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): December 20, 2005

Penford Corporation

(Exact name of registrant as specified in its charter)

Washington	0-11488	91-1221360
(State or other jurisdiction of incorporation)	(Commission File Number)	(IRS Employer Identification No.)
7094 South Revere Parkway, Centennial, Colorado		80112-3932
(Address of principal executive offices		(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 December 20, 2005, Penford Corporation issued a press release reporting its financial results for the three-month period ended November 30, 2005. 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.

The information contained in Item 2.02 of this Current Report on Form 8-K, including the exhibits attached hereto, is being furnished to the Securities and Exchange Commission and shall not be deemed to be “filed” for the purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to liabilities of that Section, nor shall it be deemed to be incorporated by reference into any registration statement or other document filed pursuant to the Securities Act of 1933, as amended.

Item 9.01: Financial Statements and Exhibits

(d)	Exhibits
	The following exhibits are furnished in accordance with Item 601 of Regulation S-K:
	Exhibit No.	Description
	99.1	Press release dated December 20, 2005

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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)
December 20, 2005	/s/ Steven O. Cordier
	Steven O. Cordier
	Senior Vice President and Chief Financial Officer

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EXHIBIT INDEX

Pursuant to Item 601(a)(2) of Regulation S-K, this exhibit index immediately precedes the exhibits.

Exhibit No.	Description
99.1	Press release dated December 20, 2005

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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 Corporation Reports First Quarter Fiscal 2006 Results

CENTENNIAL, Co., December 20, 2005 — Penford Corporation (Nasdaq: PENX), a global leader in ingredient systems for food and industrial applications, today reported financial results for the first quarter of fiscal 2006.

Penford reported net income for the quarter ended November 30, 2005 of $0.2 million, or $0.02 per diluted share, compared to a net loss of $3.8 million, or $0.43 per diluted share, for the same quarter last year. First quarter fiscal 2006 results included $0.6 million of severance expenses in the Australian and Industrial operations as well as $0.3 million of pre-tax stock-based compensation expense. The net loss in the first quarter of fiscal 2005 included $4.1 million in strike-related operating costs in the industrial ingredients business.

The Company has adopted the accounting requirements of Financial Accounting Standards Board Statement No. 123R, “Share-Based Payment.” This statement requires recognition of the cost of share-based compensation in the financial statements beginning with the first quarter of fiscal 2006. Approximately $0.1 million of compensation expense has been recognized by the Company’s operating units, with $0.2 million recorded as corporate operating expenses.

Consolidated sales for the first quarter of fiscal 2006 rose 8% to $77.9 million from $72.1 million last year. Volume increases contributed 6% to the total sales gain with an additional 2% attributable to higher unit selling prices and stronger currency exchange rates. Consolidated gross margin as a percent of sales expanded to 13.3% from 4.5% last year. The return to pre-strike operating rates in the North American Industrial Ingredients business contributed 5.3% to the margin increase. Improvements in volumes, unit prices, product mix and manufacturing efficiencies added 3.5% to the ratio despite rising natural gas and chemical costs worldwide. Consolidated operating expenses increased to $7.7 million from $5.8 million last year on increased professional fees and employee costs, including severance and stock-based compensation costs. Interest expense of $1.3 million was comparable to last year.

Segment Results

First quarter fiscal 2006 sales at the Industrial Ingredients business rose 10% to $38.5 million, due to a 6% increase in volumes as well as higher average selling prices and favorable product mix changes. Quarterly gross margin as a percent of sales improved to 9.3% from last year’s negative margin of 5.1%. Achieving pre-strike operating utilization rates and manufacturing metrics changed the margin by 10.7%. Revenue gains and improved grain procurement costs were partially offset by $3.0 million in additional natural gas and chemical costs. Operating income improved from the same period last year by $5.0 million to $0.6 million.

First quarter sales at the Australia/New Zealand business declined 2% to $24.6 million from $25.2 million last year. The impact of stronger foreign currency exchange rates partially offset decreased volumes of lower margin starches. Gross margin as a percent of sales expanded to 10.5% from 8.0% a year ago on improved production yields and throughput at every manufacturing site. The business was repositioned during the first quarter to accelerate new customer focused initiatives. Employee severance costs related to this program increased operating expense by $0.4 million. Operating income for the first quarter of fiscal 2006 was $0.7 million compared with $0.6 million last year.

