MGP Ingredients has reported results for the second quarter period ended June 30, 2015.
"We continue to be very pleased with our results through the first half of 2015 as we aggressively implement our strategic plan," said Gus Griffin, president and CEO of MGP. "Our second quarter and year-to-date performance demonstrate continued progress in shifting our product mix and driving growth in our higher value products."
Second Quarter 2015 Highlights (vs. second quarter 2014)
Net sales increased by $4.8 million or 5.9%.Gross profit increased by $9.2 million to $17.5 millionGross margin improved by 10.2 percentage points to 20.5%Operating income increased by $6.4 million to $9.5 millionICP joint venture contributed $3.2 million to pretax income, up from $2.3 million a year agoNet income increased by 54% to $7.9 millionEffective tax rate increased to 36.9% from 1.7% for the quarter ended June 30, 2014 (which benefited from a full valuation allowance on tax loss carryforwards)Earnings per share ("EPS") increased by $.16 to $.44.
For the first six months of 2015, net sales increased by 3.9% to $165.8 million. Gross profit improved by $15.8 million, to 18.7% of net sales. Operating income was $16.4 million, compared to $4.8 million in the same period a year ago. Net income grew by $3.1 million to $12.9 million, with EPS reaching $.72.
Distillery Products Segment -- Gross Profit Rises 115%
For the quarter, net sales for the Distillery Products segment increased 5.4% to $68.9 million. Gross profit rose to $13.6 million, or 19.8% of net sales, compared with $6.4 million, or 9.7% of net sales in the first quarter of 2014. The primary driver of the improvement in gross profit was improved product mix, as net sales of food grade alcohol, which includes beverage alcohol, grew 13.6%.
Griffin noted, "We continue to enjoy strong demand for our premium beverage alcohol products, particularly our whiskeys and non-GMO offerings. I am very pleased with the speed with which we have been able to refocus our investment and sales, marketing, and operations effort to meet this growing demand."
Ingredient Solutions - Gross Profit Rises 99%
For the quarter, net sales for the Ingredients Solutions segment increased 8.1% to $16.4 million. Gross profit increased to $3.9 million, or 23.7% of net sales, compared with $1.9 million, or 12.8% of net sales in the second quarter of 2014. The primary driver of the improvement in gross profit was improved product mix, as net sales of specialty proteins and specialty starches grew a combined 12.7%.
Griffin added, "Our portfolio of specialty wheat proteins and starches is well positioned to benefit from long-term macro health trends, such as high fiber, high protein and non-GMO. Additionally, due to the avian influenza crisis, we are seeing strong interest in our egg white replacement solutions."
Other
Corporate selling, general and administrative expenses were $8.0 million for the second quarter of 2015 compared to $5.2 million in the comparable 2014 period, primarily due to an increase in accruals for incentive compensation expenses, severance costs, and professional fees.
For the quarter, MGP received joint venture equity method investment earnings of $3.2 million from its ICP joint venture, which produces high quality food grade alcohol, chemical intermediates and fuel. ICP's results reflect decreasing volumes and pricing year over year as well as $4.1 million in insurance proceeds received this quarter, of which our portion was $1.2 million.
Conclusion
"We are making better than expected progress in implementing our new growth initiatives," said Griffin. "Our progress in focusing on our higher value products is evident in the exceptional gross profit growth in both our business segments. The just announced launch of our Limited Edition Metze's Select Indiana Straight Bourbon Whiskey is an example of our progress in capturing a larger share of the value chain. We are aggressively implementing our Invest for Growth initiative, to ensure we are in position to support the growth of our industries, business segments and customers." Griffin added, "Despite a significantly higher effective tax rate this year, our improved operating income results drove growth in net income and EPS. We are making great progress in realizing the potential of our business and we are encouraged by the outlook for the remainder of 2015."
