8-K/A 1 v67867e8-ka.txt AMENDMENT TO 8-K 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 8-K/A CURRENT REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 DATE OF REPORT (DATE OF EARLIEST EVENT REPORTED) SEPTEMBER 29, 2000 PENFORD CORPORATION -------------------------------------------------- (EXACT NAME OF REGISTRANT AS SPECIFIED IN CHARTER) WASHINGTON ---------------------------------------------- (STATE OR OTHER JURISDICTION OF INCORPORATION) 0-11488 91-1221360 ------------------------ -------------------------------- (COMMISSION FILE NUMBER) (IRS EMPLOYER IDENTIFICATION NO.) 777-108TH AVENUE N.E., SUITE 2390 BELLEVUE, WASHINGTON 98004-5193 ---------------------------------------- ---------- (ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE) REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE (425) 462-6000 --------------- --------------------------------- (FORMER NAME OR FORMER ADDRESS, IF CHANGED SINCE LAST REPORT) 2 ITEM 2. ACQUISITION OF ASSETS This Amendment No. 1 provides Items 7(a) and 7(b) of the Current Report on Form 8-K dated September 29, 2000, relating to Penford Corporation's acquisition of Starch Australasia Limited, renamed Penford Australia Limited. In accordance with paragraph 4 of Item 7(a) of Form 8-K, the required financial statements and pro forma financial information are being filed with this Amendment No. 1. ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS (a) Financial Statements of Business Acquired PENFORD AUSTRALIA LIMITED (formerly Starch Australasia Limited) (i) Independent Audit Report for the year ended 30 June 2000 (ii) Audited Consolidated Profit and Loss Statement for the year ended 30 June 2000 (iii) Audited Consolidated Balance Sheet as of 30 June 2000 (iv) Audited Consolidated Statement of Cash Flows for the year ended 30 June 2000 (v) Notes to Consolidated Financial Statements for the year ended 30 June 2000 (b) Pro Forma Financial Information PENFORD CORPORATION (i) Unaudited Pro Forma Consolidated Financial Statements (ii) Unaudited Pro Forma Consolidated Balance Sheet as of August 31, 2000 (iii) Unaudited Pro Forma Consolidated Statement of Income for the year ended August 31, 2000 (iv) Notes to Unaudited Pro Forma Consolidated Financial Statements (c) Exhibits 2.1 Starch Australasia Share Sale Agreement completed as of September 29, 2000 among Penford Holdings Pty Limited, a wholly owned subsidiary of Registrant, and Goodman Fielder Limited 10.1 Amended and Restated Credit Agreement dated as of November 15, 2000 among Penford Corporation and Penford Products Co. as borrowers, and certain commercial lending institutions as lenders, and the Bank of Nova Scotia, as agent for the lenders 10.2 Debenture Trust Deed dated as of November 15, 2000 among Penford Holdings Pty Limited as issuer and ANZ Capel Court Limited as trustee 10.3 Syndicated Facility Agreement dated as of November 15, 2000 among Penford Australia Limited, a wholly owned subsidiary of Penford Holdings Pty Limited, as borrowers, and Australia and New Zealand Banking Group Limited as lender and agent 10.4 Intercreditor Agreement dated as of November 15, 2000 by and among The Bank of Nova Scotia, KeyBank National Association, U.S. National Association and Australia and New Zealand Banking Group Limited 23.1 Consent of Ernst & Young LLP, Independent Auditors 99.1 Press Release dated September 29, 2000* * Previously filed as an exhibit to Form 8-K filed with the Commission by the Registrant on October 13, 2000. 3 INDEPENDENT AUDIT REPORT To the members of Penford Australia Limited (formerly Starch Australasia Limited) SCOPE We have audited the attached financial report, being a special purpose financial report, of Penford Australia Limited for the financial year ended 30 June 2000, consisting of the Profit and Loss Statement, Balance Sheet, Statement of Cash flows and Notes thereon. The company's directors are responsible for the financial report and have determined that the accounting policies used and described in Note 1 to the financial statements which form part of the financial report are appropriate for the purpose for which the financial report is prepared. We have conducted an independent audit of the financial report in order to express an opinion on it to the members of the company. The financial report has been prepared for inclusion in certain filings under the laws of the United States. We disclaim any assumption of responsibility for any reliance on this audit report or on the financial report to which it relates for any purpose other than that for which it was prepared. Our audit has been conducted in accordance with Australian Auditing Standards, which do not differ in any material respect from auditing standards generally accepted in the United States. Our procedures included examination, on a test basis, of evidence supporting the amounts and other disclosures in the financial report, and the evaluation of accounting policies and significant accounting estimates. These procedures have been undertaken to form an opinion as to whether, in all material respects, the financial report is presented fairly in accordance with the accounting policies described in Note 1, so as to present a view which is consistent with our understanding of the company's financial position and performance as represented by the results of its operations and its cash flows. The audit opinion expressed in this report has been formed on the above basis. AUDIT OPINION In our opinion, the financial report of Penford Australia Limited is in accordance with: (a) the Corporations Law including: (i) giving a true and fair view of the company's financial position as at 30 June 2000 and of the performance of the company for the year ended on that date; and (ii) complying with Accounting Standards to the extent disclosed in Note 1, and the Corporations Regulations; and (b) other mandatory professional reporting requirements. Accounting principles generally accepted in Australia vary in certain respects from accounting principles generally accepted in the United States. The application of the latter would have affected the determination of consolidated operating profit for the year ended 30 June 2000 and the determination of consolidated shareholder's equity of Penford Australia Limited as at 30 June 2000 to the extent indicated in note 29 to the financial statements. Ernst & Young /s/ David N. Balcombe Melbourne Date: 11 December 2000 4 PENFORD AUSTRALIA LIMITED PROFIT AND LOSS STATEMENT
