ATCHISON, Kan., February 23, 2023 - MGP Ingredients, Inc. (Nasdaq:MGPI), a leading provider of distilled spirits, branded spirits and food ingredient solutions, today reported results for the fourth quarter and full year ended December 31, 2022.
2022 fourth quarter consolidated results compared to 2021 fourth quarter
- Sales increased 15% to $191.0 million.
- Gross profit increased 20% to $63.2 million, representing 33.1% of sales.
- Operating income decreased 34% to $29.7 million due to the $16.3 million favorable insurance recovery recorded in the 2021 fourth quarter. Adjusted operating income increased 3% to $29.7 million.
- Net income decreased 29% to $22.5 million due to the $12.2 million tax-effected, favorable insurance recovery recorded in the 2021 fourth quarter. Adjusted net income increased 16% to $22.5 million.
- Adjusted EBITDA increased 2% to $35.1 million.
- Basic earnings per common share ("EPS") decreased to $1.02 per share from $1.44 per share due to the $0.56 per share favorable insurance recovery recorded in the 2021 fourth quarter. Adjusted basic EPS increased to $1.02 per share from $0.88 per share.
- Diluted EPS decreased to $1.01 per share from $1.44 per share due to the $0.56 per share favorable insurance recovery recorded in the 2021 fourth quarter. Adjusted diluted EPS increased to $1.01 per share from $0.88 per share.
2022 full year consolidated results compared to 2021 full year
- Sales increased 25% to $782.4 million.
- Gross profit and adjusted gross profit increased 27% and 26%, respectively, to $253.3 million, representing 32.4% of sales.
- Operating income and adjusted operating income increased 18% and 23%, respectively, to $149.0 million.
- Net income and adjusted net income increased 20% and 23%, respectively, to $108.9 million.
- Adjusted EBITDA increased 20% to $169.3 million.
- Basic EPS increased to $4.94 per share from $4.37 per share. Adjusted basic EPS increased to $4.94 per share from $4.26 per share.
- Diluted EPS increased to $4.92 from $4.37 per share. Adjusted diluted EPS increased to $4.92 per share from $4.26 per share.
“We are very pleased with our performance for the quarter and full year and remain confident in the long-term sustainability of our business model,” said Dave Colo, president and CEO of MGP Ingredients. “Our record annual results reflect continued strength in each of our business segments. Brown goods sales increased 65% and 42% for the fourth quarter and full year 2022, respectively, as compared to the prior year periods. Underpinning this growth was continued demand for our new distillate and aged whiskey. Meanwhile, increased commodity costs and excess supply in the market continue to negatively impact industrial alcohol and white goods gross profit. Sales of our premium plus portfolio of brands grew 23% in the quarter driving further gross margin expansion in our Branded Spirits segment. In our Ingredient Solutions business, we remain encouraged by the traction our specialty wheat starches and proteins continue to gain. These results for the fourth quarter and full year demonstrate the continued success of executing our long-term strategy.”
In the fourth quarter 2022, sales for the Distilling Solutions segment increased 23% to $101.2 million, reflecting a 34% increase in sales of premium beverage alcohol. Gross profit increased to $31.7 million or 31.3% of segment sales, compared to $26.9 million, or 32.6% of segment sales in the fourth quarter 2021.
For the full year 2022, Distilling Solutions segment sales increased 22% to $428.5 million, reflecting a 28% increase in sales of premium beverage alcohol, due to continued strong new distillate and aged American Whiskey sales. Gross profit increased to $126.3 million, or 29.5% of segment sales, compared to $114.1 million, or 32.4% of segment sales in 2021.
For the fourth quarter 2022, sales for the Branded Spirits segment decreased less than 1% to $60.9 million. Sales of the premium plus price tier spirit brands grew 23%. Gross profit increased to $24.7 million, or 40.6% of segment sales compared to $20.9 million, or 34.3% of segment sales in the fourth quarter 2021.
