Exhibit 99.1
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1300 Main
Street, P.O. Box 130 • Atchison, Kansas 66002-0130
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NEWS
RELEASE
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913.367.1480
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800.255.0302 • Fax
913.367.0192
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www.mgpingredients.com
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Symbol/Market: MGPI/NASDAQ
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Contact: Steve Pickman
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913-367-1480
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For Immediate Release:
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MGP INGREDIENTS ANNOUNCES FISCAL 2006 SECOND QUARTER RESULTS
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ATCHISON, Kan., February 9, 2006—MGP Ingredients, Inc. (Nasdaq/MGPI) today reported net
income of $818,000, or $0.05 per common share, for the second quarter, which
ended December 31, 2005. This
compares with net income of $1,354,000, or $0.08 per share, for the second quarter
of fiscal 2005. Net sales in the current
year’s second quarter totaled $75,671,000, an increase of 24 percent above net
sales of $61,164,000 in the prior year period.
The improvement in total revenue compared to a year ago resulted from
increased sales in both the distillery products and ingredients segments. Distillery products sales rose by nearly
$11.4 million, or 27 percent, above sales in the second quarter of fiscal
2005. Sales of ingredients in total were
up approximately $3.2 million, or 17 percent, compared to last year’s second
quarter.
“Although
we experienced a decline in second quarter earnings compared to a year ago, we
see favorable conditions taking shape, particularly in our distillery products
segment, that should result in improved profitability during the remainder of
the year,” said Ladd Seaberg, president and chief executive officer.
The
decline in second quarter net income compared to a year ago was primarily due
to a 68 percent increase in energy costs over the comparable quarter the prior
year, which affected operating profits in the distillery segment and, to a
lesser extent, contributed to a loss in the company’s ingredients segment. The primary cause of the higher energy costs was a 75
percent increase in the average price of natural gas. This contributed to a $9.4 million, or 85
percent, rise in the company’s cost of natural gas over the second quarter of
fiscal 2005 and a $6.7 million, or 49 percent, increase over the first quarter
of fiscal 2006. This
reversed the trend in operating income growth from distillery revenues over the
past several quarters.
“Notwithstanding
the severe upsurge in second quarter energy costs, income from our distillery
segment for the first six months of fiscal 2006 was more than twice our income
from that segment in the first six months of fiscal 2005,” Seaberg said. “Since the end of the current year’s second
quarter, the price of natural gas has declined while pricing for both fuel
grade and food grade alcohol has improved due to increased demand in the
marketplace,” Seaberg said. “Additionally,
prices for corn, the principal raw material used in our alcohol production
process, remain relatively stable.
Considering all of these factors, therefore, we expect improved profitability
from distillery operations for the remainder of the fiscal year.”
Although sales of the
company’s higher valued specialty ingredients, consisting primarily of
specialty wheat proteins and wheat starches for food and non-food applications,
improved in the second quarter compared to the same period a year ago, profitability
in the ingredients segment continued to be adversely affected by increased
sales of lower valued commodity wheat gluten.
Additionally, average prices for certain of the company’s specialty
proteins for food applications were lower than a year ago due principally to
competitive pressures. Second quarter
prices for wheat to manufacture the company’s ingredients were just slightly
higher compared to a year ago, but up 8 percent compared to the first quarter
of the current fiscal year.
The increase in commodity
gluten sales revenue resulted from higher unit sales compared to the prior year’s
second quarter. This increase adversely
affected profitability, as market prices for gluten have been below the company’s
cost of production. Although MGPI has deemphasized gluten sales because of such
poor market conditions, gluten remains a co-product from the processing of
flour. Because the company’s sales of specialty proteins have not grown
proportionately with increases in its specialty starch sales, more gluten was
available for sale during the second quarter of fiscal 2006 than in the second
quarter of fiscal 2005, as less gluten has been processed into specialty
proteins.
“While benefiting from
positive contributions from our distillery segment, we are striving to bring a
more profitable balance to our mix of ingredients,” Seaberg said. “We continue to address this situation on
several fronts, including product enhancements, new product and market
development, and measures to improve production efficiencies and yields. None of these things occur overnight, but are
all parts of a longer term strategic process to build our ingredients segment
into a more stable and significant profit center.”
