News Release

MGP Ingredients Reports Record Fourth Quarter and Full Year 2021 Results

02/24/2022

Full year consolidated sales increased 58.5% from prior year period

Full year operating income increased 133.0%

ATCHISON, Kan., Feb. 24, 2022 (GLOBE NEWSWIRE) -- MGP Ingredients, Inc. (Nasdaq:MGPI), a leading provider of distilled spirits, branded spirits and specialty food ingredients, today reported results for the fourth quarter and full year ended December 31, 2021.

2021 fourth quarter consolidated results compared to 2020 fourth quarter

  • Sales increased 65.3% to $166.8 million, as a result of sales growth in each of the reporting segments.
  • Gross profit increased 66.3% to $52.8 million, representing 31.6% of consolidated sales.
  • Operating income increased 191.6% to $45.3 million; adjusted operating income increased 70.5% to $29.0 million.
  • Adjusted EBITDA increased 67.5% to $34.5 million.
  • Fully diluted earnings per share ("EPS") increased to $1.40 per share from $0.69 per share; fully diluted adjusted EPS increased to $0.87 per share from $0.75 per share.

2021 full year consolidated results compared to 2020 full year

  • Sales increased 58.5% to $626.7 million, due to strong growth in each of the reporting segments.
  • Gross profit increased 101.4% to a record $199.0 million, representing 31.7% of consolidated sales, due to strong growth in each of the reporting segments.
  • Adjusted gross profit increased 103.9% to a record $201.5 million, representing 32.2% of consolidated sales.
  • Operating income increased 133.0% to $126.4 million; adjusted operating income increased 112.8% to $121.5 million.
  • Adjusted EBITDA increased 99.4% to $141.0 million.
  • Fully diluted EPS increased to $4.34 per share compared to $2.37 per share in 2020; fully diluted adjusted EPS increased to $4.24 per share from $2.51 per share.

“Our record performance this year demonstrated the strength of our business model and the value each of our segments bring to our global customer base and was bolstered by the synergistic effects of the Luxco acquisition,” said David Colo, president and CEO of MGP Ingredients. “New distillate and aged whiskey sales experienced another solid year which drove a 28.4% increase in premium beverage alcohol sales for the year. Specialty ingredients sales posted strong double-digit growth this year, resulting in a 16.1% increase in segment sales, and represents another record year for our Ingredient Solutions segment. Looking ahead to 2022, we will continue to build on our established track record of providing differentiated products and services to our customers. We remain confident in MGP’s ability to deliver sustainable, long-term growth.”

Distillery Products Segment
For the fourth quarter of 2021, Distillery Products segment sales increased 3.3% to $82.5 million, reflecting a 1.8% increase in sales of premium beverage alcohol, primarily due to higher new distillate American Whiskey and white goods sales. Gross profit increased to $26.9 million, or 32.6% of segment sales, compared to $26.0 million, or 32.5% of segment sales in the fourth quarter 2020.

For the full year 2021, Distillery Products segment sales increased 12.5% to $352.5 million, primarily due to higher aged whiskey and new distillate sales. Gross profit increased to $114.1 million, or 32.4% of segment sales, compared to $75.8 million, or 24.2% of segment sales in 2020.

“Strong consumer demand for our American Whiskey products continues to drive meaningful sales for premium beverage alcohol,” said Colo. “Our impressive gross profit results highlight the long-term value of our aging whiskey inventory and is augmented by our ability to create new relationships and develop partnerships with existing customers. We remain focused on being proactive to attract additional aged whiskey and new distillate customers across each customer type.”

Branded Spirits Segment
In the fourth quarter of 2021, sales for the Branded Spirits segment totaled $61.0 million, primarily due to the Luxco acquisition. Gross profit increased to $20.9 million, or 34.3% of segment sales.

For the full year 2021, Branded Spirits segment sales totaled $183.6 million. Gross profit increased to $62.6 million, or 34.1% of segment sales. Excluding the non-recurring impact of a purchase accounting adjustment related to the Luxco acquisition, gross margin totaled 35.5% for the year.

“Our strong Branded Spirits segment results for the quarter and year continued to benefit from the accelerated Luxco integration efforts by the organization,” commented Colo. “Growth in our American Whiskey and Tequila offerings contributed to the solid results for the quarter and year. We believe consumer demand for our expansive family of brands and spirits will continue to position us well for incremental growth.”

