Exhibit 99.1
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Contact:
Steve Pickman
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913-367-1480
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FOR IMMEDIATE RELEASE: MGPI ANNOUNCES FISCAL 2005 THIRD QUARTER
RESULTS;
REVISES FISCAL 2005 GUIDANCE
ATCHISON, Kan., May 5, 2005 - MGP Ingredients, Inc.
(Nasdaq: MGPI) today reported net income of $1,627,000, or $0.10 per
common share, for its fiscal 2005 third quarter, which ended March 31. That compares to net income of $1,999,000, or
$0.13 per share, for the same period in fiscal 2004. The earnings per share data has been adjusted
to reflect MGPI’s two-for-one stock split that went into effect after the close
of business on June 30, 2004. Net sales
in the current year’s third quarter totaled $71,186,000 compared to sales of
$75,215,000 in the prior year’s third quarter.
The
company’s pre-tax earnings in the third quarter of fiscal 2005 were reduced by
$1.3 million as the result of a decline in demand for low-carbohydrate foods
compared to a year ago. Due to this
decline, a portion of the company’s specialty ingredients inventories were sold
at a loss of $550,000 (pre-tax) during the quarter. In addition, the company recorded a reserve
of $750,000 (pre-tax) to write down its remaining specialty ingredients
inventories related to low-carb products at the end of the quarter. The company does not anticipate that any
additional significant adjustments will be made in inventories during the
fourth quarter of fiscal 2005.
Net
income for the first nine months of fiscal 2005 was $3,272,000, or $0.20 per
share, compared to net income of $6,306,000, or $0.41 per share, for the first
nine months of fiscal 2004. Net sales for the first nine months of fiscal 2005
were $201,228,000 compared to $191,678,000 in the same period a year ago. Results for the first nine months of fiscal
2004 included approximately $9.6 million in business interruption proceeds
resulting from the September 13, 2002 distillery explosion at the company’s
Atchison, Kan., plant. No such proceeds
were included in results for the first nine months of fiscal 2005.
Due
to a decrease in fuel grade alcohol prices in the current quarter, the company
has revised its fiscal 2005 earnings guidance to a range of $0.35 to $0.40 per
share. The company’s previously issued guidance for fiscal 2005 ranged from
earnings of $0.40 to $0.50 per share and was based on the assumption that fuel
alcohol prices would remain stable. Ladd
Seaberg, president and chief executive officer of the company, noted that “recent
strength in our distillery products sales had served to mitigate the effects of
our specialty ingredients business slowdown through the third quarter of fiscal
2005. During this final quarter of
fiscal 2005, however, increased competitive pressures resulting from increased
supplies throughout the industry have caused prices in the fuel grade alcohol area
to fall from levels experienced in the previous three quarters of the year.”
Sales
in MGPI’s ingredients segment in the third quarter declined from a year ago due
principally to the decrease in sales of specialty ingredients for use in
low-carbohydrate products. This decrease
was partially offset by growth in sales of specialty ingredients for use in pet
industry products together with a small increase in sales of commodity
ingredients. “In response to the
slow-down in sales of low carbohydrate products, we have been re-aligning our
specialty ingredients business platform to reflect changes in the marketplace,”
Seaberg said. “This enables us to focus
our efforts on many opportunities still available to us in the specialty
ingredients area.”
Sales
in the company’s distillery segment were slightly higher in the third quarter
of fiscal 2005 compared to the third quarter of fiscal 2004. “In spite of current pricing pressures in the
fuel grade alcohol area, MGPI remains well-positioned within its distillery
business,” Seaberg said. “Our new
distillery operations in Atchison provide us with a greater level of
flexibility to allocate production based on market demand. In addition, fuel alcohol prices have roughly
tended to track the direction of gasoline prices until very recently. A return to this pattern would contribute to
easing competitive pressures.”
-more-
ADD
1—MGPI ANNOUNCES FISCAL 2005 THIRD QUARTER RESULTS
Ingredients
Specialty
ingredients sales in the third quarter of fiscal 2005 decreased by 22 percent
compared to the fiscal 2004 third quarter, which was characterized by very
strong increases in demand for ingredients for use in low-carbohydrate products. The decline in this demand in the current
year’s third quarter compared to a year ago primarily affected the company’s Fibersym™
line of resistant starches. However,
sales of Fibersym™ have continued a recent sequential quarter rebound which
began in the second quarter of fiscal 2005.
The company’s Arise® line of specialty wheat protein isolates and
certain applications related to its Wheatex® line of textured wheat proteins
were also affected by the downturn in low-carb product demand. An increase in commodity ingredients sales of
7 percent was driven by a 135 percent rise in sales of commodity wheat gluten,
which more than offset a decline in sales of commodity wheat starch.
