1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 11-K
[X] ANNUAL REPORT PURSUANT TO SECTION 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended August 31, 2000
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from _______________ to ________________
Commission File Number 0-11488
Penford Corporation
Savings and Stock Ownership Plan
- --------------------------------------------------------------------------------
(Full title)
Penford Corporation
777 - 108TH AVENUE N.E., SUITE 2390
BELLEVUE, WASHINGTON 98004-5193
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(Name of issuer and address of issuer's
principal executive office)
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PENFORD CORPORATION SAVINGS AND STOCK OWNERSHIP PLAN
INDEX
Page No.
--------
Financial Statements 3-18
Signatures 19
EXHIBIT
Exhibit 23: Consent of Independent Auditors 20
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FINANCIAL STATEMENTS
AND SUPPLEMENTAL SCHEDULES
Penford Corporation Savings and Stock Ownership Plan
For the Years Ended August 31, 2000, 1999, and 1998
with Report of Independent Auditors
4
Penford Corporation Savings and Stock Ownership Plan
Financial Statements and Supplemental Schedules
Years Ended August 31, 2000, 1999, and 1998
CONTENTS
Report of Independent Auditors ............................................... 1
Audited Financial Statements
Statements of Net Assets Available for Benefits .............................. 2
Statements of Changes in Net Assets Available for Benefits ................... 3
Notes to Financial Statements ................................................ 4
Supplemental Schedules
Schedule H, Line 4(i) -- Schedule of Assets Held for Investment Purposes
at End of Year ............................................................ 12
Schedule H, Line 4(j) -- Schedule of Reportable Transactions ................. 13
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Report of Independent Auditors
Administrative Committee
Penford Corporation Savings and Stock Ownership Plan
We have audited the accompanying statements of net assets available for benefits
of the Penford Corporation Savings and Stock Ownership Plan as of August 31,
2000 and 1999, and the related statements of changes in net assets available for
benefits for each of the three years in the period ended August 31, 2000. These
financial statements are the responsibility of the Plan's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the net assets available for benefits of the Plan at
August 31, 2000 and 1999, and the changes in its net assets available for
benefits for each of the three years in the period ended August 31, 2000, in
conformity with accounting principles generally accepted in the United States.
Our audits were performed for the purpose of forming an opinion on the financial
statements taken as a whole. The accompanying supplemental schedules of assets
held for investment purposes at end of year as of August 31, 2000 and reportable
transactions for the year then ended, are presented for purposes of additional
analysis and are not a required part of the financial statements but are
supplementary information required by the Department of Labor's Rules and
Regulations for Reporting and Disclosure under the Employee Retirement Income
Security Act of 1974. These supplemental schedules are the responsibility of the
Plan's management. The supplemental schedules have been subjected to the
auditing procedures applied in our audits of the financial statements and, in
our opinion, are fairly stated in all material respects in relation to the
financial statements taken as a whole.
Seattle, Washington
December 21, 2000 ERNST & YOUNG LLP
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Penford Corporation Savings and Stock Ownership Plan
Statements of Net Assets Available for Benefits
AUGUST 31
2000 1999
----------- -----------
ASSETS
Investments, at fair value (Note 3):
Common trust funds $14,660,202 $14,137,803
Common stock 14,434,582 10,187,583
Participant loans 302,102 311,681
----------- -----------
29,396,886 24,637,067
Receivables:
Employer contributions 579,894 600,385
Due from broker for securities sold 102,303 17,375
Accrued interest and dividends 45,025 35,735
----------- -----------
727,222 653,495
----------- -----------
Total assets 30,124,108 25,290,562
LIABILITIES
Accrued expenses 56,000 91,260
Due to broker for securities purchased 25,559 285,229
----------- -----------
Net assets available for benefits $30,042,549 $24,914,073
=========== ===========
See accompanying notes.