Ingredient Solutions Segment
For the fourth quarter of 2021, Ingredient Solutions segment sales increased 15.2% to $23.4 million. Gross profit totaled to $5.0 million, representing 21.2% of segment sales, compared to $5.3 million, or 26.3% of segment sales in the fourth quarter 2020.

For the full year 2021, Ingredient Solutions segment sales increased 16.1% to $90.7 million, driven by higher sales of specialty wheat starches and specialty wheat proteins. Gross profit increased to $22.2 million, or 24.5% of segment sales, compared to $20.8 million, or 26.7% of segment sales in the prior year period.

"Ingredient Solutions again finished the year with great momentum, as our specialty wheat starches and proteins business lines contributed to another strong quarter," Colo continued. "We remain pleased with our diverse customer base and ability to further optimize the product mix and channels to drive additional profitability."

Other
MGP experienced a fire at the Atchison facility during the fourth quarter 2020. During the quarter, the Company received a final settlement from its insurance carrier, $16.3 million of which was for the damaged dryer. The Company has completed construction of a replacement drying system, which became operational during the fourth quarter of 2021.

Corporate selling, general and administrative ("SG&A") expenses for the fourth quarter 2021, inclusive of advertising and promotion expenses, increased to $23.8 million, primarily driven by the assumption of Luxco SG&A expenses, which were partially offset by lower incentive compensation expenses. For the full year 2021, corporate SG&A expenses, inclusive of advertising and promotion expenses, increased to $88.9 million due to the assumption of Luxco expenses and one-time acquisition related costs.

The corporate effective tax rate for the fourth quarter 2021 was 26.8% compared with 23.7% a year ago. The corporate effective tax rate for the full year 2021 was 25.0% compared with 23.3% in 2020.

Fully diluted EPS increased to $1.40 for the fourth quarter 2021, compared to $0.69 for the fourth quarter 2020. Fourth quarter 2021 fully diluted adjusted EPS increased to $0.87 per share from $0.75 per share, as compared to the prior year period. For the full year 2021, fully diluted EPS increased to $4.34, compared to $2.37 for the prior year period. Fully diluted adjusted EPS for the full year 2021 increased to $4.24 per share from $2.51 per share, as compared to the prior year period.

2022 Outlook
MGP is offering the following increased consolidated guidance for fiscal 2022:

  • Sales are projected to be in the range of $690 million to $715 million.
  • Adjusted EBITDA is expected to be in the range of $150 million to $157 million.
  • Basic adjusted earnings per share are forecasted to be in the $4.15 to $4.35 range, with basic weighted average shares outstanding expected to be approximately 22.0 million at year end.
  • Fully diluted adjusted earnings per share are forecasted to be in the $3.95 to $4.10 range, with fully diluted weighted average shares outstanding expected to be approximately 24.1 million at year end.

Conclusion
"We are very pleased with the momentum we ended the fiscal year on and believe we are well positioned to execute and deliver against our long-term growth strategy in fiscal 2022," Colo continued. “As a result of the continued demand we have been experiencing in each of our three business segments, we recently announced expansionary projects totaling approximately $33 million over the next two years. We are committed to leveraging the strong foundation we’ve established over the years to position MGP for sustainable long-term growth,” concluded Colo.

Conference Call and Webcast Information
MGP Ingredients will host a conference call for analysts and institutional investors at 10 a.m. ET today to discuss these results and current business trends. The conference call and webcast will be available via:

Webcast: ir.mgpingredients.com on the Events & Presentations page
Conference Call: 844-308-6398 (domestic) or 412-717-9605 (international)

About MGP Ingredients, Inc.
MGP Ingredients, Inc. (Nasdaq: MGPI) is a leading producer of premium distilled spirits, branded spirits, and food ingredient solutions. Since 1941, we have combined our expertise and energy aimed at formulating excellence, bringing product ideas to life collaboratively with our customers.

As one of the largest distillers in the U.S., MGP’s offerings include bourbon and rye whiskeys, gins, and vodkas, which are created at the intersection of science and imagination, for customers of all sizes, from crafts to multinational brands. With U.S. distilleries in Kentucky, Indiana, Kansas, and Washington D.C., and bottling operations in Missouri, Ohio, and Northern Ireland, MGP has the infrastructure and expertise to create on any scale.

