-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, VnnNrWGZ225NXnqYxq4S/y1NyVfrnjdafiPKUEmzWFi1IrsIF/c5wbYb04WdJcCD edwnpLA1Ik/oNxm9Ygjqug== 0000891020-97-000015.txt : 19970114 0000891020-97-000015.hdr.sgml : 19970114 ACCESSION NUMBER: 0000891020-97-000015 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19961130 FILED AS OF DATE: 19970113 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: PENWEST LTD CENTRAL INDEX KEY: 0000739608 STANDARD INDUSTRIAL CLASSIFICATION: GRAIN MILL PRODUCTS [2040] IRS NUMBER: 911221360 STATE OF INCORPORATION: DE FISCAL YEAR END: 0831 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-11488 FILM NUMBER: 97504509 BUSINESS ADDRESS: STREET 1: 777 108TH AVE NE STE 2390 CITY: BELLEVUE STATE: WA ZIP: 98004-5193 BUSINESS PHONE: 2064626000 MAIL ADDRESS: STREET 1: PO BOX 1688 CITY: BELLEVUE STATE: WA ZIP: 98009 10-Q 1 FORM 10-Q 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended November 30, 1996 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ___________________ to _______________________ Commission File No. 0-11488 PENWEST, LTD. - -------------------------------------------------------------------------------- (Exact name of registrant as specified in its charter) Washington 91-1221360 - -------------------------------------------------------------------------------- (State of Incorporation) (I.R.S. Employer Identification No.) 777-108th Avenue N.E., Suite 2390, Bellevue, WA 98004-5193 - -------------------------------------------------------------------------------- (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (206) 462-6000 ---------------------------- Indicate by a check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No ------- -------- Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of January 8, 1997: Class Outstanding ----- ----------- Common stock, par value $1.00 6,883,499 2 PENWEST, LTD. AND SUBSIDIARIES INDEX
Page No. -------- PART I - FINANCIAL INFORMATION Item 1 - Financial Statements Condensed Consolidated Balance Sheets 3 November 30, 1996 and August 31, 1996 Condensed Consolidated Statements of Income 4 Three Months Ended November 30, 1996 and November 30, 1995 Condensed Consolidated Statements of Cash Flow 5 Three Months Ended November 30, 1996 and November 30, 1995 Notes to Condensed Consolidated Financial Statements 6 Item 2 - Management's Discussion and Analysis of 7-8 Financial Condition and Results of Operations PART II - OTHER INFORMATION Item 6 - Exhibits and Reports on Form 8-K 9 SIGNATURES 10 INDEX TO EXHIBITS 11
2 3 PART I - FINANCIAL INFORMATION Item 1 Financial Statements PENWEST, LTD. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (Dollars in Thousands)
November 30, August 31, 1996 1996 --------- --------- ASSETS Current assets: Cash and cash equivalents $ 1,708 Trade accounts receivable 23,485 $ 26,766 Inventories: Raw materials, supplies and other 6,707 7,750 Work in progress 604 685 Finished goods 13,525 13,676 --------- --------- 20,836 22,111 Prepaid expenses and other 5,648 3,774 --------- --------- Total current assets 51,677 52,651 Net property, plant and equipment 126,838 121,173 Deferred income taxes 9,940 9,940 Cash value of life insurance 11,315 11,432 Other assets 7,322 7,322 --------- --------- Total assets $ 207,092 $ 202,518 ========= ========= LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Bank overdraft, net $ 847 Accounts payable $ 13,022 10,344 Accrued liabilities 7,840 7,943 Current portion of long-term debt 4,127 4,127 --------- --------- Total current liabilities 24,989 23,261 Long-term debt 64,258 62,636 Other postretirement benefits 10,068 10,306 Deferred income taxes and other 28,475 28,177 Commitments and contingencies Shareholders' equity: Common stock 8,684 8,677 Additional paid-in capital 13,752 13,633 Retained earnings 89,705 88,640 Treasury stock (30,637) (30,637) Note receivable from PENWEST Savings and Stock Ownership Plan (1,566) (1,742) Cumulative translation adjustment (636) (433) --------- --------- Total shareholders' equity 79,302 78,138 --------- --------- Total liabilities and shareholders' equity $ 207,092 $ 202,518 ========= =========
See accompanying notes to condensed consolidated financial statements. 3 4 PENWEST, LTD. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF INCOME (Dollars in thousands except per share data)
