MGP Ingredients Reports First Quarter 2017 Results
2017 results compared to 2016
- First quarter consolidated net sales increased 13.4% to
$87.2 millionas 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
- Equity in
joint venture earnings decreased from
$517,000to $471,000in the first quarter.
- Net income increased 22.9% to
$8.7 millionfor the first quarter.
- First quarter earnings per share, calculated on the two-tier method, increased 22.0% to
"Our first quarter results mark continued progress against our long term strategic plan," said
Distillery Products Segment - Beverage Alcohol Drives 12% Gross Profit Growth
For the first quarter of 2017, net sales for the Distillery
Products segment increased 15.8% to
Griffin said, "Revenue growth in premium beverage alcohol reflects increased demand for both our American whiskey products and our vodka and gin offerings. While growth remains strong for premium beverage alcohol products, segment margins were unfavorably impacted by softness in the pricing of the distillers feed co-product (Dried Distillers Grain, or "DDG") as market prices dropped significantly."
|Food Grade Alcohol|
|Quarter vs. Quarter|
Net Sales Change
|2017||2016||$ Change||% Change|
|Premium Beverage Alcohol||$||45,640||$||34,993||$||10,647||30.4||%|
|Food Grade Alcohol||$||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
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
MGP joint venture equity method investment earnings for the first quarter 2017 were comparable to the first quarter of 2016 at
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
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
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
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
OPERATING INCOME ROLLFORWARD
|Operating income quarter-versus-quarter||Operating |
|Operating income for the quarter ended ||$||10,725|
|Increase in gross profit - distillery products segment||1,765||16.5||pp(a)|
|Increase in gross profit - ingredient solutions segment||230||2.1||pp|
|Increase in SG&A expenses||(1,328||)||(12.4||)||pp|
|Operating income for the quarter ended ||$||11,392||6.2||%|
|(a) Percentage points ("pp").|
EARNINGS PER SHARE ROLLFORWARD
|Change in basic and diluted earnings per share quarter-versus-quarter||Basic and |
|Basic and diluted earnings per share for the quarter ended ||$||0.41|
|Change in operations(a)||0.03||7.3||pp(b)|
|Tax: Current effect of ASU 2016-09||0.07||17.1||pp|
|Tax: Change in effective tax rate (excluding tax item above)||(0.01||)||(2.4||)||pp|
|Basic and diluted earnings per share for the quarter
|(a) Changes are net of tax based on the effective tax rate for the base year (2016).|
|(b) Percentage points ("pp").|
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
|Less: excise taxes||4,176||356|
|Cost of sales||68,128||59,789|
|Selling, general and administrative expenses||7,649||6,321|
|Equity method investment earnings||471||517|
|Interest expense, net||(331||)||(311||)|
|Income before income taxes||11,532||10,931|
|Income tax expense||2,854||3,872|
|Income attributable to participating securities||250||270|
|Net income attributable to common shareholders and used in EPS calculation||$||8,428||$||6,789|
|Diluted weighted average common shares||16,712,578||16,607,074|
|Basic and diluted earnings per common share||$||0.50||$||0.41|
|Dividends and dividend equivalents per common share||$||0.04||$||0.08|
CONSOLIDATED BALANCE SHEET (UNAUDITED)
|(Dollars in thousands)|
|(Dollars in thousands)|
|ASSETS||LIABILITIES AND STOCKHOLDERS' EQUITY|
|Current Assets:||Current Liabilities:|
|Cash and cash equivalents||$||—||$||1,569||Current maturities of long-term debt||$||4,362||$||4,359|
|Inventory||79,988||78,858||Accounts payable to affiliate, net||2,807||3,349|
|Prepaid expenses||2,426||1,684||Accrued expenses||7,317||8,945|
|Refundable income taxes||—||2,705||Income taxes payable||534||—|
|Total Current Assets||118,801||110,901||Total Current Liabilities||31,526||36,995|
|Long-term debt, less current maturities||15,126||16,218|
|Revolving credit facility||24,205||15,424|
|Property and equipment||249,780||246,219||Deferred credits||2,777||2,978|
|Less accumulated depreciation and amortization||(156,083||)||(153,428||)||Accrued retirement, health and life insurance benefits||3,460||3,604|
|Net Property, Plant||Deferred income taxes||2,942||3,432|
|and Equipment||93,697||92,791||Other non current liabilities||399||393|
|Equity method investments||19,403||18,934||Total Liabilities||80,435||79,044|
|Other assets||2,672||2,710||Stockholders' equity||154,138||146,292|
|TOTAL ASSETS||$||234,573||$||225,336||TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY||$||234,573||$||225,336|
For More Information Investors & Analysts:
Bob Burton616-233-0500 or Investor.Relations@mgpingredients.com Media: Greg Manis913-360-5440 or email@example.com
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