##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 FORM 10-Q
  þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the quarterly period ended November 30, 2010
 OR
 o
    
    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
 PENFORD CORPORATION
  Washington
    
    91-1221360(State or Other Jurisdiction of 
Incorporation or Organization)
    
    (I.R.S. Employer
Identification No.)7094 South Revere Parkway, 
Centennial, Colorado
    
    80112-3932(Address of Principal Executive Offices)
    
    (Zip Code)
 (303) 649-1900
 þ o
 o o
  Large Accelerated Filer o
    
    Accelerated Filer þ
    
    Non-Accelerated Filer o
    
    Smaller Reporting Company o(Do not check if a smaller reporting company)
 o þ




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##### 



PENFORD CORPORATION AND SUBSIDIARIES
 INDEX
 PagePART IFINANCIAL INFORMATIONItem 1. Financial StatementsCondensed Consolidated Balance Sheets  November 30, 2010 and August 31, 2010
    
    
    3Condensed Consolidated Statements of Operations  Three Months ended November 30, 2010
and 2009
    
    
    4Condensed Consolidated Statements of Cash Flow  Three Months ended November 30, 2010 and 2009
    
    
    5Notes to Condensed Consolidated Financial Statements
    
    
    6Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    19Item 3. Quantitative and Qualitative Disclosures About Market Risk
    
    
    24Item 4. Controls and Procedures
    
    
    24PART IIOTHER INFORMATIONItem 1. Legal Proceedings
    
    
    26Item 1A. Risk Factors
    
    
    26Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    26Item 6. Exhibits
    
    
    27Signatures
    
    
    28EX-31.1EX-31.2EX-32
  2




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PART I  FINANCIAL INFORMATION
 
 Item 1: Financial Statements
 PENFORD CORPORATION AND SUBSIDIARIES
 
 CONDENSED CONSOLIDATED BALANCE SHEETS
 November 30,
    
    
    August 31,(In thousands, except per share data)
    
    2010
    
    
    2010(Unaudited)AssetsCurrent assets:Cash and cash equivalents
    
    $
    316
    
    
    $
    315Trade accounts receivable, net
    
    
    26,018
    
    
    
    26,749Inventories
    
    
    22,364
    
    
    
    19,849Prepaid expenses
    
    
    4,928
    
    
    
    5,237Income tax receivable
    
    
    201
    
    
    
    3,678Other
    
    
    7,188
    
    
    
    5,287Total current assets
    
    
    61,015
    
    
    
    61,115Property, plant and equipment, net
    
    
    110,353
    
    
    
    111,930Restricted cash value of life insurance
    
    
    7,966
    
    
    
    7,951Deferred tax assets
    
    
    16,121
    
    
    
    16,493Other assets
    
    
    2,491
    
    
    
    2,615Other intangible assets, net
    
    
    389
    
    
    
    407Goodwill, net
    
    
    7,897
    
    
    
    7,897Total assets
    
    $
    206,232
    
    
    $
    208,408Liabilities and Shareholders EquityCurrent liabilities:Cash overdraft, net
    
    $
    3,477
    
    
    $
    4,385Current portion of long-term debt and capital lease obligations
    
    
    431
    
    
    
    429Accounts payable
    
    
    14,883
    
    
    
    14,650Accrued liabilities
    
    
    7,125
    
    
    
    6,536Total current liabilities
    
    
    25,916
    
    
    
    26,000Long-term debt and capital lease obligations
    
    
    18,935
    
    
    
    21,038Redeemable preferred stock, Series A
    
    
    35,288
    
    
    
    34,104Other postretirement benefits
    
    
    17,038
    
    
    
    16,891Pension benefit liability
    
    
    20,597
    
    
    
    20,597Other liabilities
    
    
    6,338
    
    
    
    6,206Total liabilities
    
    
    124,112
    
    
    