MGP’s branded spirits portfolio covers a wide spectrum of brands in every segment, including iconic brands from Luxco, which was founded in 1958 by the Lux Family. Luxco is a leading producer, supplier, importer and bottler of beverage alcohol products. Our branded spirits mission is to meet the needs and exceed the expectations of consumers, associates and business partners. Luxco’s award-winning spirits portfolio includes well-known brands from five distilleries: Bardstown, Kentucky-based Lux Row Distillers, home of Ezra Brooks, Rebel, Blood Oath, David Nicholson and Daviess County; Lebanon, Kentucky-based Limestone Branch Distillery, maker of Yellowstone Kentucky Straight Bourbon Whiskey, Minor Case Straight Rye Whiskey and Bowling & Burch Gin; Jalisco, Mexico-based Destiladora González Lux, producer of 100% agave tequilas, El Mayor, Exotico and Dos Primos; MGP’s historic distillery in Lawrenceburg, Indiana, where the George Remus Straight Bourbon Whiskey and Rossville Union Straight Rye Whiskey are produced; and the Washington, D.C.-based Green Hat Distillery, producer of the Green Hat family of gins. The innovative and high-quality brand portfolio also includes Everclear Grain Alcohol, Pearl Vodka, Saint Brendan’s Irish Cream, The Quiet Man Irish Whiskey and other well-recognized brands.

In addition, our Ingredient Solutions segment offers specialty proteins and starches that help customers harness the power of plants and provide a host of functional, nutritional and sensory benefits for a wide range of food products.

The transformation of American grain into something more is in the soul of our people, products, and history. We’re devoted to unlocking the creative potential of this extraordinary resource. For more information, visit mgpingredients.com.

Cautionary Note Regarding Forward-Looking Statements
The forward-looking statements contained herein include, but are not limited to, statements about the expected effects on MGP Ingredients, Inc. ("the Company") of the recent acquisition of Luxco, Inc. and its affiliates ("Luxco"), anticipated earnings enhancements, synergies and other strategic options. 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.

These forward-looking statements reflect management’s current beliefs and estimates of future economic circumstances, industry conditions, Company performance, and Company financial results and financial condition 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 statements. Important factors that could cause actual results to differ materially from our expectations include, among others: (i) the satisfaction of the conditions to closing the transaction to acquire Luxco in the anticipated timeframe or at all; (ii) the failure to obtain necessary regulatory approvals related to the acquisition of Luxco; (iii) the ability to realize the anticipated benefits of the acquisition of Luxco; (iv) the ability to successfully integrate the businesses; (v) disruption from the acquisition of Luxco making it more difficult to maintain business and operational relationships; (vi) significant transaction costs and unknown liabilities;(vii) litigation or regulatory actions related to the proposed acquisition of Luxco, and (viii) the financing of the acquisition of Luxco. Additional factors that could cause results to differ materially include, among others, (i) disruptions in operations at our Atchison facility, our Indiana facility, or any Luxco 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 impact of the COVID-19 pandemic, (viii) the ability to effectively pass raw material price increases on to customers, (ix) our ability to maintain compliance with all applicable loan agreement covenants, (x) our ability to realize operating efficiencies, (xi) actions of governments, and (xii) 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, 2021.

Non-GAAP Financial Measures
In addition to reporting financial information in accordance with U.S. GAAP, the company provides certain non-GAAP financial measures that are not in accordance with, or alternatives for, GAAP. In addition to the comparable GAAP measures, MGP has disclosed adjusted operating income, adjusted income before taxes, adjusted net income, adjusted MGP earnings, basic and diluted adjusted earnings per share, and adjusted EBITDA. The presentation of non-GAAP financial measures should be reviewed in conjunction with operating income, income before taxes, net income, net income attributable to common shareholders and basic and diluted earnings per share computed in accordance with U.S. GAAP and should not be considered a substitute for these GAAP measures. The non-GAAP adjustments referenced in the section entitled "Reconciliation of Selected GAAP Measures to Adjusted Non-GAAP Measures," take into account the impacts of items that are not necessarily ongoing in nature and/or predictive of the Company's operating trends. We believe that these non-GAAP measures provide useful information to investors regarding the company's performance and overall results of operations. In addition, management uses these non-GAAP measures in conjunction with GAAP measures when evaluating the Company’s operating results compared to prior periods on a consistent basis, assessing financial trends and for forecasting purposes. Non-GAAP financial measures may not provide information that is directly comparable to other companies, even if similar terms are used to identify such measures. The attached schedules provide a full reconciliation of these non-GAAP financial measures to their most directly comparable U.S. GAAP financial measure.

