MGP Ingredients, Inc. Reports Third Quarter Results
11/12/2013
Highlights
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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
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
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
For the first nine months of 2013, net sales declined by approximately 1 percent to
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
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 -
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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
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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.
Outlook
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
About
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
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
Important Additional Information
The definitive proxy statement, any other relevant documents and other materials filed with the
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
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CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) | ||||
(unaudited) | Quarter Ended | Year to Date Ended | ||
(Dollars in thousands, 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 expenses | 6,760 | 6,037 | 17,405 | 20,070 |
Other operating costs and losses on sale of assets | 1 | 38 | 59 | 288 |
Gain on sale of assets, net | — | (889) | — | (841) |
Income (loss) from operations | (5,946) | 874 | (4,139) | (1,914) |
Gain on sale of joint venture interest | — | — | — | 4,055 |
Interest expense | (269) | (226) | (829) | (709) |
Equity in earnings (loss) of Joint Ventures | (91) | (130) | (962) | 164 |
Income (loss) from continuing operations before income taxes | (6,306) | 518 | (5,930) | 1,596 |
Provision for income taxes | 19 | 100 | 44 | 152 |
Net income (loss) from continuing operations | (6,325) | 418 | (5,974) | 1,444 |
Discontinued operations, net of tax | — | — | 1,406 | — |
Net income (loss) | (6,325) | 418 | (4,568) | 1,444 |
Other comprehensive income (loss), net of tax | (111) | 826 | (401) | 1,011 |
Comprehensive income (loss) | $ (6,436) | $ 1,244 | $ (4,969) | $ 2,455 |
Basic and diluted earnings (loss) per share | ||||
Net income (loss) | $ (0.37) | $ 0.02 | $ (0.27) | $ 0.08 |
Weighted average shares outstanding — Basic | 17,127,523 | 16,976,054 | 17,045,001 | 16,936,366 |
Weighted average shares outstanding — Diluted | 17,127,523 | 16,976,120 | 17,045,001 | 16,936,679 |
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CONSOLIDATED BALANCE SHEET (UNAUDITED) | |||||
(Dollars in thousands) |
2013 |
2012 |
(Dollars in thousands) |
2013 |
2012 |
ASSETS | LIABILITIES AND STOCKHOLDERS' EQUITY | ||||
Current Assets: | Current Liabilities: | ||||
Cash and cash equivalents | $ — | $ — | Current maturities of long-term debt | $ 1,558 | $ 1,683 |
Restricted cash | — | 12 | Accounts payable | 19,689 | 18,860 |
Receivables | 31,796 | 35,325 | Accounts payable to affiliate, net | 517 | 4,008 |
Inventory | 36,801 | 36,532 | Accrued expenses | 7,145 | 5,220 |
Prepaid expenses | 1,238 | 697 | Total Current Liabilities | 28,909 | 29,771 |
Deferred income taxes | 6,349 | 5,283 | |||
Refundable income taxes | 226 | 242 | Other Liabilities: | ||
Total Current Assets | 76,410 | 78,091 | Long-term debt, less current maturities | 4,005 | 5,168 |
Revolving credit facility | 24,867 | 25,893 | |||
Property and equipment | 192,361 | 190,519 | Deferred credit | 3,793 | 4,133 |
Less accumulated depreciation and amortization | (122,061) | (115,128) | Accrued retirement, health and life insurance benefits | 4,884 | 5,096 |
Other noncurrent liabilities | 946 | 1,000 | |||
Deferred income taxes | 6,349 | 5,283 | |||
Net Property, Plant and Equipment | 70,300 | 75,391 | Total Liabilities | 73,753 | 76,344 |
Equity method investments | 6,352 | 7,301 | Stockholders' equity | 81,462 | 86,827 |
Other noncurrent assets | 2,153 | 2,388 | |||
TOTAL ASSETS | $ 155,215 | $ 163,171 | TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY | $ 155,215 | $ 163,171 |
Capital Structure | |||||
Net Investment in: | Financed By: | ||||
Working capital | $ 47,501 | $ 48,320 | Long-term debt* | $ 28,872 | $ 31,061 |
Property, plant and equipment | 70,300 | 75,391 | Deferred liabilities | 15,972 | 15,512 |
Other noncurrent assets | 8,505 | 9,689 | Stockholders' 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 capital. | |||||
CONTACT: Investors & Analysts:Source: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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