GlobeNewswire Inc | Oct 29, 2020 07:30AM EDT

October 29, 2020

ATCHISON, Kan., Oct. 29, 2020 (GLOBE NEWSWIRE) -- MGPIngredients, Inc. (Nasdaq:MGPI), a leading supplier of premium distilled spirits and specialty wheat proteins and starches, today reported results for the third quarter ended September 30, 2020.

2020 third quarter results compared to 2019 third quarter results

-- Consolidated sales increased 13.5% to $103.0 million, reflecting an increase in both the Distillery Products and Ingredient Solutions segments. -- Consolidated gross profit increased 23.3% to $23.2 million, due to increased gross profit in the Ingredient Solutions and Distillery Products segments. -- Consolidated operating income increased 17.7% to $13.7million. -- Non-GAAP operating income increased 17.8% to $13.7million, exclusive of CEO transition costs. -- GAAP and non-GAAP earnings per share increased to $0.61 per share from $0.48 per share, primarily due to improved operating results.

These quarterly results highlighted the diversity of growth across our product lines and segments, said David Colo, president and CEO of MGP Ingredients. Aged whiskey sales experienced a record quarter while new distillate and specialty ingredients also yielded strong double-digit sales growth during the quarter. While we anticipate continued uncertainty related to the pandemic through the end of this year and into 2021, we believe we remain well positioned to execute our long-term strategic plan.

Distillery Products Segment - Brown Goods Sales Grew 29.2% Led by Strong Aged Whiskey Sales In the third quarter of 2020, sales for the Distillery Products segment increased 11.4% to $81.6million. Gross profit increased to $17.3 million or 21.2% of segment sales, compared to $15.9 million, or 21.7% of segment sales in the third quarter 2019.

We are very pleased with the continued strength of our aged whiskey sales this quarter, which equated to strong double-digit revenue growth from the prior year period, said Colo. Our objective of maximizing brown goods profitability continued this quarter by delivering one of our best gross profit results. However, total segment gross margins were negatively impacted by approximately 350 basis points resulting from decreased barrel put-away, as we continue to align our MGP-owned aging whiskey inventory with projected demand. New customer acquisition growth for our new distillate and aged whiskey products also remains strong despite the uncertainty related to the pandemic. The long-term macro trends supporting the ongoing growth of the American Whiskey category remain encouraging.

Demand for our industrial alcohol products as a result of the COVID-19 pandemic continues to remain elevated with pricing slightly increasing over the prior year quarter. However, volume sales for industrial alcohol were down slightly to support increased optimization and sales of white goods premium beverage alcohol consistent with our long-term strategy. As a result, white goods sales increased 6.5% for the quarter.

Ingredient Solutions Segment - Gross Profit Increased 102.9% For the third quarter of 2020, sales in the Ingredient Solutions segment increased 22.7% to $21.3million. Gross profit increased to $5.9million, or 27.4% of segment sales, compared to $2.9 million, or 16.6% of segment sales in the third quarter 2019.

The continued strength of our Ingredient Solutions segment and its diverse customer mix are reflected in the strong results this quarter, continued Colo. In addition to recognizing efficiencies to improve throughput and profitability, we were also successful in continuing to optimize our product mix this quarter. Consumer trends seeking to increase the amount of plant-based protein and dietary fiber in their diets as part of an overall healthier lifestyle continue to align well with our ingredient product portfolio and underscore our confidence in the sustainability of these improved results going forward.

Other Corporate selling, general and administrative expenses of $9.5 million for the third quarter 2020 increased 32.3%, compared to the third quarter 2019, primarily due to higher incentive compensation expenses and professional service fees, which were partially offset by decreased costs related to the prior year EPA settlement.

The corporate effective tax rate for the quarter was 21.6% compared with 26.9% in the year ago period. The decrease, as compared to the prior year period, was primarily due to the release of a portion of the Company's valuation allowance.

GAAP and non-GAAP earnings per share increased to $0.61 per share for the third quarter 2020, compared to $0.48 per share for the third quarter 2019.

