Milling & Baking News - November 18, 2003 - 12

F I N A N C I A L

R E S U L T S

MGP's expansion coincides with
rising demand for protein isolates
ATCHISON, KAS. - Net income of
MGP Ingredients, Inc. in the ﬁrst quarter
ended Sept. 30 totaled $2,470,000, equal
to 32c per share on the common stock,
down from $6,790,000, or 84c per share,
last year.
Earnings in the ﬁrst quarter of ﬁscal
2003 were due in part to $13 million
in non-operating income, $7.9 million
after the effects of income taxes, resulting from the recognition of insurance
proceeds in excess of the net recorded
costs of assets that were destroyed in a
distillery explosion.
Net sales in the ﬁrst quarter of
2004 were $57,054,000, up 33% from
$42,899,000 in the same year-ago quarter. The company attributed a nearly
100% increase in sales of specialty ingredients as the principal contributor to the
company's net income.
The signiﬁcant increase in sales of the
company's specialty ingredients "had a
deﬁnite impact on our bottom line in the
quarter," said Ladd Seaberg, president
and chief executive ofﬁcer.
First-quarter specialty ingredient
sales, "more than offset a decline in
sales of commodity ingredients, principally vital wheat gluten and commodity
wheat starch," Mr. Seaberg said during
MGP's Nov. 6 conference call. "As a
result, total sales in the ingredients segment rose by 62% above a year ago. The
decline in commodity ingredients sales
occurs as we have continued to shift our

production and sales efforts toward the
specialty ingredients area.
"Recent expansion projects initiated
by the company are enabling us to meet
increased demand for our specialty
ingredients. These projects include an
expansion at the Atchison plant that was
completed approximately one year ago
to boost the production of
specialty wheat proteins
for bakery, pasta and
noodle and related food
products."
Mike
Trautschold,
executive vice-president
of marketing and sales, added, "The
timing of this expansion could not have
been better. It has enabled us to satisfy
increased interest in our specialty wheat
protein isolates and concentrates for use
in multiple food formations particularly
low-carbohydrate, high-protein formulations, as well as in refrigerated, frozen
and par-baked dough systems."
Another factor was the additional $5.7
million in business interruption insurance
proceeds that compensated for the effects
of the distillery explosion at the company's
Atchison plant in September 2002.
"The business interruption insurance
reduces the adverse impact of the distillery slowdown on our operations," Mr.
Seaberg said. "The capacity expansion
that was launched at our facility in Kansas City, Kas., last March is proceeding
ahead of schedule. Although the entire

Seaboard trading and milling unit shows
gain in third-quarter operating proﬁt
MERRIAM, KAS. - Operating income of the
Commodity Trading and Milling segment of
Seaboard Corp. increased in the third quarter
ended Sept. 27 despite reduced sales.
Operating income of the segment was
$5,445,000 on sales of $151,830,000, compared
with $3,480,000 and $152,845,000, respectively, in the third quarter of ﬁscal 2002.
In the ﬁrst nine months ended Sept. 27, the
Commodity Trading and Milling segment
had operating income of $10,002,000 on sales
of $478,971,000, compared with $17,836,000
and $484,517, respectively, in the year-ago
nine months.
Seaboard said the third-quarter and ninemonth sales decreases were "primarily the result of lower commodity trading volumes to
third-party customers during 2003 as a result
of changing crop conditions in Southern Africa, partially offset by higher average selling
prices and increased sales to afﬁliates."
The nine-month decrease in operating in12 / Milling & Baking News, November 18, 2003

come was primarily from lower margins on
commodity trading activity and increased
selling expenses and reserves for bad debt.
Pork, the company's largest business segment, had operating income of $3,954,000
on sales of $186,125,000 in the third quarter,
compared with a loss of $2,397,000 and sales
of $147,864,000 in the year-ago period.
The Sugar and Citrus segment posted operating income of $5,899,000 on sales of $22,710,000,
up from $3,375,000 and $14,364,000, respectively, in the third quarter of ﬁscal 2002.
Net income of Seaboard in the third quarter was $1,838,000, equal to $1.46 per share
on the common stock, compared with a loss
of $5,673,000 in the year-ago quarter. Sales
increased 13% to $485,417,000.
In the nine months ended Sept. 27, Seaboard had net income of $1,637,000 on sales
of $1,433,167,000, compared with $11,148,000
and $1,349,827,000, respectively, in the ﬁrst
nine months of ﬁscal 2002. MBN

project had not been slated for completion until March of 2004, new equipment
that was recently installed at that location is already being operated to meet
increased demand for the company's
Wheatex line of textured wheat proteins,
which are used in vegetarian and meat
extension applications."
Reconstruction of the company's
Atchison distillery is near completion
and the company said it expected work
to be completed by or before early December of 2003. Actual
start-up of the new equipment is scheduled to occur
in early January.
"We plan to dedicate
the majority of the rebuilt
storage capacity to the
production of high-quality, high-purity
food grade alcohol for beverage and industrial applications," Mr. Seaberg said.
Mr. Seaberg noted MGP's participation in the U.S. Department of Agriculture ethanol incentive program since the
third quarter of ﬁscal 2001. The program
provides cash incentives for ethanol producers who increase their grain usage
over comparable quarters to raise fuel
alcohol production.
"Our growth strategy is focused on
building our specialty products by concentrating our manufacturing, research
and development, and marketing activities in this area," Mr. Seaberg said.
First-quarter costs for both raw materials and energy exceeded costs experienced by the company in the ﬁrst quarter
of ﬁscal 2003.
The increase in energy costs was the
result of a 65% jump in the average per
unit price of natural gas compared with
the prior year's ﬁrst quarter. The average
price of wheat on a per bushel basis was
up 4%.
"All-in-all, even in the face of these
higher costs, we took a large step during
the ﬁrst quarter toward achieving, at a
minimum, our ﬁscal 2004 budget goal
of earning pre-tax operating income of
approximately $4.5 million to $5 million,
which, assuming a tax rate of 39.5%,
translates to earnings per share in the
range of 35c to 40c," Mr. Seaberg said.
"The most gratifying and encouraging
aspect of this is the increased momentum at which our specialty ingredients
sales have progressed."
He added that actual results could differ due to various factors, including utility and grain cost ﬂuctuations, increased
competition for the company's products,
changes in market prices, delays in completing repairs to the Atchison distillery
and smaller-than-anticipated insurance
payments to cover losses from the September 2002 explosion.MBN
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Milling & Baking News - November 18, 2003

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