<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For Quarter Ended March 31, 1995 -
Commission File No. 0-17196
MIDWEST GRAIN PRODUCTS, INC.
____________________________________
(Exact Name of Registrant as Specified in Its Charter)
KANSAS 48-0531200
______________________________ ________________
(State or Other Jurisdiction of IRS Employer
Incorporation or Organization) Identification No.
1300 Main Street, Atchison, Kansas 66002
_____________________________________________________
(Address of Principal Executive Offices and Zip Code)
(913) 367-1480
______________________________________________________
(Registrant's Telephone Number, Including Area Code)
Indicate by check mark whether the Registrant (1) 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
(or for such shorter period that the Registrant was required to
file such reports) and (2) has been subject to the filing
requirements for at least the past 90 days. [x] YES [__] NO
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date.
Common stock, no par value
9,765,172 shares outstanding
as of May 1, 1995.
<PAGE>
INDEX
PART I. FINANCIAL INFORMATION Page
____
Item 1. Financial Statements
____________________
Independent Accountants' Review Report 2
Condensed Consolidated Balance Sheets as of
March 31, 1995 and June 30, 1994 3
Condensed Consolidated Statements of Income
for the Three Months and Nine Months Ended
March 31, 1995 and 1994 5
Condensed Consolidated Statements of
Cash Flows for the Nine Months Ended
March 31, 1995 and 1994 6
Note to Condensed Consolidated
Financial Statements 7
Item 2. Management's Discussion and Analysis
of Financial Condition and Results of
Operations 8
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 12
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<PAGE> [LOGO]
Baird, Kurtz & Dobson
Certified Public Accountants
Independent Accountants' Review Report
Board of Directors and Stockholders
Midwest Grain Products, Inc.
Atchison, Kansas 66002
We have reviewed the condensed consolidated balance sheet of
MIDWEST GRAIN PRODUCTS, INC. and subsidiaries as of March 31,
1995, and the related condensed consolidated statements of income
for the three month and nine month periods ended December 31,
1995 and 1994, and the related condensed consolidated statements
of cash flows for the nine month periods ended March 31, 1995 and
1994.
These financial statements are the responsibility of the
Company's management.
We conducted our reviews in accordance with STATEMENTS ON
STANDARDS FOR ACCOUNTING AND REVIEW SERVICES issued by the
American Institute of Certified Public Accountants. A review of
interim financial information consists principally of applying
analytical procedures to financial data and making inquiries of
persons responsible for financial and accounting matters. It is
substantially less in scope than an audit conducted in accordance
with generally accepted auditing standards, the objective of
which is the expression of an opinion regarding the financial
statements taken as a whole. Accordingly, we do not express such
an opinion.
Based on our reviews, we are not aware of any material
modifications that should be made to the condensed consolidated
financial statements referred to above for them to be in
conformity with generally accepted accounting principles.
We have previously audited, in accordance with generally
accepted auditing standards, the consolidated balance sheet as of
June 30, 1994, and the related consolidated statements of income,
stockholders' equity, and cash flows for the year then ended (not
presented herein); and, in our report dated August 11, 1994, we
expressed an unqualified opinion on those consolidated financial
statements. In our opinion, the information set forth in the
accompanying condensed consolidated balance sheet as of June 30,
1994, is fairly stated in all material respects in relation to
the consolidated balance sheet from which it has been derived.
/S/ Baird, Kurtz & Dobson
BAIRD, KURTZ & DOBSON
Kansas City, Missouri
April 25, 1995
City Center Square, Suite 2700, 1100 Main, 816 221-6300
Kansas City, Missouri 64105 FAX 816 221-6380
With Offices in: Arkansas, Colorado, Kansas, Kentucky, Missouri,
Nebraska, Oklahoma
Member of Moores Rowland International
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<PAGE>
MIDWEST GRAIN PRODUCTS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In Thousands)
ASSETS
March 31, June 30,
1995 1994
___________ ________
(Unaudited)
CURRENT ASSETS
Cash and cash equivalents $ 3,832
Short-term investments 339 339
Receivables 19,616 20,457
Notes receivable 814 814
Inventories 15,851 13,229
Prepaid expenses 780 576
Refundable income taxes 836
Deferred income taxes 876 876
_______ ______
Total Current Assets 39,112 40,123
_______ _______
INVESTMENTS 14,504
_______
LONG-TERM RECEIVABLES 442 961
_______ _______
PROPERTY AND EQUIPMENT, At cost 207,368 182,446
