MGP Ingredients Reports First Quarter 2017 Results

Premium Beverage Alcohol Drives 13% Revenue Increase; Net Income Increases 23%

ATCHISON, Kan., May 04, 2017 (GLOBE NEWSWIRE) -- MGP Ingredients, Inc. (Nasdaq:MGPI), a leading supplier of premium distilled spirits and specialty wheat proteins and starches, today reported results for the first quarter ended March 31, 2017.

2017 results compared to 2016

  • First quarter consolidated net sales increased 13.4% to $87.2 million as net sales of premium beverage alcohol significantly increased while net sales of industrial alcohol were flat.
  • First quarter consolidated gross profit increased 11.7% to $19.0 million, reflecting stronger gross profit results in both the Distillery Products and Ingredient Solutions segments.
  • Consolidated gross margin decreased 40 basis points to 21.8% for the first quarter, reflecting an 80 basis point decline in Distillery Products margins, partially offset by a 150 basis point expansion in Ingredient Solutions.
  • First quarter operating income increased 6.2% to $11.4 million.
  • Equity in joint venture earnings decreased from $517,000 to $471,000 in the first quarter.
  • Net income increased 22.9% to $8.7 million for the first quarter.
  • First quarter earnings per share, calculated on the two-tier method, increased 22.0% to $0.50 per share.

"Our first quarter results mark continued progress against our long term strategic plan," said Gus Griffin, president and CEO of MGP. "Revenues grew as volumes in premium beverage alcohol increased and gross profit improved in both our Distillery Products and Ingredient Solutions segments. We are off to a good start and are optimistic about the outlook for 2017."

Distillery Products Segment - Beverage Alcohol Drives 12% Gross Profit Growth

For the first quarter of 2017, net sales for the Distillery Products segment increased 15.8% to $74.0 million.  Gross profit improved to $16.6 million, or 22.5% of net segment sales, compared with $14.9 million, or 23.3% of net segment sales in the first quarter 2016.  Results for the quarter reflect continued strong demand for the Company's high quality premium beverage alcohol products. 

Griffin said, "Revenue growth in premium beverage alcohol reflects increased demand for both our American whiskey products and our vodka and gin offerings.  While growth remains strong for premium beverage alcohol products, segment margins were unfavorably impacted by softness in the pricing of the distillers feed co-product (Dried Distillers Grain, or "DDG") as market prices dropped significantly."

Food Grade Alcohol Net Sales Quarter
Ended March 31,
  Quarter vs. Quarter
Net Sales Change
  2017   2016   $ Change   % Change  
Premium Beverage Alcohol $ 45,640     $ 34,993     $ 10,647     30.4 %  
Industrial Alcohol 19,123     19,213     (90 )   (0.5 )%  
  Food Grade Alcohol $ 64,763     $ 54,206     $ 10,557     19.5 %  

Ingredient Solutions - Segment Gross Profit Grew 11%

For the 2017 first quarter, net sales for the Ingredient Solutions segment increased 1.7% to $13.2 million.  Gross profit increased to $2.4 million, or 18.4% of net segment sales, compared with $2.2 million, or 16.9% of net segment sales in the first quarter 2016.

Griffin said, "Our Ingredient Solutions segment continued to grow in the first quarter on the strength of our overall starch portfolio.  The segment also benefited from lower input costs and increased plant efficiencies."


Corporate selling, general and administrative expenses were $7.6 million for the first quarter 2017 compared to $6.3 million in the first quarter 2016, primarily due to an increase in personnel costs and advertising and promotion expenses.

MGP joint venture equity method investment earnings for the first quarter 2017 were comparable to the first quarter of 2016 at $0.5 million.

The corporate effective tax rate for the quarter was 24.7% compared with 35.4% a year ago, primarily due to the favorable impact of the required accounting change, ASU 2016-09, Compensation - Stock Compensation (Topic 718) Improvements to Employee Share-Based Payment Accounting.

Earnings per share was $0.50 for the first quarter 2017, compared with $0.41 for the first quarter 2016.

2017 and Long Term Guidance

MGP is confirming the following guidance for fiscal 2017 and beyond, with the exception of the corporate tax rate outlook, which declined to 30%.

  • Reconfirming previous guidance, operating income is expected to grow between 10% and 15% annually from 2016 through 2018. This guidance excludes a favorable litigation settlement and asset sale gain recorded in the third quarter of 2016.
  • Recognizing the difficulty of projecting three years in the future, our conservative estimate of growth in operating income in 2019 is 15% to 20% as sales of aged whiskey inventory becomes a more significant factor.
  • Modest growth is expected in net sales in 2017, subject to some volatility as the company continues to shift sales from industrial to premium beverage alcohol.
  • 2017 gross margins are expected to continue to grow versus 2016.
  • 2017 effective tax rate is forecast to be 30%, and shares outstanding are expected to be approximately 16.8 million at year end.
  • 2017 profitability for ICP remains exposed to the challenging and volatile conditions in the fuel ethanol industry.


"We continue to stay the course, building on the momentum of the past two years, and remaining tightly aligned with our long term strategic plan,” Griffin added.  “We saw strong growth in our premium beverage alcohol business, and more progress in our migration away from industrial alcohol.  Investing to build our inventory of aged whiskey continues to be a focus, and the value of that inventory, at cost, now totals $53.2 million.  Our brands initiative continues to progress, as we begin to expand distribution of our brand portfolio, and the increase in SG&A this quarter reflects our commitment to this initiative.  While the decline in DDG prices is certainly a headwind, overall we believe we are well positioned for long term growth.”

