CONTACT Steven O. Cordier Exhibit 99.1
Vice President and CFO
Penford Corporation
303-649-1900
steve.cordier@penx.com
PENFORD CORPORATION ANNOUNCES THIRD QUARTER AND NINE MONTH RESULTS
ENGLEWOOD, CO., JUNE 19, 2003 - Penford Corporation (NASDAQ: PENX) today
reported financial results for the third quarter and first nine months of fiscal
year 2003. For the quarter ended May 31, 2003, consolidated sales increased 12%
to $66.0 million from $59.1 million for the same quarter last year. Net income
for the third quarter of fiscal 2003 increased 24% to $1.8 million, or $0.21 per
diluted share, from $1.4 million, or $0.18 per diluted share for the prior year
quarter.
Sales for the nine months ended May 31, 2003 increased 14% to $193.8 million
from $170.3 million in fiscal 2002. Net income rose to $6.6 million from $2.8
million a year ago. Diluted earnings per share for the first nine months of
fiscal 2003 were $0.82 compared with $0.36 last year. The results for the nine
months ended May 31, 2003 included a previously discussed $1.9 million pre-tax
gain on the sale of the Company's Hi-maize(R) business. The results for the
first nine months of fiscal 2002 included a $1.4 million pre-tax restructuring
charge related to the Company's relocation of its headquarters to Denver,
Colorado.
BUSINESS RESULTS
Third quarter sales increased for the fifth consecutive quarter on higher
volumes at all three business units and stronger currency exchange rates at
Penford Australia Ltd. The Australian dollar has appreciated by approximately
15% compared with the third quarter of fiscal 2002. Gross margins for the period
declined by 10% from a year ago reflecting additional costs to acquire grain for
our Australian operations and higher energy costs to dry our products throughout
North America. Grain prices in Australia are approximately 25% higher than last
year and average "spot" natural gas prices in the U.S. have increased 75% from
the third quarter of fiscal 2002. Total operating expenses were held constant
with the prior year. Despite these efforts, income from operations declined by
21% from the same period a year ago.
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Interest expense for the third quarter fell to $1.3 million from $1.6 million a
year ago on lower interest rates in the U.S. and reduced debt levels. Income
before taxes in the quarter increased 7% to $2.5 million reflecting lower
interest charges and royalty income related to the licensing of certain
intellectual property rights for the Hi-Maize business. The effective tax rate
for the third quarter decreased from the prior year primarily due to changes in
Australian tax regulations. Cash from operations in the third quarter increased
to $5.3 million from $3.4 million last year and rose to $18.0 million in fiscal
2003 from $16.2 million for the first nine months of fiscal 2002.
Sales at Penford's industrial ingredients business unit rose 7% for the third
quarter and 13% year-to-date as volume increases continue in its primary product
line. Gross margin as a percent of sales in the third quarter declined to 14.5%
from 17.7% last year primarily due to rising energy costs. Cost containment
programs reduced the impact from higher natural gas costs but operating income
for the third quarter decreased to $2.2 million from $2.9 million a year ago.
The North American food ingredients business reported that sales for the third
quarter and first nine months of fiscal 2003 increased 2%. Continued soft demand
for our customers' products has reduced volumes in our potato coatings product
line and gross margin as a percent of sales in the quarter declined to 25.8%
from 31.6% last year from unfavorable product mix changes and reduced plant
utilization. Total operating expenses remain below the prior year. Operating
income for the third quarter declined to $1.1 million from $1.6 million in
fiscal 2002, reflecting the impact of the lower proportional sales of potato
coatings products.
Sales at Penford's Australia/New Zealand operations increased 28% in the third
quarter and 26% year-to-date. Higher grain input costs reduced gross margin as a
percent of sales in the third quarter to 11.4% from 13.3% last year. Income from
operations for the quarter rose to $1.2 million from $1.1 million as higher
volumes, improved pricing and favorable foreign currency exchange rates more
than offset increased grain raw material costs caused by the on-going drought in
the region.
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"Each of our business units had to react to a difficult operating environment
this quarter. We are encouraged that both volumes and pricing have improved,
reducing the impact of sharply higher natural gas and grain costs. These costs
have decreased our gross margins as a percent of sales by about 3% in the third
quarter and we expect this impact to continue" said Thomas Malkoski, Chief
Executive Officer of Penford Corporation. "We are responding to this challenge
by controlling expenses while continuing to provide superior service and value
to our customers."
Penford Corporation will host a conference call to discuss third quarter
financial and operational results today, June 19, 2003 at 9:00 a.m. Mountain
Time (11:00 a.m. Eastern Time). Access information for the call and web-cast can
be found at www.penx.com. A replay will be available at www.penx.com until June
24, 2003.