Three Months Ended November 30 ----------------- 1996 1995 ----------- ----------- Sales $ 49,310 $ 45,624 Cost of sales 38,454 33,456 ----------- ----------- Gross margin 10,856 12,168 Operating expenses 8,636 8,567 ----------- ----------- Income from operations 2,220 3,601 Other income 1,200 Interest expense, net (1,298) (1,054) ----------- ----------- Income before income taxes 2,122 2,547 Income taxes 715 799 ----------- ----------- Net income $ 1,407 $ 1,748 =========== =========== Weighted average common shares and equivalents outstanding 6,993,058 7,043,460 Earnings per common share $ 0.20 $ 0.25 =========== =========== Dividends declared per common share $ 0.05 $ 0.05 =========== ===========
See accompanying notes to condensed consolidated financial statements. 4 5 PENWEST, LTD. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOW (Dollars in Thousands)
Three Months Ended November 30 ------------------------ 1996 1995 -------- -------- Operating Activities: Net income $ 1,407 $ 1,748 Adjustments to reconcile net income to net cash from operating activities: Depreciation and amortization 2,926 2,728 Deferred income taxes 97 Foreign currency transactions 21 90 Change in operating assets and liabilities: Trade receivables 3,260 (1,485) Inventories 1,275 (1,230) Accounts payable and other 1,160 1,134 -------- -------- Net cash from operating activities 10,049 3,082 Investing Activities: Additions to property, plant and equipment (8,540) (2,845) Other (360) 336 -------- -------- Net cash used by investing activities (8,900) (2,509) Financing Activities: Proceeds from unsecured line of credit 19,035 8,375 Payments on unsecured line of credit (22,094) (7,055) Proceeds from long-term debt 5,000 Payments on long-term debt (318) (318) Exercise of stock options 125 273 Purchase of life insurance for officers' benefit plans (1,343) Payment of dividends (342) (334) -------- -------- Net cash from (used by) financing activities 1,406 (402) -------- -------- Net increase in cash and cash equivalents 2,555 171 Cash (bank overdrafts) and cash equivalents at beginning of period (847) 5,334 -------- -------- Cash and cash equivalents at end of period $ 1,708 $ 5,505 ======== ========
See accompanying notes to condensed consolidated financial statements. 5 6 PENWEST, LTD. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS 1. BASIS OF PRESENTATION The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation for the interim period presented have been included. Operating results for the three month period ended November 30, 1996 are not necessarily indicative of the results that may be expected for the year ending August 31, 1997. For further information, refer to the consolidated financial statements and footnotes thereto included in PENWEST LTD.'s ("the Company") annual report on Form 10-K for the fiscal year ended August 31, 1996. 2. OTHER INCOME During the quarter ended November 30, 1996, the Company sold its remaining Southern California air credits that related to the operations of Great Western Malting Co., a division of the Company sold in 1989. The sale of the credits resulted in a pretax gain of $1.2 million that is included in other income for the quarter. 3. RECENTLY ADOPTED ACCOUNTING STANDARDS Effective September 1, 1996, the Company adopted Statement of Financial Accounting Standards No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of". The adoption of Statement No. 121 had no effect on the Company's financial position and results of operations as of the date of adoption and for the period ended November 30, 1996. Effective September 1, 1996, the Company adopted Statement of Financial Accounting Standards No. 123, "Accounting for Stock-Based Compensation," using the intrinsic-value method prescribed by Accounting Principles Board Opinion No.25, as allowed for in the statement. The adoption of Statement No. 123 had no effect on the Company's financial position and results of operations as of the date of adoption and for the period ended November 30, 1996. 6 7 Item 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS LIQUIDITY The Company's liquidity position consisted of the following at November 30, 1996: cash and cash equivalents of $1.7 million, working capital of $26.7 million, an unsecured credit agreement of $35 million under which there was $15 million outstanding, and several uncommitted lines of credit aggregating $10 million with various banks that may be used for overnight borrowings under which there was $2.8 million outstanding. The Company used operating cash flow and debt to finance capital expenditures and operating activities during the quarter. Cash flow from operations for the three months ended November 30, 1996 was $10.0 