PENFORD AUSTRALIA YEAR ENDED 30 JUNE 2000 NOTES CONSOLIDATED LIMITED ----------------------- ----- ------------ ---------- $000 $000 OPERATING REVENUE 2 113,771 94,052 ========= ========= OPERATING PROFIT BEFORE INCOME TAX 3,604 1,614 INCOME TAX ATTRIBUTABLE TO OPERATING PROFIT 3 (493) 164 --------- --------- OPERATING PROFIT AFTER INCOME TAX 3,111 1,778 --------- --------- RETAINED PROFITS at the beginning of the financial year 3,484 (2,436) --------- --------- TOTAL AVAILABLE FOR APPROPRIATION 6,595 (658) --------- --------- DIVIDENDS PROVIDED FOR OR PAID - - --------- --------- RETAINED PROFITS at the end of the financial year 6,595 (658) ========= =========
5 PENFORD AUSTRALIA LIMITED BALANCE SHEET
PENFORD AUSTRALIA AT 30 JUNE 2000 NOTES CONSOLIDATED LIMITED --------------- ----- ------------ --------- $ 000 $ 000 CURRENT ASSETS Cash 16,286 9,795 Receivables 4 17,838 14,636 Inventories 5 24,908 20,894 Other 6 523 345 -------- -------- TOTAL CURRENT ASSETS 59,555 45,670 -------- -------- NON-CURRENT ASSETS Investments 7 - 391 Property, plant and equipment 9 57,268 50,463 Intangibles 10 421 421 Future income tax benefit 342 - -------- -------- TOTAL NON-CURRENT ASSETS 58,031 51,275 -------- -------- TOTAL ASSETS 117,586 96,945 -------- -------- CURRENT LIABILITIES Accounts payable 11 12,389 8,918 Borrowings 12 5,885 5,885 Provisions 13 5,335 4,077 -------- -------- TOTAL CURRENT LIABILITIES 23,609 18,880 -------- -------- NON-CURRENT LIABILITIES Accounts payable 14 79,827 70,733 Borrowings 15 3,377 3,377 Provisions 16 4,651 4,613 -------- -------- TOTAL NON-CURRENT LIABILITIES 87,855 78,723 -------- -------- TOTAL LIABILITIES 111,464 97,603 -------- -------- NET ASSETS 6,122 (658) ======== ======== SHAREHOLDERS' EQUITY Share Capital 17 - - Reserves 18 (473) - Retained profits 6,595 (658) -------- -------- TOTAL SHAREHOLDERS' EQUITY 6,122 (658) ======== ========
6 PENFORD AUSTRALIA LIMITED STATEMENT OF CASH FLOWS
PENFORD AUSTRALIA YEAR ENDED 30 JUNE 2000 NOTES CONSOLIDATED LIMITED ----------------------- ----- ------------ --------- $ 000 $ 000 CASH FLOWS FROM OPERATING ACTIVITIES Receipts from customers 84,371 63,812 Sales to group companies 36,570 29,798 Payments to suppliers and employees (109,122) (83,998) Other operating receipts 217 217 Interest paid (1,248) (475) Other operating payments (5,700) (5,700) Income tax paid (1,366) (966) --------- --------- NET CASH FLOWS FROM OPERATING ACTIVITIES 19 3,722 2,688 --------- --------- CASH FLOWS FROM INVESTING ACTIVITIES Acquisition of property, plant and equipment (5,938) (4,910) Proceeds from sale of property, plant and equipment 32 24 --------- --------- NET CASH FLOWS USED IN INVESTING ACTIVITIES (5,906) (4,886) --------- --------- CASH FLOWS FROM FINANCING ACTIVITIES Advances - related parties 16,075 15,314 Borrowings - other 2,062 2,062 Exchange rate effect on non trading intercompany balance 158 - --------- --------- NET CASH FLOWS FROM FINANCING ACTIVITIES 18,295 17,376 NET INCREASE IN CASH HELD 16,111 15,178 Add opening cash brought forward 245 (5,383) Effect of exchange rate changes on the opening balances of cash held in foreign currencies (106) - Effects due to translation of cash flows at transaction date exchange rate 36 - --------- --------- CLOSING CASH CARRIED FORWARD 19 16,286 9,795 ========= =========
7 PENFORD AUSTRALIA LIMITED NOTES TO FINANCIAL STATEMENTS 30 JUNE 2000 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (a) BASIS OF ACCOUNTING The financial report is a special purpose financial report, which has been prepared in accordance with all the requirements of the Corporations Law, which includes applicable Accounting Standards other than the inclusion of comparatives from the prior year, as such comparatives were not required for the purpose for which the financial report was prepared. Other mandatory professional reporting requirements (Urgent Issues Group Consensus Views) have also been complied with. The financial report has been prepared for inclusion in certain filings under the laws of the United States. Accounting principles generally accepted in Australia vary in certain respects from accounting principles generally accepted in the United States. The application of the latter would have affected the determination of consolidated operating profit for the year ended 30 June 2000 and the determination of consolidated shareholders' equity attributable to shareholders' of Penford Australia Limited as at 30 June 2000 to the extent indicated in note 29 to the financial statements. The financial statements have been prepared in accordance with the historical cost convention, except for certain assets which are at valuation. (b) CHANGE IN ACCOUNTING POLICIES The accounting policies adopted are consistent with those of the previous year. (c) PRINCIPLES OF CONSOLIDATION The consolidated financial statements are those of the economic entity, comprising Penford Australia Limited (the parent company) and all entities, which Penford Australia Limited controlled from time to time during the year and at the balance sheet date. The financial statements of subsidiaries are prepared for the same reporting period as the parent entity, using consistent accounting policies. All intercompany balances and transactions, including unrealised profits arising from intra-group transactions, have been eliminated in full. (d) FOREIGN CURRENCIES Translation of foreign currency transactions Transactions in foreign currencies of entities within the consolidated entity are converted to local currency at the rate of exchange ruling at the date of the transaction. Amounts payable to and by entities within the consolidated entity that are outstanding at the balance sheet date and are denominated in foreign currencies have been converted to local currency using rates of exchange ruling at the end of the financial year. Except for certain specific hedges, all resulting exchange differences arising on settlement or re-statement are brought to account in determining the profit and loss for the financial year. Specific Hedges Where a purchase or sale is specifically hedged, exchange gains or losses on the hedging transaction arising up to the date of purchase or sale are included with the purchase or sale. Exchange gains and losses arising on the hedge transaction after that date are taken to the profit and loss statement. Translation of financial reports of overseas operations All overseas operations are deemed self-sustaining, as each is financially and operationally independent of Penford Australia Limited. The financial reports of overseas operations are translated using the current rate method and any exchange differences are taken directly to the foreign exchange translation reserve. 