    124,836Shareholders equity:Common stock, par value $1.00 per share, authorized 29,000
shares, issued 13,328 and 13,354 shares, respectively,
including treasury shares
    
    
    13,227
    
    
    
    13,190Preferred stock, Series B
    
    
    100
    
    
    
    100Additional paid-in capital
    
    
    102,624
    
    
    
    102,303Retained earnings
    
    
    14,822
    
    
    
    14,586Treasury stock, at cost, 1,981 shares
    
    
    (32,757
    )
    
    
    (32,757
    )Accumulated other comprehensive loss
    
    
    (15,896
    )
    
    
    (13,850
    )Total shareholders equity
    
    
    82,120
    
    
    
    83,572Total liabilities and shareholders equity
    
    $
    206,232
    
    
    $
    208,408
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PENFORD CORPORATION AND SUBSIDIARIES
 
 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
  Three months endedNovember 30,
    
    
    November 30,(In thousands, except per share data)
    
    2010
    
    
    2009Sales
    
    $
    72,266
    
    
    $
    67,070Cost of sales
    
    
    63,009
    
    
    
    56,442Gross margin
    
    
    9,257
    
    
    
    10,628Operating expenses
    
    
    5,194
    
    
    
    6,488Research and development expenses
    
    
    1,094
    
    
    
    998Income from operations
    
    
    2,969
    
    
    
    3,142Interest expense
    
    
    2,270
    
    
    
    1,798Other non-operating income, net
    
    
    89
    
    
    
    636Income from continuing operations before income taxes
    
    
    788
    
    
    
    1,980Income tax expense
    
    
    452
    
    
    
    924Income from continuing operations
    
    
    336
    
    
    
    1,056Income from discontinued operations, net of tax
    
    
    
    
    
    
    3,482Net income
    
    $
    336
    
    
    $
    4,538Weighted average common shares and equivalents outstanding:Basic
    
    
    12,222
    
    
    
    11,183Diluted
    
    
    12,339
    
    
    
    11,266Earnings per common share:Basic earnings per share from continuing operations
    
    $
    0.03
    
    
    $
    0.09Basic earnings per share from discontinued operations
    
    $
    
    
    
    $
    0.31Basic earnings per share
    
    $
    0.03
    
    
    $
    0.40Diluted earnings per share from continuing operations
    
    $
    0.03
    
    
    $
    0.09Diluted earnings per share from discontinued operations
    
    $
    
    
    
    $
    0.31Diluted earnings per share
    
    $
    0.03
    
    
    $
    0.40
 The accompanying notes are an integral part of these statements.
 4




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PENFORD CORPORATION AND SUBSIDIARIES
 
 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
 Three Months EndedNovember 30,
    
    
    November 30,(In thousands)
    
    2010
    
    
    2009Cash flows from operating activities:Net income
    
    $
    336
    
    
    $
    4,538Less: Income from discontinued operations
    
    
    
    
    
    
    3,482Net income from continuing operations
    
    
    336
    
    
    
    1,056Adjustments to reconcile net income from continuing operations to net
cash provided by operations:Depreciation and amortization
    
    
    3,643
    
    
    
    3,801Stock-based compensation
    
    
    359
    
    
    
    463Deferred income tax expense (benefit)
    
    
    410
    
    
    
    (109
    )Loss on derivative transactions
    
    
    1,523
    
    
    
    976Foreign currency transaction gain
    
    
    
    
    
    
    (452
    )Change in assets and liabilities:Trade accounts receivable
    
    
    715
    
    
    
    1,830Prepaid expenses
    
    
    309
    
    
    
    778Inventories
    
    
    (7,338
    )
    
    
    539Accounts payable and accrued liabilities
    
    
    1,752
    
    
    
    1,390Income taxes
    
    
    3,520
    
    
    
    629Other
    
    
    (562
    )
    
    
    919Net cash flow provided by operating activities  continuing operations
    
    
    4,667
    
    
    
