[LOGO] Midwest Grain Products, Inc. NEWS
1300 Main P.O. Box 130 RELEASE
Atchison, Kansas 66002-0130 CONTACT:
PHONE: 913/367-1480 FAX: 913/367-0192 Steve Pickman or
www.midwestgrain.com Nate Cairney
913/367-1480
Symbol/Market: MWGP/NASDAQ
FOR IMMEDIATE RELEASE: MIDWEST GRAIN POSTS SUBSTANTIAL SECOND
QUARTER EARNINGS INCREASE
ATCHISON, Kan., Feb. 6, 2002--Midwest Grain Products, Inc. (MWGP/Nasdaq)
today reported a substantial increase in earnings for the second quarter of
fiscal 2002 compared to the same quarter the prior year. Results for the current
year's second quarter, which ended Dec. 31, show net income of $2,551,000, or 32
cents per common share, on sales of $54,394,000. That compares to net income of
$1,724,000, or 20 cents per common share, on sales of $58,489,000 that the
company experienced in the second quarter of fiscal 2001. For the first six
months of fiscal 2002, the company had net income of $4,995,000, or 62 cents per
common share, on sales of $108,688,000 versus net income of $1,329,000, or 16
cents per share, on sales of $116,786,000 for the first six months of fiscal
2001.
The second quarter earnings improvement resulted primarily from increased
demand for the company's fuel grade alcohol, commonly known as ethanol, combined
with reduced energy costs and increased sales of specialty, value-added wheat
proteins, according to Seaberg. Approximately $694,000 in net income from a
previously announced United States Department of Agriculture (USDA) program to
support the development of products and markets for value-added wheat protein
and wheat starch products also contributed to the improvement, he noted.
Total alcohol sales in the second quarter of fiscal 2002 were nearly even
with the same period the prior year as increased fuel grade alcohol sales offset
a decline in sales of food grade alcohol for beverage and industrial
applications. "The installation of new equipment at our distillery in Atchison
in December is allowing us greater flexibility in shifting our production mix
between food grade and fuel grade alcohol," Seaberg said. "Furthermore," he
added, "conditions for all of our alcohol products remains healthy." Seaberg
also noted, however, that while the market environment for fuel alcohol
"continues to be favorable, the company is experiencing a softening in fuel
alcohol prices due to lower gasoline prices."
Second quarter sales of the company's specialty value-added wheat proteins
rose significantly over the same period in fiscal 2001. Meanwhile, sales of the
company's wheat starches were approximately even with starch sales a year ago.
The growth in wheat protein sales was driven principally by higher sales of the
company's Arise line of wheat protein isolates that improve the shelf life and
textural qualities of frozen and baked dough products; Wheatex, which enhances
the texture and flavor of vegetarian and extended meat products; its Aqua Pro
line of wheat proteins for personal care and cosmetics products; and a line of
wheat-based polymers that are used in the production of high protein pet treats
as well as biodegradable plastic-like items.
The USDA program to support value-added wheat protein and wheat starch
development was implemented this past June. Administered by the USDA's Commodity
Credit Corporation, it was granted in lieu of an extended quota on imports of
foreign wheat gluten. Over the life of the program, which is scheduled to end
May 31, 2003, Midwest Grain is eligible for nearly $26 million of the program
total of $40 million. For the first 12 months of the program, approximately
$17.3 million has been allocated to the company. The remaining amount is
expected to become available starting in June, 2003. The funds are to be used
for capital, research, marketing and promotional costs related to value-added
wheat protein and starch products. Funds received will be recognized in income
during the period in which they are expended for a permitted purpose. However,
funds that are used for capital expenditure projects will be recognized in
income over the periods during which those projects are depreciated.
-more-
ADD 1--MIDWEST GRAIN POSTS SUBSTANTIAL INCREASE
At this time, the Company expects that approximately 80 percent of the
first year's allotment will go toward capital projects, including a previously
announced $8.3 million expansion project at the company's Atchison plant. The
expansion is slated for completion in early fiscal 2003 and will involve the
installation of additional processing and drying equipment for the production of
specialty wheat proteins for bakery, pasta and noodle and related food markets,
both domestic and foreign. The remaining 20 percent of the first year's funds is
expected to be applied toward research and marketing-related costs, and hence
will be reflected in earnings.
As previously announced, due to increased pricing pressures from subsidized
European Union producers, the company has elected to reduce its production of
vital wheat gluten, the protein portion of flour that is used principally in
many types of bread. Seaberg reported that "those pressures have greatly
intensified" since the expiration of the import quota this past June.
"Therefore," he reiterated, "unless future conditions warrant otherwise, we plan
to maintain a reduced presence in the more traditional commodity-related wheat
gluten and wheat starch markets. Simultaneously, we will concentrate on growing
our value-added products in the specialty wheat protein and wheat starch areas."
