MGP Ingredients Reports Strong First Quarter Profitability
05/04/2016
2016 first quarter highlights
- Net sales decreased 4.4% to
$76.8 million as increases in net sales of premium beverage alcohol were more than offset by decreases in net sales of lower margin products. - Gross profit increased 27.3% to
$17.0 million . - Gross margin improved 5.6 percentage points to 22.2%.
- Operating income increased 55.3% to
$10.7 million . - Net income increased 39.2% to
$7.1 million . - Earnings per share increased 46.4% to
$0.41 .
"We are very pleased with the results for the quarter and our continued progress in implementing our long term strategic plan," said
Distillery Products Segment - First Quarter Gross Profit Rises 29%
For the first quarter, net sales for the Distillery Products segment decreased 3.1% to
Griffin noted "We continue to enjoy very strong demand for our bourbon and rye whiskeys, reflecting the projected long term growth of that category. Net sales for our Distillery Products segment were down, primarily driven by a decline in our industrial alcohol business, the result of a very competitive market and a mild flu season. Despite that, our strong focus on our higher margin beverage alcohol products pushed segment gross profit up substantially. While we expect some volatility in our product mix, we believe the large shift this quarter is temporary and we remain pleased with the long term trend."
Ingredient Solutions - First Quarter Gross Profit Increases 16%
For the 2016 first quarter, net sales for the Ingredient Solutions segment decreased 10.7% to
Griffin added, "While net sales for our Ingredients Solutions segment were down, with exports hindered by the strong
Other
Corporate selling, general and administrative expenses were
MGP received joint venture equity method investment earnings of
Earnings per share were
2016 and Long Term Guidance
MGP is providing revised guidance for 2016 and beyond. The 2016 net sales percentage growth projection has been revised downward to reflect the impact
that the first quarter sales decline of lower margin products has on the full year. Other elements of the guidance including the operating income growth are unchanged.
- Operating income is expected to increase by a compound annual growth rate in the ten to fifteen percent range over the next three years.
- 2016 net sales percentage growth is expected to be in the mid-single digits.
- 2016 gross margin gains are expected to be moderate following strong 2015 improvement.
- 2016 effective tax rate is forecast to be 35% and shares outstanding are expected to be approximately 16.7 million, reflecting the benefit of the 2015 share repurchase.
- Due to challenging and volatile conditions in the fuel ethanol market, ICP's 2015 level of profitability may not be sustainable in 2016.
Conclusion
"The momentum established in 2015 has continued into the first quarter of 2016," concluded Griffin. "Our strategy of maximizing the value of our production is clearly producing results, and will continue over the long term. Our launch of Till American Wheat Vodka demonstrates further progress in the implementation of our strategy to capture value share. We made strong progress against our barrel warehouse expansion plan, and increased our MGP-owned barreled whiskey inventory by
Annual Meeting
The company's annual meeting of shareholders is scheduled for
About
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
EARNINGS PER SHARE ROLLFORWARD | ||||||||
Change in basic and diluted earnings per share | ||||||||
Basic and Diluted EPS | Change | |||||||
Basic and diluted earnings per share for the quarter ended | $ | 0.28 | ||||||
Change in operations(a) | 0.14 | 50.0 | pp(b) | |||||
Change in equity method investments(a) | (0.03 | ) | (10.7 | ) | pp | |||
Change in interest expense(a) | (0.01 | ) | (3.6 | ) | pp | |||
