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As Filed with the Securities and Exchange Commission on
September 20, 1994
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
Annual Report Pursuant to Section 13
of the Securities Exchange Act of 1934
For the Fiscal Year Ended June 30, 1994
MIDWEST GRAIN PRODUCTS, INC.
1300 Main Street
Box 130
Atchison, Kansas 66002
Telephone: (913) 367-1480
Incorporated in the State of Kansas
COMMISSION FILE NO. 0-17196
IRS No. 44-0531200
The Company has no securities registered pursuant to Section
12(b) of the Act. The only class of common stock outstanding
consists of Common Stock having no par value, 9,765,172 shares of
which were outstanding at June 30, 1994. The Common Stock is
registered pursuant to Section 12(g) of the Act.
The aggregate market value of the Common Stock of the
Company held by non-affiliates, based upon the last sales price
of such stock on July 26, 1994, was $269,937,144.
The Company has filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months, and has been subject to such filing
requirements for the past 90 days.
As indicated by the following check mark, disclosure of
delinquent filers pursuant to Rule 405 of Regulation S-K is not
contained herein, and will not be contained, to the best of
registrant's knowledge in a definitive proxy or information
statement incorporated by reference in Part III of this Form
10-K: [X].
The following documents are incorporated herein by
reference:
(1) Midwest Grain Products, Inc. 1994 Annual Report to
Stockholders, pages 17 through 36, and the inside back cover
[incorporated into Part II and contained in Exhibit 10(c)].
(2) Midwest Grain Products, Inc. Proxy Statement for the
Annual Meeting of Stockholders to be held on October 6, 1994,
dated September 12, 1994 [incorporated into Part III) and
contained in Exhibit 10(c)].
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MIDWEST GRAIN PRODUCTS, INC.
FORM 10-K
For the Fiscal Year Ended June 30, 1994
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CONTENTS
PAGE
PART I
Item 1. Business ..........................................4
General Information................................4
Vital Wheat Gluten.................................5
Premium Wheat Starch...............................6
Alcohol Products...................................7
Flour and Other Mill Products......................9
Transportation....................................10
Raw Materials.....................................10
Energy............................................10
Employees.........................................10
Regulation........................................11
Item 2. Properties........................................11
Item 3. Legal Proceedings.................................11
Item 4. Submission of Matters to a Vote of Security
Holders..........................................11
PART II
Item 5. Market for the Registrant's Common Equity and
Related Stockholder Matters......................12
Item 6. Selected Financial Data...........................12
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations..............12
Item 8. Financial Statements and Supplementary Data.......12
Item 9. Changes in and Disagreements with Accountants
on Accounting and Financial Disclosure...........13
PART III
Item 10. Directors and Executive Officers of
the Registrant.................................13
Item 11. Executive Compensation...........................15
Item 12. Security Ownership of Certain Beneficial
Owners and Management...........................15
Item 13. Certain Relationships and Related Transactions...15
PART IV
Item 14. Exhibits, Financial Statement Schedules
and Reports on Form 8-K.........................16
SIGNATURES....................................................18
FINANCIAL STATEMENT SCHEDULES................................S-1
Report of Independent Public Accountants on Schedules.....S-2
Schedule I. Marketable Securities - Other Investments....S-3
Schedule V. Property, Plant and Equipment................S-4
Schedule VI. Accumulated Depreciation of Property,
Plant and Equipment......................................S-5
Schedule VIII. Valuation and Qualifying Accounts.........S-6
Schedule IX. Short-term Borrowings.......................S-7
Schedule X. Supplementary Income Statement Information...S-8
________________________
The calculation of the aggregate market value of the Common
Stock of the Company held by non-affiliates is based on the
assumption that non-affiliates do not include directors. Such
assumption does not constitute an admission by the Company or any
director that any director is an affiliate of the Company.
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PART I
Item 1. Business.
General Information
Midwest Grain Products, Inc. (the Company) is a Kansas
corporation headquartered in Atchison, Kansas. It is the
successor to a business founded in 1941 by Cloud L. Cray, Sr.
The Company is a fully integrated producer of vital wheat
gluten, premium wheat starch, and alcohol products. These grain
products are processed at plants located in Atchison, Kansas, and
Pekin, Illinois. Wheat is purchased directly from local and
regional farms and grain elevators and milled into flour. The
flour is processed with water to extract vital wheat gluten which
is dried into a tan powder and sold in packaged or bulk form.
The resulting starch slurry is further processed to extract
premium wheat starch which is also dried into a powder and sold
in packaged or bulk form. The remaining slurry is mixed with
corn or milo and water and then cooked, fermented and distilled
into alcohol. The residue of the distilling operations is dried
and sold as a high protein additive for animal feed. Carbon
dioxide which is produced during the fermentation process is
trapped and sold. As a result of these processing operations,
the Company sells approximately 95% (by weight) of grain
processed.
To complement its integrated production facilities, the
Company also provides transportation services to its customers
through a fleet of truck-tractors, trailers and rail cars and
barge loading facilities on the Missouri and Illinois Rivers.
The table below shows the Company's sales from continuing
operations by product group for each of the five years ended June
30, 1994, as well as such sales as a percent of total sales. The
table does not reflect the sales of McCormick Distilling Company,
a business that was sold as of December 31, 1992.
PRODUCT GROUP SALES
<TABLE>
<CAPTION>
Year Ended June 30,
_______________________________________________________________________________________
1994 1993 1992 1991 1990
------------- ------------- ------------- -------- --- ------- ---
(thousands of dollars)
Amount % Amount % Amount % Amount % Amount %
________ ___ ________ ___ _______ ___ ________ ___ ________ ___
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Vital Wheat Gluten $70,966 38.2 $ 54,156 33.1 $ 46,941 30.1 $ 27,833 20.9 $ 31,375 23.9
Premium wheat starch 21,110 11.3 18,423 11.3 17,578 11.3 16,068 12.1 14,907 11.3
Alcohol Products:
Beverage Alcohol 29,536 15.9 27,142 16.6 26,437 17.0 25,994 19.5 26,600 20.2
Industrial and Fuel
Grade Alcohol 41,858 22.5 41,591 25.5 39,043 25.1 35,088 26.3 26,447 20.1
Alcohol by-products 18,146 9.8 19,288 11.8 17,791 11.4 17,010 12.8 16,602 12.6
------- ---- ------ ---- ------ ---- ------ ---- ------ ----
Total alcohol
products 89,540 48.2 88,021 53.9 83,271 53.5 78,092 58.6 69,649 52.9
------- ---- ------ ---- ------ ---- ------ ---- ------ ----
Flour and other mill
products (1) 4,352 2.3 2,826 1.7 8,004 5.1 11,127 8.4 15,668 11.9
------- ---- ------ ---- ------ ---- ------ ---- ------ ----
Net sales(1) $185,968 100.0 $163,426 100.0 $155,794 100.0 $133,128 100.0 $131,559 100.0
======== ===== ======== ===== ======== ===== ======== ===== ======== =====
_________________________
(1) Sales of flour and other mill products, as well as all other sales in the table, refer only to sales to
third parties and do not reflect intra-company transactions.
</TABLE>
The Company's $22.5 million increase in net sales for the
year ended June 30, 1994, resulted primarily from increased
demand for vital wheat gluten and increased production of all
three of the Company's principal products due to increased
capacities. The $2.7 million increase in pre-tax income from
continuing operations was due primarily to increased volumes and
demand for vital wheat gluten offset by reduced prices for food
grade industrial and fuel grade alcohol and increased grain
costs. For a more detailed discussion of the results of the
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Company's operations for 1994 and the two prior years see "Item
7. Management's Discussion and Analysis of Financial Condition
and Results of Operations."
The bulk of the Company's sales are made under informal
arrangements direct to large institutional food and beverage
processors or distributors with respect to which the Company has
longstanding relationships. Under these arrangements products
are usually ordered, produced, sold and shipped within 30 days.
As a consequence, the Company's backlog of orders at any time is
usually less than ten percent of annual sales.
Generally, the Company's sales are not seasonal except for
minor variations affecting beverage alcohol and gluten sales.
Beverage alcohol sales tend to peak in the fall as distributors
order stocks for the holiday season, while gluten sales tend to
increase during the second half of the fiscal year as demand
increases for hot dog buns, hamburger buns, and similar bakery
products. Seasonal demand for the Company's fuel grade alcohol
may also be affected in the future by EPA regulations mandating
the use of ethanol in certain reformulated gasoline which is
expected to be strongest during October through March of each
year. See "Alcohol Products-Industrial and Fuel Grade Alcohol."
During fiscal 1994 the Company commenced the construction
of the largest expansion program in its history at its Pekin
plant. The new facilities are expected to be completed in the
second half of fiscal 1995, to be more efficient than the
existing plant and to double total alcohol production capacity;
increase by 40% total vital wheat gluten capacity; increase by
70% total premium wheat starch production capacity; more than
double total distillers' feeds production capacity; and provide
the Pekin plant with a new and more efficient steam and
electricity generating plant. The $62 million project is being
financed from operations, the proceeds of the sale of McCormick
and the proceeds of a $25 million, fifteen year 6.68% term loan.
The Company expects that it may take several years to develop
markets for all of the added capacity.
During fiscal 1994, the Company also completed the bulk of
the expansion of its flour mill in Atchison, the construction and
renovation of new and existing quality control laboratory at the
Pekin plant, and the installation of new wastewater treatment
equipment at the Atchison plant.
For further information, see the Consolidated Financial
Statements of the Company and Management's Discussion and
Analysis of the Company's Financial Condition and Results of
Operations which appear at pages 18 through 36 of the Annual
Report.
Vital Wheat Gluten
Vital wheat gluten is a light tan powder which contains
approximately 75% to 80% protein. It is the only commercially
available high protein food additive which possesses vitality.
The vitality of the Company's vital wheat gluten results from its
elastic and cohesive characteristics when added to dough or
otherwise reconstituted with water.
Vital wheat gluten is added by bakeries and food processors
to baked goods such as wheat breads, and to pet foods, cereals,
processed meats, fish, and poultry to improve the nutritional
content, texture, strength, shape, and volume of the product.
The neutral flavor and color of wheat gluten also enhances, but
does not change, the flavor and color of food. It has been
increasingly used in breads and pet foods. The cohesiveness and
elasticity of the gluten enables the dough in wheat and other
high protein breads to rise and to support added ingredients such
as whole cracked grains, raisins and fibers. This allows the
baker to make an array of different breads by varying the gluten
content of the dough. Vital wheat gluten is also added to white
breads, and hot dog and hamburger buns to improve the hinge
strength and cohesiveness of the product.
The Company ships its vital wheat gluten throughout the
continental United States in bulk and in 50 to 100 pound bags.
Approximately 37% of fiscal 1994 gluten sales were made to a
distributor for the bakery industry, the Ben C. Williams Bakery
Services Company, which in turn distributes vital wheat gluten to
independent bakeries. The remainder is sold directly to major
food processors and bakeries such as Kellogg Co., Continental
Baking Company, Inc. and H. J. Heinz Co.
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The vital wheat gluten market is occupied primarily by the
Company, two other domestic producers and a number of foreign
importers. Foreign importers provide significant competition
from time to time due to low U.S. tariffs and export incentives
provided by foreign countries to their wheat starch producers.
Based on industry data, the Company believes that in terms of
fiscal 1994 sales it is the largest producer of vital wheat
gluten in the United States.
Competition in the vital wheat gluten industry is based
primarily upon price, quality, and service. Historically, gluten
prices have been affected by grain prices, grain quality, excess
foreign capacity and by subsidies provided to certain European
exporters by their host governments.
The Company's vital wheat gluten processing operations are
believed to produce a quality of vital wheat gluten that is equal
to or better than that of any other wheat gluten on the market.
The Company's location in the center of the United States grain
belt, together with its production capacity, fleet of
transportation equipment and years of operating experience,
enable it to provide a consistently high level of cost effective
service to customers.
The Company's sales of vital wheat gluten increased by $16.8
million during fiscal 1994, due primarily to increased demand
during the second half of the year and increased production
capacity. The increased demand resulted partially from increased
market needs, principally in the baking industry where more
gluten was required to fortify flour due to the poor quality of
available wheat following the extremely wet weather in the spring
and summer of 1993. Due to increased competition from foreign
imports and reduced needs in the baking industry the demand for
the Company's vital wheat gluten began to return to more normal
levels during the end of fiscal 1994.
During the last half of fiscal 1992 the Company completed
capital improvements projects at the Atchison and Pekin
facilities which increased the productive capacity of the
Company's vital wheat gluten operations by 50% over 1991 levels
of production. In the last half of 1994 the Company commenced an
expansion of the vital wheat gluten production facilities at its
Pekin Plant. The expansion is expected to be completed during
the second half of fiscal 1995 and increase by 40% the Company's
total vital wheat gluten production capacity over that capacity
at June 30, 1994. The combination of these expansion programs
will more than double the capacity that existed at June 30, 1991.
