MGP Ingredients Reports Strong Second Quarter 2022 Results
08/04/2022 - 07:30 AM
Consolidated sales increased 11% from prior year period Operating income increased 28%
ATCHISON, Kan., Aug. 04, 2022 (GLOBE NEWSWIRE) -- MGP Ingredients, Inc. (Nasdaq:MGPI), a leading provider of distilled spirits, branded spirits, and food ingredient solutions, today reported results for the second quarter ended June 30, 2022.
2022 second quarter consolidated results compared to 2021 second quarter
Sales increased 11% to $195.0 million , as a result of sales growth in the Distilling Solutions and Ingredient Solutions segments. Gross profit increased 4% to $59.2 million , representing 30.4% of sales. Adjusted gross profit decreased slightly from $59.4 million . Operating income increased 28% to $35.3 million . Adjusted operating income decreased 4% from $36.9 million . Net income increased 26% to $25.4 million . Adjusted net income decreased 10% from $28.1 million . Adjusted EBITDA decreased 5% to $40.1 million . Basic and diluted earnings per common share ("EPS") increased to $1.15 per share from $0.91 per share. Adjusted basic and diluted EPS decreased to $1.15 per share from $1.27 per share. “We are pleased with our team’s performance during the second quarter as we continue to execute against our long-term strategic plan,” said David Colo, president and CEO of MGP Ingredients. “Continued strength in the demand for new distillate and aged whiskey resulted in brown goods sales growth of 29% versus the prior year period, driving an overall increase in sales of 19% for premium beverage alcohol. As expected, industrial alcohol and white goods gross profits were negatively impacted by increased commodity costs and additional supply that has entered the market. Consumer demand for our Branded Spirits premium plus offerings, which include premium, super premium and ultra premium brands, remains strong. We also increased our advertising and promotion investment in these brands to support anticipated incremental growth. Our enthusiasm for our Ingredient Solutions segment remains strong, which again delivered record results during the second quarter as we made further progress to optimize segment product mix and align with consumer demand trends. We are confident the marketing platform and go-to-market strategy we have in place will drive further growth in the segment.”
Distilling Solutions 19% to $107.1 million , reflecting a 19% increase in sales of premium beverage alcohol. Gross profit decreased to $29.8 million or 27.8% of segment sales, compared to $32.0 million , or 35.4% of segment sales in the second quarter 2021.
Branded Spirits 3% to $58.6 million . Gross profit increased to $21.0 million , or 35.8% of segment sales compared to $18.4 million , or 30.5% of segment sales in the second quarter 2021. Excluding the impact of purchase accounting related to the Luxco acquisition, gross margin was 34.7% for the second quarter 2021.
Ingredient Solutions 21% to a record $29.3 million . Gross profit increased to $8.5 million , or 29.0% of segment sales, compared to $6.4 million , or 26.5% of segment sales in the second quarter 2021.
Other $2.7 million to $6.1 million as compared to the second quarter 2021, primarily driven by incremental investment in the ultra premium, super premium and premium price tier spirit brands.
Corporate selling, general and administrative ("SG&A") expenses for the second quarter 2022 decreased $7.9 million to $17.9 million as compared to the second quarter 2021, primarily due to the one-time acquisition costs in 2021 related to the Luxco acquisition that did not recur in 2022.
The corporate effective tax rate for the second quarter 2022 was 22.4% , compared with 24.2% from the year ago period.
“As we look ahead to the second half of the year, we are confident in our ability to build on the accomplishments we have made towards our long-term strategic objectives,” said Colo. “The expansionary projects we announced earlier this year remain on track and we believe will enable us to meet evolving consumer trends and demand. Our approach to capital allocation remains unchanged, and we will continue to prioritize organic and acquisitive growth. Our excellent performance during the first half of the year has enabled us to revise our full-year guidance upward.”
