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MGP Ingredients Reports Strong Fourth Quarter and Full Year 2022 Results
المصدر: Nasdaq GlobeNewswire / 23 فبراير 2023 07:30:01 America/New_York
Full year consolidated sales increased 25% from prior year period
Full year net income and adjusted EBITDA both increased 20%ATCHISON, Kan., Feb. 23, 2023 (GLOBE NEWSWIRE) -- MGP Ingredients, Inc. (Nasdaq:MGPI), a leading provider of distilled spirits, branded spirits and food ingredient solutions, today reported results for the fourth quarter and full year ended December 31, 2022.
2022 fourth quarter consolidated results compared to 2021 fourth quarter - Sales increased 15% to $191.0 million.
- Gross profit increased 20% to $63.2 million, representing 33.1% of sales.
- Operating income decreased 34% to $29.7 million due to the $16.3 million favorable insurance recovery recorded in the 2021 fourth quarter. Adjusted operating income increased 3% to $29.7 million.
- Net income decreased 29% to $22.5 million due to the $12.2 million tax-effected, favorable insurance recovery recorded in the 2021 fourth quarter. Adjusted net income increased 16% to $22.5 million.
- Adjusted EBITDA increased 2% to $35.1 million.
- Basic earnings per common share ("EPS") decreased to $1.02 per share from $1.44 per share due to the $0.56 per share favorable insurance recovery recorded in the 2021 fourth quarter. Adjusted basic EPS increased to $1.02 per share from $0.88 per share.
- Diluted EPS decreased to $1.01 per share from $1.44 per share due to the $0.56 per share favorable insurance recovery recorded in the 2021 fourth quarter. Adjusted diluted EPS increased to $1.01 per share from $0.88 per share.
2022 full year consolidated results compared to 2021 full year - Sales increased 25% to $782.4 million.
- Gross profit and adjusted gross profit increased 27% and 26%, respectively, to $253.3 million, representing 32.4% of sales.
- Operating income and adjusted operating income increased 18% and 23%, respectively, to $149.0 million.
- Net income and adjusted net income increased 20% and 23%, respectively, to $108.9 million.
- Adjusted EBITDA increased 20% to $169.3 million.
- Basic EPS increased to $4.94 per share from $4.37 per share. Adjusted basic EPS increased to $4.94 per share from $4.26 per share.
- Diluted EPS increased to $4.92 from $4.37 per share. Adjusted diluted EPS increased to $4.92 per share from $4.26 per share.
“We are very pleased with our performance for the quarter and full year and remain confident in the long-term sustainability of our business model,” said Dave Colo, president and CEO of MGP Ingredients. “Our record annual results reflect continued strength in each of our business segments. Brown goods sales increased 65% and 42% for the fourth quarter and full year 2022, respectively, as compared to the prior year periods. Underpinning this growth was continued demand for our new distillate and aged whiskey. Meanwhile, increased commodity costs and excess supply in the market continue to negatively impact industrial alcohol and white goods gross profit. Sales of our premium plus portfolio of brands grew 23% in the quarter driving further gross margin expansion in our Branded Spirits segment. In our Ingredient Solutions business, we remain encouraged by the traction our specialty wheat starches and proteins continue to gain. These results for the fourth quarter and full year demonstrate the continued success of executing our long-term strategy.”
Distilling Solutions
In the fourth quarter 2022, sales for the Distilling Solutions segment increased 23% to $101.2 million, reflecting a 34% increase in sales of premium beverage alcohol. Gross profit increased to $31.7 million or 31.3% of segment sales, compared to $26.9 million, or 32.6% of segment sales in the fourth quarter 2021.For the full year 2022, Distilling Solutions segment sales increased 22% to $428.5 million, reflecting a 28% increase in sales of premium beverage alcohol, due to continued strong new distillate and aged American Whiskey sales. Gross profit increased to $126.3 million, or 29.5% of segment sales, compared to $114.1 million, or 32.4% of segment sales in 2021.