Conclusion We remain confident in our long-term strategy and our ability to align with strong macro consumer trends across the organization, stated Colo. Our investment in aging whiskey inventory decreased this quarter to $108.4 million, at cost. This decline was primarily driven by increased sales of aged whiskey and decreased put-aways during the quarter. We are realizing the long-term value of this inventory, as reflected in our operating cash flows, and believe we are well positioned to meet projected demand while delivering sustainable growth and value creation for the Company.

Our brands initiative continued its momentum this quarter as consumer acceptance of our core portfolio remains strong. The launch of our Remus Repeal Reserve Series IV, as well as our single barrel offerings of George Remus bourbon and Rossville Union rye whiskeys during the quarter have exceeded our expectations, while infusing additional consumer excitement for our brands. We remain focused on accelerating our brands through increased distribution and sales velocity in both existing and new markets, Colo concluded.

Conference Call and Webcast Information MGP Ingredients will host a conference call for analysts and institutional investors at 10 a.m. ET today to discuss these results and current business trends. The conference call and webcast will be available via:

Webcast: ir.mgpingredients.comon the Events & Presentations page Conference Call: 844-308-6398 (domestic) or 412-717-9605 (international)

About MGP Ingredients, Inc. Founded in 1941, MGP is a leading supplier of premium distilled spirits and specialty wheat proteins and starches. Distilled spirits include bourbon and rye whiskeys, gins and vodkas, which are expertly crafted through a combination of art and science and backed by a long history of experience. The companys proteins and starches are created in the same manner and provide a host of functional, nutritional and sensory benefits for a wide range of food products. MGP additionally is a top producer of high quality industrial alcohol for use in both food and non-food applications. The company is headquartered in Atchison, Kansas, where distilled alcohol products and food ingredients are produced. Premium spirits are also distilled and matured at the companys facility in Lawrenceburg, Indiana. For more information, visit mgpingredients.com.

Cautionary Note Regarding Forward-Looking Statements This news release contains forward-looking statements as well as historical information. All statements, other than statements of historical facts, included in this news release regarding the prospects of our industry and our prospects, plans, financial position, business strategy, guidance on changes in operating income, sales, gross margin, and future effective tax rate may constitute forward-looking statements. In addition, forward-looking statements are usually identified by or are associated with such words as intend, plan, believe, estimate, expect, anticipate, hopeful, should, may, will, could, encouraged, opportunities, potential, and/or the negatives or variations of these terms or similar terminology. They reflect managements current beliefs and estimates of future economic circumstances, industry conditions, Company performance, and Company financial results 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 statement. Important factors that could cause actual results to differ materially from our expectations include, among others: (i) disruptions in operations at our Atchison facility or our Indiana facility, (ii) the availability and cost of grain and flour, 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 ability to effectively pass raw material price increases on to customers, (viii) our ability to maintain compliance with all applicable loan agreement covenants, (ix) our ability to realize operating efficiencies, (x) actions of governments, and (xi) consumer tastes and preferences. For further information on these and other risks and uncertainties that may affect our business, including risks specific to our Distillery Products and Ingredient Solutions segments, see Item 1A. Risk Factors of our Annual Report on Form 10-K for the year ended December 31, 2019 and our Quarterly Report on Form 10-Q for the quarter ended September 30, 2020.

Non-GAAP Financial Measures In addition to reporting financial information in accordance with U.S. GAAP, the company provides certain non-GAAP financial measures that are not in accordance with, or alternatives for, GAAP. In addition to the comparable GAAP measures, MGP has disclosed adjusted operating income, adjusted income before taxes, adjusted net income, adjusted MGP earnings, and basic and diluted adjusted earnings per share. The presentation of non-GAAP financial measures should be reviewed in conjunction with operating income, income before taxes, net income, net income attributable to common shareholders and basic and diluted earnings per share computed in accordance with U.S. GAAP and should not be considered a substitute for these GAAP measures. The non-GAAP adjustments referenced in the section entitled "Reconciliation of Selected GAAP Measures to Non-GAAP Measures," take into account the impacts of items that are not necessarily ongoing in nature and/or predictive of the Company's operating trends. We believe that these non-GAAP measures provide useful information to investors regarding the company's performance and overall results of operations. In addition, management uses these non-GAAP measures in conjunction with GAAP measures when evaluating the Companys operating results compared to prior periods on a consistent basis, assessing financial trends and for forecasting purposes. Non-GAAP financial measures may not provide information that is directly comparable to other companies, even if similar terms are used to identify such measures. The attached schedules provide a full reconciliation of these non-GAAP financial measures to their most directly comparable U.S. GAAP financial measure.