Premium Wheat Starch
Wheat starch constitutes the carbohydrate-bearing portion of
wheat flour. The Company produces a pure white premium wheat
starch powder by extracting the starch from the starch slurry
substantially free of all impurities and fibers and then by
spray, flash or drum drying the starch. Premium wheat starch
differs from low grade or B wheat starches which are extracted
along with impurities and fibers and are used primarily as a
binding agent for industrial applications such as the manufacture
of charcoal briquettes. The Company does not produce low grade
or B starches since its integrated processing facilities are able
to process the remaining slurry after the extraction of premium
wheat starch into alcohol, animal feed and carbon dioxide.
Premium wheat starch differs from corn starch in its granular
structure, color, granular size and name identification.
An increasing portion of the Company's premium wheat starch
is also chemically altered during processing to produce certain
unique modified wheat starches designed for special applications.
The Company's premium wheat starches are used primarily as
an additive in a variety of food products to affect their
appearance, texture, tenderness, taste, palatability, cooking
temperature, stability, viscosity, binding and freeze-thaw
characteristics. For example, the Company's starches are used to
improve the taste and mouth feel of cream puffs, eclairs,
puddings, pie fillings, breadings and batters; to improve the
size, symmetry and taste of angel food cakes; to alter the
viscosity of soups, sauces and gravies; to improve the
freeze-thaw stability and shelf life of fruit pies and other
frozen foods; to improve moisture retention in microwavable
foods; and to add stability and to improve spreadability in
frostings, mixes, glazes and sugar coatings. The Company's
specialty starches are also sold for a number of industrial and
non-food uses, such as an ink bearing coating in carbonless
paper.
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The Company's premium wheat starch is sold nationwide to
food processors, such as International Multi-Foods Corp.,
Pillsbury Company and Keebler Company, to distributors, and for
export to countries, such as Japan, Mexico and Malaysia which do
not have wheat-based economies.
The Company believes that it is the largest producer of
premium wheat starch in the United States. Although wheat starch
enjoys a relatively small portion of the total United States
starch market, the market is one which is continuing to grow.
Growth in the wheat starch market reflects a growing appreciation
for the unique characteristics of wheat starch which provide it
with a number of advantages over corn and other starches for
certain baking and other end uses. The Company has developed a
number of different modified wheat starches and continues to
explore the development of additional starch products with the
view to increasing sales of higher margin modified starches.
Premium wheat starch competes primarily with corn starch,
which dominates the United States market. Competition is based
upon price, name, color and differing granular and chemical
characteristics which affect the food product in which it is
used. Premium wheat starch prices usually enjoy a price premium
over corn starches and low grade wheat starches. Wheat starch
price fluctuations generally track the fluctuations in the corn
starch market, except in the case of modified wheat starches. The
wheat starch market also usually permits pricing consistent with
costs which affect the industry in general, including increased
grain costs. The Company's strategy is to market its premium
wheat starches in special market niches where the unique
characteristics of premium wheat starch or one of the Company's
modified wheat starches are better suited to a customers
requirements for a specific use.
Starch sales increased during fiscal 1994 by approximately
$2.7 million due primarily to higher volumes and increased sales
of modified wheat starches. The volume increases reflect added
starch production capacity installed in fiscal 1992 and 1993.
During the fourth quarter of fiscal 1994, the Company commenced
the addition of starch production facilities at the Pekin plant
in order to satisfy customers' needs from two locations and to
capitalize on the expansion of the gluten and alcohol production
facilities at that location. The new starch facility is expected
to be operational in the second half of fiscal 1995 and is
planned to increase the Company's total June 30, 1994, starch
production capacity by 70%.
Alcohol Products
The Company's Atchison and Pekin plants process corn and
milo, mixed with the starch slurry from gluten and starch
processing operations, into beverage, industrial and fuel grade
alcohol, animal feed and carbon dioxide.
Beverage Alcohol
Beverage alcohol consists primarily of grain neutral
spirits. Grain neutral spirits is alcohol made from grain that
has been further refined to remove all impurities. Grain neutral
spirits is sold in bulk or processed into vodka and gin and sold
in bulk quantities at various proof concentrations to bottlers
and rectifiers, such as Heublein, Inc. and James B. Beam
Distilling Co., which further process the alcohol for sale to
consumers under numerous labels.
The Company believes that in terms of fiscal 1994 net sales,
it is one of the two largest bulk sellers of grain neutral
spirits, vodka and gin in the United States. The Company's
principal competitors in the beverage alcohol market are Grain
Processing Company of Muscatine, Iowa and Archer Daniels Midland
of Decatur, Illinois. Competition is based primarily upon price
and service, and in the case of gin, formulation. The Company
believes that the centralized location of its Illinois and Kansas
distilleries, the capacity of its dual production facilities and
the versatility and availability of its transportation fleet and
barge facilities combine to provide the Company with a customer
service advantage that is unique within the industry.
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Beverage alcohol sales increased by approximately $2.4
million during fiscal 1994 due primarily to an increase in price.
Industrial and Fuel Grade Alcohol
Grain alcohol which is not sold as beverage alcohol is
marketed as food grade industrial alcohol or processed into fuel
grade alcohol ("Industrial Alcohol"). Fuel grade alcohol, which
is commonly referred to as "ethanol" is added to gasoline to
increase octane ratings and as an oxygenate to reduce carbon
dioxide emissions to satisfy EPA and Clean Air Act requirements.
Food grade industrial alcohol is sold as an ingredient in foods
(e.g., vinegar and food flavorings), personal care products
(e.g., hair sprays and deodorants), cleaning solutions, biocides,
insecticides, fungicides, pharmaceuticals, and a variety of other
products. Although grain alcohol is chemically the same as
petroleum-based or synthetic alcohol, certain customers prefer a
natural grain-based alcohol. In addition, gasoline refiners and
marketers who blend grain alcohol with gasoline in qualifying
proportions are charged lower excise taxes on the blend compared
to unblended gasoline. This lower tax rate is not available for
synthetic alcohol. Food grade Industrial alcohol is sold in tank
truck or rail car quantities direct to a number of industrial
processors, such as Integrated Ingredients, a division of Burns
Philp Foods, Inc., 7-Up Company, and Lehn & Fink, a producer of
Lysol based household cleaners, from both the Atchison and Pekin
plants. The Company is a minor competitor in the total United
States market for food grade industrial and fuel grade alcohol.
The Fuel grade market is dominated by Archer Daniels Midland and
the food grade industrial market is dominated by petroleum-based
alcohol. Fuel alcohol prices traditionally follow the movement of
gasoline prices, and food grade industrial alcohol prices are
normally consistent with prices for synthetic industrial alcohol.
Effective September 1, 1994, the Environmental Protection
Agency ("EPA") adopted a final rule ("Rule") which generally
requires that reformulated gasoline ("RFG") mandated by the Clean
Air Act contain an amount of "renewable oxygenate" that, on
average, is equal to or greater than 15% of the required oxygen
content from December 1, 1994 through December 31, 1995, and 30%
for each calendar year thereafter. Under the RFG program, RFG is
required to be sold in nine of the smoggiest metropolitan areas
in the United States, which are San Diego, Los Angeles-Anaheim-
Riverside, Houston-Galveston-Brazoria, Chicago-Gary, Milwaukee-
Racine, Philadelphia-Wilminton-Trenton, New York-Northern New
Jersey-Long Island, Greater Connecticut and Baltimore, as well as
in other metropolitan areas that elect to be covered by the
program. The regulation defines a renewable oxygenate as an
oxygenate that is derived from non-fossil fuel feedstocks such as
petroleum, coal or gas or an ether that is derived from non
fossil fuel feedstocks. Although the definition of renewable
oxygenate covers a variety of renewable biomass and waste product
sources the EPA release ("Release") announcing the Rule indicates
that Ethanol and ethyl tertiary butyl ether ("ETBE") are expected
to be the primary renewable oxygenates with ethanol being the
dominant oxygenate during the winter months in the initial years
since it is the "only renewable oxygenate currently produced in
large quantities." According to the Release, ethanol's
volatility is expected to make it difficult for refiners to
satisfy the RFG requirements in the summer months (May 1 through
September 15) with a blend of gas and pure ethanol. Hence, the
Release indicates that the use of ethanol in the RFG program is
expected to be concentrated during the winter months, except to
the extent that ETBE is used as the renewable oxygenate. ETBE is
an ether derived from ethanol and isobutylene that has a lower
volatility than pure ethanol that is expected to enable its use
during the summer months to satisfy the renewable oxygenate
requirement.
On July 13, 1994, two groups representing the petroleum
industry filed suit against the EPA seeking to have the Rule set
aside on the grounds that the EPA lacked the legal authority
necessary to issue the Rule. On September 13, 1994, the U.S.
Court of Appeals for the District of Columbia Circuit issued an
order staying implementation of the Rule in order to permit the
parties and other interested parties time to brief and orally
argue the issues raised in the suit. Although the Court set an
expedited schedule that requires that final briefs be submitted
by January 12, 1995, it is uncertain as to when or if the stay
will be lifted.
If the Rule is ultimately implemented, a matter which is
presently uncertain due to the pending litigation, the Company
expects that the effect of the regulation will be to increase the
demand for the Company's fuel grade
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alcohol. However, the Company's total ethanol production is
expected to be a relatively small part of a very competitive
ethanol market.
During fiscal 1994 sales of food grade industrial and fuel
grade alcohol remained relatively constant with the same results
for fiscal 1993 in spite of significantly increased volumes due
primarily to reduced gasoline prices.
Alcohol By-Products
The bulk of fiscal 1994 sales of alcohol by-products consist
of distillers feeds. Distillers feeds are the residue of corn,
milo and wheat from alcohol processing operations. The residue
is dried and sold primarily to processors of animal feeds as a
high protein additive. The Company competes with a number of
producers of animal food additives in the sale of distillers
feeds and mill feeds.
The balance of alcohol by-products consists primarily of
carbon dioxide. During the production of alcohol, the Company
traps carbon dioxide gas that is emitted in the fermentation
process. The gas is purchased and liquified on site by two
principal customers, one at the Atchison Plant and one at the
Pekin Plant, who own and operate the carbon dioxide processing
and storage equipment under long term contracts with the Company.
The liquified gas is resold by these processors to a variety of
industrial customers and producers of carbonated beverages.
Alcohol Products Capital Improvements
During the last half of fiscal 1993 the Company commenced
the construction of an expansion of its alcohol production
facilities at its Pekin plant. The expansion, which is planned
for completion in the second half of fiscal 1995, is expected to
double the Company's entire alcohol production capacity and more
than double the Company's capacity to produce distillers feeds as
such capacities existed at June 30, 1994.
On December 31, 1992, the Company sold the operations of
McCormick Distilling Company for an after-tax gain of
approximately $1.0 million. McCormick was primarily engaged in
the business of bottling alcohol beverages at a plant in Weston,
Missouri. The business was sold to increase the Company's
concentration on the marketing of alcohol in bulk and to generate
cash for the expansion of the Pekin Plant.
Flour and Other Mill Products
At the Atchison plant, the Company owns and operates a flour
mill which was purchased from Pillsbury in 1986. All of the
mill's output of flour is used internally for the production of
vital wheat gluten and premium wheat starch. In 1993 the Company
completed the first of a two-phase expansion of the flour milling
facilities. The second phase of the expansion is expected to be
substantially complete during the first quarter of fiscal 1995.
The entire project is expected to increase the mill's total
production by approximately 80%. All of the additional output of
the mill is expected to be used internally to satisfy existing
requirements for the production of gluten and starch and the
additional requirements of the gluten and starch facilities that
are being added to the Pekin plant.
In addition to flour, the wheat milling process also
generates mill feeds or midds and a small quantity of wheat germ.
Midds are sold to processors of animal feeds as a feed additive.
Wheat germ is sold primarily for use in vitamin E production.
Sales of flour and other mill products declined since 1990
due to the increased usage of the flour mill's output for the
production of other grain products.
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Transportation
To provide its customers with timely delivery and service,
the Company maintains its own fleet of 32 tank and van trailers
and 12 truck-tractors. The Company leases 126 rail cars which
may be dispatched on short notice. Shipment by barge is also
offered to customers through barge loading facilities on the
Missouri and Illinois Rivers. The barge facility on the Illinois
River is adjacent to the Pekin plant and owned by the Company.
The facility on the Missouri River, which is not company-owned,
is approximately one mile from the Atchison plant. Quick
response enables customers to reduce inventory costs and still
satisfy unanticipated production requirements and is an important
marketing tool for the Company. The Company also has a contract
for backhauls under certificate No. NC 148479.
Income from trucking operations is included in Other
Operating Income shown in the Statements of Income. See in
particular Note 8 in the Notes to Consolidated Financial
Statements in the Annual Report.