2022 Outlook
Sales are projected to be in the range of $745 million to $765 million . Adjusted EBITDA is expected to be in the range of $156 million to $163 million . Basic adjusted earnings per common share are forecasted to be in the $4.41 t o $4.65 range, with basic weighted average shares outstanding expected to be approximately 22.0 million at year end. Full year 2022 guidance measures of adjusted EBITDA and basic adjusted EPS are provided on a non-GAAP basis without a reconciliation to the most directly comparable GAAP measures because MGP is unable to predict with a reasonable degree of certainty certain items contained in the GAAP measures without unreasonable efforts. Such items include, but are not limited to, acquisition related expenses, restructuring and related expenses, and other items not reflective of MGP’s ongoing operations.
Conference Call and Webcast Information
Webcast: ir.mgpingredients.com on the Events & Presentations page Conference Call: 844-308-6398 (domestic) or 412-717-9605 (international)
About MGP Ingredients, Inc. MGP Ingredients, Inc. (Nasdaq: MGPI) is a leading producer of premium distilled spirits, branded spirits, and food ingredient solutions. Since 1941, we have combined our expertise and energy aimed at formulating excellence, and bringing product ideas to life collaboratively with our customers.
As one of the largest distillers in the U.S., MGP’s offerings include bourbon and rye whiskeys, gins, and vodkas, which are created at the intersection of science and imagination, for customers of all sizes, from crafts to multinational brands. With U.S. distilleries in Kentucky, Indiana, Kansas, and Washington D.C., and bottling operations in Missouri, Ohio, and Northern Ireland, MGP has the infrastructure and expertise to create on any scale.
MGP’s branded spirits portfolio covers a wide spectrum of brands in every segment, including iconic brands from Luxco, which was founded in 1958 by the Lux Family. Luxco is a leading producer, supplier, importer and bottler of beverage alcohol products. Our branded spirits mission is to meet the needs and exceed the expectations of consumers, associates and business partners. Luxco’s award-winning spirits portfolio includes well-known brands from five distilleries: Bardstown, Kentucky-based Lux Row Distillers, home of Ezra Brooks, Rebel, Blood Oath, David Nicholson and Daviess County; Lebanon, Kentucky-based Limestone Branch Distillery, maker of Yellowstone Kentucky Straight Bourbon Whiskey, Minor Case Straight Rye Whiskey and Bowling & Burch Gin; Jalisco, Mexico-based Destiladora González Lux, producer of 100% agave tequilas, El Mayor, Exotico and Dos Primos; MGP’s historic distillery in Lawrenceburg, Indiana, where the George Remus Straight Bourbon Whiskey and Rossville Union Straight Rye Whiskey are produced; and the Washington, D.C.-based Green Hat Distillery, producer of the Green Hat family of gins. The innovative and high-quality brand portfolio also includes Everclear Grain Alcohol, Pearl Vodka, Saint Brendan’s Irish Cream, The Quiet Man Irish Whiskey and other well-recognized brands.
In addition, our Ingredient Solutions segment offers specialty proteins and starches that help customers harness the power of plants and provide a host of functional, nutritional and sensory benefits for a wide range of food products.
The transformation of American grain into something more is in the soul of our people, products, and history. We’re devoted to unlocking the creative potential of this extraordinary resource. For more information, visit mgpingredients.com.
Cautionary Note Regarding Forward-Looking Statements
These forward-looking statements reflect management’s current beliefs and estimates of future economic circumstances, industry conditions, Company performance, and Company financial results and financial condition 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 statements. Important factors that could cause actual results to differ materially from our expectations include, (i) disruptions in the operations at any of our facilities, (ii) the availability and cost of grain, flour, and agave, 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 impact of the COVID-19 pandemic, (viii) the effects of inflation and the ability to effectively pass raw material and other price increases on to customers, (ix) our ability to maintain compliance with all applicable loan agreement covenants, (x) increases in interest rates, (xi) our ability to realize operating efficiencies, (xii) actions of governments, and (xiii) consumer tastes and preferences. For further information on these and other risks and uncertainties that may affect our business, including risks specific to our Distilling Solutions, Branded Spirits and Ingredient Solutions segments, see Item 1A. Risk Factors of our Annual Report on Form 10-K for the year ended December 31, 2021 and our Quarterly Report on Form 10-Q for the quarter ended June 30, 2022.
