MGPI - Earnings call transcript Q3 2017

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Operator

Good day and welcome to the MGP Ingredients Inc., Third Quarter 2017 Results Conference Call and webcast. All participants will be in listen-only mode. [Operator Instructions] Please note, this event is being recorded. I'd now like to turn the conference over to Mr. Mike Houston, Investor Relations. ahead. go Please

Mike Houston

And I'm Good the Andrew. discuss and Relations Officer. you President quarter their of thank Griffin, me are Chief company's Lambert, Finance Thank Vice President Executive Ingredients morning, conference joining XXXX. third the MGP Officer; results to and Edwards, management firm. Houston members call including for with financial you, for Financial team, everyone, MGP's joining Investor Mike Pigott, Chief and Gus the and of and webcast Tom

begin the open will questions. call We remarks with and up management's then to prepared the call

and President of by filed Chief www.mgpingredients.com. it issued would MGP's during Griffin. Commission. anyone the MGP not However, call objectives If the the The well call, to may Securities a Executive to today, I involve at you we statements in today factors as statements made Officer, obligation can and website, this and projections Exchange any is At results call inform the statements, company's forward-looking the Gus? my forward-looking earnings such to from release access reports over time, the company's as including and on due the the materially before quarterly no responsibility most of call. business. The company like made begin factors, actual have today's already risk does certain any of this of turn as you Gus the to update company's differ structure press could with recent that statements copy revenue, company's assumes it described a number plans to capital forward-looking

Gus Griffin

On performance we questions. on we you joining and us Then this financial a provide quarter, of key overview updates will and all an metrics our take Mike, against strategy. this thank you, the of call, discussion progress Thank on will for call. your

long-term reflect implementing Gross gross as and by prior expanded Total third quarter increased strategic in Ingredient the items Distillery both our year. increase quarter XXX showed Products continued a Products in results. net Solutions. plan. of basis gain margins in XX.X%, turning Solutions of driven other the our by results driven and in the and third for points, the increased result our profit in income our for to operating Overall, segment. over our operating income XXXX. year, Ingredient Products X.X% segment quarter progress last sales X.X% declined both X.X% recorded results Now Results growth Distillery over X.X% in strong Reported quarter solid Distillery

Excluding those our year operating year-to-date our guidance. of at income is high-end full items, growth the

trends demand segment market our for strength a in range reflects This of each of Products our whiskey, underlying to American premium attracting continue retaining whiskey and alcohol. segment, for for and at our success individually, see the gin we offerings. Looking Distillery demand strong and beverage particularly vodka customers

supplier their by making our grew largest sales as customers, Our to the area. premium XX.X% we customer partnerships that progress goal our long-term our Total a demonstrates XX.X% in while of build increase driven we disclose sales don't year alcohol the alcohol ordered of just with customers. the in this food are beverage is And grade strong beverage fact alcohol. us

our mix to product As focus towards beverage and strengthen we premium shift continue on our alcohol.

from aged continue pricing our gross the XX.X%, our profit of Consistent for related to distillers with our pricing strong, margins expanded points remained the soft strategy, downward margins conditions of reaching distillers created tariffs to DDG. products and declined our for long-term quarter. demand in pressure feed whiskey. Despite co-products the feed with DDG. year gross reflecting basis Sales by segment co-product inventory for or global $XX.X demand China's imported on continue dynamic XX.X%, we earlier headwind, grew increased supply million and build reflect XXX the While our this

this the category, growth to of robust fill the aged customers the Due by position as lightly-aged demand attract our we to to to support customers. and our retain addition ability and In used new whiskey our development for strong to demand. seek continue whiskey it to using strengthen of American to gaps driven inventory market is own whiskey consumer also see distillery brands, higher-than-expected

new We at customers of products. aged whiskey remained this quarter. we our the cost inventory increased strategy inventory with the to at long-term new existing distillate and and to lightly-aged continue sales whiskey support leverage We to focused for inventory building limited even to on our partnerships sales close that of our of million our develop $XX.X of

grew driven aligned X.X% protein of reflects Turning our in in interest to strongly specialty This wheat a progress revenues plant-based the consumer in Solutions, continued our with XX.X% sales developing textured the business, is proteins. increase by quarterly Ingredient which increased TruTex proteins.

due our expected as the expiration business, some in with in year. Fibersym saw softer also nice earlier We though increase to the pattern a pricing

For gross XX% plant concludes this profit $X.X plant initial decline segment profit gross year-to-date. quarter, We these temporary to up due view efficiencies. Despite primarily my efficiencies decreased X.X% to the is the lower quarter, as That declined remarks. million in nature.

