KANSAS | 0-17196 | 45-4082531 |
(State or other jurisdiction of incorporation) | (Commission File Number) | (IRS Employer Identification No.) |
MGP INGREDIENTS, INC. | ||
Date: March 8, 2017 | By: | /s/ Thomas K. Pigott |
Thomas K. Pigott, Vice President and Chief Financial Officer |
• | Net sales decreased 0.4% to $81.1 million, as increases in net sales of premium beverage alcohol were more than offset by a sales decline in lower margin industrial alcohol. |
• | Gross profit increased 11.6% to $17.6 million, reflecting stronger profit performance in both the Distillery Products and Ingredient Solutions segments. |
• | Gross margin increased 2.4 percentage points to 21.7% of net sales. |
• | Operating income increased 5.2% to $10.6 million. |
• | Equity method investment earnings increased from $0.1 million to $1.8 million. |
• | Net income increased 27.9% to $8.3 million. |
• | Earnings per share increased 26.3% to $0.48 per share. |
• | Net sales decreased 2.9% to $318.3 million, while product mix continued to shift toward higher value premium beverage alcohol. |
• | Gross profit increased 11.5% to $65.3 million, primarily due to improved sales mix, lower input costs, and plant efficiencies, partially offset by a lower average selling price. |
• | Gross margin increased 2.6 percentage points to 20.5% of net sales, as both operating segments grew margin by more than 200 basis points. |
• | Other income provided $3.4 million due to a previously announced legal settlement and gain on asset sale. |
• | Operating income increased 27.8% to $42.0 million. Of that percentage increase, 10.3 percentage points were attributable to the other income items mentioned earlier. |
• | Equity in joint venture earnings declined from $6.1 million to $4.0 million. |
• | Net income increased 19.1% to $31.2 million, primarily driven by the strong operating performance. |
• | Earnings per share increased 23.0% to $1.82 per share. |
Food Grade Alcohol | Net Sales Quarter Ended December 31, | Quarter vs. Quarter Net Sales Change Increase/(Decrease) | |||||||||||||
2016 | 2015 | $ Change | % Change | ||||||||||||
Premium Beverage Alcohol | $ | 40,818 | $ | 37,486 | $ | 3,332 | 8.9 | % | |||||||
Industrial Alcohol | 18,067 | 22,138 | (4,071 | ) | (18.4 | ) | |||||||||
Food Grade Alcohol | $ | 58,885 | $ | 59,624 | $ | (739 | ) | (1.2 | ) | ||||||
Net Sales Year Ended December 31, | Year vs. Year Net Sales Change Increase/(Decrease) | ||||||||||||||
2016 | 2015 | $ Change | % Change | ||||||||||||
Premium Beverage Alcohol | $ | 150,364 | $ | 131,347 | $ | 19,017 | 14.5 | % | |||||||
Industrial Alcohol | 77,290 | 98,917 | (21,627 | ) | (21.9 | ) | |||||||||
Food Grade Alcohol | $ | 227,654 | $ | 230,264 | $ | (2,610 | ) | (1.1 | ) |
• | 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 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. |
Operating income | Change | ||||||||
Operating income for the quarter ended December 31, 2015 | $ | 10,074 | |||||||
Increase in gross profit - distillery products segment | 801 | 8.0 | pp(a) | ||||||
Increase in gross profit - ingredient solutions segment | 1,029 | 10.2 | pp | ||||||
Change in SG&A | (1,306 | ) | (13.0 | ) | pp | ||||
Operating income for the quarter ended December 31, 2016 | 10,598 | 5.2 | % |
Operating income | Change | ||||||||
Operating income for the year ended December 31, 2015 | $ | 32,850 | |||||||
Increase in gross profit - distillery products segment | 6,174 | 18.8 | pp(a) | ||||||
Increase in gross profit - ingredient solutions segment | 576 | 1.8 | pp | ||||||
Change in SG&A | (1,010 | ) | (3.1 | ) | pp | ||||
Change in other operating income, net | 3,385 | 10.3 | pp | ||||||
Operating income for the year ended December 31, 2016 | $ | 41,975 | 27.8 | % |
Basic and Diluted EPS | Change | |||||||
Basic and diluted EPS for the quarter ended December 31, 2015 | $ | 0.38 | ||||||
Change in operating income: | ||||||||
Operations(a) | 0.02 | 5.3 | pp(b) | |||||
Change in equity method investments(a) | 0.07 | 18.4 | pp | |||||
Change in interest expense(a) | (0.01 | ) | (2.6 | ) | pp | |||
Tax: Change in valuation allowance | 0.01 | 2.6 | pp | |||||
Tax: Change in effective tax rate (excluding tax item above) | 0.01 | 2.6 | pp | |||||
Basic and diluted EPS for the quarter ended December 31, 2016 | $ | 0.48 | 26.3 | % |
(a) | Changes are net of tax based on the effective tax rate for each base year, excluding the change in valuation allowance. |
