SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For Quarter Ended December 31, 2000 - Commission File No. 0-17196
MIDWEST GRAIN PRODUCTS, INC.
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(Exact Name of Registrant as Specified in Its Charter)
KANSAS 48-0531200
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(State or Other Jurisdiction of IRS Employer
Incorporation or Organization) Identification No.
1300 Main Street, Atchison, Kansas 66002
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(Address of Principal Executive Offices and Zip Code)
(913) 367-1480
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(Registrant's Telephone Number, Including Area Code)
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the Registrant was
required to file such reports) and (2) has been subject to the filing
requirements for at least the past 90 days.
[X] YES [ ] NO
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Common stock, no par value
8,350,912 shares outstanding
as of January 25, 2001
INDEX
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PART I. FINANCIAL INFORMATION Page
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Item 1. Financial Statements
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Independent Accountants' Review Report............................. 1
Condensed Consolidated Balance Sheets as of
December 31, 2000 and June 30, 2000................................ 2
Condensed Consolidated Statements of Income for
the Three Months and Six Months Ended December 31, 2000 and 1999... 4
Condensed Consolidated Statements of Cash Flows for
the Six Months Ended December 31, 2000 and 1999.................... 5
Note to Condensed Consolidated Financial Statements................ 6
Item 2. Management's Discussion and Analysis of Financial
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Condition and Results of Operations.......................... 7
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Item 3. Quantitative and Qualitative Disclosures About Market Risk... 11
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PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K............................. 12
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Independent Accountants' Review Report
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Board of Directors and Stockholders
Midwest Grain Products, Inc.
Atchison, Kansas 66002
We have reviewed the condensed consolidated balance sheets of MIDWEST GRAIN
PRODUCTS, INC. and subsidiaries as of December 31, 2000, and the related
condensed consolidated statements of income for the three-month and six-month
periods ended December 31, 2000 and 1999, and the related condensed consolidated
statements of cash flows for the six-month periods ended December 31, 2000 and
1999. These financial statements are the responsibility of the Company's
management.
We conducted our reviews in accordance with standards established by the
American Institute of Certified Public Accountants. A review of interim
financial information consists principally of applying analytical procedures to
financial data and making inquiries of persons responsible for financial and
accounting matters. It is substantially less in scope than an audit conducted in
accordance with generally accepted auditing standards, the objective of which is
the expression of an opinion regarding the financial statements taken as a
whole. Accordingly, we do not express such an opinion.
Based on our reviews, we are not aware of any material modifications that
should be made to the accompanying condensed consolidated financial statements
for them to be in conformity with generally accepted accounting principles.
We have previously audited, in accordance with generally accepted auditing
standards, the consolidated balance sheet as of June 30, 2000, and the related
consolidated statements of income, stockholders' equity, and cash flows for the
year then ended (not presented herein); and, in our report dated August 1, 2000,
we expressed an unqualified opinion on those consolidated financial statements.
In our opinion, the information set forth in the accompanying condensed
consolidated balance sheet as of June 30, 2000, is fairly stated in all material
respects in relation to the consolidated balance sheet from which it has been
derived.