Raw Materials
The Company's principal raw material is grain, consisting of
wheat which is processed into all of the Company's products and
corn and milo which are processed into alcohol, animal feed and
carbon dioxide. Grain is purchased directly from surrounding
farms, primarily at harvest time, and throughout the year from
grain elevators. Historically, the cost of grain is subject to
substantial fluctuations depending upon a number of factors which
affect commodity prices in general, including crop conditions,
weather, government programs, and purchases by foreign
governments. Although significant variations in grain prices may
temporarily affect positively or negatively the results of the
Company's operations, the Company has usually, but not always,
been able to compensate for such variations through adjustments
in prices charged for the Company's grain products.
Historically the Company has not engaged in the purchase of
commodity futures to hedge economic risks associated with
fluctuating grain and grain products prices. However, due to the
significantly increased volumes of grain and grain products that
are expected as a result of the expansion of the Company's
production facilities, the Company expects to make limited
investments in commodity futures, including wheat, corn and
gasoline futures.
Energy
Because energy comprises a major cost of operations, the
Company seeks to assure the availability of fuels for the Pekin
and Atchison plants at competitive prices.
At present a substantial portion of the natural gas demand
for the Atchison plant is transported by a wholly-owned
subsidiary which owns a gas pipeline. The subsidiary procures the
gas in the open market from various suppliers and from gas
reservoirs in an adjoining county. The Atchison boilers may also
be oil fired.
In the past, the Company's Pekin plant generated the bulk of
its energy needs from coal and gas fired boilers. However, due to
the expansion of the Pekin plant, the Company has entered into a
long-term arrangement with an Illinois utility to satisfy the
energy needs of the entire plant with a new gas fired plant.
Under the arrangement, the utility will construct on Pekin plant
ground leased from the Company a gas powered electric and steam
generating facility and sell to the Company steam and
electricity, generally at fixed rates, using gas procured by the
Company. At such time as the new power plant becomes operational,
Pekin's existing plant will be kept as an emergency standby.
Employees
As of June 30, 1994, the Company had 460 employees, 317 of
whom are covered by three collective bargaining agreements with
two labor unions. The collective bargaining agreements expire on
various dates from June 30, 1995, through August 30, 1996. In
September 1993, the Company successfully renegotiated a major
labor
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agreement covering 199 employees at the Atchison Plant. The
Company considers its relations with its personnel to be good and
has not experienced a work stoppage since 1978.
Regulation
The Company's beverage and industrial alcohol business is
subject to regulation by the Bureau of Alcohol, Tobacco and
Firearms ("BATF") and the alcoholic beverage agencies in the
States of Kansas and Illinois. Such regulation covers virtually
every aspect of the Company's alcohol operations, including
production facilities, marketing, pricing, labeling, packaging,
and advertising. Food products are also subject to regulation by
the Food and Drug Administration. BATF regulation includes
periodic BATF audits of all production reports, shipping
documents, and licenses to assure that proper records are
maintained. The Company is also required to file and maintain
monthly reports with the BATF of alcohol inventories and
shipments.
Item 2. Properties.
The Company maintains the following principal plants,
warehouses and office facilities:
Plant Tract
Area Area
(in sq. (in
Location Purpose ft.) acres)
-------- ------- ------- -------
Atchison, Kansas Principal Executive
offices, grain processing,
warehousing, and research
and quality control
laboratories. 494,640 25
Pekin, Illinois Grain processing,
warehousing, and quality
control laboratories 452,395 49
Except as otherwise reflected under Item 1. the facilities
mentioned above are generally in good operating condition, are
currently in normal operation are generally suitable and adequate
for the business activity conducted therein, and have productive
capacities sufficient to maintain prior levels of production.
Except as otherwise reflected under Item 1, all of the plants,
warehouses and office facilities are owned. None are subject to
any major encumbrance. The Company also owns transportation
equipment and a gas pipeline described under Transportation and
Energy.
Item 3. Legal Proceedings.
There are no material legal proceedings pending as of June
30, 1994. Legal proceedings which are pending consist of matters
normally incident to the business conducted by the Company and
taken together do not appear material.
Item 4. Submissions of Matters to a Vote of Security Holders.
No matters have been submitted to a vote of stockholders
since the last annual meeting of stockholders on October 8, 1993.
11
<PAGE> 12
PART II
Item 5. Market for Registrants Common Equity and Related
Stockholders Matters.
The Common Stock of the Company has been traded on the
NASDAQ National Market System under the symbol MWGP since
November 1988. The Company has paid regular cash dividends on
its Common Stock in each year since its inception in 1957.
The following table reflects the cash dividends paid and the
high and low closing prices of the Common Stock for each quarter
of fiscal 1994 and 1993:
Sales Prices
Quarterly Cash ------------------------
Dividends High Low
-------------- -------- -------
1993:
First Quarter...........$ .125 $ 25.25 $ 21.50
Second Quarter.......... .125 25.25 21.25
Third Quarter........... .125 30.50 22.50
Fourth Quarter.......... .125 29.75 24.75
------
$ .50
======
1994:
First Quarter...........$ .125 $ 27.00 $ 22.25
Second Quarter........... .125 29.75 22.75
Third Quarter............ .125 32.75 26.25
Fourth Quarter........... .125 36.00 29.25
-------
$ .50
=======
At June 30, 1994, there were approximately 1,000 holders of
record of the Company's Common Stock. It is believed that the
Common Stock is held by more than 2,000 beneficial owners.
Item 6. Selected Financial Data.
Incorporated by reference to the information under Selected
Financial Information on page 17 of the Annual Report, a copy of
which page is included in Exhibit 10(c) to this Report.
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations.
Incorporated by reference to the information under
Managements Discussion and Analysis of Financial Condition and
Results of Operations on pages 18 through 24 of the Annual
Report, copies of which pages are included in Exhibit 10(c) to
this Report.
Item 8. Financial Statements and Supplementary Data.
Incorporated by reference to the consolidated financial
statements and related notes on pages 25 through 36 of the Annual
Report, copies of which pages are included in Exhibit 10(c) to
this Report.
12
<PAGE> 13
Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure.
Not applicable.
PART III
Item 10. Directors and Executive Officers of the Registrant.
The directors and executive officers of the Company are as
follows:
Name Age Position
- - ---- --- --------
Cloud L. Cray, Jr. 71 Chairman of the Board and
Director
Laidacker M. Seaberg 48 President, Chief Executive
Officer and Director
Sukh Bassi, Ph.D. 53 Vice President - Vital
Wheat Gluten Marketing,
Research and Development
and Corporate Technical
Director
Robert G. Booe 57 Vice President -
Administration,
Controller, Treasurer and
Chief Financial Officer
Norma C. Ewbank 60 Secretary
Tom V. Herriage, Jr. 49 Vice President - Beverage
Alcohol Sales
Howard W. Hinton 48 Vice President -
Distillery Marketing
Gerald Lasater 56 Vice President - Wheat
Starch Marketing
Raymond Miller 60 Vice President -
Purchasing and Energy and
President of Midwest Grain
Pipeline, Inc.
Anthony J. Petricola 58 Vice President -
Engineering
Randy M. Schrick 44 Vice President -
Operations and Director
Kenneth Smith 57 Vice President -
Transportation
Michael Braude 58 Director
Richard J. Bruggen 68 Director
Tom MacLeod, Jr. 46 Director
Robert J. Reintjes 62 Director
Eleanor B. Schwartz, D.B.A. 57 Director
13
<PAGE> 14
Mr. Cray, Jr. has been a Director since 1957, and has served
as Chairman of the Board since 1980. He served as Chief
Executive Officer from 1980 to September, 1988, and has been an
officer of the Company and its affiliates for more than thirty
years.
Mr. Seaberg, a Director since 1979, joined the Company in
1969 and has served as the President of the Company since 1980
and as Chief Executive Officer since September, 1988. He is the
son-in-law of Mr. Cray, Jr.
Dr. Bassi has served as Vice President of Research and
Development since 1985, Technical Director since 1989 and Vice
President - Vital Wheat Gluten Marketing since 1992. From 1981
to 1992 he was Manager of the Vital Wheat Gluten Strategic
Business Unit. He was previously a professor of biology at
Benedictine College for ten years.
Mr. Booe has served as Vice President, Treasurer and Chief
Financial Officer of the Company since 1988. He joined the
Company in 1966 as its Treasurer and became the Controller and
Treasurer in 1980. In 1992 he was assigned the additional task
of Vice President - Administration.
Mrs. Ewbank has served as corporate secretary since 1987.
She joined the Company in 1981.
Mr. Herriage, Jr. joined the Company in 1980. He has served
as Vice President in charge of beverage alcohol sales since 1986,
and was responsible for the Whiskey Strategic Business Unit from
1986 to 1989. Prior to that time he was responsible for
personnel and public relations.
Mr. Hinton joined the Company in 1976. He has served as
Vice President - Distillery Marketing since 1992. Between 1982
and 1992 he served as Vice President in charge of the Distilling
Strategic Business Unit.
Mr. Lasater joined the Company in 1962. He has served as
Vice President - Starch Marketing since 1992. Previously he
served as Vice President in charge of the Wheat Starch Strategic
Business Unit.
Mr. Miller joined the Company in 1956. He has served as
Vice President - Purchasing and Energy since 1992, President of
Midwest Grain Pipeline, Inc. since 1987, and as Vice President of
the Company since 1967.
Mr. Petricola joined the Company in 1985. He has served as
Vice President - Engineering since 1992. Previously he served as
Corporate Director of Engineering.
Mr. Schrick, a Director since 1987, joined the Company in
1973. He has served as Vice President - Operations since 1992.
From 1984 to 1992 he served as Vice President and General Manager
of the Pekin plant. From 1982 to 1984 he was the Plant Manager of
the Pekin Plant. Prior to 1982, he was Production Manager at the
Atchison plant.
Mr. Smith has served as Vice President - Transportation
since 1987. Prior to that time he was manager of truck services.
Mr. Bruggen has been a Director since 1976 and is a member
of the Audit and Nominating Committees. He was Senior Vice
President of Atchison Casting Corporation from 1991 until his
retirement in 1992. Previously he was the General Manager of
Rockwell International Plants at Atchison, Kansas and St. Joseph,
Missouri.
Mr. Braude has been a Director since 1991 and is a member of
the Audit and Human Resources Committees. He has been the
President and Chief Executive Officer of the Kansas City Board of
Trade, a commodity futures exchange , since 1984. Previously he
was Executive Vice President of American Bank & Trust Company of
Kansas City.
14
<PAGE>
Mr. MacLeod, Jr. has been a Director since 1986 and is a
member of the Audit and Human Resources Committees. He has been
the President and Chief Operating Officer of Iams Company, a
manufacturer of premium pet foods, since 1989. Previously, he
was President and Chief Executive Officer of Kitchens of Sara
Lee, a division of Sara Lee Corporation, a food products company.
Mr. Reintjes has been a Director since 1986, and is a member
of the Audit and Nominating Resources Committees. He has served
as President of Geo. P. Reintjes Co., Inc., of Kansas City,
Missouri, for the past 23 years. The Geo. P. Reintjes Co., Inc.
is engaged in the business of refractory construction.
Dr. Schwartz has been a director since June 3, 1993. She is
also a member of the Audit and Human Resources Committees. She
has been the Chancellor of the University of Missouri-Kansas City
since May 1992, and was previously the Vice Chancellor for
Academic Affairs.
The Board of Directors is divided into two groups (Groups A
and B) and three classes. Group A directors are elected by the
holders of Common Stock and Group B directors are elected by the
holders of Preferred Stock. One class of directors is elected at
each annual meeting of stockholders for three-year terms. The
present directors' terms of office expire as follows:
Group A Term Group B Term
Directors Expires Directors Expires
--------- ------- --------- -------
Mr. Bruggen 1994 Mr. Cray, Jr. 1995
Mr. MacLeod 1995 Mr. Reintjes 1995
Dr. Schwartz 1996 Mr. Braude 1994
Mr. Schrick 1996
Mr. Seaberg 1996
Item 11. Executive Compensation.
Incorporated by reference to the information under
"Executive Compensation" on pages 5 through 9 of the Proxy
Statement.
Item 12. Security Ownership of Certain Beneficial Owners and
Management.
Incorporated by reference to the information under
"Principal Stockholders" beginning on page 9 of the Proxy
Statement.
Item 13. Certain Relationships and Related Transactions.
None.
15
<PAGE> 16
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on
Form 8-K.
The following documents are filed as part of this report:
(a) Financial Statements:
Auditors Report on Financial Statements.
Consolidated Balance Sheets at June 30, 1994 and 1993.
Consolidated Statements of Income - for the Three Years
Ended June 30, 1994, 1993 and 1992.
Consolidated Statements of Stockholders Equity for the
Three Years Ended June 30, 1994, 1993 and 1992.
Consolidated Statements of Cash Flow - for the Three
Years Ended June 30, 1994, 1993 and 1992.
Notes to Consolidated Financial Statements.
The foregoing have been incorporated by reference to
the Annual Report as indicated under Item 8.