Less accumulated depreciation 73,944 69,888
_______ _______
133,424 112,558
_______ _______
$172,978 $168,146
======== ========
See Accompanying Note to Condensed Consolidated Financial
Statements and Independent Accountants' Review Report
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<PAGE>
MIDWEST GRAIN PRODUCTS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS (Continued)
(In Thousands)
LIABILITIES AND STOCKHOLDERS' EQUITY
March 31, June 30,
1995 1994
__________ ________
(Unaudited)
CURRENT LIABILITIES
Disbursements in excess of
demand deposit cash $ 387
Accounts payable 4,307 $ 8,551
Accrued expenses 6,014 8,189
Income taxes payable 1,232
________ ________
Total Current Liabilities 10,708 17,972
________ ________
LONG-TERM DEBT 35,000 25,000
________ ________
POST-RETIREMENT BENEFITS 5,513 5,045
________ ________
DEFERRED INCOME TAXES 5,956 5,956
________ ________
STOCKHOLDERS' EQUITY
Capital stock
Preferred, 5% noncumulative,
$10 par value; authorized
1,000 shares; issued and
outstanding 437 shares 4 4
Common, no par; authorized
20,000,000 shares; issued
9,765,172 shares 6,715 6,715
Additional paid-in capital 2,485 2,485
Retained earnings 106,597 104,969
_________ ________
115,801 114,173
_________ ________
$172,978 $168,146
======== ========
See Accompanying Note to Condensed Consolidated Financial
Statements and Independent Accountants' Review Report
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<PAGE>
MIDWEST GRAIN PRODUCTS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
THREE MONTHS AND NINE MONTHS ENDED MARCH 31, 1995 AND 1994
(Unaudited)
Three Months Nine Months
_________ _________ _________ ________
1995 1994 1995 1994
_________ _________ _________ ________
(in thousands, except per share amounts)
NET SALES $42,005 $50,652 $132,477 $135,100
COST OF SALES 39,032 38,011 115,120 109,797
_______ _______ _______ ________
GROSS PROFIT 2,973 12,641 17,357 25,303
SELLING, GENERAL
AND ADMINIS-
TRATIVE EXPENSES 2,298 2,886 8,624 8,387
_______ _______ _______ _______
675 9,755 8,733 16,916
OTHER OPERATING LOSS (36) (118) (23) (346)
_______ _______ _______ _______
INCOME FROM OPERATIONS 639 9,637 8,710 16,570
OTHER INCOME (LOSS) (138) 92 182 12
_______ _______ _______ _______
INCOME BEFORE INCOME
TAXES 501 9,729 8,892 16,582
PROVISION FOR INCOME
TAXES 203 3,645 3,601 6,218
_______ _______ _______ _______
NET INCOME $ 298 $ 6,084 $ 5,291 $10,364
======= ======= ======= =======
EARNINGS PER COMMON SHARE $.03 $.62 $.54 $1.06
==== ==== ==== =====
See Accompanying Note to Condensed Consolidated Financial
Statements and Independent Accountants' Review Report
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<PAGE>
MIDWEST GRAIN PRODUCTS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
NINE MONTHS ENDED MARCH 31, 1995 AND 1995
(Unaudited)
1995 1994
______ ______
(in thousands)
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 5,291 $ 10,364
Items not requiring (providing) cash:
Depreciation 5,623 4,819
Gain on sale of assets (205) (36)
Deferred income taxes (120)
Changes in:
Accounts receivable 841 (3,295)
Inventories (2,622) (796)
Prepaid expenses (204) (153)
Disbursements in excess of
demand deposit 387
Accounts payable (2,159) 178
Accrued expenses (1,707) (635)
Income taxes payable (2,068) 1,512
_______ ________
Net cash provided by
operating activities 3,177 11,838
_______ ________
CASH FLOWS FROM INVESTING ACTIVITIES
Additions to property and equipment (28,648) (32,995)
(Purchase) sale of short-term
investments, net 14,505 (19,891)
Proceeds from sale of equipment 279 59
Proceeds from notes receivable 814
Payment received on note for sale of plant 518 5
_______ _______
Net cash used in
investing activities (13,346) (52,008)
_______ ________
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issuance of
long-term debt 10,000 25,000
Principal payment on long-term debt (50)
Dividends paid (3,663) (3,663)
_______ ________
Net cash provided by
financing activities 6,337 21,287
_______ ________
DECREASE IN CASH AND CASH
EQUIVALENTS (3,832) (18,883)
CASH AND CASH EQUIVALENTS,
BEGINNING OF PERIOD 3,832 20,074
_______ ________
CASH AND CASH EQUIVALENTS,
END OF PERIOD $ 0 $ 1,191
======= ========
See Accompanying Note to Condensed Consolidated
Financial Statements and Independent Accountants' Review Report
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<PAGE>
MIDWEST GRAIN PRODUCTS, INC.
NOTE TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NINE MONTHS ENDED MARCH 31, 1995
(Unaudited)
NOTE: GENERAL
In the opinion of management, the accompanying unaudited
condensed consolidated financial statements contain all
adjustments necessary to present fairly the Company's condensed
consolidated financial position as of March 31, 1995, and the
condensed consolidated results of its operations and its cash
flows for the periods ended March 31, 1995 and 1994, and are of a
normal recurring nature.