metrics Tom to review Let Tom? for turn Pigott, of numbers. key me and now things over the

Tom Pigott

Gus. Thanks

focus in by we Overall, during were performance discussed our platforms. segments Gus on featured key the strong which quarter growth growth revenue with both was our the pleased this company's quarter. supported As

profit XX.X%. XX.X% profit increased consolidated $XX.X million. increased points XXX X.X% the Gross in For gross strong margin basis reflecting results the sales to net Distillery Products segment. $XX.X to to million to increased quarter, Gross

SG&A We MGP continue build platform. to brands growth invest out our in to

in over quarter, advertising was SG&A as million cost, professional as prior fees expense well year growth the personnel up promotion. the $X.X quarter and our reflecting For

our quarter year-to-date million, discussed finished income quarter full operating income and I third Third Gus income quarter for in underline litigation as growth of the should that excludes asset in guidance. was XXXX from $X.X prior sale settlement operating operating operating $XX.X income in the us million guidance other year high-end a the included year our favorable XXXX prior versus items at gain.

interest our equity Illinois As we the or July on of Processing in previously preview announced sale Corn X, ICP. can

This quarter's method This $X.XX for equity contributed million of our a as sale. per $XX.X the result to include quarter. transaction pretax share results investment of earnings a the gain

announced from gain annualized settlement cash an from significant accounting from in of that $XX.X company of per provided income be continue of quarter effective available balance dividend to a the company today fourth term the guidance due to of to rate XXXX, reported quarter and transaction XXXX. estimate continue shares XX%, way and and current compared our XX.X% Also and XX% standard flow alcohol. sales company related operations, to as to healthy an reflects quarter, prior accounting a the XX% ASU adjustment. shareholders. third the XXXX through XX.X% cash outstanding strong $XXX agreements aged on was tax is to facility year growth share, expected be of the gain of scale a equity credit XX.X% a based beverage the increased ago. paid to it expected dividend, total new this the from on industrial of million financial note versus during in $XX.X Net future tax important in company and XXXX share finished of that the related return cash company the rate payment Board's Our asset sheet. to guidance ICP are quarter report. management's compensation XXXX grow per more the million and volatility the were million. the our in quarter the into special XXXX benefit million beyond XX% program of XXXX XXXX. the from to to litigation primarily three $X company adoption declared XXXX-XX to final in XXXX. of third $XX.X the board a the in company change quarter with year the year some provide was fourth quarter become has belief The to continue Also for interest share for margins balance strong $X.XX is and per with Recognizing $X.XX to in $X.XX dividend principal improved the our from between excludes share which recorded of share million is end income remains per the represents of operating both amount further facility. and was million of periods We net per company's tax capital whiskey Operating gain and on difficulty working MGP $XX.X earnings The to and and demonstrated debt sale ICP a expected reflecting agreement. the Moderate XXXX sale its cash These MGP inventory factor. share approximately favorable to of very total On gross during the our million forecasted this sales million share. the and the and the $X.XX was expected MGP continues sheet sale investment. operating the $X rate including ship approximately in the conservative $XX.X per sheet for that performance. million end. position to $X.X now a a the included balance grow Recognizing the the strength revolving to ICP cash gain the quarter's is at MGP $XX.X announced and are quarter, and a annually subject received equity, access sale and in to projecting loan will the a paid- earnings proceeds million in and basis, to in XX% net transaction note. At and The income in flow year before sales received had cash a in credit third allow the and the updated in taxes note credit will guidance. success fees $XX a markets, million of balance off future. favorable dividend would million of its of in to with the quarter is September growth XX, On a future, This interest years with proceeds deliver and on grow business promissory of a $XX.X the quarter in the reflected the end its is persist healthy,

me let concluding for turn to things Now, remarks. back Gus over

Gus Griffin

Thanks Tom.

progress quarter. both our plan strategic results pleased are the made we against the We with and our during

offerings, product beverage In capabilities and our segment value by maximize on of plant distillery gain our protein our our beverage focusing continued production product traction. the segment, to We solution premium based alcohol coverage. expanding ingredient sales platform to alcohol our premium and continues

and We excited benefiting about our segments work advantage the full are of take trends macro we to to continue of both them. consumer business

