KANSAS | 0-17196 | 45-4082531 |
(State or other jurisdiction of incorporation) | (Commission File Number) | (IRS Employer Identification No.) |
MGP INGREDIENTS, INC. | |||
Date: | August 2, 2018 | By: | /s/ Thomas K. Pigott |
Thomas K. Pigott, Vice President and Chief Financial Officer |
• | Consolidated net sales increased 2.9% to $88.3 million, reflecting growth in both the Distillery Products and Ingredient Solutions segments. |
• | Consolidated gross profit increased 3.3% to $19.4 million from $18.8 million, driven by gross profit growth in the Distillery Products segment, partially offset by a decline in the Ingredient Solutions segment. |
• | Consolidated operating income increased to $11.1 million from $10.5 million, up 5.9% from the prior-year quarter, primarily driven by the gross profit growth. |
• | Consolidated net income increased 18.2% to $7.5 million. |
• | Earnings per share increased 18.9% to $0.44 per share from $0.37 per share in the prior-year quarter, driven by improved performance from operations and the absence of an equity method investment loss from ICP, which was divested on July 3, 2017, as well as a lower effective tax rate. |
Food Grade Alcohol (in thousands) | Net Sales Quarter Ended June 30, | Quarter vs. Quarter Net Sales Change Increase/(Decrease) | |||||||||||||
2018 | 2017 | $ Change | % Change | ||||||||||||
Premium Beverage Alcohol | $ | 42,200 | $ | 42,287 | $ | (87 | ) | (0.2 | )% | ||||||
Industrial Alcohol | 19,295 | 19,342 | (47 | ) | (0.2 | ) | |||||||||
Food Grade Alcohol | $ | 61,495 | $ | 61,629 | $ | (134 | ) | (0.2 | )% |
• | Operating income is expected to grow between 10% and 15% for fiscal year 2018. |
• | The Company’s conservative estimate of growth in operating income in 2019 is 15% to 20% as sales of aged whiskey inventory become a more significant factor. |
• | 2018 net sales growth is projected in the high single-digit percentage range versus 2017, subject to some volatility as the Company continues to shift sales from industrial to premium beverage alcohol. |
• | 2018 gross margins are expected to continue to grow modestly versus 2017. |
• | 2018 effective tax rate is forecast to be 25%, and shares outstanding are expected to be approximately 16.9 million at year end. |
Operating income, quarter versus quarter | Operating Income | Change | ||||||
Operating income for the quarter ended June 30, 2017 | $ | 10,514 | ||||||
Increase in gross profit - distillery products segment | 727 | 6.9 | pp(a) | |||||
Decrease in gross profit - ingredient solutions segment | (111 | ) | (1.0 | ) | pp | |||
SG&A expenses | 2 | — | pp | |||||
Operating income for the quarter ended June 30, 2018 | $ | 11,132 | 5.9 | % |
Operating income, year to date versus year to date | Operating Income | Change | ||||||
Operating income for year to date ended June 30, 2017 | $ | 21,906 | ||||||
Decrease in gross profit - distillery products segment | (18 | ) | (0.1 | ) | pp(a) | |||
Increase in gross profit - ingredient solutions segment | 544 | 2.5 | pp | |||||
Increase in SG&A expenses | (911 | ) | (4.2 | ) | pp | |||
Operating income for year to date ended June 30, 2018 | $ | 21,521 | (1.8 | )% |
Change in basic and diluted EPS, quarter versus quarter | Basic and Diluted EPS | Change | ||||||
Basic and diluted EPS for the quarter ended June 30, 2017 | $ | 0.37 | ||||||
Change in operations(a) | 0.03 | 8.1 | pp(b) | |||||
Change in equity method investment loss(a) | 0.03 | 8.1 | pp | |||||
Tax: Change in effective tax rate | 0.01 | 2.7 | pp | |||||
Basic and diluted EPS for the quarter ended June 30, 2018 | $ | 0.44 | 18.9 | % |
(a) | Items are net of tax based on the effective tax rate for the base year (2017). |
(b) | Percentage points ("pp"). |
Change in basic and diluted EPS, year to date versus year to date | Basic and Diluted EPS | Change | ||||||
Basic and diluted EPS for year to date ended June 30, 2017 | $ | 0.87 | ||||||
Change in operations(a) | (0.02 | ) | (2.3 | ) | pp(b) | |||
Change in equity method investment loss(a) | 0.01 | 1.2 | pp | |||||
Change in interest expense, net(a) | 0.01 | 1.2 | pp | |||||
Tax: Net effect of the tax benefit on vested share-based compensation | 0.01 | 1.2 | pp | |||||
Tax: Change in effective tax rate (excluding tax item above) | 0.08 | 9.1 | pp | |||||
Basic and diluted EPS for year to date ended June 30, 2018 | $ | 0.96 | 10.4 | % |
(a) | Items are net of tax based on the effective tax rate for the base year (2017), excluding the effect of the tax benefit on vested share-based compensation on the 2017 rate. |
(b) | Percentage points ("pp"). |
Quarter Ended | Year to date Ended | ||||||||||||||||
June 30, 2018 | June 30, 2017 | June 30, 2018 | June 30, 2017 | ||||||||||||||
Net sales | $ | 88,252 | $ | 85,753 | $ | 176,208 | $ | 172,922 | |||||||||
Cost of sales | 68,811 | 66,928 | 137,816 | 135,056 | |||||||||||||
