• MGP Ingredients Reports Strong Third Quarter 2023 Results

    Source: Nasdaq GlobeNewswire / 02 Nov 2023 06:27:01   America/Chicago

    Consolidated gross profit increased 24%;
    Continued gross margin expansion across all business segments;
    Increases full year guidance

    ATCHISON, Kan., Nov. 02, 2023 (GLOBE NEWSWIRE) -- MGP Ingredients, Inc. (Nasdaq: MGPI), a leading provider of distilled spirits, branded spirits, and food ingredient solutions, today reported results for the third quarter ended September 30, 2023.

    2023 third quarter consolidated results compared to 2022 third quarter:

    • Sales increased 5% to $211.6 million.
    • Gross profit increased 24% to $73.4 million, representing 34.7% of sales.
    • Operating income decreased 41% to $19.8 million and net income decreased 45% to $13.1 million, primarily due to the impairment of assets and other one-time expenses of $18.3 million related to the planned Atchison distillery closure as well as the increase in fair value of contingent consideration of $4.2 million related to the Penelope acquisition.
    • Adjusted operating income increased 26% to $42.7 million and adjusted net income increased 28% to $30.2 million.
    • Adjusted EBITDA increased 24% to $48.1 million.
    • Basic earnings per common share (“EPS”) decreased to $0.59 per share from $1.07 per share and diluted EPS decreased to $0.58 per share from $1.06 per share, primarily due to the impairment of assets and other one-time expenses related to the planned Atchison distillery closure as well as the increase in fair value of contingent consideration related to the Penelope acquisition.
    • Adjusted basic EPS increased to $1.36 per share from $1.07 per share and adjusted diluted EPS increased to $1.34 per share from $1.06 per share.

    “We are very pleased with our continued momentum this quarter, which has again yielded strong results across each of our business segments,” said David Colo, president and CEO of MGP Ingredients. “Sales of brown goods grew 28% from the prior year period, driven by strong demand for our new distillate and aged whiskey. The closure of the Atchison white goods and industrial alcohol distillery, which is consistent with our long-term strategic objectives, remains on track. Within our Branded Spirits segment, sales of our premium plus brands grew 33% from the prior year period, which led to additional gross margin expansion for the segment. Our Ingredient Solutions business once again generated record results during the quarter and continued to benefit from consumer preference toward high protein, low net carb diets. We remain committed to executing against our strategy and believe our continued strong performance underscores the strength of our business model.”

    Distilling Solutions
    In the third quarter 2023, sales for the Distilling Solutions segment increased 3% to $111.9 million year- over-year, driven by strong quarterly sales of brown goods, up 28% versus the prior year period. Gross profit increased to $33.3 million or 29.8% of segment sales, compared to $25.9 million or 23.9% of segment sales in the third quarter 2022.

    Branded Spirits
    For the third quarter 2023, sales for the Branded Spirits segment increased 6% to $66.8 million, led by sales of premium plus brands, which increased 33% to $30.8 million. Gross profit increased to $29.0 million, or 43.5% of segment sales, compared to $25.1 million, or 39.9% of segment sales in the third quarter 2022.

    Ingredient Solutions
    In the third quarter 2023, sales in the Ingredient Solutions segment increased 11% to $33.0 million versus the prior-year period. Gross profit increased to $11.1 million, or 33.8% of segment sales, compared to $8.1 million, or 27.1% of segment sales in the third quarter 2022.

    Other
    Advertising and promotion expenses for the third quarter 2023 increased $2.2 million to $9.5 million as compared to the third quarter 2022.

    Corporate selling, general and administrative ("SG&A") expenses for the third quarter 2023 increased $3.7 million to $21.6 million as compared to the third quarter 2022.

    During the third quarter, the impairment of assets and other one-time expenses totaled $18.3 million related to the planned closure of the Atchison distillery, and the change in fair value of the contingent consideration totaled $4.2 million related to the Penelope acquisition.

    The corporate effective tax rate for the third quarter 2023 was 25.0%, compared with 24.2% from the third quarter 2022.

    2023 Outlook
    MGP is offering the following revised consolidated guidance for fiscal 2023:

    • Sales are projected to be in the range of $815 million to $835 million.
    • Adjusted EBITDA is expected to be in the range of $192 million to $197 million.
    • Adjusted basic EPS is forecasted to be in the $5.50 to $5.65 range, with basic weighted average shares outstanding expected to be approximately 22.1 million at year end.