For More Information Investors & Analysts: Mike Houston 646-475-2998or investor.relations@mgpingredients.com

Media: Greg Manis 913-360-5440 or greg.manis@mgpingredients.com

MGP INGREDIENTS, INC.OPERATING INCOME ROLLFORWARD(Dollars in thousands)

Operating income, quarter versus quarter Operating Change IncomeOperating income for quarter ended $ 11,604 September 30, 2019Increase in gross profit - Ingredient 2,970 25.6 pp^Solutions segment (a)Increase in gross profit - Distillery 1,402 12.1 ppProducts segmentIncrease in selling general and (2,324 ) (20.0 ) ppadministrative expensesOperating income for quarter ended $ 13,652 17.7 % September 30, 2020

Operating income, year to date versus year Operating Change to date IncomeOperating income for year to date ended $ 30,991 September 30, 2019Increase in gross profit - Ingredient 8,191 26.4 pp^Solutions segment (a)Increase in gross profit - Distillery 3,912 12.6 ppProducts segmentIncrease in selling general and (4,396 ) (14.1 ) ppadministrative expensesOperating income for year to date ended $ 38,698 24.9 % September 30, 2020

(a) Percentage points (pp).

MGP INGREDIENTS, INC.EARNINGS PER SHARE (EPS) ROLLFORWARD

Change in basic and diluted EPS, quarter Basic and Change versus quarter Diluted EPSBasic and diluted EPS for quarter ended $ 0.48 September 30, 2019Increase in operations^(b) 0.09 18.8 pp^ (a)Tax: Change in income tax 0.03 6.3 ppDecrease in weighted average shares 0.01 2.1 ppoutstandingBasic and diluted EPS for quarter ended $ 0.61 27.2 % September 30, 2020

Change in basic and diluted EPS, year to Basic and Change date versus year to date Diluted EPSBasic and diluted EPS for year to date $ 1.51 ended September 30, 2019Increase in operations^(b) 0.47 31.1 pp^ (a)Decrease in weighted average shares 0.02 1.3 ppoutstandingChange in interest expense, net ^(b) (0.03 ) (2.0 ) ppTax: Change in share-based compensation (0.21 ) (13.9 ) ppTax: Change in effective tax rate (0.08 ) (5.3 ) pp(excluding above tax item)Basic and diluted EPS for year to date $ 1.68 11.2 % ended September 30, 2020

(a) Percentage points (pp). (b) Items are net of tax based on the effective tax rate for the base year (2019).

MGP INGREDIENTS, INC.SALES BY OPERATING SEGMENT(Dollars in thousands)

DISTILLERY PRODUCTS SALES Quarter Ended Quarter versus Quarter September 30, Sales Change Increase/ (Decrease) 2020 2019 $ Change % ChangeBrown goods $ 34,365 $ 26,606 $ 7,759 29.2 %White goods 16,362 15,359 1,003 6.5 Premium beverage alcohol 50,727 41,965 8,762 20.9 Industrial alcohol 19,461 19,525 (64 ) (0.3 ) Food grade alcohol 70,188 61,490 8,698 14.1 Fuel grade alcohol 1,274 1,438 (164 ) (11.4 ) Distillers feed and related 6,119 6,630 (511 ) (7.7 ) co-productsWarehouse services 4,041 3,737 304 8.1 Total Distillery Products $ 81,622 $ 73,295 $ 8,327 11.4 %

INGREDIENT SOLUTIONS SALES Quarter Ended September Quarter versus Quarter 30, Sales Change Increase/ (Decrease) 2020 2019 $ Change % ChangeSpecialty wheat $ 11,604 $ 8,432 $ 3,172 37.6 %starchesSpecialty wheat 7,994 6,166 1,828 29.6 proteinsCommodity wheat 1,596 2,300 (704 ) (30.6 ) starchesCommodity wheat 148 492 (344 ) (69.9 ) proteinsTotal Ingredient $ 21,342 $ 17,390 $ 3,952 22.7 %Solutions

