mgpi-20201029
FALSE000083501100008350112020-10-292020-10-29

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549

FORM 8-K

CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): October 29, 2020

MGP Ingredients, Inc.
(Exact name of registrant as specified in its charter)

Kansas0-1719645-4082531
(State or other jurisdiction
of incorporation)
(Commission
File Number)
(IRS Employer
Identification No.)
Cray Business Plaza
100 Commercial Street
Box 130
Atchison, Kansas 66002
(Address of principal executive offices) (Zip Code)

(913) 367-1480
(Registrant’s telephone number, including area code)

Not Applicable
(Former name or former address, if changed since last report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):
Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)

Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading SymbolName of each exchange on which registered
Common Stock, no par valueMGPINASDAQ Global Select Market
 
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.




Item 2.02. Results of Operations and Financial Condition

On October 29, 2020, MGP Ingredients, Inc. (the “Company”) issued a Press Release relating to financial results for the third quarter 2020, which ended September 30, 2020 (the “Press Release”). The Press Release is furnished herewith as Exhibit 99.1 and is incorporated herein by reference. The Press Release is furnished pursuant to Item 2.02, “Results of Operations and Financial Condition,” Item 7.01, “Regulation FD Disclosure” and Item 9.01, “Financial Statements and Exhibits.”

The information in Item 2.02 of this Current Report, including in Exhibit 99.1, is being furnished and shall not be deemed “filed” for the purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liabilities of that section. Such information shall not be deemed incorporated by reference into any registration statement or other document filed under the Securities Act of 1933, as amended, except to the extent expressly incorporated by specific reference contained in such filing or document.

Item 7.01. Regulation FD Disclosure.

Attached as Exhibit 99.1, and incorporated into this Item 7.01 by reference, is the Press Release relating to the Company’s financial results for the third quarter 2020, which ended September 30, 2020.

Item 9.01. Financial Statements and Exhibits.
(d) Exhibits
Exhibit NumberDescription
99.1*
104The cover page from this Current Report on Form 8-K, formatted in iXBRL (Inline Extensible Business Reporting Language)

* Filed herewith



SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.


                        MGP INGREDIENTS, INC.

Date: October 29, 2020
By:/s/ Brandon M. Gall
Brandon M. Gall, Vice President, Finance and Chief Financial Officer






Document

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MGP INGREDIENTS REPORTS STRONG THIRD QUARTER 2020 RESULTS
Consolidated sales increased 13.5% from prior year period; operating income increased 17.7%

ATCHISON, Kan., October 29, 2020 - MGP Ingredients, Inc. (Nasdaq:MGPI), a leading supplier of premium distilled spirits and specialty wheat proteins and starches, today reported results for the third quarter ended September 30, 2020.

2020 third quarter results compared to 2019 third quarter results

Consolidated sales increased 13.5% to $103.0 million, reflecting an increase in both the Distillery Products and Ingredient Solutions segments.
Consolidated gross profit increased 23.3% to $23.2 million, due to increased gross profit in the Ingredient Solutions and Distillery Products segments.
Consolidated operating income increased 17.7% to $13.7 million.
Non-GAAP operating income increased 17.8% to $13.7 million, exclusive of CEO transition costs.
GAAP and non-GAAP earnings per share increased to $0.61 per share from $0.48 per share, primarily due to improved operating results.

“These quarterly results highlighted the diversity of growth across our product lines and segments,” said David Colo, president and CEO of MGP Ingredients. “Aged whiskey sales experienced a record quarter while new distillate and specialty ingredients also yielded strong double-digit sales growth during the quarter. While we anticipate continued uncertainty related to the pandemic through the end of this year and into 2021, we believe we remain well positioned to execute our long-term strategic plan.”

Distillery Products Segment - Brown Goods Sales Grew 29.2% Led by Strong Aged Whiskey Sales
In the third quarter of 2020, sales for the Distillery Products segment increased 11.4% to $81.6 million. Gross profit increased to $17.3 million or 21.2% of segment sales, compared to $15.9 million, or 21.7% of segment sales in the third quarter 2019.

“We are very pleased with the continued strength of our aged whiskey sales this quarter, which equated to strong double-digit revenue growth from the prior year period,” said Colo. “Our objective of maximizing brown goods profitability continued this quarter by delivering one of our best gross profit results. However, total segment gross margins were negatively impacted by approximately 350 basis points resulting from decreased barrel put-away, as we continue to align our MGP-owned aging whiskey inventory with projected demand. New customer acquisition growth for our new distillate and aged whiskey products also remains strong despite the uncertainty related to the pandemic. The long-term macro trends supporting the ongoing growth of the American Whiskey category remain encouraging.