For the full year 2022, Branded Spirits sales increased 30% to $237.9 million, reflecting the full year impact of the merger with Luxco as well as continued strength in the premium plus portfolio of brands. Sales of the premium plus price tier spirit brands grew 56%. Gross profit increased to $95.5 million, or 40.1% of segment sales, compared to $62.6 million, or 34.1% of segment sales in 2021. Adjusted gross profit increased to $95.5 million, or 40.1% of segment sales, compared to $65.2 million, or 35.5% of segment sales.
In the fourth quarter 2022, sales for the Ingredient Solutions segment increased 24% to $29.0 million. Gross profit increased to $6.9 million, or 23.8% of segment sales, compared to $5.0 million, or 21.2% of segment sales in the fourth quarter 2021.
For the full year 2022, Ingredient Solutions segment sales increased 28% to $115.9 million, driven primarily by higher sales of specialty wheat starches and specialty wheat proteins. Gross profit increased to $31.5 million, or 27.2% of segment sales, compared to $22.2 million, or 24.5% of segment sales in 2021.
Advertising and promotion expenses for the fourth quarter 2022 increased $4.7 million, or 75%, to $10.9 million as compared to the fourth quarter 2021. For the full year 2022, advertising and promotion expenses increased $13.6 million, or 85%. The increases for both periods are primarily driven by the Luxco acquisition and further incremental investment to support continued growth in the premium plus portfolio of brands.
Corporate selling, general and administrative ("SG&A") expenses for the fourth quarter 2022 increased $5.1 million to $22.6 million as compared to the fourth quarter 2021. For the full year, corporate SG&A expenses increased $1.8 million to $74.6 million as compared to 2021.
The corporate effective tax rate for the fourth quarter 2022 was 19.0%, compared with 26.8% from the year ago period. The corporate effective tax rate for the full year 2022 was 22.3% compared with 25.0% in 2021.
MGP is offering the following 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 $178 million to $183 million.
- Adjusted basic earnings per common share are forecasted to be in the $5.05 to $5.20 range, with basic weighted average shares outstanding expected to be approximately 22.2 million at year end.
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 MGP is unable to predict with a reasonable degree of certainty certain items contained in the GAAP measures without unreasonable efforts. Such items include, but are not limited to, acquisition related expenses, restructuring and related expenses, and other items not reflective of MGP’s ongoing operations.
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 the George 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
The forward-looking statements contained herein include, but are not limited to, statements about the expected effects on MGP Ingredients, Inc. (the "Company," or "MGP") of continuing consumer trends and our announced expansionary projects. 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.
These forward-looking statements reflect management’s current beliefs and estimates of future economic circumstances, industry conditions, Company performance, and Company financial results and financial condition 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 statements. Important factors that could cause actual results to differ materially from our expectations include, (i) disruptions in the operations at any of our facilities, (ii) the availability and cost of grain, flour, and agave, 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 impact of COVID-19 and other pandemics, (viii) the effects of inflation and our ability to effectively pass raw material and other price increases on to customers, (ix) our ability to maintain compliance with all applicable loan agreement covenants, (x) increases in interest rates, (xi) our ability to realize operating efficiencies, (xii) actions of governments, and (xiii) consumer tastes and preferences. For further information on these and other risks and uncertainties that may affect our business, including risks specific to our Distilling Solutions, Branded Spirits and Ingredient Solutions segments, see Item 1A. Risk Factors of our Annual Report on Form 10-K for the year ended December 31, 2022.
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 gross profit, adjusted operating income, adjusted income before income taxes, adjusted net income, adjusted MGP earnings, adjusted EBITDA and adjusted basic and diluted earnings per common share. The presentation of non-GAAP financial measures should be reviewed in conjunction with gross profit, 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 these GAAP measures. The non-GAAP adjustments referenced in the section entitled "Reconciliation of Selected GAAP Measures to Adjusted 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 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 these non-GAAP financial measures to their most directly comparable U.S. GAAP financial measure.
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