MGP Ingredients Reports Second Quarter 2020 Results
07/30/2020
2020 second quarter results compared to 2019 second quarter results
- Consolidated sales increased 2.3% to
$92.6 million , reflecting a 1.6% increase in the Distillery Products segment and a 5.4% increase in the Ingredient Solutions segment. - Consolidated gross profit increased 6.0% to
$20.7 million , due to increased gross profit in the Ingredient Solutions segment, partially offset by a$1.7 million impact of a cyberattack that temporarily disrupted production at theAtchison facilities. - Consolidated operating income increased 4.3% to
$11 .3 million due to increased gross profit in the Ingredient Solutions segment, partially offset by decreased gross profit in the Distillery Products segment. Further offsetting the increase in operating income were the impacts from the aforementioned cyberattack, as well as increased corporate selling, general and administrative expenses. - Non-GAAP operating income increased 11.5% to
$12 .1 million, exclusive of CEO transition costs. - Earnings per share ("EPS") increased to
$0.50 per share from$0.46 per share, reflecting improved operating results. - Non-GAAP EPS increased to
$0.54 per share from$0.46 per share, exclusive of CEO transition costs.
“We remain encouraged by the demand for our products, the improved financial results, as well as a strong balance sheet with ample liquidity to weather the challenges and uncertainty related to the COVID-19 pandemic,” said
“This quarter, MGP was the target of a cyberattack that temporarily disrupted production at our
Distillery Products Segment - Strong Aged
In the second quarter of 2020, sales for the Distillery Products segment increased 1.6% to
“We are very pleased with the improved performance of our aged whiskey sales this quarter, representing strong double-digit revenue growth from the prior year period,” said Colo. “Despite the uncertainty caused by the pandemic 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. These encouraging macro trends provide confidence as some new distillate customers worked through elevated inventory levels during the quarter, reflecting a year-over-year decline in new distillate brown goods sales.
“Demand for industrial alcohol remains strong during the COVID-19 pandemic as we continue to help customers navigate the challenges they are confronted with during these difficult times. We believe the increased demand for our industrial alcohol products will continue throughout the balance of the year and into 2021.”
Premium Beverage Alcohol (in thousands) | Sales Quarter Ended |
Quarter vs. Quarter Sales Change Increase/(Decrease) |
|||||||||||||||
2020 | 2019 | $ Change | % Change | ||||||||||||||
$ | 25,540 | $ | 27,621 | $ | (2,081 | ) | (7.5 | ) | % | ||||||||
White Goods | 15,042 | 14,691 | 351 | 2.4 | |||||||||||||
Premium Beverage Alcohol | $ | 40,582 | $ | 42,312 | $ | (1,730 | ) | (4.1 | ) | % |
Premium Beverage Alcohol (in thousands) | Sales for Year to Date Ended |
YTD vs. YTD Sales Change Increase/(Decrease) | |||||||||||||
2020 | 2019 | $ Change | % Change | ||||||||||||
$ | 54,610 | $ | 52,448 | $ | 2,162 | 4.1 | % | ||||||||
White Goods | 31,944 | 31,873 | 71 | 0.2 | |||||||||||
Premium Beverage Alcohol | $ | 86,554 | $ | 84,321 | $ | 2,233 | 2.6 | % |
Ingredient Solutions Segment - Gross Profit Increased 55.7%
For the second quarter of 2020, sales in the Ingredient Solutions segment increased 5.4% to
“We are pleased with the continued strength of our Ingredient Solutions segment this quarter,” continued Colo. “We remain encouraged by the robust gross margins this quarter as a result of our ability to focus production on our highest margin products and optimize the sales mix. Our Arise® specialty protein and Fibersym® specialty starch product lines are well positioned within the baking, pasta and snacking categories to leverage the ongoing consumer desire to increase the amount of plant-based protein and dietary fiber in their diets as part of an overall healthier lifestyle.”
Other
Corporate selling, general and administrative expenses of
The corporate effective tax rate for the quarter was 23.1% compared with 25.0% in the year ago period.
