exh_993.htm

Exhibit 99.3

MGP INGREDIENTS, INC.

UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET

September 30, 2011

(Dollars in thousands)

	MGP Historical			LDIDO		Pro Forma Adjustments (1)				MGP Pro Forma

ASSETS
Current Assets
Cash and cash equivalents	$	986		$	-	$	-			$	986
Restricted cash		8,168			1,273		(1,273	)	(a)		8,168
Receivables		31,013			5,047		(719	)	(b)		35,341
Inventory		18,987			11,003		(1,082	)	(b)		28,908
Prepaid expenses		1,106			466		(466	)	(a)		1,106
Deposits		26			-		-				26
Derivative assets		385			-		-				385
Deferred income taxes		2,575			-		2,392		(d)		4,967
Refundable income taxes		525			-		-				525
Assets held for sale		-			-		2,300		(b)		2,300
Total current assets		63,771			17,789		1,152				82,712

Property and equipment, net of accumulated depreciation and amortization		61,889			14,623		3,330		(b)(e)		79,842
Investment in joint ventures		9,718			-		-				9,718
Other assets		388			-		1,496		(b)(e)		1,884
Total assets	$	135,766		$	32,412	$	5,978			$	174,156

LIABILITIES AND STOCKHOLDERS’ EQUITY
Current Liabilities
Checks written in excess of bank balance	$	-		$	1,976	$	(1,976	)	(a)	$	-
Current maturities of long-term debt		1,657			81		(81	)	(a)		1,657
Revolving credit facility		12,870			-		10,901		(c)		23,771
Accounts payable		16,029			982		2,173		(b)		19,184
Accounts payable to affiliate, net		4,620			-		-				4,620
Accrued expenses		4,916			946		(753	)	(b)		5,109
Derivative liabilities		8,694			-		-				8,694
Total current liabilities		48,786			3,985		10,264				63,400

Long-term debt, less current maturities		7,276			291		(291	)	(a)		7,276
Deferred credit		4,346			-		-				4,346
Accrued retirement health and life insurance benefits		6,617			-		-				6,617
Other non current liabilities		811			921		(556	)	(a)(b)		1,176
Deferred income taxes		2,575			-		2,392		(d)		4,967
Total liabilities		70,411			5,197		11,809				87,417

Parent and Affiliate Investment		-			27,215		(27,215	)	(a)		-
Stockholders’ Equity
Capital stock
Preferred, 5% non-cumulative; $10 par value; authorized 1,000 shares; issued and outstanding 437 shares		4					-				4
Common stock
No par value; authorized 40,000,000 shares; issued 19,530,344 shares; 18,074,437 shares outstanding		6,715					-				6,715
Additional paid-in capital		6,715					-				6,715
Retained earnings		62,809					21,384		(b)		84,193
Accumulated other comprehensive loss		(3,535	)				-				(3,535	)
Treasury stock, at cost Common: 1,455,907 shares		(7,353	)				-				(7,353	)
Total stockholders’ equity		65,355			27,215		(5,831	)			86,739
Total liabilities and stockholders’ equity	$	135,766		$	32,412	$	5,978			$	174,156

(1)	See Note 2. Pro Forma Adjustments of the Notes to the Unaudited Pro Forma Condensed Combined Financial Statements.

MGP INGREDIENTS, INC.

UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS

For the Fiscal Year Ended June 30, 2011

(Dollars in thousands, except per share amounts)

	MGP Historical			LDIDO (1)			Pro Forma Adjustments (2)				MGP Pro Forma

Net sales	$	247,915		$	42,910		$	-			$	290,825
Cost of sales		225,038			42,037			354		(e)(f)		267,429
Gross profit (loss)		22,877			873			(354	)			23,396

Selling, general and administrative expenses		21,157			3,352			148		(e)(g)		24,657
Other operating costs		1,075			-			-				1,075
Bargain purchase gain		-			-			(13,048	)	(b)		(13,048	)
Income (loss) from operations		645			(2,479	)		12,546				10,712

Other income, net		8			91			-				99
Interest expense		(358	)		(26	)		(383	)	(h)		(767	)
Equity in loss of joint ventures		(1,540	)					-				(1,540	)
Income (loss) before income taxes		(1,245	)		(2,414	)		12,163				8,504