For
the first six months of fiscal 2006, the company had net income of $4,549,000,
or $0.28 per share on sales of $152,717,000, compared to net income of
$1,645,000, or $0.10 per share, on sales of $130,042,000 for the first six
months of fiscal 2005. This improvement
was primarily due to increased sales and profitability in the distillery
products segment, which resulted from higher unit sales of food grade alcohol
and increased prices for both food grade and fuel grade alcohol. The company’s profit performance in the
ingredients segment for the first six months of fiscal 2006 declined compared
to the first half of fiscal 2005, principally for the same reasons that affected
profitability in this segment during the second quarter of the current fiscal
year. However, sales of ingredients increased
in the first six months of fiscal 2006 compared to the prior year’s first six
months due principally to increased unit sales of specialty ingredients for
food applications together with higher unit sales of commodity gluten. These increases offset a decline in sales of
specialty ingredients for non-food applications, which occurred in the first
quarter of fiscal 2006, combined with decreased unit sales of commodity
starches in both the first and second quarters of the year. While the premium
pet chew market continues to exhibit solid category growth industry-wide,
customer inventory adjustments caused company sales of this product line to be
lower in the second quarter than they were in the first quarter of fiscal
2006. However, if current customer
projections hold true, management anticipates an improved sales pattern flow
during the final two quarters of fiscal 2006.
Segment
Results
The
following is a summary of revenues and pre-tax profits/(loss) allocated to each
reportable operating segment for the three months and six months ended December 31,
2005 and 2004. Interest expense,
investment income and other general miscellaneous expenses are classified as
corporate.
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(In Thousands)
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Second Quarter
Fiscal 2006
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Second Quarter
Fiscal 2005
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Six Months
Fiscal 2006
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Six Months
Fiscal 2005
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Ingredients
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Net Sales
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$
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22,012
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$
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18,860
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$
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44,462
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$
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41,614
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Pre-Tax Income (Loss)
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(2,174
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(1,684
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(2,393
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(l,800
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)
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Distillery Products
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Net Sales
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$
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53,659
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$
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42,304
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$
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108,255
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$
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88,428
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Pre-Tax Income
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3,856
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4,301
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10,805
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5,175
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Corporate
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(446
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(541
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)
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(982
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(818
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Distillery
Products – Segment Highlights
Total
sales of distillery products in the second quarter of fiscal 2006 rose by
approximately $11.4 million, or 27 percent, compared to the second quarter of
fiscal 2005. This improvement was due to
a $6.4 million, or 58 percent, increase in sales of food grade alcohol, a $4.1
million, or 16 percent, increase in sales of fuel grade alcohol, and an
$893,000, or 15 percent, increase in sales of distillers feed. In the food grade area, sales of alcohol for
industrial applications rose by $5.3 million, or nearly 76 percent, and sales of
alcohol for beverage applications rose by approximately $1.1 million, or 26
percent, due to higher prices and increased unit sales compared to a year
ago. The increased sales of fuel grade
alcohol also resulted from higher unit sales and average selling prices. Distillers feed sales rose as the result of
higher unit sales.
Ingredients—Segment
Highlights
Total
ingredient sales in the second quarter of fiscal 2006 increased by
approximately $3.2 million, or 17 percent, compared to the prior year’s second
quarter. This principally was due to a
nearly $2.4 million, or 21 percent, increase in sales of specialty ingredients
for food applications and a $109,042, or 2 percent, increase in sales of specialty
ingredients for non-food applications. Commodity
ingredient sales increased by approximately
$347,000, or 13 percent. This increase resulted from a $373,314, or 23
percent, rise in sales of commodity gluten, which more than offset a $26,428, or
3 percent, decrease in sales of commodity starches. Sales of mill feed and other mill products
rose by $323,714, or 128 percent.
Outlook
Seaberg
offered the following outlook for the rest of the year: “Overall, we anticipate
improved profitability for the rest of the year compared to the first half of
fiscal 2006. We
expect most of this improvement will come from the distillery segment as the
result of favorable conditions in our alcohol markets. While we continue to build sales of specialty
ingredients, we obviously are not satisfied with our profit performance in the
ingredients segment. Therefore, our
immediate goal is to improve profitability in this area of our business. We hope to do this from a combination of
increased sales of higher valued ingredients and improved operating costs.”
Seaberg
concluded, “Demand for healthful foods is growing. Our customers are looking to provide foods
that are higher in fiber and lower in fat.
The challenge is in delivering foods that meets these requirements
without sacrificing taste and texture.
That spells opportunities for our wheat-based proteins and
starches. Our business franchise was
built on innovative solutions. One of the
most significant ways we can develop new strategic assets for MGPI is through
R&D. The investment in our new
technical center, which will be completed over the next 10 to 12 months, is a
key component of this program.”
