trade 11 Liabilities are Trade liabilities are normally
creditors and recognised for amounts settled on 60 days terms.
accruals to be paid in the
future for goods and
services received,
whether or not billed
to the company.
28(A) TERMS, CONDITIONS AND ACCOUNTING POLICIES (CONT'D)
RECOGNISED BALANCE ACCOUNTING POLICIES TERMS AND CONDITIONS
FINANCIAL SHEET
INSTRUMENTS NOTES
Accounts 14 These amounts are This balance represents funding of
payable to recognised at the operations. It is not directly
related amount to be paid in interest bearing
parties - non the future at the
current principal amount.
Loans 12,15 These amounts are Interest is charged monthly at a rate
recognised at the of 0.475% p.a. above the base rate.
amount to be paid in The base rate is based on either
the future at the LIBOR of BBSY.
principal amount. The loan is secured against raw
materials inventory to the same value
(III) EQUITY
Ordinary 17 Ordinary share capital The company is authorised to issue up
shares is recognised at the to 2 ordinary shares of $1 each.
fair value of the Details of shares issued are set out
consideration received in note 15.
by the company.
28(B) INTEREST RATE RISK
All financial assets and financial liabilities, both recognised and
unrecognised, are non-interest bearing.
28(C) NET FAIR VALUES
The carrying amounts of financial assets and financial liabilities, both
recognised and unrecognised, at balance date, approximate their aggregate net
fair values.
28(D) CREDIT RISK EXPOSURES
The company's maximum exposures to credit risk at balance date in relation to
each class of recognised financial asset is the carrying amount of those assets
as indicated in the balance sheet.
CONCENTRATIONS OF CREDIT RISK
The company minimises concentrations of credit risk in relation to trade
accounts receivable by undertaking transactions with a large number of
customers. However the majority of customers are concentrated in Australia.
Credit risk in trade receivables is managed in the following ways:
- - payment terms are 30 days
- - a risk assessment process is used for customers including credit limits
and credit reference checks
PENFORD AUSTRALIA LIMITED
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
29. US GAAP RECONCILIATION
PRINCIPAL DIFFERENCES BETWEEN AUSTRALIAN GAAP AND US GAAP
Financial statements in the United States are prepared in accordance with US
GAAP. In Australia statutory financial statements are prepared in accordance
with applicable accounting standards issued by the Australian Accounting
Standards Board, the Australian Corporations Law, Schedule 5 to the Corporations
Regulations and other mandatory professional reporting requirements (Urgent
Issues Consensus Views) collectively referred to as "Australian GAAP."
The statement of cash flows, which has been prepared in accordance with
Australian GAAP, complies with International Accounting Standards No. 7.
The only material differences between Australian GAAP and US GAAP for purposes
of the 30 June 2000 financial statements of the Company are as follows:
(A) ASSET REVALUATIONS
Under Australian GAAP non-current assets may be revalued both upwards and
downwards based on directors' valuations. An upwards revaluation is recorded by
a credit to the asset revaluation reserve as a component of shareholders' equity
and is not taken through the profit and loss account except where a previous
revaluation decrement has been recorded for that class of assets through the
profit and loss account. An impairment or downwards revaluation is taken through
the profit and loss account except where there is a revaluation reserve for that
particular class of assets, in which case the decrement may be debited to that
asset revaluation reserve, to the extent a credit exists, rather than the profit
and loss account.
The Company assesses the recoverability of non-current assets by comparing the
carrying value to the asset's undiscounted cash flow. To the extent that the
asset carrying value exceeds its undiscounted cash flow the asset is written
down to that amount.
US GAAP does not permit the upward revaluation of such assets. US GAAP requires
that an impairment of long-lived assets be recognised through the profit and
loss account. Under US GAAP SFAS 121 "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to be Disposed Of," entities, when
assessing an asset for impairment, compare the carrying value of the asset or
group of assets to the relevant expected cash flow, undiscounted and without
interest. If the sum of the undiscounted cash flow is less than the asset
carrying value the asset must be written down to "fair value." One method of
determining an asset's fair value, in the absence of an active market, is its
discounted cash flow. Once impairment is recorded, subsequent recoveries through
the profit and loss account are not allowed until the asset is sold.
(B) TRANSFER OF ASSETS BETWEEN RELATED PARTIES
Australian accounting standards allow for the transfer of assets between related
parties to be recorded at fair value. For US GAAP, such transfers must be
recorded at historical cost.
