MGP Ingredients Reports Surge in Q2 Sales
Total sales in the second quarter of fiscal 2011 were $57,951,000, a 21 percent increase from sales of $48,094,000 for the same period one year ago. The increase was principally due to higher sales of food grade alcohol.
2/10/2011 --- MGP Ingredients, Inc. reported net income of $3,242,000, or $0.18 in diluted earnings per share, for the second quarter of fiscal 2011, which ended December 31, 2010. This compares with net income of $4,778,000, or $0.29 in diluted earnings per share, for the second quarter of the prior fiscal year. Income from operations for the second quarter of fiscal 2011 increased to $4,344,000 compared with $504,000 a year ago. Net income for the second quarter of fiscal 2010 included several one-time items, the most significant of which was an income tax benefit of $4,659,000. The year-ago results also included a loss of $3,047,000 related to the formation of the company's distillery joint venture, Illinois Corn Processing, LLC (ICP). Total sales in the second quarter of fiscal 2011 were $57,951,000, a 21 percent increase from sales of $48,094,000 for the same period one year ago. The increase was principally due to higher sales of food grade alcohol.
For the first six months of fiscal 2011, net income was $8,244,000, or $0.46 in diluted earnings per share. This compares with net income of $8,516,000, or $0.51 in diluted earnings per share, for the prior year period. Income from operations for the first half of fiscal 2011 rose to $7,909,000 from $5,148,000 for the first half of fiscal 2010. Total sales for the first six months of fiscal 2011 were $114,929,000, a 17 percent increase from sales of $98,343,000 for the same period one year ago.
"The key to our improved performance lies in our operating profits," said Tim Newkirk, President and Chief Executive Officer. "We are pleased to report significant increases in sales and operating profits from a year ago. We also realize that we have further to go before we are executing at our highest level. On the distillery side, our growth continues to be driven by demand for high quality food grade alcohol. Further improvements to our performance in this segment were affected by higher corn and energy costs. We also experienced longer than anticipated production slowdowns at our Atchison distillery during the quarter. These slowdowns were related to a water supply disruption, along with distillery equipment repairs and upgrades, which have recently been completed. Going forward we see stronger production rates. Our ICP joint venture is approaching peak capacity in food grade alcohol. Start-up issues at ICP are largely behind us, but our contribution from the joint venture was impacted from higher costs during the quarter as the facility has continued to step up its total capacity utilization levels. We are squarely focused on maintaining our gross margins in this segment, where the general trend is positive."
Newkirk continued, "Our ingredients business is still a work in progress. We're consistently profitable at the current level of business, and there are a number of key customer projects in the pipeline. We are seeing increased demand for our unique specialty value-added ingredients and continue to concentrate much focus and resources on growing this area of our business. This includes methods to continually enhance our operational efficiencies, which experienced a decrease in the second quarter and contributed to higher production costs and affected segment profits."
Distillery Products Segment
* Distillery products pre-tax income of $7.3 million was up 74 percent from pre-tax income of $4.2 million during the same quarter a year ago. Gross margins improved significantly over the year-ago period from realized gains on hedging activities, along with higher unit volumes and improved per unit pricing in high quality food grade alcohol. Partially offsetting these gains were increases in the per-bushel cost of corn and the per-million cubic foot cost of natural gas, which were up 41 percent and 13 percent, respectively, from a year ago.
* Total distillery products sales revenue for the second quarter was $43.2 million, an increase of 35 percent compared to the prior year's second quarter. The majority of this increase was attributable to a 30 percent rise in volume of high quality food grade alcohol. Fuel grade alcohol revenues accounted for approximately 7 percent of total distillery products sales for the quarter.
* For the six-month period of fiscal 2011, pre-tax income in the distillery segment was $15.4, up 42 percent from pre-tax income of $10.8 million one year ago. Gross margins improved significantly over the year-ago period from realized gains on hedging activities, along with higher unit volumes in high quality food grade alcohol. The year to date gains were partially offset by a 27 percent increase in the per-bushel cost of corn and a 32 percent increase in the per-million cubic foot cost of natural gas compared to a year ago. Distillery sales revenue for the six-month period of fiscal 2011 was $85.7 million, an increase of 29 percent compared to the same period in the prior year. The majority of the increase was due to a 36 percent increase in the volume of high quality food grade alcohol. Fuel grade alcohol sales increased by $2.3 million compared to the prior year period.
Ingredient Solutions Segment
* Ingredient solutions pre-tax income declined to $443,000 compared with $2.8 million in the prior year's second quarter. Earnings decreased from the same period in fiscal 2010 primarily due to higher raw material costs, which were partially offset primarily by higher average selling prices for starches. Second quarter results in this segment were also affected by reduced operational efficiencies combined with increases in wheat flour and natural gas costs. As a result, overall production costs in the ingredients segment rose above the same period a year ago.
* Total ingredient segment sales revenue for the second quarter was $14.5 million, a decrease of 6 percent compared to the prior year's second quarter. The majority of the decrease in revenue was attributable to the planned reduction of commodity starches and proteins. Revenues for specialty proteins and specialty starches increased by 5 percent and 12 percent, respectively, over the same quarter a year ago.
* Consistent with the second quarter of fiscal 2011, total ingredient solutions sales revenue for the year to date period ended December 31, 2010 decreased by $2,172,000, or 7 percent, compared to the year to date period ended December 31, 2009. Revenues for specialty proteins for the first six months of fiscal 2011 increased 6 percent over the first six months of the prior fiscal year, while sales of specialty starches were approximately even with the same period a year ago. With the company's focus on the production and commercialization of specialty ingredients, revenues for commodity starch and commodity proteins decreased by 29 and 97 percent, respectively, in the first six months of fiscal 2011 versus a year ago. In addition to the overall decline in revenues for the ingredient solutions segment, the company's margins saw a decline during the year to date period ended December 31, 2010 compared to the year to date period ended December 31, 2009. This was principally due to higher productions costs caused by lower volume output and increased energy costs related to higher natural gas prices. Natural gas prices averaged approximately 32 percent higher compared to the same period a year ago. Flour costs, on the other hand, averaged approximately 6 percent lower per bushel compared to the prior year's first six months.
Other Segment
* The other segment reported a pre-tax loss of $116,000 compared to a loss of $20,000 in the prior year's second period. Sales in the other segment for the second quarter were approximately $253,000, a decrease of approximately 57 percent compared to the same period the previous year. For the first six months of fiscal 2011, this segment had a pre-tax loss of $136,000 compared to income of $96,000 one year ago. Sales for the current year's first six months were approximately $642,000, a decline of 48 percent compared to a year ago. The decline for both the quarter and six-month periods was primarily due to lower unit sales of the company's plant-based biopolymers and resins. Also contributing to the decrease in sales for the year to date period was the divestiture of our pet products business, which occurred during the first quarter of fiscal 2010.
