INVESTING
FOR GROWTH IN PREMIUM SPIRITS
AND SPECIALTY FOOD INGREDIENTS
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Analyst day 2017
Lawrenceburg, INdiana
April 6, 2017
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MGP participants:
• Gus Griffin, President and CEO; Tom Pigott, Vice President of Finance and CFO; Steve Glaser, Vice President of Production and Engineering;
Andy Mansinne, Vice President of Brands; David Whitmer, Corporate Director of Quality and Alcohol RD&I; Mike Templin, Lawrenceburg
Distillery Plant Manager; and Pam Soule, Quality Assurance Lab Manager
Schedule:
• 9:30 a.m. to 11:30 a.m.:
• management presentations and webcast from Gus Griffin, Steve Glaser, Andy Mansinne and Tom Pigott
• 11:30 a.m. to 12:00:
• box lunch and Q&A
• 12:00 p.m. to 1:15 p.m.:
• Group A: tour of Lawrenceburg distillery
• Group B: Barreling, product tasting and discussion
• 1:15 p.m. to 2:30 p.m.:
• Reverse tour cycles
A reminder: we ask your cooperation in not taking any photographs or videos in the facility for security reasons.
2
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Certain of the comments made in this presentation and in the question and answer session that follows may contain forward-looking statements in relation to operations, financial
condition and operating results of MGP Ingredients, Inc. and such statements involve a number of risks and uncertainties. All statements, other than statements of historical facts,
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. Forward-looking statements are usually identified by or 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.
These statements reflect management’s views as of today and we do not undertake any obligation to update them. We wish to caution you that these statements are only estimates
and that actual results may differ materially from those projected in the forward-looking statements. 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, flour, and barrels, 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) ICP's access to
capital, (x) our limited influence over the ICP joint venture operating decisions, strategies, financial or other decisions (including investments, capital spending and
distributions), (xi) our ability to source product from the ICP joint venture or unaffiliated third parties, (xii) our ability to maintain compliance with all applicable loan agreement
covenants, (xiii) our ability to realize operating efficiencies, (xiv) actions of governments, and (xv) consumer tastes and preferences.
Additional information concerning factors that could cause actual results to materially differ from those in the forward-looking statements is contained in Item 1A Risk Factors of our
Annual Report on Form 10-K for the period ending December 31, 2016.
3
INVESTING
FOR GROWTH IN PREMIUM SPIRITS
AND SPECIALTY FOOD INGREDIENTS
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INVESTING FOR GROWTH
IN PREMIUM SPIRITS
AND SPECIALTY FOOD INGREDIENTS
April, 2017
5
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ATCHISON, KS
PROTEIN & STARCH
• 17% of Net Sales
• 13% of Gross Profit
• Gross Profit +7%
6
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ATCHISON, KS
DISTILLERY
• Vodka
• Gin
• Industrial Alcohol
7
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LAWRENCEBURG, IN
DISTILLERY
• Whiskey
• Vodka
• Gin
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8
2014 2015 2016
Premium Beverage Alcohol Industrial Alcohol
51% 49% 57% 43% 66% 34%
% of Total Food Grade Alcohol Net Sales
9
51% Whiskey
60%
Gin & Vodka
40%
66%
2016 NET SALES = $150M
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10
• Spirits gaining share
Distilled spirits have gained share of total beverage alcohol for
7 straight years, now reaching 35.9%.
• Premiumization
Consumers are trading up across all categories, with high end and
super premium brands outperforming their categories.
• Growth of American Whiskey Category
Bourbon/Rye/Tennessee continues to outperform the overall distilled
spirits industry.
• +6.8% volume
• +7.7% value
Note: Data sourced from Distilled Spirits Council
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11
• 5-Year CAGR is accelerating
2012 2013 2014 2015 2016
2.5% 3.7% 5.1% 5.7% 6.3%
Note: Data sourced from Distilled Spirits Council
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12
• 5-Year CAGR is accelerating
• Historical Length of Trends in the U.S.
9 LTR Case Volume (000s) 1970 2010 2016
American Whiskey 35.6 15.3 21.8
Vodka 18.8 62.1 69.8
Tequila 0.4 11.6 15.9
Note: Data sourced from Distilled Spirits Council
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13
• 5-Year CAGR is accelerating
• Historical Length of Trends in the U.S.
• Headroom
Note: Data is sourced from Distilled Spirits Council
1970 2010 2016
Volume 35.6 15.3 21.8
Per Capita Consumption 0.69 0.16 0.22
LDA Pop 122m 221m 233m
Share of TDS 22.8% 8.0% 9.9%
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14
• 5-Year CAGR is accelerating
• Historical Length of Trends in the U.S.
