• MGP Ingredients Reports Strong Second Quarter 2022 Results

    ソース: Nasdaq GlobeNewswire / 04 8 2022 06:30:02   America/Chicago

    Consolidated sales increased 11% from prior year period
    Operating income increased 28%

    ATCHISON, Kan., Aug. 04, 2022 (GLOBE NEWSWIRE) -- MGP Ingredients, Inc. (Nasdaq:MGPI), a leading provider of distilled spirits, branded spirits, and food ingredient solutions, today reported results for the second quarter ended June 30, 2022.

    2022 second quarter consolidated results compared to 2021 second quarter
    • Sales increased 11% to $195.0 million, as a result of sales growth in the Distilling Solutions and Ingredient Solutions segments.
    • Gross profit increased 4% to $59.2 million, representing 30.4% of sales. Adjusted gross profit decreased slightly from $59.4 million.
    • Operating income increased 28% to $35.3 million. Adjusted operating income decreased 4% from $36.9 million.
    • Net income increased 26% to $25.4 million. Adjusted net income decreased 10% from $28.1 million.
    • Adjusted EBITDA decreased 5% to $40.1 million.
    • Basic and diluted earnings per common share ("EPS") increased to $1.15 per share from $0.91 per share. Adjusted basic and diluted EPS decreased to $1.15 per share from $1.27 per share.

    “We are pleased with our team’s performance during the second quarter as we continue to execute against our long-term strategic plan,” said David Colo, president and CEO of MGP Ingredients. “Continued strength in the demand for new distillate and aged whiskey resulted in brown goods sales growth of 29% versus the prior year period, driving an overall increase in sales of 19% for premium beverage alcohol. As expected, industrial alcohol and white goods gross profits were negatively impacted by increased commodity costs and additional supply that has entered the market. Consumer demand for our Branded Spirits premium plus offerings, which include premium, super premium and ultra premium brands, remains strong. We also increased our advertising and promotion investment in these brands to support anticipated incremental growth. Our enthusiasm for our Ingredient Solutions segment remains strong, which again delivered record results during the second quarter as we made further progress to optimize segment product mix and align with consumer demand trends. We are confident the marketing platform and go-to-market strategy we have in place will drive further growth in the segment.”

    Distilling Solutions
    In the second quarter 2022, sales for the Distilling Solutions segment increased 19% to $107.1 million, reflecting a 19% increase in sales of premium beverage alcohol. Gross profit decreased to $29.8 million or 27.8% of segment sales, compared to $32.0 million, or 35.4% of segment sales in the second quarter 2021.

    Branded Spirits
    For the second quarter 2022, sales for the Branded Spirits segment declined 3% to $58.6 million. Gross profit increased to $21.0 million, or 35.8% of segment sales compared to $18.4 million, or 30.5% of segment sales in the second quarter 2021. Excluding the impact of purchase accounting related to the Luxco acquisition, gross margin was 34.7% for the second quarter 2021.

    Ingredient Solutions
    In the second quarter 2022, sales in the Ingredient Solutions segment increased 21% to a record $29.3 million. Gross profit increased to $8.5 million, or 29.0% of segment sales, compared to $6.4 million, or 26.5% of segment sales in the second quarter 2021.

    Other
    Advertising and promotion expenses for the second quarter 2022 increased $2.7 million to $6.1 million as compared to the second quarter 2021, primarily driven by incremental investment in the ultra premium, super premium and premium price tier spirit brands.

    Corporate selling, general and administrative ("SG&A") expenses for the second quarter 2022 decreased $7.9 million to $17.9 million as compared to the second quarter 2021, primarily due to the one-time acquisition costs in 2021 related to the Luxco acquisition that did not recur in 2022.

    The corporate effective tax rate for the second quarter 2022 was 22.4%, compared with 24.2% from the year ago period.

    “As we look ahead to the second half of the year, we are confident in our ability to build on the accomplishments we have made towards our long-term strategic objectives,” said Colo. “The expansionary projects we announced earlier this year remain on track and we believe will enable us to meet evolving consumer trends and demand. Our approach to capital allocation remains unchanged, and we will continue to prioritize organic and acquisitive growth. Our excellent performance during the first half of the year has enabled us to revise our full-year guidance upward.”

