MGP Ingredients Reports First Quarter 2020 Results
04/30/2020
2020 first quarter results compared to 2019 first quarter results |
- Consolidated sales increased 11.2% to
$99.1 million , reflecting a 7.3% increase in the Distillery Products segment and a 31.4% increase in the Ingredient Solutions segment. - Consolidated gross profit increased 39.3% to
$23.2 million , due to increased gross profit in both the Distillery Products and Ingredient Solutions segments. - Consolidated operating income increased 61.0% to
$13 .7 million due to increased gross profit in both the Distillery Products and Ingredient Solutions segments, partially offset by increased corporate selling, general and administrative expenses. - Non-GAAP operating income increased 67.9% to
$14.3 million , exclusive of CEO transition costs. - Earnings per share ("EPS") was
$0.57 per share for both the first quarter of 2020 and 2019. EPS was affected by improved operating results, partially offset by a prior year period tax benefit resulting from vested share-based awards. - Non-GAAP EPS increased to
$0.61 per share from$0.57 per share, exclusive of CEO transition costs.
“We are very pleased with our results this quarter, which reflect strong customer demand in both business segments and improved effectiveness in our tactical execution,” said
Distillery Products Segment - Premium Beverage Brown Goods Growth of 17.1%
In the first quarter of 2020, sales for the Distillery Products segment increased 7.3% to
“The improved performance of our Distillery Products segment this quarter was led by double-digit growth in sales of both new distillate and aged whiskey,” said Griffin. “Despite some significant changing dynamics at the retail level and potential challenges to specific customers, we believe the underlying macro consumer trend supporting the ongoing growth of the American Whiskey category remains strong.
“While continuing to implement our broader growth plan, we are also focusing on helping our industrial alcohol customers navigate the challenges they are confronted with as a result of the COVID-19 pandemic. We remain committed to continuing the legacy our company was founded on more than 75 years ago by supporting the relief effort with both financial aid and increased production of alcohol for hand sanitizer and commercial disinfectant needs. MGP is uniquely positioned to serve as the backbone of the increased industrial alcohol production in this country and we’re proud to expand our efforts at our
Premium Beverage Alcohol (in thousands) | Sales Quarter Ended |
Quarter vs. Quarter Sales Change Increase/(Decrease) |
||||||||||||||
2020 | 2019 | $ Change | % Change | |||||||||||||
$ | 29,070 | $ | 24,827 | $ | 4,243 | 17.1 | % | |||||||||
White Goods | 16,902 | 17,182 | (280 | ) | (1.6 | ) | ||||||||||
Premium Beverage Alcohol | $ | 45,972 | $ | 42,009 | $ | 3,963 | 9.4 | % |
Ingredient Solutions Segment - Sales Increased 31.4%
For the first quarter of 2020, sales in the Ingredient Solutions segment increased 31.4% to
“Our Ingredients Solutions segment posted its fourteenth consecutive quarter of year-over-year sales growth,” continued Griffin. “We have been very pleased with the continued strength of our Ingredients business over the past several years and are encouraged by the robust gross margins this quarter due to our ability to optimize sales and production toward our highest margin products. We believe our specialty starch portfolio of fiber products and recently rebranded Proterra™ line of textured proteins continue to be aligned with strong consumer trends.”
Other
Corporate selling, general and administrative expenses of
The corporate effective tax rate for the quarter was 24.7% compared with (17.7)% in the year ago period.
EPS was
As part of a
2020 Outlook
“While we are off to a strong start to the year, with ample access to capital and encouraging customer demand, our financial results for the balance of the year could be impacted by the COVID-19 virus,” said
Conclusion
“Our pandemic response plan, which is designed to accommodate evolving information and guidance provided by government agencies and health officials, focuses on protecting our employees and customers and doing our part to help stop the spread of the virus,” continued Colo. “The aggressive implementation of our strategic plan put in place by Gus over the past several years has positioned MGP for sustainable long-term growth. Moving forward, our management team will be focused on continually refining the effectiveness of our tactical execution, accelerating the pace of our strategic implementation and leveraging the strong foundation we have built for growth in 2020 and beyond.