• Headroom
• Geographical Expansion Potential
• American Whiskey SOM of Total Whiskey
• In US 35%
• ROW 11%
• Export volume +10.2% in 2016
Note: Data is sourced from Distilled Spirits Council
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15
• Industry is Adding Capacity
• Existing producers to support growth of existing brands
• New producers to support growth of new brands
• Customers Building Capacity
• To expand their product offerings
• To expand their marketing efforts
• Understand and value our role
Strengthening our Position
• Scale – competitive pricing
• Capacity – ability to support long-term growth
• Capabilities – meet any customer needs
• Partnership – our core business
• Leveraging aged – retain and attract
• Broad Base – fastest growing segments
- --- - - - - - -
Secure our future by consistently delivering superior
financial results by more fully participating in all levels of
the alcohol and food ingredients segments for the
betterment of our shareholders, employees, partners,
consumers, and communities.
16
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17
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18
Strategy 2016 Accomplishments
Maximize Value • Continued to improve mix – Premium Beverage Alcohol
Capture Value Share • Launched Till American Wheat Vodka
• Acquired George Remus Brand
Invest for Growth • Progressed $29MM warehouse expansion
• Added $22.7MM of MGP premium whiskey inventory. YE balance of $50.9MM at cost
• Support own brands
• Strategic partnerships
• Strengthen position – attract and retain
• Sell on open market – potential value 3X
• Continued to strengthen team and board
Risk Management • Achieved “AA” rating from British Retail Consortium at both facilities
• Evolved management of input costs
• Implemented Enterprise Risk Management
Build our Brand • Celebrated 75th Anniversary – rang closing bell at NASDAQ
• Initiated Earnings Calls
• Honored by Kansas Department of Commerce
INVESTING
FOR GROWTH IN PREMIUM SPIRITS
AND SPECIALTY FOOD INGREDIENTS
CREATING EXCELLENCE
April, 2017
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20
Two
world-class
facilities
20
21
ATCHISON, KS
21
In 1941, Cloud L. Cray, Sr., founded Midwest Solvents Company
to meet the wartime demands for industrial alcohol.
Today, MGP’s integrated plant in Atchison, Kansas produces
vodka, gin, and industrial grade alcohol, as well as specialty
starch and protein food ingredients products.
22
LAWRENCEBURG, IN
22
MGP’s distillery in Lawrenceburg, Indiana has a rich history starting
in 1847 when it opened as the Rossville Union Distillery.
It was purchased by MGP in 2011 for $13.3MM. Today, MGP uses the
facility to produce world-class bourbon, whiskeys, gin, and vodka.
23
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• Flexibility to produce in small or
large quantities
• Work with high-rye mash bills.
Rye is difficult to process
• Significant production, barreling
and storage capacity and
capability
• Decades of experience in
product innovation/R&D,
quality, engineering,
production and supply
chain/logistics
24
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• Production of broad array of
spirits
• Vodkas and gins from corn, wheat,
high/low proof gin, non-GMO
• Twelve listed whiskey mash bills
• Develop wide variety of custom
mash bills to meet customer
needs
25
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25
• MGP sources the highest quality
grains available in the market
• MGP’s know-how in sourcing
and grain processing goes back
to its origins
• MGP handles multiple grains,
including corn, barley, rye,
wheat, and milo/sorghum
26
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• Deep fermentation and distillation
knowledge with microbiologists
and master distillers on staff
• Expertise in hard-to-handle high
rye mash bills
• Highest quality water from
Greater Miami aquifer
27
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• Flexible manufacturing
• Lawrenceburg distillery state-of-
the-art feed dryer installed 2015
• Efficient and consistent
• Well-trained and dedicated staff
28
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• Highly customizable whiskeys,
gins, vodkas
• Small and/or large runs
• Short lead-time
29
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• Strong RD&I team
• Expert master blenders
• Expertise in vodka, gin, whiskey,
bourbons
• Specialized in mash bill and
blend development
• State-of-the-art labs
30
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• MGP has been BRC Certified every
year since 2011
• For both sites, MGP has received
an AA rating. The highest possible
score
• BRC is part of the Global Food
Safety Initiative (GFSI) to assure
safe food around the world
31
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• Highly-regarded, experienced staff
• Heavy R&D on aging process:
• Wood types/characteristics
• Charring
• Building types and storage
• Environmental conditions
• Chemistry
• Best-in-class controls and
inventory management
(SAP)
32
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• As part of MGP’s invest-to-grow
strategy, we launched a $29 million
investment in a 20-acre campus
adjoining the company's current
facility to refurbish existing
warehouse buildings and construct
new warehouses
• More than doubling barrel storage
capacity
• Warehouse expansion program
is nearing final stages
33
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• MGP’s deep bench of experienced
and talented people
• We continue to attract the best new
talent
• Ours is a culture of collaboration
and excellence
• People are the key to “Building
our Legacy”
34
• Launched MGP University in
2015, with a dedicated
university director
• MGPU impacts all areas and
levels of the organization
• Provides knowledge and
wisdom vs. discrete training
• Among MGPU’s offerings
are the Master Distiller and
Master Blender programs
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35
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35
• Whiskey Advocate’s 2015 Distiller
of the Year
• 2015/2016 San Francisco
World Spirits Competition:
• Seven Double Gold
• Ten Gold
• 22 Silver
• Eight Bronze
36
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36
• The sum total of MGP’s capabilities
and expertise combine with the
best quality materials and facilities
to produce spirits of the highest
quality
CAPTURING VALUE SHARE THROUGH
Beverage brands
April, 2017
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- --- - - - - - -
38
Secure our future by consistently
delivering superior financial results by
more fully participating in all levels
of the alcohol and food ingredients
segments for the betterment of our
shareholders, employees, partners,
consumers, and communities.
