MGP Ingredients, Inc. Announces Fiscal 2009 Fourth Quarter and Year-End Results

For the twelve months of fiscal 2009, the company had a net loss of $69,123,000, or diluted loss per share of $4.17, with sales of $275,976,000. That compares to a net loss of $11,742,000, or diluted loss per share of $0.71, on sales of $392,893,000 for the prior fiscal year.

11 Sep 2009 --- MGP Ingredients, Inc. reported a net loss of $2,916,000, or $0.18 in diluted loss per share, for the fourth quarter of fiscal 2009, which ended June 30, 2009. This compares with a net loss of $9,989,000, or $0.60 in diluted loss per share, for the fourth quarter of fiscal 2008. Total sales in the fourth quarter of fiscal 2009 were $49,152,000, a 52.8 percent decrease from sales of $104,227,000 for the same period a year ago. Actions taken to significantly reduce production and sales of unprofitable product lines accounted for the majority of the year-over-year sales decrease.

For the twelve months of fiscal 2009, the company had a net loss of $69,123,000, or diluted loss per share of $4.17, with sales of $275,976,000. That compares to a net loss of $11,742,000, or diluted loss per share of $0.71, on sales of $392,893,000 for the prior fiscal year. The loss for the 2009 fiscal year included $26.4 million in charges related to the restructuring program comprised of asset impairments, the settlement of natural gas contract and the termination of rail car leases, as well as severance and early retirement costs associated with a workforce reduction of approximately 55 percent.

"We completed a significant transformation in fiscal 2009 in order to strengthen our position as a producer of value-added ingredients sold into a wide range of branded packaged goods," said Tim Newkirk, president and chief executive officer. "A key milestone was our planned reductions in commodity-type market categories, primarily fuel grade alcohol and vital wheat gluten. The benefit of our new product mix and cost structure is reflected by our fourth quarter fiscal 2009 ingredients segment pre-tax income of $1.4 million compared to a pre-tax loss of $7.9 million in the fourth quarter of fiscal 2008 and the distillery segment's pre-tax income of $3.9 million in the fiscal 2009 fourth quarter versus a pre-tax loss of $510,000 in that segment for the same period the prior year."

Newkirk continued, "We want to build scale in our strategically targeted markets. To make headway in accomplishing this objective, we had to first narrow our focus. Under very difficult economic conditions, we completed a significant restructuring in record time. From the date of our first restructuring initiative, we returned to pre-tax profits in our ingredient solutions and distillery products segments in less than six months."

Newkirk added that, "Fortunately, our aggressive actions to dispose of non-core assets and reduce costs allowed us to meet our financial obligations, along with the help of our lending group and major stockholders. As previously announced, a new banking relationship with Wells Fargo and $25 million revolving line of credit, subject to borrowing base limitations, is in place to supply our operating cash needs in the coming fiscal year. We are in a prime position to grow our market share by concentrating our efforts on serving targeted customer accounts in the branded packed goods industry. The plan is to strengthen our relationships and deepen our presence among key customer partners. With a more focused portfolio of value-added products today, we can do a better job of effectively utilizing our core capabilities and resources. MGPI has also transformed its business model to one that is better suited to the company's new strategy. Essentially, we have shortened our pricing horizon with customers and changed our approach to using commodity futures. This should translate into improved margin management as we better align costs with price. While working to minimize the adverse impact from commodity volatility, we have strengthened our ability to grow and become more consistently profitable in those areas which are core to the business strategy. Additionally, new disciplines and business process changes will integrate risk management into strategy and execution."

Segment Results

The following table provides a summary of sales and pre-tax profits/(loss) for each operating segment for the fourth quarter and year-to-date periods ended June 30, 2009, and June 30, 2008. Non-direct selling, general and administrative expenses, interest expense, investment income and other general miscellaneous expenses are classified as corporate. Impairment, severance, restructuring and other one-time costs are not included in segment or corporate results and are shown separately below:

Segment Highlights - Ingredient Solutions: Total ingredient solutions sales revenue for the fourth quarter decreased by $12.3 million, or 44.2 percent, compared to the same quarter a year ago due principally to the planned reduction in sales of commodity and other low or negative margin ingredients. The company's pre-tax profit performance in this segment, however, improved to $1.4 million compared with a pre-tax loss of $7.9 million a year ago due mainly to the improved sales mix of higher margin value-added ingredients. Margins continued to be impacted by increased flour costs driven by higher wheat prices compared to a year ago.

Fourth quarter sales revenue from specialty ingredients, consisting of specialty proteins and specialty starches, decreased by $1.4 million, or 8.7 percent, compared to the prior year's period. Revenues for specialty proteins decreased as a result of lower unit sales partially offset by increased per unit prices. Sales of specialty starches also decreased compared to last year's fourth quarter due to a decline in unit sales. Selling prices for specialty starches averaged higher than a year ago. Meanwhile, sales revenue from commodity vital wheat gluten in the fourth quarter decreased by approximately $7.9 million, or 99.5 percent, while sales of commodity starches declined by approximately $770,000, or 58.7 percent. These decreases resulted from the planned reduction in the manufacturing and commercialization of commodity ingredients, as well as other low and negative margin products.

Total ingredient solutions sales revenue for fiscal 2009 decreased by $20.9 million, or 20.7 percent from the prior fiscal year. The 12-month pre-tax loss in this segment was $6.7 million, compared to a pre-tax loss of approximately $7.6 million in fiscal 2008. The majority of the revenue decline was from lower sales of commodity wheat gluten. Total specialty ingredients revenues for the 2009 fiscal year were $60.8 million, an increase of 2.4 percent over the prior year.