    2022 Outlook
    MGP is revising upward its previous consolidated guidance for fiscal 2022:

    • Sales are projected to be in the range of $745 million to $765 million.
    • Adjusted EBITDA is expected to be in the range of $156 million to $163 million.
    • Basic adjusted earnings per common share are forecasted to be in the $4.41 to $4.65 range, with basic weighted average shares outstanding expected to be approximately 22.0 million at year end.

    Full year 2022 guidance measures of adjusted EBITDA and basic adjusted EPS are provided on a non-GAAP basis without a reconciliation to the most directly comparable GAAP measures because MGP is unable to predict with a reasonable degree of certainty certain items contained in the GAAP measures without unreasonable efforts. Such items include, but are not limited to, acquisition related expenses, restructuring and related expenses, and other items not reflective of MGP’s ongoing operations.

    Conference Call and Webcast Information
    MGP Ingredients will host a conference call for analysts and institutional investors at 10 a.m. ET today to discuss these results and current business trends. The conference call and webcast will be available via:

     Webcast:ir.mgpingredients.com on the Events & Presentations page
     Conference Call:844-308-6398 (domestic) or 412-717-9605 (international)

    About MGP Ingredients, Inc.
    MGP Ingredients, Inc. (Nasdaq: MGPI) is a leading producer of premium distilled spirits, branded spirits, and food ingredient solutions. Since 1941, we have combined our expertise and energy aimed at formulating excellence, and bringing product ideas to life collaboratively with our customers.

    As one of the largest distillers in the U.S., MGP’s offerings include bourbon and rye whiskeys, gins, and vodkas, which are created at the intersection of science and imagination, for customers of all sizes, from crafts to multinational brands. With U.S. distilleries in Kentucky, Indiana, Kansas, and Washington D.C., and bottling operations in Missouri, Ohio, and Northern Ireland, MGP has the infrastructure and expertise to create on any scale.

    MGP’s branded spirits portfolio covers a wide spectrum of brands in every segment, including iconic brands from Luxco, which was founded in 1958 by the Lux Family. Luxco is a leading producer, supplier, importer and bottler of beverage alcohol products. Our branded spirits mission is to meet the needs and exceed the expectations of consumers, associates and business partners. Luxco’s award-winning spirits portfolio includes well-known brands from five distilleries: Bardstown, Kentucky-based Lux Row Distillers, home of Ezra Brooks, Rebel, Blood Oath, David Nicholson and Daviess County; Lebanon, Kentucky-based Limestone Branch Distillery, maker of Yellowstone Kentucky Straight Bourbon Whiskey, Minor Case Straight Rye Whiskey and Bowling & Burch Gin; Jalisco, Mexico-based Destiladora González Lux, producer of 100% agave tequilas, El Mayor, Exotico and Dos Primos; MGP’s historic distillery in Lawrenceburg, Indiana, where the George Remus Straight Bourbon Whiskey and Rossville Union Straight Rye Whiskey are produced; and the Washington, D.C.-based Green Hat Distillery, producer of the Green Hat family of gins. The innovative and high-quality brand portfolio also includes Everclear Grain Alcohol, Pearl Vodka, Saint Brendan’s Irish Cream, The Quiet Man Irish Whiskey and other well-recognized brands.

    In addition, our Ingredient Solutions segment offers specialty proteins and starches that help customers harness the power of plants and provide a host of functional, nutritional and sensory benefits for a wide range of food products.

    The transformation of American grain into something more is in the soul of our people, products, and history. We’re devoted to unlocking the creative potential of this extraordinary resource. For more information, visit mgpingredients.com.

    Cautionary Note Regarding Forward-Looking Statements
    The forward-looking statements contained herein include, but are not limited to, statements about the expected effects on MGP Ingredients, Inc. ("the Company") of continuing consumer trends and our announced expansionary projects. Forward looking statements are usually identified by or are associated with such words as “intend,” “plan,” “believe,” “estimate,” “expect,” “anticipate,” “hopeful,” “should,” “may,” “will,” “could,” “encouraged,” “opportunities,” “potential,” and/or the negatives or variations of these terms or similar terminology.