“Our balance sheet and access to capital continue to be strong while we seek to optimize cash management during this pandemic. We remain well capitalized and drew down additional funds on our revolving credit facility during the quarter to maintain a conservative cash position. The investment spend related to our warehouse expansion plan now totals approximately
“We were pleased to announce the acquisition of New Columbia Distillers, based in
Conference Call and Webcast Information
Webcast: ir.mgpingredients.com on the Events & Presentations page
Conference Call: 844-308-6398 (domestic) or 412-717-9605 (international)
About
Founded in 1941, MGP is a leading supplier of premium distilled spirits and specialty wheat proteins and starches. Distilled spirits include bourbon and rye whiskeys, gins and vodkas, which are expertly crafted through a combination of art and science and backed by a long history 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 changes in operating income, sales, 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
Non-GAAP Financial Measures
In addition to reporting financial information in accordance with
For More Information
Investors & Analysts:
646-475-2998 or investor.relations@mgpingredients.com
Media:
913-360-5440 or greg.manis@mgpingredients.com
OPERATING INCOME ROLLFORWARD
(Dollars in thousands)
Operating income, quarter versus quarter | Operating Income |
Change | |||||||
Operating income for quarter ended |
$ | 8,513 | |||||||
Increase in gross profit - Ingredient Solutions segment | 3,541 | 41.6 | pp(a) | ||||||
Increase in gross profit - Distillery Products segment | 3,010 | 35.3 | pp | ||||||
Increase in selling general and administrative expenses | (1,356 | ) | (15.9 | ) | pp | ||||
Operating income for quarter ended |
$ | 13,708 | 61.0 | % |
(a) Percentage points (“pp”).
EARNINGS PER SHARE (“EPS”) ROLLFORWARD
Change in basic and diluted EPS, quarter versus quarter | Basic and Diluted EPS |
Change | |||||||
Basic and diluted EPS for quarter ended |
$ | 0.57 | |||||||
Increase in operations(b) | 0.36 | 63.2 | pp(a) | ||||||
Change in interest expense, net(b) | (0.03 | ) | (5.3 | ) | pp | ||||
Tax: Change in share-based compensation | (0.21 | ) | (36.8 | ) | pp | ||||
Tax: Change in income tax | (0.12 | ) | (21.1 | ) | pp | ||||
Basic and diluted EPS for quarter ended |
$ | 0.57 | — | % |
(a) Percentage points (“pp”).
(b) Items are net of tax based on the effective tax rate for the base year (2019).
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
(Dollars in thousands)
Quarter Ended |
||||||||||
2020 | 2019 | |||||||||
Sales | $ | 99,082 | $ | 89,096 | ||||||
Cost of sales | 75,871 | 72,436 | ||||||||
Gross profit | 23,211 | 16,660 | ||||||||
Selling, general and administrative expenses | 9,503 | 8,147 | ||||||||
Operating income | 13,708 | 8,513 | ||||||||
Interest expense, net and other | (642 | ) | (252 | ) | ||||||
Income before income taxes | 13,066 | 8,261 | ||||||||
Income tax expense (benefit) | 3,224 | (1,459 | ) | |||||||
Net income | 9,842 | 9,720 | ||||||||
Income attributable to participating securities | 66 | 66 | ||||||||
Net income attributable to common shareholders and used in EPS calculation | $ | 9,776 | $ | 9,654 | ||||||
Basic and diluted weighted average common shares | 17,013,925 | 16,967,631 | ||||||||
Basic and diluted earnings per common share | $ | 0.57 | $ | 0.57 |
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
(Dollars in thousands)
2020 |
2019 |
2020 |
2019 |
|||||||||||||||
ASSETS | LIABILITIES AND STOCKHOLDERS’ EQUITY |
|||||||||||||||||
Current Assets: | Current Liabilities: | |||||||||||||||||
Cash and cash equivalents | $ | 42,659 | $ | 3,309 | Current maturities of long-term debt | $ | 404 | $ | 401 | |||||||||
Receivables, net | 52,443 | 40,931 | Accounts payable | 28,456 | 29,511 | |||||||||||||
Inventory | 142,774 | 136,931 | Accrued expenses | 10,398 | 9,383 | |||||||||||||
Prepaid expenses | 4,387 | 2,048 | Income taxes payable | 2,054 | — | |||||||||||||
Refundable income taxes | — | 987 | Total Current Liabilities | 41,312 | 39,295 | |||||||||||||
Total Current Assets | 242,263 | 184,206 | Other Liabilities: | |||||||||||||||
Long-term debt, less current maturities | 40,561 | 40,658 | ||||||||||||||||