8 PENFORD AUSTRALIA LIMITED NOTES TO FINANCIAL STATEMENTS (CONTINUED) (e) CASH For the purposes of the statement of cash flows, cash includes cash on hand and in banks, and money market investments readily convertible to cash within 2 working days, net of outstanding bank overdrafts. (f) TRADE RECEIVABLES Trade receivables are carried at nominal amounts due less any provision for doubtful debts. A provision for doubtful debts is recognised when collection of the full nominal amount is no longer probable. (g) RECEIVABLES - RELATED PARTIES Amounts (other than trade debts) receivable from related parties are carried at nominal amounts due. (h) INVENTORIES Inventories are valued at the lower of cost and net realisable value. Costs incurred in bringing each product to its present location and condition are accounted for as follows: [ ] Raw materials -- weighted average cost basis [ ] Finished goods and work-in-progress -- cost of direct material and labour and a proportion of manufacturing overheads based on normal operating capacity. (i) RECOVERABLE AMOUNT Non-current assets are not revalued to an amount above their recoverable amount, and where carrying values exceed this recoverable amount assets are written down. In determining recoverable amount the expected net cash flows have been discounted to their present value using a market determined risk adjusted discount rate. (j) PROPERTY, PLANT AND EQUIPMENT Cost and valuation Items of property, plant and equipment comprising a class of non-current asset are revalued at the same date on a consistent basis. Where assets have been revalued, the potential effect of the capital gains tax on disposal has not been taken into account in the determination of the revalued carrying amount. Where it is expected that a liability for capital gains tax will arise, this expected amount is disclosed by way of note. Depreciation Depreciation is provided on a straight line basis on all property, plant and equipment, other than freehold land. Major depreciation periods are: 2000 Freehold buildings: 25 to 40 years Plant and equipment: 5 to 20 years 9 PENFORD AUSTRALIA LIMITED NOTES TO FINANCIAL STATEMENTS (CONTINUED) (k) LEASES Leases are classified at their inception as either operating or finance leases based on the economic substance of the agreement so as to reflect the risks and benefits incidental to ownership. Operating leases The minimum lease payments of operating leases, where the lessor effectively retains substantially all of the risks and benefits of ownership of the leased item, are recognised as an expense on a straight line basis. Finance leases Leases which effectively transfer substantially all the risks and benefits incidental to ownership of the leased item to the company are capitalised at the present value of the minimum lease payments and disclosed as property, plant and equipment under lease. A lease liability of equal value is also recognised. Capitalised lease assets are depreciated over the shorter of the estimated useful life of the assets and the lease term. Minimum lease payments are allocated between interest expense and reduction of the lease liability with the interest expense calculated using the interest rate implicit in the lease and charged directly to profit and loss. (l) INTANGIBLES Goodwill Goodwill is amortised by the straight line method over the period during which benefits are expected to be received. This is taken as being 10 years. Patents The costs of obtaining patents has been capitalised and is being amortised over a ten year period. (m) TRADE PAYABLES Liabilities are recognised for amounts to be paid in the future for goods and services received, whether or not billed to the company. (n) LOANS AND BORROWINGS All borrowings are carried at the principal amount. Interest is charged as an expense as it accrues. (o) PROVISIONS Dividends payable are recognised when a legal obligation to pay the dividend arises, typically following approval of the dividend at a meeting of shareholders. (p) SHARE CAPITAL Ordinary share capital is recognised at the fair value of the consideration received by the company. 10 PENFORD AUSTRALIA LIMITED NOTES TO FINANCIAL STATEMENTS (CONTINUED) (q) REVENUE RECOGNITION Revenue is recognised to the extent that it is probable that the economic benefits will flow to the entity and the revenue can be reliably measured. The following specific recognition criteria must also be met before revenue is recognised: Sale of Goods Control of the goods has passed to the buyer. Interest Control of a right to receive consideration for the provision of, or investment in, assets has been attained. Dividends Control of a right to receive consideration for the investment in assets is attained, usually evidenced by approval of the dividend at a meeting of shareholders. (r) EMPLOYEE ENTITLEMENTS Provision is made for employee entitlement benefits accumulated as a result of employees rendering services up to the reporting date. These benefits include wages and salaries, annual leave, sick leave and long service leave. Liabilities arising in respect of wages and salaries, annual leave, sick leave and any other employee entitlements expected to be settled within twelve months of the reporting date are measured at their nominal amounts. All other employee entitlement liabilities are measured at the present value of the estimated future cash outflow to be made in respect of services provided by employees up to the reporting date. Employee entitlements expenses and revenues arising in respect of the following categories: - Wages and salaries, non-monetary benefits, annual leave, long service leave, sick leave and other leave entitlements; and - Other types of employee entitlements Are charged against profits on a net basis in their respective categories. (s) INCOME TAX Tax-effect accounting is applied using the liability method whereby income tax is regarded as an expense and is calculated on the accounting profit after allowing for permanent differences. To the extent timing differences occur between the time items are recognised in the financial statements and when items are taken into account in determining taxable income, the net related taxation benefit or liability, calculated at current rates, is disclosed as a future income tax benefit or a provision for deferred income tax. The net future income tax benefit relating to tax losses and timing differences is not carried forward as an asset unless the benefit is virtually certain of being realised. Where assets are revalued no provision for potential capital gains tax has been made. The income tax expense for the year is calculated using the 36% tax rate, however the deferred tax balances have been adjusted for the decreased corporate tax rate of 34% for the tax year 2000-01 and 30% thereafter. The adjustment recognises that reversal of timing differences will occur within the 2000-01 or later income tax year, at which time tax will be attributed at a lower rate. The corresponding adjustment has been charged to income tax expense. 11 PENFORD AUSTRALIA LIMITED NOTES TO FINANCIAL STATEMENTS (CONTINUED)