    These forward-looking statements reflect management’s current beliefs and estimates of future economic circumstances, industry conditions, Company performance, and Company financial results and financial condition and are not guarantees of future performance. All such forward-looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially from those contemplated by the relevant forward-looking statements. Important factors that could cause actual results to differ materially from our expectations include, (i) disruptions in the operations at any of our facilities, (ii) the availability and cost of grain, flour, and agave, and fluctuations in energy costs, (iii) the effectiveness of our grain purchasing program to mitigate our exposure to commodity price fluctuations, (iv) the effectiveness or execution of our strategic plan, (v) potential adverse effects to operations and our system of internal controls related to the loss of key management personnel, (vi) the competitive environment and related market conditions, (vii) the impact of the COVID-19 pandemic, (viii) the effects of inflation and the ability to effectively pass raw material and other price increases on to customers, (ix) our ability to maintain compliance with all applicable loan agreement covenants, (x) increases in interest rates, (xi) our ability to realize operating efficiencies, (xii) actions of governments, and (xiii) consumer tastes and preferences. For further information on these and other risks and uncertainties that may affect our business, including risks specific to our Distilling Solutions, Branded Spirits and Ingredient Solutions segments, see Item 1A. Risk Factors of our Annual Report on Form 10-K for the year ended December 31, 2021 and our Quarterly Report on Form 10-Q for the quarter ended June 30, 2022.

    Non-GAAP Financial Measures
    In addition to reporting financial information in accordance with U.S. GAAP, the Company provides certain non-GAAP financial measures that are not in accordance with, or alternatives for, GAAP. In addition to the comparable GAAP measures, MGP has disclosed adjusted gross profit, adjusted operating income, adjusted income before taxes, adjusted net income, adjusted MGP earnings, adjusted EBITDA and basic and diluted adjusted earnings per common share. The presentation of non-GAAP financial measures should be reviewed in conjunction with gross profit, operating income, income before income taxes, net income, net income used in earnings per common share calculation and basic and diluted EPS computed in accordance with U.S. GAAP and should not be considered a substitute for these GAAP measures. The non-GAAP adjustments referenced in the section entitled "Reconciliation of Selected GAAP Measures to Non-GAAP Measures," take into account the impacts of items that are not necessarily ongoing in nature and/or predictive of the Company's operating trends. We believe that these non-GAAP measures provide useful information to investors regarding the Company's performance and overall results of operations. In addition, management uses these non-GAAP measures in conjunction with GAAP measures when evaluating the Company’s operating results compared to prior periods on a consistent basis, assessing financial trends and for forecasting purposes. Non-GAAP financial measures may not provide information that is directly comparable to other companies, even if similar terms are used to identify such measures. The attached schedules provide a full reconciliation of these non-GAAP financial measures to their most directly comparable U.S. GAAP financial measure.

    For More Information
    Investors & Analysts:
    Mike Houston
    646-475-2998 or investor.relations@mgpingredients.com

    Media:
    Greg Manis
    913-360-5440 or greg.manis@mgpingredients.com


    MGP INGREDIENTS, INC.
    OPERATING INCOME ROLLFORWARD
    (Dollars in thousands)

    Operating income, quarter versus quarter Operating Income  Change 
    Operating income for quarter ended June 30, 2021 $27,663    
    Increase in gross profit - Branded Spirits segment  2,526  9 pp(a)
    Increase in gross profit - Ingredient Solutions segment  2,076  8 pp
    Decrease in gross profit - Distilling Solutions segment  (2,205) (8)pp
    Increase in Advertising and promotion expenses  (2,694) (10)pp
    Decrease in SG&A expenses  7,934  29 pp
    Increase in Other operating income (expense), net  6   pp
    Operating income for quarter ended June 30, 2022 $35,306  28% 


    Operating income, year to date versus year to date Operating Income  Change 
    Operating income for year to date ended June 30, 2021 $48,163    
    Increase in gross profit - Branded Spirits segment  27,222  57 pp(a)
    Increase in gross profit - Distilling Solutions segment  8,483  17 pp
    Increase in gross profit - Ingredient Solutions segment  6,214  13 pp
    Increase in Advertising and promotion expenses  (7,345) (15)pp
    Decrease in SG&A expenses  2,614  5 pp
    Increase in Other operating income (expense), net  35   pp
    Operating income for year to date June 30, 2022 $85,386  77% 

    (a) Percentage points (“pp”).