For More Information
Investors & Analysts:
Mike Houston
646-475-2998 or investor.relations@mgpingredients.com 

Media:
Greg Manis
913-360-5440 or greg.manis@mgpingredients.com 

MGP INGREDIENTS, INC.
OPERATING INCOME ROLLFORWARD
(Dollars in thousands)

Operating income, quarter versus quarter   Operating Income   Change  
Operating income for quarter ended December 31, 2020   $ 15,543        
Increase in gross profit - Branded Spirits segment     20,447     131.6   pp(a)
Increase in gross profit - Distillery Products segment     953     6.1   pp
Decrease in gross profit - Ingredient Solutions segment     (378 )   (2.4 ) pp
Increase in insurance recoveries     16,325     105.0   pp
Increase in Advertising and promotion expenses     (5,332 )   (34.3 ) pp
Increase in selling general and administrative expenses     (2,242 )   (14.4 ) pp
Operating income for quarter ended December 31, 2021   $ 45,316     191.6 %  


Operating income, year versus year   Operating Income   Change  
Operating income for year ended December 31, 2020   $ 54,241        
Increase in gross profit - Branded Spirits segment     60,457     111.5   pp(a)
Increase in gross profit - Distillery Products segment     38,333     70.7   pp
Increase in gross profit - Ingredient Solutions segment     1,369     2.5   pp
Increase in Insurance recoveries     16,325     30.1   pp
Increase in Advertising and promotion expenses     (13,386 )   (24.7 ) pp
Increase in SG&A expenses     (30,976 )   (57.1 ) pp
Operating income for year ended December 31, 2021   $ 126,363     133.0 %  

(a) Percentage points (“pp”).


MGP INGREDIENTS, INC.
EARNINGS PER SHARE (“EPS”) ROLLFORWARD

Change in basic and diluted EPS, quarter versus quarter   EPS   Change  
Basic and diluted EPS for quarter ended December 31, 2020   $ 0.69        
Change in operations (a)     1.32     191.3   pp(b)
Change in income attributable to participating securities(c)     0.03     4.3   pp
Change in other income (expense), net (a)     (0.05 )   (7.2 ) pp
Change in interest expense(a)     (0.04 )   (5.8 ) pp
Change in weighted average shares outstanding(d)     (0.40 )   (58.0 ) pp
Tax: Change in effective tax rate     (0.08 )   (11.6 ) pp
Change in noncontrolling interest     (0.03 )   (4.3 ) pp
Basic EPS for quarter ended December 31, 2021     1.44     108.7 %  
Conversion feature of Convertible Senior Notes     (0.04 )   (5.8 ) pp
Diluted EPS for quarter ended December 31, 2021   $ 1.40     102.9 %  


Change in basic and diluted EPS, year versus year   EPS   Change  
Basic and diluted EPS for year ended December 31, 2020   $ 2.37        
Change in operating income(a)     3.24     136.7   pp(b)
Change in income attributable to participating securities(c)     0.03     1.3   pp
Change in interest expense(a)     (0.08 )   (3.4 ) pp
Change in other income (expense), net(a)     (0.08 )   (3.4 ) pp
Change in weighted average shares outstanding(d)     (0.98 )   (41.4 ) pp
Tax: Change in effective tax rate     (0.10 )   (4.2 ) pp
Change in noncontrolling interest     (0.03 )   (1.3 ) pp
Basic EPS for year ended December 31, 2021     4.37     84.4 %  
Conversion feature of Convertible Senior Notes     (0.03 )   (1.3 ) pp
Diluted EPS for year ended December 31, 2021   $ 4.34     83.1 %  

(a) Items are net of tax based on the effective tax rate for the base year (2020).
(b) Percentage points ("pp")
(c) Income attributable to participating securities changes primarily due to the awarding and vesting of the employee RSUs that receive dividend equivalent payments.
(d) Weighted average shares outstanding change primarily due to our repurchases of Common Stock, the vesting of employee RSUs, our purchase of vested RSUs from employees to pay withholding taxes, and the granting of Common Stock to directors. Additionally, during 2021, the weighted average shares outstanding was impacted by the issuance of shares as part of the Merger consideration.