    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.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, 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 distilleries in Kentucky, Indiana, and Kansas, 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 four 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; and the historic Ross & Squibb Distillery in Lawrenceburg, Indiana, where Penelope Bourbon, Remus Straight Bourbon Whiskey and Rossville Union Straight Rye Whiskey are produced. The innovative and high-quality brand portfolio also includes Everclear Grain Alcohol, Pearl Vodka, Green Hat Gin, 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
    This press release may contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, including without limitation statements about the strategy and strategic objectives of MGP Ingredients, Inc. (the “Company” or “MGP”), its business model strength, and the Company’s 2023 outlook, including its expectations for sales, adjusted EBITDA, adjusted basic EPS, and shares outstanding. Forward looking statements are usually identified by or are associated with words such as “intend,” “plan,” “believe,” “estimate,” “expect,” “anticipate,” “project,” “forecast,” “hopeful,” “should,” “may,” “will,” “could,” “encouraged,” “opportunities,” “potential,” and similar terminology. These forward-looking statements reflect management’s current beliefs and estimates of future economic circumstances, industry conditions, Company performance, Company financial results, and Company financial condition and are not guarantees of future performance.

    All forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially. Factors that could cause actual results to differ materially from our expectations include without limitation any effects of disruptions in our operations or a catastrophic event at our facilities; commodity price fluctuations; the effectiveness or execution of our strategic plan; our reliance on a limited number of suppliers; climate change and legal, regulatory or market measures to address climate change; product recalls or other product liability claims; damage to our reputation or that of any of our key customers or their brands; adverse public opinion about any of our specialty ingredients; warehouse expansion issues; our reliance on fewer, more profitable customer relationships; commercial, political, and financial risks; regulation and taxation requirements; tariffs, trade relations, and trade policies; labeling or warning requirements or limitations on the availability of our products; anti-corruption laws, trade sanctions and restrictions; changes in consumer preferences and purchases and our ability to anticipate or react to those changes; changes in public opinion about alcohol; our reliance on our distributors to distribute our branded spirits within their territories; failure to secure and maintain listings in control states; changes in excise taxes, incentives and customs duties; class action or other litigation; the availability and cost of raw materials, product ingredients, energy resources, or labor; global supply chain challenges; inflation; the ongoing military conflict between Ukraine and Russia; our ability to protect our intellectual property rights and defend against alleged intellectual property rights infringement claims; our dual-class stock structure and governing document provisions; our reliance on key information technology systems, networks, processes, associated sites, or service providers; acquisitions and potential future acquisitions; our ability to compete and competitive market conditions; work disruptions or stoppages; our reliance on key management personnel; covenants and other provisions in our credit arrangements; interest rate increases; pandemics or other health crises; and our planned closure of our Atchison, Kansas distillery. For further information on these risks and uncertainties and other factors that could affect the Company’s business, see the “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” sections of the Company’s Annual Report on Form 10-K for the year ended December 31, 2022 and its Quarterly Reports on Form 10-Q for the quarters ended March 31, June 30, and September 30, 2023, as well as the Company’s other SEC filings. The Company undertakes no obligation to update any forward-looking statements or information in this press release, except as required by law.

    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, the Company has disclosed adjusted operating income, adjusted income before income taxes, adjusted net income, adjusted MGP earnings, adjusted EBITDA and adjusted basic and diluted EPS, as well as guidance for adjusted EBITDA and adjusted basic EPS. The presentation of these non-GAAP financial measures should be reviewed in conjunction with operating income, income before income taxes, net income, net income used in earnings per common share calculation, and basic and diluted EPS computed in accordance with U.S. GAAP and should not be considered a substitute for the GAAP measure. We believe that the 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 Company’s 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 historical non-GAAP financial measures to the most directly comparable U.S. GAAP financial measure. Full year 2023 guidance measures of adjusted EBITDA and adjusted basic EPS are provided on a non-GAAP basis without a reconciliation to the most directly comparable GAAP measures because the Company is unable to predict with a reasonable degree of certainty certain items contained in the GAAP measures without unreasonable efforts. Such items include without limitation, acquisition related expenses, restructuring and related expenses, and other items not reflective of the Company's ongoing operations.