“The
third and fourth quarters of fiscal 2004 represented the peak in our
ingredients sales related to last year’s low-carbohydrate trend,” said Michael
Trautschold, executive vice president of marketing and sales. “While we work
through unfavorable comparisons to the spike in that area, we are pleased with
the efforts of our marketing and business development staff to continue
identifying and pursuing new opportunities for our innovative product
lines. We also expect the larger market
trends toward healthier food products to contribute favorably to demand for
ingredients with specialized nutritional profiles such as Fibersym™.”
Trautschold
reported that compared to two years ago, before the low-carb trend became a
factor, sales of the company’s specialty ingredients in the first nine months
of fiscal 2005 have grown by 93 percent.
He noted that this growth has principally occurred in sales of specialty
proteins and starches for use in the food and pet areas. For pet industry applications, MGPI’s unique
line of protein- and starch-based resins are sold for use in the manufacture of
pet chews and related treats. In
addition, previously announced equipment upgrades designed to expand the
company’s processing and packaging capabilities for retail-ready pet products
were completed last month and are already supplying customers’ needs. These upgrades were completed at MGPI’s
Kansas City, Kansas, facility at a cost of approximately $5.5 million.
In
the company’s personal care ingredients area, staffing has been strengthened to
boost sales to manufacturers of both hair and skin care products. Mary Kay O’Connor, a highly successful
business consultant and senior executive with over 20 years of experience in
sales, sales management and marketing, recently joined MGPI as general manager
of personal care ingredients as well as the company’s emerging biopolymer area.
“Mary Kay’s extensive sales management experience will help accelerate the
growth of our presence in the personal care market as we continue to build our
portfolio of naturally-derived ingredients for this area of the company,”
Trautschold said. “In addition, her
strategic planning and marketing expertise provides MGPI with the experience
needed to effectively develop our plant-based polymer business to meet
increasing interest in environmentally-friendly bioplastic products.”
Distillery Products
Total
sales of distillery products in the fiscal 2005 third quarter increased 3
percent over the third quarter of 2004.
This increase was due to a $6.3 million, or 74 percent, improvement in
food grade alcohol sales, which was partially offset by a $5 million, or 17
percent, decline in fuel alcohol sales.
Lower
unit sales of fuel grade alcohol were partially offset by improved prices
compared to a year ago. The increase in
total food grade alcohol sales resulted in a shift in production at the company’s
Atchison distillery. In the prior year’s
third quarter, more fuel grade alcohol was produced at that location while the
distillery was undergoing start-up operations after being rebuilt following the
September, 2002 explosion. Sales of food
grade alcohol for industrial applications rose by $5.1 million, or 95 percent,
and sales of food grade alcohol for beverage applications rose by approximately
$1.2 million, or 38 percent, compared to the third quarter of fiscal 2004.
Distillers feed sales increased by one percent compared to the prior year due to
higher unit sales, which were offset by lower selling prices.
-more-
ADD
2—MGPI ANNOUNCES FISCAL 2005 THIRD QUARTER RESULTS
The
company is on schedule for a late-summer completion of two previously announced
capital improvement projects at its distillery operations in Atchison and
Pekin, Ill. The capital expenditures,
which total approximately $12 million, are expected to realize additional
improvements in production efficiencies, primarily in the area of energy conservation.
Segment Data
Complete
sales and pre-tax income data by segments for the third quarter ended March 31,
2005 follow below. Pretax operating profits for each segment are based on net
sales less identifiable operating expenses.
Interest expense, investment income and other general miscellaneous
expenses have been excluded from segment operations and classified as
Corporate:
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Sales
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3rd QTR.
FY2005
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3rd QTR.
FY2004
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9 Months
FY2005
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9 Months
FY2004
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Ingredients Segment
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$
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24,245,000
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$
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29,651,000
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$
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65,859,000
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$
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71,198,000
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Distillery
Products Segment
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46,941,000
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45,564,000
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135,369,000
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120,480,000
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Pre-tax income (loss)
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Ingredients
Segment
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$
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(941,000
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$
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5,639,000
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$
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(2,741,000
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$
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10,285,000
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Distillery
Products Segment
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3,576,000
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(1,732,000
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8,751,000
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1,573,000
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Corporate
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(275,000
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(603,000
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(1,093,000
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(1,450,000
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Outlook
“Looking
at the fourth quarter, year-over-year comparisons will be a challenge, but our
emphasis will be on continuing the recent positive trends we are seeing in
certain parts of our business,” Seaberg said. “Our underlying fundamentals
remain solid, with a strong balance sheet and good cash flows. We expect to begin reaping the benefits of
recent capital investments and an improved operational focus on our way to
achieving growth long-term.”
