MGP Ingredients, Inc. (Nasdaq:MGPI), a
leading supplier of premium distilled spirits and specialty wheat
proteins and starches, today reported results for the first quarter
ended March 31, 2017.
2017 results compared to 2016
- First quarter consolidated net sales increased 13.4% to $87.2
million as net sales of premium beverage alcohol significantly
increased while net sales of industrial alcohol were flat.
- First quarter consolidated gross profit increased 11.7% to
$19.0 million, reflecting stronger gross profit results in both the
Distillery Products and Ingredient Solutions segments.
- Consolidated gross margin decreased 40 basis points to 21.8%
for the first quarter, reflecting an 80 basis point decline in
Distillery Products margins, partially offset by a 150 basis point
expansion in Ingredient Solutions.
- First quarter operating income increased 6.2% to $11.4
million.
- Equity in joint venture earnings decreased from $517,000 to
$471,000 in the first quarter.
- Net income increased 22.9% to $8.7 million for the first
quarter.
- First quarter earnings per share, calculated on the two-tier
method, increased 22.0% to $0.50 per share.
"Our first quarter results mark continued progress against our
long term strategic plan," said Gus Griffin, president and CEO of
MGP. "Revenues grew as volumes in premium beverage alcohol
increased and gross profit improved in both our Distillery Products
and Ingredient Solutions segments. We are off to a good start and
are optimistic about the outlook for 2017."
Distillery Products Segment - Beverage Alcohol Drives
12% Gross Profit Growth
For the first quarter of 2017, net sales for the Distillery
Products segment increased 15.8% to $74.0 million. Gross
profit improved to $16.6 million, or 22.5% of net segment sales,
compared with $14.9 million, or 23.3% of net segment sales in the
first quarter 2016. Results for the quarter reflect continued
strong demand for the Company's high quality premium beverage
alcohol products.
Griffin said, "Revenue growth in premium beverage alcohol
reflects increased demand for both our American whiskey products
and our vodka and gin offerings. While growth remains strong
for premium beverage alcohol products, segment margins were
unfavorably impacted by softness in the pricing of the distillers
feed co-product (Dried Distillers Grain, or "DDG") as market prices
dropped significantly."
Food Grade
Alcohol |
Net Sales Quarter Ended March 31, |
|
Quarter vs. QuarterNet Sales Change
Increase/(Decrease) |
|
|
2017 |
|
2016 |
|
$ Change |
|
% Change |
|
Premium Beverage
Alcohol |
$ |
45,640 |
|
|
$ |
34,993 |
|
|
$ |
10,647 |
|
|
30.4 |
% |
|
Industrial Alcohol |
19,123 |
|
|
19,213 |
|
|
(90 |
) |
|
(0.5 |
)% |
|
Food Grade
Alcohol |
$ |
64,763 |
|
|
$ |
54,206 |
|
|
$ |
10,557 |
|
|
19.5 |
% |
|
|
Ingredient Solutions - Segment Gross Profit Grew
11%
For the 2017 first quarter, net sales for the Ingredient
Solutions segment increased 1.7% to $13.2 million. Gross
profit increased to $2.4 million, or 18.4% of net segment sales,
compared with $2.2 million, or 16.9% of net segment sales in the
first quarter 2016.
Griffin said, "Our Ingredient Solutions segment continued to
grow in the first quarter on the strength of our overall starch
portfolio. The segment also benefited from lower input costs
and increased plant efficiencies."
Other
Corporate selling, general and administrative expenses were $7.6
million for the first quarter 2017 compared to $6.3 million in the
first quarter 2016, primarily due to an increase in personnel costs
and advertising and promotion expenses.
MGP joint venture equity method investment earnings for the
first quarter 2017 were comparable to the first quarter of 2016 at
$0.5 million.
The corporate effective tax rate for the quarter was 24.7%
compared with 35.4% a year ago, primarily due to the favorable
impact of the required accounting change, ASU 2016-09, Compensation
- Stock Compensation (Topic 718) Improvements to Employee
Share-Based Payment Accounting.
Earnings per share was $0.50 for the first quarter 2017,
compared with $0.41 for the first quarter 2016.
2017 and Long Term Guidance
MGP is confirming the following guidance for fiscal 2017 and
beyond, with the exception of the corporate tax rate outlook, which
declined to 30%.
- Reconfirming previous guidance, operating income is expected to
grow between 10% and 15% annually from 2016 through 2018. This
guidance excludes a favorable litigation settlement and asset sale
gain recorded in the third quarter of 2016.
- Recognizing the difficulty of projecting three years in the
future, our conservative estimate of growth in operating income in
2019 is 15% to 20% as sales of aged whiskey inventory becomes a
more significant factor.
- Modest growth is expected in net sales in 2017, subject to some
volatility as the company continues to shift sales from industrial
to premium beverage alcohol.
- 2017 gross margins are expected to continue to grow versus
2016.
- 2017 effective tax rate is forecast to be 30%, and shares
outstanding are expected to be approximately 16.8 million at year
end.