PENFORD AUSTRALIA AT 30 JUNE 2000 NOTES CONSOLIDATED LIMITED --------------- ----- ------------ --------- $ 000 $ 000 2. OPERATING PROFIT The operating profit before income tax is arrived at after charging/(crediting) the following items: Amortisation of non-current assets Goodwill 55 55 Patents 72 72 -------- -------- 127 127 Depreciation of non-current assets Plant and equipment 5,140 4,532 Buildings 324 228 -------- -------- 5,464 4,760 Borrowing costs expensed Interest expense -- Other related parties 1,248 475 -------- -------- Bad and doubtful debts - Trade debtors 16 16 Net loss on disposal of property, plant and equipment 91 90 Operating leases - minimum lease payments 1,210 1,178 Other provisions Provision for employee entitlements 1,337 1,273 Research and development costs 1,584 1,584 Included in the operating profit are the following revenues arising from operating activities: Sales revenue 113,648 94,036 -------- -------- Other revenue 123 16 -------- -------- Operating revenue 113,771 94,052 ======== ========
12 PENFORD AUSTRALIA LIMITED NOTES TO FINANCIAL STATEMENTS (CONTINUED)
PENFORD AUSTRALIA AT 30 JUNE 2000 NOTES CONSOLIDATED LIMITED --------------- ----- ------------ --------- $ 000 $ 000 3. INCOME TAX The prima facie tax on operating profit differs from the income tax provided in financial statements as follows: Prima facie tax on operating profit 1,240 581 Tax effect of permanent differences Depreciation of buildings 82 82 Depreciation of plant & equipment 127 127 Amortisation of intangible assets 20 20 Non-deductible expenses 22 20 Research and Development incentive (242) (242) Other permanent decreases (141) (141) Over provision of previous year (151) (147) Net loss attributable to change in income tax rate (464) (464) -------- -------- Total income tax provided on operating profit 493 (164) ======== ======== 4. RECEIVABLES (CURRENT) Trade debtors 17,412 14,184 Provision for doubtful debts (97) (66) -------- -------- 17,315 14,118 Other debtors 523 518 -------- -------- 17,838 14,636 ======== ======== (a) Aggregate amounts receivable from related parties: Wholly-owned group -- companies under common control 3,265 2,770 ======== ======== (b) Movement in provision for doubtful debts -- balance at beginning of year 135 86 -- bad and doubtful debts provided for during the year (38) (20) -------- -------- -- balance at end of year 97 66 ======== ========
13 PENFORD AUSTRALIA LIMITED NOTES TO FINANCIAL STATEMENTS (CONTINUED)
PENFORD AUSTRALIA AT 30 JUNE 2000 NOTES CONSOLIDATED LIMITED --------------- ----- ------------ --------- $ 000 $ 000 5. INVENTORIES (CURRENT) Raw materials and stores - at cost 16,181 14,316 Work-in-progress - at cost 196 196 Finished goods 8,350 6,382 Other inventory 181 - ======= ======= Total inventories at lower of cost and net realisable value 24,908 20,894 ======= ======= 6. OTHER CURRENT ASSETS Prepayments 523 345 ======= ======= 7. INVESTMENTS (NON-CURRENT) INVESTMENTS AT COST COMPRISE: Controlled entities Unlisted shares - 391 ======= ======= 8. INTERESTS IN SUBSIDIARIES Name Country of Percentage of equity incorporation interest held by the consolidated entity % Penford New Zealand Limited (formerly Starch New Zealand Limited) NZ 100 - 391 - ordinary shares ======= =======
14 PENFORD AUSTRALIA LIMITED NOTES TO FINANCIAL STATEMENTS (CONTINUED)
PENFORD AUSTRALIA AT 30 JUNE 2000 NOTES CONSOLIDATED LIMITED --------------- ----- ------------ --------- $ 000 $ 000 9. PROPERTY, PLANT AND EQUIPMENT Freehold land: At cost 12,445 12,445 At independent valuation 1998 9(a) 1,372 - --------- ------ 13,817 12,445 --------- ------ Buildings on freehold land At cost 5,831 5,831 Provision for depreciation (446) (446) --------- ------ 5,385 5,385 --------- ------ At independent valuation 1998 9(a) 2,107 - Provision for depreciation (145) - --------- ------ 1,962 - --------- ------ TOTAL LAND AND BUILDINGS 21,164 17,830 --------- ------ Plant and equipment At cost 82,248 70,083 Provision for depreciation (48,861) (39,532) --------- ------ 33,388 30,551 --------- ------ Plant and equipment under construction At cost 2,716 2,082 Provision for depreciation - - --------- ------ 2,716 2,082 --------- ------ TOTAL PLANT AND EQUIPMENT 36,104 32,633 --------- ------ TOTAL PROPERTY, PLANT AND EQUIPMENT 57,268 50,463 ========= ====== Cost 103,426 90,441 Independent valuation 1998 3,293 - --------- ------ 106,719 90,441 Provision for depreciation (49,451) (39,978) --------- ------ TOTAL WRITTEN DOWN AMOUNT 57,268 50,463 ========= ======
(a) Valuations All valuations are estimates of the amounts for which the assets could be exchanged between a knowledgeable willing buyer and a knowledgeable willing seller in an arm's length transaction at the valuation date. The company has a policy of revaluing assets every 3 years. The valuation of the New Zealand Land and Buildings was carried out by National Portfolio Strategies. 15 PENFORD AUSTRALIA LIMITED NOTES TO FINANCIAL STATEMENTS (CONTINUED)
PENFORD AUSTRALIA AT 30 JUNE 2000 NOTES CONSOLIDATED LIMITED --------------- ----- ------------ --------- $ 000 $ 000 10. INTANGIBLES Goodwill 275 275 Provision for amortisation (275) (275) -------- -------- - - -------- -------- Patents 493 493 Provision for amortisation (72) (72) -------- -------- 421 421 -------- -------- 421 421 ======== ======== 11. ACCOUNTS PAYABLE (CURRENT) Trade creditors 8,189 5,434 Other creditors 4,200 3,484 -------- -------- 12,389 8,918 ======== ======== Aggregate amounts payable to related parties Wholly owned group - companies under common control 1,817 1,662 ======== ======== 12. BORROWINGS (CURRENT) Loan - other 15(a) 5,885 5,885 ======== ======== 13. PROVISIONS (CURRENT) Taxation 3,535 2,558 Employee entitlements 21 1,800 1,519 -------- -------- 5,335 4,077 ======== ========
16 PENFORD AUSTRALIA LIMITED NOTES TO FINANCIAL STATEMENTS (CONTINUED)