ABOUT PENFORD CORPORATION
Penford Corporation develops, manufactures and markets specialty natural-based
ingredient systems for various applications, including papermaking and food
products. Penford has nine locations in the United States, Australia and New
Zealand.
For automated shareholder information, please call 1-888-317-2013.
TABLES TO FOLLOW
This press release contains forward-looking statements concerning the Company's
future performance and the prospects for the continuation of current performance
trends in fiscal 2003. There are a variety of factors which could cause actual
events to differ materially from those projected in the forward-looking
statements such as decreases or delays in customer demand or orders, increased
competition, decreases in market share, unfavorable changes in product mix,
disappointments in product development and commercialization efforts, interest
rate and energy cost volatility, foreign exchange rate fluctuations and those
listed in the Company's SEC reports, including the report on Form 10-K for the
year ended August 31, 2002.
# # #
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<Table>
<Caption>
Three months ended Nine months ended
PENFORD CORPORATION May 31, May 31,
FINANCIAL HIGHLIGHTS ---------------------- ----------------------
(In thousands except per share data) 2003 2002 2003 2002
- --------------------------------------------------------------------- -------- -------- -------- --------
CONSOLIDATED RESULTS
Sales $ 66,035 $ 59,137 $193,769 $170,280
Net income $ 1,755 $ 1,420 $ 6,639 $ 2,804
Earnings per share, diluted $ 0.21 $ 0.18 $ 0 .82 $ 0.36
RESULTS BY SEGMENT
INDUSTRIAL INGREDIENTS:
Sales $ 34,912 $ 32,546 $104,272 $ 92,416
Gross margin 14.5% 17.7% 15.6% 16.1%
Operating income 2,190 2,917 7,390 6,487
FOOD INGREDIENTS - NORTH AMERICA:
Sales $ 10,954 $ 10,729 $ 33,418 $ 32,845
Gross margin 25.8% 31.6% 28.3% 30.9%
Operating income 1,113 1,581 4,499 4,989
AUSTRALIA/NEW ZEALAND:
Sales $ 20,304 $ 15,863 $ 56,551 $ 45,019
Gross margin 11.4% 13.3% 12.2% 14.5%
Operating income 1,217 1,094 3,682 3,604
</Table>
<Table>
<Caption>
May 31, August 31,
2003 2002
------------ ------------
Current assets $ 73,052 $ 62,871
Property, plant and equipment, net 130,844 132,042
Other assets 47,382 44,292
------------ ------------
Total assets 251,278 239,205
============ ============
Current portion of debt* 72,052 18,779
Other current liabilities 33,093 29,022
Long-term debt 10,446 77,632
Other liabilities 46,508 44,808
Shareholders' equity 89,179 68,964
------------ ------------
Total liabilities and equity $ 251,278 $ 239,205
============ ============
</Table>
* Includes $51 million in revolving loans, representing the scheduled October
31, 2003 expiration of Penford's revolving credit agreements dated November
2000.
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<Table>
<Caption>
Three months ended Nine months ended
PENFORD CORPORATION May 31, May 31,
CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED) --------------------------- ----------------------------
(In thousands except share and per share data) 2003 2002 2003 2002
- ------------------------------------------------ ----------- ----------- ----------- -----------
Sales $ 66,035 $ 59,137 $ 193,769 $ 170,280
Cost of sales 55,839 47,870 161,141 138,750
----------- ----------- ----------- -----------
Gross margin 10,196 11,267 32,628 31,530
Operating expenses 5,786 5,795 17,969 15,854
Research and development expenses 1,290 1,526 4,036 4,550
Restructure costs, net -- -- (117) 1,383
----------- ----------- ----------- -----------
Income from operations 3,120 3,946 10,740 9,743
Non-operating income, net 627 5 2,809 50
Interest expense 1,265 1,633 4,249 5,455
----------- ----------- ----------- -----------
Income before income taxes 2,482 2,318 9,300 4,338
Income taxes 727 898 2,661 1,534
----------- ----------- ----------- -----------
Net income $ 1,755 $ 1,420 $ 6,639 $ 2,804
=========== =========== =========== ===========
Weighted average common shares and equivalents
outstanding, diluted 8,489,320 7,907,213 8,098,943 7,748,022
Earnings per share, diluted $ 0.21 $ 0.18 $ 0.82 $ 0.36
Dividends declared per common share $ 0.06 $ 0.06 $ 0.18 $ 0.18
</Table>
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