EPS was
Conclusion
“The headwinds we identified last quarter have persisted with varying impacts on our financial results during the quarter. The closures of bars, restaurants, and tasting rooms had an impact on our craft customer sales the past few months, even as some states implemented phased re-opening plans. Second, we began to see some of our multinational customers conserve cash this quarter, which had an impact on new distillate sales results. Lastly, international export sales did not meet pre-pandemic expectations as travel has been dramatically reduced and tariffs in key international markets persist. We continue to believe that our investments to expand international sales will provide long-term shareholder value.
“Given the continued uncertainty surrounding the COVID-19 virus, and the diminished visibility of a possible macroeconomic recovery in the back half of the year, we have maintained our position against providing 2020 financial guidance at this time,” continued Colo. “I am very pleased with the continued execution of our pandemic response plan, which focuses on protecting our employees and doing our part to help stop the spread of the virus.
“Our balance sheet and access to capital continue to be strong while we continue to optimize cash management during this pandemic. To date, the investment spend related to our warehouse expansion plan was substantially completed during the quarter and totaled approximately
“In response to growing demand, we were pleased to announce the release of Remus Repeal Reserve Series IV Straight Bourbon Whiskey 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 |
$ | 10,874 | ||||||||
Increase in gross profit - Ingredient Solutions segment | 1,681 | 15.5 | pp(a) | |||||||
Decrease in gross profit - Distillery Products segment | (501 | ) | (4.6 | ) | pp | |||||
Increase in selling general and administrative expenses | (716 | ) | (6.6 | ) | pp | |||||
Operating income for quarter ended |
$ | 11,338 | 4.3 | % |
Operating income, year to date versus year to date | Operating Income | Change | ||||||||
Operating income for year to date ended |
$ | 19,387 | ||||||||
Increase in gross profit - Ingredient Solutions segment | 5,222 | 26.9 | pp(a) | |||||||
Increase in gross profit - Distillery Products segment | 2,509 | 12.9 | pp | |||||||
Increase in selling general and administrative expenses | (2,072 | ) | (10.6 | ) | pp | |||||
Operating income for year to date ended |
$ | 25,046 | 29.2 | % |
(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 |
$ | 0.46 | ||||||
Increase in operations(b) | 0.02 | 4.3 | pp(a) | |||||
Tax: Change in income tax | 0.01 | 2.2 | pp | |||||
Decrease in weighted average shares outstanding | 0.01 | 2.2 | pp | |||||
Basic and diluted EPS for quarter ended |
$ | 0.50 | 8.7 | % |
Change in basic and diluted EPS, year to date versus year to date | Basic and Diluted EPS | Change | ||||||||
Basic and diluted EPS for year to date ended |
$ | 1.03 | ||||||||
Increase in operations(b) | 0.38 | 36.9 | pp(a) | |||||||
Decrease in weighted average shares outstanding | 0.01 | 1.0 | pp | |||||||
Change in interest expense, net (b) | (0.03 | ) | (2.9 | ) | pp | |||||
Tax: Change in share-based compensation | (0.21 | ) | (20.4 | ) | pp | |||||
Tax: Change in effective tax rate (excluding above tax item) | (0.11 | ) | (10.7 | ) | pp | |||||
Basic and diluted EPS for year to date ended |
$ | 1.07 | 3.9 | % |
(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 |