We of our are to capture greater the a also share laying the brands value initiative. with chain foundation

both our brand very with early, pleased continue progress be we in still While and portfolio. organization to our developing our

implement whiskey bourbon and Tenner's deep Wheat including building continue and limited market. American We brand a Remus our strategy Vodka, Creek existing blended portfolio in Till bourbon to George whiskey number narrow of our straight

the Reserve the X, our November birthday Repeal bootleggers. Remus, on on Repeal of Remus this limited George December the Repeal debut Remus to of the month. will new Additionally, would celebrate later be Introduce Reserve XX, legendary edition available king prohibition

building to warehouse We complete completion continued We with on whiskey year. for a of our in the and growth next time Kentucky implementing by and under program the of expansion inventory budget to this look program. Williamstown, warehouse invest our initial aged

on our Operator, focusing remarks. long-term call. the volatility, begin to although focus That over we ready continue concludes confident returns. strategies on long-term we these would experience remain shareholder drive to portion are key We that the may question-and-answer strategies our the quarter-to-quarter and we of superior prepared

Operator

[Operator Group. will the now begin Alex Fuhrman Capital go Please session. We Craig-Hallum ahead. The first from Instructions] question-and-answer of question comes

Alex Fuhrman

be catch-up a think much about, taking make are my under for to conference and I and years. a whiskey played you your congratulations really wanted it couple on give much of to for they a in that on had alluded like here. customers ask very been Can -- you call, your how the lot of accelerating quarter some of, sounds you Thank you next perhaps strong over I really dynamic into sense of question progress their years? the of give last the the they and here us us as effectively two the to some how growth that them starting third invested still over in purchases Great. strength in and think to progress whiskey good on assume customers how in in here, that it up quarter or the might a your you be much catching do made your three have about Can future? or accelerating short fair a lies they biggest sense purchases quarter by they you mostly that Would made catching think up? the

Gus Griffin

I so on. of all, you the is to Alex, then, be trends I And think, choosing underlying strong. going very first think see -- continue

growth see on You brands. go you M&A a see then, everybody's And activity on. the

So, whether more fill or a so complete pockets, they whether capital it's investment players can a those puts into just purchase those it's gaps. stake

whether they trend the to way then will to go an investment. you and see because those would think gaps. to going I required factors try mentioned just along the other as So, capital underlying both on because it it the those fill or are of to of to They be continue continue get -- because I

Alex Fuhrman

Great. Thanks of $X the million ask And you warehouse if Gus. year, follow-up you barrel. close then, made. this added over on really a upgrades of of have like status That's helpful. the could the It course to I looks just

your house Just in customer whiskey being from get big that to kind in being able your the of customers your of How a well you priority grow the revenue as you serve able couple more more next a purchases whiskey? sheet customers, space do as of versus and and how balance is aged facility room to own also of warehousing as your being build balance over seen your the to for stockpile much you in two on own terms whiskey, increase are both lid years. there

Tom Pigott

Tom. This That's good is Alex.

of building much And balancing are the million demand sheet. project be how lightly-aged balance expect we factors the on in we in of distilled, whiskey And our CapEx. be of $XX warehouse overall, completed the are is it to XXXX. So, now for number sales customer a terms capacity, to current we inventory in the new forecasted

terms program mentioned to certainly to of in our and continue we the Now, monitor as trend And overall landscape invest. Gus want are overall the where bullish. we capital

something ongoing. to look it's are continuing we at that So,

Alex Fuhrman

Tom. helpful. Greta. That's Thanks really

Operator

question go next Bill Chappell The Please comes from SunTrust. ahead. of

Grant O'Brien

expectation. grow Hi. Grant actually much This on for inventory, as as a the had is seem question just We on maybe Bill. didn't our to it

expansion was it's So, Thank color roll-off aged on some that now dynamic you. just fully Remus maybe George whether some of more that color if of lightly-aged there the that brand, more with or great. more would be

Gus Griffin

factors as a Tom of impact that. Grant, said, was couple there that

important I of what's our are that are that. our part think or on And focus we to build committed key plan. is inventory that part in -- numbers -- of our is just long-term the really to quarter-to-quarter terms building strategic of a

at look going are really where I think I -- we long-term.

we can own are to We committed sure making supplier brands. our

can we to that's are on. build and focusing sure, strong are make we where committed We partnerships

Grant O'Brien

portfolio White branded expanding about right feeling question second And January how just maybe Spirits your great. a there? on out thoughts potentially into other that brands now just there another maybe Okay, then, offering, are you

Gus Griffin

Yes.