Non-GAAP Financial Measures
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MGP INGREDIENTS, INC. OPERATING INCOME ROLLFORWARD (Dollars in thousands)
Operating income, quarter versus quarter Operating Income Change Operating income for quarter ended June 30, 2021 $ 27,663 Increase in gross profit - Branded Spirits segment 2,526 9 pp(a) Increase in gross profit - Ingredient Solutions segment 2,076 8 pp Decrease in gross profit - Distilling Solutions segment (2,205 ) (8 ) pp Increase in Advertising and promotion expenses (2,694 ) (10 ) pp Decrease in SG&A expenses 7,934 29 pp Increase in Other operating income (expense), net 6 — pp Operating income for quarter ended June 30, 2022 $ 35,306 28 %
Operating income, year to date versus year to date Operating Income Change Operating income for year to date ended June 30, 2021 $ 48,163 Increase in gross profit - Branded Spirits segment 27,222 57 pp(a) Increase in gross profit - Distilling Solutions segment 8,483 17 pp Increase in gross profit - Ingredient Solutions segment 6,214 13 pp Increase in Advertising and promotion expenses (7,345 ) (15 ) pp Decrease in SG&A expenses 2,614 5 pp Increase in Other operating income (expense), net 35 — pp Operating income for year to date June 30, 2022 $ 85,386 77 %
(a) Percentage points (“pp”).
MGP INGREDIENTS, INC. EARNINGS PER COMMON SHARE (“EPS”) ROLLFORWARD
Change in basic and diluted EPS, quarter versus quarter Basic and Change Basic and diluted EPS for quarter ended June 30, 2021 $ 0.91 Increase in Operating income (b) 0.26 28 pp(a) Increase in other income (expense), net(b) (0.03 ) (3 ) pp Tax: Change in effective tax rate 0.04 4 pp Change in income allocated to participating securities (0.01 ) (1 ) pp Change in interest expense, net (b) (0.02 ) (2 ) pp Basic and diluted EPS for quarter ended June 30, 2022 $ 1.15 26 %
Change in basic and diluted EPS, year to date versus year to date Basic and Change Basic and diluted EPS for year to date ended June 30, 2021 $ 1.81 Increase in Operating income(b) 1.60 88 pp(a) Change in interest expense, net(b) (0.07 ) (4 ) pp Increase in other income (expense), net(b) (0.03 ) (1 ) pp Tax: Change in effective tax rate 0.04 2 pp Change in weighted average shares outstanding (0.51 ) (28 ) pp Basic and diluted EPS for year to date ended June 30, 2022 $ 2.84 57 %
(a) Percentage points (“pp”).
MGP INGREDIENTS, INC. SALES BY OPERATING SEGMENT (Dollars in thousands)
DISTILLING SOLUTIONS SALES Quarter Ended June 30, Quarter versus Quarter Sales Change Increase/(Decrease) 2022 2021 $ Change % Change Brown goods $ 56,331 $ 43,766 $ 12,565 29 % White goods 17,441 18,205 (764 ) (4 ) Premium beverage alcohol 73,772 61,971 11,801 19 Industrial alcohol 12,885 14,770 (1,885 ) (13 ) Food grade alcohol 86,657 76,741 9,916 13 Fuel grade alcohol 3,312 4,753 (1,441 ) (30 ) Distillers feed and related co-products 11,267 4,672 6,595 141 Warehouse services 5,902 4,182 1,720 41 Total Distilling Solutions $ 107,138 $ 90,348 $ 16,790 19 %
BRANDED SPIRITS SALES Quarter Ended June 30, Quarter versus Quarter Sales Change Increase/(Decrease) 2022 2021 $ Change % Change Ultra premium $ 9,435 $ 8,002 $ 1,433 18 % Super premium 3,226 3,184 42 1 Premium 5,775 5,303 472 9 Mid 23,301 25,407 (2,106 ) (8 ) Value 12,908 13,228 (320 ) (2 ) Other 3,921 5,302 (1,381 ) (26 ) Total Branded Spirits $ 58,566 $ 60,426 $ (1,860 ) (3 )%