(b) | Percentage points ("pp"). |
Basic and Diluted EPS | Change | |||||||
Basic and diluted EPS for the year ended December 31, 2015 | $ | 1.48 | ||||||
Change in operating income: | ||||||||
Operations(a) | 0.21 | 14.2 | pp(b) | |||||
Other operating income, net(a) | 0.13 | 8.8 | pp | |||||
Change in equity method investments(a) | (0.08 | ) | (5.4 | ) | pp | |||
Change in interest expense(a) | (0.03 | ) | (2.0 | ) | pp | |||
Change in weighted average shares outstanding(c) | 0.05 | 3.4 | pp | |||||
Tax: Change in valuation allowance | (0.10 | ) | (6.8 | ) | pp | |||
Tax: Implementation of ASU No. 2016-09 | 0.09 | 6.1 | pp | |||||
Tax: Change in effective tax rate (excluding tax items above) | 0.07 | 4.7 | pp | |||||
Basic and diluted EPS for the year ended December 31, 2016 | $ | 1.82 | 23.0 | % |
(a) | Changes are net of tax based on the effective tax rate for each base year, excluding the change in valuation allowance. |
(b) | Percentage points ("pp"). |
Quarter Ended | Year Ended | |||||||||||||||
(Dollars in thousands, except per share) | December 31, 2016 | December 31, 2015 | December 31, 2016 | December 31, 2015 | ||||||||||||
Sales | $ | 85,005 | $ | 85,072 | $ | 328,081 | $ | 345,887 | ||||||||
Less: excise taxes | 3,860 | 3,563 | 9,818 | 18,283 | ||||||||||||
Net sales | 81,145 | 81,509 | 318,263 | 327,604 | ||||||||||||
Cost of sales | 63,560 | 65,754 | 252,980 | 269,071 | ||||||||||||
Gross profit | 17,585 | 15,755 | 65,283 | 58,533 | ||||||||||||
Selling, general and administrative expenses | 6,987 | 5,681 | 26,693 | 25,683 | ||||||||||||
Other operating costs and losses on sale of assets | — | — | (3,385 | ) | — | |||||||||||
Operating income | 10,598 | 10,074 | 41,975 | 32,850 | ||||||||||||
Equity method investment earnings | 1,776 | 92 | 4,036 | 6,102 | ||||||||||||
Interest expense, net | (314 | ) | (160 | ) | (1,294 | ) | (534 | ) | ||||||||
Income before income taxes | 12,060 | 10,006 | 44,717 | 38,418 | ||||||||||||
Income tax expense | 3,775 | 3,527 | 13,533 | 12,227 | ||||||||||||
Net income | 8,285 | 6,479 | 31,184 | 26,191 | ||||||||||||
Income attributable to participating securities | 254 | 214 | 954 | 873 | ||||||||||||
Net income attributable to common shareholders and used in earnings per share calculation | $ | 8,031 | $ | 6,265 | $ | 30,230 | $ | 25,318 | ||||||||
Share information | ||||||||||||||||
Diluted weighted average common shares | 16,696,787 | 16,552,873 | 16,643,811 | 17,123,556 | ||||||||||||
Basic and diluted EPS | $ | 0.48 | $ | 0.38 | $ | 1.82 | $ | 1.48 | ||||||||
Dividends and dividend equivalents per common share | $ | 0.02 | $ | — | $ | 0.12 | $ | 0.06 |
(Dollars in thousands) | December 31, 2016 | December 31, 2015 | (Dollars in thousands) | December 31, 2016 | December 31, 2015 | |||||||||||
ASSETS | LIABILITIES AND STOCKHOLDERS’ EQUITY | |||||||||||||||
Current Assets: | Current Liabilities: | |||||||||||||||
Cash and cash equivalents | $ | 1,569 | $ | 747 | Current maturities of long-term debt | $ | 4,359 | $ | 3,345 | |||||||
Receivables | 26,085 | 30,670 | Accounts payable | 20,342 | 20,940 | |||||||||||
Inventory | 78,858 | 58,701 | Accounts payable to affiliate, net | 3,349 | 2,291 | |||||||||||
Prepaid expenses | 1,684 | 1,062 | Accrued expenses | 8,945 | 10,400 | |||||||||||
Refundable income taxes | 2,705 | — | Income taxes payable | — | 685 | |||||||||||
Total Current Assets | 110,901 | 91,180 | Total Current Liabilities | 36,995 | 37,661 | |||||||||||
Other Liabilities: | ||||||||||||||||
Long-term debt, less current maturities | 16,218 | 7,579 | ||||||||||||||
Revolving credit facility | 15,424 | 22,536 | ||||||||||||||
Property and equipment | 246,219 | 229,914 | Deferred credit | 2,978 | 3,402 | |||||||||||
Less accumulated depreciation and amortization | (153,428 | ) | (146,360 | ) | Accrued retirement, health and life insurance benefits | 3,604 | 4,136 | |||||||||
Net Property, Plant | Other non current liabilities | 393 | 79 | |||||||||||||
and Equipment | 92,791 | 83,554 | Deferred income taxes | 3,432 | 2,757 | |||||||||||
Equity method investments | 18,934 | 18,563 | Total Liabilities | 79,044 | 78,150 | |||||||||||
Other assets | 2,710 | 1,013 | Stockholders’ equity | 146,292 | 116,160 | |||||||||||
TOTAL ASSETS | $ | 225,336 | $ | 194,310 | TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY | $ | 225,336 | $ | 194,310 |
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