MGP Ingredients, Inc. Reports Third Quarter Results

MGP Ingredients, Inc. Reports Third Quarter Results

Expected Gross Profit Rebound in Q4 From Lower Corn Costs


  *Net sales of $80.1 million increase 5.3 percent vs year ago, aided by
    rising prices for high quality alcohol
  *Income from operations declined by $6.8 million vs year ago due mainly to
    reduced industrial alcohol volume and costs associated with a corporate
    proxy dispute
  *With new lower corn costs and the majority of its Q4 distillery production
    committed and priced, Company expects Q4 gross profit to top previous
    three quarters

ATCHISON, Kan., Nov. 12, 2013 (GLOBE NEWSWIRE) -- MGP Ingredients, Inc.
(Nasdaq:MGPI) (the "Company") today reported results for the third quarter
ended September 30, 2013. Net loss for the third quarter was $6.4 million, or
$0.37 per diluted share, compared with net income of $418,000, or $0.02 per
diluted share, in the prior year. Operating profit in the third quarter was
negatively impacted by, among other things, reduced industrial alcohol sales
and increased fees related to the current proxy dispute. Year-ago net income
included a $1.8 million unrealized hedging gain on open commodity derivatives.
In the current quarter the Company did not have any open commodity

Lower sales of industrial alcohol continue to be offset by increasing sales of
beverage alcohol. Sales of the company's premium bourbons and whiskeys remain
at higher capacity levels made possible by manufacturing efficiencies and
other process changes at the Indiana distillery. Production of new bourbon and
whiskey distillate has more than doubled since the acquisition of the Indiana
distillery in late 2011, with plans for further expansion by the end of 2014.
Sales of MGP's bourbons and whiskeys continue to have a positive impact on

Net sales for the third quarter improved by approximately 5 percent from the
year ago period. Beverage alcohol sales benefited from higher unit volume and
pricing, while sales of industrial alcohol saw lower unit sales but increased
pricing compared with the same time period a year ago. Ingredient Solutions
sales in the third quarter were flat with a year ago.

Third quarter loss from operations was $6.0 million compared to income from
operations of $0.9 million in the third quarter of 2012. The Company's net
sales increased by $4.0 million, while cost of sales increased $9.3 million,
or 13 percent, over the prior year period. The reduction in third quarter
gross profit from the prior year was attributable to the distillery segment
related to: 1) the sales price decline of by-products; 2) significantly lower
industrial sales; and 3) a year-ago quarter hedging gain, compared to no
hedging impact in the current quarter. Selling, General and Administrative
expenses reflected increased professional fees related to the corporate proxy

For the first nine months of 2013, net sales declined by approximately 1
percent to $245.9 million. This was mainly due to a decrease in net sales of
distillery products partially offset by increased net sales of ingredient
solutions. For the year-to-date period the Company generated a gross profit
margin of 5.4 percent compared to 7.1 percent in the prior year period. Also
during the first nine months of the year the Company experienced incoming
power supply interruptions in Atchison, KS, which negatively impacted
manufacturing output compared to the same period a year ago. Loss from
operations for the first nine months of 2013 was $4.2 million compared to a
loss of $2.0 million in the prior year.

Beginning with the fourth quarter the Company expects to experience its lowest
corn costs in approximately three years, reflecting the strong U.S. corn
harvest. With the majority of its fourth quarter distillery volume committed
and priced, the Company estimates that fourth quarter gross profit could
approach or exceed a level last achieved in first quarter of 2013.

"With the market fundamentals in certain grades of industrial alcohol now
showing signs of improvement, we believe that we've reached a major turning
point for achieving higher profits in our bulk white goods, which still
comprise the vast majority of our distillery volume," said Tim Newkirk,
President and Chief Executive Officer. "MGP's profitability has been pressured
from the combination of tight U.S. corn supplies coupled with very competitive
pricing. Today, however, we're on the receiving end of one of the largest corn
harvests in recent history. With greater liquidity returning to the corn
markets, we expect a two-fold benefit: lower corn costs going forward and the
ability to fully hedge our customer contract pricing. Sustained lower corn
costs are the key to achieving the Company's long-term targets of double-digit
gross margins in industrial alcohol. Regardless of improving fundamentals, we
will not stop looking for ways to lower our per-gallon manufacturing costs."