MGP INGREDIENTS, INC.
SALES BY OPERATING SEGMENT
(Dollars in thousands)

  DISTILLERY PRODUCTS SALES
  Quarter Ended December 31,   Quarter versus Quarter Sales Change Increase/(Decrease)
  2021   2020   $ Change   % Change
Brown goods $ 32,474   $ 35,346   $ (2,872 )   (8.1 )%
White goods   19,769     15,951     3,818     23.9  
Premium beverage alcohol   52,243     51,297     946     1.8  
Industrial alcohol   15,732     16,650     (918 )   (5.5 )
Food grade alcohol   67,975     67,947     28      
Fuel grade alcohol   4,054     1,660     2,394     144.2  
Distillers feed and related co-products   5,885     6,220     (335 )   (5.4 )
Warehouse services   4,574     3,990     584     14.6  
Total Distillery Products $ 82,488   $ 79,817   $ 2,671     3.3 %
               


  BRANDED SPIRITS SALES
  Quarter Ended December 31,   Quarter versus Quarter Sales
Change Increase/(Decrease)
  2021   2020   $ Change   % Change
Ultra premium $ 10,338   $ 723   $ 9,615   1,329.9 %
Premium   6,971     91     6,880   7,560.4  
Mid   16,996         16,996   N/A  
Value   18,513         18,513   N/A  
Other   8,191     14     8,177   58,407.1  
Total Branded Spirits $ 61,009   $ 828   $ 60,181   7,268.2 %


  INGREDIENT SOLUTIONS SALES
  Quarter Ended December 31,   Quarter versus Quarter Sales
Change Increase / (Decrease)
  2021   2020   $ Change   % Change
Specialty wheat starches $ 12,707   $ 10,693   $ 2,014     18.8 %
Specialty wheat proteins   8,186     6,588     1,598     24.4  
Commodity wheat starches   2,442     2,383     59     2.5  
Commodity wheat proteins   15     606     (591 )   (97.5 )
Total Ingredient Solutions $ 23,350   $ 20,270   $ 3,080     15.2 %
               


MGP INGREDIENTS, INC.
SALES BY OPERATING SEGMENT
(Dollars in thousands)

  DISTILLERY PRODUCTS SALES
  Year Ended December 31,   Year versus Year Sales
Change Increase/(Decrease)
  2021   2020   $ Change   % Change
Brown goods $ 162,074   $ 121,384   $ 40,690     33.5 %
White goods   75,818     63,873     11,945     18.7  
Premium beverage alcohol   237,892     185,257     52,635     28.4  
Industrial alcohol   62,628     80,682     (18,054 )   (22.4 )
Food grade alcohol   300,520     265,939     34,581     13.0  
Fuel grade alcohol   14,916     5,630     9,286     164.9  
Distillers feed and related co-products   19,545     26,109     (6,564 )   (25.1 )
Warehouse services   17,523     15,631     1,892     12.1  
Total Distillery Products $ 352,504   $ 313,309   $ 39,195     12.5 %
               


  BRANDED SPIRITS SALES
  Year Ended December 31,   Year versus Year Sales
Change Increase/(Decrease)
  2021   2020   $ Change   % Change
Ultra premium $ 34,030   $ 3,772   $ 30,258   802.2 %
Premium   19,663     334     19,329   5,787.1  
Mid   51,890         51,890   N/A  
Value   58,514         58,514   N/A  
Other   19,469     43     19,426   45,176.7  
Total Branded Spirits $ 183,566   $ 4,149   $ 179,417   4,324.3 %
               