Investor
Conference Call
The
company will host an investor conference call today at 10 a.m. central time to
review the second quarter results.
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., Kansas City, Kan., and Onaga, 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 usually identified by or are
associated with such words such as “intend,” “plan”, “believe,” “estimate,” “expect,”
“anticipate,” “hopeful,” “should,” “may,” “will”, “could” and or the negatives
of these terms or variations of them or similar terminology. 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. 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) the availability and cost of grain, (ii) fluctuations
in gasoline prices, (iii) fluctuations in energy costs, (iv) competitive
environment and related market conditions, (vi) our ability to realize
operating efficiencies, (vii) the effectiveness of our hedging programs; (viii) access
to capital and (ix) actions of governments. For further information on
these and other risks and uncertainties that may affect the company’s business,
see Item 1. Business – Risks and Uncertainties of the company’s Annual Report
on Form 10-K for the fiscal year ended June 30, 2005.
MGP Ingredients, Inc.
CONSOLIDATED STATEMENT OF EARNINGS
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(unaudited)
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Three Months Ended
December 31
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Six Months Ended
December 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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75,671
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$
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61,164
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$
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152,717
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$
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130,042
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COST OF SALES
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69,931
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54,392
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134,793
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118,196
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GROSS PROFIT
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5,740
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6,772
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17,924
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11,846
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SELLING, GENERAL AND
ADMINISTRATIVE EXPENSES
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(5,039
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(4,508
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(10,748
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(9,390
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OTHER OPERATING INCOME
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281
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140
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449
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426
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INCOME FROM OPERATIONS
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982
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2,404
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7,625
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2,882
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OTHER INCOME (EXPENSE)
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OTHER INCOME (NET)
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521
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56
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637
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365
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INTEREST EXPENSE
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(267
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(384
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(832
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(690
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INCOME BEFORE INCOME TAXES
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1,236
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2,076
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7,430
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2,557
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PROVISION FOR INCOME TAXES
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418
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722
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2,881
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912
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NET INCOME
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$
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818
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$
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1,354
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$
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4,549
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$
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1,645
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OTHER COMPREHENSIVE INCOME
(LOSS)
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393
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(34
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258
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(347
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COMPREHENSIVE INCOME
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1,211
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1,320
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4,807
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1,298
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BASIC EARNINGS PER COMMON SHARE
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$
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0.05
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$
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0.08
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$
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0.28
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$
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0.10
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DILUTED EARNINGS PER COMMON
SHARE
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$
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0.05
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$
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0.08
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$
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0.27
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$
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0.09
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Weighted average shares
outstanding – Basic
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16,064,041
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15,982,031
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16,035,482
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15,957,472
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Weighted average shares
outstanding – Diluted
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16,666,037
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16,452,782
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16,601,642
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16,586,519
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CONSOLIDATED BALANCE SHEETS
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(unaudited)
(Dollars in thousands)
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Dec. 31
2005
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June 30
2005
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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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3,771
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$
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10,384
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Receivables
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32,662
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28,097
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Inventories
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37,291
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31,252
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Prepaid expenses
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1,719
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628
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Deferred income taxes
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945
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663
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Refundable income taxes
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—
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2,622
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Total Current Assets
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76,388
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73,646
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PROPERTY AND EQUIPMENT, At Cost
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327,717
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317,626
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Less accumulated depreciation
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(207,964
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(201,997
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)
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119,753
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115,629
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OTHER ASSETS
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218
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225
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$
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196,359
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$
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189,500
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(unaudited)
(Dollars in thousands)
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Dec. 31
2005
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June 30
2005
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LIABILITIES
AND STOCKHOLDERS’ EQUITY
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CURRENT LIABILITIES:
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Line of credit
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$
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4,000
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$
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—
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Current maturities of long-term debt
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3,721
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4,705
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Accounts payable
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14,958
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11,744
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Accrued expenses
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5,588
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5,621
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Deferred income
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10,160
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10,948
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Income taxes payable
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568
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—
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Total Current Liabilities
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$
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38,995
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$
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33,018
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LONG-TERM DEBT
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14,272
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16,785
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POST-RETIREMENT BENEFITS
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6,597
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6,342
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DEFERRED INCOME TAXES
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12,811
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12,828
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STOCKHOLDERS’ EQUITY
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123,684
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120,527
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$
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196,359
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$
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189,500
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