PENFORD AUSTRALIA 30 JUNE 2000 NOTES CONSOLIDATED LIMITED $ 000 $ 000 14. ACCOUNTS PAYABLE (NON-CURRENT) Amounts payable to companies under common control 79,827 70,733 ======== ======== 15. BORROWINGS (NON-CURRENT) Loan - other 3,377 3,377 ======== ======== a) Loans-other relate to loans from unrelated parties. Interest is charged monthly at a rate of 0.475% p.a. above the base rate. The base rate is based on either LIBOR of BBSY The loan is secured against raw materials inventory to the same value 16. PROVISIONS (NON-CURRENT) Employee entitlements 21 2,072 2,035 Deferred income tax liability 2,579 2,578 -------- -------- 4,651 4,613 ======== ======== 17. SHARE CAPITAL ISSUED AND PAID UP CAPITAL - 2 ordinary shares each fully paid - - ======== ======== 18. RESERVES Foreign exchange fluctuation reserve (473) - -------- -------- (473) - ======== ========
17 PENFORD AUSTRALIA LIMITED NOTES TO FINANCIAL STATEMENTS (CONTINUED)
PENFORD AUSTRALIA 30 JUNE 2000 NOTES CONSOLIDATED LIMITED $ 000 $ 000 19. STATEMENT OF CASH FLOWS (a) Reconciliation of the operating profit after tax to the net cash flows from operations Operating profit after tax 3,111 1,778 Depreciation of non-current assets 5,464 4,760 Amortisation of non-current assets 127 127 Net (profit)/loss on disposal of property, plant and equipment 91 90 CHANGES IN ASSETS AND LIABILITIES Trade receivables (1,822) (915) Inventory (2,690) (1,845) Other assets (22) 29 Trade creditors 1 (487) Tax provision (1,677) (1,908) Deferred income tax liability 778 778 Future income tax benefit 26 - Other provisions 335 281 -------- -------- Net cash flow from (used in) operating activities 3,722 2,688 ======== ======== (b) Reconciliation of cash Cash balance comprises: Other provisions 16,286 9,795 -------- -------- Closing cash balance 16,286 9,795 ======== ======== (c) Bank Overdraft Facility The company is part of a set off group containing Goodman Fielder companies.
18 PENFORD AUSTRALIA LIMITED NOTES TO FINANCIAL STATEMENTS (CONTINUED)
PENFORD AUSTRALIA 30 JUNE 2000 NOTES CONSOLIDATED LIMITED $ 000 $ 000 20. EXPENDITURE COMMITMENTS (a) Capital expenditure commitments Estimated capital expenditure contracted for at balance date but not provided for - payable not later than one year 1,380 1,314 ====== ====== (b) Lease expenditure commitments Operating leases (non-cancelable) Minimum lease payments - not later than one year 938 906 - later than one year and not later than five years 2,326 2,322 ------ ------ - aggregate lease expenditure contracted for at balance date 3,264 3,228 ====== ====== 21. EMPLOYEE ENTITLEMENTS AND SUPERANNUATION COMMITMENTS EMPLOYEE ENTITLEMENTS The aggregate employee entitlement liability is comprised of: Accrued wages, salaries and on costs Provisions (current) 13 1,800 1,519 Provisions (non-current) 16 2,072 2,035 ------ ------ 3,872 3,554 ====== ======
22. CONTINGENT LIABILITIES The company is part of a group guarantee secured in favour of Goodman Fielder. 19 PENFORD AUSTRALIA LIMITED NOTES TO FINANCIAL STATEMENTS (CONTINUED) 23. SUBSEQUENT EVENTS On 29 September 2000, Penford Corporation completed its acquisition of Penford Australia Limited from Goodman Fielder Limited for $98 million in cash. No significant changes are anticipated to the company's management team or principal activities. The sale of Penford Australia Limited provides Penford with new opportunities to develop, manufacture and market specialty carbohydrate-based ingredients for food and paper applications in expanded markets. On 1st November 2000, Starch Australasia Limited changed its name to Penford Australia Limited.
PENFORD AUSTRALIA 30 JUNE 2000 NOTES CONSOLIDATED LIMITED 24. REMUNERATION OF DIRECTORS Directors' remuneration Income paid or payable, or otherwise made available, in respect of the financial year, to all directors of Penford Australia Limited, directly or indirectly, from the entity or any related party: - - ====== ====== The number of directors of Penford Australia Limited whose income (including superannuation contributions) falls within the following bands is: 2000 $0 -- $9,999 3 25. AUDITORS' REMUNERATION Amounts received or due and receivable by the auditors of Penford Australia Limited for: -- an audit or review of the financial statements 19,797 11,000 -- other services - - ------ ------ 19,797 11,000 ====== ======
20 PENFORD AUSTRALIA LIMITED NOTES TO FINANCIAL STATEMENTS (CONTINUED) 26. RELATED PARTY DISCLOSURES All related party disclosures relate to those parties that were related at 30 June 2000 or during the year then ended. (a) The directors of Penford Australia Limited during the financial year were: Geoffrey Stephenson (resigned 29 September 2000) Ian Glasson (resigned 29 September 2000) Ian Gilmour (resigned 29 September 2000) (b) The following related party transactions occurred during the financial year: (i) Transactions with related parties in wholly-owned group 1. SALES MADE UNDER NORMAL COMMERCIAL TERMS AND CONDITIONS TO COMPANIES UNDER COMMON CONTROL 2. PURCHASES MADE UNDER NORMAL COMMERCIAL TERMS AND CONDITIONS FROM COMPANIES UNDER COMMON CONTROL (ii) Transactions with other related parties NONE (iii) Transactions with the directors of Penford Australia Limited NONE (iv) Transactions with director-related entities NONE (c) The ultimate parent entity of the wholly owned group was Goodman Fielder Limited at 30 June 2000 and Penford Corporation at the date of this report. (d) Equity instruments of directors NONE 21 PENFORD AUSTRALIA LIMITED NOTES TO FINANCIAL STATEMENTS (CONTINUED) 27. SEGMENT INFORMATION a) The consolidated entity operates predominantly in one industry -- manufacturing of starch products. b) GEOGRAPHICAL SEGMENTS
AUSTRALIA NEW ZEALAND ELIMINATION CONSOLIDATED Operating revenue Sales to customers outside 94,052 25,041 (5,322) 113,771 the consolidated entity ----------------------------------------------------------- Total revenue 94,052 25,041 (5,322) 113,771 =========================================================== Segment result 1,614 2,071 (81) 3,604 ========================================== Unallocated expenses - ----------------- Consolidated entity operating 3,604 profit before income tax ================= Segment assets 96,945 20,725 (84) 117,586 ===========================================================
28. FINANCIAL INSTRUMENTS 28(a) TERMS, CONDITIONS AND ACCOUNTING POLICIES The company's accounting policies, including the terms and conditions of each class of financial asset, financial liability and equity instrument, both recognised and unrecognised at the balance date, are as follows:
--------------------------------------------------------------------------------------------------------- RECOGNISED BALANCE ACCOUNTING POLICIES TERMS AND CONDITIONS FINANCIAL SHEET INSTRUMENTS NOTES --------------------------------------------------------------------------------------------------------- (i) FINANCIAL ASSETS --------------------------------------------------------------------------------------------------------- Receivables -- 4 Trade receivables are Credit sales are on 30 days terms. trade carried at nominal amounts due less any provision for doubtful debts. A provision for doubtful debts is recognised when collection of the full nominal amount is no longer probable. --------------------------------------------------------------------------------------------------------- Receivables -- 4 Amounts (other than trade As above related parties debts) receivable from related parties are carried at nominal amounts due. --------------------------------------------------------------------------------------------------------- (ii) FINANCIAL LIABILITIES --------------------------------------------------------------------------------------------------------- Bank overdrafts Bank overdrafts are Penford Australia Limited is included carried at the principal in the Goodman Fielder set off facility. amount. As such it is only charged interest on the basis of the overall group expense. ---------------------------------------------------------------------------------------------------------
22 PENFORD AUSTRALIA LIMITED NOTES TO FINANCIAL STATEMENTS (CONTINUED) 28. FINANCIAL INSTRUMENTS (CONT'D)
--------------------------------------------------------------------------------------------------------- (ii) FINANCIAL LIABILITIES --------------------------------------------------------------------------------------------------------- Trade creditors 11 Liabilities are recognised Trade liabilities are normally and accruals for amounts to be paid in settled on 60 days terms. the future for goods and services received, whether or not billed to the company. --------------------------------------------------------------------------------------------------------- 28(a) TERMS, CONDITIONS AND ACCOUNTING POLICIES (CONT'D) --------------------------------------------------------------------------------------------------------- RECOGNISED BALANCE ACCOUNTING POLICIES TERMS AND CONDITIONS FINANCIAL SHEET INSTRUMENTS NOTES --------------------------------------------------------------------------------------------------------- Accounts 14 These amounts are This balance represents funding of payable to recognised at the amount operations. It is not directly related parties to be paid in the future interest bearing -- non current at the principal amount. --------------------------------------------------------------------------------------------------------- Loans 12,15 These amounts are Interest is charged monthly at a rate recognised at the amount of 0.475% p.a. above the base rate. to be paid in the future The base rate is based on either at the principal amount. LIBOR of BBSY. The loan is secured against raw materials inventory to the same value --------------------------------------------------------------------------------------------------------- (iii)EQUITY --------------------------------------------------------------------------------------------------------- Ordinary shares 17 Ordinary share capital is The company is authorised to issue up recognised at the fair value to 2 ordinary shares of $1 each. Details of the consideration of shares issued are set out in note 15. received by the company. ---------------------------------------------------------------------------------------------------------
28(b) INTEREST RATE RISK All financial assets and financial liabilities, both recognised and unrecognised, are non-interest bearing. 28(c) NET FAIR VALUES The carrying amounts of financial assets and financial liabilities, both recognised and unrecognised, at balance date, approximate their aggregate net fair values. 28(d) CREDIT RISK EXPOSURES The company's maximum exposures to credit risk at balance date in relation to each class of recognised financial asset is the carrying amount of those assets as indicated in the balance sheet. CONCENTRATIONS OF CREDIT RISK The company minimises concentrations of credit risk in relation to trade accounts receivable by undertaking transactions with a large number of customers. However the majority of customers are concentrated in Australia. Credit risk in trade receivables is managed in the following ways: - payment terms are 30 days - a risk assessment process is used for customers including credit limits and credit reference checks 23 PENFORD AUSTRALIA LIMITED NOTES TO FINANCIAL STATEMENTS (CONTINUED) 29. US GAAP RECONCILIATION PRINCIPAL DIFFERENCES BETWEEN AUSTRALIAN GAAP AND US GAAP Financial statements in the United States are prepared in accordance with US GAAP. In Australia statutory financial statements are prepared in accordance with applicable accounting standards issued by the Australian Accounting Standards Board, the Australian Corporations Law, Schedule 5 to the Corporations Regulations and other mandatory professional reporting requirements (Urgent Issues Consensus Views) collectively referred to as "Australian GAAP." The statement of cash flows, which has been prepared in accordance with Australian GAAP, complies with International Accounting Standards No. 7. The only material differences between Australian GAAP and US GAAP for purposes of the 30 June 2000 financial statements of the Company are as follows: (A) ASSET REVALUATIONS Under Australian GAAP non-current assets may be revalued both upwards and downwards based on directors' valuations. An upwards revaluation is recorded by a credit to the asset revaluation reserve as a component of shareholders' equity and is not taken through the profit and loss account except where a previous revaluation decrement has been recorded for that class of assets through the profit and loss account. An impairment or downwards revaluation is taken through the profit and loss account except where there is a revaluation reserve for that particular class of assets, in which case the decrement may be debited to that asset revaluation reserve, to the extent a credit exists, rather than the profit and loss account. The Company assesses the recoverability of non-current assets by comparing the carrying value to the asset's undiscounted cash flow. To the extent that the asset carrying value exceeds its undiscounted cash flow the asset is written down to that amount. US GAAP does not permit the upward revaluation of such assets. US GAAP requires that an impairment of long-lived assets be recognised through the profit and loss account. Under US GAAP SFAS 121 "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of," entities, when assessing an asset for impairment, compare the carrying value of the asset or group of assets to the relevant expected cash flow, undiscounted and without interest. If the sum of the undiscounted cash flow is less than the asset carrying value the asset must be written down to "fair value." One method of determining an asset's fair value, in the absence of an active market, is its discounted cash flow. Once impairment is recorded, subsequent recoveries through the profit and loss account are not allowed until the asset is sold. (B) TRANSFER OF ASSETS BETWEEN RELATED PARTIES Australian accounting standards allow for the transfer of assets between related parties to be recorded at fair value. For US GAAP, such transfers must be recorded at historical cost. 24 PENFORD AUSTRALIA LIMITED NOTES TO FINANCIAL STATEMENTS (CONTINUED) 29. US GAAP RECONCILIATION (CONT'D) (C) PROFIT AND LOSS ACCOUNT RECONCILIATION Reconciliation of the consolidated profit and loss accounts determined in accordance with Australian GAAP to profits under U.S. GAAP is as follows:
Year Ended 30 June 2000 A$,000 ------------ Operating profit after income tax as reported under Australian GAAP 3,111 Reconciliation to US GAAP: Depreciation of revalued assets (1) 77 ----- Operating profit after income tax in accordance with U.S. GAAP 3,188 =====
25 PENFORD AUSTRALIA LIMITED NOTES TO FINANCIAL STATEMENTS (CONTINUED) 29. US GAAP RECONCILIATION (CONT'D) (D) SHAREHOLDERS' EQUITY RECONCILIATION Reconciliation of shareholders' equity determined in accordance with Australian GAAP to shareholders' equity under U.S. GAAP is as follows:
As at 30 June 2000 A$,000 ------------ Shareholders' equity in accordance with Australian GAAP 6,122 Reconciliation to US GAAP: Difference of historical cost to carrying amount of assets (2) (3,099) Revaluations made to non-current assets (1) (3,293) Accumulated depreciation on revaluation of assets (1) 129 ------ Adjusted shareholders' equity in accordance with U.S. GAAP (141) ======
(1) Under Australian GAAP non-current assets may be revalued both upwards and downwards based on directors' valuations. Where a non-current asset is revalued, all assets within that class must also be revalued on a consistent basis. The Company revalues its land and buildings approximately every three years. Downward revaluations are taken to the profit and loss account, which is comparable to the treatment of an impairment of an asset under SFAS 121. Under U.S. GAAP, upward revaluations are not recorded. The Company revalued land and buildings at the Auckland plant site in 1998. The revaluations resulted in an increase in the value of land of AUD 1,372,000 and an increase in the value of buildings of AUD 1,921,000. Accumulated depreciation on the revaluation increment of the buildings is AUD 129,000 to 30 June 2000. Depreciation for the year is AUD 76,840 based on a useful life of the buildings of 25 years. The revaluation reserve of the Company was distributed through dividends prior to acquisition. The reversal of the revaluation reserve therefore results in a decrease in retained profits. (2) Australian accounting principles reflect the purchase of assets between 100% related parties at fair value. Under U.S. GAAP, such transfers of assets must be recorded at historical cost. The difference between historical cost and the carrying amount of the assets of AUD 3,099,475 represents an increase in the value of the land in Lane Cove and Tamworth that cannot be recorded under U.S. GAAP. 26 PENFORD CORPORATION UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS The following unaudited pro forma consolidated financial statements for Penford Corporation ("Penford") consist of the Unaudited Pro Forma Consolidated Balance Sheet as of August 31, 2000, and the Unaudited Pro Forma Consolidated Statement of Income for the year then ended. These unaudited pro forma financial statements give effect to Penford's acquisition of Starch Australasia Limited, renamed Penford Australia Limited ("PAL" or "Penford Australia"), from Goodman Fielder Limited for $54.5 million (USD) in cash. The acquisition closed on September 29, 2000, and was accounted for as a purchase. The Unaudited Pro Forma Consolidated Balance Sheet combines Penford's historical consolidated balance sheet at August 31, 2000 and Penford Australia's historical balance sheet at June 30, 2000. The Unaudited Pro Forma Consolidated Statement of Income combines Penford's historical results of operations for the year ended August 31, 2000, with Penford Australia's historical results of operations for the year ended June 30, 2000. The unaudited pro forma consolidated financial statements and related notes should be read in conjunction with the audited financial statements and related notes thereto of Penford Australia included in Item 7 (a) herein, and the audited consolidated financial statements and notes of Penford Corporation as previously filed on Form 10-K for the year ended August 31, 2000. The unaudited pro forma consolidated financial statements do not purport to be indicative of the financial position or results of operations which would have actually been reported had the acquisition been consummated on the dates indicated, or which may be reported in the future. 27 PENFORD CORPORATION UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET AS OF AUGUST 31, 2000 (In thousands of US dollars)
Penford PAL Pro Forma Historical(1) Historical(2) Adjustments Pro Forma ------------- ------------- ----------- --------- Assets Current assets: Cash and cash equivalents $- $- $ 7(4) $ 7 Trade accounts receivable 17,530 9,425 26,955 Inventories 10,219 13,493 23,712 Prepaid expenses and other 5,580 567 6,147 -------- -------- -------- -------- Total current assets 33,329 23,485 7 56,821 Property, plant and equipment: Land 5,387 11,464 16,851 Net, plant and equipment 102,666 18,088 120,754 Construction in progress 6,795 1,471 8,266 -------- -------- -------- -------- Net property, plant and equipment 114,848 31,023 - 145,871 Deferred income taxes 11,466 185 11,651 Restricted cash value of life insurance 12,330 12,330 Other assets 3,650 228 3,878 Goodwill 19,459(3) 19,459 -------- -------- -------- -------- $175,623 $ 54,921 $ 19,466 $250,010 ======== ======== ======== ========
28 PENFORD CORPORATION UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET AS OF AUGUST 31, 2000 (In thousands of US dollars)