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Penford Corporation Savings and Stock Ownership Plan
Statements of Changes in Net Assets Available for Benefits
YEAR ENDED AUGUST 31
2000 1999 1998
------------ ------------ ------------
ADDITIONS
Contributions:
Employer $ 1,145,893 $ 1,196,559 $ 2,213,306
Participants 1,445,655 1,500,329 2,001,246
Investment income:
Interest and dividends 423,494 239,923 227,980
Net appreciation (depreciation) in fair
value of investments 6,169,849 1,791,433 (2,426,997)
------------ ------------ ------------
Total investment income (loss) 6,593,343 2,031,356 (2,199,017)
DEDUCTIONS
Benefits paid to participants 3,864,117 2,625,234 1,934,523
Transfer of Plan assets to the Penwest
Pharmaceuticals Co. Savings Plan
(Note 1) -- 3,591,829 --
Administrative expenses 192,298 181,739 231,771
------------ ------------ ------------
Net increase (decrease) 5,128,476 (1,670,558) (150,759)
NET ASSETS AVAILABLE FOR BENEFITS
Beginning of year 24,914,073 26,584,631 26,735,390
------------ ------------ ------------
End of year $ 30,042,549 $ 24,914,073 $ 26,584,631
============ ============ ============
See accompanying notes.
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Penford Corporation Savings and Stock Ownership Plan
Notes to Financial Statements
August 31, 2000
1. DESCRIPTION OF THE PLAN
The following description of the Penford Corporation Savings and Stock Ownership
Plan (the Plan) provides only general information. Participants should refer to
the actual Plan document or the Summary Plan Description for a more complete
description of the Plan's provisions. Copies are available from the Plan
Administrative Committee.
GENERAL
The Plan is a defined-contribution plan available to all U.S. employees who have
completed three months of service with Penford Corporation (the Company),
including part-time employees. The Plan was created effective September 1, 1984.
It is subject to the provisions of the Employee Retirement Income Security Act
of 1974 (ERISA).
At the end of fiscal 1998, the Company completed a tax-free distribution to its
shareholders of the Company's pharmaceuticals subsidiary, Penwest
Pharmaceuticals Co. (PPCO). On August 31, 1998, the Company's shareholders of
record on August 10, 1998 received PPCO shares on a basis of three shares of
PPCO for every two shares of the Company. The Plan received the distributions of
PPCO shares effective September 1, 1998.
Penford and PPCO entered into an Employee Benefits Agreement that went into
effect upon the successful spin-off. Among other provisions, the agreement
established a separate defined contribution plan for PPCO employees
substantially the same in all material features to the Plan. On September 1,
1998, the Plan transferred to the trustee of the newly established PPCO plan all
assets and liabilities relating to the 99 PPCO employees who participated in the
Plan, including the Company's discretionary contribution for fiscal 1998. PPCO
employees are able to participate in the new plan to the extent eligible and
received credit for all eligibility, vesting, and benefit accrual service for
all service credited for such purposes under the Company's Plan. The Company
paid all costs related to the separation of the plan and PPCO paid all costs
related to formation of the new plan.
CONTRIBUTIONS
Participants may contribute up to 12% of their annual compensation. Participants
may elect to invest their contribution in any of the Plan's fund options, with
the exception of the PPCO Stock Fund. Following the initial investment in the
PPCO Stock Fund on September 1, 1998, no additional investments are allowed. At
any time, but limited to
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Penford Corporation Savings and Stock Ownership Plan
Notes to Financial Statements (continued)
1. DESCRIPTION OF THE PLAN (CONTINUED)
once per month, participants have the opportunity to change the investment
option previously elected. The Company matches 75% of the first 6% of
compensation contributed to the Plan. Company matching contributions are made in
the form of Penford Corporation common stock. The Company may also make annual
discretionary contributions to the Plan. Company discretionary contributions are
allocated based on participant compensation. Company discretionary contributions
for fiscal years 2000, 1999, and 1998 were $378,849, $393,405, and $636,498,
respectively. The discretionary contribution for fiscal year 1998 includes
amounts related to PPCO participants. Forfeitures are used to reduce employer
contributions to the Plan for the next Plan year.
PARTICIPANT ACCOUNTS
Individual accounts are maintained for all Plan participants. These accounts
reflect participants' contributions and related Company matching and
discretionary contributions to the Plan as well as allocations of earnings or
losses on the Plan's investments. Allocations of Plan earnings are based on each
participant's account balance.