Branded Spirits
For the fourth quarter 2022, sales for the Branded Spirits segment decreased less than 1% to $60.9 million. Sales of the premium plus price tier spirit brands grew 23%. Gross profit increased to $24.7 million, or 40.6% of segment sales compared to $20.9 million, or 34.3% of segment sales in the fourth quarter 2021.For the full year 2022, Branded Spirits sales increased 30% to $237.9 million, reflecting the full year impact of the merger with Luxco as well as continued strength in the premium plus portfolio of brands. Sales of the premium plus price tier spirit brands grew 56%. Gross profit increased to $95.5 million, or 40.1% of segment sales, compared to $62.6 million, or 34.1% of segment sales in 2021. Adjusted gross profit increased to $95.5 million, or 40.1% of segment sales, compared to $65.2 million, or 35.5% of segment sales.
Ingredient Solutions
In the fourth quarter 2022, sales for the Ingredient Solutions segment increased 24% to $29.0 million. Gross profit increased to $6.9 million, or 23.8% of segment sales, compared to $5.0 million, or 21.2% of segment sales in the fourth quarter 2021.For the full year 2022, Ingredient Solutions segment sales increased 28% to $115.9 million, driven primarily by higher sales of specialty wheat starches and specialty wheat proteins. Gross profit increased to $31.5 million, or 27.2% of segment sales, compared to $22.2 million, or 24.5% of segment sales in 2021.
Other
Advertising and promotion expenses for the fourth quarter 2022 increased $4.7 million, or 75%, to $10.9 million as compared to the fourth quarter 2021. For the full year 2022, advertising and promotion expenses increased $13.6 million, or 85%. The increases for both periods are primarily driven by the Luxco acquisition and further incremental investment to support continued growth in the premium plus portfolio of brands.Corporate selling, general and administrative ("SG&A") expenses for the fourth quarter 2022 increased $5.1 million to $22.6 million as compared to the fourth quarter 2021. For the full year, corporate SG&A expenses increased $1.8 million to $74.6 million as compared to 2021.
The corporate effective tax rate for the fourth quarter 2022 was 19.0%, compared with 26.8% from the year ago period. The corporate effective tax rate for the full year 2022 was 22.3% compared with 25.0% in 2021.
2023 Outlook
MGP is offering the following consolidated guidance for fiscal 2023:- Sales are projected to be in the range of $815 million to $835 million.
- Adjusted EBITDA is expected to be in the range of $178 million to $183 million.
- Adjusted basic earnings per common share are forecasted to be in the $5.05 to $5.20 range, with basic weighted average shares outstanding expected to be approximately 22.2 million at year end.
Full year 2023 guidance measures of adjusted EBITDA and adjusted basic 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, 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 distilleries in Kentucky, Indiana and Kansas, 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 four 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; and the historic Ross & Squibb Distillery in Lawrenceburg, Indiana, where the George Remus Straight Bourbon Whiskey and Rossville Union Straight Rye Whiskey are produced. The innovative and high-quality brand portfolio also includes Everclear Grain Alcohol, Pearl Vodka, Green Hat Gin, 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," or "MGP") 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 COVID-19 and other pandemics, (viii) the effects of inflation and our 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, 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 income taxes, adjusted net income, adjusted MGP earnings, adjusted EBITDA and adjusted basic and diluted 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 Adjusted 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.comMedia:
Greg Manis
913-360-5440 or greg.manis@mgpingredients.comMGP INGREDIENTS, INC.
OPERATING INCOME ROLLFORWARD
(Dollars in thousands)Operating income, quarter versus quarter Operating
IncomeChange Operating income for quarter ended December 31, 2021 $ 45,316 Increase in gross profit - Distilling Solutions segment 4,757 11 pp(a) Increase in gross profit - Branded Spirits segment 3,805 8 pp Increase in gross profit - Ingredient Solutions segment 1,898 4 pp Increase in advertising and promotion expenses (4,656 ) (10) pp Increase in SG&A expenses (5,080 ) (11) pp Decrease in insurance recoveries (16,325 ) (36) pp Operating income for quarter ended December 31, 2022 $ 29,715 (34)% Operating income, year versus year Operating
IncomeChange Operating income for year ended December 31, 2021 $ 126,363 Increase in gross profit - Branded Spirits segment 32,877 26 pp(a) Increase in gross profit - Distilling Solutions segment 12,176 10 pp Increase in gross profit - Ingredient Solutions segment 9,288 7 pp Increase in advertising and promotion expenses (13,616 ) (11 ) pp Increase in SG&A expenses (1,798 ) (1 ) pp Decrease in insurance recoveries (16,325 ) (13 ) pp Operating income for year ended December 31, 2022 $ 148,965 18 % (a) Percentage points (“pp”).