Penford PAL Pro Forma Historical(1) Historical(2) Adjustments Pro Forma ------------- ------------- ----------- --------- Liabilities and shareholders' equity Current liabilities: Bank overdraft, net $ 313 $ - $ - $ 313 Current portion of long-term debt 2,857 3,188 3,499(6) 9,544 Accounts payable 10,068 6,758 16,826 Accrued liabilities 8,305 975 811(5) 10,091 --------- --------- --------- --------- Total current liabilities 21,543 10,921 4,310 36,774 Long-term debt 47,824 1,829 58,410(4) 104,564 (3,499)(6) Intercompany debt 39,755 (39,755)(3) - Deferred income taxes 21,048 1,294 22,342 Other post-retirement benefits 10,805 10,805 Other liabilities 6,539 1,122 7,661 Shareholders' equity: Common stock 9,392 9,392 Additional paid-in capital 23,129 23,129 Retained earnings 68,100 68,100 Treasury stock (32,757) (32,757) --------- --------- --------- --------- Total shareholders' equity 67,864 - - 67,864 --------- --------- --------- --------- $ 175,623 $ 54,921 $ 19,466 $ 250,010 ========= ========= ========= =========
The accompanying notes are an integral part of these unaudited pro forma consolidated financial statements. 29 PENFORD CORPORATION NOTES TO UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET (1) The column designated "Penford Historical" reflects the consolidated balance sheet of Penford Corporation as of August 31, 2000. (2) The column designated "PAL Historical" reflects the consolidated balance of Penford Australia Limited (formerly Starch Australasia Limited) as of June 30, 2000. The amount shown under intercompany debt of $39,755 represents the fair value of the net assets assumed in the purchase business combination. This amount differs from the net equity of Penford Australia Limited as shown in the statutory consolidated financial statements as of June 30, 2000, as not all assets and liabilities of Penford Australia Limited were assumed by Penford Corporation in the purchase business combination. (3) Represents the recording of goodwill resulting from the acquisition. The goodwill represents the excess of the purchase price over the net assets acquired at fair value as follows: Purchase price $59,214 Fair value of net assets acquired 39,755 ------- Excess purchase price 19,459 ======= (4) Represents borrowings of $58,410 to finance the purchase price. (5) Represents estimated additional fees and expenses related to the acquisition. (6) Represents current portion of borrowings assumed for the acquisition. 30 PENFORD CORPORATION UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF INCOME AS OF AUGUST 31, 2000 (In thousands of US dollars)
Penford PAL Pro Forma Historical(1) Historical(2) Adjustments Pro Forma ------------- ------------- ----------- --------- Sales $ 158,150 $ 71,481 $ - $ 229,631 Cost of sales 114,873 59,504 174,377 ----------- ----------- ----------- ----------- Gross margin 43,277 11,977 - 55,254 Operating expenses 17,202 7,929 973(3) 22,770 (3,334)(6) Research and development expenses 5,359 996 - 6,355 ----------- ----------- ----------- ----------- Income from operations 20,716 3,052 2,361 26,129 Investment income 39 - - 39 Interest expense (4,813) (785) (5,282)(4) (10,880) ----------- ----------- ----------- ----------- Income before income taxes 15,942 2,267 (2,921) 15,288 Income taxes 5,580 310 (1,849)(5) 5,241 1,200 (7) ----------- ----------- ----------- ----------- Net income (loss) $ 10,362 $ 1,957 $( 2,272) $ 10,047 =========== =========== =========== =========== Weighted average common shares outstanding 7,414,435 7,414,435 Net effect of dilutive stock options 350,609 350,609 ----------- ------------ Weighted average common shares and equivalents outstanding 7,765,044 7,765,044 =========== ============ Net income per common share Basic $ 1.40 $ 1.36 =========== ============ Diluted $ 1.33 $ 1.29 =========== ============ Dividends declared per common share $ 0.22 $ 0.22 =========== ============
The accompanying notes are an integral part of these unaudited pro forma consolidated financial statements. 31 PENFORD CORPORATION NOTES TO UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF INCOME (1) The column designated "Penford Historical" reflects the consolidated results of operations of Penford Corporation for the year ended August 31, 2000. (2) The column designated "PAL Historical" reflects the consolidated results operations of Penford Australia Limited (formerly Starch Australasia Limited) for the year ended June 30, 2000. (3) Represents one year of amortization of goodwill based on a period of 20 years. See note (3) to the Unaudited Pro Forma Consolidated Balance Sheet. (4) Represents one year of interest expense at an assumed rate of 8.92% (which represents the average interest rate on Penford Corporation's debt for fiscal year 2000) on borrowings of $58,410 undertaken to purchase Penford Australia. (5) Represents the tax effect at an assumed U.S. statutory rate of 35% on the interest expense recorded under adjustment (4). (6) Represents cost reductions identified as a result of the acquisition of Penford Australia, including the elimination of management fees of $3,585, offset by management's estimate of costs of $251 that would have been incurred for shared services had Penford Australia been separated from the former shareholder. (7) Represents the tax effect at an assumed Australian statutory rate of 36% on the cost increases and reductions recorded under adjustments (6). 32 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 hereunto duly authorized. PENFORD CORPORATION December 12, 2000 By /s/ Jeffrey T. Cook ----------------- ---------------------- Date Jeffrey T. Cook President and Chief Executive Officer 33 EXHIBIT INDEX ------------- (c) Exhibits 2.1 Starch Australasia Share Sale Agreement completed as of September 29, 2000 among Penford Holdings Pty Limited, a wholly owned subsidiary of Registrant, and Goodman Fielder Limited 10.1 Amended and Restated Credit Agreement dated as of November 15, 2000 among Penford Corporation and Penford Products Co. as borrowers, and certain commercial lending institutions as lenders, and the Bank of Nova Scotia, as agent for the lenders 10.2 Debenture Trust Deed dated as of November 15, 2000 among Penford Holdings Pty Limited as issuer and ANZ Capel Court Limited as trustee 10.3 Syndicated Facility Agreement dated as of November 15, 2000 among Penford Australia Limited, a wholly owned subsidiary of Penford Holdings Pty Limited, as borrowers, and Australia and New Zealand Banking Group Limited as lender and agent 10.4 Intercreditor Agreement dated as of November 15, 2000 by and among The Bank of Nova Scotia, KeyBank National Association, U.S. National Association and Australia and New Zealand Banking Group Limited 23.1 Consent of Ernst & Young LLP, Independent Auditors 99.1 Press Release dated September 29, 2000* * Previously filed as an exhibit to Form 8-K filed with the Commission by the Registrant on October 13, 2000.