    MGP INGREDIENTS, INC.
    EARNINGS PER COMMON SHARE (“EPS”) ROLLFORWARD

    Change in basic and diluted EPS, quarter versus quarter Basic and
    Diluted EPS
     Change 
    Basic and diluted EPS for quarter ended June 30, 2021 $0.91    
    Increase in Operating income (b)  0.26  28 pp(a)
    Increase in other income (expense), net(b)  (0.03) (3)pp
    Tax: Change in effective tax rate  0.04  4 pp
    Change in income allocated to participating securities  (0.01) (1)pp
    Change in interest expense, net (b)  (0.02) (2)pp
    Basic and diluted EPS for quarter ended June 30, 2022 $1.15  26% 


    Change in basic and diluted EPS, year to date versus year to date Basic and
    Diluted EPS
     Change 
    Basic and diluted EPS for year to date ended June 30, 2021 $1.81    
    Increase in Operating income(b)  1.60  88 pp(a)
    Change in interest expense, net(b)  (0.07) (4)pp
    Increase in other income (expense), net(b)  (0.03) (1)pp
    Tax: Change in effective tax rate  0.04  2 pp
    Change in weighted average shares outstanding  (0.51) (28)pp
    Basic and diluted EPS for year to date ended June 30, 2022 $2.84  57% 

      (a) Percentage points (“pp”).
      (b) Items are net of tax based on the effective tax rate for the base year (2021).


    MGP INGREDIENTS, INC.
    SALES BY OPERATING SEGMENT
    (Dollars in thousands)

     DISTILLING SOLUTIONS SALES 
     Quarter Ended June 30, Quarter versus Quarter Sales Change Increase/(Decrease) 
      2022  2021 $ Change % Change 
    Brown goods$56,331 $43,766 $12,565  29% 
    White goods 17,441  18,205  (764) (4) 
    Premium beverage alcohol 73,772  61,971  11,801  19  
    Industrial alcohol 12,885  14,770  (1,885) (13) 
    Food grade alcohol 86,657  76,741  9,916  13  
    Fuel grade alcohol 3,312  4,753  (1,441) (30) 
    Distillers feed and related co-products 11,267  4,672  6,595  141  
    Warehouse services 5,902  4,182  1,720  41  
    Total Distilling Solutions$107,138 $90,348 $16,790  19% 
             


     BRANDED SPIRITS SALES 
     Quarter Ended June 30, Quarter versus Quarter Sales Change Increase/(Decrease) 
      2022  2021 $ Change % Change 
    Ultra premium$9,435 $8,002 $1,433  18% 
    Super premium 3,226  3,184  42  1  
    Premium 5,775  5,303  472  9  
    Mid 23,301  25,407  (2,106) (8) 
    Value 12,908  13,228  (320) (2) 
    Other 3,921  5,302  (1,381) (26) 
    Total Branded Spirits$58,566 $60,426 $(1,860) (3)% 


     INGREDIENT SOLUTIONS SALES 
     Quarter Ended June 30, Quarter versus Quarter Sales Change
    Increase / (Decrease)
     
      2022  2021 $ Change % Change 
    Specialty wheat starches$16,001 $12,598 $3,403  27% 
    Specialty wheat proteins 10,109  8,352  1,757  21  
    Commodity wheat starches 3,130  2,663  467  18  
    Commodity wheat proteins 38  552  (514) (93) 
    Total Ingredient Solutions$29,278 $24,165 $5,113  21% 
             

    MGP INGREDIENTS, INC.
    SALES BY OPERATING SEGMENT
    (Dollars in thousands)