INGREDIENT SOLUTIONS SALES Quarter Ended June 30, Quarter versus Quarter Sales Change 2022 2021 $ Change % Change Specialty wheat starches $ 16,001 $ 12,598 $ 3,403 27 % Specialty wheat proteins 10,109 8,352 1,757 21 Commodity wheat starches 3,130 2,663 467 18 Commodity wheat proteins 38 552 (514 ) (93 ) Total Ingredient Solutions $ 29,278 $ 24,165 $ 5,113 21 %
MGP INGREDIENTS, INC. SALES BY OPERATING SEGMENT (Dollars in thousands)
DISTILLERY PRODUCTS SALES Year to Date Ended June 30, Year to Date versus Year to date Sales Change Increase/(Decrease) 2022 2021 $ Change % Change Brown goods $ 118,476 $ 86,807 $ 31,669 36 % White goods 37,527 34,862 2,665 8 Premium beverage alcohol 156,003 121,669 34,334 28 Industrial alcohol 24,380 32,106 (7,726 ) (24 ) Food grade alcohol 180,383 153,775 26,608 17 Fuel grade alcohol 6,594 7,270 (676 ) (9 ) Distillers feed and related co-products 20,184 9,644 10,540 109 Warehouse services 11,486 8,283 3,203 39 Total Distilling Soutions $ 218,647 $ 178,972 $ 39,675 22 %
BRANDED SPIRITS SALES Year to Date Ended June 30, Year to Date versus Year to date Sales Change Increase/(Decrease) 2022 2021 $ Change % Change Ultra premium $ 22,032 $ 8,128 $ 13,904 171 % Super premium 6,172 3,595 2,577 72 Premium 11,915 5,329 6,586 124 Mid 42,574 25,407 17,167 68 Value 24,207 13,228 10,979 83 Other 7,417 5,309 2,108 40 Total Branded Spirits $ 114,317 $ 60,996 $ 53,321 87 %
INGREDIENT SOLUTIONS SALES Year to Date Ended June 30, Year to Date versus Year to date Sales Change Increase/(Decrease) 2022 2021 $ Change % Change Specialty wheat starches $ 31,204 $ 22,820 $ 8,384 37 % Specialty wheat proteins 19,528 14,398 5,130 36 Commodity wheat starches 6,483 4,946 1,537 31 Commodity wheat proteins 38 1,130 (1,092 ) (97 ) Total Ingredient Solutions $ 57,253 $ 43,294 $ 13,959 32 %
MGP INGREDIENTS, INC. CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED) (Dollars in thousands)
Quarter Ended June 30, Year to Date Ended June 30, 2022 2021 2022 2021 Sales $ 194,982 $ 174,939 $ 390,217 $ 283,262 Cost of sales 135,758 118,112 259,172 194,136 Gross profit 59,224 56,827 131,045 89,126 Advertising and promotion expenses 6,065 3,371 11,569 4,224 Selling, general and administrative expenses 17,859 25,793 34,125 36,739 Other operating (income) expense, net (6 ) — (35 ) — Operating income 35,306 27,663 85,386 48,163 Interest expense, net (1,543 ) (1,104 ) (3,141 ) (1,592 ) Other income (expense), net (1,062 ) (88 ) (1,008 ) (58 ) Income before income taxes 32,701 26,471 81,237 46,513 Income tax expense 7,339 6,412 18,504 11,027 Net income 25,362 20,059 62,733 35,486 Net (income) loss attributable to noncontrolling interest 198 76 264 76 Net income attributable to MGP Ingredients, Inc. 25,560 20,135 62,997 35,562 Income attributable to participating securities (217 ) (150 ) (535 ) (299 ) Net income used in earnings per common share calculation $ 25,343 $ 19,985 $ 62,462 $ 35,263 Basic and diluted weighted average common shares 22,002,385 21,916,721 21,995,779 19,436,143 Basic and diluted earnings per common share $ 1.15 $ 0.91 $ 2.84 $ 1.81
MGP INGREDIENTS, INC. CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED) (Dollars in thousands)