(b) Financial Statement Schedules:
Auditors Report on Financial Statement Schedules:
I. Marketable Securities - Other Investments
V - Property, Plant and Equipment
VI - Accumulated Depreciation, Depletion and
Amortization of Property, Plant and Equipment
VIII - Valuation and Qualifying Accounts
IX - Short Term Borrowings
X - Supplementary Income Statement Information
All other schedules are omitted because they are not
applicable or the information is contained in the
Consolidated Financial Statements or notes thereto.
(c) Exhibits:
Exhibit No. Description
----------- -----------
3(a) Articles of Incorporation of the Company
(Incorporated by reference to Exhibit 3(a) of the
Company's Registration Statement No. 33-24398 on
Form S-1).
3(b) Bylaws of the Company (Incorporated by reference to
Exhibit 3(b) of the Company's Registration
Statement No. 33-24398 on Form S-1).
4(a) Copy of Note Agreement dated as of August 1, 1993,
providing for the issuance and sale of $25 million
of 6.68% term notes ("Term Notes", incorporated by
reference to Exhibit 4.1 to the Company's Report on
Form 10-Q for the quarter ended September 30,
1993).
4(b) Copy of Term Notes dated August 27, 1993
(incorporated by reference to Exhibit 4.2 to the
Company's Report on Form 10-Q for the quarter ended
September 30, 1993).
9(a) Copy of Cray Family Trust (Incorporated by
reference to Exhibit 9(a) of the Company's
Registration Statement No. 33-22600 on Form S-4).
16
<PAGE>
10(a) Summary of informal cash bonus plan (incorporated
by reference to the summary contained in the
Company's Proxy Statement dated September 12, 1994,
which is incorporated by reference into Part III of
this Form 10-K).
10(b) Executive Stock Bonus Plan as amended June 15, 1992
(incorporated by reference to Exhibit 10(b) to the
Company's Form 10-K for the year ended June 30,
1992).
10(c) Information contained in the Midwest Grain
Products, Inc. 1994 Annual Report to Stockholders
that is incorporated herein by reference.
22 Subsidiaries of the Company other than
insignificant subsidiaries:
State of
Incorporation
Subsidiary or Organization
---------- ---------------
Midwest Solvents Company of Illinois, Inc. Illinois
Midwest Grain Pipeline, Inc. Kansas
Midwest Grain Products of Illinois, Inc. Illinois
Midwest Purchasing Company, Inc. Illinois
25 Powers of Attorney executed by all officers and
directors of the Company who have signed this
report on Form 10-K (incorporated by reference to
the signature pages of this report).
27 Midwest Grain Products Financial Data Schedule as
at June 30, 1994 and for the year then ended.
No reports on Form 8-K have been filed during the quarter
ended June 30, 1994.
17
<PAGE> 18
SIGNATURES
Pursuant to requirements of Section 13 of the Securities
Exchange Act of 1934, the Registrant has duly caused this report
to be signed on its behalf by the undersigned, thereunto duly
authorized, in the city of Atchison, State of Kansas, on this
19th day of September, 1994.
MIDWEST GRAIN PRODUCTS, INC.
By /s/ Laidacker M. Seaberg
------------------------
Laidacker M. Seaberg, President
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose
signature appears below constitutes and appoints Cloud L. Cray,
Jr., Laidacker M. Seaberg and Robert G. Booe and each of them,
his true and lawful attorneys-in-fact and agents, with full power
of substitution and re-substitution, for him and in his name,
place and stead, in any and all capacities, to sign any and all
reports of the Registrant on Form 10-K and to sign any and all
amendments to such reports and to file the same with all exhibits
thereto, and other documents in connection therewith, with the
Securities & Exchange Commission, granting unto said
attorneys-in-fact and agents, and each of them, full power and
authority to do and perform each and every act and thing
requisite or necessary to be done in and about the premises, as
fully to all intents and purposes as he might or could do in
person, hereby ratifying and confirming all that said
attorneys-in-fact and agents or any of them, or their or his
substitute or substitutes, may lawfully do or cause to be done by
virtue hereof.
Pursuant to the requirements of the Securities Exchange Act
of 1934, this report has been signed below by the following
persons on behalf of the Registrant in the capacities indicated
on the dates indicated.
Name Title Date
/s/ Laidacker M. Seaberg President (Principal
--------------------- Executive Officer)
Laidacker M. Seaberg and Director September 19, 1994
/s/ Robert G. Booe Vice President,
-------------------- Treasurer and
Robert G. Booe Controller (Principal
Financial and
Accounting
Officer) September 19, 1994
/s/ Michael Braude
--------------------
Michael Braude Director September 19, 1994
/s/ Richard J. Bruggen
--------------------
Richard J. Bruggen Director September 19, 1994
/s/ Cloud L. Cray, Jr.
--------------------
Cloud L. Cray, Jr. Director September 19, 1994
/s/ Eleanor B. Schwartz
--------------------
Eleanor B. Schwartz Director September 19, 1994
/s/ Tom MacLeod, Jr.
--------------------
Tom MacLeod, Jr. Director September 19, 1994
/s/ Robert J. Reintjes
--------------------
Robert J. Reintjes Director September 19, 1994
/s/ Randy M. Schrick
--------------------
Randy M. Schrick Director September 19, 1994
18
<PAGE> S-1
MIDWEST GRAIN PRODUCTS, INC.
Consolidated Financial Statement Schedules
(Form 10-K)
June 30, 1994, 1993 and 1992
(With Auditors' Report Thereon)
S-1
<PAGE> S-2
Report of Independent Accountants
On Financial Statement Schedules
Board of Directors and Stockholders
Midwest Grain Products, Inc.
Atchison, Kansas
In connection with our audit of the financial statements of
MIDWEST GRAIN PRODUCTS, INC. for each of the three years in the
period ended June 30, 1994, we have also audited the following
financial statement schedules. These financial statement
schedules are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial
statement schedules based on our audits of the basic financial
statements. The schedules are presented for purposes of
complying with the Securities and Exchange Commission's rules and
regulations and are not a required part of the consolidated
financial statements.
In our opinion, the financial statement schedules referred
to above, when considered in relation to the basic financial
statements taken as a whole, present fairly, in all material
respects, the information required to be included therein.
/s/ Baird, Kurtz & Dobson
BAIRD, KURTZ & DOBSON
Kansas City, Missouri
August 11, 1994
S-2
<PAGE> S-3
MIDWEST GRAIN PRODUCTS, INC.
I. MARKETABLE SECURITIES - OTHER INVESTMENTS
(In Thousands)
Market
Value at Balance
Name of Issuer and Number of Balance at end of
Title of Each Issue Shares Cost Sheet Date Period
------------------- --------- ---- ---------- ---------
YEAR ENDED JUNE 30, 1994
Tax-Free Obligations
Fund (an investment
portfolio of Money
Market Obligations
Trust) 14,504 $14,504 $14,504 $14,504
======= ======= ======= =======
S-3
<PAGE> S-4
MIDWEST GRAIN PRODUCTS, INC.
V. PROPERTY, PLANT AND EQUIPMENT
<TABLE>
<CAPTION>
Balance Transfers
at of Balance
Beginning Additions Retire- Completed at End
of Year at Cost ments Projects of Year
_________ __________ _______ _________ _________
(In Thousands)
<S> <C> <C> <C> <C> <C>
YEAR ENDED JUNE 30, 1994
Land, buildings and improvements $ 18,262 $ 2,290 $3,662 $ 16,890
Transportation equipment 3,354 5,212 1,327 7,239
Machinery, equipment, etc. 102,263 6,739 3,198 105,804
Construction in progress 11,882 49,660 $ 9,028 52,513
________ _______ ______ _______ ________
$135,761 $63,901 $8,187 $ 9,028 $182,446
======== ======= ====== ====== ========
YEAR ENDED JUNE 30, 1993
Land, buildings and improvements $ 19,584 $ 437 $1,759 $ 18,262
Transportation equipment 3,732 89 467 3,354
Machinery, equipment, etc. 97,287 8,851 3,875 102,263
Construction in progress 6,708 14,542 $ 9,368 11,882
________ ________ ______ ______ ________
$127,311 $ 23,919 $6,101 $ 9,368 $135,761
======== ======== ====== ======= ========
YEAR ENDED JUNE 30, 1992
Land, buildings and improvements $ 19,352 $ 1,122 $ 890 $ 19,584
Transportation equipment 3,541 278 87 3,732
Machinery, equipment, etc. 89,788 9,698 2,199 97,287
Construction in progress 3,275 13,608 $10,175 6,708
________ ________ ______ _______ ________
$115,956 $24,706 $3,176 $10,175 $127,311
======== ======= ====== ======= ========
</TABLE>
S-4
<PAGE> S-5
VI. ACCUMULATED DEPRECIATION OF PROPERTY, PLANT AND EQUIPMENT
<TABLE>
<CAPTION>
Balance Additions
at Charged Balance
Beginning to at End
of Year Expenses Retirements of Year
__________ __________ ___________ _______________
(In Thousands)
<S> <C> <C> <C> <C>
YEAR ENDED JUNE 30, 1994
Land, buildings and improvements $ 6,239 $ 966 $ 481 $ 6,724
Transportation equipment 2,631 289 1,249 1,671
Machinery, equipment, etc. 56,796 5,905 1,208 61,493
________ _______ ______ ________
$ 65,666 $ 7,160 $ 2,983 $ 69,888
======== ======= ====== ========
YEAR ENDED JUNE 30, 1993
Land, buildings and improvements $ 4,715 $ 2,324 $ 800 $ 6,239
Transportation equipment 2,610 360 339 2,631
Machinery, equipment, etc. 55,373 3,517 2,094 56,796
________ ________ _______ ________
$ 62,698 $ 6,201 $ 3,233 $ 65,666
======== ======== ======= ========
YEAR ENDED JUNE 30, 1992
Land, buildings and improvements $ 4,900 $ 672 $ 857 $ 4,715
Transportation equipment 2,238 438 66 2,610
Machinery, equipment, etc. 51,297 6,126 2,050 55,373
________ ________ _______ ________
$ 58,435 $ 7,236 $ 2,973 $ 62,698
======== ======= ======= ========
</TABLE>
S-5
<PAGE> S-6
MIDWEST GRAIN PRODUCTS, INC.
VII. VALUATION AND QUALIFYING ACCOUNTS
<TABLE>
<CAPTION>
Additions
__________________________
Balance, Charged to Charged Balance,
Beginning Costs and to Other Deductions End of
of Period Expenses Accounts Write-Offs Period
_________ ___________ ___________ ___________ ___________
(In Thousands)
<S> <C> <C> <C> <C>
YEAR ENDED JUNE 30, 1994
Allowance for doubtful accounts $ 25 $ 59 $ 59 $ 25
===== ==== ==== ====
YEAR ENDED JUNE 30, 1993
Allowance for doubtful accounts $ 200 $375 $550 $ 25
===== ==== ==== ====
YEAR ENDED JUNE 30, 1992
Allowance for doubtful accounts $175 $197 $197 $175
==== ==== ==== ====
</TABLE>
S-6
<PAGE> S-7
MIDWEST GRAIN PRODUCTS, INC.
IX. SHORT-TERM BORROWINGS
(In Thousands)
<TABLE>
<CAPTION>
Amount
Weighted Outstanding Weighted
Balance at Average During Period Average
Category of Aggregate End of Interest --------------- Interest Rate
Short-Term Borrowings Period Rate Maximum Average During Period
---------- -------- ------- ------- -------------
<S> <C> <C> <C> <C> <C>
Notes payable - Banks, unsecured $-0- N/A $-0- $-0- .00%
June 30, 1994 -0- N/A -0- -0- .00
June 30, 1993 -0- N/A -0- -0- .00
June 30, 1992 -0- N/A -0- -0- .00
</TABLE>
S-7
<PAGE> S-8
MIDWEST GRAIN PRODUCTS, INC.
X. SUPPLEMENTARY INCOME STATEMENT INFORMATION
YEARS ENDED JUNE 30, 1994, 1993 AND 1992
1994 1993 1992
---- ---- ----
(In Thousands)
Excise taxes $ 0 $26,133 $52,542
Other taxes 940 1,935 813
Maintenance
and repairs 9,191 9,900 8,667
S-8
<PAGE> 1
Exhibit 10-C
Annual report Financial information
MIDWEST GRAIN PRODUCTS, INC.
SELECTED FINANCIAL INFORMATION
<TABLE>
<CAPTION> (in thousands except per share amounts)
Years ended June 30.