“Demand for our industrial alcohol products as a result of the COVID-19 pandemic continues to remain elevated with pricing slightly increasing over the prior year quarter. However, volume sales for industrial alcohol were down slightly to support increased optimization and sales of white goods premium beverage alcohol– consistent with our long-term strategy. As a result, white goods sales increased 6.5% for the quarter.”

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Ingredient Solutions Segment - Gross Profit Increased 102.9%
For the third quarter of 2020, sales in the Ingredient Solutions segment increased 22.7% to $21.3 million. Gross profit increased to $5.9 million, or 27.4% of segment sales, compared to $2.9 million, or 16.6% of segment sales in the third quarter 2019.

“The continued strength of our Ingredient Solutions segment and its diverse customer mix are reflected in the strong results this quarter,” continued Colo. “In addition to recognizing efficiencies to improve throughput and profitability, we were also successful in continuing to optimize our product mix this quarter. Consumer trends seeking to increase the amount of plant-based protein and dietary fiber in their diets as part of an overall healthier lifestyle continue to align well with our ingredient product portfolio and underscore our confidence in the sustainability of these improved results going forward.”

Other
Corporate selling, general and administrative expenses of $9.5 million for the third quarter 2020 increased 32.3%, compared to the third quarter 2019, primarily due to higher incentive compensation expenses and professional service fees, which were partially offset by decreased costs related to the prior year EPA settlement.

The corporate effective tax rate for the quarter was 21.6% compared with 26.9% in the year ago period. The decrease, as compared to the prior year period, was primarily due to the release of a portion of the Company's valuation allowance.

GAAP and non-GAAP earnings per share increased to $0.61 per share for the third quarter 2020, compared to $0.48 per share for the third quarter 2019.

Conclusion
“We remain confident in our long-term strategy and our ability to align with strong macro consumer trends across the organization,” stated Colo. “Our investment in aging whiskey inventory decreased this quarter to $108.4 million, at cost. This decline was primarily driven by increased sales of aged whiskey and decreased put-aways during the quarter. We are realizing the long-term value of this inventory, as reflected in our operating cash flows, and believe we are well positioned to meet projected demand while delivering sustainable growth and value creation for the Company.

“Our brands initiative continued its momentum this quarter as consumer acceptance of our core portfolio remains strong. The launch of our Remus Repeal Reserve Series IV, as well as our single barrel offerings of George Remus® bourbon and Rossville Union® rye whiskeys during the quarter have exceeded our expectations, while infusing additional consumer excitement for our brands. We remain focused on accelerating our brands through increased distribution and sales velocity in both existing and new markets,” Colo concluded.




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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.
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 Atchison, Kansas, where distilled alcohol products and food ingredients are produced. Premium spirits are also distilled and matured at the company’s facility in Lawrenceburg, Indiana. For more information, visit mgpingredients.com.

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 Atchison facility or our Indiana 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 ability to effectively pass raw material price increases on to customers, (viii) our ability to maintain compliance with all applicable loan agreement covenants, (ix) our ability to realize operating efficiencies, (x) actions of governments, and (xi) 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, 2019 and our Quarterly Report on Form 10-Q for the quarter ended September 30, 2020.

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, and basic and diluted adjusted earnings per share. 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


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these GAAP measures. The non-GAAP adjustments referenced in the section entitled "Reconciliation of Selected GAAP Measures to 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


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

Operating income, quarter versus quarterOperating Income Change
Operating income for quarter ended September 30, 2019
$11,604 
Increase in gross profit - Ingredient Solutions segment
2,970 25.6 
pp(a)
Increase in gross profit - Distillery Products segment
1,402 12.1 pp
Increase in selling general and administrative expenses
(2,324)(20.0)pp
Operating income for quarter ended September 30, 2020
$13,652 17.7 %


Operating income, year to date versus year to dateOperating Income Change
Operating income for year to date ended September 30, 2019
$30,991 
Increase in gross profit - Ingredient Solutions segment
8,191 26.4 
pp(a)
Increase in gross profit - Distillery Products segment
3,912 12.6 pp
Increase in selling general and administrative expenses
(4,396)(14.1)pp
Operating income for year to date ended September 30, 2020
$38,698 24.9 %

(a) Percentage points (“pp”).