million compared to $3.1 million in the corresponding period of the prior year. The increase in cash flow is due to decreases in trade receivables and inventories at November 30, 1996. The decreases are primarily due to a lower cost of corn associated with the new crop harvest late in the Company's first fiscal quarter. The Company paid a $0.05 per share dividend on December 6, 1996, to shareholders of record as of November 15, 1996. CAPITAL RESOURCES Additions to property, plant and equipment during the three months ended November 30, 1996 were $8.5 million. The additions were primarily for improvements to Penford Product Co.'s manufacturing facility in Cedar Rapids, Iowa and the commencement of a capacity expansion project for Penwest Foods' facility in Richland, Washington. RESULTS OF OPERATIONS Net income was $1.4 million, or $0.20 per share, for the quarter ended November 30, 1996, compared to net income of $1.7 million, or $0.25 per share, for the corresponding period a year ago. The first quarter of fiscal year 1997 included other income of $1.2 million ($800,000 after tax, or $0.11 per share) from the sale of the remaining Southern California air credits related to Great Western Malting Co. which was sold in 1989. Sales increased in the three months ended November 30, 1996 to $49.3 million from $45.6 million, or 8.1%, from the corresponding period a year ago. The increase is primarily due to higher corn costs through the first two months of the quarter, a key component used in pricing Penford's paper chemical products. Corn costs and changes in those costs are generally passed through to customers. Volumes of Penford Gums were down slightly from the same period in the prior year reflecting a weaker paper industry than a year ago. Paper industry analysts are forecasting modest industry growth in 1997. Penwest Foods Co.'s sales improved 31% primarily due to increased volumes of starches for french fry coatings. The division was profitable for the three months ended November 30, 1996. Gross margin for the first quarter of fiscal year 1997 was 22.0% compared to 26.7% for the corresponding period a year ago. The majority of the margin percentage difference compared to the prior year is due to higher corn prices, and to a lesser extent, lower overall gross margins on 7 8 two major Penford contracts. The Company expects margins to improve in the second quarter as the new crop is harvested and corn prices moderate. Net interest expense for the quarter ended November 30, 1996 was $1.3 million compared to $1.1 million for the corresponding period a year ago due to slightly higher debt levels. The effective tax rate for the first quarter of fiscal 1997 was 34.0% compared to 31.4% in the corresponding period a year ago. The effective tax rate approximates the statutory rate and is higher than in the same period in the prior year primarily due to state tax refunds received by the Company in the previous year. FORWARD-LOOKING STATEMENTS The above discussion contains forward-looking statements. There are certain important factors that could cause results to differ materially from those anticipated by the statements made above. These factors include, but are not limited to, the economic condition of the paper industry, the market price of corn and corn prices, competition, product development risks, patent and intellectual property matters, and regulatory and manufacturing issues. Additional information on these and other factors which could affect the Company's financial results is included in the Company's 1996 Annual Report to Shareholders and its Form 10-K for the fiscal year ended August 31, 1996 on file with the Securities and Exchange Commission. 8 9 PART II - OTHER INFORMATION Item 6 Exhibits and Reports on Form 8-K. (a) Exhibits: 11 Statement re: Computation of Earnings Per Share 27 Financial Data Schedule (b) No reports on Form 8-K were filed during the quarter for which this report is filed. 