________________________________________________________________________________________
1994 1993 1992 1991 1990
_______________________________________________________________________________________________________________
<S> <C> <C> <C> <C> <C>
Income Statement Data
Net Sales $185,968 $163,426 $155,794 $133,120 $131,599
Cost of Sales 148,320 130,551 127,883 108,963 112,701
_______________________________________________________________________________________________________________
Gross Profit 37,648 32,875 27,911 24,157 18,898
Selling, general and
administrative expenses 12,212 10,677 9,794 8,083 7,209
Other operating income (expense) (669) (264) 17 135 161
_______________________________________________________________________________________________________________
Income from operations 24,767 21,934 18,134 16,209 11,850
Other income, net 924 1,045 1,191 501 985
Interest expense 127 71 93 123 490
_______________________________________________________________________________________________________________
Income from operations
before income taxes 25,564 22,908 19,232 16,587 12,345
Provision for income taxes 9,713 8,278 7,020 5,977 4,461
_______________________________________________________________________________________________________________
Income from continuing operations 15,851 14,630 12,212 10,610 7,884
Discontinued operations 1,665 1,294 530 468
Cumulative effect of change in accounting
principles--post-retirement benefits (2,241)
Cumulative effect of change in accounting
principles--income taxes 2,182
_______________________________________________________________________________________________________________
Net Income $15,851 $16,236 $13,506 $11,140 $ 8,352
===============================================================================================================
Earnings per common share
Continuing operations $1.62 $1.50 $1.25 $1.09 $ .81
Discontinued operations .17 .13 .05 .05
Cumulative effect of accounting changes (.01)
--------------------------------------------------------------
$1.62 $1.66 $1.38 $1.14 $ .86
==============================================================
Cash dividends per common share $.50 $.50 $.48 $.47 $.45
Weighted average common
shares outstanding 9,765 9,765 9,765 9,765 9,765
Balance Sheet Data:
Working capital $22,151 $41,580 $37,021 $36,928 $30,943
Total Assets $168,146 $126,671 $115,626 $109,690 $102,271
Long-term debt, less
current maturities $ 25,000 $ 50 $ 1,093 $ 1,341
Stockholders' equity $114,173 $103,206 $ 91,853 $ 82,986 $76,403
</TABLE>
1994 ANNUAL REPORT
17
<PAGE>2
MIDWEST GRAIN PRODUCTS, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
The following table sets forth items in the Company's
consolidated statements of income expressed as percentages of net
sales for the years indicated and the percentage change in the
dollar amount of such items compared to the prior period.
<TABLE>
<CAPTION>
Percentage of Percentage
Net Sales Increase (Decrease)
Years Ended June 30 -----------------------------
___________________________________ Fiscal 1994 Fiscal 1993
1994 1993 1992 Over 1993 Over 1992
_________________________________________________________________________ _____________________________
<S> <C> <C> <C> <C> <C>
Net Sales 100.0% 100.0% 100.0% 13.8% 5.0%
Cost of sales 79.8 79.9 82.1 13.6 2.1
_________________________________________________________________________
Gross profit 20.2 20.1 17.9 14.5 17.8
Selling, general and
administrative expenses 6.6 6.5 6.3 14.4 9.0
Other operating income (loss) (.3) (.2) (153.4) (165.3)
_________________________________________________________________________
Income from operations 13.3 13.4 11.6 12.9 21.0
Other income (expense) .4 .6 .7 (18.2) (11.3)
_________________________________________________________________________
Income from continuing
operations before
income taxes 13.7 14.0 12.3 11.6 19.1
Provision for income taxes 5.2 5.1 4.5 17.3 17.9
_________________________________________________________________________
Income from continuing
operations 8.5% 8.9% 7.8% 8.3% 19.8%
=========================================================================
_______________________________________________________________________________________________________________
</TABLE>
FISCAL 1994 COMPARED TO FISCAL 1993
Results of operations in fiscal 1994 surpassed the prior
year's results, placing sales and income from continuing
operations at record levels. Growth in sales was spurred by
strengthened demand for the Company's vital wheat gluten, mostly
in the second half of fiscal 1994, and increased production
capacities. This resulted in increased volumes and greater
production efficiencies, substantially improving the cost
effectiveness of Midwest Grain's fully integrated production
processes. The improved efficiencies helped to offset higher raw
material costs for grain resulting mainly from the adverse
effects of last summer's unusually wet weather and floods in the
Midwest. Costs for wheat, which the Company mills into flour and
then processes into vital wheat gluten and premium wheat starch
for food and some non-food applications, were significantly
higher in fiscal 1994 compared to costs experienced in fiscal
1993. Because of the wheat's poor milling and protein yield, the
Company had to pay substantially higher prices for moderate to
high protein wheats, while using more wheat than normally would
be necessary to satisfy production requirements. Additionally,
costs for corn and milo, which the Company uses for alcohol
production, rose considerably in the third and fourth quarters
while prices for food grade industrial and fuel alcohol declined.
The negative impact of these raw material cost increases was
somewhat reduced by improved alcohol production efficiencies
resulting from higher alcohol volumes in the food grade
industrial category. The higher raw material costs for wheat,
corn and milo have subsided since the end of fiscal 1994 due to
improved crop conditions
1994 ANNUAL REPORT
18
<PAGE>3
MIDWEST GRAIN PRODUCTS, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
throughout the Midwest generally. Also, gasoline prices are
returning to higher levels. However, because the current year's
higher quality wheat requires that less gluten be used to fortify
flour, demand for gluten has decreased somewhat. Additionally,
the Company is seeing strong indications of growing competition
from European wheat gluten producers, who are able to take
advantage of inequitably low tariff rates to ship their excess
product into the United States market. The threat and frequent
materialization of this situation has been ongoing, but has
ranged in severity depending on the size and quality of European
wheat crops and associated factors. To withstand increased
competitive pressures, the Company will continue to strengthen
its position as a highly reliable, cost-effective domestic
supplier.
Greater operational efficiencies for Midwest Grain's entire
corporate complex are expected to result from the major
distillery expansion which currently is under construction at the
Company's Pekin, Illinois plant. The expansion will prepare the
way for future growth objectives in all alcohol product areas by
doubling the Company's total alcohol production capacity by early
1995. Significant growth opportunities for fuel alcohol are
expected to result from the Environmental Protection Agency's
recent ruling that 30% of the motor fuel oxygenates sold in the
nation's smoggiest cities be made from renewable sources such as
grain-based ethanol. The distillery expansion also is allowing
the Company to proceed with additional construction at the Pekin
facility which is expected to result in a 70% increase in total
wheat starch production capacity and a 40% increase in total
wheat gluten production capacity by the spring of 1995.
The increase in net sales for the 12-month period of fiscal
1994, amounting to approximately $22.5 million, was largely
experienced in the third and fourth quarters. The remainder of
the increase was experienced in the second quarter. This was
mainly due to substantially increased demand for vital wheat
gluten and increased production of all three of the Company's
principal products, significantly improving operational
efficiency. Sales in the first quarter were more severely
affected by conditions resulting from last summer's excessive
moisture and flooding. In addition to experiencing higher grain
costs, the Company was forced to use more expensive methods for
routing shipments of raw and finished goods due to damaged rail
lines and highways across the country's midsection. More
abnormal first quarter costs resulted from a four-day shutdown of
the Atchison plant, which occurred when nearby pumping stations
which supply water for the plant's distillery process were
flooded by the rain-swollen Missouri River. Sales of wheat
gluten in fiscal 1994 rose by approximately 31% as the result of
increased demand, increased grain costs, and higher volumes. The
increased demand resulted partially from increased market needs,
principally in the baking industry where more gluten was required
to fortify flour due to the poor quality of available wheat
during most of the year. Premium wheat starch sales increased by
15%, mainly as the result of higher volumes and increased sales
of modified starch varieties in special market niches. Sales of
alcohol products climbed 4% in spite of reduced demand, with a
substantial increase in food grade industrial alcohol volume and
a slight increase in beverage alcohol volume. These increases
more than offset a decrease in fuel alcohol volume and added
1994 ANNUAL REPORT
19
<PAGE>4
MIDWEST GRAIN PRODUCTS, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
substantially to improvements in the Company's total operational
efficiencies. Sales of distillers feed, a by-product of the
alcohol production process, were approximately even with the
prior year's sales, while all of the Company's flour was used
internally as a raw material for the gluten production process.
Sales of flour mill by-products, namely mill feeds, rose
significantly due to higher volumes resulting from increased
flour production to satisfy heightened gluten processing needs.
Fluctuations in selling prices of the Company's vital wheat
gluten generally are due to fluctuations in grain costs and
competition. Wheat starch prices traditionally track corn starch
prices, with the exception of the Company's specialty modified
starches. Fuel alcohol prices traditionally follow the movement
of gasoline prices, and food grade industrial alcohol prices are
normally consistent with prices for industrial alcohol derived
from synthetic products such as petroleum. During fiscal 1994,
the Company's results were negatively affected by low gasoline
prices coupled with increased grain costs.
Raw material cost increases in fiscal 1994 accounted for
slightly more than $16 million of the approximately $17.8 million
increase in cost of sales compared to fiscal 1993. This was
principally due to higher wheat costs and lower protein yields,
and increased costs for corn and mil. The lower protein yields
caused more wheat to be used than normally would have been
required to produce enough flour for wheat gluten processing. A
rise in employee insurance costs of approximately $1.6 million
also contributed to the increase in total cost of sales in fiscal
1994. This was partially offset by a decrease of $709,150 in
maintenance and repair costs compared to fiscal 1993. Other
manufacturing cost increases were due to increased production
volumes.
Selling, general and administrative expenses in fiscal 1994
increased by approximately $1.5 million compared to fiscal 1993.
The majority of the increase, approximately $1.1 million,
resulted from contributions to the Company's management bonus
program, which is designed to recognize the accomplishment of
specific, pre-established Company goals. Goals in fiscal 1994
were made exceptionally challenging by conditions related to the
adverse effects of last summer's unusually wet weather and record
floods in the Midwest. The Company achieved a high level of
performance for the year and there was a significant rise in the
number of bonus recipients. The remainder of the increase was
experienced generally throughout the expense categories.
Pre-tax income for fiscal 1994 increased by approximately
11.5% due primarily to increased volumes and demand for vital
wheat gluten offset by reduced prices for food grade industrial
and fuel grade alcohol and increased grain costs.
The consolidated effective income tax rate is consistent for
the two fiscal years.
The general effects of inflation were minimal.
As a result of the foregoing factors, the Company realized
income from continuing operations of $15,851,000 in fiscal 1994
compared to $14,630,000 in fiscal 1993.
FISCAL 1993 COMPARED TO FISCAL 1992
Sales and income from continuing operations in fiscal 1993
outdistanced the record results achieved in fiscal 1992. The
higher results were reached through
1994 ANNUAL REPORT
20
<PAGE>5
MIDWEST GRAIN PRODUCTS, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
increased volume sales of all major products, with alcohol
products accounting for the largest surge. Higher yields on
grain helped reduce overall raw material costs, which in turn
contributed to the increase in profitability. The growth in
alcohol volume occurred in the Company's beverage and fuel grade
alcohol markets. In January, 1993, the Company announced plans
for doubling its total alcohol production capacity by early 1995
with a major expansion at its Pekin, Illinois plant. While the
Company will continue to focus on increasing its presence in the
beverage and high quality industrial alcohol markets, a sizeable
portion of the new capacity is scheduled for fuel alcohol
production. The expanded gluten production capacities that went
into operation at the Pekin and Atchison, Kansas plants in the
latter half of fiscal 1992 allowed the Company to supply
increased customer needs and realize higher volume sales in
fiscal 1993. Opportunities to produce even greater quantities of
gluten were eroded somewhat by a steady stream of gluten imports
from the European Community, which grew substantially in the
second quarter and had carry-over effects on sales in the third
and fourth quarters. The increase in wheat starch volume sales
resulted mainly from greater development and penetration of
special market niches which utilize the Company's modified starch
varieties. To keep up with increasing demand for its wheat
starch, the Company initiated the expansion of its modified
starch production capacity at the Atchison plant. Expansion of
the Company's flour mill in Atchison was also begun in fiscal
1993 to keep pace with increased needs for flour to supply the
wheat gluten process.
The Company's strong financial position has allowed it to
adopt an aggressive plant expansion program so that it can remain
highly competitive in the years to come. While the Company
believes long-term prospects are strong, the excessively wet
spring and summer flooding in much of the Midwest is expected to
adversely impact fiscal 1994. In addition to causing lower
quality wheat harvests, severe damage to rail lines and major
highways has caused difficulties with shipments of raw materials
and finished goods.
On December 31, 1992, the Company sold the operations of
McCormick Distilling Company, a wholly-owned subsidiary, for an
after-tax gain of approximately $1.0 million. McCormick was
primarily engaged in the business of bottling alcohol beverages
at the Weston, Missouri plant and selling same throughout the
United States through distributors. The following discussion
relates to the results of continuing operations exclusive of
McCormick.
The increase in sales for the 12-month period of fiscal
1993, amounting to approximately $7.6 million, was evenly
experienced through the first three quarters of the year as a
result of the higher volumes of all major products. Sales in the
fourth quarter were approximately $2.1 million lower than in the
final quarter of fiscal 1992 due principally to a curtailment in
alcohol and gluten production while necessary repairs and
improvements were made to distillery equipment in Atchison.