June 30, 2022 December 31, 2021 ASSETS Current Assets: Cash and cash equivalents $ 37,415 $ 21,568 Receivables, net 105,393 92,537 Inventory 272,948 245,944 Prepaid expenses 6,768 1,510 Refundable income taxes — 5,539 Total Current Assets 422,524 367,098 Property, plant, and equipment 418,040 404,149 Less accumulated depreciation and amortization (206,055 ) (196,863 ) Property, Plant, and Equipment, net 211,985 207,286 Operating lease right-of-use assets, net 15,559 9,671 Investment in joint ventures 5,792 4,944 Intangible assets, net 217,803 218,838 Goodwill 226,294 226,294 Other assets 6,663 7,336 TOTAL ASSETS $ 1,106,620 $ 1,041,467 LIABILITIES AND STOCKHOLDERS’ EQUITY Current Liabilities: Current maturities of long-term debt $ 4,189 $ 3,227 Accounts payable 60,572 53,712 Federal and state excise taxes payable 7,673 6,992 Income taxes payable 141 — Accrued expenses and other 20,681 24,869 Total Current Liabilities 93,256 88,800 Long-term debt, less current maturities 32,698 35,266 Convertible senior notes 195,066 194,906 Long-term operating lease liabilities 12,206 6,997 Other noncurrent liabilities 4,095 5,132 Deferred income taxes 66,226 66,101 Total Liabilities 403,547 397,202 Total equity 703,073 644,265 TOTAL LIABILITIES AND TOTAL EQUITY $ 1,106,620 $ 1,041,467
MGP INGREDIENTS, INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)(Dollars in thousands)
Year to Date Ended June 30, 2022 2021 Cash Flows from Operating Activities Net income $ 62,733 $ 35,486 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 10,924 8,425 Share-based compensation 2,131 4,767 Deferred income taxes, including change in valuation allowance 125 (1,568 ) Other, net 82 (69 ) Changes in operating assets and liabilities, net of effects of acquisition: Receivables, net (13,142 ) 7,531 Inventory (27,508 ) (408 ) Prepaid expenses 266 (897 ) Income taxes payable 141 1,017 Accounts payable 11,438 (12,996 ) Accrued expenses and other (4,791 ) 7,987 Federal and state liquor excise payable 681 716 Other, net (61 ) (2,537 ) Net cash provided by operating activities 43,019 47,454 Cash Flows from Investing Activities Additions to property, plant, and equipment (18,087 ) (18,336 ) Purchase of business, net of cash acquired — (149,599 ) Contributions to equity method investment (1,028 ) (988 ) Other, net (369 ) (1,312 ) Net cash used in investing activities (19,484 ) (170,235 ) Cash Flows from Financing Activities Payment of dividends and dividend equivalents (5,322 ) (4,707 ) Purchase of treasury stock (713 ) (765 ) Loan fees paid related to borrowings — (666 ) Principal payments on long-term debt (1,614 ) — Proceeds from credit agreement - revolver — 242,300 Payments on credit agreement - revolver — (10,306 ) Payment on assumed debt as part of the Merger — (87,497 ) Net cash provided by (used in) financing activities (7,649 ) 138,359 Effect of exchange rate changes on cash (39 ) 3 Increase in cash and cash equivalents 15,847 15,581 Cash and cash equivalents, beginning of period 21,568 21,662 Cash and cash equivalents, end of period $ 37,415 $ 37,243
MGP INGREDIENTS, INC. RECONCILIATION OF SELECTED GAAP MEASURES TO ADJUSTED NON-GAAP MEASURES (UNAUDITED)