Year to Date Ended |
|||||||||||||||||||
2020 | 2019 | 2020 | 2019 | |||||||||||||||||
Sales | $ | 92,560 | $ | 90,501 | $ | 191,642 | $ | 179,597 | ||||||||||||
Cost of sales | 71,858 | 70,979 | 147,729 | 143,415 | ||||||||||||||||
Gross profit | 20,702 | 19,522 | 43,913 | 36,182 | ||||||||||||||||
Selling, general and administrative expenses | 9,364 | 8,648 | 18,867 | 16,795 | ||||||||||||||||
Operating income | 11,338 | 10,874 | 25,046 | 19,387 | ||||||||||||||||
Interest expense, net and other | (298 | ) | (321 | ) | (940 | ) | (573 | ) | ||||||||||||
Income before income taxes | 11,040 | 10,553 | 24,106 | 18,814 | ||||||||||||||||
Income tax expense | 2,550 | 2,642 | 5,774 | 1,183 | ||||||||||||||||
Net income | 8,490 | 7,911 | 18,332 | 17,631 | ||||||||||||||||
Income attributable to participating securities | 57 | 51 | 123 | 117 | ||||||||||||||||
Net income attributable to common shareholders and used in EPS calculation | $ | 8,433 | $ | 7,860 | $ | 18,209 | $ | 17,514 | ||||||||||||
Basic and diluted weighted average common shares | 16,899,079 | 17,021,599 | 16,956,502 | 16,994,864 | ||||||||||||||||
Basic and diluted earnings per common share | $ | 0.50 | $ | 0.46 | $ | 1.07 | $ | 1.03 | ||||||||||||
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
(Dollars in thousands)
ASSETS | LIABILITIES AND STOCKHOLDERS’ EQUITY | |||||||||||||||||
Current Assets: | Current Liabilities: | |||||||||||||||||
Cash and cash equivalents | $ | 11,745 | $ | 3,309 | Current maturities of long-term debt | $ | 408 | $ | 401 | |||||||||
Receivables, net | 54,164 | 40,931 | Accounts payable | 21,429 | 29,511 | |||||||||||||
Inventory | 147,108 | 136,931 | Accrued expenses | 12,626 | 9,383 | |||||||||||||
Prepaid expenses | 4,021 | 2,048 | Income taxes payable | 4,732 | — | |||||||||||||
Refundable income taxes | — | 987 | Total Current Liabilities | 39,195 | 39,295 | |||||||||||||
Total Current Assets | 217,038 | 184,206 | Other Liabilities: | |||||||||||||||
Long-term debt, less current maturities | 40,463 | 40,658 | ||||||||||||||||
Credit agreement - revolver | 23,662 | 1 | ||||||||||||||||
Long-term operating lease liabilities | 3,691 | 4,267 | ||||||||||||||||
Property, plant, and equipment | 320,192 | 313,958 | Deferred credits | 1,094 | 1,233 | |||||||||||||
Less accumulated depreciation and amortization | (191,589 | ) | (185,539 | ) | Other noncurrent liabilities | 4,605 | 4,170 | |||||||||||
Property, Plant, and Equipment, net | 128,603 | 128,419 | Deferred income taxes | 1,606 | 1,929 | |||||||||||||
Operating lease right-of-use assets, net | 5,903 | 6,490 | Total Liabilities | 114,316 | 91,553 | |||||||||||||
Other assets | 5,469 | 3,482 | Stockholders’ equity | 242,697 | 231,044 | |||||||||||||
TOTAL ASSETS | $ | 357,013 | $ | 322,597 | TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY | $ | 357,013 | $ | 322,597 | |||||||||
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(Dollars in thousands)
Year to Date Ended |
||||||||||
2020 | 2019 | |||||||||
Cash Flows from Operating Activities | ||||||||||
Net income | $ | 18,332 | $ | 17,631 | ||||||
Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||||
Depreciation and amortization | 6,344 | 5,602 | ||||||||
Gain on sale of assets | (8 | ) | (138 | ) | ||||||
Share-based compensation | 1,801 | 2,267 | ||||||||
Deferred income taxes, including change in valuation allowance | (99 | ) | 547 | |||||||
Changes in operating assets and liabilities: | ||||||||||