     DISTILLERY PRODUCTS SALES 
     Year to Date Ended June 30, Year to Date versus Year to date Sales Change Increase/(Decrease) 
      2022  2021 $ Change % Change 
    Brown goods$118,476 $86,807 $31,669  36% 
    White goods 37,527  34,862  2,665  8  
    Premium beverage alcohol 156,003  121,669  34,334  28  
    Industrial alcohol 24,380  32,106  (7,726) (24) 
    Food grade alcohol 180,383  153,775  26,608  17  
    Fuel grade alcohol 6,594  7,270  (676) (9) 
    Distillers feed and related co-products 20,184  9,644  10,540  109  
    Warehouse services 11,486  8,283  3,203  39  
    Total Distilling Soutions$218,647 $178,972 $39,675  22% 
             


     BRANDED SPIRITS SALES 
     Year to Date Ended June 30, Year to Date versus Year to date Sales Change Increase/(Decrease) 
      2022  2021 $ Change % Change 
    Ultra premium$22,032 $8,128 $13,904 171% 
    Super premium 6,172  3,595  2,577 72  
    Premium 11,915  5,329  6,586 124  
    Mid 42,574  25,407  17,167 68  
    Value 24,207  13,228  10,979 83  
    Other 7,417  5,309  2,108 40  
    Total Branded Spirits$114,317 $60,996 $53,321 87% 
             


     INGREDIENT SOLUTIONS SALES 
     Year to Date Ended June 30, Year to Date versus Year to date Sales Change Increase/(Decrease) 
      2022  2021 $ Change % Change 
    Specialty wheat starches$31,204 $22,820 $8,384  37% 
    Specialty wheat proteins 19,528  14,398  5,130  36  
    Commodity wheat starches 6,483  4,946  1,537  31  
    Commodity wheat proteins 38  1,130  (1,092) (97) 
    Total Ingredient Solutions$57,253 $43,294 $13,959  32% 
             

    MGP INGREDIENTS, INC.
    CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
    (Dollars in thousands)

      Quarter Ended June 30, Year to Date Ended June 30,
       2022   2021   2022   2021 
    Sales $194,982  $174,939  $390,217  $283,262 
    Cost of sales  135,758   118,112   259,172   194,136 
    Gross profit  59,224   56,827   131,045   89,126 
             
    Advertising and promotion expenses  6,065   3,371   11,569   4,224 
    Selling, general and administrative expenses  17,859   25,793   34,125   36,739 
    Other operating (income) expense, net  (6)     (35)   
    Operating income  35,306   27,663   85,386   48,163 
             
    Interest expense, net  (1,543)  (1,104)  (3,141)  (1,592)
    Other income (expense), net  (1,062)  (88)  (1,008)  (58)
    Income before income taxes  32,701   26,471   81,237   46,513 
             
    Income tax expense  7,339   6,412   18,504   11,027 
    Net income  25,362   20,059   62,733   35,486 
             
    Net (income) loss attributable to noncontrolling interest  198   76   264   76 
    Net income attributable to MGP Ingredients, Inc.  25,560   20,135   62,997   35,562 
             
    Income attributable to participating securities  (217)  (150)  (535)  (299)
    Net income used in earnings per common share calculation $25,343  $19,985  $62,462  $35,263 
             
    Basic and diluted weighted average common shares  22,002,385   21,916,721   21,995,779   19,436,143 
             
    Basic and diluted earnings per common share $1.15  $0.91  $2.84  $1.81 


    MGP INGREDIENTS, INC.
    CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
    (Dollars in thousands)

     June 30, 2022 December 31, 2021
    ASSETS   
    Current Assets:   
    Cash and cash equivalents$37,415  $21,568 
    Receivables, net 105,393   92,537 
    Inventory 272,948   245,944 
    Prepaid expenses 6,768   1,510 
    Refundable income taxes    5,539 
    Total Current Assets 422,524   367,098 
        