    11,820Investing activities:Acquisition of property, plant and equipment, net
    
    
    (1,670
    )
    
    
    (1,059
    )Net proceeds received from sale of discontinued operations and other
    
    
    (15
    )
    
    
    8,995Net cash (used in) provided by investing activities  continuing operations
    
    
    (1,685
    )
    
    
    7,936Cash flows from financing activities:Proceeds from revolving line of credit
    
    
    16,500
    
    
    
    Payments on revolving line of credit
    
    
    (18,500
    )
    
    
    Proceeds from long-term debt
    
    
    
    
    
    
    2,000Payments of long-term debt
    
    
    (50
    )
    
    
    (7,820
    )Payments under capital lease obligation
    
    
    (61
    )
    
    
    (61
    )Decrease in cash overdraft
    
    
    (908
    )
    
    
    Other
    
    
    38
    
    
    
    (38
    )Net cash used in financing activities  continuing activities
    
    
    (2,981
    )
    
    
    (5,919
    )Cash flows from discontinued operations:Net cash used in operating activities
    
    
    
    
    
    
    (9,161
    )Net cash provided by investing activities
    
    
    
    
    
    
    18,375Net cash used in financing activities
    
    
    
    
    
    
    (3,399
    )Effect of exchange rate changes on cash and cash equivalents
    
    
    
    
    
    
    55Net cash provided by discontinued operations
    
    
    
    
    
    
    5,870Increase in cash and cash equivalents
    
    
    1
    
    
    
    19,707Cash and cash equivalents of continuing operations, beginning of period
    
    
    315
    
    
    
    5,540Cash balance of discontinued operations, beginning of period
    
    
    
    
    
    
    634Cash and cash equivalents, end of period
    
    
    316
    
    
    
    25,881Less: cash balance of discontinued operations, end of period
    
    
    
    
    
    
    6,504Cash and cash equivalents of continuing operations, end of period
    
    $
    316
    
    
    $
    19,377
 The accompanying notes are an integral part of these statements.
 5




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PENFORD CORPORATION AND SUBSIDIARIES
 
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 1BUSINESS
    Discontinued Operations
   2BASIS OF PRESENTATION
 Consolidation
  6




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Use of Estimates
  Recent Accounting Pronouncements
  3INVENTORIES
  November 30,
    
    
    August 31,2010
    
    
    2010(In thousands)Raw materials
    
    $
    11,227
    
    
    $
    8,708Work in progress
    
    
    1,324
    
    
    
    1,299Finished goods
    
    
    9,813
    
    
    
    9,842Total inventories
    
    $
    22,364
    
    
    $
    19,849
  4PROPERTY, PLANT AND EQUIPMENT
  November 30,
    
    
    August 31,2010
    
    
    2010(In thousands)Land
    
    $
    10,307
    
    
    $
    10,307Plant and equipment
    
    
    324,915
    
    
    
    324,904Construction in progress
    
    
    5,941
    
    
    
    4,272341,163
    
    
    
    339,483Accumulated depreciation
    
    
    (230,810
    )
    
    
    (227,553
    )Net property, plant and equipment
    
    $
    110,353
    
    
    $
    111,930
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5PREFERRED STOCK SUBJECT TO MANDATORY REDEMPTION
  Shares Issuedand OutstandingSeries A 15% Cumulative Non-Voting
Non-Convertible Preferred Stock, redeemable
    
    
    100,000Series B Voting Convertible Preferred Stock
    
    
    100,000
     6DEBT
    8




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7INCOME TAXES
       9




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8OTHER COMPREHENSIVE INCOME (LOSS) (OCI)
  Three months endedNovember 30,
    
    
    November 30,2010
    
    
    2009(In thousands)Net income
    
    $
    336
    
    
    $
    4,538Foreign currency translation adjustments
    
    
    
    
    
    
    1,615Net unrealized gain (loss) on derivative
instruments that qualify as cash flow
hedges,
net of tax
    