9 10 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. PENWEST, LTD. --------------- (Registrant) January 10, 1996 /s/ Tod R. Hamachek - ---------------- -------------------- Date Tod R. Hamachek President and Chief Executive Officer (Principal Executive Officer) January 10, 1996 /s/ Jeffrey T. Cook - ---------------- -------------------- Date Jeffrey T. Cook Vice President, Finance and Chief Financial Officer (Principal Financial Officer) 10 11 INDEX TO EXHIBITS Exhibits identified in parentheses below, on file with the Securities and Exchange Commission, are incorporated by reference. Exhibit No. Item - ----------- ---- (3.1) Restated Articles of Incorporation of Registrant (filed as an Exhibit to Registrant's Form 10-K for fiscal year ended August 31, 1995) (3.2) Bylaws of Registrant as amended and restated as of June 27, 1995 (filed as an Exhibit to Registrant's Form 10-K for the fiscal year ended August 31, 1995) (4.1) PENWEST, LTD. Common Stock Purchase Rights, dated June 3, 1988 (filed on Form 8-A dated June 3, 1988) (10.1) Senior Note Agreement among PENWEST, LTD. as Borrower and Mutual of Omaha and Affiliates as lenders, dated November 1, 1992 (filed as an Exhibit to Registrant's Form 10-Q for the quarter ended February 28, 1993) (10.2) Term Loan Agreement among Penford Products Co., and PENWEST, LTD. as Borrowers, and First Interstate Bank of Washington, N.A. as Lender, dated September 27, 1990 (Registrant agrees to furnish a copy of this instrument to the Commission on request) (10.3) Loan Agreement among PENWEST, LTD. as Borrower and Seattle-First National Bank as Lender, dated December 1, 1989 (Registrant agrees to furnish a copy of this instrument to the Commission on request) (10.4) PENWEST, LTD. Supplemental Executive Retirement Plan, dated March 19, 1990 (filed as an Exhibit to Registrant's Form 10-K for the fiscal year ended August 31, 1991) (10.5) PENWEST, LTD. Supplemental Survivor Benefit Plan, dated January 15, 1991 (filed as an Exhibit to Registrant's Form 10-K for the fiscal year ended August 31, 1991) (10.6) PENWEST, LTD. Deferred Compensation Plan, dated January 15, 1991 (filed as an Exhibit to Registrant's Form 10-K for the fiscal year ended August 31, 1991) (10.7) Change of Control Agreements with Messrs. Hamachek, Reed, Cook, Widmaier, Talley, Horn, Rydzewski and Belsheim (a representative copy of these agreements is filed as an exhibit to Registrant's Form 10-K for the fiscal year ended August 31, 1995) 11 12 (10.8) PENWEST, LTD. 1993 Non-Employee Director Restricted Stock Plan (filed as an Exhibit to Registrant's Form 10-Q for the quarter ended November 30, 1993) (10.9) Note Agreement dated as of October 1, 1994 among PENWEST, LTD., Principal Mutual Life Insurance Company and TMG Life Insurance Company (filed as an Exhibit to Registrant's Form 10-Q for the quarter ended February 28, 1995) (10.10) PENWEST, LTD. 1994 Stock Option Plan as amended and restated as of January 23, 1996 (filed as an Exhibit to Registrant's Form 10-Q for the quarter ended May 31, 1996) (10.11) Credit Agreement dated as of December 22, 1995 among PENWEST, LTD., and its subsidiaries, Bank of America National Trust and Savings Association, ABN-AMRO Bank, N.V., The Bank of Nova Scotia, and Seattle-First National Bank (filed as an Exhibit to Registrant's Form 10-Q for the quarter ended February 29, 1996) (10.12) PENWEST, LTD. Stock Option Plan for Non-Employee Directors (filed as an Exhibit to the Registrant's Form 10-Q for the quarter ended May 31, 1996) 11 Statement re: Computation of Earnings Per Share 27 Financial Data Schedule 12 EX-11 2 COMPUTATION OF EARNINGS PER SHARE 1 PENWEST, LTD. AND SUBSIDIARIES COMPUTATION OF EARNINGS PER SHARE
Quarter Ended November 30 --------------------------- 1996 1995 ---------- ---------- PRIMARY: Net income $1,407,000 $1,748,000 ========== ========== Weighted average number of shares outstanding 6,851,257 6,763,208 Net effect of dilutive stock options 141,801 280,252 ---------- ---------- Adjusted shares outstanding 6,993,058 7,043,460 ========== ========== Earnings per share $ 0.20 $ 0.25 ========== ========== FULLY DILUTED: Net income $1,407,000 $1,748,000 ========== ========== Weighted average number of shares outstanding 6,851,257 6,763,208 Net effect of dilutive stock options 141,801 308,166 ---------- ---------- Adjusted shares outstanding 6,993,058 7,071,374 ========== ========== Earnings per share $ 0.20 $ 0.25 ========== ==========
13 EX-27 3 FINANCIAL DATA SCHEDULE
5 This schedule contains summary financial information extracted from the Consolidated Balance Sheets at November 30, 1996 (unaudited), the Condensed Consolidated Statements of Income at November 30, 1996 (unaudited), and the Condensed Consolidated Statements of Cash Flow at November 30, 1996 (unaudited) and is qualified in its entirety by reference to such financial statements. US DOLLARS 3-MOS AUG-31-1997 SEP-01-1996 NOV-30-1996 1 1,708 0 23,485 0 20,836 51,677 126,838 0 207,092 24,989 0 0 0 8,684 70,618 207,092 49,310 49,310 38,454 38,454 8,636 0 1,298 2,122 715 1,407 0 0 0 1,407 .20 .20
-----END PRIVACY-ENHANCED MESSAGE-----