<PAGE>   1

                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                    FORM 10-Q

         [X]     QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
                       THE SECURITIES EXCHANGE ACT OF 1934

                   For the quarterly period ended May 31, 1999
                                                  ------------

                                       OR

         [ ]  TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
                         SECURITIES EXCHANGE ACT OF 1934

For the transition period from __________________ to __________________

                           Commission File No. 0-11488
                                               -------

                               Penford Corporation
--------------------------------------------------------------------------------
             (Exact name of registrant as specified in its charter)

                Washington                               91-1221360
--------------------------------------------------------------------------------
         (State of Incorporation)                     (I.R.S. Employer
                                                     Identification No.)

777-108th Avenue N.E., Suite 2390, Bellevue, WA          98004-5193
--------------------------------------------------------------------------------
(Address of principal executive offices)                 (Zip Code)

                                 (425) 462-6000
              (Registrant's telephone number, including area code.)

        Indicate by a check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.

                            Yes   X    No
                                -----     -----

         Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of July 6, 1999.

<TABLE>
<CAPTION>
             Class                                             Outstanding
             -----                                             -----------
<S>                                                             <C>
Common stock, par value $1.00                                   7,428,694
</TABLE>


<PAGE>   2



                      PENFORD CORPORATION AND SUBSIDIARIES

                                      INDEX


<TABLE>
<CAPTION>
                                                                       Page No.
                                                                       --------
<S>                                                                     <C>
PART I - FINANCIAL INFORMATION

Item 1 - Financial Statements

Condensed Consolidated Balance Sheets                                    3
         May 31, 1999 and August 31, 1998

Condensed Consolidated Statements of Operations                          4
         Three Months and Nine Months Ended May 31, 1999
         and May 31, 1998

Condensed Consolidated Statements of Cash Flow                           5
         Nine Months Ended May 31, 1999 and
         May 31, 1998

Notes to Condensed Consolidated Financial Statements                   6-8


Item 2 - Management's Discussion and Analysis of                       9-13
         Financial Condition and Results of Operations

Item 3 - Quantitative and Qualitative Disclosures                       13
         About Market Risk


PART II - OTHER INFORMATION

Item 1 - Legal Proceedings                                              14

Item 2 - Changes in Securities                                          14

Item 3 - Defaults Upon Senior Securities                                14

Item 4 - Submission of Matters to a Vote of Security Holders            14

Item 5 - Other Information                                              14

Item 6 - Exhibits and Reports on Form 8-K                             14-16

SIGNATURES                                                              17
</TABLE>



                                       2
<PAGE>   3



                         PART I - FINANCIAL INFORMATION

Item 1  Financial Statements

                      PENFORD CORPORATION AND SUBSIDIARIES
                      CONDENSED CONSOLIDATED BALANCE SHEETS

                             (Dollars in Thousands)


<TABLE>
<CAPTION>
                                                                May 31, 1999   August 31, 1998
                                                                ------------   ---------------
<S>                                                              <C>              <C>
                                          ASSETS

Current assets:
         Cash and cash equivalents                               $     782        $   3,200
         Trade accounts receivable                                  18,789           20,957
         Inventories:
              Raw materials and other                                4,093            7,161
              Work in progress                                         534              900
              Finished goods                                         7,031            8,091
                                                                 ---------        ---------
                                                                    11,658           16,152
         Prepaid expenses and other                                  4,872            5,424
                                                                 ---------        ---------
              Total current assets                                  36,101           45,733

Net property, plant and equipment                                  110,915          107,049
Deferred income taxes                                               13,831           13,781
Restricted cash value of life insurance                             11,494           11,371
Other assets                                                         3,328            5,274
                                                                 ---------        ---------
              Total assets                                       $ 175,669        $ 183,208
                                                                 =========        =========

                           LIABILITIES AND SHAREHOLDERS' EQUITY

Current liabilities:
         Accounts payable                                        $   7,851            8,509
         Accrued liabilities                                         9,663            5,596
         Current portion of long-term debt                           3,487           13,697
         Accrued liabilities, discontinued operations                   --            1,761
                                                                 ---------        ---------
              Total current liabilities                             21,001           29,563

Long-term debt                                                      58,571           60,199
Other postretirement benefits                                       10,522           10,383
Deferred income taxes                                               21,672           21,882
Other liabilities                                                    5,751            7,186

Shareholders' equity:
         Common stock                                                9,196            9,130
         Additional paid-in capital                                 20,640           20,223
         Retained earnings                                          57,792           54,644
         Treasury stock                                            (29,334)         (29,647)
         Note receivable from Savings and
              Stock Ownership Plan                                    (142)            (355)
                                                                 ---------        ---------
                Total shareholders' equity                          58,152           53,995
                                                                 ---------        ---------
                Total liabilities and shareholders' equity       $ 175,669        $ 183,208
                                                                 =========        =========
</TABLE>



See accompanying notes to condensed consolidated financial statements.