- 2017 profitability for ICP remains exposed to the challenging
and volatile conditions in the fuel ethanol industry.
Conclusion
"We continue to stay the course, building on the momentum of the
past two years, and remaining tightly aligned with our long term
strategic plan,” Griffin added. “We saw strong growth in
our premium beverage alcohol business, and more progress in our
migration away from industrial alcohol. Investing to build
our inventory of aged whiskey continues to be a focus, and the
value of that inventory, at cost, now totals $53.2 million.
Our brands initiative continues to progress, as we begin to expand
distribution of our brand portfolio, and the increase in SG&A
this quarter reflects our commitment to this initiative.
While the decline in DDG prices is certainly a headwind, overall we
believe we are well positioned for long term growth.”
About MGP Ingredients, Inc.MGP is a leading
producer and supplier of premium distilled spirits and specialty
wheat proteins and starches. Distilled spirits include premium
bourbon and rye whiskeys, gins and vodkas, which are carefully
crafted through a combination of art and science and backed by over
150 years of experience. The company's proteins and starches are
created in the same manner and provide a host of functional,
nutritional and sensory benefits for a wide range of food products.
MGP additionally is a top producer of high quality industrial
alcohol for use in both food and non-food applications. The company
is headquartered in Atchison, Kansas, where distilled alcohol
products and food ingredients are produced. Premium spirits are
also distilled and matured at the company facility in Lawrenceburg,
Indiana. For more information, visit mgpingredients.com.
Cautionary Note Regarding Forward-Looking
StatementsThis news release contains forward-looking
statements as well as historical information. All statements, other
than statements of historical facts, included in this news release
regarding the prospects of our industry and our prospects, plans,
financial position, business strategy, guidance on growth in
operating income, revenue, gross margin, and future effective tax
rate may constitute forward-looking statements. In addition,
forward-looking statements are usually identified by or are
associated with such words as "intend," "plan," "believe,"
"estimate," "expect," "anticipate," "hopeful," "should," "may,"
"will," "could," "encouraged," "opportunities," "potential" and/or
the negatives or variations of these terms or similar terminology.
They reflect management's current beliefs and estimates of future
economic circumstances, industry conditions, company performance,
and company 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) disruptions in operations at our Atchison
facility, Indiana facility, or at the Illinois Corn Processing, LLC
("ICP") facility, (ii) the availability and cost of grain and
flour, and fluctuations in energy costs, (iii) the effectiveness of
our grain purchasing program to mitigate our exposure to commodity
price fluctuations, (iv) the effectiveness or execution of our
strategic plan, (v) potential adverse effects to operations and our
system of internal controls related to the loss of key management
personnel, (vi) the competitive environment and related market
conditions, (vii) the ability to effectively pass raw material
price increases on to customers, (viii) the positive or adverse
impact to our earnings as a result of the ownership of our equity
method investment in ICP and the volatility of its operating
results, (ix) our limited influence over the ICP joint venture
operating decisions, strategies, financial or other decisions
(including investments, capital spending and distributions), (x)
our ability to source product from the ICP joint venture or
unaffiliated third parties, (xi) our ability to maintain compliance
with all applicable loan agreement covenants, (xii) our ability to
realize operating efficiencies, (xiii) actions of governments, and
(xiv) consumer tastes and preferences. For further information on
these and other risks and uncertainties that may affect our
business, including risks specific to our Distillery Products and
Ingredient Solutions segments, see Item 1A. Risk Factors of our
Annual Report on Form 10-K for the year ended December 31,
2016.
MGP INGREDIENTS, INC.OPERATING INCOME
ROLLFORWARD
Operating
income quarter-versus-quarter |
|
Operating Income |