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<PAGE>
MIDWEST GRAIN PRODUCTS, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
THREE MONTHS AND NINE MONTHS ENDED MARCH 31, 1995
RESULTS OF OPERATIONS
General
_______
Sales and earnings for the third quarter of fiscal 1995 declined
significantly compared to these same results for the third
quarter of fiscal 1994. Lower sales of vital wheat gluten
combined with reduced efficiencies associated with the start-up
of new distillery equipment at the Company's Pekin, Illinois
plant were principal causes for the decrease. The drop in wheat
gluten volume resulted from reduced marketing opportunities due
to increased gluten imports from Europe. The high sales of wheat
gluten the Company experienced in the third quarter of fiscal
1994 resulted from an exceptionally large increase in demand
during that period. This situation was principally caused by
greatly increased requirements for gluten for use in fortifying
flour due to poor protein levels in domestic and non-domestic
wheat supplies. After a return to more normal crop conditions
this past summer, the U.S. market began experiencing a
substantial rise in imported wheat gluten from the European
Union, where wheat starch and gluten capacities underwent
sizeable increases. Profits from their highly subsidized and
protected wheat starch business allow European producers to
easily place their gluten surpluses in the United States market.
Low U.S. tariff rates on wheat gluten provide little deterrence
to this practice, while high tariffs in Europe effectively
prohibit non-European Union member countries from competing in
the wheat gluten and wheat starch markets there. Although the
Company is actively seeking measures that would create a more
level playing field, gluten imports from Europe continue to come
into this country at a record pace.
The Company's unit sales of alcohol products in the third quarter
were up significantly compared to the prior year's third quarter
amount. A significant increase in unit sales of fuel grade
alcohol, which is sold as an octane additive commonly known as
ethanol, offset a decrease in unit sales of food grade alcohol,
which is sold for beverage industrial and commercial
applications. While market opportunities for food grade alcohol
have remained strong, the lower unit sales of this product in the
third quarter resulted from a change in the Company's alcohol
production mix, which was required to satisfy heightened customer
needs in the fuel market. The Company expects growth
opportunities in the fuel grade market to continue, but at a more
gradual rate due to the recent reversal of an Environmental
Protection Agency regulation requiring that renewable fuel
oxygenates such as grain-based ethanol play a larger role in
satisfying future Clean Air Act requirements in certain areas of
the country. The EPA regulation was rescinded by the U. S.
Circuit Court of Appeals for the District of Columbia on
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<PAGE>
MIDWEST GRAIN PRODUCTS, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
THREE MONTHS AND NINE MONTHS ENDED MARCH 31, 1995
April 28, several months after a suit contesting the EPA's
authority to issue the regulation was filed by two groups
representing the petroleum industry. With completion of the
distillery expansion in Pekin, which is designed to double
Midwest Grain's total alcohol production capacity, the Company
expects to improve its ability to satisfy demand in all of its
alcohol markets more effectively. This expansion was scheduled
to be on line by January 1995. However, the completion was
delayed by unanticipated mechanical equipment problems with two
new distillery feed driers. At the end of the quarter,
intermediate repairs to the driers were completed by the
equipment supplier. Since then, the Company has experienced
increased alcohol production levels. Production is expected to
improve further when final repairs to the equipment are completed
late this summer. Substantial improvements in operational
efficiencies should occur as a result.
The Company's unit sales of wheat starch in the third quarter
rose above the prior year's third quarter level. The increase
resulted mainly from higher volumes of modified wheat starches
which are sold in a variety of special market niches. A planned
70% increase in wheat starch production capacity, that was
originally slated for completion at the Pekin plant toward the
end of this year's third quarter, was rescheduled for completion
at the end of the fourth quarter. The postponement was prompted
by the delay in the distillery expansion. A planned 40% increase
in total gluten production capacity also was postponed from the
third quarter, principally due to weakened unit sales caused by
increased foreign competition. The rescheduling of this project
will be based on a return to greater stability in the gluten
market. While the Company believes unfavorable conditions,
namely reduced efficiencies and intense foreign competition, will
continue to have significant negative impact on results for the
current quarter, it expects gradual improvements to occur from
its projected higher alcohol capacities, and assuming a
continuance of strong demand for its alcohol products and wheat
starch.
Sales
_____
Grain products sales for the third quarter of fiscal 1995
decreased by approximately $8,647,000 below sales in the third
quarter of fiscal 1994. The decrease was principally due to
lower sales of vital wheat gluten, which fell nearly 50% as the
result of reduced marketing opportunities caused by a large
increase in gluten imports from Europe. An 18% increase in sales
of alcohol products compared to the prior year's third quarter
resulted from a significant jump in fuel alcohol volume. Sales
of food grade alcohol for beverage, industrial and commercial
applications declined, as a sizeable percentage of the Company's
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<PAGE>
MIDWEST GRAIN PRODUCTS, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
THREE MONTHS AND NINE MONTHS ENDED MARCH 31, 1995
alcohol production was shifted to the fuel category in response
to pre-established customer requirements. Sales of distillers'
feeds, a by-product of the alcohol production process, remained
approximately even with levels experienced in the third quarter
of fiscal 1994. A continued increase in sales of modified wheat
starches pushed total wheat starch sales in this year's third
quarter almost 7% above the prior year's third quarter level.
The majority of the decrease in grain products sales for the
first nine-month period of fiscal 1995, amounting to
approximately $2,623,000, was experienced in the third quarter.