                                       3
<PAGE>   4



                      PENFORD CORPORATION AND SUBSIDIARIES
                 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

                  (Dollars in thousands except per share data)


<TABLE>
<CAPTION>
                                         Three Months Ended May 31          Nine Months Ended May 31
                                        ----------------------------      ----------------------------
                                            1999            1998             1999             1998
                                            ----            ----             ----             ----
<S>                                     <C>              <C>              <C>              <C>
Sales                                   $    39,226      $    40,306      $   115,146      $   122,848

Cost of sales                                29,008           28,976           85,408           88,709
                                        -----------      -----------      -----------      -----------

     Gross margin                            10,218           11,330           29,738           34,139

Operating expenses                            6,234            6,061           17,542           19,354

Restructure costs                             1,559            1,931            1,559            1,931
                                        -----------      -----------      -----------      -----------

     Income from operations                   2,425            3,338           10,637           12,854

Interest expense, net                        (1,343)          (1,470)          (4,087)          (4,350)
                                        -----------      -----------      -----------      -----------

     Income from continuing
     operations before income taxes           1,082            1,868            6,550            8,504

Income taxes                                    379              654            2,293            2,971
                                        -----------      -----------      -----------      -----------

Income from continuing operations               703            1,214            4,257            5,533

Loss from discontinued operations,
       net of applicable income tax              --           (5,766)              --           (8,573)
                                        -----------      -----------      -----------      -----------

Net income (loss)                       $       703      $    (4,552)     $     4,257      $    (3,040)
                                        ===========      ===========      ===========      ===========

Weighted average common shares
        and equivalents outstanding       7,701,498        7,545,607        7,767,554        7,534,001

Earnings per common share from
continuing operations;
        Basic                           $      0.09      $      0.17      $      0.58      $      0.76
                                        ===========      ===========      ===========      ===========
        Diluted                         $      0.09      $      0.16      $      0.55      $      0.74
                                        ===========      ===========      ===========      ===========

Earnings per common share;
        Basic                           $      0.09      $     (0.62)     $      0.58      $     (0.42)
                                        ===========      ===========      ===========      ===========
        Diluted                         $      0.09      $     (0.60)     $      0.55      $     (0.40)
                                        ===========      ===========      ===========      ===========

Dividends declared per
        common share                    $      0.05      $      0.05      $      0.15      $      0.15
                                        ===========      ===========      ===========      ===========
</TABLE>


See accompanying notes to condensed consolidated financial statements.


                                       4
<PAGE>   5


                      PENFORD CORPORATION AND SUBSIDIARIES
                 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOW

                             (Dollars in Thousands)


<TABLE>
<CAPTION>
                                                                     Nine Months Ended May 31
                                                                     ------------------------
                                                                       1999           1998
                                                                       ----           ----
<S>                                                                  <C>            <C>
Operating Activities:
         Income from continuing operations                           $  4,257       $  5,533
         Adjustments to reconcile income from continuing
             operations to net cash from continuing operations:
                 Depreciation                                           9,250          9,040
                 Deferred income taxes                                   (260)           176
                 Change in operating assets and liabilities of
                 continuing operations:
                     Trade receivables                                  2,168          1,291
                     Inventories                                        4,494         (3,179)
                     Accounts payable, prepaids and other               4,610         (2,814)
                                                                     --------       --------
         Net cash flow from continuing operations                      24,519         10,047

         Net cash used by discontinued operations                      (1,133)        (5,088)
                                                                     --------       --------

         Net cash from operating activities                            23,386          4,959

Investing Activities:
         Additions to property, plant and equipment, net              (13,064)        (8,228)
         Other                                                            475            931
                                                                     --------       --------
         Net cash used by investing activities                        (12,589)        (7,297)

Financing Activities:
         Proceeds from unsecured line of credit                        26,320         68,885
         Payments on unsecured line of credit                         (30,671)       (64,728)
         Proceeds of long-term debt                                    10,000          5,000
         Payments on long-term debt                                   (17,487)        (5,746)
         Exercise of stock options                                        645            451
         Purchase of treasury stock                                      (919)            --
         Purchase of life insurance for officers' benefit plan             --         (1,158)
         Payment of dividends                                          (1,103)        (1,096)
                                                                     --------       --------
         Net cash from (used by) financing activities                 (13,215)         1,608
                                                                     --------       --------

         Net decrease in cash and cash equivalents                     (2,418)          (730)
         Cash and cash equivalents (bank overdraft)
             at beginning of period                                     3,200         (1,019)
                                                                     --------       --------

Cash and cash equivalents (bank overdraft) at end of period          $    782       $ (1,749)
                                                                     ========       ========
</TABLE>


See accompanying notes to condensed consolidated financial statements.