PENFORD AUSTRALIA LIMITED
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
29. US GAAP RECONCILIATION (CONT'D)
(C) PROFIT AND LOSS ACCOUNT RECONCILIATION
Reconciliation of the consolidated profit and loss accounts determined in
accordance with Australian GAAP to profits under U.S. GAAP is as follows:
Year Ended
30 June 2000
A$,000
------------
Operating profit after income tax as reported under Australian GAAP 3,111
Reconciliation to US GAAP:
Depreciation of revalued assets (1) 77
------------
Operating profit after income tax in accordance with U.S. GAAP 3,188
============
PENFORD AUSTRALIA LIMITED
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
29. US GAAP RECONCILIATION (CONT'D)
(D) SHAREHOLDERS' EQUITY RECONCILIATION
Reconciliation of shareholders' equity determined in accordance with Australian
GAAP to shareholders' equity under U.S. GAAP is as follows:
As at
30 June 2000
A$,000
------------
Shareholders' equity in accordance with Australian GAAP 6,122
Reconciliation to US GAAP:
Difference of historical cost to carrying amount of assets (2) (3,099)
Revaluations made to non-current assets (1) (3,293)
Accumulated depreciation on revaluation of assets (1) 129
------------
Adjusted shareholders' equity in accordance with U.S. GAAP (141)
============
(1) Under Australian GAAP non-current assets may be revalued both upwards and
downwards based on directors' valuations. Where a non-current asset is
revalued, all assets within that class must also be revalued on a
consistent basis. The Company revalues its land and buildings
approximately every three years. Downward revaluations are taken to the
profit and loss account, which is comparable to the treatment of an
impairment of an asset under SFAS 121. Under U.S. GAAP, upward
revaluations are not recorded.
The Company revalued land and buildings at the Auckland plant site in
1998. The revaluations resulted in an increase in the value of land of AUD
1,372,000 and an increase in the value of buildings of AUD 1,921,000.
Accumulated depreciation on the revaluation increment of the buildings is
AUD 129,000 to 30 June 2000. Depreciation for the year is AUD 76,840 based
on a useful life of the buildings of 25 years.
The revaluation reserve of the Company was distributed through dividends
prior to acquisition. The reversal of the revaluation reserve therefore
results in a decrease in retained profits.
(2) Australian accounting principles reflect the purchase of assets between
100% related parties at fair value. Under U.S. GAAP, such transfers of
assets must be recorded at historical cost. The difference between
historical cost and the carrying amount of the assets of AUD 3,099,475
represents an increase in the value of the land in Lane Cove and Tamworth
that cannot be recorded under U.S. GAAP.
PENFORD CORPORATION
UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
The following unaudited pro forma consolidated financial statements for Penford
Corporation ("Penford") consist of the Unaudited Pro Forma Consolidated Balance
Sheet as of August 31, 2000, and the Unaudited Pro Forma Consolidated Statement
of Income for the year then ended. These unaudited pro forma financial
statements give effect to Penford's acquisition of Starch Australasia Limited,
renamed Penford Australia Limited ("PAL" or "Penford Australia"), from Goodman
Fielder Limited for $54.5 million (USD) in cash. The acquisition closed on
September 29, 2000, and was accounted for as a purchase.
The Unaudited Pro Forma Consolidated Balance Sheet combines Penford's historical
consolidated balance sheet at August 31, 2000 and Penford Australia's historical
balance sheet at June 30, 2000. The Unaudited Pro Forma Consolidated Statement
of Income combines Penford's historical results of operations for the year ended
August 31, 2000, with Penford Australia's historical results of operations for
the year ended June 30, 2000. The unaudited pro forma consolidated financial
statements and related notes should be read in conjunction with the audited
financial statements and related notes thereto of Penford Australia included in
Item 7 (a) herein, and the audited consolidated financial statements and notes
of Penford Corporation as previously filed on Form 10-K for the year ended
August 31, 2000. The unaudited pro forma consolidated financial statements do
not purport to be indicative of the financial position or results of operations
which would have actually been reported had the acquisition been consummated on
the dates indicated, or which may be reported in the future.
PENFORD CORPORATION
UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
AS OF AUGUST 31, 2000
(In thousands of US dollars)
Penford PAL Pro Forma
Historical(1) Historical(2) Adjustments Pro Forma
Assets
Current assets:
Cash and cash equivalents $ - $ - $ 7 (4) $ 7
Trade accounts receivable 17,530 9,425 26,955
Inventories 10,219 13,493 23,712
Prepaid expenses and other 5,580 567 6,147
-------- -------- -------- --------
Total current assets 33,329 23,485 7 56,821
Property, plant and equipment:
Land 5,387 11,464 16,851
Net, plant and equipment 102,666 18,088 120,754
Construction in progress 6,795 1,471 8,266
-------- -------- -------- --------
Net property, plant and equipment 114,848 31,023 - 145,871
Deferred income taxes 11,466 185 11,651
Restricted cash value of life insurance 12,330 12,330
Other assets 3,650 228 3,878
19,459 (3) 19,459
Goodwill
-------- -------- -------- --------
$175,623 $ 54,921 $ 19,466 $250,010
======== ======== ======== ========
PENFORD CORPORATION
UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
AS OF AUGUST 31, 2000
(In thousands of US dollars)
Penford PAL Pro Forma
Historical(1) Historical(2) Adjustments Pro Forma
Liabilities and shareholders' equity
Current liabilities:
Bank overdraft, net $ 313 $ -- $ -- $ 313
Current portion of long-term debt 2,857 3,188 3,499 (6) 9,544
Accounts payable 10,068 6,758 16,826
Accrued liabilities 8,305 975 811 (5) 10,091
-------- -------- --------- ---------
Total current liabilities 21,543 10,921 4,310 36,774
Long-term debt 47,824 1,829 58,410 (4) 104,564
(3,499)(6)
Intercompany debt 39,755 (39,755)(3) --
Deferred income taxes 21,048 1,294 22,342
Other post-retirement benefits 10,805 10,805
Other liabilities 6,539 1,122 7,661
Shareholders' equity:
Common stock 9,392 9,392
Additional paid-in capital 23,129 23,129
Retained earnings 68,100 68,100
Treasury stock (32,757) (32,757)
-------- -------- --------- ---------
Total shareholders' equity 67,864 -- -- 67,864
-------- -------- --------- ---------
$175,623 $ 54,921 $ 19,466 $ 250,010
======== ======== ========= =========
The accompanying notes are an integral part of these unaudited pro forma
consolidated financial statements.