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

Change in basic and diluted EPS, quarter versus quarterBasic and Diluted EPSChange
Basic and diluted EPS for quarter ended September 30, 2019
$0.48 
Increase in operations(b)
0.09 18.8 
pp(a)
Tax: Change in income tax0.03 6.3 pp
Decrease in weighted average shares outstanding0.01 2.1 pp
Basic and diluted EPS for quarter ended September 30, 2020
$0.61 27.2 %

Change in basic and diluted EPS, year to date versus year to dateBasic and Diluted EPSChange
Basic and diluted EPS for year to date ended September 30, 2019
$1.51 
Increase in operations(b)
0.47 31.1 
pp(a)
Decrease in weighted average shares outstanding
0.02 1.3 pp
Change in interest expense, net (b)
(0.03)(2.0)pp
Tax: Change in share-based compensation(0.21)(13.9)pp
Tax: Change in effective tax rate (excluding above tax item)(0.08)(5.3)pp
Basic and diluted EPS for year to date ended September 30, 2020
$1.68 11.2 %

(a) Percentage points (“pp”).
(b) Items are net of tax based on the effective tax rate for the base year (2019).



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

DISTILLERY PRODUCTS SALES
Quarter Ended September 30,Quarter versus Quarter Sales Change Increase/(Decrease)
20202019$ Change% Change
Brown goods$34,365 $26,606 $7,759 29.2 %
White goods16,362 15,359 1,003 6.5 
Premium beverage alcohol50,727 41,965 8,762 20.9 
Industrial alcohol19,461 19,525 (64)(0.3)
Food grade alcohol70,188 61,490 8,698 14.1 
Fuel grade alcohol1,274 1,438 (164)(11.4)
Distillers feed and related co-products6,119 6,630 (511)(7.7)
Warehouse services4,041 3,737 304 8.1 
Total Distillery Products$81,622 $73,295 $8,327 11.4 %


INGREDIENT SOLUTIONS SALES
Quarter Ended September 30,Quarter versus Quarter Sales Change Increase / (Decrease)
20202019$ Change% Change
Specialty wheat starches$11,604 $8,432 $3,172 37.6 %
Specialty wheat proteins7,994 6,166 1,828 29.6 
Commodity wheat starches1,596 2,300 (704)(30.6)
Commodity wheat proteins148 492 (344)(69.9)
Total Ingredient Solutions$21,342 $17,390 $3,952 22.7 %
























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

DISTILLERY PRODUCTS SALES
Year to Date Ended September 30,Year to Date versus Year to Date
Sales Change Increase/(Decrease)
20202019$ Change% Change
Brown Goods$88,975 $79,054 $9,921 12.5 %
White Goods48,306 47,232 1,074 2.3 
Premium beverage alcohol137,281 126,286 10,995 8.7 
Industrial alcohol64,032 60,604 3,428 5.7 
Food grade alcohol201,313 186,890 14,423 7.7 
Fuel grade alcohol3,970 4,337 (367)(8.5)
Distillers feed and related co-products19,889 19,906 (17)(0.1)
Warehouse services11,641 10,762 879 8.2 
Total Distillery Products$236,813 $221,895 $14,918 6.7 %



INGREDIENT SOLUTIONS SALES
Year to Date Ended September 30,Year to Date versus Year to Date Sales Change Increase/(Decrease)
20202019$ Change% Change
Specialty wheat starches$30,938 $22,523 $8,415 37.4 %
Specialty wheat proteins20,372 15,884 4,488 28.3 
Commodity wheat starches5,247 7,575 (2,328)(30.7)
Commodity wheat proteins1,236 2,405 (1,169)(48.6)
Total Ingredient Solutions$57,793 $48,387 $9,406 19.4 %



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MGP INGREDIENTS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
(Dollars in thousands)
 Quarter Ended September 30,Year to Date Ended September 30,
 2020201920202019
Sales$102,964 $90,685 $294,606 $270,282 
Cost of sales79,802 71,895 227,531 215,310 
Gross profit23,162 18,790 67,075 54,972 
Selling, general and administrative expenses9,510 7,186 28,377 23,981 
Operating income13,652 11,604 38,698 30,991 
Interest expense, net and other(409)(364)(1,349)(937)
Income before income taxes13,243 11,240 37,349 30,054 
Income tax expense2,862 3,025 8,636 4,208 
Net income10,381 8,215 28,713 25,846 
Income attributable to participating securities69 54 192 171 
Net income attributable to common shareholders and used in EPS calculation$10,312 $8,161 $28,521 $25,675 
Basic and diluted weighted average common shares16,916,675 17,027,068 16,943,130 17,006,226 
Basic and diluted earnings per common share$0.61 $0.48 $1.68 $1.51 