                                       5
<PAGE>   6



                      PENFORD CORPORATION AND SUBSIDIARIES

              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                   (Unaudited)

1.      BASIS OF PRESENTATION

        The accompanying unaudited condensed consolidated financial statements
        have been prepared in accordance with generally accepted accounting
        principles for interim financial information and with the instructions
        to Form 10-Q and Rule 10-01 of Regulation S-X. Accordingly, they do not
        include all of the information and footnotes required by generally
        accepted accounting principles for complete financial statements. In the
        opinion of management, all adjustments (consisting of normal recurring
        accruals) considered necessary for a fair presentation for the interim
        periods presented have been included. The preparation of financial
        statements in conformity with generally accepted accounting principles
        requires management to make estimates and assumptions that affect the
        amounts reported in the financial statements and accompanying notes.
        Actual results could differ from those estimates. Operating results for
        the three and nine month periods ended May 31, 1999 are not necessarily
        indicative of the results that may be expected for the year ending
        August 31, 1999. For further information, refer to the consolidated
        financial statements and footnotes thereto included in Penford
        Corporation's ("Penford" or the "Company") annual report on Form 10-K
        for the fiscal year ended August 31, 1998.

        Certain prior year amounts have been reclassified to conform with
        current year presentation. These reclassifications had no effect on
        previously reported net income.

2.      INCOME TAXES

        The effective tax rate for the three and nine months ended May 31, 1999
        was 35%, the same as in the prior year. The effective rate is higher
        than the federal statutory rate of 34% due primarily to the effects of
        state income taxes.




                                       6
<PAGE>   7



3.      EARNINGS PER COMMON SHARE

        The following table presents the computation of basic and diluted
        earnings per share under SFAS No. 128 (dollars in thousands, except per
        share data):


<TABLE>
<CAPTION>
                                                 Three Months Ended              Nine Months Ended
                                                       May 31                         May 31
                                                       ------                         ------
                                                 1999           1998            1999           1998
                                                 ----           ----            ----           ----
<S>                                           <C>            <C>             <C>            <C>
        Income from continuing operations     $      703     $    1,214      $    4,257     $    5,533
                                              ==========     ==========      ==========     ==========

        Net income (loss)                     $      703     $   (4,552)     $    4,257     $   (3,040)
                                              ==========     ==========      ==========     ==========

        Weighted average common
            shares outstanding                 7,416,605      7,314,759       7,389,852      7,291,809
        Net effect of dilutive
            stock options                        284,893        230,848         377,702        242,192
                                              ----------     ----------      ----------     ----------
        Weighted average common shares
            outstanding assuming dilution      7,701,498      7,545,607       7,767,554      7,534,001
                                              ==========     ==========      ==========     ==========

        Continuing operations:
        Earnings per common share             $     0.09     $     0.17      $     0.58     $     0.76
                                              ==========     ==========      ==========     ==========
        Earnings per common share,
            assuming dilution                 $     0.09     $     0.16      $     0.55     $     0.74
                                              ==========     ==========      ==========     ==========

        Net income (loss):
        Earnings (loss) per common share      $     0.09     $    (0.62)     $     0.58     $    (0.42)
                                              ==========     ==========      ==========     ==========

        Earnings (loss) per common share,
            assuming dilution                 $     0.09     $    (0.60)     $     0.55     $    (0.40)
                                              ==========     ==========      ==========     ==========
</TABLE>


4.      RESTRUCTURE COSTS

        On March 22, 1999, the Company announced a plan to reduce the
        administrative workforce at Penford Products Co. by approximately 15% in
        an effort to align operating costs with current market conditions. The
        workforce reduction of approximately 20 employees was implemented
        through a combination of a voluntary retirement incentive program and
        involuntary layoffs.