    For More Information

    Investors & Analysts:
    Mike Houston
    646-475-2998 or 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 Income  Change 
    Operating income for the quarter ended September 30, 2022 $33,864    
    Increase in gross profit - Distilling Solutions segment  7,363  22 % 
    Increase in gross profit - Branded Spirits segment  3,973  12 pp(a)
    Increase in gross profit - Ingredient Solutions segment  3,064  9 pp
    Increase in advertising and promotion expenses  (2,226) (7)pp
    Increase in SG&A expenses  (3,665) (11)pp
    Impairment of long-lived assets and other  (18,334) (54)pp
    Change in fair value of contingent consideration  (4,200) (12)pp
    Operating income for the quarter ended September 30, 2023 $19,839  (41)% 


    Operating income, year to date versus year to date Operating Income  Change 
    Operating income for the year to date ended September 30, 2022 $119,250    
    Increase in gross profit - Distilling Solutions segment  10,356  9 % 
    Increase in gross profit - Ingredient Solutions segment  10,291  9 pp(a)
    Increase in gross profit - Branded Spirits segment  8,827  7 pp
    Increase in advertising and promotion expenses  (7,029) (6)pp
    Increase in SG&A expenses  (13,620) (11)pp
    Impairment of long-lived assets and other  (18,334) (15)pp
    Change in fair value of contingent consideration  (4,200) (4)pp
    Operating income for the year to date ended September 30, 2023 $105,541  (11)% 

    (a) Percentage points (“pp”).


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

    Change in EPS, quarter versus quarter EPS Change 
    Basic EPS for the quarter ended September 30, 2022 $1.07    
    Change in operating income (b)  (0.48) (45)% 
    Change in other income (expense), net(b)  0.05  5 pp(a)
    Change in interest expense, net (b)  (0.03) (3)pp
    Change in effective tax rate  (0.02) (2)pp
    Basic EPS for the quarter ended September 30, 2023 $0.59  (45)% 
    Impact of dilutive shares outstanding  (0.01) (1)pp
    Diluted EPS for the quarter ended September 30, 2023 $0.58  (46)% 


    Change in EPS, year to date versus year to date EPS Change 
    Basic EPS for the year to date ended September 30, 2022 $3.91    
    Change in operating income(b)  (0.47) (12)% 
    Change in other income (expense), net(b)  0.08  2 pp(a)
    Change in effective tax rate  (0.08) (2)pp
    Change in weighted average shares outstanding  (0.01) — pp
    Basic EPS for the year to date ended September 30, 2023 $3.43  (12)% 
    Impact of dilutive shares outstanding  (0.02) (1)pp
    Diluted EPS for the year to date ended September 30, 2023 $3.41  (13)% 

    (a) Percentage points (“pp”).
    (b) Items are net of tax based on the effective tax rate for the base year (2022).


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

     DISTILLING SOLUTIONS SALES
     Quarter Ended September 30, Quarter versus Quarter Sales Change Increase/(Decrease)
      2023 2022 $ Change % Change
    Brown goods$73,409 $57,423 $15,986  28%
    White goods 14,429  20,469  (6,040) (30)
    Premium beverage alcohol 87,838  77,892  9,946  13 
    Industrial alcohol 9,407  10,761  (1,354) (13)
    Food grade alcohol 97,245  88,653  8,592  10 
    Fuel grade alcohol 1,509  3,713  (2,204) (59)
    Distillers feed and related co-products 5,746  9,943  (4,197) (42)
    Warehouse services 7,353  6,335  1,018  16 
    Total Distilling Solutions$111,853 $108,644 $3,209  3%


     BRANDED SPIRITS SALES
     Quarter Ended September 30, Quarter versus Quarter Sales Change Increase/(Decrease)
     2023 2022 $ Change % Change
    Ultra premium$20,107 $13,804 $6,303  46%
    Super premium 3,637  3,350  287  9 
    Premium 7,099  6,013  1,086  18 
    Premium plus 30,843  23,167  7,676  33 
    Mid 17,650  20,834  (3,184) (15)
    Value 11,049  12,097  (1,048) (9)
    Other 7,277  6,663  614  9 
    Total Branded Spirits$66,819 $62,761 $4,058  6%


     INGREDIENT SOLUTIONS SALES
     Quarter Ended September 30, Quarter versus Quarter Sales Change Increase / (Decrease)
     2023 2022 $ Change % Change
    Specialty wheat starches$17,196 $16,241 $955 6%
    Specialty wheat proteins 11,440  9,697  1,743 18 
    Commodity wheat starches 4,226  3,803  423 11 
    Commodity wheat proteins 90  —  90 N/A
    Total Ingredient Solutions$32,952 $29,741 $3,211 11%
            