This mainly resulted from decreased volume sales of vital wheat
gluten due to increased foreign competition and a reduction in
market demand compared to the extraordinary demand experienced
during the same period a year ago. Changes 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. Prices for
food grade alcohol for beverage applications normally follow the
movement of corn prices, while prices for food grade alcohol for
industrial and commercial applications are normally consistent
with prices for industrial alcohol derived from synthetic
products such as petroleum.
Cost of Sales
_____________
The cost of sales in the third quarter of fiscal 1995 rose by
approximately $1 million above cost of sales in the same period
the preceding year. Increased maintenance and repair costs,
amounting to approximately $832,000, and increased energy costs
amounting to $410,000 were offset by decreased raw material costs
for grain. The higher maintenance and repair costs were mainly
due to work associated with the distillery expansion at the
Company's Pekin plant. Other manufacturing cost increases were
due to higher costs for chemicals and additives resulting from
increased production of modified wheat starches, and depreciation
of buildings and equipment. The cost of sales for the first nine
months of fiscal 1995 increased by approximately $5.3 million
over costs for the first nine months of fiscal 1994. The
majority of this increase was primarily due to volume increases
in the first quarter, as well as increased maintenance and repair
costs in the second and third quarters.
Selling, General and Administrative Expenses
____________________________________________
Selling, general and administrative expenses in the third quarter
of fiscal 1995 were down approximately $588,000 compared to the
same period the prior year. This principally was due to a
decrease of approximately $302,000 in the Company's management
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<PAGE>
MIDWEST GRAIN PRODUCTS, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
THREE MONTHS AND NINE MONTHS ENDED MARCH 31, 1995
bonus program accrual, and a decrease of approximately $265,000
in sales subject to commissions. The $237,000 increase of
expenses for the nine month period was primarily experienced
during the first quarter and was incurred generally throughout
the expense categories. The consolidated effective income tax
rate increased as a result of federal and state tax rates.
The general effects of inflation were minimal.
Net Income
__________
Primarily as the result of the foregoing factors, net income in
the third quarter of fiscal 1995 declined to $298,000 from
$6,084,000 realized in the third quarter of fiscal 1994. Net
income for the first nine months of fiscal 1995 decreased to
$5,291,000 from $10,364,000 in the first nine months of fiscal
1994.
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<PAGE>
MIDWEST GRAIN PRODUCTS, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
THREE MONTHS AND NINE MONTHS ENDED MARCH 31, 1995
LIQUIDITY AND CAPITAL RESOURCES
The following table is presented as a measure of the Company's
liquidity and financial condition:
March 31, June 30,
1995 1994
_________ _________
(in thousands)
Cash, cash equivalents and
short-term investments $ 339 $ 4,171
Long-term liquid investments 14,504
Long-term debt 35,000 25,000
Working capital 28,404 22,151
While the Company's working capital position improved during the
nine month period, expenditures for plant additions, including
the Pekin expansion, totalled $28.6 million resulting in reduced
investments held for this purpose and operating cash balances and
increased borrowings. Higher inventory balances, primarily
increased quantities of milo, and increased income tax payments
during the first nine months also impacted short-term liquidity.
At March 31, 1995, the Company has amounts remaining to spend
under capital improvement projects totalling approximately $10.9
million. The expenditures in Pekin primarily relate to the new
wheat starch facilities and expansion of the gluten facilities.
Capital improvement projects in Atchison include normal
improvements and expansions primarily in the gluten and starch
processes and expanded storage facilities for gluten and starch.
After borrowing $10 million on its lines of credit during the
third quarter, remaining available balances total $15 million.
Midwest Grain Products believes the above borrowings, existing
working capital and working capital to be generated from future
operations, will allow it to complete its expansion projects and
meet expanded working capital needs.
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<PAGE>
PART II
OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
________________________________
(a) Exhibits
4(a) Copy of First Amended Line of Credit Loan
Agreement providing for the Issuance of a
Line of Credit Note in the amount of
$20,000,000.
4(b) Copy of Line of Credit Note Under First
Amended Line of Credit Loan Agreement
15 Letter from independent public accountants
pursuant to paragraph (d) of Rule 10-01 of
Regulation S-X (incorporated by reference
to Independent Accountants' Review Report
at page 2 hereof)
20 Report to stockholders for the nine months
ended March 31, 1995.
27 Financial Data Schedule for the nine
months ended March 31, 1995.
(b) Reports on Form 8-K
The Company has filed no reports on Form 8-K
during the quarter ended March 31, 1995.
SIGNATURES
Pursuant to the requirements 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.
MIDWEST GRAIN PRODUCTS, INC.
5-9-95 By /s/ Ladd M. Seaberg
__________________________ ______________________________
Date Ladd M. Seaberg
President and Chief Executive
Officer
5-9-95 By /s/ Robert G. Booe
__________________________ ______________________________
Date Robert G. Booe, Vice President
and Chief Financial Officer
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<PAGE>
<PAGE>
EXHIBIT 99
EXHIBIT INDEX
Exhibit
Number Description
4(a) Copy of First Amended Line of Credit Loan
Agreement providing for the Issuance of a
Line of Credit Note in the amount of
$20,000,000.