    Property, plant, and equipment 418,040   404,149 
    Less accumulated depreciation and amortization (206,055)  (196,863)
    Property, Plant, and Equipment, net 211,985   207,286 
    Operating lease right-of-use assets, net 15,559   9,671 
    Investment in joint ventures 5,792   4,944 
    Intangible assets, net 217,803   218,838 
    Goodwill 226,294   226,294 
    Other assets 6,663   7,336 
    TOTAL ASSETS$1,106,620  $1,041,467 
        
    LIABILITIES AND STOCKHOLDERS’ EQUITY   
    Current Liabilities:   
    Current maturities of long-term debt$4,189  $3,227 
    Accounts payable 60,572   53,712 
    Federal and state excise taxes payable 7,673   6,992 
    Income taxes payable 141    
    Accrued expenses and other 20,681   24,869 
    Total Current Liabilities 93,256   88,800 
        
    Long-term debt, less current maturities 32,698   35,266 
    Convertible senior notes 195,066   194,906 
    Long-term operating lease liabilities 12,206   6,997 
    Other noncurrent liabilities 4,095   5,132 
    Deferred income taxes 66,226   66,101 
    Total Liabilities 403,547   397,202 
    Total equity 703,073   644,265 
    TOTAL LIABILITIES AND TOTAL EQUITY$1,106,620  $1,041,467 


    MGP INGREDIENTS, INC.
    CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
    (Dollars in thousands)

      Year to Date Ended June 30,
       2022   2021 
    Cash Flows from Operating Activities    
    Net income $62,733  $35,486 
    Adjustments to reconcile net income to net cash provided by operating activities:    
    Depreciation and amortization  10,924   8,425 
    Share-based compensation  2,131   4,767 
    Deferred income taxes, including change in valuation allowance  125   (1,568)
    Other, net  82   (69)
    Changes in operating assets and liabilities, net of effects of acquisition:    
    Receivables, net  (13,142)  7,531 
    Inventory  (27,508)  (408)
    Prepaid expenses  266   (897)
    Income taxes payable  141   1,017 
    Accounts payable  11,438   (12,996)
    Accrued expenses and other  (4,791)  7,987 
    Federal and state liquor excise payable  681   716 
    Other, net  (61)  (2,537)
    Net cash provided by operating activities  43,019   47,454 
         
    Cash Flows from Investing Activities    
    Additions to property, plant, and equipment  (18,087)  (18,336)
    Purchase of business, net of cash acquired     (149,599)
    Contributions to equity method investment  (1,028)  (988)
    Other, net  (369)  (1,312)
    Net cash used in investing activities  (19,484)  (170,235)
         
    Cash Flows from Financing Activities    
    Payment of dividends and dividend equivalents  (5,322)  (4,707)
    Purchase of treasury stock  (713)  (765)
    Loan fees paid related to borrowings     (666)
    Principal payments on long-term debt  (1,614)   
    Proceeds from credit agreement - revolver     242,300 
    Payments on credit agreement - revolver     (10,306)
    Payment on assumed debt as part of the Merger     (87,497)
    Net cash provided by (used in) financing activities  (7,649)  138,359 
         
    Effect of exchange rate changes on cash  (39)  3 
    Increase in cash and cash equivalents  15,847   15,581 
    Cash and cash equivalents, beginning of period  21,568   21,662 
    Cash and cash equivalents, end of period $37,415  $37,243 


    MGP INGREDIENTS, INC.
    RECONCILIATION OF SELECTED GAAP MEASURES TO ADJUSTED NON-GAAP MEASURES (UNAUDITED)
    (in thousands)

     Quarter Ended June 30, 2022
     Gross Profit Operating Income Income before Income Taxes Net Income MGP Earnings(a) Basic and
    Diluted EPS
    Reported GAAP Results$59,224 $35,306 $32,701 $25,362 $25,343 $1.15
    No adjustments for the period           
    Adjusted Non-GAAP results$59,224 $35,306 $32,701 $25,362 $25,343 $1.15


     Quarter Ended June 30, 2021
     Gross Profit Operating Income Income before Income Taxes Net Income MGP Earnings(a) Basic and
    Diluted EPS
    Reported GAAP Results$56,827 $27,663 $26,471 $20,059 $19,985 $0.91
    Adjusted to remove:           
    Inventory step-up - Branded Spirits (b) 2,529  2,529  2,529  2,529  2,510  0.11
    Business acquisition costs (c)   6,738  6,738  5,535  5,473  0.25
    Adjusted Non-GAAP results$59,356 $36,930 $35,738 $28,123 $27,968 $1.27