Seaberg
noted that actual results could differ from the company’s forward-looking
earnings guidance as a result of various factors, including increased
competition with the company’s products, changes in market prices, and/or
energy and grain cost fluctuations.
Conference
Call Information
The
company will host an investor conference call today at 10 a.m. central time to
review the third quarter results and updated guidance. Stockholders and other
interested parties may listen to the call live via telephone by dialing
800-322-0079 by 9:50 a.m. central time, or access it on the Internet at www.mgpingredients.com.
About MGP Ingredients
In business
since 1941, MGP Ingredients, Inc. is a recognized pioneer in the development
and production of natural grain-based products. The Company has facilities in
Atchison, Kan., Pekin, Ill., and Kansas City, Kan. that utilize the latest
technologies to assure high quality products and to maintain efficient
production and service capabilities.
Cautionary Note Regarding Forward-Looking Statements
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 market conditions,
operating efficiencies, access to capital, actions of governments or government
officials and actions of insurers. Any changes in the assumptions or factors
could produce materially different results than those predicted and could
impact stock values.
(Financial Tables Follow)
MGP
Ingredients, Inc.
CONSOLIDATED STATEMENT OF EARNINGS
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(unaudited)
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Three Months Ended March 31
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Nine Months Ended March 31
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(Dollars
in thousands, except per share)
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2005
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2004
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2005
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2004
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NET SALES
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$
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71,186
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$
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75,215
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$
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201,228
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$
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191,678
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COST OF SALES
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64,270
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68,312
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182,466
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177,950
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GROSS PROFIT
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6,916
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6,903
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18,762
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13,728
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SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
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4,864
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4,426
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14,254
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13,326
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OTHER OPERATING INCOME
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153
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1,244
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579
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10,718
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INCOME FROM OPERATIONS
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2,205
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3,721
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5,087
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11,120
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OTHER INCOME (LOSS) NET
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505
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(142
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870
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105
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INTEREST EXPENSE
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(350
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(275
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(1,040
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(817
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INCOME BEFORE INCOME TAXES
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2,360
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3,304
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4,917
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10,408
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PROVISION FOR INCOME TAXES
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733
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1,305
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1,645
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4,105
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NET INCOME
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$
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1,627
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$
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1,999
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$
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3,272
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$
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6,303
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OTHER COMPREHENSIVE INCOME
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569
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884
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222
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761
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COMPREHENSIVE INCOME
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2,196
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2,883
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3,494
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7,064
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BASIC EARNINGS PER COMMON SHARE
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$
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0.10
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$
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0.13
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$
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0.20
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$
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0.41
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DILUTED EARNINGS PER COMMON SHARE
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$
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0.10
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$
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0.12
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$
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0.20
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$
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0.40
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DIVIDENDS PER COMMON SHARE
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$
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—
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$
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—
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$
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0.15
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$
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0.075
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Weighted average shares outstanding - Basic
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15,989,499
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15,505,254
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15,967,992
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15,384,634
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Weighted average shares outstanding – Diluted
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16,409,507
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16,223,582
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16,548,708
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15,396,638
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CONSOLIDATED BALANCE SHEETS
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(unaudited)
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March 31
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June 30
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(Dollars
in thousands)
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2005
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2004
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ASSETS
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CURRENT ASSETS:
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Cash and cash equivalents
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$
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6,569
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$
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6,488
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Receivables
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31,922
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34,243
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Inventories
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37,933
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32,775
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Prepaid expenses
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1,742
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828
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Deferred income taxes
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2,090
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2,090
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Total Current Assets
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80,256
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76,424
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PROPERTY AND EQUIPMENT, At Cost
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308,348
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296,377
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Less accumulated depreciation
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197,818
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187,280
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110,530
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109,097
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Insurance Receivable
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—
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1,425
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OTHER ASSETS
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91
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91
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$
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190,877
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$
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187,037
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(unaudited)
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March 31
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June 30
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(Dollars
in thousands)
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2005
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2004
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LIABILITIES AND STOCKHOLDERS’ EQUITY
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CURRENT LIABILITIES:
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Current maturities of
long-term debt
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$
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4,687
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$
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3,201
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Note Payable Bank
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2,000
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0
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Accounts payable
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11,026
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10,576
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Accrued expenses
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4,818
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7,815
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Deferred income
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11,356
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12,598
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Income taxes payable
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2,416
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2,423
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Total Current Liabilities
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$
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36,303
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$
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36,613
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LONG-TERM DEBT
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17,399
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12,561
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POST-RETIREMENT BENEFITS
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6,205
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5,977
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DEFERRED INCOME TAXES
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10,977
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13,677
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STOCKHOLDERS’ EQUITY
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119,993
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118,209
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$
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190,877
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$
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187,037
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