    MGP INGREDIENTS, INC.
    SALES BY OPERATING SEGMENT

     DISTILLING SOLUTIONS SALES
     Year to Date Ended
    September 30,    		 Year to Date versus Year to Date Sales Change Increase/(Decrease)
     2023 2022 $ Change % Change
    Brown goods$214,857 $175,899 $38,958  22%
    White goods 47,199  57,996  (10,797) (19)
    Premium beverage alcohol 262,056  233,895  28,161  12 
    Industrial alcohol 29,911  35,141  (5,230) (15)
    Food grade alcohol 291,967  269,036  22,931  9 
    Fuel grade alcohol 5,963  10,307  (4,344) (42)
    Distillers feed and related co-products 23,053  30,127  (7,074) (23)
    Warehouse services 20,958  17,821  3,137  18 
    Total Distilling Solutions$341,941 $327,291 $14,650  4%


     BRANDED SPIRITS SALES
     Year to Date Ended
    September 30,    		 Year to Date versus Year to Date Sales Change Increase/(Decrease)
     2023 2022 $ Change % Change
    Ultra premium$43,594 $35,836 $7,758  22%
    Super premium 9,614  9,522  92  1 
    Premium 20,144  17,928  2,216  12 
    Premium plus 73,352  63,286  10,066  16 
    Mid 55,575  63,408  (7,833) (12)
    Value 36,048  36,304  (256) (1)
    Other 16,343  14,080  2,263  16 
    Total Branded Spirits$181,318 $177,078 $4,240  2%


     INGREDIENT SOLUTIONS SALES
     Year to Date Ended
    September 30,    		 Year to Date versus Year to Date Sales Change Increase/(Decrease)
     2023 2022 $ Change % Change
    Specialty wheat starches$48,977 $47,445 $1,532 3%
    Specialty wheat proteins 35,918  29,225  6,693 23 
    Commodity wheat starches 12,870  10,286  2,584 25 
    Commodity wheat proteins 611  38  573 1,508 
    Total Ingredient Solutions$98,376 $86,994 $11,382 13%
            


    MGP INGREDIENTS, INC.
    CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
    (Dollars in thousands, except share and per share amounts)

      Quarter Ended September 30, Year to Date Ended September 30,
       2023   2022   2023   2022 
    Sales $211,624  $201,146  $621,635  $591,363 
    Cost of sales  138,176   142,098   402,068   401,270 
    Gross profit  73,448   59,048   219,567   190,093 
             
    Advertising and promotion expenses  9,505   7,279   25,877   18,848 
    Selling, general, and administrative expenses  21,570   17,905   65,615   51,995 
    Impairment of long-lived assets and other  18,334   —   18,334   — 
    Change in fair value of contingent consideration  4,200   —   4,200   — 
    Operating income  19,839   33,864   105,541   119,250 
             
    Interest expense, net  (2,353)  (1,350)  (4,630)  (4,491)
    Other income (expense), net  (25)  (1,353)  5   (2,361)
    Income before income taxes  17,461   31,161   100,916   112,398 
             
    Income tax expense  4,373   7,533   24,832   26,037 
    Net income  13,088   23,628   76,084   86,361 
             
    Net loss attributable to noncontrolling interest  123   180   324   444 
    Net income attributable to MGP Ingredients, Inc.  13,211   23,808   76,408   86,805 
             
    Income attributable to participating securities  (129)  (188)  (760)  (688)
    Net income used in earnings per common share calculation $13,082  $23,620  $75,648  $86,117 
             
    Weighted average common shares        
    Basic  22,066,159   22,008,381   22,056,270   22,000,026 
    Diluted  22,381,516   22,228,814   22,207,031   22,000,026 
             
    Earnings per common share        
    Basic $0.59  $1.07  $3.43  $3.91 
    Diluted $0.58  $1.06  $3.41  $3.91 
     


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

     September 30, 2023 December 31, 2022
    ASSETS   
    Current Assets:   
    Cash and cash equivalents$28,030  $47,889 
    Receivables, net 126,692   109,267 
    Inventory 342,401   289,722 
    Prepaid expenses 4,600   2,957 
    Refundable income taxes 2,193   4,327 
    Total Current Assets 503,916   454,162 
        