    
    (2,046
    )
    
    
    1,097Total comprehensive income (loss)
    
    $
    (1,710
    )
    
    $
    7,250
  9  DISCONTINUED OPERATIONS
    10




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Three Months EndedNovember 30, 2009(In Thousands)Sales
    
    $
    16,963Loss from operations
    
    $
    (1,525
    )Interest expense
    
    
    315Gain on sale of assets
    
    
    351Other non-operating income, net
    
    
    57Loss from discontinued operations before taxes
    
    
    (1,432
    )Income tax benefit
    
    
    (4,914
    )Income from discontinued operations, net of tax
    
    $
    3,482
 10STOCK-BASED COMPENSATION
 Stock Compensation Plans
  General Option Information
  Weighted AverageNumber of
    
    
    Weighted Average
    
    
    Remaining Term
    
    
    Aggregate IntrinsicShares
    
    
    Exercise Price
    
    

(in years)
    
    
    ValueOutstanding Balance, August 31, 2010
    
    
    1,264,564
    
    
    $
    15.07Granted
    
    
    90,000
    
    
    
    6.63Exercised
    
    
    
    
    
    
    Cancelled
    
    
    (9,701
    )
    
    
    13.45Outstanding Balance, November 30, 2010
    
    
    1,344,863
    
    
    
    14.51
    
    
    
    3.41
    
    
    $
    13,100Options Exercisable at November 30, 2010
    
    
    1,081,863
    
    
    $
    14.73
    
    
    
    2.91
    
    
    $
    
  Expected volatility
    
    
    72
    %Expected life (years)
    
    
    4.2Interest rate
    
    
    1.1-2.1
    %Weighted-average fair values
    
    $
    3.63
  11




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Restricted Stock Awards
  WeightedAverageNumber of
    
    
    Grant DateShares
    
    
    Fair ValueNonvested at August 31, 2010
    
    
    154,707
    
    
    $
    15.67Granted
    
    
    
    
    
    
    Vested
    
    
    54,368
    
    
    
    19.29Cancelled
    
    
    
    
    
    
    Nonvested at November 30, 2010
    
    
    100,339
    
    
    $
    13.71
  Compensation Expense
  Three Months EndedNovember 30,2010
    
    
    2009Cost of sales
    
    $
    29
    
    
    $
    47Operating expenses
    
    
    325
    
    
    
    408Research and development expenses
    
    
    5
    
    
    
    8Income (loss) from discontinued operations
    
    
    
    
    
    
    (25
    )Total stock-based compensation expense
    
    $
    359
    
    
    $
    438Income tax benefit
    
    
    136
    
    
    
    166Total stock-based compensation expense,
net of tax
    
    $
    223
    
    
    $
    272
 11NON-OPERATING INCOME, NET
  Three months endedNovember 30,
    
    
    November 30,2010
    
    
    2009(In thousands)Gain on foreign currency transactions
    
    
    
    
    
    
    452Other
    
    
    89
    
    
    
    184Total
    
    $
    89
    
    
    $
    636
 12




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12  PENSION AND POST-RETIREMENT BENEFIT PLANS
  Three months endedNovember 30,
    
    
    November 30,2010
    
    
    2009Defined benefit pension plans
    
    (in thousands)Service cost
    
    $
    404
    
    
    $
    389Interest cost
    
    
    674
    
    
    
    641Expected return on plan assets
    
    
    (558
    )
    
    
    (506
    )Amortization of prior service cost
    
    
    57
    
    
    
    61Amortization of actuarial losses
    
    
    360
    
    
    
    304Net periodic benefit cost
    
    $
    937
    
    
    $
    889
 Three months endedNovember 30,
    
    
    November 30,2010
    
    
    2009Post-retirement health care plans
    
    (in thousands)Service cost
    
    $
    68
    
    
    $
    88Interest cost
    
    
    243
    
    
    