|
Change |
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating
income for the quarter ended March 31, 2016 |
|
$ |
10,725 |
|
|
|
|
Increase in gross
profit - distillery products segment |
|
1,765 |
|
|
16.5 |
|
pp(a) |
Increase in gross
profit - ingredient solutions segment |
|
230 |
|
|
2.1 |
|
pp |
Increase in SG&A
expenses |
|
(1,328 |
) |
|
(12.4 |
) |
pp |
Operating
income for the quarter ended March 31, 2017 |
|
$ |
11,392 |
|
|
6.2 |
% |
|
|
|
|
|
|
|
|
|
|
(a) Percentage
points ("pp"). |
|
|
|
|
|
|
|
|
MGP INGREDIENTS, INC.EARNINGS PER SHARE
ROLLFORWARD
Change in basic
and diluted earnings per share quarter-versus-quarter |
|
Basic and Diluted EPS |
|
Change |
|
Basic and
diluted earnings per share for the quarter ended March 31,
2016 |
|
$ |
0.41 |
|
|
|
|
Change in
operations(a) |
|
0.03 |
|
|
7.3 |
|
pp(b) |
Tax: Current effect of
ASU 2016-09 |
|
0.07 |
|
|
17.1 |
|
pp |
Tax: Change in
effective tax rate (excluding tax item above) |
|
(0.01 |
) |
|
(2.4 |
) |
pp |
Basic and
diluted earnings per share for the quarter ended March 31,
2017 |
|
$ |
0.50 |
|
|
22.0 |
% |
|
|
|
|
|
|
|
|
|
|
(a)
Changes are net of tax based on the effective tax rate for the base
year (2016). |
(b)
Percentage points ("pp"). |
MGP INGREDIENTS, INC.CONDENSED
CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
|
|
Quarter Ended |
|
|
March 31, 2017 |
|
March 31, 2016 |
Sales |
|
$ |
91,345 |
|
|
$ |
77,191 |
|
Less: excise taxes |
|
4,176 |
|
|
356 |
|
Net sales |
|
87,169 |
|
|
76,835 |
|
Cost of sales |
|
68,128 |
|
|
59,789 |
|
Gross
profit |
|
19,041 |
|
|
17,046 |
|
Selling, general and
administrative expenses |
|
7,649 |
|
|
6,321 |
|
Operating income |
|
11,392 |
|
|
10,725 |
|
Equity method
investment earnings |
|
471 |
|
|
517 |
|
Interest expense,
net |
|
(331 |
) |
|
(311 |
) |
Income
before income taxes |
|
11,532 |
|
|
10,931 |
|
Income tax expense |
|
2,854 |
|
|
3,872 |
|
Net income |
|
$ |
8,678 |
|
|
$ |
7,059 |
|
|
|
|
|
|
Income attributable to
participating securities |
|
250 |
|
|
270 |
|
Net income attributable
to common shareholders and used in EPS calculation |
|
$ |
8,428 |
|
|
$ |
6,789 |
|
|
|
|
|
|
Share information: |
|
|
|
|
Diluted weighted average common shares |
|
16,712,578 |
|
|
16,607,074 |
|
|
|
|
|
|
Basic and
diluted earnings per common share |
|
$ |
0.50 |
|
|
$ |
0.41 |
|
Dividends and dividend
equivalents per common share |
|
$ |
0.04 |
|
|
$ |
0.08 |
|
MGP INGREDIENTS, INC.CONSOLIDATED
BALANCE SHEET (UNAUDITED)
(Dollars in thousands) |
March 31, 2017 |
|
December 31, 2016 |
|
(Dollars in thousands) |
March 31, 2017 |
|
December 31, 2016 |
ASSETS |
|
|
|
|
LIABILITIES AND STOCKHOLDERS’ EQUITY |
|
|
Current Assets: |
|
|
|
|
Current
Liabilities: |
|
|
|
Cash and cash
equivalents |
$ |
— |
|
|
$ |
1,569 |
|
|
Current maturities of
long-term debt |
$ |
4,362 |
|
|
$ |
4,359 |
|
Receivables |
36,387 |
|
|
26,085 |
|
|
Accounts payable |
16,506 |
|
|
20,342 |
|
Inventory |
79,988 |
|
|
78,858 |
|
|
Accounts payable to
affiliate, net |
2,807 |
|
|
3,349 |
|
Prepaid expenses |
2,426 |
|
|
1,684 |
|
|
Accrued expenses |
7,317 |
|
|
8,945 |
|
Refundable income
taxes |
— |
|
|
2,705 |
|
|
Income taxes
payable |
534 |
|
|
— |
|
Total Current
Assets |
118,801 |
|
|
110,901 |
|
|
Total Current
Liabilities |
31,526 |
|
|
36,995 |
|
|
|
|
|
|
Other Liabilities: |
|
|
|
|
|
|
|
|
Long-term debt, less
current maturities |
15,126 |
|
|
16,218 |
|
|
|
|
|
|
Revolving credit
facility |
24,205 |
|
|
15,424 |
|
Property and
equipment |
249,780 |
|
|
246,219 |
|
|
Deferred credits |
2,777 |
|
|
2,978 |
|
Less accumulated
depreciation and amortization |
(156,083 |
) |
|
(153,428 |
) |
|
Accrued retirement,
health and life insurance benefits |
3,460 |
|
|
3,604 |
|
Net Property,
Plant |
|
|
|
|
Deferred income
taxes |
2,942 |
|
|
3,432 |
|
and
Equipment |
93,697 |
|
|
92,791 |
|
|
Other non current
liabilities |
399 |
|
|
393 |
|
Equity method
investments |
19,403 |
|
|
18,934 |
|
|
Total
Liabilities |
80,435 |
|
|
79,044 |
|
Other assets |
2,672 |
|
|
2,710 |
|
|
Stockholders’
equity |
154,138 |
|
|
146,292 |
|
TOTAL
ASSETS |
$ |
234,573 |
|
|
$ |
225,336 |
|
|
TOTAL
LIABILITIES AND STOCKHOLDERS’ EQUITY |
$ |
234,573 |
|
|
$ |
225,336 |
|
For More Information
Investors & Analysts:
Bob Burton
616-233-0500 or Investor.Relations@mgpingredients.com
Media:
Greg Manis
913-360-5440 or greg.manis@mgpingredients.com
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