Sales of all alcohol products for the year increased by
approximately 6% over fiscal 1992. An 11% increase in beverage
alcohol volume, together with an 11% increase in fuel alcohol
volume outweighed a nearly 15% decrease in volume sales of food
grade industrial alcohol. Increased prices for fuel and high
quality industrial alcohol offset a slight price decrease in the
beverage category to
1994 ANNUAL REPORT
21
<PAGE>6
MIDWEST GRAIN PRODUCTS, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
contribute to the gain in total alcohol sales. A 7% increase in
volume sales of distillers feed, an alcohol by-product, also
contributed to the gain. Sales of vital wheat gluten increased
by 15% over fiscal 1992 as a result of increased volume coupled
with a modest price increase. The price increase only partially
offset successive increases in raw material costs for wheat,
which the Company experienced in the second and third quarters of
fiscal 1993. For the year, wheat costs averaged slightly higher
per bushel than in fiscal 1992, and, because more wheat was
required to supply increased production needs, the total cost for
this raw material rose accordingly. Sales of flour and other
mill products decreased by approximately $5.2 million. This
decline resulted almost entirely from a significant reduction in
outside sales of flour in order to satisfy internal requirements
for its use as a raw material in the gluten process. Sales of
premium wheat starch rose by 5% as the result of increased
volumes in the second, third and fourth quarters. Wheat starch
prices for the year were approximately level with those realized
during fiscal 1992.
The cost of sales for fiscal 1993 increased by approximately
$2.7 million over the prior year. Higher costs for repairs and
maintenance, utilities and post-retirement benefits were offset
by lower raw material costs and insurance expenses.
Volume-related increases of natural gas and electricity usage
combined with higher natural gas prices to cause an increase of
$2.4 million in utility costs. Increased repairs and maintenance
costs approximating $1.3 million resulted from a plant shutdown
for maintenance, ongoing expenditures to continually improve
clean operations and modifications to distillery equipment.
Also, fiscal 1993 employee benefit costs increased by almost
$350,000 due to the accrual of higher post-retirement costs in
accordance with the newly adopted accounting pronouncement. The
reduction of raw material costs ($1.6 million), in spite of
volume increases, was caused by lower prices for corn and milo
combined with higher yields. Lower wheat prices were more than
offset by decreased yields due to lower quality of the wheat
crops. Insurance costs declined substantially as a result of
more favorable experience in workers' compensation and general
liability claims.
Selling, general and administrative expenses increased over
fiscal 1992 by $883,000. Commissions increased by approximately
$540,000 due to higher volumes of sales subject to commissions.
The provision for bad debts was $356,000 higher than the
preceding year primarily relating to the write-off of one
customer. Salaries and other employee benefits decreased by
$260,000.
Income from continuing operations increased by $2,418,000 to
$14,630,000 in fiscal 1993. The improved profitability was
largely due to higher volume sales of alcohol products combined
with increased price realizations, primarily of fuel alcohol
sales. While volume and price increases in vital wheat gluten
and premium wheat starch occurred, increased raw material costs
for wheat caused profitability of these products to decline.
Higher volumes in all products resulted in greater overall
operational efficiency which improved profitability.
The consolidated effective income tax rate is consistent for
the two fiscal years.
The general effects of inflation for fiscal 1993 were
minimal.
The Company adopted two new accounting
1994 ANNUAL REPORT
22
<PAGE>7
MIDWEST GRAIN PRODUCTS, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
pronouncements in fiscal 1993. Statement of Financial Accounting
Standards (SFAS) No. 106, "Employer's Accounting for
Post-Retirement Benefits Other Than Pensions," requires the cost
of these benefits to be charged to expense during the years that
employees render service rather than on the cash basis previously
used. In addition to the initial recording of the cumulative
effect of this accounting change as of July 1, 1992, the ongoing
expense will also be higher than that charged in prior years
under the previous method. SFAS No. 109, "Accounting for Income
Taxes," establishes financial accounting and reporting standards
for the effects of income taxes. The cumulative effect at July
1, 1992 results from the recomputation of the deferred income tax
liability at current rates for temporary differences between tax
and financial reporting which were originated in periods of
higher tax rates.
The effects of the activities of the discontinued operations
and cumulative effects of the accounting changes combined with
the Company's income from continuing operations to produce a net
income of $16,236,000 for fiscal 1993, compared to $13,506,000
for the preceding year.
________________________________________________________________
QUARTERLY FINANCIAL INFORMATION
Generally the Company's sales are not seasonal except for
minor variations affecting beverage alcohol and gluten sales.
Beverage alcohol sales tend to peak in the fall as distributors
order stocks for the holiday season, while gluten sales tend to
increase during the second half on the fiscal year as demand
increases for hot dog buns, and similar bakery products. The
following table shows quarterly information for each of the years
ended June 30, 1994 and 1993.
<TABLE>
<CAPTION> Quarter Ending
_________________________________________________
Sept. 30 Dec. 31 March 31 June 30 Total
_______________________________________________________________________________________________________________
(in thousands except per share amounts)
<S> <C> <C> <C> <C> <C>
Fiscal 1994
Sales $39,162 $45,286 $50,652 $50,868 $185,968
Gross Profit 4,577 8,085 12,641 12,345 37,648
Net Income 1,093 3,187 6,084 5,487 15,851
Earnings per share .11 .33 .62 .56 1.62
Fiscal 1993
Sales $40,117 $41,993 $40,784 $40,532 $163,426
Gross Profit 7,717 8,861 8,232 8,065 32,875
Income from continuing operations 3,253 3,993 3,503 3,881 14,630
Income before cumulative change
in accounting principle 3,543 5,368 3,503 3,881 16,295
Net Income 3,484 5,368 3,503 3,881 16,236
Earnings per share
Continuing operations .33 .41 .36 .40 1.50
Before cumulative change
in accounting principle .36 .55 .36 .40 1.67
Net Income .35 .55 .36 .40 1.66
_______________________________________________________________________________________________________________
</TABLE>
1994 ANNUAL REPORT
23
<PAGE>8
MIDWEST GRAIN PRODUCTS, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
LIQUIDITY AND CAPITAL RESOURCES
The following table is presented as a measure of the
Company's liquidity and financial condition:
<TABLE>
<CAPTION> At June 30,
________________________________________
1994 1993
___________________________________________________________________________________________
(In Thousands)
<S> <C> <C>
Cash, cash equivalents and short-term investments $ 4,171 $23,539
Long-term liquid investments 14,504
Long-term debt (including current maturities) 25,000 50
Working capital 22,151 41,580
____________________________________________________________________________________________
</TABLE>
LIQUIDITY AND CAPITAL RESOURCES
Strong operations and the liquidation of net operating
assets of McCormick caused the Company's cash and working capital
positions to be higher than normal at June 30, 1993. These
amounts have since been reduced as expenditures for the
distillery expansion in Pekin, as well as other capital
improvement projects, have exceeded cash generated from operating
activities. Additionally, the Company has used $10.5 million of
the $25 million borrowed to fund its expansion program.
Increased receivable and inventory levels due to volume increases
have also reduced short-term liquidity. In spite of these high
cash requirements to fund growth, the Company continued paying
dividends to stockholders at a consistent pace.
At June 30, 1994, the Company has amounts remaining to spend
under capital improvements projects totaling approximately $22.3
million. As previously discussed, the distillery project at
Pekin is proceeding on schedule toward a January, 1995
completion. Additionally, the gluten expansion and new wheat
starch facilities at Pekin are expected to come on line in March,
1995, which will increase gluten and starch capacities by 40% and
70%, respectively. Capital improvement projects in Atchison
include expansions of the flour mill, wheat starch capacity and
wastewater treatment plant.
In August, 1993, the Company borrowed $25 million through
the issuance of unsecured fifteen-year senior notes bearing
interest at 6.68%. The proceeds from this borrowing have been
invested in short-term investments and are fully available to
finance the ongoing expenditures. Additionally, the Company
obtained an additional $20.0 million line of credit to go along
with two already existing lines of credit totaling $5.0 million.
There were no borrowings on either line of credit at June 30,
1994.
Midwest Grain Products believes the above borrowings,
existing working capital and working capital generated from
future operations will allow it to accomplish its plant expansion
and expanded working capital needs.
1994 ANNUAL REPORT
24
<PAGE>9
MIDWEST GRAIN PRODUCTS, INC.
Independent Accountants' Report
Board of Directors and Stockholders
Midwest Grain Products, Inc.
Atchison, Kansas
We have audited the accompanying consolidated balance sheets
of MIDWEST GRAIN PRODUCTS, INC. as of June 30, 1994 and 1993, and
the related consolidated statements of income, stockholders'
equity, and cash flows for each of the three years in the period
ended June 30, 1994. These financial statements are the
responsibility of the Company's management. Our responsibility
is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally
accepted auditing standards. Those standards require that we
plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the consolidated financial statements
referred to above present fairly, in all material respects, the
consolidated financial position of MIDWEST GRAIN PRODUCTS, INC.
as of June 30, 1994 and 1993 and the results of its operation and
its cash flows for each of the three years in the period ended
June 30, 1994, in conformity with generally accepted accounting
principles.
As discussed in Notes 6 and 9 to the consolidated financial
statements, the Company changed its methods of accounting for
income taxes and post-retirement benefits other than pensions,
respectively, during fiscal 1993.
/s/ Baird, Kurtz & Dobson
BAIRD, KURTZ & DOBSON
Kansas City, Missouri
August 11, 1994
1994 ANNUAL REPORT
25
<PAGE>10
MIDWEST GRAIN PRODUCTS, INC.
Financial Review
<TABLE>
<CAPTION> Consolidated Statements of Income
Years Ended June 30, 1994, 1993, and 1992
1994 1993 1992
_______________________________________________________________________________________________________________
(In Thousands, Except Per Share Amounts)
<S> <C> <C> <C>
NET SALES (Note 14) $185,968 $163,426 $155,794
COST OF SALES 148,320 130,551 127,883
_______________________________________________________________________________________________________________
GROSS PROFIT 37,648 32,875 27,911
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES 12,212 10,677 9,794
_______________________________________________________________________________________________________________
25,436 22,198 18,117
OTHER OPERATING INCOME (EXPENSE)(Note 8) (669) (264) 17
_______________________________________________________________________________________________________________
INCOME FROM OPERATIONS 24,767 21,934 18,134
OTHER INCOME, NET 924 1,045 1,191
INTEREST EXPENSE 127 71 93
_______________________________________________________________________________________________________________
INCOME FROM CONTINUING OPERATIONS
BEFORE INCOME TAXES 25,564 22,908 19,232
PROVISION FOR INCOME TAXES (Note 6) 9,713 8,278 7,020
_______________________________________________________________________________________________________________
INCOME FROM CONTINUING OPERATIONS 15,851 14,630 12,212
DISCONTINUED OPERATIONS (Note 14)
Income from operations of McCormick Distilling
(less applicable income tax) 616 1,294
Gain on sale of certain assets of McCormick Distilling
(less applicable income tax of $604) 1,049
_______________________________________________________________________________________________________________
INCOME BEFORE CUMULATIVE CHANGE
IN ACCOUNTING PRINCIPLE 16,295 13,506
CHANGE IN ACCOUNTING PRINCIPLE
Cumulative effect of change in method of accounting
for post-retirement benefits (net of income tax
benefit of $1,288) (Note 9) (2,241)
Cumulative effect of change in method of accounting
for income taxes (Note 6) 2,182
_______________________________________________________________________________________________________________
NET INCOME $ 15,851 $ 16,236 $ 13,506
===============================================================================================================
EARNINGS PER COMMON SHARE
Continuing operations $1.62 $1.50 $1.25
Discontinued operations .17 .13
Cumulative effect of changes in accounting principles (.01)
______________________________________________________________________________________________________________
$1.62 $1.66 $1.38
===============================================================================================================
</TABLE>
See Notes to Consolidated Financial Statements
1994 ANNUAL REPORT
26
<PAGE>11
MIDWEST GRAIN PRODUCTS, INC.
Financial Review
<TABLE>
<CAPTION> Consolidated Balance Sheets
June 30, 1994 and 1993
Assets
1994 1993
_______________________________________________________________________________________________________________
(In Thousands)
<S> <C> <C>
CURRENT ASSETS
Cash and cash equivalents $ 3,832 $ 20,074
Short term investments 339 3,465
Receivables (less allowance for doubtful accounts:
1994-$25; 1993-$25) 20,457 18,005
Notes receivable 814 814
Inventories (Note 2) 13,229 10,873
Prepaid expenses 576 629
Deferred income taxes 876 548
_______________________________________________________________________________________________________________
Total Current Assets 40,123 54,408
_______________________________________________________________________________________________________________
INVESTMENTS 14,504
_______________________________________________________________________________________________________________
LONG-TERM RECEIVABLES 961 2,168
_______________________________________________________________________________________________________________
PROPERTY AND EQUIPMENT, At cost (Note 3) 182,446 135,761
Less accumulated depreciation 69,888 65,666
_______________________________________________________________________________________________________________
PROPERTY AND EQUIPMENT, NET 112,558 70,095
_______________________________________________________________________________________________________________
TOTAL ASSETS $168,146 $126,671
===============================================================================================================
</TABLE>
See Notes to Consolidated Financial Statements
1994 ANNUAL REPORT
27
<PAGE> 12
MIDWEST GRAIN PRODUCTS, INC.
