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MGP Ingredients, Inc. Reports First Quarter Results



MGP Ingredients, Inc. Reports First Quarter Results

Improvements in Plant Performance and Sourcing Contribute to Operating Gains

Highlights

  * Net sales even with prior year; growth in premium beverages offset by
    lower industrial volumes
  * Income from operations has improved for four consecutive quarters,
    reaching $1.2 million in the first quarter compared with a loss of $2.3
    million in the year-ago period
  * Company sets aggressive agenda for premium spirits in 2013, including
    continued growth in whiskey distillates, new mash bills for whiskeys and
    bourbons, and a customer innovation center

ATCHISON, Kan., May 6, 2013 (GLOBE NEWSWIRE) -- MGP Ingredients, Inc.
(Nasdaq:MGPI) (the "Company") today reported results for the first quarter
ended March 31, 2013. Net income for the first quarter was $1.4 million
compared with net income of $1.8 million in the prior year. Net income in the
first quarter of 2013 includes a previously announced $1.4 million gain on
sale of discontinued operations. The Company sold its bioplastics
manufacturing facility in Onaga, Kansas, and certain assets at the extruder
bio-resin laboratory located in Atchison, Kansas. Net income in the prior-year
period includes a gain of $4.0 million associated with the sale of a 20
percent interest in the Illinois Corn Processing (ICP) joint venture.

Net sales for the first quarter were approximately even compared with the
year-ago period. Higher beverage alcohol sales continue to offset the
reduction in sales of bulk alcohol for industrial applications. Premium
spirits growth at the Indiana distillery is being driven by the addition of
new customers and strong demand for whiskey and bourbon. Higher ingredient
sales in the first quarter were led by strong demand for our specialty wheat
proteins used in a variety of food applications in the U.S. and
internationally.

First quarter income from operations improved significantly to $1.2 million,
compared with an operating loss of $2.3 million in the prior-year quarter. The
Company's shift to a higher value alcohol product mix is being augmented with
increased manufacturing yields, lowering the cost-per-gallon. Other factors
contributing to better operating performance in the first quarter include
improved pricing for the distiller's feed by-product. Net income for the
current quarter also included a pre-tax net loss in equity earnings of
$969,000 from the ICP joint venture. The Company's marketing agreement with
ICP was not renewed for 2013.

"Business remains challenging in bulk white goods, which still represent the
majority of our alcohol sales," said Tim Newkirk, President and Chief
Executive Officer. "The difference, however, from one year ago is in our
improved ability to generate positive operating results. Despite corn and
flour prices that remain elevated, MGP has benefited in terms of availability
and pricing from our grain sourcing agreements. Our new approach has also
lowered working capital requirements and reduced inventory volatility related
to commodity price swings. This is a complete departure from the past. MGP's
inventory today reflects our premium focus, with much lower volumes yet higher
per-unit values. We've gone from barge loads to barrels. Another area where
we've reduced our fixed costs and increased flexibility is transportation,
resulting in greater efficiency and better customer service."

He continued, "We've made real progress over the past few quarters. I credit
our employees, including key personnel we added in the areas of supply chain,
plant operations and finance. The addition of whiskeys and bourbons to our
revenue mix has certainly helped our profitability, and that holds even
greater potential in the coming years."

"MGP is gearing up for the next phase of growth in premium spirits," Newkirk
said. "The first year of ownership of our new distillery was mainly about
honoring past contracts and showing that we can deliver a quality product. At
the same time, our expanded sales team has brought in a significant number of
new customers. More recently, we raised our profile among the hundreds of
artisan craft distillers with the release of our new mash bills. Almost half
of the spirits industry growth in 2012 was from flavored new products. We are
uniquely positioned to support a large number of famous and emerging distiller
brands with new product development, production and warehousing. Our Indiana
location, near the famous Whiskey Trail, is ideal for establishing MGP as the
innovation leader for all things whiskey and bourbon. Our vision includes a
new customer innovation center, plans for which are currently under
development."

Premium Spirits and Industrial Alcohol

  * Distillery products sales for the first quarter were $70.8 million, a
    decrease of 2.3 percent compared to the prior year quarter. Increases in
    sales of premium spirits, whiskeys, bourbons and distillers feed were
    offset by declines in lower-grade industrial alcohol products.
     