  INGREDIENT SOLUTIONS SALES
  Year Ended December 31,   Year versus Year Sales
Change Increase/(Decrease)
  2021   2020   $ Change   % Change
Specialty wheat starches $ 47,758   $ 41,631   $ 6,127     14.7 %
Specialty wheat proteins   31,485     26,960     4,525     16.8  
Commodity wheat starches   10,014     7,630     2,384     31.2  
Commodity wheat proteins   1,393     1,842     (449 )   (24.4 )
Total Ingredient Solutions $ 90,650   $ 78,063   $ 12,587     16.1 %
               


MGP INGREDIENTS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
(Dollars in thousands)

    Quarter Ended December 31,   Year Ended December 31,
    2021   2020   2021   2020
Sales   $ 166,847     $ 100,915     $ 626,720     $ 395,521  
Cost of sales     114,094       69,184       427,755       296,715  
Gross profit     52,753       31,731       198,965       98,806  
                 
Advertising and promotion expense     6,210       878       16,098       2,712  
Selling, general and administrative     17,552       15,310       72,829       41,853  
Insurance Recoveries     (16,325 )           (16,325 )      
Operating income     45,316       15,543       126,363       54,241  
                 
Interest expense, net     (1,329 )     (566 )     (4,037 )     (2,267 )
Other income (loss), net     (751 )     275       (1,230 )     627  
Income before income taxes     43,236       15,252       121,096       52,601  
                 
Income tax expense     11,578       3,620       30,279       12,256  
Net income     31,658       11,632       90,817       40,345  
                 
Net loss attributable to noncontrolling interest     211             490        
Net income attributable to MGP Ingredients, Inc.     31,869       11,632       91,307       40,345  
                 
Income attributable to participating securities     (236 )     (75 )     (712 )     (261 )
Net income used in earnings per share calculation   $ 31,633     $ 11,557     $ 90,595     $ 40,084  
                 
Weighted average common shares                
Basic     21,983,310       16,919,241       20,719,663       16,937,125  
Diluted     23,011,154       16,919,241       20,982,453       16,937,125  
                 
Earnings per share                
Basic   $ 1.44     $ 0.69     $ 4.37     $ 2.37  
Diluted   $ 1.40     $ 0.69     $ 4.34     $ 2.37  
                                 


MGP INGREDIENTS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
(Dollars in thousands)

  December 31,
2021
  December 31,
2020
    December 31,
2021
  December 31,
2020
ASSETS         LIABILITIES AND STOCKHOLDERS’ EQUITY      
Current Assets:         Current Liabilities:      
Cash and cash equivalents $ 21,568     $ 21,662     Current maturities of long-term debt $ 3,227   $ 1,600
Receivables, net   92,537       56,966     Accounts payable   53,712     30,273
Inventory   245,944       141,011     Federal and state excise taxes payable   6,992     107
Prepaid expenses   1,510       2,644     Income taxes payable       704
Refundable income taxes   5,539           Accrued expenses and other   24,869     20,645
Total Current Assets   367,098       222,283     Total Current Liabilities   88,800     53,329
                 
Property, plant, and equipment   428,249       313,730     Other liabilities:      
Less accumulated depreciation and amortization   (220,963 )     (181,738 )   Long-term debt, less current maturities   35,266     38,271
Property, Plant, and Equipment, net   207,286       131,992     Convertible senior notes   194,906    
Operating lease right-of-use assets, net   9,671       5,151     Long-term operating lease liabilities   6,997     3,057
Investment in joint ventures   4,944           Other noncurrent liabilities   5,132     7,094
Intangible assets, net   218,838       890     Deferred income taxes   66,101     2,298
Goodwill   226,294       2,738     Total Liabilities   397,202     104,049
Other assets   7,336       3,521     Total equity   644,265     262,526
TOTAL ASSETS $ 1,041,467     $ 366,575     TOTAL LIABILITIES AND TOTAL EQUITY $ 1,041,467   $ 366,575


MGP INGREDIENTS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(Dollars in thousands)

    December 31,
    2021   2020
Cash Flows from Operating Activities        
Net income   $ 90,817     $ 40,345  
Adjustments to reconcile net income to net cash provided by operating activities:        
Depreciation and amortization     19,092       12,961  
Gain on insurance recoveries     (16,325 )      
Share-based compensation     5,555       3,002  
Equity Method investment loss     1,611        
Deferred income taxes, including change in valuation allowance     6,772       593  
Other, net     145       494  
Changes in operating assets and liabilities, net of effects of acquisition:        
Receivables, net     (6,031 )     (16,173 )
Inventory     (14,214 )     (3,886 )
Prepaid expenses     2,586       (748 )
Income taxes payable (refundable)     (6,242 )     1,750  
Accounts payable     5,301       1,817  
Accrued expenses and other     738       11,537  
Federal and state excise taxes payable     (1,467 )     (34 )
Other, net     (75 )     1,597  
Net cash provided by operating activities     88,263       53,255  
         