VESTING
Participants are immediately vested in their contributions, plus actual earnings
thereon. Company contributions and related earnings vest in accordance with the
following schedule:
PERCENT
CREDITED SERVICE VESTED
- ------------------ -------
Less than one year 0%
One year 20%
Two years 40%
Three years 60%
Four years 80%
Five years or more 100%
In the event of disability, attainment of age 65, or death, the participant is
fully vested.
PAYMENT OF BENEFITS
Distributions to terminated participants for vested account balances are made in
cash, unless elected to be made in Penford stock, as soon as practicable after
termination.
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Penford Corporation Savings and Stock Ownership Plan
Notes to Financial Statements (continued)
1. DESCRIPTION OF THE PLAN (CONTINUED)
Participants are eligible for distribution of 100% of their vested account
balance, including both participant and employer contributions, as soon as
practicable after their normal or postponed retirement date, at death, or at
total disability, as defined by the Plan document.
PARTICIPANT LOANS
Participants may borrow from their fund accounts a minimum of $1,000 up to a
maximum equal to the lesser of $50,000 or 50% of their vested account balance.
Loan terms range from 1 to 5 years or up to 15 years for the purchase of a
primary residence. The loans are secured by the balance in the participant's
account and bear interest at a rate commensurate with local prevailing rates as
determined by the Plan Administrative Committee. Principal and interest are paid
ratably through payroll deductions.
PLAN TERMINATION
Although the Company has not expressed any intent to do so, it has the right
under the Plan to discontinue its contributions at any time and to terminate the
Plan subject to the provisions of ERISA. In the event of Plan termination,
participants will become 100% vested in their accounts.
2. SIGNIFICANT ACCOUNTING POLICIES
VALUATION OF INVESTMENTS
Assets of the Plan are invested in six funds, including four common trust funds
and two common stock funds. The common stock funds are comprised of the
Company's common stock and the common stock of PPCO to the extent participants
received PPCO shares in connection with the spin-off of PPCO in 1998. The unit
value of each common trust fund is stated at fair value, determined on a daily
basis by reference to the market values of the underlying assets. Investments in
common stock are stated at fair value based on closing market prices on the last
business day of the year.
Participant loans are recorded at their outstanding balances, which approximate
fair value.
Purchases and sales of investments are recorded on the trade dates. Interest
income is recorded on the accrual basis.
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Penford Corporation Savings and Stock Ownership Plan
Notes to Financial Statements (continued)
2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
BASIS OF PRESENTATION
The accounting records of the Plan are maintained on an accrual basis.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates that affect the
amounts reported in the financial statements and accompanying notes. Actual
results could differ from those estimates.
RISKS AND UNCERTAINTIES
The Plan provides for various investment options. Investment securities are
exposed to various risks, such as interest rate, market, and credit. Due to the
level of risk associated with certain investment securities and the level of
uncertainty related to changes in the value of investment securities, it is at
least reasonably possible that changes in risks in the near term would
materially affect the value of participants' account balances, and in the
amounts reported in the statements of net assets available for benefits and the
statements of changes in net assets available for benefits.
RECLASSIFICATIONS
Certain reclassifications have been made to the prior year financial statements
to conform to the current year's presentation. These reclassifications had no
effect on net assets available for benefits.