About MGP Ingredients, Inc.
MGP is a leading producer and supplier of premium distilled spirits and specialty wheat proteins and starches. Distilled spirits include premium bourbon and rye whiskeys, gins and vodkas, which are carefully crafted through a combination of art and science and backed by over 150 years of experience. The company's proteins and starches are created in the same manner and provide a host of functional, nutritional and sensory benefits for a wide range of food products. MGP additionally is a top producer of high quality industrial alcohol for use in both food and non-food applications. The company is headquartered in Atchison, Kansas, where distilled alcohol products and food ingredients are produced. Premium spirits are also distilled and matured at the company facility in Lawrenceburg, Indiana. For more information, visit

Cautionary Note Regarding Forward-Looking Statements
This news release contains forward-looking statements as well as historical information. All statements, other than statements of historical facts, included in this news release regarding the prospects of our industry and our prospects, plans, financial position, business strategy, guidance on growth in operating income, revenue, gross margin, and future effective tax rate may constitute forward-looking statements. In addition, 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 or variations of these terms or similar terminology. They reflect management's current beliefs and estimates of future economic circumstances, industry conditions, company performance, and company 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. Important factors that could cause actual results to differ materially from our expectations include, among others: (i) disruptions in operations at our Atchison facility, Indiana facility, or at the Illinois Corn Processing, LLC ("ICP") facility, (ii) the availability and cost of grain and flour, and fluctuations in energy costs, (iii) the effectiveness of our grain purchasing program to mitigate our exposure to commodity price fluctuations, (iv) the effectiveness or execution of our strategic plan, (v) potential adverse effects to operations and our system of internal controls related to the loss of key management personnel, (vi) the competitive environment and related market conditions, (vii) the ability to effectively pass raw material price increases on to customers, (viii) the positive or adverse impact to our earnings as a result of the ownership of our equity method investment in ICP and the volatility of its operating results, (ix) our limited influence over the ICP joint venture operating decisions, strategies, financial or other decisions (including investments, capital spending and distributions), (x) our ability to source product from the ICP joint venture or unaffiliated third parties, (xi) our ability to maintain compliance with all applicable loan agreement covenants, (xii) our ability to realize operating efficiencies, (xiii) actions of governments, and (xiv) 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 Products and Ingredient Solutions segments, see Item 1A. Risk Factors of our Annual Report on Form 10-K for the year ended December 31, 2016.


Operating income quarter-versus-quarter   Operating
Operating income for the quarter ended March 31, 2016   $ 10,725        
Increase in gross profit - distillery products segment   1,765     16.5   pp(a)
Increase in gross profit - ingredient solutions segment   230     2.1   pp
Increase in SG&A expenses   (1,328 )   (12.4 ) pp
Operating income for the quarter ended March 31, 2017   $ 11,392     6.2 %  
(a)  Percentage points ("pp").                



Change in basic and diluted earnings per share quarter-versus-quarter   Basic and
Basic and diluted earnings per share for the quarter ended March 31, 2016   $ 0.41        
Change in operations(a)   0.03     7.3   pp(b)
Tax: Current effect of ASU 2016-09   0.07     17.1   pp
Tax: Change in effective tax rate (excluding tax item above)   (0.01 )   (2.4 ) pp
Basic and diluted earnings per share for the quarter ended March 31, 2017   $ 0.50     22.0 %  
(a)   Changes are net of tax based on the effective tax rate for the base year (2016).
(b)   Percentage points ("pp").



    Quarter Ended
    March 31,
  March 31,
Sales   $ 91,345     $ 77,191  
Less: excise taxes   4,176     356  
Net sales   87,169     76,835  
Cost of sales   68,128     59,789  
Gross profit   19,041     17,046  
Selling, general and administrative expenses   7,649     6,321  
Operating income   11,392     10,725  
Equity method investment earnings   471     517  
Interest expense, net   (331 )   (311 )
Income before income taxes   11,532     10,931  
Income tax expense   2,854     3,872  
Net income   $ 8,678     $ 7,059  
Income attributable to participating securities   250     270  
Net income attributable to common shareholders and used in EPS calculation   $ 8,428     $ 6,789  
Share information:        
Diluted weighted average common shares   16,712,578     16,607,074  
Basic and diluted earnings per common share   $ 0.50     $ 0.41  
Dividends and dividend equivalents per common share   $ 0.04     $ 0.08  


(Dollars in thousands) March 31,
  December 31,
  (Dollars in thousands) March 31,
  December 31,
Current Assets:         Current Liabilities:      
Cash and cash equivalents $     $ 1,569     Current maturities of long-term debt $ 4,362     $ 4,359  
Receivables 36,387     26,085     Accounts payable 16,506     20,342  
Inventory 79,988     78,858     Accounts payable to affiliate, net 2,807     3,349  
Prepaid expenses 2,426     1,684     Accrued expenses 7,317     8,945  
Refundable income taxes     2,705     Income taxes payable 534      
Total Current Assets 118,801     110,901     Total Current Liabilities 31,526     36,995  
          Other Liabilities:      
          Long-term debt, less current maturities 15,126     16,218  
          Revolving credit facility 24,205     15,424  
Property and equipment 249,780     246,219     Deferred credits 2,777     2,978  
Less accumulated depreciation and amortization (156,083 )   (153,428 )   Accrued retirement, health and life insurance benefits 3,460     3,604  
Net Property, Plant         Deferred income taxes 2,942     3,432  
and Equipment 93,697     92,791     Other non current liabilities 399     393  
Equity method investments 19,403     18,934     Total Liabilities 80,435     79,044  
Other assets 2,672     2,710     Stockholders’ equity 154,138     146,292  
TOTAL ASSETS $ 234,573     $ 225,336     TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY $ 234,573     $ 225,336  


For More Information
Investors & Analysts:
Bob Burton
616-233-0500 or

Greg Manis
913-360-5440 or

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Source: MGP Ingredients Inc.