    Property, plant, and equipment 465,746   450,800 
    Less accumulated depreciation and amortization (222,497)  (215,168)
    Property, Plant, and Equipment, net 243,249   235,632 
    Operating lease right-of-use assets, net 15,551   15,042 
    Investment in joint ventures 5,343   5,534 
    Intangible assets, net 272,520   216,768 
    Goodwill 321,544   226,294 
    Other assets 4,242   4,779 
    TOTAL ASSETS$1,366,365  $1,158,211 
        
    LIABILITIES AND STOCKHOLDERS’ EQUITY   
    Current Liabilities:   
    Current maturities of long-term debt$6,400  $5,600 
    Accounts payable 54,403   66,432 
    Federal and state excise taxes payable 2,719   4,627 
    Accrued expenses and other 26,586   28,716 
    Total Current Liabilities 90,108   105,375 
        
    Long-term debt, less current maturities 114,812   29,510 
    Convertible senior notes 195,465   195,225 
    Long-term operating lease liabilities 12,606   11,622 
    Contingent consideration 66,300   — 
    Other noncurrent liabilities 3,888   3,723 
    Deferred income taxes 65,000   67,112 
    Total Liabilities 548,179   412,567 
    Total equity 818,186   745,644 
    TOTAL LIABILITIES AND TOTAL EQUITY$1,366,365  $1,158,211 
     


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

      Year to Date Ended
    September 30,
       2023   2022 
    Cash Flows from Operating Activities    
    Net income $76,084  $86,361 
    Adjustments to reconcile net income to net cash provided by operating activities:    
    Depreciation and amortization  16,272   16,257 
    Impairment of long-lived assets and other  18,334   — 
    Share-based compensation  5,651   3,086 
    Equity method investment loss  191   1,036 
    Deferred income taxes, including change in valuation allowance  (2,112)  (302)
    Change in fair value of contingent consideration  4,200   — 
    Other, net  376   426 
    Changes in operating assets and liabilities, net of effects of acquisition:    
    Receivables, net  (14,980)  (15,582)
    Inventory  (42,015)  (30,599)
    Prepaid expenses  (1,517)  1,165 
    Income taxes payable (refundable)  2,134   (1,006)
    Accounts payable  (10,069)  12,613 
    Accrued expenses and other  (2,471)  1,220 
    Federal and state excise taxes payable  (1,908)  (2,279)
    Other, net  435   (143)
       Net cash provided by operating activities  48,605   72,253 
         
    Cash Flows from Investing Activities    
    Additions to property, plant, and equipment  (42,062)  (29,217)
    Purchase of business, net of cash acquired  (103,712)  — 
    Contributions to equity method investment  —   (2,232)
    Other, net  (916)  (315)
       Net cash used in investing activities  (146,690)  (31,764)
         
    Cash Flows from Financing Activities    
    Payment of dividends and dividend equivalents  (8,006)  (7,984)
    Purchase of treasury stock  (801)  (714)
    Proceeds from long-term debt  105,000   — 
    Principal payments on long-term debt  (18,000)  (2,603)
       Net cash provided by (used in) financing activities  78,193   (11,301)
         
    Effect of exchange rate changes on cash and cash equivalents  33   (82)
    Increase (decrease) in cash and cash equivalents  (19,859)  29,106 
    Cash and cash equivalents, beginning of period  47,889   21,568 
    Cash and cash equivalents, end of period $28,030  $50,674 
     


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

     Quarter Ended September 30, 2023
     Operating Income Income before Income Taxes Net Income(b) MGP Earnings(a) Basic EPS Diluted EPS
    Reported GAAP Results$19,839 $17,461 $13,088 $13,082 $0.59 $0.58
    Adjusted to remove:           
    Impairment of long-lived assets and other (c) 18,334  18,334  13,750  13,750  0.62  0.61
    Fair value of contingent consideration(d) 4,200  4,200  3,150  3,150  0.14  0.14
    Business acquisition costs (e) 314  314  235  235  0.01  0.01
    Adjusted Non-GAAP results$42,687 $40,309 $30,223 $30,217 $1.36 $1.34

     

     Quarter Ended September 30, 2022
     Operating Income Income before Income Taxes Net Income MGP Earnings(a) Basic EPS Diluted EPS
    Reported GAAP Results$33,864 $31,161 $23,628 $23,620 $1.07 $1.06
    Adjusted to remove:           
    No adjustments for the period —  —  —  —  —  
    Adjusted Non-GAAP results$33,864 $31,161 $23,628 $23,620 $1.07 $1.06