Cash Flows from Investing Activities        
Additions to property, plant, and equipment     (47,389 )     (19,701 )
Purchase of business, net of cash acquired     (149,005 )     (2,750 )
Contributions to equity method investment     (1,470 )      
Proceeds from property insurance recoveries     16,325        
Proceeds from sale of property and other           2,906  
Other, net     (1,080 )     (102 )
Net cash used in investing activities     (182,619 )     (19,647 )
         
Cash Flows from Financing Activities        
Payment of dividends and dividend equivalents     (10,017 )     (8,188 )
Purchase of treasury stock     (767 )     (4,411 )
Loan fees paid related to borrowings     (7,050 )     (1,148 )
Principal payments on long-term debt     (1,620 )     (1,208 )
Proceeds from credit agreement - revolver     242,300       54,700  
Payments on credit agreement - revolver     (242,300 )     (55,000 )
Proceeds from Convertible Senior Notes     201,250        
Payment on assumed debt as part of the Merger     (87,509 )      
Net cash provided by (used in) financing activities     94,287       (15,255 )
         
Effect of exchange rate changes on cash and cash equivalents     (25 )      
Increase (decrease) in cash and cash equivalents     (94 )     18,353  
Cash and cash equivalents, beginning of period     21,662       3,309  
Cash and cash equivalents, end of period   $ 21,568     $ 21,662  


MGP INGREDIENTS, INC.
RECONCILIATION OF SELECTED GAAP MEASURES TO ADJUSTED NON-GAAP MEASURES
(UNAUDITED)
(in thousands)

  Quarter Ended December 31, 2021
  Gross Profit   Operating Income   Income before Income Taxes   Net Income   MGP Earnings(a)   Basic EPS   Diluted EPS
Reported GAAP Results $ 52,753   $ 45,316     $ 43,236     $ 31,658     $ 31,633     $ 1.44     $ 1.40  
Adjusted to remove:                          
Insurance recoveries(b)       (16,325 )     (16,325 )     (12,244 )     (12,244 )     (0.56 )     (0.53 )
Business acquisition costs(c)       5       5       5       5              
Adjusted Non-GAAP results $ 52,753   $ 28,996     $ 26,916     $ 19,419     $ 19,394     $ 0.88     $ 0.87  









  Quarter Ended December 31, 2020
  Gross Profit   Operating Income   Income before Income Taxes   Net Income   MGP Earnings(a)   Basic and Diluted EPS
Reported GAAP Results   31,731   $ 15,543   $ 15,252   $ 11,632   $ 11,557   $ 0.69
Adjusted to remove:                      
CEO transition costs (d)       542     542     188     188     0.01
Business acquisition costs (c)       919     919     919     919     0.05
Adjusted Non-GAAP results $ 31,731   $ 17,004   $ 16,713   $ 12,739   $ 12,664   $ 0.75


  Year Ended December 31, 2021
  Gross Profit   Operating Income   Income before Income Taxes   Net Income   MGP Earnings(a)   Basic EPS   Diluted EPS
Reported GAAP Results $ 198,965   $ 126,363     $ 121,096     $ 90,817     $ 90,595     $ 4.37     $ 4.34  
Adjusted to remove:                          
Insurance recoveries(b)       (16,325 )     (16,325 )     (12,244 )     (12,244 )     (0.59 )     (0.58 )
Inventory step-up - Branded Spirits (e)   2,529     2,529       2,529       2,529       2,510       0.12       0.12  
Business acquisition costs(c)       8,927       8,927       7,529       7,467       0.36       0.36  
Adjusted Non-GAAP results $ 201,494   $ 121,494     $ 116,227     $ 88,631     $ 88,328     $ 4.26     $ 4.24  


  