/s/ BAIRD, KURTZ & DOBSON
BAIRD, KURTZ & DOBSON
Kansas City, Missouri
January 25, 2001
MIDWEST GRAIN PRODUCTS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In Thousands)
ASSETS
December 31, June 30,
2000 2000
----------- --------
(Unaudited)
CURRENT ASSETS
Cash and cash equivalents $ 5,235 $ 7,728
Receivables 30,036 30,272
Inventories 19,390 19,246
Prepaid expenses 1,982 1,617
Deferred income taxes 4,022 4,058
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Total Current Assets 60,665 62,921
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PROPERTY AND EQUIPMENT, At cost 235,371 232,508
Less accumulated depreciation 146,135 139,737
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89,236 92,771
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OTHER ASSETS 87 87
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$149,988 $ 155,779
======== ========
See Accompanying Note to Condensed Consolidated Financial
Statements and Independent Accountants' Review Report
-2-
MIDWEST GRAIN PRODUCTS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS (Continued)
(In Thousands)
LIABILITIES AND STOCKHOLDERS' EQUITY
December 31, June 30,
2000 2000
---- ----
(Unaudited)
CURRENT LIABILITIES
Current maturities of long-term debt $ 2,273 $ 2,273
Accounts payable 10,515 10,563
Accrued expenses 2,364 4,044
Income taxes payable 220 952
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Total Current Liabilities 15,372 17,832
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LONG-TERM DEBT 15,908 18,181
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POST-RETIREMENT BENEFITS 6,149 6,170
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DEFERRED INCOME TAXES 11,218 11,218
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STOCKHOLDERS' EQUITY
Capital stock
Preferred, 5% noncumulative, $10 par value; authorized
1,000 shares; issued and outstanding 437 shares 4 4
Common, no par; authorized 20,000,000 shares; issued
9,765,172 shares 6,715 6,715
Additional paid-in capital 2,485 2,485
Retained earnings 104,546 104,073
Cash flow hedges 55
--------- ---------
113,805 113,277
Treasury stock, at cost
Common;
December 31, 2000 - 1,356,360 shares
June 30, 2000 - 1,181,775 shares (12,464) (10,899)
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101,341 102,378
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TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 149,988 $ 155,779
========== ==========
See Accompanying Note to Condensed Consolidated Financial
Statements and Independent Accountants' Review Report
-3-
MIDWEST GRAIN PRODUCTS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(In Thousands)
THREE MONTHS AND SIX MONTHS ENDED DECEMBER 31, 2000 AND 1999
(Unaudited)
Three Months Six Months
2000 1999 2000 1999
--------- --------- --------- --------
(in thousands) (in thousands)
NET SALES $ 58,489 $ 59,962 $ 116,786 $ 114,937
COST OF SALES 52,336 54,007 107,868 104,757
--------- --------- --------- ----------
GROSS PROFIT 6,153 5,955 8,918 10,180
SELLING, GENERAL AND
ADMINISTRATIVE EXPENSES 3,220 3,001 6,421 5,681
--------- --------- --------- ----------
2,933 2,954 2,497 4,499
OTHER OPERATING INCOME 6 24 5 44
--------- --------- --------- ----------
INCOME FROM OPERATIONS 2,939 2,978 2,502 4,543
OTHER INCOME (EXPENSE)
Interest (304) (372) (648) (761)
Other 215 (23) 343 42
--------- --------- --------- ----------
INCOME BEFORE INCOME TAXES 2,850 2,583 2,197 3,824
PROVISION FOR INCOME TAXES 1,126 1,020 868 1,510
--------- --------- --------- ----------
NET INCOME $ 1,724 $ 1,563 $ 1,329 $ 2,314
========= ========= ========= ==========
EARNINGS PER COMMON SHARE $ 0.20 $ 0.17 $ 0.16 $ 0.25
========= ========= ========= ==========
See Accompanying Note to Condensed Consolidated Financial
Statements and Independent Accountants= Review Report
-4-
MIDWEST GRAIN PRODUCTS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In Thousands)
SIX MONTHS ENDED DECEMBER 31, 2000 AND 1999
(Unaudited)
2000 1999
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(in thousands)
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 1,329 $ 2,314
Items not requiring (providing) cash:
Depreciation 6,581 6,743
Loss on sale of equipment 6 3
Changes in:
Accounts receivable 236 (2,844)
Inventories (53) 2,085
Prepaid expenses (365) (818)
Accounts payable 297 1,500
Accrued expenses (1,701) (1,047)
Income taxes receivable/payable (732) 1,485
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Net cash provided by operating activities 5,598 9,421
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CASH FLOWS FROM INVESTING ACTIVITIES
Additions to property and equipment (3,414) (3,036)
Proceeds from sale of equipment 17 6
Net cash used in investing activities (3,397) (3,030)
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CASH FLOWS FROM FINANCING ACTIVITIES
Purchase of treasury stock (1,565) (4,648)
Net payments on long-term debt (2,273) (2,494)
Dividends paid (856)
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Net cash used in financing activities (4,694) (7,142)
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DECREASE IN CASH AND CASH EQUIVALENTS (2,493) ( 751)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 7,728 4,054
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CASH AND CASH EQUIVALENTS, END OF PERIOD $ 5,235 $ 3,303
========= =========
See Accompanying Note to Condensed Consolidated Financial
Statements and Independent Accountants' Review Report
-5-
MIDWEST GRAIN PRODUCTS, INC.