     Year to Date Ended September 30, 2023
     Operating Income Income before Income Taxes Net Income(b) MGP Earnings(a) Basic EPS Diluted EPS
    Reported GAAP Results$105,541 $100,916 $76,084 $75,648 $3.43 $3.41
    Adjusted to remove:           
    Impairment of long-lived assets and other (c) 18,334  18,334  13,824  13,824  0.63  0.62
    Fair value of contingent consideration(d) 4,200  4,200  3,167  3,167  0.14  0.14
    Business acquisition costs (e) 1,814  1,814  1,368  1,368  0.06  0.06
    Adjusted Non-GAAP results$129,889 $125,264 $94,443 $94,007 $4.26 $4.23


     Year to Date Ended September 30, 2022
     Operating Income Income before Income Taxes Net Income MGP Earnings(a) Basic and Diluted EPS
    Reported GAAP Results$119,250 $112,398 $86,361 $86,117 $3.91
    Adjusted to remove:         
    No adjustments for the period —  —  —  —  —
    Adjusted Non-GAAP results$119,250 $112,398 $86,361 $86,117 $3.91

    (a) MGP Earnings is defined as "Net income used in Earnings Per Common Share calculation."
    (b) The tax rate used for non-GAAP items for the quarter and year to date ended September 30, 2023 was 25.0% and 24.6%, respectively.
    (c) The impairment of long-lived assets and other relates to the planned closure of the Atchison Distillery, which included $17,112 of impairment of assets as well as $1,222 of expenses related to severance costs, contract termination fees, and consulting fees. Impairment of long-lived assets and other are included in the Consolidated Statement of Income as a component of operating income and relates to the Distilling Solutions segment.
    (d) Fair value of contingent consideration relates to the quarterly adjustment of the contingent consideration related to the acquisition of Penelope Bourbon LLC. It is included in the Consolidated Statement of Income as a component of operating income and relates to the Branded Spirits segment.
    (e) Business acquisition costs are included in the Consolidated Statement of Income within the selling, general, and administrative line item and include transaction and integration costs associated with the acquisition of Penelope Bourbon LLC.


    MGP INGREDIENTS, INC.
    RECONCILIATION OF NET INCOME TO ADJUSTED EBITDA (UNAUDITED)
    (in thousands)

     Quarter Ended September 30, Year to Date Ended
    September 30,
     2023  2022 2023 2022
    Net Income$13,088  $23,628 $76,084 $86,361
    Interest expense 2,353   1,350  4,630  4,491
    Income tax expense 4,373   7,533  24,832  26,037
    Depreciation and amortization 5,782   5,333  16,272  16,257
    Equity method investment loss (income) (388)  856  191  1,036
    Impairment of long-lived assets and other 18,334   —  18,334  —
    Fair value of contingent consideration 4,200   —  4,200  —
    Business acquisition costs 314   —  1,814  —
    Adjusted EBITDA$48,056  $38,700 $146,357 $134,182
     

    The non-GAAP adjusted EBITDA measure is defined as earnings before interest expense, income tax expense, depreciation and amortization, equity method investment loss (income), impairment of long-lived assets and other, fair value of contingent consideration, and business acquisition costs. See "Reconciliation of selected GAAP measure to adjusted non-GAAP measures" for further details.


    MGP INGREDIENTS, INC.
    DILUTIVE SHARES OUTSTANDING CALCULATION (UNAUDITED)

     Quarter Ended September 30, Year to Date Ended
    September 30,
      2023   2022   2023   2022 
    Principal amount of the bonds$201,250,000  $201,250,000  $201,250,000  $201,250,000 
    Par value$1,000  $1,000  $1,000  $1,000 
    Number of bonds outstanding (a) 201,250   201,250   201,250   201,250 
            
    Initial conversion rate 10.3911   10.3911   10.3911   10.3911 
    Conversion price$96.23620  $96.23620  $96.23620  $96.23620 
            
    Average share price (b)$113.32587  $107.44873  $103.71316  $94.08909 
    Impact of conversion (c)$236,988,065  $224,697,738  $216,885,881  $— 
            
    Cash paid for principal (201,250,000)  (201,250,000)  (201,250,000)  (201,250,000)
    Conversion premium$35,738,065  $23,447,738  $15,635,881  $— 
            