MGP INGREDIENTS, INC.
EARNINGS PER SHARE (“EPS”) ROLLFORWARDChange in basic and diluted EPS, quarter versus quarter EPS Change Basic and diluted EPS for quarter ended December 31, 2021 $ 1.44 Change in operating income(a) (0.52 ) (36 ) pp(b) Change in other income (expense), net(a) (0.02 ) (1 ) pp Change in interest expense(a) 0.02 1 pp Change in effective tax rate 0.10 7 pp Basic EPS for quarter ended December 31, 2022 1.02 (29)% Impact of dilutive shares outstanding (0.01 ) (1 ) pp Diluted EPS for quarter ended December 31, 2022 $ 1.01 (30)% Change in basic and diluted EPS, year versus year EPS Change Basic and diluted EPS for year ended December 31, 2021 $ 4.37 Change in operating income(a) 1.12 26 pp(b) Change in interest expense(a) (0.06 ) (1 ) pp Change in other income (expense), net(a) (0.08 ) (2 ) pp Change in weighted average shares outstanding(c) (0.51 ) (12 ) pp Change in effective tax rate 0.10 2 pp Basic EPS for year ended December 31, 2022 4.94 13 % Impact of dilutive shares outstanding (0.02 ) — pp Diluted EPS for year ended December 31, 2022 $ 4.92 13 % (a) Items are net of tax based on the effective tax rate for the base year (2021).
(b) Percentage points ("pp")
(c) Weighted average shares outstanding change primarily due to our repurchases of Common Stock, the vesting of employee restricted stock units ("RSUs"), our purchase of vested RSUs from employees to pay withholding taxes, and the granting of Common Stock to directors.MGP INGREDIENTS, INC.
SALES BY OPERATING SEGMENT
(Dollars in thousands)DISTILLING SOLUTIONS SALES Quarter Ended December 31, Quarter versus Quarter Sales
Change Increase/(Decrease)2022 2021 $ Change % Change Brown goods $ 53,624 $ 32,474 $ 21,150 65 % White goods 16,514 19,769 (3,255 ) (16 ) Premium beverage alcohol 70,138 52,243 17,895 34 Industrial alcohol 11,671 15,732 (4,061 ) (26 ) Food grade alcohol 81,809 67,975 13,834 20 Fuel grade alcohol 3,374 4,054 (680 ) (17 ) Distillers feed and related co-products 10,227 5,885 4,342 74 Warehouse services 5,777 4,574 1,203 26 Total Distilling Solutions $ 101,187 $ 82,488 $ 18,699 23 % BRANDED SPIRITS SALES Quarter Ended December 31, Quarter versus Quarter Sales
Change Increase/(Decrease)2022 2021 $ Change % Change Ultra premium $ 12,409 $ 8,231 $ 4,178 51 % Super premium 2,752 2,544 208 8 Premium 6,283 6,614 (331 ) (5 ) Premium plus 21,444 17,389 4,055 23 Mid 19,122 22,893 (3,771 ) (16 ) Value 11,091 12,536 (1,445 ) (12 ) Other 9,204 8,191 1,013 12 Total Branded Spirits $ 60,861 $ 61,009 $ (148 ) — % INGREDIENT SOLUTIONS SALES Quarter Ended December 31, Quarter versus Quarter Sales
Change Increase / (Decrease)2022 2021 $ Change % Change Specialty wheat starches $ 15,122 $ 12,707 $ 2,415 19 % Specialty wheat proteins 10,088 8,186 1,902 23 Commodity wheat starches 3,737 2,442 1,295 53 Commodity wheat proteins — 15 (15 ) (100 ) Total Ingredient Solutions $ 28,947 $ 23,350 $ 5,597 24 % MGP INGREDIENTS, INC.