Receivables, net | (13,174 | ) | (2,807 | ) | ||||||
Inventory | (9,983 | ) | (9,238 | ) | ||||||
Prepaid expenses | (1,973 | ) | (514 | ) | ||||||
Income taxes payable (refundable) | 5,778 | (4,692 | ) | |||||||
Accounts payable | (4,218 | ) | (2,883 | ) | ||||||
Accrued expenses | 3,258 | (2,750 | ) | |||||||
Deferred credits | (139 | ) | (166 | ) | ||||||
Other, net | 67 | 211 | ||||||||
Net cash provided by operating activities | 5,986 | 3,070 | ||||||||
Cash Flows from Investing Activities | ||||||||||
Additions to property, plant, and equipment | (10,177 | ) | (6,192 | ) | ||||||
Deferred compensation plan investments | — | (1,177 | ) | |||||||
Acquisition of business | (2,750 | ) | — | |||||||
Proceeds from sale of property | 688 | — | ||||||||
Other, net | (168 | ) | — | |||||||
Net cash used in investing activities | (12,407 | ) | (7,369 | ) | ||||||
Cash Flows from Financing Activities | ||||||||||
Payment of dividends and dividend equivalents | (4,101 | ) | (3,427 | ) | ||||||
Purchase of treasury stock | (4,395 | ) | (5,467 | ) | ||||||
Loan fees paid related to borrowings | (1,148 | ) | — | |||||||
Proceeds from long-term debt | — | 20,000 | ||||||||
Principal payments on long-term debt | (199 | ) | (192 | ) | ||||||
Proceeds from credit agreement - revolver | 54,700 | 12,625 | ||||||||
Payments on credit agreement - revolver | (30,000 | ) | (22,025 | ) | ||||||
Other, net | — | (78 | ) | |||||||
Net cash provided by financing activities | 14,857 | 1,436 | ||||||||
Increase (decrease) in cash and cash equivalents | 8,436 | (2,863 | ) | |||||||
Cash and cash equivalents, beginning of period | 3,309 | 5,025 | ||||||||
Cash and cash equivalents, end of period | $ | 11,745 | $ | 2,162 |
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 | $ | 11,338 | $ | 11,040 | $ | 8,490 | $ | 8,433 | $ | 0.50 | ||||||||||
Adjusted to remove: | ||||||||||||||||||||
CEO transition costs (b) | 783 | 783 | 684 | 684 | 0.04 | |||||||||||||||
Adjusted Non-GAAP results | $ | 12,121 | $ | 11,823 | $ | 9,174 | $ | 9,117 | $ | 0.54 |
Quarter Ended |
||||||||||||||||||||
Operating Income | Income before Income Taxes | Net Income | MGP Earnings (a) | Basic and Diluted EPS | ||||||||||||||||
Reported GAAP Results | $ | 10,874 | $ | 10,553 | $ | 7,911 | $ | 7,860 | $ | 0.46 | ||||||||||
Adjusted to remove: | ||||||||||||||||||||
— | — | — | — | — | ||||||||||||||||
Adjusted Non-GAAP results | $ | 10,874 | $ | 10,553 | $ | 7,911 | $ | 7,860 | $ | 0.46 |
Year to Date Ended |
||||||||||||||||||||
Operating Income | Income before Income Taxes | Net Income | MGP Earnings (a) | Basic and Diluted EPS | ||||||||||||||||
Reported GAAP Results | $ | 25,046 | $ | 24,106 | $ | 18,332 | $ | 18,209 | $ | 1.07 | ||||||||||
Adjusted to remove: | ||||||||||||||||||||
CEO transition costs (b) | 1,368 | 1,368 | 1,258 | 1,258 | 0.07 | |||||||||||||||
Adjusted Non-GAAP results | $ | 26,414 | $ | 25,474 | $ | 19,590 | $ | 19,467 | $ | 1.14 |
Year to Date Ended |
||||||||||||||||||||
Operating Income | Income before Income Taxes | Net Income | MGP Earnings (a) | Basic and Diluted EPS | ||||||||||||||||
Reported GAAP Results | $ | 19,387 | $ | 18,814 | $ | 17,631 | $ | 17,514 | $ | 1.03 | ||||||||||
Adjusted to remove: | ||||||||||||||||||||
— | — | — | — | — | ||||||||||||||||
Adjusted Non-GAAP results | $ | 19,387 | $ | 18,814 | $ | 17,631 | $ | 17,514 | $ | 1.03 |
(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.