4(b) Copy of Line of Credit Note Under First
Amended Line of Credit Loan Agreement
15 Letter from independent public accountants
pursuant to paragraph (d) of Rule 10-01 of
Regulation S-X (incorporated by reference to
Independent Accountants' Review Report at page 2
hereof).
20 Report to Stockholders for the six months ended
March 31, 1995.
27 Financial Data Schedule for the nine months ended
March 31, 1995.
Exhibit 4(a)
<PAGE> Exhibit 4(a)
FIRST AMENDED LINE OF CREDIT LOAN AGREEMENT
THIS FIRST AMENDED LINE OF CREDIT LOAN AGREEMENT (the
"Agreement"), executed this 25th day of February, 1994, by and
between MIDWEST GRAIN PRODUCTS, INC., a corporation
organized under the laws of the state of Kansas and having its
principal place of business in Atchison, Kansas ("Borrower"), and
Commerce Bank of Kansas City, N.A., a national banking
association, having its principal place of business in Kansas
City, Missouri ("Bank").
WHEREAS, Borrower desires to establish a line of credit with
Bank to provide working capital and capital expenditures; and
WHEREAS, Bank desires to extend such line of credit upon the
terms and conditions set forth in this Agreement.
NOW, THEREFORE, in consideration of the premises and mutual
agreements contained in this Agreement, the parties agree as
follows:
ARTICLE I
Line of Credit
Section 1.1. General Terms. Subject to the terms of this
Agreement, Bank will lend Borrower, from time to time, until the
termination hereof, such sums as Borrower may request, in minimum
increments of $100,000, which shall not exceed in the aggregate
principal amount at any one time outstanding the sum of Twenty
Million and no/100 Dollars ($20,000,000.00) (the "Line of Credit
Loan").
Bank's obligation to lend hereunder may be terminated by
Bank at any time in Bank's sole discretion, or if no such
termination is made, then on October 1, 1997. Each advance under
the Line of Credit Loan is at the option of Bank and Bank has no
obligation to make advances. In addition this Agreement shall be
deemed to automatically terminate if the occurrence of an event
pursuant to Section 4.1 causes the Line of Credit Note to become
immediately due and payable. The inclusion of monthly interest
payments, events of default and an alternate maturity date does
not alter the discretionary nature of the line of credit.
Section 1.2. Commitment Fee. Borrower shall pay a fee equal to
1/4% per annum on the unused portion of the Line of Credit Loan.
Such fee shall be paid quarterly in arrears.
Section 1.3. Note. Borrower agrees to execute and deliver to
Bank the Line of Credit Note to evidence the Line of Credit Loan.
Each advance made thereunder, together with each repayment made
by Borrower, shall be evidenced by a notation dated the date of
the advance or repayment and recorded by Bank on the schedule
appearing on the reverse side of or attached to the Line of
Credit Note. The aggregate unpaid principal amount of the Line
of Credit Note set forth on the schedule shall be conclusively
presumed to reflect the amounts advanced and repaid, and the
outstanding principal balance of the Line of Credit Loan.
Section 1.4. Principal Payment. In the event of a default as
<PAGE>
defined in Section 4.1 or on October 1, 1997, the principal
balance of the Line of Credit Note together with all accrued
interest shall become immediately due and payable.
Section 1.5. Interest. If the outstanding balance is less than
$500,000, the line of credit shall bear interest at a per annum
rate equal to the Prime Rate. If the outstanding balance is
$500,000 or greater, the line of credit shall bear interest at
the greater of either (1) the Prime Rate, minus 1%, or (2) the
Federal Funds Rate plus 1.50%.
Interest will be payable monthly, in arrears, and at maturity,
whether by acceleration or otherwise. Interest will be computed
on the actual days outstanding based upon a year consisting of
360 days.
"Prime Rate" means the Prime Rate of interest established from
time to time by Commerce Bank and designated as such for its
internal convenience, and no representation is made that the
Prime Rate is the best, the lowest or a favored rate of interest.
The rate of interest, if tied to the Prime Rate, shall change
with and be effective on the date of each change in the Prime
Rate.
"Federal Funds Rate" means the effective Federal Funds Rate as
quoted by the Federal Reserve Bank of New York on a daily basis.
The Federal Funds Rate is adjusted daily.
Section 1.6. Purpose. Borrower represents the purpose of the
Line of Credit Loan is to provide short term working capital and
capital expenditures.
Section 1.7. Disbursements. Bank will credit the proceeds of
any borrowing hereunder to Borrower's deposit account maintained
with Bank.
Section 1.8. Condition of Loans. Any advance under the Line of
Credit Note is subject to the condition precedent that no event
of default described in Section 4.1 shall have occurred, and that
the Line of Credit has not been terminated. Each request for a
borrowing under the Line of Credit Note shall be deemed to
constitute a representation by Borrower at the time of the
request that no event of default as defined in Section 4.1 exists
or is imminent and that the representations and warranties of
Borrower contained in this Agreement are true in all material
respects on or as of the date of borrowing.