SALES BY OPERATING SEGMENT
(Dollars in thousands)DISTILLING SOLUTIONS SALES Year Ended December 31, Year versus Year Sales Change
Increase/(Decrease)2022 2021 $ Change % Change Brown goods $ 229,523 $ 162,074 $ 67,449 42 % White goods 74,510 75,818 (1,308 ) (2 ) Premium beverage alcohol 304,033 237,892 66,141 28 Industrial alcohol 46,812 62,628 (15,816 ) (25 ) Food grade alcohol 350,845 300,520 50,325 17 Fuel grade alcohol 13,681 14,916 (1,235 ) (8 ) Distillers feed and related co-products 40,354 19,545 20,809 106 Warehouse services 23,598 17,523 6,075 35 Total Distilling Solutions $ 428,478 $ 352,504 $ 75,974 22 % BRANDED SPIRITS SALES Year Ended December 31, Year versus Year Sales Change
Increase/(Decrease)2022 2021 $ Change % Change Ultra premium $ 48,245 $ 27,722 $ 20,523 74 % Super premium 12,274 8,937 3,337 37 Premium 24,211 17,626 6,585 37 Premium Plus 84,730 54,285 30,445 56 Mid 82,530 71,292 11,238 16 Value 47,395 38,520 8,875 23 Other 23,284 19,469 3,815 20 Total Branded Spirits $ 237,939 $ 183,566 $ 54,373 30 % INGREDIENT SOLUTIONS SALES Year Ended December 31, Year versus Year Sales Change
Increase/(Decrease)2022 2021 $ Change % Change Specialty wheat starches $ 62,567 $ 47,758 $ 14,809 31 % Specialty wheat proteins 39,313 31,485 7,828 25 Commodity wheat starches 14,023 10,014 4,009 40 Commodity wheat proteins 38 1,393 (1,355 ) (97 ) Total Ingredient Solutions $ 115,941 $ 90,650 $ 25,291 28 % MGP INGREDIENTS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
(Dollars in thousands)Quarter Ended December 31, Year Ended December 31, 2022 2021 2022 2021 Sales $ 190,995 $ 166,847 $ 782,358 $ 626,720 Cost of sales 127,782 114,094 529,052 427,755 Gross profit 63,213 52,753 253,306 198,965 Advertising and promotion expense 10,866 6,210 29,714 16,098 Selling, general and administrative 22,632 17,552 74,627 72,829 Insurance recoveries — (16,325 ) — (16,325 ) Operating income 29,715 45,316 148,965 126,363 Interest expense, net (960 ) (1,329 ) (5,451 ) (4,037 ) Other income (loss), net (981 ) (751 ) (3,342 ) (1,230 ) Income before income taxes 27,774 43,236 140,172 121,096 Income tax expense 5,263 11,578 31,300 30,279 Net income 22,511 31,658 108,872 90,817 Net loss attributable to noncontrolling interest 146 211 590 490 Net income attributable to MGP Ingredients, Inc. 22,657 31,869 109,462 91,307 Income attributable to participating securities (180 ) (236 ) (871 ) (712 ) Net income used in earnings per share calculation $ 22,477 $ 31,633 $ 108,591 $ 90,595 Weighted average common shares Basic 22,011,785 21,983,310 22,002,990 20,719,663 Diluted 22,304,093 21,983,310 22,053,966 20,719,663 Earnings per common share Basic $ 1.02 $ 1.44 $ 4.94 $ 4.37 Diluted $ 1.01 $ 1.44 $ 4.92 $ 4.37 MGP INGREDIENTS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
(Dollars in thousands)December 31, 2022 2021 ASSETS Current Assets: Cash and cash equivalents $ 47,889 $ 21,568 Receivables, net 109,267 92,537 Inventory 289,722 245,944 Prepaid expenses 2,957 1,510 Refundable income taxes 4,327 5,539 Total Current Assets 454,162 367,098 Property, plant, and equipment 450,800 404,149 Less accumulated depreciation and amortization (215,168 ) (196,863 ) Property, Plant, and Equipment, net 235,632 207,286 Operating lease right-of-use assets, net 15,042 9,671 Investment in joint ventures 5,534 4,944 Intangible assets, net 216,768 218,838 Goodwill 226,294 226,294 Other assets 4,779 7,336 TOTAL ASSETS $ 1,158,211 $ 1,041,467 LIABILITIES AND STOCKHOLDERS’ EQUITY Current Liabilities: Current maturities of long-term debt $ 5,600 $ 3,227 Accounts payable 66,432 53,712 Federal and state excise taxes payable 4,627 6,992 Accrued expenses and other 28,716 24,869 Total Current Liabilities 105,375 88,800 Long-term debt, less current maturities 29,510 35,266 Convertible senior notes 195,225 194,906 Long-term operating lease liabilities 11,622 6,997 Other noncurrent liabilities 3,723 5,132 Deferred income taxes 67,112 66,101 Total Liabilities 412,567 397,202 Total equity 745,644 644,265 TOTAL LIABILITIES AND TOTAL EQUITY $ 1,158,211 $ 1,041,467 MGP INGREDIENTS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(Dollars in thousands)December 31, 2022 2021 Cash Flows from Operating