8-K

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): July 8, 2010

Penford Corporation

(Exact name of registrant as specified in its charter)

Washington
(State or other jurisdiction
of incorporation) 0-11488
(Commission File Number) 91-1221360
(IRS Employer
Identification No.)

7094 South Revere Parkway,
Centennial, Colorado
(Address of principal executive offices 80112-3932
(Zip Code)

303-649-1900
(Registrant’s telephone number, including area code)

Not Applicable
(Former name or former address, if changed since last report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

o Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

o Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

o Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Item 2.02: Results of Operations and Financial Condition

On July 8, 2010, Penford Corporation issued a press release reporting its financial results for the three- and nine-month periods ended May 31, 2010. A copy of the Registrant’s press release containing this information is furnished as Exhibit 99.1 to this Report on Form 8-K and is incorporated herein by reference.

Item 9.01: Financial Statements and Exhibits

(d) Exhibits

Exhibit No.	Description
99.1	Press release dated July 8, 2010

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 thereunto duly authorized.

	Penford Corporation
	(Registrant)
July 8, 2010	/s/ Steven O. Cordier
	Steven O. Cordier
	Senior Vice President and Chief Financial Officer

EXHIBIT INDEX

Exhibit No.	Description
99.1	Press Release dated July 8, 2010

EX-99.1

Exhibit 99.1

Contacts:	Steven O. Cordier
	Senior Vice President and CFO
	Penford Corporation
	303-649-1900
	steve.cordier@penx.com

Penford Reports Financial Results

Food Ingredients business reports record sales and operating profits for the quarter.

Consolidated gross margin improved and operating loss declined.

Debt was reduced $35 million during first 9 months of FY’10.

CENTENNIAL, Co., July 8, 2010 – Penford Corporation (Nasdaq: PENX), a leader in renewable, natural-based ingredient systems for industrial and food applications, today reported that consolidated sales for the quarter ended May 31, 2010 were $61.9 million compared with $61.3 million a year ago. Diluted loss per share, including discontinued operations, was $0.51. Net loss from continuing operations was $5.8 million, or $0.49 per diluted share, compared to a net loss of $4.3 million, or $0.39 per diluted share last year. A table summarizing third quarter results from continuing operations is shown below:

Penford Corporation – Financial Highlights	Quarter Ended
(In thousands except per share data)	5/31/10			5/31/09			% Change
Industrial Ingredients:
Sales	$	42,010		$	44,670			(6	)%
Gross margin		(3,847	)		(5,558	)		31	%
Operating loss		(6,847	)		(7,047	)(1)		3	%
Food Ingredients:
Sales	$	19,899		$	16,606			20	%
Gross margin		7,112			5,573			28	%
Operating income		5,018			3,365			49	%
Consolidated:
Sales	$	61,909		$	61,276			1	%
Gross margin		3,265			14		NA
Operating loss		(4,091	)		(6,036	)(1)		32	%
Net Loss from continuing operations		(5,758	)		(4,343	)		(33	)%
Diluted loss per share – continuing operations	$	(0.49	)	$	(0.39	)		26	%
Diluted loss per share – discontinued operations	$	(0.02	)	$	(0.27	)		93	%
Diluted loss per share	$	(0.51	)	$	(0.66	)		23	%

(1) Includes $1.1 million of net insurance recoveries in the quarter ended 5/31/09

Third Fiscal Quarter Consolidated Financial Results

• Consolidated sales were comparable to last year at $61.9 million. Higher volume offset lower selling prices.

• Lower costs and higher productivity improved results. Gross margin expanded $3.3 million and unit costs declined by 11%.

• Quarterly operating losses were $4.1 million compared with a loss of $7.1 million last year, excluding net insurance recoveries of $1.1 million in fiscal 2009.

• Net loss from continuing operations for the third quarter includes a $1.0 million pre-tax non-cash charge related to unamortized transaction costs from the Company’s prior credit facility, and a $1.6 million pre-tax interest rate swap termination expense.

Food Ingredients Third Quarter Results

• The Food Ingredients business reported record sales of $19.9 million for the quarter, increasing 20% over last year.

• Revenue grew by 20% in the quarter from a combination of stronger sales of established products and gains in new business in several areas.

• Gross margin and operating income increased as unit costs fell 9%. Cost savings programs and higher plant throughput contributed $1.3 million to higher quarter profits.

Industrial Ingredients Third Quarter Results

• Sales of specialty products grew 15%.

• Industrial starch volumes expanded by more than 10% as paper end-market fundamentals improved. Higher volumes offset approximately half of the impact of lower average unit selling prices.

• Ethanol volume represented just under half of the Industrial product mix. Revenues and volume for the third quarter of fiscal 2010 were comparable to a year ago.

• Cost reduction program effects, higher throughput rates, improved yields and lower raw material costs impacted results by $7.2 million in the quarter.

Cash and Debt

• A previously announced, on April 7, 2010, the Company issued $40 million of preferred stock, which is mandatorily redeemable in seven years. The dividend rate on the preferred stock is 15%, with 6% payable in cash quarterly. The Company also entered into a five-year, $60 million, secured revolving line of credit with a syndicate of banks that includes the Bank of Montreal, Bank of America and Rabobank Nederland.