ARTICLE II
Warranties and Representations
Section 2.1. Good Standing. The Borrower is a corporation duly
organized and in good standing, under the laws of the state of
Kansas, and has the power to own its property and to carry on its
business and is in good standing in each jurisdiction in which
the character of the properties owned by it or in which the
transaction of its business makes such qualifications necessary.
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<PAGE>
Section 2.2. Authority. The Borrower has full power and
authority to enter into this Agreement, to make the borrowing
hereunder, and to execute and deliver the Line of Credit Note,
all of which has been duly authorized by all proper and necessary
corporate action. No consent or approval of stockholders is
required as a condition to the validity of this Agreement or the
Line of Credit Loan.
Section 2.3. Binding Agreement. This Agreement constitutes, and
the Line of Credit Note when issued and delivered pursuant
hereto, for value received, will constitute, the valid and
legally binding obligations of the Borrower in accordance with
all stated terms.
Section 2.4. Litigation. There are no proceedings pending, or,
so far as the officers of the Borrower know threatened, which
will materially adversely affect the financial condition or
operations of the Borrower or any subsidiary.
Section 2.5. No Conflicting Agreements. There are no charter,
bylaw, or preference stock provisions of the Borrower and no
provision of any existing mortgage, indenture, contract or
agreement binding on the Borrower or affecting its property,
which would conflict with or in any way prevent the execution,
delivery, or carrying out of the terms of this Agreement and of
the Line of Credit Note.
Section 2.6. Taxes. The Borrower has filed all Federal, State
and other tax and similar returns and has paid or provided for
the payment of all taxes and assessments due thereunder
including, without limitation, all withholding, FICA and
franchise taxes.
Section 2.7. Financial Statements. There have been no material
changes in the Borrower's financial statements dated June 30,
1993.
ARTICLE III
Covenants
So long as this Agreement remains in effect or as long as
there is any principal or interest due on the Line of Credit
Note, Borrower agrees as follows:
Section 3.1. Comply with all Company Covenants as defined and
contained in Section 5 of the Note Agreement dated as of August
1, 1993, between Borrower and the Principal Mutual Life Insurance
Company (the "Principal Agreement") including, but not limited
to, the following:
(a) Current Ratio. Maintain a Current Ratio of not less
than 1.50 to 1.00.
(b) Consolidated Tangible Net Worth. Maintain Consolidated
Tangible Net Worth at an amount not less than THE GREATER OF (I)
$70,000,000 and (ii) the sum of $70,000,000 plus 50% of
- 3 -
<PAGE>
Consolidated Net Income for the period from and after March 31,
1993 to the date of determination thereof (considered as a single
accounting period).
(c) Funded Debt. Not permit Consolidated Funded Debt to
exceed 60% of total capitalization.
(d) Debt/Worth. Maintain a ratio of Debt to Tangible Net
Worth of not more than 2.50 to 1.00.
(e) Fixed Charges Coverage Ratio. Maintain a ratio of Net
Income Available for Fixed Charges of not less than 1.50 to 1.00.
The Company Covenants as of the date of this Agreement shall
survive any modification or termination of the Principal
Agreement.
Section 3.2 Promptly pay all taxes, assessments and other
government charges (unless such payments are being contested in
good faith).
Section 3.3 Maintain insurance on all its properties in such
amounts and against such hazards as is customary in Borrower's
industry.
Section 3.4 Maintain its books and records and account for
financial transactions in accordance with generally accepted
accounting principals.
Section 3.5 Borrower shall furnish Commerce Bank with the
following information:
(a) Its annual audited financial statement within 90 days
of its fiscal year-end, in a form and prepared by a certified
public accounting firm acceptable to Commerce Bank;
(b) Its quarterly financial statements within 45 days after
the end of each quarter; and
(c) Such other information as Commerce Bank may reasonably
request from time to time.
ARTICLE IV
Defaults
Section 4.1. Events of Default. The entire unpaid balance of
the Line of Credit Note shall become immediately due and payable
without demand, presentment, notice or protest of any kind (all
of which are expressly waived), upon the happening of any of the
following events of default:
(a) Nonpayment of any interest or any principal payment
owing under the Line of Credit Note whether at maturity or
otherwise; or
- 4 -
<PAGE>
(b) If any certificate, statement, representation, warranty
or audit furnished by or on behalf of the Borrower in connection
with this Agreement, including those contained herein, or as an
inducement by Borrower to enter into, modify, extend, or renew
this Agreement shall prove to be false in any material respect,
or if Borrower shall have omitted the listing of a substantial
contingent or unliquidated liability or claim against Borrower
or, if on the date of execution of this Agreement there shall
have been any materially adverse change in any of the facts
disclosed by any such certificate, statement, representation,
warranty or audit, which change shall not have been disclosed by
Borrower to Bank at or prior to the time of execution; or
(c) If Borrower shall default in the due performance or
observance of any covenant undertaken by it under this Agreement;
or
(d) Default in the performance of the obligations of
Borrower pursuant to any other note or agreement binding on
Borrower including, but not limited to the Principal Agreement;
or
(e) Borrower shall be adjudicated a bankrupt, or make a
general assignment for the benefit of its creditors, or there are
instituted by or against Borrower any type of bankruptcy
proceedings or any proceeding for the liquidation or the
termination of Borrower's affairs, or the appointment of a
receiver or trustee for Borrower or for any of Borrower's assets,
or a properly filed petition for Borrower's reorganization under
the Bankruptcy Code or otherwise is approved, or Borrower files a
petition for arrangement under Chapter 11 of the Bankruptcy Code
or any similar statute.