    269Amortization of prior service cost
    
    
    (38
    )
    
    
    (38
    )Amortization of actuarial losses
    
    
    16
    
    
    
    74Net periodic benefit cost
    
    $
    289
    
    
    $
    393
 13FAIR VALUE MEASURMENTS AND DERIVATIVE INSTRUMENTS
 Fair Value Measurements
  (Level 1)
    
    
    (Level 2)
    
    
    (Level 3)
    
    
    TotalAs of November 30, 2010

    
    (in thousands)Current assets (Other Current Assets):Commodity derivatives (1)
    
    $
    2,221
    
    
    $
    
    
    
    $
    
    
    
    $
    2,221
 
 (1)
    
    Commodity derivative assets and liabilities have been offset by cash collateral due and paid under master
netting arrangements. The cash collateral offset was $4.1 million at November 30, 2010. (Level 1)
    
    
    (Level 2)
    
    
    (Level 3)
    
    
    TotalAs of August 31, 2010
    
    (in thousands)Current assets (Other Current Assets):Commodity derivatives (1)
    
    $
    1,827
    
    
    $
    
    
    
    $
    
    
    
    $
    1,827
 
 (1)
    
    Commodity derivative assets and liabilities have been offset by cash collateral due and paid under master
netting arrangements. The cash collateral offset was $4.5 million at August 31, 2010. 13




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
    
    Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or
liabilities that the entity has the ability to access at the measurement date.
    
    Level 2 inputs are other than quoted prices included within Level 1 that are observable
for assets and liabilities such as (1) quoted prices for similar assets or liabilities in
active markets, (2) quoted prices for identical or similar assets or liabilities in markets
that are not active, or (3) inputs that are derived principally or corroborated by
observable market date by correlation or other means.
    
    Level 3 inputs are unobservable inputs to the valuation methodology for the assets or
liabilities.
 Other Financial Instruments
    Interest Rate Swap Agreements
  Foreign Currency Contracts
  Commodity Contracts
   14




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Corn Futures
    
    
    4,075,000
    
    
    BushelsNatural Gas Futures
    
    
    380,000
    
    
    mmbtu (millions of British thermal units)Ethanol Swaps
    
    
    3,015,000
    
    
    Gallons
  Asset Derivatives
    
    
    Liability DerivativesFair Value
    
    
    
    
    Fair ValueBalance Sheet
    
    Nov. 30
    
    
    Aug. 31
    
    
    Balance Sheet
    
    Nov. 30
    
    
    Aug. 31In thousands
    
    Location
    
    2010
    
    
    2010
    
    
    Location
    
    2010
    
    
    2010Cash Flow Hedges:Corn Futures
    
    Other Current Assets
    
    $
    49
    
    
    $
    
    
    
    Other Current Assets
    
    $
    8
    
    
    $
    Natural Gas Futures
    
    Other Current Assets
    
    
    
    
    
    
    
    
    
    Other Current Assets
    
    
    452
    
    
    
    1,082Interest Rate Contracts
    
    Other Current Assets
    
    
    
    
    
    
    
    
    
    Accrued Liabilities
    
    
    
    
    
    
    Ethanol Gas Futures
    
    Other Current Assets
    
    
    17
    
    
    
    
    
    
    Accrued Liabilities
    
    
    
    
    
    
    Fair Value Hedges:Corn Futures
    
    Other Current Assets
    
    
    142
    
    
    
    28
    
    
    Other Current Assets
    
    
    3,603
    
    
    
    1,735Total DerivativesDesignated as HedgingInstruments
    
    
    
    $
    208
    
    
    $
    28
    
    
    
    
    $
    4,063
    
    
    $
    2,817
 15




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Amount of Gain (Loss)Amount of Gain (Loss)
    
