MGP: Continued Strength in Beverage Alcohol and Lower Costs Drive Growth
08 Aug 2014 --- MGP Ingredients, Inc. has reported results for the second quarter ended June 30, 2014. Net income was $5.1 million, or $0.28 per diluted share, compared to net income of $0.3 million, or $0.02 per diluted share, in the second quarter of the prior year. Second quarter net income included $2.3 million in equity earnings from the Company's joint ventures.
Net sales of $80.6 million for the second quarter increased by 1.5 percent from the year-ago quarter. Beverage alcohol sales improved significantly on higher shipments from the Indiana distillery. Increased sales of industrial alcohol were offset by lower sales of by-products. Ingredient segment sales in the second quarter declined from a year ago. The Company's gross profit during the second quarter was $8.4 million, or 10.4 percent of net sales, compared to $5.3 million, or 6.7 percent of net sales in the prior year period.
For the first six months of 2014 net sales were $159.6 million, a decrease of 3.8 percent from the prior year period. Income from operations for the year to date was $4.8 million, an increase of 166 percent from the same period a year ago. Net income of $9.9 million for the first six months includes $5.7 million in equity earnings from the Company's joint ventures, compared with a joint venture loss of $0.9 million during the same period a year ago.
The distillery products segment reported second quarter pre-tax operating income of $6.0 million, or 9.1 percent of distillery products net sales, compared to $3.1 million, or 4.9 percent of distillery products sales, during the same quarter a year ago. Lower corn costs were mainly responsible for the improvement in return on sales over the prior year. The average per-bushel cost of corn decreased 35.7 percent from second quarter 2013, while the per-million cubic foot cost of natural gas was essentially unchanged. Distillery products sales for the second quarter were $65.4 million, an increase of 2.3 percent compared to the prior year quarter. Higher volume in all categories was somewhat offset by lower pricing.
Distillery segment results for the first six months include pre-tax operating income of $11.4 million, or 8.8 percent of distillery products sales, compared to pre-tax operating income of $7.5 million, or 5.6 percent of distillery products sales, during the same period a year ago. The average per-bushel cost of corn decreased 37.6 percent from second quarter 2013, while the per-million cubic foot cost of natural gas increased by 9.9 percent.
The ingredients segment reported second quarter pre-tax operating income of $1.4 million, or approximately 9.5 percent of sales, compared to $0.9 million, or approximately 5.7 percent of sales, for the same quarter a year ago. Profitability in this year's second quarter was positively impacted by product mix and lower flour prices compared to a year ago. The price of flour decreased by 13.5 percent year-over-year. Total ingredient segment sales for the second quarter declined by 2.1 percent to $15.2 million from the prior year.
Ingredients segment results for the first six months include pre-tax operating income of $1.7 million, or approximately 6.0 percent of sales, compared to income of $2.7 million, or approximately 8.6 percent of sales, for the same period a year ago. The price of flour decreased by 12.2 percent from the same period a year ago.
The Company continues to show improved operating performance compared to a year ago, driven by demand for premium beverages, positive fundamentals for industrial alcohol, and lower raw material costs. The Company's focus on costs includes reduced levels of selling, general and administrative expenses, after adjusting for severance and proxy-related costs incurred in the prior year.