  Year Ended December 31, 2020
  Gross Profit   Operating Income   Income before Income Taxes   Net Income   MGP Earnings(a)   Basic and Diluted EPS
Reported GAAP Results $ 98,806   $ 54,241   $ 52,601   $ 40,345   $ 40,084   $ 2.37
Adjusted to remove:                      
CEO transition costs (d)       1,932     1,932     1,467     1,467     0.09
Business acquisition costs (c)       919     919     919     919     0.05
Adjusted Non-GAAP results $ 98,806   $ 57,092   $ 55,452   $ 42,731   $ 42,470   $ 2.51


MGP INGREDIENTS, INC.
RECONCILIATION OF SELECTED GAAP MEASURES TO ADJUSTED NON-GAAP MEASURES

(a)   MGP Earnings has been defined as "Net income used in earnings per share calculation"

(b)   The Insurance recovery costs are included in the Consolidated Statement of Income within the Insurance recoveries line item. During November 2020, we experienced a fire at the Atchison facility. The fire damaged certain equipment in the facility’s feed drying operations and caused a temporary loss of production time. This adjustment includes the legally binding commitment from our insurance carrier for final settlement for the replacement of the damaged dryer.

(c)   The Business acquisition costs are included in the Consolidated Statement of Income within the Selling, general and administrative line item. The adjustment includes transaction and integration costs associated with the merger with Luxco.

(d)   The CEO transition costs are included in the 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.

(e)   The finished goods Inventory valuation step-up costs are included in the Consolidated Statement of Income within Cost of goods by the Branded Spirits segment. The adjustment includes the purchase accounting adjustment to value the acquired finished goods inventory at its estimated fair value.


MGP INGREDIENTS, INC.
RECONCILIATION OF NET INCOME TO ADJUSTED EBITDA
(UNAUDITED) (in thousands)

  Quarter Ended December 31,   Year Ended December 31,
  2021   2020   2021   2020
Net Income $ 31,658     $ 11,632   $ 90,817     $ 40,345
Interest expense   1,329       566     4,037       2,267
Income tax expense   11,578       3,620     30,279       12,256
Depreciation and amortization   5,424       3,343     19,092       12,961
Equity method investment   872           1,611      
Insurance recoveries   (16,325 )         (16,325 )    
Inventory step-up - Branded Spirits             2,529      
Business acquisition costs   5       919     8,927       919
CEO transition costs         542           1,932
Adjusted EBITDA $ 34,541     $ 20,622   $ 140,967     $ 70,680

The non-GAAP adjusted EBITDA measure is defined as earnings before interest, taxes, depreciation and amortization, equity method investment, insurance recoveries, inventory step-up, business acquisition costs and CEO transition costs. See section "reconciliation of selected GAAP measure to non-GAAP measures" for further details on each of these non-GAAP Items.


MGP INGREDIENTS, INC.
Purchase Accounting - Summary of Preliminary Fair Value Step Up
(UNAUDITED) (in thousands)

The Merger was accounted for as a business combination in accordance with Accounting Standard Codification 805 (“ASC 805”), Business Combinations, and as such, assets acquired, liabilities assumed, and consideration transferred were recorded at their estimated fair values on the acquisition date. The fair value of the assets and liabilities are based upon a preliminary assessment of fair value and may change as valuations for certain tangible assets, intangible assets and contingent liabilities are finalized and the associated income tax impacts are determined. The Company expects to finalize the purchase price allocation as soon as practicable, but no longer than one year from the acquisition date. The table below reflects the summary for Finished Goods inventory, Whiskey inventory, Property, plant and equipment, and Distributor relationships preliminary purchase price accounting step up to fair value, the related amortization period and the Income Statement caption within which the adjustment is included.

              Income Statement Impact
  Step Up Value   Amortization Period   Income Statement Caption   Quarter Ended December 31, 2021   Year Ended
December 31, 2021
Finished Goods Inventory $ 2,529   3 months   Cost of sales   $   $ 2,529
Whiskey Inventory   1,065   10 years   Cost of sales     27     81
Property, plant and equipment   7,340   various   Cost of sales     487     1,534
Definite-lived intangible asset - Distributor relationships   41,400   20 years   SG&A     516     1,552
Total Fair Value Step Up $ 52,334           $ 1,030   $ 5,696



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Source: MGP Ingredients, Inc.