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): March 22, 2005

Penford Corporation

(Exact name of registrant as specified in its charter)

Washington	0-11488	91-1221360
(State or other jurisdiction	(Commission File Number)	(IRS Employer
of incorporation)		Identification No.)
7094 South Revere Parkway,
Englewood, 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 March 22, 2005, Penford Corporation (the “Company”) issued a press release reporting its financial results for the three and six months ended February 28, 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

(c)	Exhibits
	The following exhibits are furnished in accordance with Item 601 of Regulation S-K:

Exhibit No.	Description
99.1	Press release dated March 22, 2005

2

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)
March 24, 2005	/s/ Steven O. Cordier
	Steven O. Cordier
	Senior Vice President, Chief Financial Officer    and Corporate Secretary

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 March 22, 2005

3

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 Second Quarter Fiscal 2005 Results

DENVER, Co., March 22, 2005 – Penford Corporation (Nasdaq: PENX), a global leader in ingredient systems for food and industrial applications, today reported financial results for the second quarter and first half of fiscal year 2005 . Penford reported a net loss for the quarter ended February 28, 2005 of $1.0 million, or $0.11 per diluted share, compared to net income of $1.0 million, or $0.12 per diluted share for the same period last year. Year-to-date fiscal 2005 reported net loss was $4.8 million, or $0.55 per diluted share, compared to net income of $1.9 million or $0.21 per diluted share, in 2004.

Second quarter consolidated sales of $69.2 million grew 1% over the same period in the previous year. The impact of improved pricing in our North American operations and stronger foreign exchange translation rates were offset by declines in exports from Australia and lower volumes in the Industrial segment, which continued to feel the impact from the strike that ended October 17^th. Consolidated gross margin as a percent of sales declined to 10.3% from 14.5% in the prior year. Higher energy and chemical costs contributed 1% to this change while another 3% was caused by delays in integrating new plant process flows in the Australian business. Operating expenses for the second quarter of fiscal 2005 increased from 8.0% of sales in the prior year to 8.6% of sales in 2005 primarily due to additional expenses related to the initial attestation of internal controls as required by the Sarbanes-Oxley Act of 2002. Interest expense rose to $1.4 million from $1.2 million in the previous year on increases in floating interest rates in the United States.

Segment Results
Revenues for the second quarter 2005 at the Food Ingredients – North America business rose 8% due to volume growth of 6% and product mix changes reflecting expanded sales of new, value-added formulations. Sale of applications that serve bakery, dairy, dextrose, nutrition and other markets that represent an emerging business for Penford increased 52% versus a year ago. Deliveries of “low carb” applications have re-established at planned levels. Gross margin as a percent of sales increased to 23.8% from 21.9% for the same period a year ago as improved plant utilization and sales of higher margin products overcame increased costs of raw materials, chemicals and energy.

Second quarter 2005 sales of $35.6 million at the Industrial Ingredients – North America business were comparable to the same period last year. Improved pricing in all core product categories and market share gains in specialty products offset a sales volume decrease of 7% that reflected order softness related to the strike that ended October 17^th. Export sales rose by 22%. Sales of higher margin specialty starches continue to increase. Revenue has grown rapidly from a small base in fiscal 2003, expanding by 25% in fiscal 2004 and realizing gains of 43% in the second quarter of fiscal 2005 over the same period last year. Segment gross margin declined to 9.6% from 13.1% the previous year due to rising energy and chemical expenses as well as increased unit manufacturing costs. These manufacturing costs are continuing to decline each month from peak levels incurred during the strike.

Australia/New Zealand sales rose slightly from a year earlier. The business is implementing a product mix transition that will reinforce a value-added marketing approach. Significant increases in selected product lines and deliberate declines in other categories resulted in an overall volume expansion of 4%. The impact from higher volumes and stronger foreign currency exchange rates were offset by competitive pricing from imported products and production problems that hampered the program to bring higher value products to markets in Australia. These manufacturing issues are now largely behind us. Gross margin as a percent of sales in the second quarter was 4.2% compared to 12.8% last year reflecting these additional costs.

“We are seeing daylight in the recovery from the strike in our Cedar Rapids facility. There was steady progress in operating reliability and costs throughout the second quarter. The business is now producing and shipping at rates that meet full customer demand,” said Tom Malkoski, Penford’s chief executive officer. “Also, the improvements to the production processes in Australia were implemented by the end of the quarter, and we have begun producing at commercial rates that will support the change in product mix required to sustain improved profitability. The company is on track to report improved operating performance in the second half of the fiscal year.”

Penford will host a conference call to discuss second quarter results today, March 22, 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.

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 disclaims any intention or obligation 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 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						Six months ended
(In thousands except per share data)	February 28, 2005			February 29, 2004			February 28, 2005			February 29, 2004
Consolidated Results
Sales	$	69,219		$	68,482		$	141,284		$	134,652
Net income (loss)	$	(992	)	$	1,035		$	(4,818	)	$	1,880
Earnings (loss) per share, diluted	$	(0.11	)	$	0.12		$	(0.55	)	$	0.21
Results by Segment
Industrial Ingredients:
Sales	$	35,634		$	35,801		$	70,769		$	68,327
Gross margin		9.6	%		13.1	%		2.3	%		13.6	%
Operating income (loss)		604			1,567			(3,786	)		3,115
Food Ingredients – North America:
Sales	$	11,852		$	10,973		$	24,124		$	22,866
Gross margin		23.8	%		21.9	%		24.1	%		25.8	%
Operating income		1,103			719			2,495			2,618
Australia/New Zealand:
Sales	$	21,905		$	21,782		$	47,109		$	43,726
Gross margin		4.2	%		12.8	%		6.3	%		10.4	%
Operating income (loss)		(327	)		1,537			248			1,808

	February 28,		August 31,
	2005		2004
Current assets	$	82,422	$	83,580
Property, plant and equipment, net		131,206		130,392
Other assets		54,244		51,824
Total assets		267,872		265,796
Current liabilities		42,113		43,295
Long-term debt		78,212		75,551
Other liabilities		50,893		51,231
Shareholders’ equity		96,654		95,719
Total liabilities and equity	$	267,872	$	265,796

Penford Corporation
Consolidated Statements of Income (unaudited)	Three months ended						Six months ended
(In thousands except share and per share data)	February 28, 2005			February 29, 2004			February 28, 2005			February 29, 2004
Sales	$	69,219		$	68,482		$	141,284		$	134,652
Cost of sales		62,059			58,574			130,895			114,932
Gross margin		7,160			9,908			10,389			19,720
Operating expenses		5,986			5,483			11,794			11,175
Research and development expenses		1,431			1,454			2,843			2,956
Restructuring costs, net		—			487			—			740
Income (loss) from operations		(257	)		2,484			(4,248	)		4,849
Non-operating income, net		370			530			452			505
Interest expense		(1,358	)		(1,185	)		(2,620	)		(2,292	)
Income (loss) before income taxes		(1,245	)		1,829			(6,416	)		3,062
Income tax expense (benefit)		(253	)		794			(1,598	)		1,182
Net income (loss)	$	(992	)	$	1,035		$	(4,818	)	$	1,880
Weighted average common shares and equivalents outstanding, diluted		8,824,983			8,830,901			8,820,802			8,780,022
Earnings (loss) per share, diluted	$	(0.11	)	$	0.12		$	(0.55	)	$	0.21
Dividends declared per common share	$	0.06		$	0.06		$	0.12		$	0.12

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