Credit agreement - revolver | 53,590 | 1 | ||||||||||||||||
Long-term operating lease liabilities | 4,058 | 4,267 | ||||||||||||||||
Property, plant, and equipment | 317,159 | 313,958 | Deferred credits | 1,152 | 1,233 | |||||||||||||
Less accumulated depreciation and amortization | (188,488 | ) | (185,539 | ) | Other noncurrent liabilities | 4,358 | 4,170 | |||||||||||
Property, Plant, and Equipment, net | 128,671 | 128,419 | Deferred income taxes | 1,806 | 1,929 | |||||||||||||
Operating lease right-of-use assets, net | 6,295 | 6,490 | Total Liabilities | 146,837 | 91,553 | |||||||||||||
Other assets | 5,173 | 3,482 | Stockholders’ equity | 235,565 | 231,044 | |||||||||||||
TOTAL ASSETS | $ | 382,402 | $ | 322,597 | TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY | $ | 382,402 | $ | 322,597 |
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(Dollars in thousands)
Quarter Ended |
||||||||||
2020 | 2019 | |||||||||
Cash Flows from Operating Activities | ||||||||||
Net income | $ | 9,842 | $ | 9,720 | ||||||
Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||||
Depreciation and amortization | 3,125 | 2,810 | ||||||||
Gain on sale of assets | (9 | ) | (138 | ) | ||||||
Share-based compensation | 1,139 | 1,125 | ||||||||
Deferred income taxes, including change in valuation allowance | 101 | 145 | ||||||||
Changes in operating assets and liabilities: | ||||||||||
Receivables, net | (11,453 | ) | (5,088 | ) | ||||||
Inventory | (5,649 | ) | (2,561 | ) | ||||||
Prepaid expenses | (2,339 | ) | (943 | ) | ||||||
Income taxes payable (refundable) | 3,100 | (1,649 | ) | |||||||
Accounts payable | 1,635 | (3,976 | ) | |||||||
Accrued expenses | 1,003 | (3,140 | ) | |||||||
Deferred credits | (81 | ) | (83 | ) | ||||||
Other, net | 128 | (11 | ) | |||||||
Net cash provided by (used in) operating activities | 542 | (3,789 | ) | |||||||
Cash Flows from Investing Activities | ||||||||||
Additions to property, plant, and equipment | (5,645 | ) | (3,741 | ) | ||||||
Deferred compensation plan investments | — | (1,166 | ) | |||||||
Acquisition of business | (2,750 | ) | — | |||||||
Proceeds from sale of property | 366 | — | ||||||||
Other, net | (160 | ) | — | |||||||
Net cash used in investing activities | (8,189 | ) | (4,907 | ) | ||||||
Cash Flows from Financing Activities | ||||||||||
Payment of dividends and dividend equivalents | (2,060 | ) | (1,714 | ) | ||||||
Purchase of treasury stock | (4,395 | ) | (5,467 | ) | ||||||
Loan fees paid related to borrowings | (1,148 | ) | — | |||||||
Principal payments on long-term debt | (100 | ) | (95 | ) | ||||||
Proceeds from credit agreement - revolver | 54,700 | 11,025 | ||||||||
Other, net | — | (78 | ) | |||||||
Net cash provided by financing activities | 46,997 | 3,671 | ||||||||
Increase (decrease) in cash and cash equivalents | 39,350 | (5,025 | ) | |||||||
Cash and cash equivalents, beginning of period | 3,309 | 5,025 | ||||||||
Cash and cash equivalents, end of period | $ | 42,659 | $ | — |
RECONCILIATION OF SELECTED GAAP MEASURES TO NON-GAAP MEASURES (UNAUDITED)
(in thousands)
Quarter Ended |
||||||||||||||||||||
Operating Income |
Income before Income Taxes |
Net Income | MGP Earnings (a) |
Basic and Diluted EPS |
||||||||||||||||
Reported GAAP Results | $ | 13,708 | $ | 13,066 | $ | 9,842 | $ | 9,776 | $ | 0.57 |
||||||||||
Adjusted to remove: | ||||||||||||||||||||
CEO transition costs (b) | 585 | 585 | 574 | 574 | 0.04 |
|||||||||||||||
Adjusted Non-GAAP results | $ | 14,293 | $ | 13,651 | $ | 10,416 | $ | 10,350 | $ | 0.61 |
Quarter Ended |
||||||||||||||||||||
Operating Income |
Income before Income Taxes |
Net Income | MGP Earnings (a) |
Basic and Diluted EPS |
||||||||||||||||
Reported GAAP Results | $ | 8,513 | $ | 8,261 | $ | 9,720 | $ | 9,654 | $ | 0.57 | ||||||||||
Adjusted to remove: | ||||||||||||||||||||
Adjusted Non-GAAP results | $ | 8,513 | $ | 8,261 | $ | 9,720 | $ | 9,654 | $ | 0.57 |
(a) MGP Earnings has been defined as "Net income attributable to common shareholders and used in EPS calculation."
(b) The CEO transition costs are included in the Condensed Consolidated Statement of Income within the Selling, general and administrative line item. The adjustment includes additional employee related costs in connection with the transition of CEOs.
Source: MGP Ingredients, Inc.