(f) Any judgment or judgments, writ or writs, or warrant or
warrants of attachment, or any similar process or processes shall
be entered or filed against the Borrower or any Subsidiary or
against any of their respective property or assets and remain
unstayed and undischarged for a period of 60 days from the date
of its entry.
Section 4.2. Remedies. If any event of default occurs, Bank may
resort to any remedy existing at law or in equity for the
collection of the Line of Credit Note and enforcement of the
covenants and provisions of this Agreement. Bank's resort to any
remedy shall not prevent the concurrent or subsequent employment
of any other remedy.
Section 4.3. Waiver. Any waiver of an event of default by Bank
shall not extend to or affect any subsequent default. No failure
or delay by Bank in exercising any right hereunder shall operate
as a waiver nor shall any single or partial exercise of any right
preclude any other right hereunder.
- 5 -
<PAGE>
ARTICLE V
Miscellaneous
Section 5.1. Amendments. This Agreement may be amended or
modified in whole or in part at anytime, if in writing and signed
by the parties. Bank may further consent in writing, or give
written waiver to any covenant or event which might otherwise
create a default.
Section 5.2. Delay, Waiver. No omission or delay on the part of
Bank in exercising any right, power, or privilege hereunder shall
impair or operate as a waiver thereof; nor shall any single or
partial exercise or any right, power, or privilege hereunder
preclude any other or further exercise thereof or the exercise of
any other right, power, or privilege. No waiver by Bank will be
valid unless in writing and signed by Bank and then only to the
extent specified therein. The rights and remedies herein
expressly specified are cumulative and not exclusive of any
rights or remedies which Bank would otherwise have.
Section 5.3. Bank. Whenever in this Agreement reference is made
to the Bank, such term shall be deemed for the purpose of
benefits, powers, and privileges hereunder to include any firm,
person, or corporation who may be the holder from time to time of
the Note issued hereunder or a participation therein.
Section 5.4. Governing Law. This Agreement and the Line of
Credit Note shall be construed and interpreted in accordance with
the laws of the State of Missouri.
IN WITNESS WHEREOF, the parties have caused this Agreement
to be duly executed as of the date first above written.
BORROWER:
MIDWEST GRAIN PRODUCTS, INC.
By: /s/ Ladd M. Seaberg
Title: President - CEO
By: /s/ Robert G. Booe
Title: VP - CFO
BANK:
COMMERCE BANK OF KANSAS CITY, N.A.
By: /s/ Fredrick J. Marston
Title: Vice-President
- 6 -
<PAGE>
<PAGE>
Exhibit 4(b)
LINE OF CREDIT NOTE
$20,000,000 February 25, 1994
FOR VALUE RECEIVED, the undersigned, MIDWEST GRAIN PRODUCTS,
INC., a Kansas corporation ("Borrower") hereby promises to pay to
the order of Commerce Bank of Kansas City, N.A. ("Bank") at its
offices in Kansas City, Missouri, the aggregate unpaid principal
amount and accrued interest of all borrowings hereunder. The
aggregate unpaid principal amount shall also become immediately
due and payable, without demand or further action on the part of
Bank upon the occurrence of an event of default as set forth in
Section 4.1 of the Line of Credit Loan Agreement, as amended,
dated November 30, 1993 (the "Agreement").
Interest on this note shall be calculated on the actual
number of days on the basis of a year of 360 days. If the
outstanding balance is less than $500,000, the line of credit
shall bear interest at a per annum rate equal to the Prime Rate.
If the outstanding balance is $500,000 or greater, the line of
credit shall bear interest at the greater of either (1) the Prime
Rate, minus 1%, or (2) the Federal Funds Rate plus 1.50%.
Interest will be payable monthly, in arrears, and at maturity,
whether by acceleration or otherwise. Interest will be computed
on the actual days outstanding based upon a year consisting of
360 days.
"Prime Rate" means the Prime Rate of interest established from
time to time by Commerce Bank and designated as such for its
internal convenience, and no representation is made that the
Prime Rate is the best, the lowest or a favored rate of interest.
The rate of interest, if tied to the Prime Rate, shall change
with and be effective on the date of each change in the Prime
Rate.
"Federal Funds Rate" means the effective Federal Funds Rate as
quoted by the Federal Reserve Bank of New York on a daily basis.
The Federal Funds Rate is adjusted daily.
So long as the Agreement has not been terminated, Borrower
may, from the date of this note through October 1, 1997 borrow,
repay and reborrow sums, at any one time outstanding, not to
exceed $20,000,000. All advances and repayments hereunder shall
be endorsed on the reverse hereof (or an attached schedule) by
the Bank or holder, and between the undersigned and Bank, such
endorsements and the balances derived from such endorsements
shall be conclusively presumed to reflect the amounts advanced
and repaid hereunder and the then outstanding and unpaid balance
of sums advanced or readvanced hereunder.