    Average share price$113.32587  $107.44873  $103.71316  $94.08909 
    Conversion premium in shares (d) (e) 315,357   218,223   150,761   — 

    (a) Number of bonds outstanding is calculated by taking the principal amount of the bonds divided by the par value.
    (b) Average share price is calculated by taking the average of the daily closing share price for the period. If the average share price is less than the conversion price of $96.23620 per share, the impact to EPS is anti-dilutive and therefore the shares were excluded from the diluted EPS calculation.
    (c) Impact of conversion is calculated by taking the number of bonds outstanding multiplied by the initial conversion rate multiplied by the average share price. If the average share price is less than the conversion price then the impact of conversion is zero.
    (d) The impacts of the Convertible Senior Notes were included in the diluted weighted average common shares outstanding if the impact was dilutive. The Convertible Senior Notes would only have a dilutive impact if the average market price per share during the quarter and year to date period exceeds the conversion price of $96.23620 per share.
    (e) Conversion premium in shares is calculated by taking the conversion premium divided by the average share price. If the average share price is less than the conversion price, then the conversion premium in shares is zero.


    MGP INGREDIENTS, INC.
    Purchase Accounting - Summary of Preliminary Fair Value Step Up
    (UNAUDITED)
    (in thousands)

    The acquisition of Penelope Bourbon LLC, which closed on June 1, 2023, was accounted for as a business combination in accordance with Accounting Standard Codification 805, Business Combinations, and as such, assets acquired, liabilities assumed, and consideration transferred were recorded at their estimated fair values on the acquisition date. The fair value of the assets and liabilities are based upon a preliminary assessment of fair value and may change as valuations for certain tangible assets, intangible assets, and contingent liabilities are finalized and the associated income tax impacts are determined. The Company expects to finalize the purchase price allocation as soon as practicable, but no longer than one year from the acquisition date. The table below reflects the summary for distributor relationships preliminary purchase price accounting step up to fair value, the related amortization period, and the Income Statement caption within which the adjustment is included.

           Income Statement Impact
     Step Up Value Amortization Period Income Statement Caption Quarter Ended September 30, 2023 Year to Date Ended September 30, 2023
    Definite-lived intangible asset -
    Distributor relationships    		$23,700 20 years SG&A $303 $395
     


    MGP INGREDIENTS, INC.
    Impact of the Planned Closure of the Atchison Distillery
    Segment Operating Results and Pro-Forma Results
    Year to Date Ended September 30, 2023
    (UNAUDITED) (in thousands)

     Distilling Solutions  
     Year to Date Ended
    September 30, 2023    		 Increase/(Decrease) 
     As Reported (a) Pro-Forma(b) $ Change % Change 
    Brown Goods$214,857  $214,857  $—  — % 
    White Goods 47,199   11,378   (35,821) (76) 
    Premium beverage alcohol 262,056   226,235   (35,821) (14) 
    Industrial alcohol 29,911   —   (29,911) (100) 
    Food grade alcohol 291,967   226,235   (65,732) (23) 
    Fuel grade alcohol 5,963   16   (5,947) (100) 
    Distillers feed and related co-products 23,053   7,749   (15,304) (66) 
    Warehouse services 20,958   20,958   —  —  
    Total Sales$341,941  $254,958  $(86,983) (25)% 
             
    Gross profit$104,986  $112,547  $7,561  7 % 
    Gross margin % 30.7%  44.1%   13.4 pp(c)


     Ingredient Solutions 
     Year to Date Ended
    September 30, 2023    		 Increase/(Decrease) 
     As Reported (a) Pro-Forma(b) $ Change % Change 
    Specialty wheat starches$48,977  $48,977  $—  — % 
    Specialty wheat proteins 35,918   35,918   —  —  
    Commodity wheat starches 12,870   12,870   —  —  
    Commodity wheat proteins 611   611   —  —  
    Total Sales$98,376  $98,376  $—  — % 
             
    Gross profit$34,945  $29,812  $(5,133)(d)(15)% 
    Gross margin % 35.5%  30.3%   (5.2)pp(c)


     Consolidated 
     Year to Date Ended
    September 30, 2023    		 Increase/(Decrease) 
     As Reported (a) Pro-Forma(b) $ Change % Change 
    Sales$621,635  $534,652  $(86,983) (14)% 
    Gross profit$219,567  $221,995  $2,428  1 % 
    Gross margin % 35.3%  41.5%   6.2 pp(c)