Change in weighted average shares outstanding(c) | 0.02 | 7.1 | pp | |||||
Change in effective tax rate | 0.01 | 3.6 | pp | |||||
Basic and diluted earnings per share for the quarter ended | $ | 0.41 | 46.4 | % | ||||
(a) Changes are net of tax based on the effective tax rate for each base year. | ||||||||
(b) Percentage points ("pp"). | ||||||||
(c) Weighted average shares outstanding change primarily due to the vesting of employee restricted stock units, the granting of Common Stock to directors, the purchase of vested stock by the Company from employees to pay withholding taxes, and repurchases by the Company of Common Stock. |
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED) | ||||||||
Quarter Ended | ||||||||
2016 | 2015 | |||||||
Sales | $ | 77,191 | $ | 84,864 | ||||
Less: excise taxes | 356 | 4,451 | ||||||
Net sales | 76,835 | 80,413 | ||||||
Cost of sales | 59,789 | 67,025 | ||||||
Gross profit | 17,046 | 13,388 | ||||||
Selling, general and administrative expenses | 6,321 | 6,480 | ||||||
Operating income | 10,725 | 6,908 | ||||||
Equity method investment earnings (Note 2) | 517 | 1,352 | ||||||
Interest expense, net | (311 | ) | (131 | ) | ||||
Income before income taxes | 10,931 | 8,129 | ||||||
Income tax expense | 3,872 | 3,059 | ||||||
Net income | 7,059 | 5,070 | ||||||
Other comprehensive loss, net of tax | (17 | ) | (72 | ) | ||||
Comprehensive income | $ | 7,042 | $ | 4,998 | ||||
Basic and diluted earnings per share(a) | $ | 0.41 | $ | 0.28 | ||||
Dividends and dividend equivalents per common share | $ | 0.08 | $ | 0.06 |
(a) | Share information: | Quarter Ended | |||||
2016 | 2015 | ||||||
Basic weighted average common shares | 16,607,074 | 17,395,659 | |||||
Incremental shares from potential dilutive securities | — | 713 | |||||
Diluted weighted average common shares | 16,607,074 | 17,396,372 |
CONSOLIDATED BALANCE SHEET (UNAUDITED) | |||||||||||||||||
(Dollars in thousands) | 2016 | 2015 | (Dollars in thousands) | 2016 | 2015 | ||||||||||||
ASSETS | LIABILITIES AND STOCKHOLDERS' EQUITY | ||||||||||||||||
Current Assets: | Current Liabilities: | ||||||||||||||||
Cash and cash equivalents | $ | — | $ | 747 | Current maturities of long-term debt | $ | 5,997 | $ | 3,345 | ||||||||
Receivables | 31,204 | 30,670 | Accounts payable | 16,740 | 20,940 | ||||||||||||
Inventory | 68,383 | 58,701 | Accounts payable to affiliate, net | 2,302 | 2,291 | ||||||||||||
Prepaid expenses | 1,351 | 1,062 | Accrued expenses | 7,335 | 10,400 | ||||||||||||
Income taxes payable | 4,797 | 685 | |||||||||||||||
Other current liabilities | |||||||||||||||||
Total Current Assets | 100,938 | 91,180 | Total Current Liabilities | 37,171 | 37,661 | ||||||||||||
Other Liabilities: | |||||||||||||||||
Long-term debt, less current maturities | 19,239 | 7,579 | |||||||||||||||
Revolving credit facility | 12,208 | 22,536 | |||||||||||||||
Property and equipment | 233,002 | 229,914 | Deferred credit | 3,228 | 3,402 | ||||||||||||
Less accumulated depreciation and amortization | (149,585 | ) | (146,360 | ) | Accrued retirement, health and life insurance benefits | 4,085 | 4,136 | ||||||||||
Net Property, Plant | Deferred income taxes | 2,135 | 2,757 | ||||||||||||||
and Equipment | 83,417 | 83,554 | Other non current liabilities | 80 | 79 | ||||||||||||
Equity method investments | 15,780 | 18,563 | Total Liabilities | 78,146 | 78,150 | ||||||||||||
Other assets | 972 | 1,013 | Stockholders' equity | 122,961 | 116,160 | ||||||||||||
TOTAL ASSETS | $ | 201,107 | $ | 194,310 | TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY | $ | 201,107 | $ | 194,310 |
For More Information Investors & Analysts:Source:Bob Burton 616-233-0500 or Investor.Relations@mgpingredients.com Media:Greg Hibbeler 913-367-1480 or greg.hibbeler@mgpingredients.com
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