    
    Reclassified from
    
    
    Amount of Gain (Loss)Recognized in OCI
    
    
    AOCI into Income
    
    
    Recognized in IncomeQuarter Ended Nov 30
    
    
    Quarter Ended Nov 30
    
    
    Quarter Ended Nov 30In thousands
    
    2010
    
    
    2009
    
    
    2010
    
    
    2009
    
    
    2010
    
    
    2009Cash Flow Hedges:Corn Futures (1)
    
    $
    44
    
    
    $
    301
    
    
    $
    (2,398
    )
    
    $
    (23
    )
    
    $
    (182
    )
    
    $
    (95
    )Natural Gas Futures (1)
    
    
    (452
    )
    
    
    (696
    )
    
    
    (812
    )
    
    
    (865
    )
    
    
    
    
    
    
    Ethanol Futures (1)
    
    
    17
    
    
    
    (709
    )
    
    
    (155
    )
    
    
    (577
    )
    
    
    
    
    
    
    Interest Rate Contracts(2)
    
    
    
    
    
    
    (349
    )
    
    
    
    
    
    
    (287
    )
    
    
    
    
    
    
    FX Contracts (1)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (26
    )
    
    
    
    
    
    
    $
    (391
    )
    
    $
    (1,453
    )
    
    $
    (3,365
    )
    
    $
    (1,778
    )
    
    $
    (182
    )
    
    $
    (95
    )Fair Value Hedges:Corn Futures (1) (3)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    (14
    )
    
    $
    33
 
 (1)
    
    Gains and losses reported in cost of goods sold(2)
    
    Gains and losses reported in interest expense.(3)
    
    Hedged items are firm commitments and inventory 14SEGMENT REPORTING
  Three months endedNovember 30,
    
    
    November 30,2010
    
    
    2009(In thousands)Sales:Industrial IngredientsIndustrial Starch
    
    $
    29,369
    
    
    $
    32,348Ethanol
    
    
    24,561
    
    
    
    17,96053,930
    
    
    $
    50,308Food Ingredients
    
    
    18,336
    
    
    
    16,762$
    72,266
    
    
    $
    67,070Income (loss) from operations:Industrial Ingredients
    
    $
    142
    
    
    $
    2,154Food Ingredients
    
    
    4,808
    
    
    
    3,581Corporate and other
    
    
    (1,981
    )
    
    
    (2,593
    )$
    2,969
    
    
    $
    3,142
 16




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November 30,
    
    
    August 31,2010
    
    
    2010(In thousands)Total assets:Industrial Ingredients
    
    $
    135,151
    
    
    $
    133,738Food Ingredients
    
    
    37,415
    
    
    
    36,542Corporate and other
    
    
    33,666
    
    
    
    38,128$
    206,232
    
    
    $
    208,408
  15EARNINGS PER SHARE
  .
 17




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##### Table of Contents



Three months endedNovember 30, 2010
    
    
    November 30, 2009(In thousands)Numerator:Income from continuing operations
    
    $
    336
    
    
    $
    1,056Less: Allocation to participating securities
    
    
    (3
    )
    
    
    (40
    )Income from continuing operations applicable to
common shares
    
    $
    333
    
    
    $
    1,016Income from discontinued operations
    
    $
    
    
    
    $
    3,482Less: Allocation to participating securities
    
    
    
    
    
    
    Income from discontinued operations applicable to
common shares
    
    $
    
    
    
    $
    3,482Net income
    
    $
    336
    
    
    $
    4,538Less: Allocation to participating securities
    
    
    (3
    )
    
    
    (40
    )Net income applicable to common shares
    
    $
    333
    
    
    $
    4,498Denominator:Weighted average common shares outstanding, basic
    
    
    12,222
    
    
    
    11,183Dilutive stock options and awards
    
    
    117
    
    
    
    83Weighted average common shares outstanding, diluted
    
    
    12,339
    
    
    
    11,266
   16LEGAL PROCEEDINGS
   18




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##### Table of Contents



Item 2: Managements Discussion and Analysis of Financial Condition and Results of Operations
 Overview
     Results of Operations
 Executive Overview
   Industrial Ingredients
   19