  * The distillery products segment reported first quarter pre-tax operating
    income of $4.3 million, or 6.1 percent of sales, compared to a pre-tax
    profit of $2.6 million, or 3.7 percent of sales, during the same quarter a
    year ago. Quarter over quarter, pricing for distillery products out-paced
    increased market costs for corn and natural gas. For the first quarter,
    the per-bushel cost of corn averaged 19.7 percent higher than a year ago
    and natural gas increased by an average of 3.7 percent over the same
    period.

Food Ingredients

  * Ingredient segment sales for the first quarter were $15.4 million, an
    increase of 13.4 percent from the prior year's quarter. Sales benefited
    from both higher average pricing and unit volumes.
     
  * The ingredients segment reported first quarter pre-tax operating income of
    $1.5 million, or 10.2 percent of sales, compared with income of $1.6
    million, or 12.1 percent of sales, for the same quarter a year ago.
    Profits were approximately even with the prior year due to higher average
    selling prices offset by increases in the average cost of flour and
    natural gas.

Bioplastics

  * Sales of the Company's plant-based bioplastics business in the first
    quarter were $198,000 compared with $281,000 in the same period one year
    ago. The decline in sales was mainly due to the sale of this business on
    February 8, 2013. The Company reported a pre-tax operating loss of $90,000
    compared to a pre-tax loss of $96,000 in the prior year's quarter.

Outlook

Newkirk said, "MGP is running more efficiently, and it's helping to counter
the effects of weak markets for bulk white goods and high input prices. We
continue to reshape our product mix and our balance sheet to support growth
opportunities in our premium markets. Our strategic business partners continue
to play a key role in MGP's future, especially as we take these relationships
to the next level. With the addition of our new distillery, we're exploring
systemwide opportunities for optimizing storage and transportation, as well as
protecting our margin on materials."

He concluded, "We've come through a volatile and protracted grain cycle in
very good shape. More importantly, our future success will not be dependent on
input prices as it was in years past. We think that the acquisition of the
Indiana distillery was a seminal event for MGP. It gave us critical scale in
the important premium spirits industry, but it also created new momentum
across the company. We've accomplished a great deal in the past year,
including the creation of a strong new business pipeline."

About MGP Ingredients

MGP is a leading independent supplier of premium spirits, offering flavor
innovations and custom distillery blends to the beverage alcohol industry. The
Company also produces high quality food grade industrial alcohol and
formulates grain-based starches and proteins into nutritional, as well as
highly functional, innovations for the branded consumer packaged goods
industry. Distilled spirits are produced at facilities in the adjacent towns
of Lawrenceburg and Greendale, Indiana. The Company is headquartered in
Atchison, Kansas, where a variety of distilled alcohol products and food
ingredients are manufactured. For more information, visit mgpingredients.com.

Cautionary Note Regarding Forward-Looking Statements

This news release contains forward-looking statements as well as historical
information. Forward-looking statements are usually identified by or are
associated with such words as "intend," "plan," "believe," "estimate,"
"expect," "anticipate," "hopeful," "should," "may," "will," "could,"
"encouraged," "opportunities," "potential" and/or the negatives of these terms
or variations of them or similar terminology. They reflect management's
current beliefs and estimates of future economic circumstances, industry
conditions, Company performance and financial results and are not guarantees
of future performance. All such forward-looking statements are subject to
certain risks and uncertainties that could cause actual results to differ
materially from those contemplated by the relevant forward-looking statement.
Investors should not place undue reliance upon forward-looking statements and
the Company undertakes no obligation to publicly update or revise any
forward-looking statements. Important factors that could cause actual results
to differ materially from our expectations include, among others: (i)
disruptions in operations at our Atchison facility or Indiana Distillery, (ii)
the availability and cost of grain and fluctuations in energy costs, (iii) the
effectiveness of our hedging strategy, (iv) the competitive environment and
related market conditions, (v) the ability to effectively pass raw material
price increases on to customers, (vi) the viability of the Illinois Corn
Processing, LLC ("ICP") joint venture and its ability to obtain financing,
(vii) our ability to maintain compliance with all applicable loan agreement
covenants, (viii) our ability to realize operating efficiencies, (ix) actions
of governments, (x) and consumer tastes and preferences. For further
information on these and other risks and uncertainties that may affect our
business, including risks specific to our Distillery and Ingredient segments,
see Item 1A. Risk Factors of our Annual Report on Form 10-K for the year ended
December 31, 2012. 