MGP INGREDIENTS, INC.SALES BY OPERATING SEGMENTS (continued)(Dollars in thousands)

DISTILLERY PRODUCTS SALES Year to Date versus Year Year to Date Ended to Date September 30, Sales Change Increase/ (Decrease) 2020 2019 $ Change % ChangeBrown Goods $ 88,975 $ 79,054 $ 9,921 12.5 %White Goods 48,306 47,232 1,074 2.3 Premium beverage alcohol 137,281 126,286 10,995 8.7 Industrial alcohol 64,032 60,604 3,428 5.7 Food grade alcohol 201,313 186,890 14,423 7.7 Fuel grade alcohol 3,970 4,337 (367 ) (8.5 ) Distillers feed and 19,889 19,906 (17 ) (0.1 ) related co-productsWarehouse services 11,641 10,762 879 8.2 Total Distillery Products $ 236,813 $ 221,895 $ 14,918 6.7 %

INGREDIENT SOLUTIONS SALES Year to Date versus Year to Year to Date Ended Date September 30, Sales Change Increase/ (Decrease) 2020 2019 $ Change % ChangeSpecialty wheat $ 30,938 $ 22,523 $ 8,415 37.4 %starchesSpecialty wheat 20,372 15,884 4,488 28.3 proteinsCommodity wheat 5,247 7,575 (2,328 ) (30.7 ) starchesCommodity wheat 1,236 2,405 (1,169 ) (48.6 ) proteinsTotal Ingredient $ 57,793 $ 48,387 $ 9,406 19.4 %Solutions

MGP INGREDIENTS, INC.CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED) (Dollars in thousands)

Quarter Ended Year to Date Ended September 30, September 30, 2020 2019 2020 2019Sales $ 102,964 $ 90,685 $ 294,606 $ 270,282 Cost of sales 79,802 71,895 227,531 215,310 Gross profit 23,162 18,790 67,075 54,972 Selling,general and 9,510 7,186 28,377 23,981 administrativeexpensesOperating 13,652 11,604 38,698 30,991 incomeInterestexpense, net (409 ) (364 ) (1,349 ) (937 )and otherIncome before 13,243 11,240 37,349 30,054 income taxesIncome tax 2,862 3,025 8,636 4,208 expenseNet income 10,381 8,215 28,713 25,846 Incomeattributableto 69 54 192 171 participatingsecuritiesNet incomeattributableto commonshareholders $ 10,312 $ 8,161 $ 28,521 $ 25,675 and used inEPScalculation Basic anddilutedweighted 16,916,675 17,027,068 16,943,130 17,006,226 average commonshares Basic anddiluted $ 0.61 $ 0.48 $ 1.68 $ 1.51 earnings percommon share

MGP INGREDIENTS, INC.CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED) (Dollars in thousands)

September December 31, September December 30, 2019 30, 31, 2020 2020 2019 LIABILITIESASSETS AND STOCKHOLDERS? EQUITYCurrent Current Assets: Liabilities: CurrentCash and cash $ 19,966 $ 3,309 maturities of $ 412 $ 401equivalents long-term debtReceivables, 52,673 40,931 Accounts 29,055 29,511net payableInventory 142,798 136,931 Accrued 14,938 9,383 expensesPrepaid 3,928 2,048 Total Current 44,405 39,295expenses LiabilitiesRefundable 1,719 987 Other income taxes Liabilities: Long-termTotal Current 221,084 184,206 debt, less 40,363 40,658Assets current maturities Credit agreement - 13,733 1 revolver Long-term operating 3,226 4,267 lease liabilitiesProperty, Deferredplant, and 323,755 313,958 credits 1,035 1,233equipmentLessaccumulated Otherdepreciation (194,112 ) (185,539 ) noncurrent 4,818 4,170and liabilitiesamortizationProperty,Plant, and 129,643 128,419 Deferred 2,165 1,929Equipment, income taxesnetOperatinglease 5,362 6,490 Total 109,745 91,553right-of-use Liabilitiesassets, netOther assets 5,657 3,482 Stockholders? 252,001 231,044 equity TOTAL LIABILITIESTOTAL ASSETS $ 361,746 $ 322,597 AND $ 361,746 $ 322,597 STOCKHOLDERS? EQUITY