Gross profit | 19,441 | 18,825 | 38,392 | 37,866 | |||||||||||||
Selling, general and administrative expenses | 8,309 | 8,311 | 16,871 | 15,960 | |||||||||||||
Operating income | 11,132 | 10,514 | 21,521 | 21,906 | |||||||||||||
Equity method investment loss | — | (819 | ) | — | (348 | ) | |||||||||||
Interest expense, net | (289 | ) | (379 | ) | (496 | ) | (710 | ) | |||||||||
Income before income taxes | 10,843 | 9,316 | 21,025 | 20,848 | |||||||||||||
Income tax expense | 3,316 | 2,947 | 4,571 | 5,801 | |||||||||||||
Net income | $ | 7,527 | $ | 6,369 | $ | 16,454 | $ | 15,047 | |||||||||
Income attributable to participating securities | 148 | 183 | 323 | 433 | |||||||||||||
Net income attributable to common shareholders and used in EPS calculation | $ | 7,379 | $ | 6,186 | $ | 16,131 | $ | 14,614 | |||||||||
Share information: | |||||||||||||||||
Basic and Diluted weighted average common shares | 16,869,481 | 16,745,679 | 16,856,423 | 16,727,305 | |||||||||||||
Basic and diluted earnings per common share | $ | 0.44 | $ | 0.37 | $ | 0.96 | $ | 0.87 | |||||||||
Dividends and dividend equivalents per common share | $ | 0.08 | $ | 0.04 | $ | 0.16 | $ | 0.08 |
(Dollars in thousands) | June 30, 2018 | December 31, 2017 | (Dollars in thousands) | June 30, 2018 | December 31, 2017 | |||||||||||
ASSETS | LIABILITIES AND STOCKHOLDERS’ EQUITY | |||||||||||||||
Current Assets: | Current Liabilities: | |||||||||||||||
Cash and cash equivalents | $ | 2,280 | $ | 3,084 | Current maturities of long-term debt | $ | 379 | $ | 372 | |||||||
Receivables, net | 35,758 | 34,347 | Accounts payable | 23,333 | 30,037 | |||||||||||
Inventory | 106,487 | 93,149 | Accrued expenses | 7,937 | 11,171 | |||||||||||
Prepaid expenses | 2,802 | 2,182 | ||||||||||||||
Refundable income taxes | 1,534 | 1,980 | Total Current Liabilities | 31,649 | 41,580 | |||||||||||
Total Current Assets | 148,861 | 134,742 | Other Liabilities: | |||||||||||||
Long-term debt, less current maturities | 21,225 | 21,407 | ||||||||||||||
Revolving credit facility | 18,857 | 2,775 | ||||||||||||||
Deferred credits | 1,789 | 2,151 | ||||||||||||||
Property and equipment | 278,548 | 267,288 | Accrued retirement, health, and life insurance benefits | 2,989 | 3,133 | |||||||||||
Less accumulated depreciation and amortization | (169,712 | ) | (164,237 | ) | Other noncurrent liabilities | 545 | 540 | |||||||||
Net Property, Plant, and Equipment | 108,836 | 103,051 | Deferred income taxes | 741 | 12 | |||||||||||
Total Liabilities | 77,795 | 71,598 | ||||||||||||||
Other assets | 2,458 | 2,535 | Stockholders’ equity | 182,360 | 168,730 | |||||||||||
TOTAL ASSETS | $ | 260,155 | $ | 240,328 | TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY | $ | 260,155 | $ | 240,328 |
Year to Date Ended | ||||||||
June 30, 2018 | June 30, 2017 | |||||||
Cash Flows from Operating Activities | ||||||||
Net income | $ | 16,454 | $ | 15,047 | ||||
Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||
Depreciation and amortization | 5,826 | 5,554 | ||||||
Distributions received from equity method investee | — | 7,131 | ||||||
Deferred income taxes | 729 | 577 | ||||||
Share-based compensation | 1,968 | 1,737 | ||||||
Equity method investment loss | — | 348 | ||||||
Changes in operating assets and liabilities: | ||||||||
Receivables, net | (1,411 | ) | (8,845 | ) | ||||
Inventory | (13,338 | ) | (6,693 | ) | ||||
Prepaid expenses | (620 | ) | (1,148 | ) | ||||
Accounts payable | (5,106 | ) | (671 | ) | ||||
Accounts payable to affiliate, net | — | (168 | ) | |||||
Accrued expenses | (3,232 | ) | (934 | ) | ||||
Income taxes payable/refundable | 446 | (426 | ) | |||||
Deferred credit | (362 | ) | (410 | ) | ||||
Accrued retirement health and life insurance benefits | (111 | ) | (256 | ) | ||||
Net cash provided by operating activities | 1,243 | 10,843 | ||||||
Cash Flows from Investing Activities | ||||||||
Additions to plant, property and equipment | (13,065 | ) | (9,933 | ) | ||||
Return of equity method investment | — | 299 | ||||||
Net cash used in investing activities | (13,065 | ) | (9,634 | ) | ||||
Cash Flows from Financing Activities | ||||||||
Purchase of treasury stock for tax withholding on share-based compensation | (2,073 | ) | (1,131 | ) | ||||
Payment of dividends and dividend equivalents | (2,750 | ) | (1,376 | ) | ||||
Principal payments on long-term debt | (185 | ) | (177 | ) | ||||
Proceeds from credit agreement | 16,946 | 12,467 | ||||||
Payments on credit agreement | (920 | ) | (4,650 | ) | ||||
Net cash provided by financing activities | 11,018 | 5,133 | ||||||
Increase (decrease) in cash and cash equivalents | (804 | ) | 6,342 | |||||
Cash and cash equivalents, beginning of period | 3,084 | 1,569 | ||||||
Cash and cash equivalents, end of period | $ | 2,280 | $ | 7,911 |
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