ATCHISON, Kan., August 2, 2018 - MGP Ingredients, Inc. (Nasdaq/MGPI), a leading supplier of premium distilled spirits and specialty wheat proteins and starches, today reported results for the second quarter ended June 30, 2018.
2018 second quarter results compared to 2017 second quarter results
- 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.
“While the overall American Whiskey category continues to be robust, we experienced some temporary softness in the first half, as a few existing customers delayed or reduced orders due to having previously purchased adequate inventory to meet their near-term needs,” said Gus Griffin, president and CEO of MGP Ingredients. “We continue to expect that our focus on attracting new customers, as well as our strong partnerships with existing customers, will result in stronger revenue growth in the second half of the year, and we are reaffirming our guidance for the year. In addition, we remain very pleased with our progress against all parts of our strategic plan and are continuing to invest for growth.”
Distillery Products Segment - Gross Profit Increases 4.6%
For the second quarter of 2018, net sales for the Distillery Products segment increased 2.8% to $72.7 million. Gross profit increased to $16.7 million, or 23.0% of net segment sales, compared to $16.0 million, or 22.6% of net segment sales in the second quarter 2017.
"We remain focused on the long-term opportunities provided by our positioning within the distilled spirits industry,” said Griffin. “We continue to experience strong demand for our bourbon and rye whiskeys, and our plan for sustainable growth in premium beverage alcohol remains on track for the balance of the year.”
|
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)% |
|
Ingredient Solutions Segment - Sales Grows 3.6%
For the 2018 second quarter, net sales in the Ingredient Solutions segment increased 3.6% to $15.6 million. Gross profit decreased to $2.8 million, or 17.7% of net segment sales, compared to $2.9 million, or 19.1% of net segment sales in the second quarter 2017.
"We are pleased to report our seventh consecutive quarter of revenue growth versus the prior-year quarter for our Ingredient Solutions segment. Our focus on leveraging the key consumer trends of high fiber, high protein, non-GMO, plant-based proteins and ‘clean label’ ingredients is fueling this growth,” Griffin said.
Other
Corporate selling, general and administrative expenses of $8.3 million for the second quarter 2018 remained flat to the prior year quarter. Increases in personnel costs primarily to support the brands platform and other personnel costs were offset by savings in professional fees.
The corporate effective tax rate for the quarter was 30.6%, down from an effective tax rate of 31.6% in the year ago period.
Earnings per share grew to $0.44 for the second quarter 2018, compared to $0.37 for the second quarter 2017.
2018 and Long-Term Guidance
MGP is reaffirming the following guidance for fiscal 2018 and beyond:
- 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.
Conclusion
“Despite the lower growth rate reflected in our year-to-date results, we remain pleased with our progress and the sustained strength of the categories in which we compete,” Griffin added. “We continue to invest to take full advantage of these key consumer trends and are now pleased to announce that based on continued strong demand for our premium American Whiskeys, we are making significant additional capital investments in our barrel warehouse program. Our projected investment in this program has been increased to approximately $51.8 million in capital expenditures, up from approximately $33.8 million. This increased investment will enable us to meet the long-term storage needs of both our new distillate customers and our own aging whiskey inventory. Our investment in aged whiskey inventory continues to grow, and has now reached $73.0 million, at cost. A portion of the sizable increase in our inventory from last quarter reflects stronger anticipated sales of our premium American Whiskey products in the second half of the year.
“We continue to be pleased with the positive momentum we have experienced on our brands initiative - in particular, our recently launched Rossville Union Rye Whiskey. For the remainder of the year, our focus will be on increasing distribution and velocity in our existing markets,” concluded Griffin.
Conference Call and Webcast Information
MGP Ingredients will host a conference call for analysts and institutional investors at 10 a.m. ET today to discuss these results and current business trends. The conference call and webcast will be available via:
Webcast: ir.mgpingredients.com on the Events & Presentations page
Conference Call: 844-308-6398 (domestic) or 412-717-9605 (international)
About MGP Ingredients, Inc.
Founded in 1941, MGP is a leading supplier of premium distilled spirits and specialty wheat proteins and starches. Distilled spirits include bourbon and rye whiskeys, gins and vodkas, which are expertly crafted through a combination of art and science and backed by a long history 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's facility in Lawrenceburg, Indiana. For more information, visit mgpingredients.com.
Cautionary Note Regarding Forward-Looking Statements
This 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, net sales, 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 or our Indiana 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) our ability to maintain compliance with all applicable loan agreement covenants, (ix) our ability to realize operating efficiencies, (x) actions of governments, and (xi) 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, 2017.