First quarter Food Ingredients—North America revenues grew 23% to $15.1 million from $12.3 million a year ago. Sales of potato coating formulations grew by 10% with all other applications expanding by more than 50%. Gross margin as a percent of sales increased to 28.1% from 24.4% a year ago as higher revenue and improved plant utilization more than offset higher energy and chemical costs. Operating income for the first quarter of fiscal 2006 rose to $2.4 million from $1.4 million in the prior year.

“We reported improved operating income in every business segment during the first quarter despite the challenge of rapidly escalating energy and chemical costs,” said Tom Malkoski, Penford’s chief executive officer. “Sales of value-added food and industrial applications are accelerating. Our plants are producing more efficiently. The strategy for success is showing results.”

Conference Call
Penford will host a conference call to discuss first quarter financial and operational results today, December 20, 2005 at 9:00 a.m. Mountain time (11:00 a.m. Eastern time). Access information for the call and web-cast can be found at www.penx.com. A replay will be available at www.penx.com.

About Penford Corporation
Penford Corporation develops, manufactures and markets specialty natural-based ingredient systems for various applications, including papermaking, textiles and food products. Penford has nine locations in the United States, Australia and New Zealand.

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 filings with the Securities and Exchange Commission which include, but are not limited to, competition; the possibility of interruption of business activities due to equipment problems, accidents, strikes, weather or other factors; product development risk; changes in corn and other raw material prices and availability; changes in general economic conditions or developments with respect to specific industries or customers affecting demand for the Company’s products including unfavorable shifts in product mix; unanticipated costs, expenses or third party claims; the risk that results may be affected by construction delays, cost overruns, technical difficulties, nonperformance by contractors or changes in capital improvement project requirements or specifications; interest rate, chemical and energy cost volatility; foreign currency exchange rate fluctuations; changes in assumptions used for determining employee benefit expense and obligations; or other unforeseen developments in the industries in which Penford operates.

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CHARTS TO FOLLOW

Penford Corporation
Financial Highlights

	Three months ended
	November 30,
(In thousands except per share data)	2005			2004
Consolidated Results
Sales	$	77,903		$	72,065
Net income (loss)	$	196		$	(3,826	)
Earnings (loss) per share, diluted	$	0.02		$	(0.43	)
Results by Segment
Industrial Ingredients:
Sales	$	38,480		$	35,135
Gross margin		9.3	%		(5.1	)%
Operating income (loss)		574			(4,390	)
Food Ingredients — North America:
Sales	$	15,090		$	12,273
Gross margin		28.1	%		24.4	%
Operating income		2,401			1,392
Australia/New Zealand:
Sales	$	24,635		$	25,204
Gross margin		10.5	%		8.0	%
Operating income		697			575

	November 30,		August 31,
	2005		2005
Current assets	$	89,044	$	88,937
Property, plant and equipment, net		126,393		125,267
Other assets		35,440		35,713
Total assets		250,877		249,917
Current liabilities		48,965		53,366
Long-term debt		67,333		62,107
Other liabilities		34,772		34,418
Shareholders’ equity		99,807		100,026
Total liabilities and equity	$	250,877	$	249,917

Penford Corporation
Consolidated Statements of Income (unaudited)

	Three months ended
	November 30,
(In thousands except share and per share data)	2005			2004
Sales	$	77,903		$	72,065
Cost of sales		67,503			68,836
Gross margin		10,400			3,229
Operating expenses		7,738			5,808
Research and development expenses		1,437			1,412
Income (loss) from operations		1,225			(3,991	)
Non-operating income, net		362			81
Interest expense		(1,333	)		(1,260	)
Income (loss) before income taxes		254			(5,170	)
Income tax expense (benefit)		58			(1,344	)
Net income (loss)	$	196		$	(3,826	)
Weighted average common shares and equivalents outstanding, diluted		8,923,457			8,816,667
Earnings (loss) per share, diluted	$	0.02		$	(0.43	)
Dividends declared per common share	$	0.06		$	0.06