        In connection with the workforce reduction plan, restructuring costs
        totaling $1.6 million were charged to continuing operations in the third
        quarter of fiscal 1999. The restructuring costs included an increase to
        the actuarial liability of the Company's retirement pension plan,
        severance and other actual and estimated expenses related to the overall
        workforce reduction plan. The Company has disbursed approximately
        $210,000 of the total charge as of May 31, 1999. In addition, the
        Company's retirement plan will fund approximately 60% of the total
        charge with existing assets.

        Prior year restructure costs of $1.9 million are described under
        discontinued operations below.



                                       7
<PAGE>   8

5.      DISCONTINUED OPERATIONS

        At the end of fiscal 1998, Penford completed a tax-free distribution to
        its shareholders of the Company's pharmaceuticals subsidiary, PPCO. On
        August 31, 1998, Penford shareholders of record on August 10, 1998
        received PPCO shares on a basis of three shares of PPCO for every two
        shares of the Company. Prior to the spin-off, PPCO entered into a $15
        million revolving credit facility that is guaranteed by Penford. As of
        May 31, 1999 there was $3.0 million owed by PPCO under the facility.

        The consolidated financial statements of the Company reflect the
        spin-off of PPCO. Accordingly, PPCO's operating results and cash flows
        for the three and nine months ended May 31, 1998 have been excluded from
        their respective captions in the accompanying financial statements.
        These items have been reported as Loss from Discontinued Operations
        (including disposal costs) and Net Cash Flows Used by Discontinued
        Operations.

        In the third quarter of the prior fiscal year, PPCO generated total
        revenues and pre-tax losses of $7.9 million and $3.6 million,
        respectively. For the nine month period ended May 31, 1998, total
        revenues and pre-tax losses of PPCO were $21.4 million and $7.9 million,
        respectively. Included in PPCO's pre-tax losses in both periods were
        approximately $1.7 million in costs incurred in connection with a
        previously planned initial public offering.

        In addition to PPCO's operating results, the prior year loss from
        discontinued operations included one time charges totaling $5.3 million
        ($3.4 million after tax, or $0.45 per share) reflecting the disposal
        costs of separating the two businesses which approximated $3.3 million
        and estimated operating losses through the spin-off date, August 31,
        1998, which approximated $2.0 million.

        Restructuring costs of $1.9 million were charged to continuing
        operations reflecting other costs associated with implementing the
        spin-off including adjustments to the corporate infrastructure and other
        facilities charges.





                                       8
<PAGE>   9



Item 2

                      MANAGEMENT'S DISCUSSION AND ANALYSIS
                OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS


SPIN-OFF OF PENWEST PHARMACEUTICALS CO.

At the end of fiscal 1998, Penford effected a tax-free distribution to its
shareholders of the Company's pharmaceuticals subsidiary, Penwest
Pharmaceuticals Co. ("PPCO"). The distribution was completed on August 31, 1998
representing the culmination of the plan to foster the growth potential of the
Company's specialty paper chemical and food ingredients businesses, and
separately, the pharmaceuticals business.

PPCO's operating results from the prior fiscal year are reflected as
discontinued operations. For the quarter ended May 31, 1998, PPCO generated
total revenues and pre-tax losses of $7.9 million and $3.6 million,
respectively. Total revenues and pre-tax losses for the nine months ended May
31, 1998 were $21.4 million and $7.9 million, respectively.

In fiscal 1998, the Company recorded certain restructuring costs consisting
primarily of estimated costs associated with implementing the spin-off including
adjustments to the corporate office infrastructure, severance costs and other
facilities charges. The obligation related to the spin-off as of August 31, 1998
of approximately $1.8 million has been paid as of May 31, 1999. Prior to the
spin-off, PPCO entered into a $15 million revolving credit facility, which is
guaranteed by Penford. As of May 31, 1999 there was $3.0 million owed by PPCO
under the facility.

The financial results discussed below are comprised of the Company's operations
in the carbohydrate-based specialty paper chemical and food ingredients
businesses.

RESULTS OF OPERATIONS

Income from continuing operations for the quarter ended May 31, 1999 was
$703,000, or $0.09 per share assuming dilution, compared to income from
continuing operations of $1.2 million, or $0.16 per share assuming dilution, for
the corresponding period a year ago. Income from continuing operations for the
nine months ended May 31, 1999 was $4.3 million, or $0.55 per share assuming
dilution, compared to $5.5 million, or $0.74 per share assuming dilution, in the
corresponding period in fiscal 1998. The three and nine month periods in fiscal
1999 include $1.6 million ($1.0 million after-tax, or $0.13 per share assuming
dilution) of restructure costs primarily related to the previously announced
plan to reduce the administrative workforce at Penford Products Co. The three
and nine month periods in fiscal 1998 include $1.9 million ($1.3 million
after-tax, or $0.17 per share assuming dilution) of restructure costs associated
with implementing the spin-off of PPCO described above.

