mgpi-20230331

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, 2023

☐ 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, every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit 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,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

x Large accelerated filer ☐ Accelerated filer

☐ Non-accelerated filer ☐ 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:

22,009,834 shares of Common Stock, no par value, as of April 28, 2023

INDEX


PART I. FINANCIAL INFORMATION			Page

	Item 1.	Financial Statements

	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	25

	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	26

	Item 3.	Defaults Upon Senior Securities	26

	Item 4.	Mine Safety Disclosures	26

	Item 5.	Other Information	26

	Item 6.	Exhibits	26

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 Report, for any references to Note 1 through Note 10, 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, 9-liter cases, per share, per bushel, per gallon, per proof gallon, per 9-liter case 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,
	2023		2022


Sales	$	201,010	$	195,235
Cost of sales	131,186		123,414
Gross profit	69,824		71,821
Advertising and promotion expenses	7,733		5,504
Selling, general, and administrative expenses	20,532		16,237

Operating income	41,559		50,080
Interest expense, net	(995)		(1,598)
Other income (expense), net	123		54
Income before income taxes	40,687		48,536
Income tax expense	9,655		11,165
Net income	31,032		37,371
Net loss attributable to noncontrolling interest	39		66
Net income attributable to MGP Ingredients, Inc.	31,071		37,437
Income attributable to participating securities	(311)		(318)

Net income used in earnings per common share calculation	$	30,760	$	37,119

Weighted average common shares
Basic	22,040,224		21,989,100
Diluted	22,072,271		21,989,100

Earnings per common share
Basic	$	1.40	$	1.69
Diluted	$	1.39	$	1.69

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,
	2023		2022
Net income attributable to MGP Ingredients, Inc.	$	31,071	$	37,437
Other comprehensive income (loss), net of tax:
Unrealized gain (loss) on foreign currency translation adjustment	175		(219)
Change in Company-sponsored post-employment benefit plan	(107)		(13)
Other comprehensive income (loss)	68		(232)

Comprehensive income attributable to MGP Ingredients, Inc.	31,139		37,205

Comprehensive loss attributable to noncontrolling interest	(39)		(66)
Comprehensive income	$	31,100	$	37,139

See accompanying notes to unaudited condensed consolidated financial statements

MGP INGREDIENTS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited) (Dollars in thousands)


	March 31, 2023		December 31, 2022
Current Assets
Cash and cash equivalents	$	31,728	$	47,889
Receivables (less allowance for credit loss, $1,475 at both March 31, 2023, and December 31, 2022)	128,611		109,267
Inventory	308,558		289,722
Prepaid expenses	6,542		2,957
Refundable income taxes	—		4,327
Total current assets	475,439		454,162
Property, plant, and equipment	461,069		450,800
Less accumulated depreciation and amortization	(220,100)		(215,168)
Property, plant, and equipment, net	240,969		235,632
Operating lease right-of-use assets, net	14,698		15,042
Investment in joint ventures	5,274		5,534
Intangible assets, net	216,250		216,768
Goodwill	226,294		226,294
Other assets	5,262		4,779
Total assets	$	1,184,186	$	1,158,211
Current Liabilities
Current maturities of long-term debt	$	6,400	$	5,600
Accounts payable	66,755		66,432
Federal and state excise taxes payable	7,388		4,627
Income taxes payable	4,716		—
Accrued expenses and other	17,056		28,716
Total current liabilities	102,315		105,375
Long-term debt, less current maturities	27,914		29,510
Convertible senior notes	195,305		195,225
Long-term operating lease liabilities	11,252		11,622


Other noncurrent liabilities	3,768		3,723
Deferred income taxes	67,685		67,112
Total liabilities	408,239		412,567
Commitments and Contingencies (Note 7)
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 23,125,166 shares at March 31, 2023 and December 31, 2022; and 22,008,929 and 21,994,042 shares outstanding at March 31, 2023 and December 31, 2022, respectively	6,715		6,715
Additional paid-in capital	320,997		318,839
Retained earnings	471,471		443,061
Accumulated other comprehensive income (loss)	(236)		(304)
Treasury stock, at cost, 1,116,237 and 1,131,124 shares at March 31, 2023 and December 31, 2022, respectively	(21,885)		(21,591)
Total MGP Ingredients, Inc. stockholders’ equity	777,066		746,724
Noncontrolling interest	(1,119)		(1,080)
Total equity	775,947		745,644
Total liabilities and equity	$	1,184,186	$	1,158,211

See accompanying notes to unaudited condensed consolidated financial statements

MGP INGREDIENTS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

(Dollars in thousands)


	Quarter to Date Ended March 31,
	2023		2022
Cash Flows from Operating Activities
Net income	$	31,032	$	37,371
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	5,171		5,621


Share-based compensation	1,215		1,373
Equity method investment loss (income)	260		(394)
Deferred income taxes, including change in valuation allowance	573		347
Other, net	99		24
Changes in operating assets and liabilities:
Receivables, net	(19,227)		(9,601)
Inventory	(18,707)		(13,696)
Prepaid expenses	(3,578)		657
Income taxes payable (refundable)	9,043		5,437
Accounts payable	6,498		4,638
Accrued expenses and other	(

SEC Form 10-Q filed by MGP Ingredients Inc.