Exhibit 99.1
CONTACTS: Steven O. Cordier
Vice President and CFO
Penford Corporation
303-649-1900
steve.cordier@penx.com
PENFORD CORPORATION REPORTS FIRST QUARTER FISCAL 2004 RESULTS
DENVER, CO., DECEMBER 18, 2003 - Penford Corporation (Nasdaq: PENX), a global
leader in ingredient systems for food and industrial applications, today
reported financial results for the first quarter of fiscal 2004 ending November
30, 2003.
Net income for the quarter ended November 30, 2003 was $0.8 million, or $0.10
per diluted share versus $3.3 million, or $0.42 per diluted share last year. Net
income for the first fiscal quarter of 2004 included a $0.7 million pre-tax,
non-operating expense related to unamortized transaction fees associated with
the Company's prior credit agreement. Net income for the first fiscal quarter of
2003 included a pre-tax gain of $1.9 million on the sale of certain assets of
Penford Australia's Hi-maize(R) business.
First quarter sales of $66.2 million increased $0.1 million over a very strong
performance last year. Favorable foreign currency exchange rates and improved
product mix in Australia during the first quarter of 2004 offset the impact of
lower volumes at Industrial Ingredients. Consolidated gross margin as a percent
of sales declined by 3.2% from the prior year. Lower volumes contributed 1.7% to
the decline. Higher natural gas and Australian grain costs reduced this ratio
another 1.5%. The impact of input price changes was moderated through hedge
transactions and by sharing some additional costs with our customers. Input
costs are expected to remain unfavorable for the first half of this year with
natural gas costs significantly above a year ago and the impact of higher priced
Australian grain continuing until the fiscal third quarter of 2004. Operating
expenses decreased to 8.6% of sales, down from 9.6% last year.
"The largest customers in our Industrial Ingredients segment continue to idle
production, reflecting persistent soft demand for their printing and writing
products. The strategic plan to
develop carbohydrate products for new industrial markets is demonstrating
positive results with our Liquid Natural Additives portfolio growing by 60% in
fiscal 2003 and more than 10% this quarter. However, the pace of this progress
has not offset the effect of a drop in demand from our core historical markets.
With the objective of saving more than $2 million annually, today we announced a
restructuring plan that includes a 13% reduction in force at our Industrial
Business," Penford Chief Executive Officer Thomas Malkoski said. "The plan is
based on extensive evaluation and analysis of our costs and strategic
opportunities. It optimizes resources supporting core product markets and aligns
our structure with the best growth prospects."
SEGMENT RESULTS
Sales at Industrial Ingredients decreased 9% to $32.5 million for the first
quarter of fiscal 2004 compared to the same period last year driven entirely by
a 9% decline in sales volumes. Retail demand for coated and uncoated grades of
paper has declined over the last several months and related production
curtailments by Penford's Industrial customers expanded during the first quarter
of fiscal 2004. Penford remains in a strong competitive position within this
segment and the market share gain realized by the Industrial business during
fiscal 2003 is intact. Gross margin as a percent of sales fell to 14.0% from
16.7% because of lower production volumes and the rising cost of natural gas, a
key input to the starch manufacturing process that has increased in price by 23%
over the same period last year.
Sales at Australia/New Zealand rose 16.1% to $21.9 million for the first quarter
of fiscal 2004, primarily due to a stronger Australian Dollar exchange rate.
Sales volumes declined 4.9% on changing formulation requirements and pricing
competition for goods manufactured within Australia and New Zealand. Gross
margin as a percent of sales fell to 8.0% from 13.3% in the prior year due to
lower volumes and a 20% increase in grain raw material costs. We expect a normal
grain harvest in 2004 which will improve margins during the second half of the
fiscal year. The Australian business has also implemented cost reduction
measures, eliminating nine positions during the first quarter with an
expectation of saving $0.4 million annually. Severance costs of $0.3 million
were recorded in the first fiscal quarter of 2004.
A 3% improvement in volumes at the Food Ingredients - North America business
drove revenues 3.3% higher to $11.9 million in the first quarter. Gross margin
as a percent of sales was
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comparable to last year at 29.3%. Revenue from potato coating products used in
quick service restaurants grew by 2% and new applications for the processed meat
category increased by 35%.