Quarter Ended June 30, 2022 Gross Profit Operating Income Income before Income Taxes Net Income MGP Earnings (a) Basic and Reported GAAP Results $ 59,224 $ 35,306 $ 32,701 $ 25,362 $ 25,343 $ 1.15 No adjustments for the period — — — — — — Adjusted Non-GAAP results $ 59,224 $ 35,306 $ 32,701 $ 25,362 $ 25,343 $ 1.15
Quarter Ended June 30, 2021 Gross Profit Operating Income Income before Income Taxes Net Income MGP Earnings (a) Basic and Reported GAAP Results $ 56,827 $ 27,663 $ 26,471 $ 20,059 $ 19,985 $ 0.91 Adjusted to remove: Inventory step-up - Branded Spirits (b) 2,529 2,529 2,529 2,529 2,510 0.11 Business acquisition costs (c) — 6,738 6,738 5,535 5,473 0.25 Adjusted Non-GAAP results $ 59,356 $ 36,930 $ 35,738 $ 28,123 $ 27,968 $ 1.27
Year to Date Ended June 30, 2022 Gross Profit Operating Income Income before Income Taxes Net Income MGP Earnings (a) Basic and Reported GAAP Results $ 131,045 $ 85,386 $ 81,237 $ 62,733 $ 62,462 $ 2.84 No adjustments for the period — — — — — — Adjusted Non-GAAP results $ 131,045 $ 85,386 $ 81,237 $ 62,733 $ 62,462 $ 2.84
Year to Date Ended June 30, 2021 Gross Profit Operating Income Income before Income Taxes Net Income MGP Earnings (a) Basic and Reported GAAP Results $ 89,126 $ 48,163 $ 46,513 $ 35,486 $ 35,263 $ 1.81 Adjusted to remove: Inventory step-up - Branded Spirits (b) 2,529 2,529 2,529 2,529 2,510 0.13 Business acquisition costs(c) — 8,628 8,628 7,303 7,241 0.37 Adjusted Non-GAAP results $ 91,655 $ 59,320 $ 57,670 $ 45,318 $ 45,014 $ 2.31
(a) MGP Earnings has been defined as "Net income used in Earnings Per Common Share calculation."
MGP INGREDIENTS, INC. RECONCILIATION OF SELECTED GAAP MEASURES TO ADJUSTED NON-GAAP MEASURES - BRANDED SPIRITS SEGMENT (UNAUDITED)
Quarter Ended June 30, 2022 Revenue Gross Profit Gross Margin Reported GAAP Results - Branded Spirits segment $ 58,566 $ 20,960 35.8 % No adjustments for the period — — — Adjusted Non-GAAP results - Branded Spirits segment $ 58,566 $ 20,960 35.8 %
Quarter Ended June 30, 2021 Revenue Gross Profit Gross Margin Reported GAAP Results - Branded Spirits segment $ 60,426 $ 18,434 30.5 % Inventory step-up (a) — 2,529 4.2 pp(b) Adjusted Non-GAAP results - Branded Spirits segment $ 60,426 $ 20,963 34.7 %
(a) The finished goods Inventory valuation step-up costs are included in the Condensed Consolidated Statement of Income within Cost of goods by the Branded Spirits segment. The adjustment includes the purchase accounting adjustment to value the finished goods inventory acquired in the Luxco acquisition at its estimated fair value.
MGP INGREDIENTS, INC. RECONCILIATION OF NET INCOME TO ADJUSTED EBITDA
Quarter Ended June 30, Year to Date Ended June 30, 2022 2021 2022 2021 Net Income $ 25,362 $ 20,059 $ 62,733 $ 35,486 Interest expense 1,543 1,104 3,141 1,592 Income tax expense 7,339 6,412 18,504 11,027 Depreciation and amortization 5,303 5,115 10,924 8,425 Equity method investment 574 334 180 334 Inventory step-up - Branded Spirits — 2,529 — 2,529 Business acquisition costs — 6,738 — 8,628 Adjusted EBITDA $ 40,121 $ 42,291 $ 95,482 $ 68,021
The non-GAAP adjusted EBITDA measure is defined as earnings before interest, taxes, depreciation and amortization, equity method investment and business acquisition costs. See section "reconciliation of selected GAAP measure to non-GAAP measures" for further details on each of these non-GAAP Items.