MGP INGREDIENTS, INC.CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) (Dollars in thousands)

Year to Date Ended September 30, 2020 2019Cash Flows from Operating Activities Net income $ 28,713 $ 25,846 Adjustments to reconcile net income to net cash provided by operating activities:Depreciation and amortization 9,618 8,537 Loss (gain) on sale of assets 337 (138 )Share-based compensation 2,693 2,752 Deferred income taxes, including change in valuation 460 952 allowanceChanges in operating assets and liabilities: Receivables, net (11,683 ) (1,757 )Inventory (5,673 ) (17,424 )Prepaid expenses (2,032 ) (326 )Refundable income taxes (673 ) (2,138 )Accounts payable 2,196 (331 )Accrued expenses 5,647 (3,236 )Deferred credits (198 ) (249 )Other, net 52 (75 ) Net cash provided by operating activities 29,457 12,413 Cash Flows from Investing Activities Additions to property, plant, and equipment (13,507 ) (10,375 )Deferred compensation plan investments ? (1,189 )Acquisition of business (2,750 ) ? Proceeds from sale of property 688 ? Other, net 56 ? Net cash used in investing activities (15,513 ) (11,564 )Cash Flows from Financing Activities Payment of dividends and dividend equivalents (6,144 ) (5,141 )Purchase of treasury stock (4,395 ) (5,470 )Loan fees paid related to borrowings (1,148 ) ? Proceeds from long-term debt ? 20,000 Principal payments on long-term debt (300 ) (288 )Proceeds from credit agreement - revolver 54,700 14,140 Payments on credit agreement - revolver (40,000 ) (24,640 )Other, net ? (78 ) Net cash provided by (used in) financing activities 2,713 (1,477 )Increase (decrease) in cash and cash equivalents 16,657 (628 )Cash and cash equivalents, beginning of period 3,309 5,025 Cash and cash equivalents, end of period $ 19,966 $ 4,397

MGP INGREDIENTS, INC.RECONCILIATION OF SELECTED GAAP MEASURES TO NON-GAAP MEASURES (UNAUDITED) (in thousands)

Quarter Ended September 30, 2020 Income MGP Basic Operating before Net Earnings and Income Income Income (a) Diluted Taxes EPSReported GAAP $ 13,652 $ 13,243 $ 10,381 $ 10,312 $0.61ResultsAdjusted to remove:CEO transition 22 22 21 21 ?costs (b)Adjusted Non-GAAP $ 13,674 $ 13,265 $ 10,402 $ 10,333 $ 0.61results

Quarter Ended September 30, 2019 Income MGP Basic Operating before Net Earnings and Income Income Income (a) Diluted Taxes EPSReported GAAP $ 11,604 $ 11,240 $ 8,215 $ 8,161 $0.48ResultsAdjusted to remove: ? ? ? ? ?Adjusted Non-GAAP $ 11,604 $ 11,240 $ 8,215 $ 8,161 $ 0.48results

Year to Date Ended September 30, 2020 Income MGP Basic Operating before Net Earnings and Income Income Income (a) Diluted Taxes EPSReportedGAAP $ 38,698 $ 37,349 $ 28,713 $ 28,521 $1.68ResultsAdjusted to remove:CEOtransition 1,390 1,390 1,279 1,279 0.08costs (b)AdjustedNon-GAAP $ 40,088 $ 38,739 $ 29,992 $ 29,800 $ 1.76results

Year to Date Ended September 30, 2019 Income MGP Basic Operating before Net Earnings and Income Income Income (a) Diluted Taxes EPSReported GAAP $ 30,991 $ 30,054 $ 25,846 $ 25,675 $1.51ResultsAdjusted to remove: ? ? ? ? ?Adjusted Non-GAAP $ 30,991 $ 30,054 $ 25,846 $ 25,675 $ 1.51results

(a) MGP Earnings has been defined as "Net income attributable to common shareholders and used in EPS calculation." The CEO transition costs are included in the Condensed Consolidated (b) Statement of Income within the Selling, general and administrative line item. The adjustment includes additional employee related costs in connection with the transition of CEOs.