Activities Net income $ 108,872 $ 90,817 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 21,455 19,092 Gain on insurance recoveries — (16,325 ) Share-based compensation 5,502 5,555 Equity method investment loss 2,220 1,611 Deferred income taxes, including change in valuation allowance 1,011 6,772 Other, net 194 145 Changes in operating assets and liabilities, net of effects of acquisition: Receivables, net (16,786 ) (6,031 ) Inventory (44,350 ) (14,214 ) Prepaid expenses (1,468 ) 2,586 Income taxes payable (refundable) 1,212 (6,242 ) Accounts payable 10,626 5,301 Accrued expenses and other 1,984 738 Federal and state excise taxes payable (2,365 ) (1,467 ) Other, net 829 (75 ) Net cash provided by operating activities 88,936 88,263 Cash Flows from Investing Activities Additions to property, plant, and equipment (45,323 ) (47,389 ) Purchase of business, net of cash acquired — (149,005 ) Contributions to equity method investment (2,810 ) (1,470 ) Proceeds from property insurance recoveries — 16,325 Proceeds from sale of property and other 150 — Other, net 170 (1,080 ) Net cash used in investing activities (47,813 ) (182,619 ) Cash Flows from Financing Activities Payment of dividends and dividend equivalents (10,646 ) (10,017 ) Purchase of treasury stock (715 ) (767 ) Loan fees paid related to borrowings — (7,050 ) Principal payments on long-term debt (3,403 ) (1,620 ) Proceeds from credit agreement - revolver — 242,300 Payments on credit agreement - revolver — (242,300 ) Proceeds from convertible senior notes — 201,250 Payment on assumed debt as part of the Merger — (87,509 ) Net cash provided by (used in) financing activities (14,764 ) 94,287 Effect of exchange rate changes on cash and cash equivalents (38 ) (25 ) Increase (decrease) in cash and cash equivalents 26,321 (94 ) Cash and cash equivalents, beginning of period 21,568 21,662 Cash and cash equivalents, end of period $ 47,889 $ 21,568 MGP INGREDIENTS, INC.
RECONCILIATION OF SELECTED GAAP MEASURES TO ADJUSTED NON-GAAP MEASURES (UNAUDITED)(in thousands)Quarter Ended December 31, 2022 Gross
ProfitOperating
IncomeIncome before
Income TaxesNet
IncomeMGP
Earnings(a)Basic
EPSDiluted
EPSReported GAAP Results $ 63,213 $ 29,715 $ 27,774 $ 22,511 $ 22,477 $ 1.02 $ 1.01 No adjustments for the period — — — — — — — Adjusted Non-GAAP results $ 63,213 $ 29,715 $ 27,774 $ 22,511 $ 22,477 $ 1.02 $ 1.01 Quarter Ended December 31, 2021 Gross
ProfitOperating
IncomeIncome before
Income TaxesNet
IncomeMGP
Earnings(a)Basic and
Diluted EPSReported GAAP Results 52,753 $ 45,316 $ 43,236 $ 31,658 $ 31,633 $ 1.44 Adjusted to remove: Insurance recoveries(b) — (16,325 ) (16,325 ) (12,244 ) (12,244 ) (0.56 ) Business acquisition costs(c) — 5 5 5 5 — Adjusted Non-GAAP results $ 52,753 $ 28,996 $ 26,916 $ 19,419 $ 19,394 $ 0.88 Year Ended December 31, 2022 Gross
ProfitOperating
IncomeIncome before
Income TaxesNet
IncomeMGP
Earnings(a)Basic
EPSDiluted
EPSReported GAAP Results $ 253,306 $ 148,965 $ 140,172 $ 108,872 $ 108,591 $ 4.94 $ 4.92 No adjustments for the period — — — — — — — Adjusted Non-GAAP results $ 253,306 $ 148,965 $ 140,172 $ 108,872 $ 108,591 $ 4.94 $ 4.92 Year Ended December 31, 2021 Gross
ProfitOperating
IncomeIncome before
Income TaxesNet
IncomeMGP
Earnings(a)Basic and
Diluted EPSReported GAAP Results $ 198,965 $ 126,363 $ 121,096 $ 90,817 $ 90,595 $ 4.37 Adjusted to remove: Insurance recoveries(b) — (16,325 ) (16,325 ) (12,244 ) (12,244 ) (0.59 ) Inventory step-up - Branded Spirits(d) 2,529 2,529 2,529 2,529 2,510 0.12 Business acquisition costs(c) — 8,927 8,927 7,529 7,467 0.36 Adjusted Non-GAAP results $ 201,494 $ 121,494 $ 116,227 $ 88,631 $ 88,328 $ 4.26 (a) MGP Earnings has been defined as "Net income used in earnings per share calculation"
(b) The insurance recovery costs are included in the Consolidated Statement of Income within the insurance recoveries line item. During November 2020, we experienced a fire at the Atchison facility. The fire damaged certain equipment in the facility’s feed drying operations and caused a temporary loss of production time. This adjustment includes the legally binding commitment from our insurance carrier for final settlement for the replacement of the damaged dryer.
