EXHIBIT 20
Letter To Our Stockholders
February 9, 1995
Dear Stockholder:
Final results for the second quarter of fiscal 1995 confirm
our recently announced expectations of reduced earnings compared to
the same period the prior year. Net income for the quarter, which
ended December 31, 1994, was $2,237,000, or $0.23 per share on
sales of $44,488,000. For the second quarter of fiscal 1994, our
net income was $3,187,000, or $0.33 per share on sales of
$45,286,000.
Despite this decrease, and because of a stronger first quarter
performance, total results for the first six months of fiscal 1995
moved ahead of results for the first half of fiscal 1994. Net
income midway through the current fiscal year totaled $4,993,000,
or $0.51 per share on sales of $90,472,000, compared to net income
of $4,280,000, or $0.44 per share on sales of $84,448,000 after six
months the prior year.
As previously reported, principal reasons for our second
quarter decline were reduced sales of vital wheat gluten, costs
associated with the start-up of new distillery equipment at our
Pekin, Illinois plant and a resulting decrease in overall
operational efficiencies.
The lower wheat gluten sales were caused by decreased volumes
due to a swell in gluten imports from Europe. Additional pressures
continued to be felt from higher per bushel costs for wheat than
were experienced the prior year. Because of profits from their
highly subsidized and protected wheat starch business, European
producers are able to take advantage of low U.S. tariff rates to
ship their excess gluten into this country. In an attempt to
correct this problem, we are actively working with legislative
leaders and trade officials in Washington. Their attention to this
inequitable situation provides encouragement that a solution may
ultimately be reached.
The equipment start-up costs at our Pekin plant are the
result of the distillery expansion which is designed to double our
total alcohol production capacity. We planned to have this project
completed by early January. However, due to unanticipated
mechanical problems with our new distillers feed drying equipment,
the new capacity is not expected to be in full operating condition
until later in this quarter. In the meantime, our production
efficiencies will be adversely affected.
I want to emphasize that this problem has not been created by any
design flaws in our new distillery process. It is purely the
result of defective equipment, which is being repaired by the
supplier.
The planned increases in our wheat starch and wheat gluten
production capacities at Pekin have been tentatively rescheduled
for completion in the fourth quarter rather than in the third
quarter as originally planned. These projects are regularly under
review as we match production capacities to market demands. The
current postponement will allow us to concentrate on finishing the
distillery project, which is essential to the efficient operation
of expanded facilities in other product areas.
Based on the challenges we are experiencing at this time, our
results for the third quarter and for all of fiscal 1995 will
undergo a significant downturn compared to the prior year. Looking
beyond this period, however, I remain excited and optimistic about
our long-term growth possibilities.
Demand for our wheat starch remains very strong, and, as the
result of an expansion at our Atchison plant last fiscal year, we
have been able to experience steady growth in unit sales of our
special modified varieties. The wheat gluten market, despite our
problems with gluten imports, continues to be healthy. Our
markets for food grade alcohol, which include beverage and
industrial applications, and fuel grade alcohol are solid. Growth
in both of these principal alcohol categories, the majority in
fuel, will be realized as a result of the current distillery
expansion. When this expansion is completed, we expect to become
a much stronger, more efficient company overall.
As previously announced, a dividend of $0.125 per share was
declared and is payable February 9, 1995 to stockholders of record
January 13, 1995.
Sincerely,
/s/ Ladd M. Seaberg
Ladd M. Seaberg
President and CEO
Corporate Profile
Founded in 1941, Midwest Grain Products, Inc., is a fully
integrated producer of vital wheat gluten, premium wheat starch and
alcohol products.
In addition to its major product lines, the Company also
produces flour for internal use, and several by-products, including
wheat bran, mill feeds, distillers feeds and carbon dioxide. The
Company's principal raw material is grain, consisting of wheat,
which is processed into all products, and corn and milo, which are
processed into alcohol and alcohol by-products.
Vital wheat gluten and premium wheat starch are sold
primarily as food additives to enhance the nutritional value,
appearance, texture, taste, and a variety of other characteristics
of baked and processed foods. Alcohol products are produced as
part of the gluten and starch processing operations. They consist
of food grade alcohol for beverage, industrial and commercial
applications, and fuel grade alcohol, which is sold as an octane
additive for motor fuel.
The Company operates two processing plants in the United
States. The corporate headquarters and original plant are located
in Atchison, Kan. The plant located in Pekin, Ill., was acquired
from the American Distilling Company in June, 1980. These
facilities are operated 24 hours each day of the year and enable
utilization in the Company's products of approximately 95% (by
weight) of grain processed.
Midwest Grain Products, Inc.
1300 Main Street
PO Box 130
Atchison, Kansas 66002-0130
Phone: 913-367-1480
Symbol/Market: MWGP/NASDAQ