NOTE TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SIX MONTHS ENDED DECEMBER 31, 2000
(Unaudited)
NOTE 1: GENERAL
In the opinion of management, the accompanying unaudited condensed
consolidated financial statements contain all adjustments necessary to present
fairly the Company's condensed consolidated financial position as of December
31, 2000, and the condensed consolidated results of its operations and its cash
flows for the periods ended December 31, 2000 and 1999, and are of a normal
recurring nature.
See Independent Accountants' Review Report
-6-
MIDWEST GRAIN PRODUCTS, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
THREE MONTHS AND SIX MONTHS ENDED DECEMBER 31, 2000
RESULTS OF OPERATIONS
General
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The Company's net income of $1,724,000 in the second quarter of fiscal 2001
represented a $161,000 increase compared to the prior year's second quarter net
income of $1,563,000. The increase was principally due to the effects of
increased demand for the Company's fuel grade alcohol, or ethanol as it is
commonly known. Higher than normal energy costs caused by increased natural gas
prices, particularly in the latter part of the quarter, prevented the
realization of an even greater improvement in the quarter. Reduced sales of
vital wheat gluten, wheat starch and food grade alcohol were also offsetting
factors.
The heightened demand for fuel grade alcohol was partially attributable to a
recent proposal by the Environment Protection Agency to phase out MTBE, a
competing fuel oxygenate that is synthetically derived and has been shown to be
harmful to ground water supplies. In response to the increased demand, the
Company raised fuel alcohol production levels, while also experiencing upward
price adjustments. The Company also experienced improved selling prices for its
food grade alcohol for beverage applications. However, the unit volume of all
food grade alcohol declined compared to a year ago as the Company reduced sales
to export markets and shifted more of its alcohol production mix to the fuel
area. This decision was influenced by the strengthened demand for fuel alcohol,
as well as the Company's plan to participate in an incentive program developed
by the U.S. Department of Agriculture. Under the program, initiated in December
2000, the Agriculture Department plans to provide a two-year cash incentive for
ethanol producers who increase their grain usage by specified amounts to raise
fuel alcohol production. The Company expects to satisfy the program's
eligibility requirements, and to begin experiencing its effects in the current
quarter. Additionally, the installation of new distillery columns to replace
older equipment at the Company's Atchison, Kansas plant during the current
year's first quarter allowed for the realization of improved food grade alcohol
production efficiencies at that location in the second quarter. This project
also is allowing the Company to serve beverage alcohol customers with an even
higher purity, higher quality premium product.
Lower demand for the Company's vital wheat gluten in the second quarter was
due mainly to increased supplies throughout the industry. Currently, the Company
is seeing no improvement in this situation and, therefore, has adopted a
strategy to further decrease gluten production and more selectively target
gluten sales for an undetermined period going forward. The Company expects that
the current oversupply situation will adversely affect the third quarter
performance and would be even more substantial but for a three-year long quota
that was placed on gluten imports by former President Clinton in 1998. The quota
has helped to reduce the severity of injuries caused to U.S. producers by excess
amounts of low priced gluten imports from subsidized European Union (E.U.)
producers.
The Company expects that the quota will remain in place until May 31, 2001
despite recent efforts by the E.U. to have it terminated before that date.