Extraordinarily high natural gas prices which drove up the company's energy
costs through most of fiscal 2001 were substantially lower in the current year's
second quarter compared to the same period the prior year. "The average per unit
price of natural gas was 44 percent lower in the second quarter compared to a
year ago, and currently is averaging 58 percent lower versus last year's third
quarter," Seaberg said "Based on current indications, we expect our energy costs
to remain at these lower, more reasonable levels during the fourth quarter as
well," he added. "Likewise, although per unit raw material costs for grain were
up just slightly compared to the second quarter a year ago, we see no signs at
this time suggesting that we should anticipate any sizeable increases in grain
costs in the coming months. Therefore, our major production costs should remain
relatively stable through the remainder of fiscal 2002," Seaberg said.
Seaberg noted that in the first half of fiscal 2002, "our net income has
already surpassed annual earnings levels that were realized in each of the past
seven years." He added that "we expect a significant improvement in net income
for the third quarter, compared with the prior year's third quarter net loss of
$218,000. Despite the possibility of further softening in fuel alcohol prices in
the fourth quarter due to reduced gasoline prices, we expect to post our best
annual earnings performance in some time. Seaberg cautioned that these
forward-looking statements assume stable energy and raw material costs, stable
production efficiencies and continued improvement in value-added wheat protein
sales during the remainder of the fiscal year. Actual results could vary from
expectations if such assumptions prove incorrect.
This news release 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," "should," "may" 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, gasoline prices, energy
costs, product pricing, competitive environment and related marketing
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.
###
MIDWEST GRAIN PRODUCTS, INC.
CONSOLIDATED STATEMENTS OF EARNINGS
- ----------------------------------------------------------------------------------------------------------------------
(unaudited) Three Months Ended December 31 Six Months Ended December 31
(Dollars in thousands, except per share) 2001 2000 2001 2000
- ----------------------------------------------------------------------------------------------------------------------
NET SALES $ 54,394 $ 58,489 $ 108,688 $ 116,786
COST OF SALES 47,500 52,336 94,804 107,868
---------------------------------- ----------------------------------
GROSS PROFIT 6,894 6,153 13,884 8,918
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES 3,548 3,220 7,699 6,421
---------------------------------- ----------------------------------
3,346 2,933 6,185 2,497
OTHER OPERATING INCOME (EXPENSE) (42) 6 (63) 5
---------------------------------- ----------------------------------
INCOME FROM OPERATIONS 3,304 2,939 6,122 2,502
OTHER INCOME (EXPENSE
INTEREST (355) (304) (749) (648)
OTHER 1,268 215 2,884 343
---------------------------------- ----------------------------------
INCOME BEFORE INCOME TAXES 4,217 2,850 8,257 2,197
PROVISION (CREDIT) FOR INCOME TAXES 1,666 1,126 3,262 868
---------------------------------- ----------------------------------
NET INCOME $ 2,551 $ 1,724 4,995 $ 1,329
================================== ==================================
EARNINGS PER COMMON SHARE $ 0.32 $ .20 $ 0.62 $ 0.16
Weighted average shares outstanding 8,070,712 8,492,309 8,118,018 8,527,126
CONSOLIDATED BALANCE SHEETS
- ------------------------------------------------------------------------------------------------------------------------------------
(unaudited) December 31 June 30 (unaudited) December 31 June 30
(Dollars in thousands) 2001 2001 (Dollars in thousands) 2001 2001
- ------------------------------------------------------------------------------------------------------------------------------------
ASSETS LIABILITIES AND
STOCKHOLDERS' EQUITY
CURRENT ASSETS: CURRENT LIABILITIES:
Cash and cash equivalents $ 29,391 $ 33,454 Current maturities of long-term
debt $ 3,202 $ 4,273
Receivables 24,433 26,109 Accounts payable 11,061 10,446
Inventories 22,149 18,230 Accrued expenses 3,505 4,008
Prepaid expenses 2,017 1,625 Deferred income 13,437 15,951
Deferred income taxes 2,484 2,451 Income taxes payable 1,262
Income taxes receivable 299 -------------------------------
------------------------------
Total Current Assets 80,474 82,168 Total Current Liabilities 32,467 34,678
PROPERTY AND EQUIPMENT, At Cost 250,281 245,305 LONG-TERM DEBT 18,897 22,420
Less accumulated depreciation 160,290 153,181 POST-RETIREMENT BENEFITS 5,932 6,034
------------------------------ DEFERRED INCOME TAXES 10,769 10,774
89,991 92,124 STOCKHOLDERS' EQUITY 102,647 100,544
OTHER ASSETS 247 158 -------------------------------
------------------------------ $ 170,712 $ 174,450
$ 170,712 $ 174,450 ===============================
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