Provision (benefit) for income taxes		68			-			(8,336	)	(i)		(8,268	)
Net income (loss)	$	(1,313	)	$	(2,414	)	$	20,499			$	16,772

Per Share Data
Total basic earnings (loss) per common share	$	(0.07	)								$	0.94
Total diluted earnings (loss) per common share	$	(0.07	)								$	0.94

(1)

This financial information has been derived from the audited Lawrenceburg Distillers Indiana Distillery Operations (“LDIDO”) carve-out statement of income for the year ended December 31, 2010 and adding its unaudited six month interim condensed statement of income through June 30, 2011 and reducing these amounts by its unaudited six month interim condensed statement of income through June 30, 2010.

(2)	See Note 2. Pro Forma Adjustments of the Notes to the Unaudited Pro Forma Condensed Combined Financial Statements.

MGP INGREDIENTS, INC.

UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS

For the Three Months Ended September 30, 2011

(Dollars in thousands, except per share amounts)

	MGP Historical			LDIDO			Pro Forma Adjustments (1)				MGP Pro Forma

Net sales	$	76,138		$	8,923		$	-			$	85,061
Cost of sales		73,347			10,832			93		(e)(f)		84,272
Gross profit (loss)		2,791			(1,909	)		(93	)			789

Selling, general and administrative expenses		5,074			930			(220	)	(e)(g)(j)		5,784
Other operating costs		294			-			-				294
Income (loss) from operations		(2,577	)		(2,839	)		127				(5,289	)

Other income, net		46			11			-				57
Interest expense		(114	)		(7	)		(49	)	(h)		(170	)
Equity in loss of joint ventures		(2,830	)		-							(2,830	)
Income (loss) before income taxes		(5,475	)		(2,835	)		78				(8,232	)

Provision for income taxes		34			-			-		(i)		34
Net income (loss)	$	(5,509	)	$	(2,835	)	$	78			$	(8,266	)

Per Share Data
Total basic loss per common share	$	(0.31	)								$	(0.46	)
Total diluted loss per common share	$	(0.31	)								$	(0.46	)

(1)	See Note 2. Pro Forma Adjustments of the Notes to the Unaudited Pro Forma Condensed Combined Financial Statements.

MGP INGREDIENTS, INC.

NOTES TO THE UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS

(Dollars in thousands, unless otherwise noted)

NOTE 1. BACKGROUND AND DESCRIPTION OF TRANSACTION

On December 27, 2011, MGPI of Indiana, LLC (“MGPII”), a wholly-owned subsidiary of MGP Ingredients, Inc. (the “Company” or “MGP”), closed its previously-announced acquisition (the “Acquisition”) of substantially all of the assets of Lawrenceburg Distillers Indiana, LLC (“LDI”) located in Lawrenceburg and Greendale, Indiana, which are used in the production of customized and premium grade whiskeys, gins and grain neutral spirits. The purchased assets include distillery assets, related bulk barrel storage facilities, blending operations, a tank farm, a grain elevator and certain intangible assets (“Distillery Business”). In this acquisition we also assumed certain liabilities, consisting primarily of trade payables and customer and contractual obligations, as described in the Asset Purchase Agreement dated October 20, 2011. MGPII did not purchase LDI’s associated assets related to packaging and bottling of alcoholic beverages, which were acquired by a third party. The purchase price of the acquisition is equal to the current assets minus current liabilities as of December 27, 2011, which was estimated at closing to be $11,041. The purchase was funded through the Company’s bank revolving credit facility and accrued consideration and is subject to post closing adjustments for working capital true-ups. A bargain purchase gain of $21,384 was recorded based on the excess of the fair value of the net assets acquired in the acquisition of LDI’s Distillery Business over the purchase price.

NOTE 2. BASIS OF PRO FORMA PRESENTATION

The unaudited pro forma condensed combined balance sheet as of September 30, 2011 and the unaudited pro forma condensed combined statements of operations for the fiscal year ended June 30, 2011 and for three months ended September 30, 2011 are based on the historical financial statements of the Company and the carve-out financial statements of Lawrenceburg Distillers Indiana Distillery Operations (“LDIDO”). The LDIDO financial statements were carved-out from LDI, which included a packaging and bottling business. For additional information regarding the carve-out basis of presentation of the LDIDO financial statements, refer to the audited financial statements of LDIDO as of December 31, 2010 and for the year then ended and the unaudited financial statements of LDIDO as of September 30, 2011 for the nine months then ended, which are included as Exhibits 99.1 and 99.2, respectively, of this Form 8-K/A. Certain amounts have been reclassified from the LDIDO financial statements to conform to the Company’s presentation.