Newkirk added, "Our premium spirits strategy continues to gain momentum. The
main challenge at this point is to meet the growing backlog of orders. The
tight supply situation for both new and aged distillate in the U.S. has been
compounded, at least temporarily, by a weather-related shortage of whiskey
barrels, which we hope is resolved in 2014. MGP has come a long way since we
acquired MGPI - Indiana less than two years ago, becoming one of the leading
independent suppliers to both large and small branded spirits companies."

Premium Spirits and Industrial Alcohol

  *Distillery products net sales for the third quarter were $66 million, an
    increase of 7.4 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 decline
    in the lower grades was primarily driven by a 90 percent reduction in the
    supply sourcing of industrial alcohol from the Company's joint venture
    partner, ICP, to be sold by the Company.
  *The distillery products segment reported a third quarter loss from
    continuing operations before income taxes of $1.7 million compared to
    income from continuing operations before income taxes of $3.5 million
    during the same quarter a year ago. Along with higher cost of goods as
    previously mentioned, the Company experienced a quarter-versus-quarter
    reduction in gross profit from lower grade bulk white goods, as corn costs
    rose while net sales prices remained flat.
  *For the nine months of 2013, distillery segment sales were $200.7 million,
    a decrease of 2.2 percent compared to the prior year period. The decrease
    was mainly due to a 99 percent reduction in the supply sourcing of
    industrial alcohol from the Company's joint venture partner, ICP. Income
    from continuing operations before income taxes for the year-to-date was
    $5.8 million compared to $9.9 million in the prior year period. Overall
    distillery segment pricing was out-paced by increased costs for corn and
    natural gas, which averaged 8.5 percent and 2.8 percent higher,
    respectively, from the prior year period.

Food Ingredients

  *Ingredient segment net sales for the third quarter were $14.1 million, a
    decrease of less than 1 percent from the prior year's quarter. For the
    segment as a whole, the 6.5 percent decrease in volume was partially
    offset by a 6.4 percent increase in unit pricing.
  *The ingredients segment reported third quarter income from continuing
    operations before income taxes of $1.2 million, or 9.1 percent of net
    sales, equal to the same quarter a year ago. Flour costs averaged 13.9
    percent higher than the prior year period. This was offset by improved
    sales mix.
  *For the first nine months of 2013, ingredient segment net sales were $44.9
    million, an increase of 7.5 percent. Sales benefited from both higher
    average unit pricing and unit volumes. Income from continuing operations
    before income taxes for the year-to-date period was $3.9 million, equal to
    the prior year period.


Newkirk said, "The groundwork has been laid for profitable sales growth at
MGP, starting with a more positive outlook for our industrial alcohol grades.
Added to that is the growing contribution from our bourbon and whiskey
distillates. As premium spirits with higher margins comprise a greater
percentage of our sales mix, we expect to see the direct impact to MGP's
operating profits. The recent five-year supply agreement not only validates
the quality of our bourbons and whiskeys, it brings stability to a portion of
our future output. We look to close additional agreements with both branded
spirits companies and distributors. The third driver of future profit growth
is our specialty food ingredients, where we continue to add technical and
sales resources. MGP's ingredient product innovations were recently featured
at the American Association of Cereal Chemists International (AACCI) Annual

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

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)
potential adverse affects to the business, operations and profitability, as
well as the rights of our common shareholders as a result of a proxy contest
initiated by a dissident shareholder group, (x) litigation that we have
launched against the co-trustees of the MGP Ingredients, Inc. Voting Trust and
the Cray Family Trust, (xi) actions of governments, (xii) 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, as updated by Item
1A. Risk Factors of our Quarterly Report on Form 10-Q for the quarterly period
ended September 30, 2013.

Important Additional Information

The definitive proxy statement, any other relevant documents and other
materials filed with the SEC concerning the Company are available free of
charge at For a copy of final definitive materials with respect
to 2013 Annual Meeting, including Amendment No. 3 of the supplement to the
proxy statement, please see Voting
remains open to stockholders of record at the close of business on April 3,
2013. Stockholders should carefully read the definitive proxy statement,
including supplements thereto, before making any voting decision.