INDUSTRIAL INGREDIENTS WORKFORCE REDUCTIONS
Sixteen positions are being eliminated within Penford's collective bargaining
unit through permanent furloughs. An additional 22 management and administrative
positions are being eliminated through terminations or early retirement
programs. Most of these positions are located at the Company's Cedar Rapids
facility. All affected full-time employees will be compensated through December
31, 2003 and be offered separation packages that include severance pay and
outplacement. The Company anticipates reporting a pre-tax charge of $0.5 million
related to severance costs in the Industrial Ingredients segment during the
second fiscal quarter ended February 29, 2004.
"Over the past several weeks we have realigned commercial resources to more
effectively support our growth initiatives. Reducing our workforce is a
necessary but difficult decision that positions Penford more competitively in
our core segments, a necessary step for improving our financial performance,"
Mr. Malkoski said.
CONFERENCE CALL
Penford will host a conference call to discuss first quarter financial and
operational results today, December 18, 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.
ABOUT PENFORD CORPORATION
Penford Corporation develops, manufactures and markets specialty natural-based
ingredient systems for various applications, including papermaking, textiles and
food products. Penford has nine locations in the United States, Australia and
New Zealand.
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For automated shareholder information, please call 1-888-317-2013.
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 disclaims any intention or obligation 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 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; changes in general economic
conditions or developments with respect to specific industries or customers
affecting demand for the Company's products including unfavorable shifts in
product mix; unanticipated costs, expenses or third party claims; the risk that
results may be affected by construction delays, cost overruns, technical
difficulties, nonperformance by contractors or changes in capital improvement
project requirements or specifications; interest rate and energy cost
volatility; foreign currency exchange rate fluctuations; or other unforeseen
developments in the industries in which Penford operates.
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CHARTS TO FOLLOW
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<Table>
<Caption>
PENFORD CORPORATION Three months ended
FINANCIAL HIGHLIGHTS November 30,
--------------------
(In thousands except per share data) 2003 2002
- ------------------------------------ ------- -------
CONSOLIDATED RESULTS
Sales $66,170 $66,041
Net income $ 845 $ 3,298
Earnings per share, diluted $ 0.10 $ 0.42
RESULTS BY SEGMENT
INDUSTRIAL INGREDIENTS:
Sales $32,526 $35,688
Gross margin 14.0% 16.7%
Operating income 1,548 2,804
FOOD INGREDIENTS - NORTH AMERICA:
Sales $11,893 $11,511
Gross margin 29.3% 29.6%
Operating income 1,900 1,700
AUSTRALIA/NEW ZEALAND:
Sales $21,944 $18,903
Gross margin 8.0% 13.3%
Operating income 524 1,447
</Table>
<Table>
<Caption>
November 30, August 31,
2003 2003
------------ ----------
Current assets $ 79,917 $ 76,285
Property, plant and equipment, net 131,271 128,776
Other assets 49,026 45,832
-------- --------
Total assets $260,214 $250,893
======== ========
Current liabilities 34,983 37,272
Long-term debt 80,942 76,696
Other liabilities 49,384 49,040
Shareholders' equity 94,905 87,885
-------- --------
Total liabilities and equity $260,214 $250,893
======== ========
</Table>
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<Table>
<Caption>
PENFORD CORPORATION Three months ended
CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED) November 30,
----------------------------
(In thousands except share and per share data) 2003 2002
- ---------------------------------------------- ----------- -----------
Sales $ 66,170 $ 66,041
Cost of sales 56,359 54,156
----------- -----------
Gross margin 9,811 11,885
Operating expenses 5,691 6,368
Research and development expenses 1,502 1,411
----------- -----------
Income from operations 2,618 4,106
Non-operating income (expense), net (278) 1,912
Interest expense (1,107) (1,581)
----------- -----------
Income before income taxes 1,233 4,437
Income taxes 388 1,139
----------- -----------
Net income $ 845 $ 3,298
=========== ===========
Weighted average common shares and equivalents
outstanding, diluted 8,727,732 7,883,796
Earnings per share, diluted $ 0.10 $ 0.42
Dividends declared per common share $ 0.06 $ 0.06
</Table>
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