Net income for the quarter ended May 31, 1999 was $703,000, or $0.09 per share
assuming dilution, compared to a net loss of $4.6 million, or $0.60 per share
assuming



                                       9
<PAGE>   10

dilution, for the corresponding period a year ago. Net income for the nine
months ended May 31, 1999 was $4.3 million, or $0.55 per share assuming
dilution, compared to a net loss of $3.0 million, or $0.40 per share assuming
dilution, in the corresponding period in fiscal 1998. Net income for the quarter
and nine months ended May 31, 1998 include the losses from the discontinued
operations of PPCO.

Total company sales decreased in the third quarter and first nine months of
fiscal 1999 to $39.2 million and $115.1 million, respectively, representing
decreases of 2.7% and 6.3%, respectively, from the corresponding periods in the
prior year. The decrease in sales was attributed to lower sales volumes at
Penford Products Co., the Company's specialty paper chemicals business. The
North American paper markets served by Penford Products Co. stabilized during
the current fiscal quarter, but continued to be negatively affected by the
import imbalance stemming from Asian and worldwide economic conditions.

On a consolidated basis, strong sales volume at Penford Food Ingredients Co.
(PFI) driven by continued market penetration of specialty potato-based food
starches lessened the impact of the volume and revenue declines at Penford
Products Co. Sales volume of specialty starches for food applications increased
by approximately 68% and 50% for the three and nine month periods ended May 31,
1999 compared to the same periods a year ago.

Gross margin in the third quarter declined to 26.1% from 28.1% in the
corresponding quarter a year earlier. Gross margin for the nine months ended May
31, 1999 decreased to 25.8% from 27.8% in the same period last year. The
decreases in gross margin percentage were primarily the result of increased
margin pressure from competitive pricing in the North American paper markets
served by Penford Products Co. and lower capacity utilization related to its
specialty carbohydrate-based paper chemicals. However, Penford Products Co.
experienced modest improvement in operating rates and a shift in product mix
towards higher value-added paper forming products during the third fiscal
quarter. Increased sales and production of higher margin specialty food-grade
starches at PFI partially offset the gross margin decrease.

Operating expenses from continuing operations for the third quarter increased by
$173,000, or 2.9%, compared to the prior year period. For the nine months ended
May 31, 1999, operating expenses decreased $1.8 million, or 9.4%. The increase
in the third quarter reflects efforts in research and development at Penford
Products Co. and increases in marketing activities and product development at
PFI. The year-to-date decrease in operating expenses is primarily due to the
results of company-wide cost containment efforts and reductions in corporate
office expenses associated with the spin-off of PPCO.

As noted above, in connection with the workforce reduction program,
restructuring costs totaling $1.6 million were charged to continuing operations
in the third quarter. The administrative workforce at Penford Products Co. was
reduced by approximately 15%, consistent with the plan announced in March, 1999.
The restructuring costs included an increase in the actuarial liability of the
Company's retirement pension plan, severance and other actual and estimated
expenses related to the overall workforce reduction plan. Approximately $210,000
of the total charge has been paid as of the end of the third fiscal



                                       10
<PAGE>   11

year, and approximately 60% of the total charge will be funded through the
Company's retirement plan with existing assets.

Net interest expense for the third quarter and first nine months of fiscal 1999
was $1.3 million and $4.1 million, respectively, compared to $1.5 million and
$4.4 million in the corresponding periods a year ago. The decreases are a result
of lower debt levels in the current year.

The effective tax rate for the third quarter and first nine months of fiscal
1999 was 35.0%, compared to 35.0% in the corresponding periods a year ago. The
effective tax rate is higher than the federal statutory rate of 34% due to the
impact of state income taxes.

LIQUIDITY AND CAPITAL RESOURCES

At May 31, 1999, Penford had working capital of $15.1 million, an unsecured
credit agreement of $75.0 million under which there was $40.0 million
outstanding, and several uncommitted lines of credit aggregating $15.0 million
under which there were no amounts outstanding. The Company used available cash
and operating cash flow primarily to pay down $11.8 million of debt and to
finance investing activities of $12.6 million during the first nine months of
fiscal 1999.