    (a) Represents actual results of the Company for the year to date ended September 30, 2023, as reported in the Company's Quarterly Report on Form 10-Q for the quarter ended September 30, 2023.
    (b) Represents the Company's results for the year to date ended September 30, 2023 excluding results associated with the Company's Atchison, Kansas distillery. These are pro-forma unaudited financial results and are preliminary. In some circumstances, white goods, industrial alcohol, fuel grade alcohol, and at times certain co-products are produced at the Company's Lawrenceburg, Indiana distillery. The pro-forma financial results assume the loss of the waste starch slurry credit and no gain or loss on the disposal. The results of the Branded Spirits segment for the year to date ended September 30, 2023 would not have been impacted by a closure of the Atchison, Kansas distillery.
    (c) Percentage points (“pp”).
    (d) The reduction in gross profit for the Ingredient Solutions segment is the result of increased cost of goods sold from no longer receiving an intercompany credit for the waste starch slurry by-product purchased by the adjoined Atchison, Kansas distillery. The value of the intercompany credit is derived from the value of corn which has fluctuated over time.


    MGP INGREDIENTS, INC.
    Impact of the Planned Closure of the Atchison Distillery
    Segment Operating Results and Pro-Forma Results
    Year Ended December 31, 2022
    (UNAUDITED) (in thousands)

     Distilling Solutions 
     Year Ended December 31, 2022 Increase/(Decrease) 
     As Reported (a) Pro-Forma(b) $ Change % Change 
    Brown Goods$229,523  $229,523  $—  — % 
    White Goods 74,510   24,110   (50,400) (68) 
    Premium beverage alcohol 304,033   253,633   (50,400) (17) 
    Industrial alcohol 46,812   907   (45,905) (98) 
    Food grade alcohol 350,845   254,540   (96,305) (27) 
    Fuel grade alcohol 13,681   41   (13,640) (100) 
    Distillers feed and related co-products 40,354   9,477   (30,877) (77) 
    Warehouse services 23,598   23,598   —  —  
    Total Sales$428,478  $287,656  $(140,822) (33)% 
             
    Gross profit$126,282  $132,388  $6,106  5 % 
    Gross margin % 29.5%  46.0%   16.5 pp(c)


     Ingredient Solutions 
     Year Ended December 31, 2022 Increase/(Decrease) 
     As Reported (a) Pro-Forma(b) $ Change % Change 
    Specialty wheat starches$62,567  $62,567  $—  — % 
    Specialty wheat proteins 39,313   39,313   —  —  
    Commodity wheat starches 14,023   14,023   —  —  
    Commodity wheat proteins 38   38   —  —  
    Total Sales$115,941  $115,941  $—  — % 
             
    Gross profit$31,503  $26,017  $(5,486)(d)(17)% 
    Gross margin % 27.2%  22.4%   (4.8)pp(c)


     Consolidated 
     Year Ended December 31, 2022 Increase/(Decrease) 
     As Reported (a) Pro-Forma(b) $ Change % Change 
    Sales$782,358  $641,536  $(140,822) (18)% 
    Gross profit$253,306  $253,926  $620  — % 
    Gross margin % 32.4%  39.6%   7.2 pp(c)

    (a) Represents actual results of the Company for the year ended December 31, 2022, as reported in the Company's Annual Report on Form 10-K for the year ended December 31, 2022.
    (b) Represents the Company's results for the year ended December 31, 2022 excluding results associated with the Company's Atchison, Kansas distillery. These are pro-forma unaudited financial results and are preliminary. In some circumstances, white goods, industrial alcohol, fuel grade alcohol, and at times certain co-products are produced at the Company's Lawrenceburg, Indiana distillery. The pro-forma financial results assume the loss of the waste starch slurry credit and no gain or loss on the disposal. The results of the Branded Spirits segment for the year ended December 31, 2022 would not have been impacted by a closure of the Atchison, Kansas distillery.
    (c) Percentage points (“pp”).
    (d) The reduction in gross profit for the Ingredient Solutions segment is the result of increased cost of goods sold from no longer receiving an intercompany credit for the waste starch slurry by-product purchased by the adjoined Atchison, Kansas distillery. The value of the intercompany credit is derived from the value of corn which has fluctuated over time.


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