mgpi-20210331

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2021

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from _________________________ to _________________________________

Commission File Number: 0-17196

MGP INGREDIENTS, INC.

(Exact name of registrant as specified in its charter)


Kansas			45-4082531
(State or other jurisdiction of incorporation or organization)			(I.R.S. Employer Identification No.)


100 Commercial Street
Atchison	Kansas	66002
(Address of principal executive offices)		(Zip Code)

(913) 367-1480

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol	Name of each exchange on which registered
Common Stock, no par value	MGPI	NASDAQ Global Select Market

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. x Yes ☐ No

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). x Yes ☐ No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an “emerging growth company.” See definition of “large accelerated filer”, “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

☐ Large accelerated filer x Accelerated filer

☐ Non-accelerated filer (Do not check if smaller reporting company) ☐ Smaller Reporting Company

☐ Emerging growth company

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). ☐Yes x No

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date:

21,950,862 shares of Common Stock, no par value as of April 29, 2021

INDEX


PART I. FINANCIAL INFORMATION			Page

	Item 1.	Condensed Consolidated Financial Statements (Unaudited)

	Condensed Consolidated Statements of Income (Unaudited)		3
	Condensed Consolidated Statements of Comprehensive Income (Unaudited)		4
	Condensed Consolidated Balance Sheets (Unaudited)		5
	Condensed Consolidated Statements of Cash Flows (Unaudited)		6
	Condensed Consolidated Statements of Changes in Stockholders’ Equity (Unaudited)		7
	Notes to Unaudited Condensed Consolidated Financial Statements		8

	Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	17

	Item 3.	Quantitative and Qualitative Disclosures About Market Risk	24

	Item 4.	Controls and Procedures	25

PART II. OTHER INFORMATION

	Item 1.	Legal Proceedings	25

	Item 1A.	Risk Factors	25

	Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	37

	Item 3.	Defaults Upon Senior Securities	37

	Item 4.	Mine Safety Disclosures	37

	Item 5.	Other Information	37

	Item 6.	Exhibits	38

METHOD OF PRESENTATION

Throughout this Report, when we refer to “the Company,” “MGP,” “we,” “us,” “our,” and words of similar import, we are referring to the combined business of MGP Ingredients, Inc. and its consolidated subsidiaries, except to the extent that the context otherwise indicates. In this document, for any references to Note 1 through Note 11, refer to the Notes to Unaudited Condensed Consolidated Financial Statements in Item 1.

All amounts in this report, except for share, par values, bushels, gallons, pounds, mmbtu, proof gallons, per share, per bushel, per gallon, per proof gallon and percentage amounts, are shown in thousands unless otherwise noted.

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

MGP INGREDIENTS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(Unaudited)

(Dollars in thousands, except share and per share amounts)


	Quarter Ended March 31,
	2021		2020


Sales	$	108,323	$	99,082
Cost of sales	76,024		75,871
Gross profit	32,299		23,211
Selling, general and administrative expenses	11,799		9,503

Operating income	20,500		13,708
Interest expense, net and other	(458)		(642)

Income before income taxes	20,042		13,066
Income tax expense	4,615		3,224
Net income	15,427		9,842

Income attributable to participating securities	146		66
Net income attributable to common shareholders and used in Earnings Per Share calculation	$	15,281	$	9,776


Basic and diluted weighted average common shares	16,928,003		17,013,925

Basic and diluted Earnings Per Share	$	0.90	$	0.57

See accompanying notes to unaudited condensed consolidated financial statements

MGP INGREDIENTS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Unaudited)

(Dollars in thousands)


	Quarter Ended March 31,
	2021		2020
Net income	$	15,427	$	9,842
Other comprehensive income (loss), net of tax:
Change in Company-sponsored post-employment benefit plan	55		(6)
Comprehensive income	$	15,482	$	9,836

See accompanying notes to unaudited condensed consolidated financial statements

MGP INGREDIENTS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

(Dollars in thousands)


	March 31, 2021		December 31, 2020
Current Assets
Cash and cash equivalents	$	22,586	$	21,662
Receivables (less allowance for credit losses, $100 and $24 at March 31, 2021, and December 31, 2020, respectively)	67,147		56,966
Inventory	136,087		141,011
Prepaid expenses	3,728		2,644

Total current assets	229,548		222,283

Property, plant, and equipment	323,551		313,730
Less accumulated depreciation and amortization	(184,932)		(181,738)
Property, plant, and equipment, net	138,619		131,992
Operating lease right-of-use assets, net	4,606		5,151
Other assets	8,329		7,149
Total assets	$	381,102	$	366,575

Current Liabilities
Current maturities of long-term debt	$	2,400	$	1,600
Accounts payable	28,545		30,273
Income taxes payable	5,941		704
Accrued expenses and other	18,117		20,752