(c) The business acquisition costs are included in the 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.
(d) The finished goods inventory valuation step-up costs are included in the Consolidated Statement of Income within cost of goods by the Branded Spirits segment. The adjustment includes the purchase accounting adjustment to value the acquired finished goods inventory at its estimated fair value.MGP INGREDIENTS, INC.
RECONCILIATION OF NET INCOME TO Adjusted EBITDA
(UNAUDITED) (in thousands)Quarter Ended December 31, Year Ended December 31, 2022 2021 2022 2021 Net Income $ 22,511 $ 31,658 $ 108,872 $ 90,817 Interest expense 960 1,329 5,451 4,037 Income tax expense 5,263 11,578 31,300 30,279 Depreciation and amortization 5,198 5,424 21,455 19,092 Equity method investment 1,184 872 2,220 1,611 Insurance recoveries — (16,325 ) — (16,325 ) Inventory step-up - Branded Spirits — — — 2,529 Business acquisition costs — 5 — 8,927 Adjusted EBITDA $ 35,116 $ 34,541 $ 169,298 $ 140,967 The non-GAAP adjusted EBITDA measure is defined as earnings before interest, taxes, depreciation and amortization, equity method investment, insurance recoveries, inventory step-up 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.
MGP INGREDIENTS, INC.
DILUTIVE SHARES OUTSTANDING CALCULATION
(UNAUDITED)Quarter Ended
December 31,Year to Date Ended
December 31,2022 2022 Principal amount of the bonds $ 201,250,000 $ 201,250,000 Par value $ 1,000 $ 1,000 Number of bonds outstanding (b) 201,250 201,250 Initial conversion rate 10.3911 10.3911 Conversion price $ 96.23620 $ 96.23620 Average share price (c) $ 111.74095 $ 98.53736 Impact of conversion (d) $ 233,673,666 $ 206,062,202 Cash paid for principal (201,250,000 ) (201,250,000 ) Conversion premium $ 32,423,666 $ 4,812,202 Average share price $ 111.74095 $ 98.53736 Conversion premium in shares (a) (e) 290,168 48,836 (a) The impacts of the Convertible Senior Notes were included in the diluted weighted average common shares outstanding if the impact was dilutive. The Convertible Senior Notes would only have a dilutive impact if the average market price per share during the quarter and year to date period exceeds the conversion price of $96.23620 per share. For the quarter and year ended December 31, 2022, the inclusion of the shares had a dilutive impact and were included in the diluted EPS calculation.
(b) Number of bonds outstanding is calculated by taking the principal amount of the bonds divided by the par value.
(c) Average share price is calculated by taking the average of the daily closing share price for the period. If the average share price is less then the conversion price of 96.23620 per share, the impact to EPS is anti-dilutive and therefore the shares were excluded from the diluted EPS calculation.
(d) Impact of conversion is calculated by taking the number of bonds outstanding multiplied by the initial conversion rate multiplied by the average share price. If the average share price is less then the conversion price then the impact of conversion is zero.
(e) Conversion premium in shares is calculated by taking the conversion premium divided by the average share price. If the average share price is less then the conversion price then the conversion premium in shares is zero.