ATCHISON, Kan., May 10, 2007 - MGP Ingredients, Inc. reported net income of $2,178,000, or $0.13 in diluted earnings per share, for the third quarter of fiscal 2007, which ended April 1, 2007. This compares with net income of $2,083,000, or $0.12 in diluted earnings per share, for the third quarter of fiscal 2006, which ended March 31, 2006. Total sales in the third quarter of fiscal 2007 were $93,807,000, an increase of 18 percent above sales of $79,422,000 in the year ago period.
The improvement in third quarter net income resulted from a reduced loss in the company's ingredients segment compared to the prior year's third quarter. This primarily was due to increased sales of specialty ingredients for food applications, which rose by approximately 12 percent over the same period a year ago and by nearly 23 percent over the second quarter of fiscal 2007. Profitability in the distillery segment was slightly lower than a year ago due to significantly higher costs for corn, the principal raw material used in the company's alcohol production process. Distillery products sales, meanwhile, increased by approximately $17.6 million, or 31 percent, above distillery sales a year ago. Total ingredients sales in the current year's third quarter declined by approximately $3 million, or 14 percent, from the prior year quarter, principally as a result of a decline in sales of specialty ingredients for non-food applications.
"Very similar to our first half results, the revenue growth in our distillery segment was strong due to higher alcohol pricing in all categories combined with increased unit sales of fuel alcohol, or ethanol, versus a year ago," said Ladd Seaberg, chairman and chief executive officer. "Our fuel contracting strategy allowed us to capture substantially higher prices over spot ethanol prices during the period. In addition, we have continued to improve our production throughput and efficiencies through recent measures to improve our capacity. These measures were part of our previously announced plan to expand our total alcohol production capacity by approximately 15 percent by late this summer."
Seaberg added, "While we reported strong gains in distillery sales this quarter, our profitability was adversely affected by rising corn costs, which averaged approximately 65 percent higher compared to a year ago. Without our hedging programs, our costs would have been even more substantial. Consistent with our hedging policy, the majority of our anticipated corn requirements for the current quarter are hedged. We maintain our focus on continually improving distillery production efficiencies, with the goal of generating strong cash flows supported with hedging and contracting strategies. On the ingredients side, we are benefiting from an improvement in the average sales price of our products as a result of changing our product mix in the food area in favor of higher end proteins and starches."
The third quarter earnings performance in the ingredients segment continued to be negatively impacted primarily by lower unit sales of specialty ingredients for non-food applications combined with increased wheat prices, which averaged 20 percent higher compared to a year ago. Significantly lower sales of Chewtex(R) pet resins compared to a year ago were partially offset by gains in sales of specialty proteins and starches for food applications. As previously announced, MGPI has had no sales of pet resins to its former principal customer since May, 2006, following a change in the customer's ownership.