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39
Note: data is sourced from 2015 Impact Databank
Top Distilled Spirits Companies, 2014:
(millions of nine-liter cases sold)
Sazerac Co.
23.2
Beam Suntory, Inc.
21.5
Bacardi USA
14.8
Pernod Ricard
USA
14.5
Brown-
Forman
Worldwide
11.0
Constellation
Brands
8.0 MGP Brands
Circa 2016
Diageo North America
40.4
40
Vodka
Gin
• Total Vodka CAGR 0%
• 71.1M 9L cs
• Ultra- and Super-Premium priced Vodka projected CAGR 11%
and 3%, respectively
• Growth to 5.0M 9L cs
• Total Gin CAGR -1%
• 9.3M 9L cs
• Super-Premium priced Gin projected 13% CAGR
• Growth to 3.9M 9L cs
• Data Source: IWSR Forecast Report; US Spirits Industry; October 2016
• CAGR = 2015-2021
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41
Bourbon
Rye
- - - - - - - - - - -
•Total U.S. Whiskey CAGR 3%
•31.3M 9L cs
•Ultra- and Super-Premium priced U.S. Whiskey projected
CAGR 12% and 10%, respectively
•Growth to 1.9M 9L cs
• Leverage market share leadership through MGP-owned
brand(s)
• Data Source: IWSR Forecast Report; US Spirits Industry; October 2016
• CAGR = 2015-2021
42
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Product Provenance Authenticity
Pricing Distribution
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43
• MGP is an influencer
• MGP Brands provide above average margin contribution
• Distributor open to planning and managing the business the
“MGP Way”:
o Transparent planning and account selection
o Account sold tracking
o Granular performance analysis
44
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45
Video
(will not play in PDF)
46
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47
48
Bottle shape similar to other high-
end vodkas; communicates quality
and premium price.
Frosted bottle similar to Ultra
Premium Imports conveys upscale
and refreshing image.
Stylized wheat field is attractive and
communicates ingredients as well as
farm/local, while being modern.