 

MGP INGREDIENTS, INC.
CONSOLIDATED STATEMENTS OF INCOME
(unaudited)                                        Quarter Ended
(Dollars in thousands, except per share)           Mar. 31, 2013 Mar. 31, 2012
Gross Sales                                        $ 88,718      $ 88,430
Less Excise Taxes                                  2,314         2,086
Net Sales                                          86,404        86,344
Cost of Sales                                      79,175        80,765
Gross Profit                                       7,229         5,579
                                                                  
Selling, General and Administrative Expenses       5,875         7,748
Other Operating Costs and Losses on Sale of Assets 58            74
Income (Loss) from Operations                       1,296        (2,243)
                                                                  
Gain on Sale of Joint Venture Interest             --             4,055
Interest Income                                    6             2
Interest Expense                                   (289)         (255)
Equity in Earnings (Loss)                          (942)         437
Income from Continuing Operations Before Income    71            1,996
Taxes
                                                                  
Provision for Income Taxes                         --            120
Net Income from Continuing Operations              71            1,876
Discontinued Operations, Net of Tax                1,406         --
Net Income                                         1,477         1,876
Other Comprehensive Income (Loss)                      (149)     173
Comprehensive Income                               $  1,328      $  2,049
Basic and Diluted Earnings per Share                              
Net Income                                         $  0.08       $ 0.10
                                                                  
Weighted average shares outstanding – Basic         16,999,146   16,916,304
Weighted average shares outstanding – Diluted       16,999,146   16,919,308

 
MGP INGREDIENTS, INC.
CONSOLIDATED BALANCE SHEET(UNAUDITED)
(Dollars in        Mar. 31,    Dec. 31, (Dollars in        Mar. 31,  Dec. 31,
thousands)        2013        2012      thousands)         2013      2012
ASSETS                                  LIABILITIES AND               
                                        STOCKHOLDERS' EQUITY
Current Assets:                         Current                       
                                        Liabilities:
Restricted Cash   $ --        $ 12      Current Maturities $1,642    $1,683
                                        of Long-term Debt
Receivables       34,345      35,325    Accounts Payable   22,977    18,860
Inventory         38,998      36,532    Accounts Payable   721       4,008
                                        to Affiliate, Net
Prepaid Expenses  1,351       697       Accrued Expenses   6,677     5,220
Deferred Income   5,044       5,283     Total Current      32,017    29,771
Taxes                                   Liabilities
Refundable Income 280         242                                     
Taxes
Total Current     80,018      78,091    Other Liabilities:            
Assets
                                        Long-term Debt,
                                        Less Current        4,783    5,168
                                        Maturities
                                        Revolving Credit   21,766    25,893
                                        Facility
Property and
Equipment, at     188,764      190,519  Deferred Credit    4,036     4,133
Cost
Less Accumulated                        Accrued
Depreciation       (116,227)  (115,128) Retirement, Health            
                                        and Life
                                        Insurance Benefits 4,985     5,096
Net Property,                           Other Noncurrent   1,006     1,000
Plant and                               Liabilities
                                        Noncurrent
Equipment         72,537      75,391    Deferred Income    5,044     5,283
                                        Taxes
                                                                      
                                        Total Other        41,620    46,573
                                        Liabilities
Equity Method     6,347        7,301    Total Liabilities  73,637    76,344
Investments
Other Assets      2,312        2,388    Stockholders'      87,577    86,827
                                        Equity
                                        TOTAL LIABILITIES             
                                        AND
TOTAL ASSETS      $161,214    $163,171  STOCKHOLDERS'      $ 161,214 $ 163,171
                                        EQUITY
                                                                      
Capital Structure                                                     
Net Investment                          Financed By:                  
in:
Working Capital   $ 48,001    $ 48,320  Long-term Debt*    $26,549   $31,061
Property, Plant   72,537       75,391   Deferred           15,071    15,512
and Equipment                           Liabilities
Other Noncurrent  8,659       9,689     Stockholders'      87,577    86,827
Assets                                  Equity
Total             $129,197    $133,400  Total              $ 129,197 $ 133,400
*Excludes short-term portion. Short- term portion is included within working
capital.

CONTACT: Investors & Analysts:
         George Zagoudis, Investor Relations
         913-360-5441 or george.zagoudis@mgpingredients.com
        
         Media:
         Shanae Randolph, Corporate Director of Communications
         913-360-5442 or shanae.randolph@mgpingredients.com

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