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##### Table of Contents



Food Ingredients
   Corporate operating expenses
  Interest expense
   Income taxes
    20




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##### Table of Contents



Non-operating income, net
  Three months endedNovember 30, 2010
    
    
    November 30, 2009(In thousands)Gain on foreign currency transactions
    
    
    
    
    
    
    452Other
    
    
    89
    
    
    
    184Total
    
    $
    89
    
    
    $
    636
  Results of Discontinued Operations
 Three Months EndedNovember 30, 2009(In Thousands)Sales
    
    $
    16,963Loss from operations
    
    $
    (1,525
    )Interest expense
    
    
    315Gain on sale of assets
    
    
    351Other non-operating income, net
    
    
    57Loss from discontinued operations before taxes
    
    
    (1,432
    )Income tax benefit
    
    
    (4,914
    )Income from discontinued operations, net of tax
    
    $
    3,482
   21




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##### Table of Contents



Liquidity and Capital Resources
  Operating Activities
  Investing Activities
  Financing Activities
      Discontinued Operations
  22




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##### Table of Contents



Contractual Obligations
  Off-Balance Sheet Arrangements
  Recent Accounting Pronouncements
  Critical Accounting Policies and Estimates
  Forward-looking Statements
  23




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##### Table of Contents




    
    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;
    
    changes in returns on pension plan assets and/or assumptions used for determining
employee benefit expense and obligations;
    
    other unforeseen developments in the industries in which Penford operates,
    
    the Companys ability to successfully operate under and comply with the terms of its
debt instruments;
    
    other factors described in the Companys Form 10-K Part I, Item 1A Risk Factors.
 
 Item 3: Quantitative and Qualitative Disclosures about Market Risk.
  
 Item 4: Controls and Procedures.
 Evaluation of Disclosure Controls and Procedures
   24




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##### Table of Contents



Changes in Internal Control over Financial Reporting
  25




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##### Table of Contents



PART II  OTHER INFORMATION
 
 Item 1: Legal Proceedings
   
 Item 1A: Risk Factors
  
 Item 2: Unregistered Sales of Equity Securities and Use of Proceeds
    Total Number ofShares Purchased as
    
    
    Maximum Number ofTotal Number of
    
    
    
    
    
    
    Part of Publicly
    
    
    Shares that May Yet BeShares
    
    
    Average Price Paid
    
    
    Announced Plans or
    
    
    Purchased Under thePurchased (1)
    
    
    per Share
    
    
    Programs
    
    
    Plans or ProgramsNovember 1  November 30, 2010
    
    
    16,671
    
    
    $
    6.06
    
    
    
    
    
    
    
    October 1  October 31, 2010
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    September 1  September 30, 2010
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Total
    
    
    16,671
    
    
    $
    6.06
    
    
    
    
    
    
    
    
 
 (1)
    
    Represents shares repurchased to satisfy tax withholding obligations on vesting shares of
restricted stock awards. 26




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##### Table of Contents



Item 6: Exhibits.
  31.1
    
    Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 200231.2
    
    Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 200232
    
    Certifications of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C.
Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
 27




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##### Table of Contents



SIGNATURES
  Penford Corporation(Registrant)January 7, 2011
    /s/ Steven O. CordierSteven O. CordierSenior Vice President and
Chief Financial Officer 28




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##### Table of Contents



EXHIBIT INDEX
 Exhibit No.
    
    Description31.1
    
    Certification of Chief Executive Officer pursuant to Section
302 of the Sarbanes-Oxley Act of 200231.2
    
    Certification of Chief Financial Officer pursuant to Section
302 of the Sarbanes-Oxley Act of 200232
    
    Certifications of Chief Executive Officer and Chief Financial
Officer pursuant to 18 U.S.C. Section 1350, as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
 29