Cash flow from continuing operations for the nine months ended May 31, 1999 was
$24.5 million compared to $10.0 million in the corresponding period of the prior
year. The increase in operating cash flow is due to fluctuations in the
components of working capital including decreases in accounts receivable and
inventory.

The Company began paying a quarterly cash dividend of $0.05 per share in 1992
and has paid such dividends each quarter since.

In November of 1998, the Board of Directors authorized a stock repurchase
program for the purchase of up to 500,000 shares of the outstanding stock of the
company. The Company repurchased 70,800 shares of its common stock in the first
nine months of fiscal 1999 for approximately $919,000.

Net additions to property, plant and equipment during the nine months ended May
31, 1999 were $13.1 million. Third quarter additions of $3.7 million were
primarily for various improvements to the Penford Products Co. manufacturing
facility in Cedar Rapids, Iowa and equipment additions at the PFI facility in
Plover, Wisconsin, and to a lesser extent, computer upgrades. Capital
expenditures for the Company's specialty paper chemicals and food ingredients
businesses for fiscal 1999 are expected to be approximately $15 million,
including several new project initiatives. See "Forward-looking Statements."

YEAR 2000

The Company has undergone an assessment of its information systems for
compliance with the Year 2000 issue. The assessment and resulting remediation
efforts are addressing all facets of the Company including plant automation
software including



                                       11
<PAGE>   12


embedded controllers and process control devices, materials management,
engineering, laboratory, business systems and general user software. In
connection with the Company's ongoing capital program, and as part of the Year
2000 remediation, a series of technology related expenditures are planned, many
of which have been, or are currently being implemented. The Company anticipates
that internal Year 2000 compliance issues will be substantially remediated by
August, 1999. See "Forward-looking Statements."

It is anticipated that total expenses for Year 2000 remediation efforts may
range from $500,000 to $700,000, approximately 80% of which had been expended as
of May 31, 1999. See "Forward-looking Statements."

The Company does not anticipate significant delays in finalizing internal Year
2000 remediation efforts. See "Forward-looking Statements." However, third
parties having a material relationship with the Company may be a potential risk
based on their Year 2000 preparedness, which is not within the Company's
control. The Company has identified and evaluated the Year 2000 preparedness of
critical customers, suppliers and service providers. Based on the results of the
review, no alternative courses of action to the initial remediation plan were
warranted.

Management of the Company believes it has an effective program in place to
resolve the Year 2000 issue in a timely manner. As noted above, the Company has
not yet fully completed all necessary phases of the Year 2000 program. The
failure to correct a material Year 2000 problem could result in an interruption
in, or a failure of certain normal business activities. Such failures could
adversely affect the Company's results of operations, liquidity and financial
condition. In addition, disruptions in the economy generally resulting from Year
2000 issues could also materially adversely affect the Company. Although there
is uncertainty inherent in the Year 2000 problem, resulting in part from the
uncertainty of the full extent of the readiness of critical third-parties, and
the Company is unable to determine all of the consequences of Year 2000
failures, the impact on the Company is not expected to be material.

The Company has contingency plans for its critical applications. These
contingency plans involve, among other actions, manual workarounds, increasing
inventories, and adjusting staffing strategies.

FORWARD-LOOKING STATEMENTS

This report contains forward-looking statements concerning the estimated capital
expenditures, estimated expenses related to year 2000 issues and year 2000
preparedness, the information in Item 3 of this report and the anticipated
results of the Company. Certain forward-looking statements are identified with a
cross-reference to this section. There are a variety of factors which could
cause actual events or results to differ materially from those projected in the
forward-looking statements, including without limitation, 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; changes in general economic conditions or
developments with respect to specific industries or customers affecting



                                       12
<PAGE>   13

demand for the Company's products; unanticipated costs, expenses or third party
claims; the risk that results may be effected by construction delays, cost
overruns, technical difficulties, nonperformance by contractors or changes in
capital improvement project requirements or specifications; the possibility of
technical difficulties or cost overruns in the Company's Year 2000 compliance
program; or other unforeseen developments in the industries in which the Company
operates. Accordingly, there can be no assurance that future activities or
results will be as anticipated.

Forward-looking statements are based on the estimates and opinions of management
on the date the statements are made. The Company assumes no obligation to update
any forward-looking statements if circumstances or management's estimates or
opinions should change.

Additional information, which could affect the Company's financial results, is
included in the Company's 1998 Annual Report to Shareholders and its Form 10-K
for the fiscal year ended August 31, 1998 on file with the Securities and
Exchange Commission.