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Penford Corporation Savings and Stock Ownership Plan
Notes to Financial Statements (continued)
3. INVESTMENTS
The Plan's investments are held by Frank Russell Trust Company, the Trustee of
the Plan. Individual investments whose fair value was in excess of 5% of Plan
net assets at year-end were as follows:
AUGUST 31
2000 1999
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Penford Corporation common stock* $9,674,227 $7,028,688
Penwest Pharmaceuticals Co. common stock* 4,760,355 3,158,895
Frank Russell Trust Company Commingled Employee
Benefit Funds Trust Short-Term Investment Fund 2,102,968 2,062,309
Frank Russell Trust Company Commingled Employee
Benefit Funds Trust Global Aggressive Balanced Fund 6,738,399 7,136,295
Frank Russell Trust Company Commingled Employee
Benefit Funds Trust Tactical Asset Allocation Fund 2,317,839 2,290,834
Frank Russell Trust Company Commingled Employee
Benefit Funds Trust Global Equity Fund 3,500,996 2,648,365
*Nonparticipant directed
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Penford Corporation Savings and Stock Ownership Plan
Notes to Financial Statements (continued)
3. INVESTMENTS (CONTINUED)
During the years ended August 31, 2000, 1999, and 1998, the Plan's investments
(including investments bought and sold, as well as held, during the year)
appreciated (depreciated) in fair value as follows:
NET APPRECIATION
(DEPRECIATION)
IN FAIR VALUE FAIR VALUE AT
OF INVESTMENTS END OF YEAR
---------------- -------------
Year Ended August 31, 2000
Fair value as determined by quoted unit price:
Common trust funds $ 1,875,149 $ 14,660,202
Common stock 4,294,700 14,434,582
Participant loans, at estimated fair value -- 302,102
------------ ------------
$ 6,169,849 $ 29,396,886
============ ============
Year Ended August 31, 1999
Fair value as determined by quoted unit price:
Common trust funds $ 2,549,825 $ 14,137,803
Common stock (758,392) 10,187,583
Participant loans, at estimated fair value -- 311,681
------------ ------------
$ 1,791,433 $ 24,637,067
============ ============
Year Ended August 31, 1998
Fair value as determined by quoted unit price:
Common trust funds $ 377,791 $ 12,837,860
Common stock (2,804,788) 12,879,398
Participant loans, at estimated fair value -- 308,758
------------ ------------
$ (2,426,997) $ 26,026,016
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Penford Corporation Savings and Stock Ownership Plan
Notes to Financial Statements (continued)
4. NONPARTICIPANT-DIRECTED INVESTMENTS
The Penford Corporation Stock Fund and the PPCO Stock Fund both contain amounts
to which participants have not yet vested, and therefore, cannot be directed
into other investment funds by the participants. As the breakdown between
amounts that are participant directed and nonparticipant directed cannot be
readily determined, the funds are considered to be nonparticipant directed.
Information about the net assets and the significant components of changes in
net assets related to the nonparticipant-directed investments is as follows:
AUGUST 31
2000 1999
------------ ------------
Investments, at fair value:
Common trust funds $ 569,012 $ 206,723
Penford Corporation common stock 9,674,227 7,028,688
Penwest Pharmaceuticals Co. common stock 4,760,355 3,158,895
Employer contributions receivable 579,894 600,385
Due from broker for securities sold -- 17,375
Accrued interest and dividends 35,171 26,770
Less: Due to broker for securities purchased -- (262,769)
------------ ------------
$ 15,618,659 $ 10,776,067
============ ============
YEAR ENDED AUGUST 31
2000 1999 1998
----------- ----------- -----------
Changes in net assets:
Contributions:
Employer $ 1,145,893 $ 1,196,559 $ 1,579,026
Participants 186,208 196,519 386,582
Interfund transfers 830,515 (146,153) 178,508
Interest and dividends 159,001 99,990 87,466
Net appreciation (depreciation) in fair
value of investments 4,294,700 (758,392) (2,804,788)
Benefits paid to participants (1,773,725) (872,267) (966,644)
Transfer of Plan assets to the Penwest
Pharmaceuticals Co. Savings Plan -- (2,547,211) --
----------- ----------- -----------
$ 4,842,592 $(2,830,955) $(1,539,850)
=========== =========== ===========
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Penford Corporation Savings and Stock Ownership Plan
Notes to Financial Statements (continued)
5. RECONCILIATION TO FORM 5500
The following provides a reconciliation of net assets available for benefits per
the financial statements to the Form 5500:
AUGUST 31
2000 1999
----------- -----------
Net assets available for benefits, per the financial
statements $30,042,549 $24,914,073
Less: Benefit claims payable, per Form 5500 35,118 --
----------- -----------
Net assets available for benefits, per Form 5500 $30,007,431 $24,914,073
=========== ===========
The following is a reconciliation of benefits paid to participants per the
financial statements to the Form 5500:
YEAR ENDED AUGUST 31
2000 1999
---------- ----------
Benefits paid to participants, per the financial statements $3,864,117 $2,625,234
Plus: Benefit claims payable at the end of the year, per
Form 5500 35,118 --
---------- ----------
Benefits paid to participants, per Form 5500 $3,899,235 $2,625,234
========== ==========
Benefit claims payable are recorded on the Form 5500 for benefit claims that
have been processed and approved for payment prior to year-end but are not
recorded in the financial statements until benefit claims are paid.