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

September 30, 2020December 31, 2019September 30, 2020December 31, 2019
ASSETS  LIABILITIES AND STOCKHOLDERS’ EQUITY
Current Assets:Current Liabilities:  
Cash and cash equivalents$19,966 $3,309 Current maturities of long-term debt$412 $401 
Receivables, net52,673 40,931 Accounts payable29,055 29,511 
Inventory142,798 136,931 Accrued expenses14,938 9,383 
Prepaid expenses3,928 2,048 Total Current Liabilities44,405 39,295 
Refundable income taxes1,719 987 Other Liabilities:
Total Current Assets221,084 184,206 Long-term debt, less current maturities40,363 40,658 
   Credit agreement - revolver13,733 
Long-term operating lease liabilities3,226 4,267 
Property, plant, and equipment323,755 313,958 Deferred credits1,035 1,233 
Less accumulated depreciation and amortization(194,112)(185,539)Other noncurrent liabilities4,818 4,170 
Property, Plant, and Equipment, net129,643 128,419 Deferred income taxes2,165 1,929 
Operating lease right-of-use assets, net5,362 6,490 Total Liabilities109,745 91,553 
Other assets5,657 3,482 Stockholders’ equity252,001 231,044 
TOTAL ASSETS$361,746 $322,597 TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY$361,746 $322,597 
 


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MGP INGREDIENTS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(Dollars in thousands)
 Year to Date Ended September 30,
 20202019
Cash Flows from Operating Activities  
Net income$28,713 $25,846 
Adjustments to reconcile net income to net cash provided by operating activities:  
Depreciation and amortization9,618 8,537 
Loss (gain) on sale of assets337 (138)
Share-based compensation2,693 2,752 
Deferred income taxes, including change in valuation allowance460 952 
Changes in operating assets and liabilities:  
Receivables, net(11,683)(1,757)
Inventory(5,673)(17,424)
Prepaid expenses(2,032)(326)
Refundable income taxes(673)(2,138)
Accounts payable2,196 (331)
Accrued expenses5,647 (3,236)
Deferred credits(198)(249)
Other, net52 (75)
Net cash provided by operating activities29,457 12,413 
Cash Flows from Investing Activities  
Additions to property, plant, and equipment(13,507)(10,375)
Deferred compensation plan investments (1,189)
Acquisition of business(2,750)— 
Proceeds from sale of property688 — 
Other, net56 — 
Net cash used in investing activities(15,513)(11,564)
Cash Flows from Financing Activities  
Payment of dividends and dividend equivalents(6,144)(5,141)
Purchase of treasury stock(4,395)(5,470)
Loan fees paid related to borrowings(1,148)— 
Proceeds from long-term debt 20,000 
Principal payments on long-term debt(300)(288)
Proceeds from credit agreement - revolver54,700 14,140 
Payments on credit agreement - revolver(40,000)(24,640)
Other, net (78)
Net cash provided by (used in) financing activities2,713 (1,477)
Increase (decrease) in cash and cash equivalents16,657 (628)
Cash and cash equivalents, beginning of period3,309 5,025 
Cash and cash equivalents, end of period$19,966 $4,397 




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


Quarter Ended September 30, 2020
Operating IncomeIncome before Income TaxesNet IncomeMGP Earnings (a)Basic and Diluted EPS
Reported GAAP Results$13,652 $13,243 $10,381 $10,312 $0.61
Adjusted to remove:
CEO transition costs (b)22 22 21 21  
Adjusted Non-GAAP results$13,674 $13,265 $10,402 $10,333 $0.61 


Quarter Ended September 30, 2019
Operating IncomeIncome before Income TaxesNet IncomeMGP Earnings (a)Basic and Diluted EPS
Reported GAAP Results$11,604 $11,240 $8,215 $8,161 $0.48
Adjusted to remove:
— — — — — 
Adjusted Non-GAAP results$11,604 $11,240 $8,215 $8,161 $0.48 


Year to Date Ended September 30, 2020
Operating IncomeIncome before Income TaxesNet IncomeMGP Earnings (a)Basic and Diluted EPS
Reported GAAP Results$38,698 $37,349 $28,713 $28,521 $1.68
Adjusted to remove:
CEO transition costs (b)1,390 1,390 1,279 1,279 0.08
Adjusted Non-GAAP results$40,088 $38,739 $29,992 $29,800 $1.76 


Year to Date Ended September 30, 2019
Operating IncomeIncome before Income TaxesNet IncomeMGP Earnings (a)Basic and Diluted EPS
Reported GAAP Results$30,991 $30,054 $25,846 $25,675 $1.51
Adjusted to remove:
— — — — — 
Adjusted Non-GAAP results$30,991 $30,054 $25,846 $25,675 $1.51 


(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.



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