• The Company reduced debt levels from $95.7 million at August 31, 2009 to $60.3 million, including $40 million of preferred stock, at May 31, 2010.

• Year-to-date cash provided by operations was $9.8 million compared to cash used in operations of $12.3 million for the first nine months of fiscal 2009. Improvements in working capital contributed $5.2 million to cash in fiscal 2010.

Conference Call

Penford will host a conference call to discuss third quarter financial and operational results today, July 8, 2010 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. To participate in the call on July 8, 2010, please phone 1-877-407-9205 at 8:50 a.m. Mountain Time. A replay will be available at www.penx.com.

About Penford Corporation

Penford Corporation develops, manufactures and markets specialty, natural-based ingredient systems for a variety of industrial and food applications. Penford has five manufacturing and/or research locations in the United States.

     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 does not intend 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 other 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; the amount and timing of flood insurance recoveries; the Company’s inability to comply with the terms of instruments governing the Company’s debt; the effects of the current economic recession as well as other 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; interest rate, chemical and energy cost volatility; foreign currency exchange rate fluctuations; changes in returns on pension plan assets and/or assumptions used for determining

employee benefit expense and obligations; unforeseen developments in the industries in which Penford operates; and other factors described in the “Risk Factors” section in reports filed by the Company with the Securities and Exchange Commission.

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CHARTS TO FOLLOW

Penford Corporation	Three months ended						Nine months ended
Financial Highlights	May 31						May
(In thousands except per share data)	2010			2009			2010			2009
	(unaudited)
Consolidated Results
Sales	$	61,909		$	61,276		$	191,272		$	184,799
Loss from continuing operations		(5,758	)		(4,343	)		(6,503	)		(7,984	)
Income (loss) from discontinued operations, net of tax		(218	)		(3,072	)		16,312			(21,978	)
Net income (loss)	$	(5,976	)	$	(7,415	)	$	9,809		$	(29,962	)
Loss per share, diluted – continuing operations	$	(0.49	)	$	(0.39	)	$	(0.58	)	$	(0.72	)
Income (loss) per share, diluted – discontinued operations	$	(0.02	)	$	(0.27	)	$	1.43		$	(1.97	)
Income (loss) per share, diluted	$	(0.51	)	$	(0.66	)	$	0.85		$	(2.69	)
Cash Flows
Cash flow provided by (used in) continuing operations:
Operating activities	$	(1,855	)	$	1,725		$	9,759		$	(12,293	)
Investing activities		(663	)		(5,254	)		16,238			(7,981	)
Financing activities		2,518			5,106			(31,537	)		21,850
		—			1,577			(5,540	)		1,576
Net cash flow provided (used in) by discontinued operations		(890	)		876			(270	)		382
Total cash used	$	(890	)	$	2,453		$	(5,810	)		1,958

Balance Sheets

	May 31,		August 31,
	2010		2009
	(unaudited)
Current assets	$	61,636	$	68,336
Current assets of discontinued operations		—		38,486
Property, plant and equipment, net		113,524		119,049
Other assets		33,618		28,147
Non-current assets of discontinued operations		—		4,227
Total assets		208,778		258,245
Current liabilities		27,035		44,958
Current liabilities of discontinued operations		—		16,028
Long-term debt		19,833		71,141
Redeemable preferred stock		32,940
Other liabilities		42,628		43,908
Non-current liabilities of discontinued operations		—		2,851
Shareholders’ equity		86,342		79,359
Total liabilities and equity	$	208,778	$	258,245

Penford Corporation	Three months ended						Nine months ended
Consolidated Statements of Operations	May 31						May 31
(In thousands except per share data)	2010			2009			2010			2009
	(unaudited)
Sales	$	61,909		$	61,276		$	191,272		$	184,799
Cost of sales		58,644			61,262			171,317			181,960
Gross margin		3,265			14			19,955			2,839
Operating expenses		6,312			6,048			18,854			18,212
Research and development expenses		1,044			1,077			3,165			3,368
Flood related costs, net of insurance recoveries		—			(1,075	)		—			(9,109	)
Loss from operations		(4,091	)		(6,036	)		(2,064	)		(9,632	)
Non-operating income (expense), net		(2,606	)		515			(1,997	)		1,464
Interest expense		1,904			1,400			5,324			3,848
Loss before income taxes		(8,601	)		(6,921	)		(9,385	)		(12,016	)
Income tax benefit		(2,843	)		(2,578	)		(2,882	)		(4,032	)
Loss from continuing operations		(5,758	)		(4,343	)		(6,503	)		(7,984	)
Income (loss) from discontinued operations, net of tax		(218	)		(3,072	)		16,312			(21,978	)
Net income (loss)	$	(5,976	)	$	(7,415	)	$	9,809		$	(29,962	)
Weighted average common shares and equivalents outstanding, diluted		11,796			11,176			11,396			11,169
Loss per share, diluted – continuing operations	$	(0.49	)	$	(0.39	)	$	(0.58	)	$	(0.72	)
Income (loss) per share, diluted – discontinued operations	$	(0.02	)	$	(0.27	)	$	1.43		$	(1.97	)
Income (loss) per share, diluted	$	(0.51	)	$	(0.66	)	$	0.85		$	(2.69	)
Dividends declared per common share	$	—		$	—		$	—		$	0.12

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