Black and white visuals seen as
simple, clean and sophisticated
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49
Source: 1/17 Vodka Exploratory and Till Focus Groups
- - - - - - - - - - -
Sophisticated
Casual
For Me/
Few People
Flavored
Import Vodka
Popular Price
Import Vodka
Super Premium
Import Vodka
Flavored Domestic
Vodka
Ultra Premium
Import Vodka
New Craft Vodka
For Parties/
More People
50
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Popular Price
Import Vodka
Super Premium
Import Vodka
Ultra Premium
Import Vodka
Domestic Craft
Vodka
Retail Price Spectrum
Source: 1/17 Vodka Exploratory and Till Focus Groups
51
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52
Video
(will not play in PDF)
53
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0% 10% 20% 30% 40% 50% 60% 70%
Craft Bourbon #2
Craft Bourbon #1
G. Remus
Top 2 Box Uniqueness – Total Sample
Craft Bourbon #2 Craft Bourbon #1 G. Remus
Source: 2/17 Bourbon/Rye Exploratory Focus Groups
George Remus is seen as more unique
compared to leading craft bourbon brands
54
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Price comparison among competition
Super
Premium
Premium
Value
High End
Source: 2/17 Bourbon/Rye Exploratory Focus Groups
Price Index = 100
Price Index = 111 Price Index = 112
Craft Bourbon #2 Craft Bourbon #1 G. Remus
55
Proprietary Blend of Bourbons
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Prohibition-style tax stamp
Custom bottle
Unique paper stock
Enhanced artwork
56
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57
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• Steadily expand distribution platform for Till and George Remus
• Add key resources (people, A&P, distribution relationships)
• Engage in brand marketing and activations
58
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• Identify and/or create well-positioned brands that fit MGP criteria:
• MGP makes the product [vodka, gin, corn, bourbon and rye whiskey]
• Super to Ultra premium positioning and price point
• Regional business with growth opportunities
• Brand positioning does not conflict with existing major customers
• Line Extensions
• Ultra Premium Bourbons and Whiskeys
• New Concepts
• Limited Releases
59
2016 Results & Outlook
April, 2017
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Fav / (Unfav) vs Prior Year
$MM $MM %
Distillery Products $265.2 $(5.0) (1.8)%
Ingredient Solutions 53.0 (4.4) (7.6)%
MGP Ingredients $318.3 $(9.3) (2.9)%
NET SALES
YEAR ENDED 12/31/2016
• Distillery products decline primarily driven
by reduced sales of lower margin
industrial alcohol
• Ingredient solutions decline due to lower
volume and pricing
KEY DRIVERS
60 Note: Totals in presentation may not foot due to rounding.
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Fav / (Unfav) vs Prior Year
$MM $MM %
Premium Beverage Alcohol $150.4 $19.0 14.5%
Industrial Alcohol 77.3 (21.6) (21.9)
Food Grade Alcohol $227.7 $(2.6) (1.1)
Fuel Grade Alcohol 7.4 - 0.1
Distillers Feed 21.8 (4.4) (16.8)
Warehouse Services 8.4 2.0 31.6
Total Distillery Products $265.2 $(5.0) (1.8)%
NET SALES
YEAR ENDED 12/31/2016
61 Note: Totals in presentation may not foot due to rounding.
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62
Food Grade Alcohol Products
MGP Branded Product
Whiskey: Aged
Whiskey: New Distillate
White Goods: Gin
White Goods: Vodka
Industrial Alcohol
M
a
r
g
i
n
s
Premium
Beverage
Alcohol
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GROSS PROFIT MARGINS
DISTILLERY PRODUCTS
8.7%
18.7%
21.4%
2014 2015 2016
63
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64
PLANT EFFICIENCIES AND EFFECTIVE RISK MANAGEMENT
PRODUCT MIX OPTIMIZATION: NEW CUSTOMERS / EXISTING CUSTOMER GROWTH
LEVERAGING AGED SALES
BRANDED PLATFORM
STAGE 1 STAGE 2 STAGE 3
STAGES OF MARGIN EXPANSION
DISTILLERY PRODUCTS
- - - - - - - - - - - - - - - - - - - - -
2015 Distillery Gross
Profit
Ingredients
Gross Profit
SG&A Other
Operating
Income*
2016
OPERATING INCOME DRIVERS
2015 TO 2016 – $MM
$32.9
$6.2 $0.6
$(1.0)
$3.4 $42.0
65
* Other operating income includes legal settlement and sale of corporate asset.
Note: Totals in presentation may not foot due to rounding.
EARNINGS PER SHARE DRIVERS
2015 TO 2016
66
2015 Actual Operations Other Operating
Income*
ICP** Interest Wtd. Avg. Shares Tax Rate
Changes, Net
2016 Actual
$(0.03)
$0.05 $0.06 $0.13
$1.48
$0.21
$1.82
* Other Operating Income includes legal settlement and sale of corporate asset.
** See appendix for background on MGP’s equity method investment in ICP.
Note: changes are net of tax based on the effective tax rate for each base year, excluding the change in valuation allowance.
$(0.08)
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Net Income Depreciation and
Amortization
Investment in
Barreled Distillate
Other Operating
Cash Drivers*
Cash Provided by
Operations
CASH FLOW DRIVERS
YEAR ENDED 2016 – $MM
INVESTING ACTIVITIES
Source / (Use) Amount
PP&E additions $(17.9)
Acquisition of George
Remus
(1.6)
Divestiture of DMI 0.4
Other investing activities* 1.4
Net Cash Used in Investing
Activities
$(17.7)
Remaining Cash Flow $2.0
$31.2
$11.3
$(22.7) $(0.1)
$19.7
67
* See appendix for detail.