6. INCOME TAX STATUS
The Internal Revenue Service has determined and informed the Sponsor by a letter
dated December 13, 1995 that the Plan is qualified and the trust established
under the Plan is tax exempt under the appropriate sections of the Internal
Revenue Code (IRC). The Plan has been amended since receiving the determination
letter. However, the Plan administrator believes that the Plan is currently
designed and being operated in compliance with the applicable requirements of
the Plan document and the IRC. Therefore, the Plan administrator believes that
the Plan was qualified and that the related trust was tax exempt as of the
financial statements date.
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Supplemental Schedules
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Penford Corporation Savings and Stock Ownership Plan
Schedule H, Line 4(i) -- Schedule of Assets Held for Investment Purposes
at End of Year
(EIN: 91 -- 1221360, PN: 003)
August 31, 2000
(c)
(b) DESCRIPTION OF INVESTMENT INCLUDING
IDENTITY OF ISSUE, BORROWER, MATURITY RATE, RATE OF INTEREST, PAR, (d) (e)
(a) LESSOR, OR SIMILAR PARTY OR MATURITY VALUE COST CURRENT VALUE
- ----------------------------------------------------------------------------------------------------------------
Common Trust Funds:
* Frank Russell Trust Company 2,102,968 units of the Commingled
Employee Benefit Funds Trust
Short-Term Investment Fund $ (1) $ 2,102,968
* Frank Russell Trust Company 266,066 units of the Commingled
Employee Benefit Funds Trust
Global Aggressive Balanced Fund (1) 6,738,399
* Frank Russell Trust Company 73,878 units of the Commingled
Employee Benefit Funds Trust Tactical
Asset Allocation Fund (1) 2,317,839
* Frank Russell Trust Company 92,855 units of the Commingled
Employee Benefit Funds Trust Global
Equity Fund (1) 3,500,996
Common Stock:
* Penford Corporation 531,916 common shares 7,254,823 9,674,227
* Penwest Pharmaceuticals Co. 371,540 common shares 3,089,007 4,760,355
* Participant loans Interest at prime plus 1%; various
maturities -- 302,102
-----------
$29,396,886
===========
*Denotes party-in-interest.
(1) Cost information is omitted as investments are participant directed.
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Penford Corporation Savings and Stock Ownership Plan
Schedule H, Line 4(j) -- Schedule of Reportable Transactions
(EIN: 91 -- 1221360, PN: 003)
August 31, 2000
(h)
CURRENT
VALUE OF
(a) (b) (c) (d) (g) ASSET ON (i)
IDENTITY OF PARTY INVOLVED DESCRIPTION OF PURCHASE SELLING COST OF TRANSACTION NET GAIN
AND DESCRIPTION OF ASSET TRANSACTION PRICE PRICE ASSETS DATE OR (LOSS)
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Category (iii) -- A series of transactions
in excess of 5% of Plan assets.
Penford Corporation* Common stock $ -- $2,655,932 $1,926,203 $2,655,932 $729,729
Penford Corporation* Common stock 3,419,945 -- 3,419,945 3,419,945 --
There were no Category (i), (ii), or (iv)
reportable transactions during 2000.
*Denotes party-in-interest.
Columns (e) and (f) are not applicable.
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SIGNATURES
The Plan. Pursuant to the requirements of the Securities Exchange Act of
1934, the trustees (or other persons who administer the employee benefit plan)
have duly caused this annual report to be signed on its behalf by the
undersigned hereunto duly authorized.
Penford Corporation Savings and
Stock Ownership Plan
February 26, 2001 By: /s/ Jeffrey T. Cook
-------------------------------------
Jeffrey T. Cook
President and Chief Executive Officer
-- Penford Corporation Savings and
Stock Ownership Plan Administrative
Committee, Vice President
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INDEX TO EXHIBITS
Exhibit No. Title
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23 Consent of Ernst & Young LLP, Independent Auditors