Financial Review
<TABLE>
<CAPTION> Consolidated Balance Sheets
June 30, 1994 and 1993
Liabilities and Stockholders' Equity
1994 1993
_______________________________________________________________________________________________________________
(In Thousands)
<S> <C> <C>
CURRENT LIABILITIES
Current maturities of long-term debt $ 50
Accounts payable $ 8,551 5,742
Accrued expenses (Note 4) 8,189 6,797
Income taxes payable 1,232 239
_______________________________________________________________________________________________________________
Total Current Liabilities 17,972 12,828
_______________________________________________________________________________________________________________
LONG-TERM DEBT (Note 5) 25,000
_______________________________________________________________________________________________________________
POST-RETIREMENT BENEFITS (Note 9) 5,045 4,267
_______________________________________________________________________________________________________________
DEFERRED INCOME TAXES (Note 6) 5,956 6,370
_______________________________________________________________________________________________________________
STOCKHOLDERS' EQUITY (Note 5)
Capital stock (Note 7)
Preferred, 5% non-cumulative, $10 par value;
authorized 1,000 shares; issued and outstanding 437 shares 4 4
Common, no par;
authorized 20,000,000 shares;
issued and outstanding 9,765,172 6,715 6,715
Additional paid-in capital 2,485 2,485
Retained earnings 104,969 94,002
_______________________________________________________________________________________________________________
TOTAL STOCKHOLDERS' EQUITY 114,173 103,206
_______________________________________________________________________________________________________________
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $168,146 $126,671
===============================================================================================================
</TABLE>
See Notes to Consolidated Financial Statements
1994 ANNUAL REPORT
28
<PAGE>13
MIDWEST GRAIN PRODUCTS, INC.
FINANCIAL REVIEW
<TABLE>
<CAPTION> Consolidated Statements of Stockholders' Equity
Years Ended June 30, 1994, 1993, and 1992
Additional
Preferred Common Paid-in Retained
Stock Stock Capital Earnings Total
_______________________________________________________________________________________________________________
(In Thousands)
<S> <C> <C> <C> <C> <C>
BALANCE, JUNE 30, 1991 $4 $6,715 $2,485 $73,782 $ 82,986
1992 net income 13,506 13,506
Payment of cash dividends
of $.48 per share (4,639) (4,639)
_______________________________________________________________________________________________________________
BALANCE, JUNE 30, 1992 4 6,715 2,485 82,649 91,853
1993 net income 16,236 16,236
Payment of cash dividends
of $.50 per share (4,883) (4,883)
_______________________________________________________________________________________________________________
BALANCE, JUNE 30, 1993 4 6,715 2,485 94,002 103,206
1994 net income 15,851 15,851
Payment of cash dividends
of $.50 per share (4,884) (4,884)
_______________________________________________________________________________________________________________
BALANCE, JUNE 30, 1994 $4 $6,715 $2,485 $104,969 $114,173
===============================================================================================================
</TABLE>
See Notes to Consolidated Financial Statements
1994 ANNUAL REPORT
29
<PAGE>14
MIDWEST GRAIN PRODUCTS, INC.
FINANCIAL REVIEW
<TABLE>
<CAPTION> CONSOLIDATED STATEMENTS OF CASH FLOWS
Years Ended June 30, 1994, 1993, and 1992
1994 1993 1992
_______________________________________________________________________________________________________________
(In Thousands)
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income $15,851 $16,236 $13,506
Items not requiring (providing) cash
Depreciation 7,160 6,201 7,236
Gain on sale of assets (513) (1,119) (325)
Deferred income taxes (742) (677) (731)
Change in accounting principles 59
Changes in:
Accounts receivable (2,452) (4,861) (2,888)
Inventories (2,356) (2,294) 71
Prepaid expenses 53 (107) (280)
Accounts payable (111) (1,699) 1,791
Accrued expenses 932 2,108 1,406
Income taxes payable 993 (1,087) (483)
Discontinued operations 10,414 1,344
_______________________________________________________________________________________________________________
Net cash provided by operating activities 18,815 23,174 20,647
_______________________________________________________________________________________________________________
CASH FLOWS FROM INVESTING ACTIVITIES
Additions to property and equipment (45,690) (12,190) (15,020)
Proceeds from sale of equipment 738 150 516
Proceeds from sale of McCormick Distilling Company
net of cash acquired 1,089 5,088
Change in current and non current investments, net (11,260) (2,465) (1,000)
_______________________________________________________________________________________________________________
Net cash used in investing activities (55,123) (9,417) (15,504)
______________________________________________________________________________________________________________
CASH FLOWS FROM FINANCING ACTIVITIES
Principal payment on long-term debt (50) (1,043) (248)
Proceeds from issuance of long-term debt 25,000
Dividends paid (4,884) (4,883) (4,557)
_______________________________________________________________________________________________________________
Net cash provided by (used in) financing activities 20,066 (5,926) (4,805)
_______________________________________________________________________________________________________________
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (16,242) 7,831 338
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR 20,074 12,243 11,905
_______________________________________________________________________________________________________________
CASH AND CASH EQUIVALENTS, END OF YEAR $ 3,832 $20,074 $12,243
===============================================================================================================
</TABLE>
See Notes to Consolidated Financial Statements
1994 ANNUAL REPORT
30
<PAGE>15
MIDWEST GRAIN PRODUCTS, INC.
Financial Review
Notes to Consolidated Financial Statements
NOTE 1: ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES
Organization. The activities of Midwest Grain Products Inc.
and its subsidiaries consist of production of vital wheat gluten,
premium wheat starch, alcohol products and flour mill products.
The Company sells its products on normal credit terms to
customers in a variety of industries located primarily throughout
the United States. Through its wholly-owned subsidiaries, the
Company operates in Atchison, Kansas and Pekin, Illinois (Midwest
Grain Products of Illinois, Inc.). Additionally, Midwest Grain
Pipeline, Inc. another wholly-owned subsidiary, supplies natural
gas to the Company.
Principles of Consolidation. The consolidated financial
statements include the accounts of Midwest Grain Products, Inc.
and all subsidiaries. All significant intercompany balances and
transactions have been eliminated in consolidation.
Inventories. Inventories are stated at the lower of cost or
market on the first-in, first-out (FIFO) method.
Property and Equipment. Depreciation is computed using both
straight-line and accelerated methods over the estimated useful
lives of the assets. The Company capitalizes interest costs as a
component of construction in progress, based on the weighted
average rates paid for long-term borrowing. Total interest
incurred each year was:
Years Ended June 30,
---------------------------
1994 1993 1992
----------------------------
(In Thousands)
Interest costs capitalized $1,328
Interest costs
charged to expense 127 $71 $93
-----------------------------
$1,455 $71 $93
=============================
Earnings Per Common Share. Earnings per common share data
is based upon the weighted average number of shares totaling
9,765,172 outstanding for each year.
Cash Equivalents. The Company considers all liquid
investments with maturities of three months or less to be cash
equivalents and excludes unexpended funds included in investments
intended for construction projects.
Investments. Current and non-current investments consist
primarily of money market funds and are valued at cost which
approximates market.
Income Taxes. Deferred tax liabilities and assets are
recognized for the tax effect of the differences between the
financial statement and tax basis of assets and liabilities. A
valuation allowance is established to reduce deferred tax assets
if it is more likely than not that a deferred tax asset will not
be realized.
Reclassification. Certain reclassifications have been made
to the 1993 financial statements to conform to the 1994
presentation. These changes had no effect on net income.
NOTE 2: INVENTORIES
Inventories consist of the following:
June 30,
______________________
1994 1993
______________________
(In Thousands)
Whiskey, alcohol, and spirits $ 3,798 $3,308
Unprocessed grain 5,248 4,543
Operating supplies 2,206 1,957
Gluten 1,460 661
By-products and other 517 404
______________________
$13,229 $10,873
======================
NOTE 3: PROPERTY AND EQUIPMENT
Property and equipment consists of the following:
1994 ANNUAL REPORT
31
<PAGE>16
MIDWEST GRAIN PRODUCTS, INC.
FINANCIAL REVIEW
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30,
______________________
1994 1993
______________________
(In Thousands)
Land, buildings and improvements $16,890 $18,262
Transportation equipment 7,239 3,354
Machinery and equipment 105,804 102,263
Construction in progress 52,513 11,882
______________________
182,446 135,761
Less accumulated depreciation 69,888 65,666
______________________
$112,558 $ 70,095
======================
NOTE 4: ACCRUED EXPENSES
Other accrued expenses consist of the following:
June 30,
______________________
1994 1993
______________________
(In Thousands)
Excise taxes $ 768 $1,392
Employee benefit plans (Note 9) 2,098 1,404
Salaries and wages 1,354 1,378
Dividends declared 1,221 1,221
Property taxes 511 429
Royalties 441 429
Payroll taxes 48 14
Insurance 1,045 489
Interest 696
Other expenses 7 41
______________________
$8,189 $6,797
======================
NOTE 5: LONG-TERM DEBT
Long-term debt consists of the following:
June 30,
______________________
1994 1993
______________________
(In Thousands)
Senior notes payable $25,000
Other $50
______________________
25,000 50
Less current maturities 50
______________________
Long-term portion $25,000 $ 0
======================
The senior notes payable are payable in annual installments of
$2,273,000 from 1999 through 2008 with the final principal
payment of $2,270,000 due in 2009. Interest is payable
semi-annually at 6.68% per annum for the fifteen-year term of the
notes. In connection with the borrowing, the Company, among
other covenants, is required to maintain certain financial
ratios, including a minimum consolidated tangible net worth of
$70,000,000.
At June 30, 1994, the Company had a formal revolving line of
credit, with interest at prime minus 1%, amounting to $20.0
million, and two additional lines of credit with interest at
prime, amounting to $5.0 million. There were no borrowings on
any of the available lines.
The fair value of the senior notes payable debt, based upon
the borrowing rate of 8.0% currently available to the Company at
June 30, 1994, was $23,700,000.
Aggregate annual maturities of long-term debt at June 30,
1994 are as follows:
(In Thousands)
1995 $ 0
1996 0
1997 0
1998 0
1999 2,273
Thereafter 22,727
_________
$ 25,000
=========
NOTE 6: INCOME TAXES
Effective July 1, 1992, the Company elected early adoption
of Statement of Financial Accounting Standards (SFAS) No. 109,
Accounting for Income Taxes. The cumulative effect at July 1,
1992 included in the accompanying consolidated statements of
income was a $2,182,000 reduction in previously recorded
deferred tax liabilities, or $.22 per share. Prior years'
financial statements have not been restated to apply the
provision of SFAS No. 109.
The provisions for income taxes is comprised of the
following:
Years Ended June 30,
______________________________
1994 1993 1992
______________________________
(In Thousands)
Income taxes
currently payable $10,455 $9,913 $8,496
Income taxes deferred (742) (677) (731)
______________________________
$9,713 $9,236 $7,765
==============================
1994 ANNUAL REPORT
32
<PAGE> 17
MIDWEST GRAIN PRODUCTS, INC.
FINANCIAL REVIEW
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The income tax expense is reflected in the accompanying
statements of income as follows:
Years Ended June 30,
____________________________
1994 1993 1992
____________________________
(In Thousands)
Continuing operations $9,713 $8,278 $7,020
Discontinued operations
Income from operations 354 745
Gain on disposal 604
____________________________
$9,713 $9,236 $7,765
============================
The tax effects of temporary differences related to deferred
taxes shown on the consolidated balance sheets were as follows:
June 30,
__________________________
1994 1993
__________________________
(In Thousands)
Deferred tax assets
Accrued employee benefits $ 456 $ 415
Post-retirement liability 2,007 1,565
Insurance accruals 415 182
Other 110 68
__________________________
2,988 2,230
__________________________
Deferred tax liabilities:
Accumulated depreciation (7,564) (7,520)
Deferred gain on
involuntary conversion (504) (532)
__________________________
(8,068) (8,052)
__________________________
Net deferred tax liability $(5,080) $(5,822)
==========================
The above net deferred tax liability is presented on the
consolidated balance sheets as follows:
June 30,
_________________________
1994 1993
_________________________
(In Thousands)
Deferred tax asset - current $ 876 $ 548
Deferred tax liability - current (5,956) (6,370)
_________________________
Net deferred tax liability $(5,080) $ (5,822)
=========================
No valuation allowance has been recorded at June 30, 1994 or
1993.
During 1992, deferred income taxes were provided for timing
differences in the recognition of revenue and expense for tax and
financial purposes. In 1992, the largest component of deferred
taxes was an $8.5 million deferred tax liability resulting from
depreciation.