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2014 2015 2016
DEBT TO EBITDA – $MM
Debt EBITDA
• 2016 YE Debt to
EBITDA Ratio of .63
• $51.6MM Available on
Credit Facility at
12/31/16 $9.9
$33.5
$39.1
$51.3
Note: See Appendix for GAAP to Non GAAP Reconciliation
68
$36.0
$57.3
69
• Working capital
• Continue to build whiskey inventory
• Capital expenditures
• Complete $29MM warehouse expansion
• Invest in capabilities
• Acquisitions
• May be used to accelerate expansion into brands
• Key criteria established
• Super premium brands
• Product MGP can produce
• Strong financial returns
• Return funds to shareholders
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USES OF CASH
70
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MGP is reconfirming the following guidance for fiscal 2017 and beyond:
• 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 31%, 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.
71
• Long term strategy in place
• Well positioned against macro trends
• Great capabilities
• Making necessary investments to deliver long
term shareholder return
• Strong results
- --- - - - - - -
• U.S. spirits market volume trends
• Industrial alcohol market dynamics background information
• ICP background information
• GAAP to Non GAAP reconciliations
• Cash flow details
- --- - - - - - -
72
73
U.S. Spirits Market
9-Liter Cases (000s)
- --- - - - - - -
2016
Volume
% Change
Total Distilled Spirits (TDS) 220,349 +2.4%
Total Whiskey 61,816 +4.1%
American Whiskey
(Bourbon/Rye/Tennessee)
21,753 +6.8%
• Super Premium 2,061 +11.8%
• Rye 775 +15.5%
• < 2.5m Cases* 11,540 +8.0%
Vodka 69,782 +2.4%
• Super Premium 6,306 +13.4%
Gin 9,932 +.7%
• Super Premium 143 +11.7 %
Note: Data is sourced from Distilled Sports Council
*Data is sourced from Impact
74
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Fuel Ethanol
14.3 Billion
??
??
Industrial
313 Million
Beverage
74 Million
Market Leaders
Poet
ADM
Green Plains
Market Leaders
GPC
ADM
Equistar
MGP
Market Leaders
GPC
MGP
ADM
2016 MGP Internal Estimates.
Volumes in wine gallons
Volume flows between markets when ethanol margins are compressed
The “Fuel Ethanol Effect”
As fuel ethanol prices come down and crush margins turn lower or negative,
producers are forced to “go idle” or enter the Industrial or Beverage markets to
maintain margins. This in turn depresses pricing and overall margins of the industrial
alcohol market due to market oversupply.
• Illinois Corn Processing, LLC (“ICP”) produces high quality food grade alcohol, chemical intermediates and fuel
• ICP’s production facility is located in Pekin, Illinois
• MGP owns 30% of ICP, and the income from the joint venture is reported in Equity method investment earnings,
and ICP’s summary financial information is provided in Note 3 of the 10K. This ownership position makes ICP a
related party to MGP
• MGP also purchases product from ICP to support it’s industrial alcohol customers and beverage alcohol production.
These purchases are also provided in Note 3 of the 10K
• When these products purchased from ICP are then sold, the amount in cost of goods sold is noted on the
Consolidated Statement of Income combined with other related party sales (DMI)
• The amount of purchases from ICP can depend on MGP’s industrial customer demand, beverage alcohol
production needs and production capacity planning
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75
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76
Reconciliation of GAAP to Non GAAP Measures
EBITDA
(Dollars in Thousands)
2016 2015 2014
Net Income 31,184$ 26,191$ 23,675$
Interest 1,294 534 816
Taxes 13,533 12,227 2,265
Depreciation / Amortization 11,253 12,382 12,325
EBITDA 57,264$ 51,334$ 39,081$
Total Debt (See Note 5 of 10K) 36,001$ 33,460$ 9,899$
Debt to EBITDA 0.63 0.65 0.25
77
Year to Date Ended
December 31, 2016
Other operating cash drivers Dollars in Thousands
Gain on property insurance recoveries (230)$
Loss (gain) on sale of assets (872)
Share-based compensation 2,402
Excess tax benefits -
Equity method investment earnings (4,036)
Distribution received from equity method investee 3,300
Deferred income taxes, including change in valuation allowance 681
Changes in working capital items:
Receivables, net 4,585
Inventory, net of assets acquired in acquisition, excluding barreled distillate 2,557
Prepaid expenses (622)
Refundable income taxes (3,390)
Accounts payable (3,178)
Accounts payable to affiliate, net 1,058
Accrued expenses (1,407)
Deferred credits (424)
Accrued retirement health and life insurance benefits (477)
Other, net -
Total (53)$
Other investing activities net
Proceeds from property insurance recoveries 230$
Proceeds from sale of property and other 1,209
Total 1,439$
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