     Year to Date Ended June 30, 2022
     Gross Profit Operating Income Income before Income Taxes Net Income MGP Earnings(a) Basic and
    Diluted EPS
    Reported GAAP Results$131,045 $85,386 $81,237 $62,733 $62,462 $2.84
    No adjustments for the period           
    Adjusted Non-GAAP results$131,045 $85,386 $81,237 $62,733 $62,462 $2.84


     Year to Date Ended June 30, 2021
     Gross Profit Operating Income Income before Income Taxes Net Income MGP Earnings(a) Basic and
    Diluted EPS
    Reported GAAP Results$89,126 $48,163 $46,513 $35,486 $35,263 $1.81
    Adjusted to remove:           
    Inventory step-up - Branded Spirits (b) 2,529  2,529  2,529  2,529  2,510  0.13
    Business acquisition costs(c)   8,628  8,628  7,303  7,241  0.37
    Adjusted Non-GAAP results$91,655 $59,320 $57,670 $45,318 $45,014 $2.31

    (a)   MGP Earnings has been defined as "Net income used in Earnings Per Common Share calculation."

    (b)   The finished goods Inventory valuation step-up costs are included in the Condensed Consolidated Statement of Income within Cost of goods by the Branded Spirits segment. The adjustment includes the purchase accounting adjustment to value the finished goods inventory acquired in the Luxco acquisition at its estimated fair value.

    (c)   The Business acquisition costs are included in the Condensed Consolidated Statement of Income within the Selling, general and administrative line item. The adjustment includes transaction and integration costs associated with the merger with Luxco.

    MGP INGREDIENTS, INC.
    RECONCILIATION OF SELECTED GAAP MEASURES TO ADJUSTED NON-GAAP MEASURES - BRANDED SPIRITS SEGMENT (UNAUDITED)
    (in thousands)

     Quarter Ended June 30, 2022 
     Revenue Gross Profit Gross Margin 
    Reported GAAP Results - Branded Spirits segment$58,566 $20,960 35.8% 
    No adjustments for the period      
    Adjusted Non-GAAP results - Branded Spirits segment$58,566 $20,960 35.8% 


     Quarter Ended June 30, 2021 
     Revenue Gross Profit Gross Margin 
    Reported GAAP Results - Branded Spirits segment$60,426 $18,434 30.5% 
    Inventory step-up (a)   2,529 4.2 pp(b)
    Adjusted Non-GAAP results - Branded Spirits segment$60,426 $20,963 34.7% 

    (a)   The finished goods Inventory valuation step-up costs are included in the Condensed Consolidated Statement of Income within Cost of goods by the Branded Spirits segment. The adjustment includes the purchase accounting adjustment to value the finished goods inventory acquired in the Luxco acquisition at its estimated fair value.
    (b)   Percentage points (“pp”).


    MGP INGREDIENTS, INC.
    RECONCILIATION OF NET INCOME TO ADJUSTED EBITDA
    (UNAUDITED)
    (in thousands)

     Quarter Ended June 30, Year to Date Ended June 30,
      2022  2021  2022  2021
    Net Income$25,362 $20,059 $62,733 $35,486
    Interest expense 1,543  1,104  3,141  1,592
    Income tax expense 7,339  6,412  18,504  11,027
    Depreciation and amortization 5,303  5,115  10,924  8,425
    Equity method investment 574  334  180  334
    Inventory step-up - Branded Spirits   2,529    2,529
    Business acquisition costs   6,738    8,628
    Adjusted EBITDA$40,121 $42,291 $95,482 $68,021

    The non-GAAP adjusted EBITDA measure is defined as earnings before interest, taxes, depreciation and amortization, equity method investment and business acquisition costs. See section "reconciliation of selected GAAP measure to non-GAAP measures" for further details on each of these non-GAAP Items.


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