PENFORD CORPORATION
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
(1) The column designated "Penford Historical" reflects the consolidated
balance sheet of Penford Corporation as of August 31, 2000.
(2) The column designated "PAL Historical" reflects the consolidated balance
of Penford Australia Limited (formerly Starch Australasia Limited) as of
June 30, 2000. The amount shown under intercompany debt of $39,755
represents the fair value of the net assets assumed in the purchase
business combination. This amount differs from the net equity of Penford
Australia Limited as shown in the statutory consolidated financial
statements as of June 30, 2000, as not all assets and liabilities of
Penford Australia Limited were assumed by Penford Corporation in the
purchase business combination.
(3) Represents the recording of goodwill resulting from the acquisition. The
goodwill represents the excess of the purchase price over the net assets
acquired at fair value as follows:
Purchase price $59,214
Fair value of net assets acquired 39,755
-------
Excess purchase price 19,459
=======
(4) Represents borrowings of $58,410 to finance the purchase price.
(5) Represents estimated additional fees and expenses related to the
acquisition.
(6) Represents current portion of borrowings assumed for the acquisition.
PENFORD CORPORATION
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF INCOME
AS OF AUGUST 31, 2000
(In thousands of US dollars)
Penford PAL Pro Forma
Historical(1) Historical(2) Adjustments Pro Forma
------------- ------------- -------------- -----------
Sales $ 158,150 $ 71,481 $ -- $ 229,631
Cost of sales 114,873 59,504 174,377
---------- -------- --------- ----------
Gross margin 43,277 11,977 -- 55,254
Operating expenses 17,202 7,929 973 (3) 22,770
(3,334)(6)
Research and development expenses 5,359 996 -- 6,355
---------- -------- --------- ----------
Income from operations 20,716 3,052 2,361 26,129
Investment income 39 -- -- 39
Interest expense (4,813) (785) (5,282)(4) (10,880)
---------- -------- --------- ----------
Income before income taxes 15,942 2,267 (2,921) 15,288
Income taxes 5,580 310 (1,849)(5) 5,241
1,200 (7)
---------- -------- --------- ----------
Net income (loss) $ 10,362 $ 1,957 $ (2,272) $ 10,047
========== ======== ========= ==========
Weighted average common shares
outstanding 7,414,435 7,414,435
Net effect of dilutive stock options 350,609 350,609
---------- ----------
Weighted average common shares
and equivalents outstanding 7,765,044 7,765,044
========== ==========
Net income per common share
Basic $ 1.40 $ 1.36
========== ==========
Diluted $ 1.33 $ 1.29
========== ==========
Dividends declared per common share $ 0.22 $ 0.22
========== ==========
The accompanying notes are an integral part of these unaudited pro forma
consolidated financial statements.
PENFORD CORPORATION
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF INCOME
(1) The column designated "Penford Historical" reflects the consolidated
results of operations of Penford Corporation for the year ended August 31,
2000.
(2) The column designated "PAL Historical" reflects the consolidated results
operations of Penford Australia Limited (formerly Starch Australasia
Limited) for the year ended June 30, 2000.
(3) Represents one year of amortization of goodwill based on a period of 20
years. See note (3) to the Unaudited Pro Forma Consolidated Balance Sheet.
(4) Represents one year of interest expense at an assumed rate of 8.92% (which
represents the average interest rate on Penford Corporation's debt for
fiscal year 2000) on borrowings of $58,410 undertaken to purchase Penford
Australia.
(5) Represents the tax effect at an assumed U.S. statutory rate of 35% on the
interest expense recorded under adjustment (4).
(6) Represents cost reductions identified as a result of the acquisition of
Penford Australia, including the elimination of management fees of $3,585,
offset by management's estimate of costs of $251 that would have been
incurred for shared services had Penford Australia been separated from the
former shareholder.
(7) Represents the tax effect at an assumed Australian statutory rate of 36%
on the cost increases and reductions recorded under adjustments (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
July 10, 2003 By /s/ Thomas D. Malkoski
-------------------------
Thomas D. Malkoski
Chief Executive Officer