The Company and its directors, director nominees, the Company's chief
executive officer and its chief financial officer (the "Participants") may be
deemed to be participants in the solicitation of proxies in connection with
the 2013 Annual Meeting. Information regarding the Participants in the
solicitation is more specifically set forth in the definitive proxy statement
and the proxy statement supplement that were filed by the Company with the SEC
and which are available free of charge from the SEC and the Company, as
indicated above.


(unaudited)            Quarter Ended               Year to Date Ended
(Dollars in thousands, September 30, September 30, September 30, September 30,
except per share)      2013          2012          2013          2012
Sales                  $80,709     $76,189     $253,134    $251,882
Less:excise taxes     538           82            7,164         3,897
Net sales              80,171        76,107        245,970       247,985
Cost of sales (a)      79,356        70,047        232,645       230,382
Gross profit           815           6,060         13,325        17,603
Selling, general and
administrative         6,760         6,037         17,405        20,070
Other operating costs
and losses on sale of  1             38            59            288
Gain on sale of        —           (889)        —           (841)
assets, net
Income (loss) from     (5,946)      874          (4,139)      (1,914)
Gain on sale of joint  —             —             —             4,055
venture interest
Interest expense       (269)        (226)        (829)        (709)
Equity in earnings
(loss) of Joint        (91)         (130)        (962)        164
Income (loss) from
continuing operations  (6,306)      518          (5,930)      1,596
before income taxes
Provision for income   19            100           44            152
Net income (loss) from (6,325)      418          (5,974)      1,444
continuing operations
Discontinued           —             —             1,406         —
operations, net of tax
Net income (loss)      (6,325)      418          (4,568)      1,444
Other comprehensive
income (loss), net of  (111)        826          (401)        1,011
Comprehensive income   $(6,436)    $1,244      $(4,969)    $2,455
Basic and diluted
earnings (loss) per                                           
Net income (loss)      $(0.37)     $0.02       $(0.27)     $0.08
Weighted average
shares outstanding –   17,127,523    16,976,054    17,045,001    16,936,366
Weighted average
shares outstanding –   17,127,523    16,976,120    17,045,001    16,936,679


(Dollars in     September  December   (Dollars in        September  December
thousands)      30,        31,        thousands)         30,        31,
                2013       2012                          2013       2012
                                      LIABILITIES AND
ASSETS                              STOCKHOLDERS'                
Current Assets:                     Current                      
Cash and cash   $ —        $ —        Current maturities $1,558   $1,683
equivalents                           of long-term debt
Restricted cash —          12         Accounts payable   19,689     18,860
Receivables     31,796     35,325     Accounts payable   517        4,008
                                      to affiliate, net
Inventory       36,801     36,532     Accrued expenses   7,145      5,220
Prepaid         1,238      697        Total Current      28,909     29,771
expenses                              Liabilities
Deferred income 6,349      5,283                                  
Refundable      226        242        Other Liabilities:           
income taxes
Total Current                         Long-term debt,
Assets          76,410     78,091     less current       4,005      5,168
                                   Revolving credit   24,867     25,893
Property and    192,361    190,519    Deferred credit    3,793      4,133
Less                                  Accrued
accumulated                           retirement, health
depreciation    (122,061) (115,128) and life insurance 4,884      5,096
and                                   benefits
                                   Other noncurrent   946        1,000
                                   Deferred income    6,349      5,283
Net Property,
Plant and       70,300     75,391     Total Liabilities  73,753     76,344
Equity method   6,352      7,301      Stockholders'      81,462     86,827
investments                           equity
noncurrent      2,153      2,388                                  
                                      TOTAL LIABILITIES
TOTAL ASSETS    $ 155,215 $163,171 AND STOCKHOLDERS'  $ 155,215 $163,171
Net Investment                      Financed By:                 
Working capital $47,501  $48,320  Long-term debt*    $28,872  $31,061
Property, plant 70,300     75,391     Deferred           15,972     15,512
and equipment                         liabilities
Other                                 Stockholders'
noncurrent      8,505      9,689      equity             81,462     86,827
Total           $ 126,306 $133,400 Total              $ 126,306 $133,400

*Excludes short-term portion.Short-term portion is included within working

CONTACT: Investors & Analysts:
         George Zagoudis, Investor Relations
         913-360-5441 or
         Shanae Randolph, Corporate Director of Communications
         913-360-5442 or

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