MGP Ingredients(US:MGPI)2020-05-01 23:16Financial Data and Key Metrics Changes - Consolidated sales increased by 11.2% to $99.1 million, with gross profit rising by 39.3% to $23.2 million, reflecting strong performance across both business segments [10][24][25] - Consolidated gross margin improved by 470 basis points to 23.4% from 18.7% in the prior year quarter [25] - Consolidated operating income rose by 61% to $13.7 million, while non-GAAP operating income increased by 67.9% to $14.3 million, excluding CEO transition costs [26][27] - Consolidated net income slightly increased to $9.8 million, with earnings per share remaining flat at $0.57 [28] Business Segment Data and Key Metrics Changes - In the Distillery Products segment, sales increased by 7.3% to $80 million, with gross profit rising to $18.2 million, representing 22.8% of segment sales [11] - Sales of premium beverage alcohol grew by 9.4%, driven by double-digit growth in new distillate and aged whisky, leading to a 17.1% increase in sales of brown goods [12][14] - Ingredient Solutions segment sales grew by 31.4% to $19.1 million, with gross profit increasing to $5 million, reflecting a significant increase in gross profit margin [20] Market Data and Key Metrics Changes - Sales of industrial alcohol increased by 5.7%, while sales of dried distillers grains (DDG) declined by 1.5% due to a slight decrease in sales volume [17][19] - Revenue from warehouse services increased by 10.5%, reflecting growth in the number of customer barrels aging in whiskey warehouses [19] Company Strategy and Development Direction - The company is focused on supporting industrial alcohol customers during the COVID-19 pandemic and has increased production of alcohol for hand sanitizer and disinfectants [15][16] - The management plans to optimize cash management during the pandemic while maintaining a conservative cash position and continuing to invest in the American whiskey category [40][42] - The company aims to grow volume share in the global American whiskey category while refining its approach to pricing and product offerings [44][45] Management's Comments on Operating Environment and Future Outlook - Management acknowledged the uncertainty caused by the COVID-19 pandemic and withdrew previous 2020 guidance, indicating a reassessment based on macroeconomic recovery visibility [41] - The company is monitoring potential headwinds, including changes in consumer purchasing behavior and impacts on craft customer sales due to stay-at-home orders [46][48] - Management expressed confidence in the long-term growth of the American whiskey category despite short-term challenges [44][46] Other Important Information - The company ended the quarter with a debt balance of $96.1 million and a cash balance of $42.7 million, with approximately $245 million available under the revolving credit line [30] - The company repurchased 159,104 shares for approximately $4.1 million as part of a stock repurchase program [37] - A second-quarter dividend of $0.12 per share was authorized by the Board [38] Q&A Session Summary Question: Can you break down the growth numbers in the Ingredients segment? - Management indicated that the growth was driven by strong consumer demand and a well-positioned portfolio, with no significant anomalies in Q1 [60][61] Question: How are consumer goods companies adjusting their R&D processes? - Most processes remain uninterrupted, although some slowdown was noted in the Foodservice channel [62] Question: What is the outlook for the export market? - Initial traction was seen in the export market, but engagement has been impacted by travel restrictions due to COVID-19 [64] Question: What is the current state of M&A activity? - There has been a significant slowdown in M&A activity globally, and the company is assessing opportunities as circumstances evolve [66][67] Question: Can you provide more details on the aged whiskey inventory? - Some sales in Q1 were carry-over from Q4, and pricing is aligned with historical expectations [72][74] Question: How is the industrial alcohol business performing? - The company is uniquely positioned due to long-standing customer relationships and has been optimizing output to meet increased demand during the pandemic [77][85]