Item 3              QUANTITATIVE AND QUALITATIVE DISCLOSURES
                                ABOUT MARKET RISK

MARKET RISK SENSITIVE INSTRUMENTS AND POSITIONS

The market risk associated with the Company's market risk sensitive instruments
is the potential loss from adverse changes in interest rates and commodities
prices.

The Company is unaware of any material changes to the market risk disclosures
referred to in the Company's Report on Form 10-K for the year ended August 31,
1998.










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<PAGE>   14



                           PART II - OTHER INFORMATION

Item 1  Legal Proceedings
        The Registrant is unaware of any material developments in the legal
        proceedings referred to in the Registrant's Report on Form 10-K for the
        fiscal year ended August 31, 1998.

Item 2  Changes in Securities
        Not applicable

Item 3  Defaults Upon Senior Securities
        Not applicable

Item 4  Submission of Matters to a Vote of Security Holders
        Not applicable

Item 5  Other Information
        Not applicable

Item 6  Exhibits and Reports on Form 8-K.

   (a)  Exhibits:

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          (3.1)  Restated Articles of Incorporation of Registrant (filed as an
                 Exhibit to Registrant's Form 10-K for fiscal year ended August
                 31, 1995)

          (3.2)  Articles of Amendment to Restated Articles of Incorporation of
                 Registrant (filed as an exhibit to Registrant's Form 10-K for
                 fiscal year ended August 31, 1997)

          (3.3)  Bylaws of Registrant as amended and restated as of October 20,
                 1997 (filed as an exhibit to Registrant's Form 10-K for fiscal
                 year ended August 31, 1997)

          (4.1)  Amended and Restated Rights Agreement dated as of April 30,
                 1997 (filed as an Exhibit to Registrant's Amendment to
                 Registration Statement on Form 8-A/A dated May 5, 1997)

         (10.1)  Senior Note Agreement among Penford Corporation as Borrower and
                 Mutual of Omaha and Affiliates as lenders, dated November 1,
                 1992 (filed as an Exhibit to Registrant's Form 10-Q for the
                 quarter ended February 28, 1993)

         (10.2)  Loan Agreement among Penford Corporation as Borrower and
                 Seattle-First National Bank as Lender, dated December 1, 1989
                 (Registrant agrees to furnish a copy of this instrument to the
                 Commission on request)

         (10.3)  Penford Corporation Supplemental Executive Retirement Plan,
                 dated March 19, 1990 (filed as an Exhibit to Registrant's Form
                 10-K for the fiscal year ended August 31, 1991)
</TABLE>



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<PAGE>   15

<TABLE>
<S>              <C>
         (10.4)  Penford Corporation Supplemental Survivor Benefit Plan, dated
                 January 15, 1991 (filed as an Exhibit to Registrant's Form 10-K
                 for the fiscal year ended August 31, 1991)

         (10.5)  Penford Corporation Deferred Compensation Plan, dated January
                 15, 1991 (filed as an Exhibit to Registrant's Form 10-K for the
                 fiscal year ended August 31, 1991)

         (10.6)  Change of Control Agreements between Penford Corporation and
                 Messrs. Cook, Widmaier, Talley, Horn, and Rydzewski (a
                 representative copy of these agreements is filed as an exhibit
                 to Registrant's Form 10-K for the fiscal year ended August 31,
                 1995)

         (10.7)  Penford Corporation 1993 Non-Employee Director Restricted Stock
                 Plan (filed as an Exhibit to Registrant's Form 10-Q for the
                 quarter ended November 30, 1993)

         (10.8)  Note Agreement dated as of October 1, 1994 among Penford
                 Corporation, Principal Mutual Life Insurance Company and TMG
                 Life Insurance Company (filed as an Exhibit to Registrant's
                 Form 10-Q for the quarter ended February 28, 1995)

         (10.9)  Penford Corporation 1994 Stock Option Plan as amended and
                 restated as of January 21, 1997 (filed on Form S-8 dated March
                 17, 1997)

         (10.10) Penford Corporation Stock Option Plan for Non-Employee
                 Directors (filed as an exhibit to the Registrant's Form 10-Q
                 for the quarter ended May 31, 1996)

         (10.11) Separation Agreement dated as of July 31, 1998 between
                 Registrant and Penwest Pharmaceuticals Co. (filed as an exhibit
                 to Registrant's Form 8-K dated August 31, 1998)

         (10.12) Services Agreement dated as of July 31, 1998 between Registrant
                 and Penwest Pharmaceuticals Co. (filed as an exhibit to
                 Registrant's Form 8-K dated August 31, 1998)