Although a recent ruling by the Appellate Body of the World Trade Organization
(WTO) confirmed a previous ruling that the safeguard action implementing the
quota was inconsistent with the United States' obligations under the WTO
Agreement on Safeguards, the U.S. has a reasonable period of time to bring its
safeguard action into conformity with such obligations. The Company expects that
this could occur within approximately 120 days. The Company believes that the
President may not withdraw the safeguard before the U.S. International Trade
Commission (USITC) has had an opportunity to bring it into conformity with the
Appellate Body decision and, therefore, expects that the present quota will
remain in place until its scheduled May 31 termination date. In a related
matter, the Wheat Gluten Industry Council of the U.S. has formally requested a
two-year extension to the quota. The request is based on grounds that through
circumvention and similar tactics, E.U. producers have deliberately and
effectively disallowed the U.S. wheat
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MIDWEST GRAIN PRODUCTS, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
THREE MONTHS AND SIX MONTHS ENDED DECEMBER 31, 2000
gluten industry from receiving the full extent of relief that the quota
intended. A hearing on the request is scheduled to occur before the USITC in
late February 2001. An actual decision as to whether an extension will be
granted is expected to be made prior to May 31, 2001. If an extension is not
granted, the Company expects the current oversupply situation to become more
pronounced.
Demand for the Company's specialty wheat proteins continued a gradual rise in
the second quarter, principally due to increased customer interest and the
effects of intensified marketing programs. Produced for a variety of food and
non-food applications, these value-added products include dough conditioners,
meat extenders and replacers, ingredients for hair care and skin care systems,
and bio-polymers for producing pet treats as well as degradable, plastic-like
items.
Recently, the Company was named the successful bidder on the state-of-the-art
manufacturing facility owned by a Kansas City, Kansas firm that entered Chapter
11 bankruptcy proceedings. The Company plans to use the facility primarily for
the production of Wheatex, Midwest Grain's unique line of textured wheat
proteins that are sold to enhance the flavor and texture of vegetarian and
extended meat products. Expected to be finalized on February 12, 2001 at a cost
of approximately $6.5 million, the purchase replaces the Company's earlier plan
to build a Wheatex plant at similar cost. The Company expects the acquisition
will allow it to increase the production of textured wheat proteins at a more
accelerated rate. Also, the Company anticipates that, in addition to providing
more space than was incorporated into the design for a new plant, the facility
will provide greater flexibility for producing other lines of value-added
specialty wheat proteins.
The Company's wheat starch sales, while down in total unit volume, remained
relatively strong due largely to a sizeable percentage of sales coming from
value-added modified and specialty starches. Demand for these ingredients has
improved in the current quarter, and the Company expects that starch sales for
the second half of fiscal 2001 will remain strong.
Raw material costs for grain on a per bushel basis, although slightly higher
than they were a year ago, have continued to remain relatively low, a situation
which should benefit production cost efficiencies throughout the Company's
entire operation. However, further dramatic hikes in natural gas prices
currently are being experienced by the Company and are expected to have a severe
adverse impact on the Company's third quarter earnings performance. The
continued use of less expensive fuel oil to supply energy to a portion of the
Company's Atchison operations during this period should help soften that impact.
Meanwhile, the Company is exploring ways to make more efficient use of its
energy, both short-term and long-term, and is taking steps to further enhance
its risk management program.
Sales
- -----
Net sales in the second quarter of fiscal 2001 decreased approximately $1.5
million below net sales in the second quarter of fiscal 2000. The decrease
resulted principally from lower sales of vital wheat gluten, wheat starch and
food grade alcohol, which offset increased sales of fuel grade alcohol.
-8-
MIDWEST GRAIN PRODUCTS, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
THREE MONTHS AND SIX MONTHS ENDED DECEMBER 31, 2000
Sales of vital wheat gluten dropped due to reductions in both unit sales and
selling prices. This decrease was partially offset by increased unit sales of
the Company's specialty wheat proteins. Wheat starch sales declined due to lower
unit sales. Selling prices for wheat starch were approximately even with selling
prices experienced during the same period a year ago. Sales of food grade
alcohol for beverage and industrial applications fell as the result of decreased
unit sales, as well as reduced selling prices in the industrial area. Improved
selling prices for alcohol sold for beverage applications only partially offset
this drop. The rise in fuel alcohol sales, on the other hand, was due to higher
unit sales and improved prices caused by increased demand. Sales of distillers'
feed, the principal byproduct of the Company's alcohol production process, were
below the prior year's second quarter level due to a slight decrease in the
average selling price.
