Exhibit 99.1
CONTACTS: Steven O. Cordier
Vice President and CFO
Penford Corporation
303-649-1900
steve.cordier@penx.com
PENFORD CORPORATION REPORTS SECOND QUARTER FISCAL 2004 RESULTS
DENVER, CO., MARCH 22, 2004 - Penford Corporation (Nasdaq: PENX), a global
leader in ingredient systems for food and industrial applications, today
reported financial results for the second quarter and first half of fiscal year
2004. Net income for the quarter ended February 29, 2004 was $1.0 million, or
$0.12 per diluted share versus $1.6 million, or $0.20 per diluted share for the
same period last year. Net income for the second fiscal quarter of 2004 included
$0.5 million of pre-tax costs related to a workforce reduction at the Company's
Industrial Ingredients segment.
Second quarter consolidated sales of $68.5 million rose $6.8 million or 11% over
last year on favorable currency exchange rates as well as increased volumes and
improved pricing in the Industrial Ingredients business. Consolidated gross
margin decreased by $0.6 million to $9.9 million reflecting higher natural gas
costs in North America and increased manufacturing costs at Food
Ingredients-North America. Reduced discretionary spending contributed to a $0.3
million drop in operating expenses and interest expense fell by $0.2 million
from last year on lower average debt outstanding.
Income tax expense in the second quarter of fiscal 2004 includes a $0.3 million
charge for the effects of the final implementation of the new Australian
consolidation tax legislation. Diluted weighted average shares outstanding
increased to 8.8 million from 7.9 million a year ago primarily reflecting the
issuance of 0.7 million shares in March 2003.
"Over the past few quarters we have made progress in implementing several
strategic initiatives designed to deliver greater value to our customers'
products and processes," said Penford Chief
Executive Officer Thomas D. Malkoski. "Our heightened focus on innovation and
differentiated products and services is positively impacting results. We are
aggressively pursuing operational excellence through improvements in all supply
chain activities to drive out unnecessary costs and increase the productivity of
our assets. We have improved organizational effectiveness by better aligning
resources with growth opportunities and upgrading skills in selected areas of
the business. Collectively, I believe these initiatives will contribute to
increasing shareholder value in the future."
SEGMENT RESULTS
Average pricing improved and volumes recovered in the second quarter of fiscal
2004 as sales rose 6% to $35.8 million at Industrial Ingredients. Our growth
category, which includes the Liquid Natural Additives product line, expanded its
positive impact on margins again this quarter. However, segment gross margin as
a percent of sales fell to 13.1% from 15.6% primarily driven by a 40% increase
in the unit price of natural gas which is used to dry starch in the
manufacturing process. Penford also recorded a $0.5 million pre-tax charge
during the second quarter of fiscal 2004 in connection with a workforce
reduction affecting 38 employees at the Industrial Ingredients unit.
Second quarter 2004 sales of $11.0 million at the Food Ingredients - North
America business were comparable to the same period last year. Sales from potato
coating applications and new formulations for processed meats expanded while
volumes of lower margin products decreased from the prior year. Gross margin as
a percent of sales declined to 21.9% from 29.5% for the same period a year ago
from lower plant utilization caused by a five-week shutdown of our dextrose
plant to reduce inventory levels, higher unit costs for natural gas and supply
chain adjustments. Inventory levels are now balanced and manufacturing flows are
improving.
Sales at Australia/New Zealand rose 26% to $21.8 million for the second quarter
of fiscal 2004, due to a stronger Australian Dollar exchange rate. Volumes
softened by 1% as we encounter increased price competition from imported
products. Gross margin as a percent of sales rose to 12.8% from 11.8% in fiscal
2003 as stocks of higher cost grain raw material acquired during the drought
last year were depleted from inventories.
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"There's no doubt that our operating environment for the first half fiscal 2004
has been challenging," Malkoski said. " We believe that we've responded to these
challenges forcefully and appropriately by implementing cost reduction measures
while continuing to execute our strategic plan. These programs allow us to
compete more effectively as we grow."
CONFERENCE CALL
Penford will host a conference call to discuss second quarter financial and
operational results today, March 22, 2004 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.
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 Six months ended
FINANCIAL HIGHLIGHTS -------------------- --------------------
(In thousands except per share data) February February February February
29, 2004 28, 2003 29, 2004 28, 2003
- ------------------------------------ -------- -------- -------- --------
CONSOLIDATED RESULTS
Sales $ 68,482 $ 61,692 $134,652 $127,734
Net income $ 1,035 $ 1,585 $ 1,880 $ 4,883
Earnings per share, diluted $ 0.12 $ 0.20 $ 0.21 $ 0.62
RESULTS BY SEGMENT
INDUSTRIAL INGREDIENTS:
Sales $ 35,801 $ 33,672 $ 68,327 $ 69,360
Gross margin 13.1% 15.6% 13.6% 16.2%
Operating income 1,567 2,396 3,115 5,200
FOOD INGREDIENTS - NORTH AMERICA:
Sales $ 10,973 $ 10,953 $ 22,866 $ 22,463
Gross margin 21.9% 29.5% 25.8% 29.5%
Operating income 719 1,685 2,618 3,385
AUSTRALIA/NEW ZEALAND:
Sales $ 21,782 $ 17,344 $ 43,726 $ 36,247
Gross margin 12.8% 11.8% 10.4% 12.6%
Operating income 1,537 1,017 1,808 2,465
</Table>
<Table>
<Caption>
February 29, August 31,
2004 2003
------------ ------------
Current assets $ 78,307 $ 76,285
Property, plant and equipment, net 131,860 128,776
Other assets 50,392 45,832
------------ ------------
Total assets 260,559 250,893
============ ============
Current liabilities 32,809 37,272
Long-term debt 78,112 76,696
Other liabilities 49,918 49,040
Shareholders' equity 99,720 87,885
------------ ------------
Total liabilities and equity $ 260,559 $ 250,893
============ ============
</Table>
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<Table>
<Caption>
PENFORD CORPORATION Three months ended Six months ended
CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED) ---------------------- ----------------------
(In thousands except share and per share data) February February February February
29, 2004 28, 2003 29, 2004 28, 2003
- ---------------------------------------------- ---------- ---------- ---------- ----------
Sales $ 68,482 $ 61,692 $ 134,652 $ 127,734
Cost of sales 58,574 51,145 114,932 105,302
---------- ---------- ---------- ----------
Gross margin 9,908 10,547 19,720 22,432
Operating expenses 5,483 5,813 11,175 12,180
Research and development expenses 1,454 1,336 2,956 2,748
Restructuring costs, net 487 (117) 740 (117)
---------- ---------- ---------- ----------
Income from operations 2,484 3,515 4,849 7,621
Non-operating income, net 530 269 505 2,181
Interest expense (1,185) (1,403) (2,292) (2,984)
---------- ---------- ---------- ----------
Income before income taxes 1,829 2,381 3,062 6,818
Income taxes 794 796 1,182 1,935
---------- ---------- ---------- ----------
Net income $ 1,035 $ 1,585 $ 1,880 $ 4,883
========== ========== ========== ==========
Weighted average common shares and equivalents
outstanding, diluted 8,830,901 7,934,858 8,780,022 7,902,764
Earnings per share, diluted $ 0.12 $ 0.20 $ 0.21 $ 0.62
Dividends declared per common share $ 0.06 $ 0.06 $ 0.12 $ 0.12
</Table>
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