Total current liabilities	55,003		53,329

Long-term debt, less current maturities	37,476		38,271

Long-term operating lease liabilities	2,593		3,057
Deferred credits	1,394		2,196

Other noncurrent liabilities	4,475		4,898
Deferred income taxes	1,650		2,298
Total liabilities	102,591		104,049

Commitments and Contingencies (Note 8)
Stockholders’ Equity
Capital stock
Preferred, 5% non-cumulative; $10 par value; authorized 1,000 shares; issued and outstanding 437 shares	4		4
Common stock
No par value; authorized 40,000,000 shares; issued 18,115,965 shares at March 31, 2021 and December 31, 2020; and 16,940,600 and 16,915,862 shares outstanding at March 31, 2021 and December 31, 2020, respectively	6,715		6,715
Additional paid-in capital	18,016		15,503
Retained earnings	276,318		262,943
Accumulated other comprehensive income	541		486
Treasury stock, at cost, 1,175,365 and 1,200,103 shares at March 31, 2021 and December 31, 2020, respectively	(23,083)		(23,125)
Total stockholders’ equity	278,511		262,526
Total liabilities and stockholders’ equity	$	381,102	$	366,575

See accompanying notes to unaudited condensed consolidated financial statements

MGP INGREDIENTS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

(Dollars in thousands)


	Quarter Ended March 31,
	2021		2020
Cash Flows from Operating Activities
Net income	$	15,427	$	9,842
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	3,311		3,125

Loss on sale of assets	—		(9)
Share-based compensation	3,229		1,139
Deferred income taxes, including change in valuation allowance	(648)		101
Changes in operating assets and liabilities:
Receivables, net	(4,348)		(11,453)
Inventory	4,924		(5,649)
Prepaid expenses	(1,084)		(2,339)
Income taxes payable	5,237		3,100
Accounts payable	509		1,635
Accrued expenses and other	(8,385)		1,003
Deferred credits	(802)		(81)

Other, net	(380)		128
Net cash provided by operating activities	16,990		542

Cash Flows from Investing Activities
Additions to property, plant, and equipment	(12,059)		(5,645)

Acquisition of business	—		(2,750)
Proceeds from sale of property	—		366
Other, net	(1,281)		(160)
Net cash used in investing activities	(13,340)		(8,189)

Cash Flows from Financing Activities
Payment of dividends and dividend equivalents	(2,052)		(2,060)
Purchase of treasury stock	(674)		(4,395)
Loan fees paid related to borrowings	—		(1,148)

Principal payments on long-term debt	—		(100)
Proceeds from credit agreement - revolver	—		54,700


Net cash (used in) provided by financing activities	(2,726)		46,997

Increase in cash and cash equivalents	924		39,350
Cash and cash equivalents, beginning of period	21,662		3,309
Cash and cash equivalents, end of period	$	22,586	$	42,659

See accompanying notes to unaudited condensed consolidated financial statements

MGP INGREDIENTS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

For Quarter Ended March 31, 2021 and 2020

(Unaudited) (Dollars in thousands)


	Capital Stock Preferred		Issued Common		Additional Paid-In Capital		Retained Earnings		Accumulated Other Comprehensive income		Treasury Stock		Total
Balance, December 31, 2020	$	4	$	6,715	$	15,503	$	262,943	$	486	$	(23,125)	$	262,526
Comprehensive income:
Net income	—		—		—		15,427		—		—		15,427
Other comprehensive income	—		—		—		—		55		—		55
Dividends and dividend equivalents of $0.12 per common share and per restricted stock unit, net of estimated forfeitures	—		—		—		(2,052)		—		—		(2,052)
Share-based compensation	—		—		3,229		—		—		—		3,229
Stock shares awarded, forfeited or vested	—		—		(716)		—		—		716		—
Stock shares repurchased	—		—		—		—		—		(674)		(674)
Balance, March 31, 2021	$	4	$	6,715	$	18,016	$	276,318	$	541	$	(23,083)	$	278,511


	Capital Stock Preferred		Issued Common		Additional Paid-In Capital		Retained Earnings		Accumulated Other Comprehensive Loss		Treasury Stock		Total
Balance, December 31, 2019	$	4	$	6,715	$	14,029	$	230,784	$	(246)	$	(20,242)	$	231,044
Comprehensive income:
Net income	—		—		—		9,842		—		—		9,842
Other comprehensive loss	—		—		—		—		(6)		—		(6)
Dividends and dividend equivalents of $0.12 per common share and per restricted stock unit, net of estimated forfeitures	—		—		—		(2,059)		—		—		(2,059)
Share-based compensation	—		—		902		—		—		—		902
Stock shares awarded, forfeited or vested	—		—		(567)		—		—		804		237
Stock shares repurchased	—		—		—		—		—		(4,395)		(4,395)
Balance, March 31, 2020	$	4	$	6,715	$

SEC Form 10-Q filed by MGP Ingredients, Inc.