A reconciliation of the provision for income taxes from
continuing operations at the normal statutory federal rate to the
provision included in the accompanying consolidated statements of
income is shown below:
Years Ended June 30,
____________________________
1994 1993 1992
____________________________
(In Thousands)
"Expected" provision at
Federal statutory rate (34%) $8,694 $7,790 $6,539
Increases (decreases)
resulting from:
Effect of State
income taxes 760 871 510
Other 259 (383) ( 29)
____________________________
Provision for income taxes $9,713 $8,278 $7,020
============================
NOTE 7: CAPITAL STOCK
The Common Stock is entitled to elect four out of the nine
members of the Board of Directors of the Company, while the
Preferred Stock is entitled to elect the remaining five
directors. Holders of Common Stock are not entitled to vote with
respect to a merger, dissolution, lease, exchange or sale of
substantially all of the Company's assets, or on an amendment to
the Articles of Incorporation, unless such action would increase
or decrease the authorized shares or par value of the Common or
Preferred Stock, or change the powers, preferences or special
rights of the Common or Preferred Stock so as to affect the
holders of Common Stock adversely.
NOTE 8: OTHER OPERATING INCOME (EXPENSE)
Other operating income (expense) consists of the following:
Years Ended June 30,
____________________________
1994 1993 1992
____________________________
(In Thousands)
Truck operations $(88) $(31) $29
Warehousing and
storage operations (632) (328) (75)
Miscellaneous 51 95 63
____________________________
$(669) $(264) $17
============================
1994 ANNUAL REPORT
33
<PAGE>18
MIDWEST GRAIN PRODUCTS, INC.
FINANCIAL REVIEW
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1994, 1993, and 1992
NOTE 9: EMPLOYEE BENEFIT PLANS
The Company has a noncontributory defined benefit pension
plan covering union employees. The plan provides benefits based
on the participants' years of service. The Company only
contributes amounts deductible for federal income tax purposes.
Pension cost included the following components:
Years Ended June 30,
____________________________
1994 1993 1992
____________________________
(In Thousands)
Service cost-benefits
earned during year $ 53 $ 53 $ 57
Interest cost on projected
benefit obligations 142 136 128
Actual investment income
earned on plan assets (83) (203) (103)
Amortization of transition
liability and difference
between actual and expected
return on plan assets (28) 105 12
____________________________
Pension cost $ 84 $ 94 $94
============================
The funded status of the plan is as follows:
June 30,
__________________
1994 1993
__________________
(In Thousands)
Accumulated benefit obligations
including vested benefits
of $1,976 and $1,938 $1,983 $1,955
==================
Plan assets at fair value $1,727 $1,702
Projected benefit obligations
for participants' service
rendered to date 1,983 1,955
______ ______
Projected benefit obligations
in excess of plan's assets (256) (253)
Unrecognized gain (loss) 21 (1)
Unrecognized prior service cost 71 77
Unrecognized net obligation at
July 1, 1987 being recognized
over the participants' average
remaining service period 141 159
Adjustment required to recognize
the minimum liability (233) (235)
__________________
Minimum pension liability $(256) $(253)
==================
Plan assets are invested in cash equivalents, U.S.
Government securities, corporate bonds, fixed income funds and
common stocks.
The discount rate used in determining the actuarial resent
value of the projected benefit obligation was 7.5%. The expected
long-term rate of return on the plan's assets was 8.0%.
The Company and its subsidiaries have employee stock
ownership plans covering all eligible employees. Discretionary
contributions to the plans totaled $1,323,000, $1,163,000 and
$1,193,000 for the years ended June 30, 1994, 1993 and 1992,
respectively. Contributions are made in the form of cash and/or
additional shares of common stock.
The Company and its subsidiaries provide certain health care
and life insurance benefits to existing retired employees. The
liability for such benefits is unfunded. The Company adopted the
accounting provisions of the Statement of Financial Accounting
Standards (SFAS) No. 106, "Employer's Accounting for
Post-Retirement Benefits Other Than Pensions," during fiscal
1993. This standard requires that the expected cost of retiree
health and life insurance benefits be charged to expense during
the years that the employees render service rather than the
Company's past practice of recognizing these costs on a cash
basis.
The cumulative effect of this accounting change reduced net
income for the year ended June 30, 1993 by approximately $2.2
million ($3.5 million less related deferred income taxes of $1.3
million), or $.23 per share. The Company elected to record the
transition obligation as a one-time charge against earnings
rather than amortize it over a longer period. If the 1993
expense had been determined under the cash method previously
used, the amount recognized would have been $187,000 before
taxes.
1994 ANNUAL REPORT
34
<PAGE>19
MIDWEST GRAIN PRODUCTS, INC.
FINANCIAL REVIEW
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The status of the Company's plans at June 30, 1994 and 1993
was as follows:
June 30,
_______________________
1994 1993
_______________________
(In Thousands)
Accumulated post-retirement
benefit obligation:
Retirees $2,854 $2,785
Active plan participants 2,645 2,059
_______________________
Unfunded accumulated
obligation 5,499 4,844
Unrecognized actuarial
loss (454) (577)
_______________________
Accrued post-retirement
benefit cost $5,045 $4,267
=======================
Net post-retirement benefit cost included the following
components:
June 30,
______________________
1994 1993
______________________
(In Thousands)
Service cost $ 153 $ 115
Interest cost 388 420
______________________
Post-retirement benefit cost $ 541 $ 535
======================
The expense under the cash method previously used was
$136,000 for fiscal 1992.
The weighted average annual assumed rate of increase in the
per capita cost of covered benefits (i.e., health care cost trend
rate) is assumed to be 13.5% (compared to 14.0% assumed for 1993)
reducing to reducing to 11.0 % over five years and 6 % over 23
years. A one percentage point increase in the assumed health care
cost trend rate would have increased the accumulated benefit
obligation by $480,000 at June 30, 1994 and the service and
interest cost by $80,000 for the year then ended.
A weighted average discount rate of 8.0% was used in
determining the accumulated benefit obligation.
NOTE 10: MAJOR CUSTOMERS
During the years ended June 30, 1994, 1993 and 1992, the
Company had sales to one customer accounting for approximately
14.5 % 13.0 % and 14.5 %, respectively, of consolidated sales.
NOTE 11: OPERATING LEASES
The Company has several noncancellable operating leases for
railcars which expire from January, 1995 through November, 2000.
The leases generally require the Company to pay all service costs
associated with the railcars. Rental payments include minimum
rentals plus contingent amounts based on mileage.
Future minimum lease payments at June 30, 1994 are as
follows:
(In Thousands)
1995 $ 697
1996 651
1997 596
1998 501
1999 262
Thereafter 48
_________
Future minimum lease payments $ 2,755
=========
Rental expense for all operating leases with terms longer
than one month totaled $532,000, $136,000 and $166,000 for the
years ended June 30, 1994, 1993 and 1992, respectively.
NOTE 12: ADDITIONAL CASH FLOW INFORMATION
Years Ended June 30,
______________________________
1994 1993 1992
______________________________
(In Thousands)
Noncash Investing and
Financing Activities
Purchase of property and
equipment in accounts
payable $ 3,931 $ 2,045 $ 100
Notes received from
sale of subsidiary 4,557
Dividends declared 1,221 1,221 1,221
Additional Cash Information
Interest paid 127 67 93
Income taxes paid 9,460 10,648 8,354
1994 ANNUAL REPORT
35
<PAGE>20
MIDWEST GRAIN PRODUCTS, INC.
FINANCIAL REVIEW
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 13: CONTINGENCIES
There are various legal proceedings involving the Company
and its subsidiaries. Management considers that the aggregate
liabilities, if any, arising from such actions would not have a
material adverse effect on the consolidated financial position or
operations of the Company.
NOTE 14: SALE OF McCORMICK DISTILLING COMPANY
On December 31, 1992, the Company's wholly-owned subsidiary
McCormick Distilling Company, sold its principal operating assets
consisting of inventories, property and equipment, trademarks,
patents and licenses, to MDC Acquisition Company (now known as
McCormick Distilling Company), an independent business formed by
a group of private investors. The Company retained accounts
receivable and assumed accounts payable while MDC assumed certain
accrued liabilities, including excise taxes, of approximately
$1.7 million. In addition, the Company received cash of
approximately $3.1 million, a $1.6 million 30-day note at prime
and a three year note for approximately $3.0 million,
collateralized by bulk whiskey, with interest payable at prime.
The sale resulted in a gain of $1.0 million after taxes of
approximately $600,000.
The three year note receivable had a balance due of
approximately $1.5 million at June 30, 1994 and is included in
notes receivable in the consolidated balance sheet.
The disposal is being accounted for as a discontinued
operation and, accordingly, its operating results are segregated
and reported as discontinued operations in the accompanying
consolidated statements of income.
Summarized results of operations of McCormick Distilling
Company were as follows:
Years Ended June 30,
________________________
1993 1992
________________________
(In Thousands)
Results of Operations:
Net Sales:
Grain products sales $ 13,167 $ 22,970
Excise taxes 26,133 52,542
________________________
39,300 75,512
Income before
income taxes 971 2,039
Provision for
income taxes 355 745
________________________
Income from
operations $ 616 $ 1,294
========================
1994 ANNUAL REPORT
36
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED
FROM MIDWEST GRAIN PRODUCTS, INC. CONSOLIDATED STATEMENT OF
INCOME FOR THE YEAR ENDED JUNE 30, 1994 AND CONSOLIDATED BALANCE
SHEET AS AT JUNE 30, 1994, AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000835011
<NAME> MIDWEST GRAIN PRODUCTS, INC.
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JUN-30-1994
<PERIOD-START> JUL-1-1993
<PERIOD-END> JUN-30-1994
<CASH> 3,832
<SECURITIES> 339
<RECEIVABLES> 20,482<F1>
<ALLOWANCES> 25
<INVENTORY> 13,229
<CURRENT-ASSETS> 40,123
<PP&E> 182,446
<DEPRECIATION> 69,888
<TOTAL-ASSETS> 168,146
<CURRENT-LIABILITIES> 17,972
<BONDS> 25,000
<COMMON> 6,715
0
4
<OTHER-SE> 107,454<F2>
<TOTAL-LIABILITY-AND-EQUITY> 168,146
<SALES> 185,968
<TOTAL-REVENUES> 186,892
<CGS> 148,320
<TOTAL-COSTS> 148,320
<OTHER-EXPENSES> 669
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 127
<INCOME-PRETAX> 25,564
<INCOME-TAX> 9,713
<INCOME-CONTINUING> 15,851
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 15,851
<EPS-PRIMARY> 1.62
<EPS-DILUTED> 1.62
<FN>
<F1>Consists of trade receivables and does not include notes
receivable.
<F2>Reflects retained earnings and additional paid in captial
</FN>
</TABLE>
<PAGE> 1
Exhibit 99
EXHIBIT INDEX
EXHIBIT
NUMBER DESCRIPTION
--------- -------------
3(a) Articles of Incorporation of the Company
(Incorporated by reference to Exhibit 3(a) of the
Company's Registration Statement No. 33-24398 on
Form S-1).
3(b) Bylaws of the Company (Incorporated by reference to
Exhibit 3(b) of the Company's Registration
Statement No. 33-24398 on Form S-1).
4(a) Copy of Note Agreement dated as of August 1, 1993,
providing for the issuance and sale of $25 million
of 6.68% term notes ("Term Notes", incorporated by
reference to Exhibit 4.1 to the Company's Report on
Form 10-Q for the quarter ended September 30,
1993).
4(b) Copy of Term Notes dated August 27, 1993
(incorporated by reference to Exhibit 4.2 to the
Company's Report on Form 10-Q for the quarter ended
September 30, 1993).
9(a) Copy of Cray Family Trust (Incorporated by
reference to Exhibit 9(a) of the Company's
Registration Statement No. 33-22600 on Form S-4).
10(a) Summary of informal cash bonus plan (incorporated
by reference to the summary contained in the
Company's Proxy Statement dated September 12, 1994,
which is incorporated by reference into Part III of
this Form 10-K).
10(b) Executive Stock Bonus Plan as amended June 15, 1992
(incorporated by reference to Exhibit 10(b) to the
Company's Form 10-K for the year ended June 30,
1992).
10(c) Information contained in the Midwest Grain
Products, Inc. 1994 Annual Report to Stockholders
that is incorporated herein by reference.
<PAGE> 2
22 Subsidiaries of the Company other than
insignificant subsidiaries:
State of
Incorporation
Subsidiary or Organization
---------- ---------------
Midwest Solvents Company of Illinois, Inc. Illinois
Midwest Grain Pipeline, Inc. Kansas
Midwest Grain Products of Illinois, Inc. Illinois
Midwest Purchasing Company, Inc. Illinois
25 Powers of Attorney executed by all officers and
directors of the Company who have signed this
report on Form 10-K (incorporated by reference to
the signature pages of this report).
27 Midwest Grain Products Financial Data Schedule as
at June 30, 1994 and for the year then ended.