The Acquisition was accounted for using the acquisition method in accordance with Financial Accounting Standards Board Accounting Standards Codification 805, Business Combinations (“ASC 805”). Under the acquisition method of accounting, the Company allocates the purchase price of a business acquisition based on the fair value of the identifiable tangible and intangible assets. The difference between the total cost of the acquisition and the sum of the fair values of the acquired tangible and identifiable intangible assets less liabilities is recorded as goodwill or bargain purchase gain. Management used third party appraisers to assist in estimating fair values, including (a) the business enterprise value, which is based on estimated future cash flows (including timing) which are estimated using the income approach and discount rates reflecting the risk inherent in the future cash flows, and (b) the values of land, buildings and equipment, which are estimated using the cost and market approaches. The estimated fair values recorded were based on unobservable inputs, which are material and represent Level 3 measures in the fair value hierarchy. There are also judgments made to determine the expected useful life assigned to each class of assets acquired and the duration of liabilities assumed. The judgments made in this determination of the estimated fair value assigned to the assets acquired and liabilities assumed, as well as the estimated useful life of each asset and the duration of each liability, can materially impact the financial statements in periods after acquisition, such as through depreciation and amortization expense. Under ASC 805, acquisition related transaction costs (such as advisory, legal, valuation, and other professional fees) are expensed as incurred.

Management and the seller are still in the process of truing-up values for net working capital assets purchased. Based on information presently known, any such adjustments are not expected to be material. The final purchase accounting is subject to change for these working capital true-ups and other final purchase accounting adjustments. Final determination of the net working capital assets recorded and final purchase accounting adjustments would change the amount of bargain purchase gain recorded.

The unaudited condensed combined pro forma balance sheet as of September 30, 2011 gives effect to the Acquisition as if it had occurred on September 30, 2011, and includes all adjustments that give effect to events that are directly attributable to the Acquisition and are factually supportable. The unaudited pro forma condensed combined statements of operations for the fiscal year ended June 30, 2011 and for three months ended September 30, 2011 give effect to the Acquisition as if it had occurred on July 1, 2010, and include all adjustments that give effect to events that are directly attributable to the Acquisition, are expected to have a continuing impact, and are factually supportable.

The unaudited pro forma condensed combined financial statements:

are presented for informational purposes only and are not intended to represent or to be indicative of the results of operations or financial position that the Company would have reported had the Acquisition been completed as of the dates set forth in the unaudited pro forma condensed combined financial statements;

·	do not reflect any operating efficiencies, synergies or cost savings that the Company may achieve, or any additional expense that may be incurred with respect to the combined company.

NOTE 3. PRO FORMA ADJUSTMENTS

(a)	To adjust for assets of LDI not acquired by the Company and to adjust for liabilities of LDI not assumed by the Company.

(b)	The following table summarizes the total purchase price paid by the Company and the amounts of the assets acquired, liabilities assumed and bargain purchase gain recognized.

	(i)			(ii)			(iii)
							(iii) = (i)-(ii)
	Estimated			LDIDO
	Fair Value			Historical
Assets Acquired and Liabilities Assumed	at December 27, 2011			at September 30, 2011			Pro Forma Adjustment
Receivables	$	4,328		$	5,407		$	(719	)
Inventory	$	9,921		$	11,003		$	(1,082	)
Land, buildings and improvements	$	6,549		$	4,908		$	1,641
Machinery and equipment	$	11,404		$	13,158		$	(1,754	)
Assets held for sale	$	2,300		$	-		$	2,300
(Accumulated depreciation)	$	-		$	(3,443	)	$	3,443
Customer relationships	$	1,496		$	-		$	1,496
Accounts payable and accrued expenses*	$	(3,208	)	$	(1,928	)	$	(1,280	)
Other non current liabilities	$	(365	)	$	(921	)	$	556
Deferred tax liabilities	$	(8,336	)	$	-		$	(8,336	)
Total identifiable net assets	$	24,089

Components of purchase price
Cash consideration paid to seller at closing	$	10,901
Accrued consideration		140
Total purchase price	$	11,041

Bargain Purchase Gain, net of tax	$	13,048

*Amount excludes the $140 of accrued compensation. When including the $140, the pro forma adjustment totals $1,420.