look at M&A, have continue far think is at We the really important how last look what year. we I come over to to

here sitting are ago, a think. brand and had would year one have one we person, We I

stands it job, portfolio and made, And so, a with organization the the brand great I'm out now. as we've done we've pleased building very, progress really very

deep We goes as on have it taken expansion. narrow a approach focus it, very and to steady market

expand us see will You to continue markets.

our see as us level success our is over for growth. it to of will out continue You organization appropriate build our and time

right will continue in we keep you to us, the at see M&A, perspective. So, this to look going are but

Grant O'Brien

segment, expect assume just here, more safe like may of as it business Okay, going seems forward alcohol. And here shift on the that beverage we then, is more would premium focus question, industrial bottomed to that or have actually that on alcohol one great. a you more

Gus Griffin

shifted focus in alcohol. change the definitely premium we've So, shift won't beverage -- to and that focus

get on the the and -- to as alcohol can run that market. do challenging best continue a we of very to with best job can utilization we We will plant plant the industrial

going that over to choppy, to the it industrial is inherent be the nature continue be of it's fact supplied. it's alcohol, -- So,

not try slight much decline the it X% bottoming to I read the growth before. So, too growth, into the this period do or versus out

away you beverage focus building get in best I business alcohol. should our with to what continues alcohol be take think then our to on doing the is, can squarely and utilization plant we industrial

Grant O'Brien

Great. Thanks so much.

Operator

& next comes Company. ahead. Francesco Please The Pellegrino from of Sidoti question go

Francesco Pellegrino

guys. morning Good

Tom Pigott

morning. Good

Gus Griffith

morning Francesco. Good

Francesco Pellegrino

little a to into more your of understand I all dynamics. the wanted distillery I really gain So, segments, bit some just don't

were at read basis X% when which while up were up revenue the market increase look your distributable or distillers that distiller was XXX very points, sales? prices spot down strongly a greater speed of read XX%. to the in were through, margins XX% use up volumes your I the So, as majority down through, -- a -- volume your was Is is by feed

Tom Pigott

No. necessarily. saw We the platform. nice entire across growth Not

is our it's distillers to manufacturing feed obviously co-product kind -- process. of a Now,

will it So, distiller actual feed. in move the volume

We will we in quarter margins unfortunately And pricing about move was unfavorable an XXX the points. impacted the with basis the it softness with by complex. rest Distillery the quarter, the impact it experienced, the a on of

So, around feed pricing talked challenge in that we've the that the we'll past. to to And a in us, that for of continues wrap dynamics QX about next distillers be start year.

Francesco Pellegrino

production little a the bit headwinds of from pretty of regards cost a decreasing regards overall that bit beverage utilization tap distiller margin the number give start decelerating. the sort premium the barrel your know you elevated experiencing the there basis alcohol, is or or sure well lower has well, of distillers maybe are guess you're I production way maybe market some actually inventory that in feed. to what we spot as us you volumes offset pressures are because barrel distiller up rates not of more sort I been could color to volume feed, think distillers a as to your So, I a are as see I to little in from basis. if in a premium sequential prices of would But year-over-year its am that which given on obviously the

could layers? a your you is, position out have into help of us maybe inventory where go frame better you don't So to understanding the

Tom Pigott

we broadly number talked growth Gus, say new Yes. as can and, I demand away the put about as for the alcohol continued distillate influenced happy with premium as our would be were beverage we in well. by customers

And so, customers and supporting and situation our we're certainly the focused on with assessing them. growing

The other by thing as we did lower offset that corn distillery in input pricing in industrial we mentioned. is the have have this as DDT we well the us that quarter some lower was lower certainly helped slightly did costs, and

the So, that's the margin you're also terms quarter. playing into in of profile for on what Distillery seeing

Gus Griffin

me brown, we'll also going growth that's what strong brown not can just a demand white add, a put short-term of for basis but once we're the away with a versus we we Let to how that we very both strong function saw production. really, break impacts, so alcohol, the across out DDG, just on and break, it white really back and the is saw beverage year of

treat the pricing I that's So around it's best get the as soft it in signaled the we'll probably I it. first to wrap think and quarter wouldn't way too, we've

Francesco Pellegrino

Thank you much. perfect. right, All so

Operator

session. question-and-answer our concludes This

Executive President I like Chief back and for closing remarks. over turn Gus Officer any the Griffin, Now to to would conference

Gus Griffin

quarter. to Thank the our fourth you look again after in forward with company. you for your We interest talking

Operator

today's presentation. you The conference for attending concluded. has Thank now

now You may disconnect.

MGP Ingredients (MGPI) 2 Nov 172017 Q3 Earnings call transcript