MGPI sustains $11.7 million loss in fiscal '08

by Eric Schroeder
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ATCHISON, KAS. — MGP Ingredients, Inc., in the year ended June 30, sustained a loss of $11,742,000, versus net profit of $17,566,000, equal to $1.07 per share on the common stock, in fiscal 2007. Sales were $392,893,000, up 7% from fiscal 2007.

Results during the year included one-time items net of tax of $4.6 million related to litigation settlement and a $2 million tax credit. Those items were offset by a $4.9 million impairment charge net of tax, $929,000 of inventory write-downs, and a $1 million write-off of fixed assets.

For the fourth quarter ended June 30, MGPI sustained a loss of $9,989,000, which compared with income of $1,668,000, or 10c per share, in the same period a year ago. Sales in the quarter were $104,227,000, up from $101,547,000.

Because of the loss suffered in the fourth quarter, Tim Newkirk, president and chief executive officer, said MGPI was forced to default on several financial covenants units its credit facility.

"Although they (bank lenders) could have terminated our ability to borrow or accelerated our debt, they have elected not to do so at this time and have continued to honor our draws under the credit facility," Mr. Newkirk said. "They are working with us to develop our new credit terms."

Mr. Newkirk said the bank lenders have issued several proposals, including eliminating MGPI’s unused term facility and restricting the company from paying dividends for at least 60 days.

Reflecting on a difficult 2008, Mr. Newkirk said MGPI received no price relief in key input costs.

"Corn and wheat prices for the year average 37.6% and 63.3% higher, respectively, above our fiscal 2007 levels, while the price of natural gas averaged 14.8% higher than the average price of natural gas during the prior year," he said.

In its Ingredient Solution segment, MGPI sustained an operating loss of $15,395,000 in the full year, versus a loss of $5,515,000 during the same period last year. Net sales were $100,994,000, up 49%.

Distillery Products pre-tax income in fiscal 2008 was $2,546,000, down 94% from $38,666,000 in fiscal 2007. Net sales were $285,738,000, down 3%.

Despite the challenges, Mr. Newkirk said MGPI made several strategic moves during the year that are expected to impact future periods, including reconfiguring its ingredient technology platforms around customers, narrowing product lines to drive a higher value mix and rationalizing its manufacturing footprint.

"These actions in total are geared toward improving our long-term profits and cash flow," he said. "At the same time, the structural and business process changes have created a strong foundation for enabling new growth opportunities in our respective business segments."

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