Net sales for the first six months of fiscal 2001 increased by approximately
$1.8 million over net sales for the first six months of fiscal 2000. This
resulted from increased sales of fuel grade alcohol in both the first and second
quarters, and higher sales of food grade alcohol for industrial uses in the
first quarter. Sales of vital wheat gluten were down for all six months compared
to the same period the prior year, while sales of wheat starch were just shy of
the level reached during the first half of fiscal 2000.
Cost of Sales
- -------------
The cost of sales in the second quarter of fiscal 2001 fell by approximately
$1.7 million below the cost of sales for the same period the prior year. This
principally was due to decreases in raw material costs, which more than offset a
substantial increase in energy costs resulting from higher natural gas prices.
For the first six months of fiscal 2001, the cost of sales increased by
approximately $3.1 million above costs of sales for the first six months of
fiscal 2000. This was largely attributable to higher energy costs in both the
first and second quarters. Non-recurring costs related to the final installation
of new distillation equipment at the Company's Atchison plant in the first
quarter also contributed to the increase. Lower raw material costs for grain
partially offset the higher costs resulting from the above.
In connection with the purchase of raw materials, principally corn and wheat,
for anticipated operating requirements, the Company enters into commodity
contracts to reduce or hedge the risk of future grain price increases.
Additionally, the Company uses gasoline futures to hedge fuel alcohol sales
contractually sold at prices fluctuating with gasoline futures. For the second
quarter of fiscal 2001, raw material costs included a net hedging loss of
$233,000 on contracts compared to a net hedging loss of $530,000 on contracts
for the second quarter of fiscal 2000. For the first six months of fiscal 2001,
raw material costs included a net hedging loss of $330,000 on contracts compared
to a net hedging loss of $1,204,000 for the first six months of the prior year.
Selling, General and Administrative Expenses
- --------------------------------------------
Selling, general and administrative expenses in the second quarter of fiscal
2001 were approximately $219,000 higher than selling, general and administrative
expenses in the second quarter of fiscal 2000. The increase was due largely to
increased marketing activities, industry-related fees and higher technology
costs.
-9-
MIDWEST GRAIN PRODUCTS, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
THREE MONTHS AND SIX MONTHS ENDED DECEMBER 31, 2000
Selling, general and administrative expenses for the first six months of
fiscal 2001 rose by approximately $740,000 above selling, general and
administrative expenses for the first half of fiscal 2000. Reasons for this
increase were essentially the same as those cited above.
The consolidated effective income tax rate is consistent for all periods. The
general effects of inflation were minimal.
Net Income
- ----------
As the result of the foregoing factors, the Company experienced net income of
$1,724,000 in the second quarter of fiscal 2001 compared to net income of
$1,563,000 in the second quarter of fiscal 2000. For the first six months of
fiscal 2001, the Company had net income of $1,329,000 versus net income of
$2,314,000 for the first six months of fiscal 2000.
LIQUIDITY AND CAPITAL RESOURCES
The following table is presented as a measure of the Company's liquidity and
financial condition:
December 31, June 30,
2000 2000
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Cash and cash equivalents $ 5,235 $ 7,728
Working capital 45,297 45,089
Amounts available under lines of credit 23,000 23,000
Notes payable and long-term debt 18,181 20,454
Stockholders= equity 101,341 102,378
Inventory and receivable levels are relatively constant with levels at June
30, 2000. Short-term liquidity has been impacted by additions to property and
equipment ($3.4 million), purchases of the Company's common stock ($1.6 million)
and dividends ($.9 million).
The Company made open market purchases of 174,585 shares of its common stock
during the six-month period. These purchases were made to fund the Company's
stock option plans and for other corporate purposes. As of December 31, 2000,
the Board has authorized the purchase of an additional 643,640 shares of the
Company's common stock.
At December 31, 2000, the Company had $12.5 million committed to improvements
and replacements of existing equipment. Included in this amount is the
previously discussed acquisition of the new facility to increase the Company's
production of its Wheatex series of specialty wheat proteins.