The bargain purchase gain of $13,048 (net of taxes of $8,336) included in these pro forma financial statements is based on the estimated fair values on December 27, 2011. Had the acquisition occurred on September 30, 2011, the estimated fair values of the net assets acquired and resulting bargain purchase would be subject to change.

Accounting standards require that when the fair value of the net assets acquired exceeds the purchase price, resulting in a bargain purchase gain, the acquirer must reassess the reasonableness of the values assigned to all of the assets acquired, liabilities assumed and consideration transferred. The Company has performed such a reassessment and has concluded that the values assigned for the LDI acquisition are reasonable. Consequently, the Company recorded a $13,048 bargain purchase gain (net of taxes of $8,336) on the acquisition of LDI’s Distillery Business, which the Company determined to be reasonable because (a) the seller was financially distressed, (b) LDI’s Distillery Business was not widely marketed for sales – an investment bank was hired; however efforts were initially unsuccessful, (c) the machinery and equipment are highly specialized for the industry, resulting in limited alternative uses for the property, and (d) independent property appraisals and business valuations indicated that its fair value was in excess of the purchase price.

The Company acquired a grain elevator in conjunction with the acquisition of LDI’s Distillery Business that is not expected to be used. Accordingly, this facility and its related assets totaling $2,300 are being reported as “Assets held for sale”, which is a component of current assets on the Company’s unaudited pro forma condensed combined balance sheet as of September 30, 2011. The Company’s estimate of fair value is based on current negotiations. The value of this asset upon its ultimate disposition could vary significantly from the Company’s estimate.

(c)	Represents debt of $10,901 incurred under the Company’s revolving credit facility in connection with the acquisition of LDI’s Distillery Business.

(d)	Any deferred income tax liability calculated as a result of the acquisition is offset by the Company’s deferred tax assets, which are fully reserved by a valuation allowance.

(e)	Tangible and intangibles assets (and the weighted average depreciable life) include land, buildings and improvements (32 years), machinery and equipment (10 years) and customer relationships (10 years).

(f)	Pro forma depreciation expense:


	Pro forma depreciation expense
	Fiscal Year ended June 30, 2011			Three months ended September 30, 2011
Depreciation based on fair values assigned in pro-forma adjustment (a) above	$	1,276		$	319
Less: LDIDO depreciation		(922	)		(226	)
Pro forma depreciation expense	$	354		$	93

(g)	Includes $148 and $37 of amortization expense related to acquired customer relationships for the fiscal year ended June 30, 2011 and the three months ended September 30, 2011, respectively.

(h)	Pro forma interest expense:


	Pro forma interest expense
	Fiscal Year ended June 30, 2011			Three months ended September 30, 2011
Interest *	$	409		$	56
Less: LDIDO interest		(26	)		(7	)
Pro forma interest expense	$	383		$	49

* Reflects interest expense on the approximate $10,901 of debt incurred, which had an average effective interest rate of 3.75% for the fiscal year ended June 30, 2011 and 2.063% for the three months ended September 30, 2011.

(i)

For the fiscal year ended June 30, 2011, the bargain purchase gain was reduced by deferred tax liabilities resulting from the book and tax basis differences on the acquired assets. The basis differences in acquired assets result in positive sources of income in the future. As such, the transaction had an impact on the Company's assessment on its valuation allowance against deferred tax assets. The resulting valuation allowance release is reflected as a benefit of $8,336 in the provision for income taxes.

For the three months ended September 30, 2011, no adjustment is required as the income tax benefit, calculated on the additional loss from LDIDO partially offset by income from pro forma adjustments, is offset by the changes to the Company’s deferred tax assets, which are fully reserved by a valuation allowance.

(j)

MGP’s historical results for the three months ended September 30, 2011 include $257 of acquisition expenses related to the Company’s acquisition of LDI’s Distillery Business. This adjustment eliminates this cost from the pro forma condensed combined statement of operations for the three months ended September 30, 2011 since these costs are non-recurring and directly attributable to the acquisition of LDI’s Distillery Business.