         (10.13) Employee Benefits Agreement dated as of July 31, 1998 between
                 Registrant and Penwest Pharmaceuticals Co. (filed as an exhibit
                 to Registrant's Form 8-K dated August 31, 1998)

         (10.14) Tax Allocation Agreement dated as of July 31, 1998 between
                 Registrant and Penwest Pharmaceuticals Co. (filed as an exhibit
                 to Registrant's Form 8-K dated August 31, 1998)

         (10.15) Excipient Supply Agreement dated as of July 31, 1998 between
                 Registrant and Penwest Pharmaceuticals Co. (filed as an exhibit
                 to Registrant's Form 8-K dated August 31, 1998)

         (10.16) Restatement and Exchange Agreement amending the Senior Note
                 Agreement among Penford Corporation as Borrower and Mutual of
                 Omaha and Affiliates as lenders, dated as of August 1, 1998
                 (filed as an exhibit to Registrant's Form 10-K for the fiscal
                 year ended August 31, 1998)

         (10.17) Guaranty Agreement dated as of August 1, 1998 by Penford
                 Products Co., a wholly-owned subsidiary of Registrant, of the
                 Restatement and Exchange Agreement among Registrant and Mutual
                 of Omaha and
</TABLE>


                                       15
<PAGE>   16

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                 Affiliates (filed as an exhibit to Registrant's Form 10-K for
                 the fiscal year ended August 31, 1998).

         (10.18) Intercreditor Agreement dated as of August 1, 1998 among the
                 parties to the Credit Agreement dated July 2, 1998 and the
                 parties to the Senior Note Agreements dated as of August 1,
                 1998 (filed as an exhibit to Registrant's Form 10-K for the
                 fiscal year ended August 31, 1998).

         (10.19) Restatement and Exchange Agreement amending the Note Agreement
                 among Penford Corporation as Borrower, and Principal Mutual
                 Life Insurance Company and TMG Life Insurance Company as
                 lenders, dated as of August 1, 1998 (filed as an exhibit to
                 Registrant's Form 10-K for the fiscal year ended August 31,
                 1998).

         (10.20) Guaranty Agreement dated as of August 1, 1998 by Penford
                 Products Co., a wholly-owned subsidiary of Registrant, of the
                 Restatement and Exchange Agreement among Registrant, Principal
                 Mutual Life Insurance Company, and TMG Life Insurance Company
                 (filed as an exhibit to Registrant's Form 10-K for the fiscal
                 year ended August 31, 1998)

         (10.21) Credit Agreement dated as of July 2, 1998 among Penford
                 Corporation and Penford Products Co. as borrowers, and certain
                 commercial lending institutions as the lenders, and The Bank of
                 Nova Scotia, as agent for the lenders (filed as an exhibit to
                 Registrant's Form 10-K for the fiscal year ended August 31,
                 1998)

         (10.22) Specific Guarantee made by Penford Corporation in favor of The
                 Bank of Nova Scotia (the "Bank") in respect to the indebtedness
                 and liability of Penwest Pharmaceuticals Co. to the Bank under
                 a letter loan agreement dated as of July 2, 1998 (filed as an
                 exhibit to Registrant's Form 10-K for the fiscal year ended
                 August 31, 1998)

         (10.23) Specific Guarantee made by Penford Products Co. in favor of The
                 Bank of Nova Scotia (the "Bank") in respect to the indebtedness
                 and liability of Penwest Pharmaceuticals Co. to the Bank under
                 a letter loan agreement dated as of July 2, 1998 (filed as an
                 exhibit to Registrant's Form 10-K for the fiscal year ended
                 August 31, 1998)

         (10.24) Revolving Term Credit Facility in Favor of Penwest
                 Pharmaceuticals Co. as borrowers and The Bank of Nova Scotia as
                 lender dated as of July 2, 1998 (filed as an exhibit to
                 Registrant's Form 10-K for the fiscal year ended August 31,
                 1998)

             27  Financial Data Schedule
</TABLE>

        (b) There were no filings on Form 8-K in the quarter ended May 31, 1999.



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<PAGE>   17



                                   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)



July 12, 1999                           /s/ Jeffrey T. Cook
-------------                           ----------------------------------------
    Date                                Jeffrey T. Cook
                                        President and
                                        Chief Executive Officer (Principal
                                        Executive Officer)



July 12, 1999                           /s/ Keith T. Fujinaga
-------------                           ----------------------------------------
    Date                                Keith T. Fujinaga
                                        Corporate Controller
                                        (Chief Accounting Officer)






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