The Company continues to maintain a strong working capital position and a low
debt-to-equity ratio while generating strong earnings before interest, taxes and
depreciation. Management believes this strong financial position and available
lines of credit will allow the Company to effectively expand its production of
specialty products as well as supply customer needs for all its other products.
-10-
MIDWEST GRAIN PRODUCTS, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
THREE MONTHS AND SIX MONTHS ENDED DECEMBER 31, 2000
FORWARD-LOOKING INFORMATION
This report contains forward-looking statements as well as historical
information. Forward-looking statements are identified by or are associated with
such words as "intend," "believe," "estimate," "expect," "anticipate," "hopeful"
and similar expressions. They reflect management's current beliefs and estimates
of future economic circumstances, industry conditions, Company performance and
financial results and are not guarantees of future performance. The
forward-looking statements are based on many assumptions and factors including
those relating to grain prices, energy costs, product pricing, competitive
environment and related market conditions, operating efficiencies, access to
capital and actions of governments or government officials. Any changes in the
assumptions or factors could produce materially different results than those
predicted and could impact stock values.
Item 3. Quantitative And Qualitative Disclosures About Market Risk
The Company produces its products from wheat, corn and milo and, as such, is
sensitive to changes in commodity prices. Grain futures and/or options are used
as a hedge to protect against fluctuations in the market. The information
regarding inventories and futures contracts at June 30, 2000, as presented in
the annual report, is not significantly different from December 31, 2000.
-11-
MIDWEST GRAIN PRODUCTS, INC.
PART II
OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
10.1 Form of Incentive Stock Option Agreement approved on December
7, 2000 for use thereafter under the Stock Incentive Plan of
1996.
10.2 Form of Incentive Stock Option Agreement approved on December
7, 2000 for use thereafter under the 1998 Stock Incentive Plan
for Salaried Employees.
10.3 Form of Memorandum of Agreement Concerning Options approved on
December 7, 2000 between the Company and certain members of
senior management, including the following named executive
officers: Ladd M. Seaberg, Randall M. Schrick, Robert G. Booe,
Dennis E. Sprague and Dr. Sukh Bassi.
15.1 Letter from independent public accountants pursuant to
paragraph (d) of Rule 10-01 of Regulation S-X (incorporated by
reference to Independent Accountants' Review Report at page 2
hereof).
15.2 Letter from independent public accountants concerning the use
of its Review Report in the Company's Registration Statement
No. 333-51849.
99 Press Release dated February 8, 2001 (w/o financial
statements).
(b) Reports on Form 8-K
The Company has filed no reports on Form 8-K during the quarter
ended December 31, 2000.
-12-
MIDWEST GRAIN PRODUCTS, INC.
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 thereunto duly authorized.
MIDWEST GRAIN PRODUCTS, INC.
Date: February 12, 2001 By /s/ Ladd M. Seaberg
Ladd M. Seaberg, President
and Chief Executive Officer
Date: February 12, 2001 By /s/ Robert G. Booe
Robert G. Booe, Vice President
and Chief Financial Officer
-13-
EXHIBIT INDEX
Exhibit Description
No. --------------
----
10.1 Form of Incentive Stock Option Agreement approved on December 7,
2000 for use thereafter under the Stock Incentive Plan of 1996.
10.2 Form of Incentive Stock Option Agreement approved on December 7,
2000 for use thereafter under the 1998 Stock Incentive Plan for
Salaried Employees.
10.3 Form of Memorandum of Agreement Concerning Options approved on
December 7, 2000 between the Company and certain members of
senior management, including the following named executive
officers: Ladd M. Seaberg, Randall M. Schrick, Robert G. Booe,
Dennis E. Sprague and Dr. Sukh Bassi.
15.1 Letter from independent public accountants pursuant to paragraph
(d) of Rule 10-01 of Regulation S-X (incorporated by reference
to Independent Accountants' Review Report at page 2 hereof).
15.2 Letter from independent public accountants concerning the use of
its Review Report in the Company's Registration Statement No.
333-51849.
99 Press Release dated February 8, 2001 (w/o financial statements).
-14-