The undersigned hereby waives presentment, protest, demand
and notice of dishonor or default.
This note is issued pursuant to the terms of the Agreement,
to which Agreement, and any amendments thereto, reference is
hereby made for a statement of the terms and conditions under
which this borrowing was made, and is to be repaid.
<PAGE>
MIDWEST GRAIN PRODUCTS, INC.
By: /S/ Ladd M. Seaberg
_____________________________
Title: President - CEO
__________________________
By: /s/ Robert Booe
_____________________________
Title: VP-CFO
__________________________
C:\B10\545
<PAGE>
EXHIBIT 20
Letter To Our Stockholders
May 9, 1995
Dear Stockholder:
Reduced production efficiencies and the continuance of strong
competition from European wheat gluten producers caused results for
our third quarter of fiscal 1995 to decrease significantly compared
to the prior year's third quarter results. Our net income for the
quarter was $298,000, or $0.03 per share on sales of $42,005,000.
In the third quarter of fiscal 1994, our net income was $6,084,000,
or $0.62 per share on sales of $50,652,000.
A principal reason for the outstanding results we experienced in
last year's third quarter was the extraordinary increase in demand
for wheat gluten during that period. This mainly resulted from
poor wheat protein levels domestically and abroad, requiring
substantially more gluten than usual for use in fortifying flour.
Following a return to more normal crop conditions this past summer,
the U.S. market began experiencing a tremendous rise in imported
wheat gluten from the European Union, where wheat starch and gluten
capacities underwent sizeable increases. The escalation of this
situation was a principal cause for a decline in our total results
for the first nine months of fiscal 1995, which had net income of
$5,291,000, or $0.54 per share on sales of $132,477,000. Our net
income for the first nine months of fiscal 1994 was $10,364,000, or
$1.06 per share on sales of $135,100,000.
Although the intense competitive conditions in our wheat gluten
market remain unchanged at this time, I am encouraged by the
improved efficiencies we are beginning to experience through the
increased utilization of our expanded distillery capacity in Pekin,
Illinois. Completion of this expansion, which is designed to
double our total alcohol production capacity, was delayed by
mechanical equipment problems with new distillers feed drying
equipment. Intermediate repairs to the equipment were completed by
the supplier at the end of the third quarter. Production should
further improve when permanent repairs to the equipment are
completed late this summer.
Our total alcohol unit sales were up substantially in the third
quarter as the result of a large increase in the fuel grade alcohol
category. We are now also experiencing an increase in unit sales
of food grade alcohol for industrial and beverage applications,
principally as a result of new capacity we have gained from our
expansion in Pekin.
Growth opportunities in the fuel market, for which the majority of
our expanded capacity is designed, remain viable but will occur
more gradually due to a recent ruling by the U.S. Circuit Court of
Appeals for the District of Columbia. On April 28, the Court reversed the
Environmental Protection Agency's regulation requiring that renew-
able fuel oxygenates such as grain-based ethanol play a larger role
in satisfying future Clean Air Act requirements in nine of the
nation's smoggiest metropolitan areas. The Court's decision
resulted from a suit filed against the EPA regulation last
September by two groups representing the petroleum industry.
<PAGE>
Favorable conditions continue to exist in our wheat starch market,
where growth in our multiple modified and specialty varieties has
occurred throughout the current fiscal year. Our ability to
increase wheat starch production will be strengthened by the new
starch processing capacity that we plan to have installed at our
Pekin plant by the end of this year's fourth quarter.
Our planned wheat gluten capacity increase in Pekin remains on hold
until greater stability returns to the market. Through our
membership in the U.S. Wheat Gluten Industry Council, we are
actively raising awareness of policies and practices that allow our
European counterparts overwhelming competitive advantages. In
concert with this program, we are seeking reasonable solutions to
the problem with assistance from leading government officials.
In the meantime, with increased use of our expanded distillery
operation, our overall operational efficiencies should steadily
improve. While we don't expect marked improvements in results for
this year's fourth quarter compared to the third quarter, we do
expect more favorable conditions to prevail long-term.
As previously announced, a dividend of $0.125 per share was
declared and is payable May 9, 1995 to stockholders of record April
7, 1995.
Sincerely,
/s/ Ladd M. Seaberg
Ladd M. Seaberg
President and CEO
<PAGE>
Corporate Profile
Founded in 1941, Midwest Grain Products, Inc., is a fully
integrated producer of vital wheat gluten, premium wheat starch and
alcohol products.
In addition to its major product lines, the Company also
produces flour for internal use, and several by-products, including
wheat bran, mill feeds, distillers feeds and carbon dioxide. The
Company's principal raw material is grain, consisting of wheat,
which is processed into all products, and corn and milo, which are
processed into alcohol and alcohol by-products.
Vital wheat gluten and premium wheat starch are sold
primarily as food additives to enhance the nutritional value,
appearance, texture, taste, and a variety of other characteristics
of baked and processed foods. Alcohol products are produced as
part of the gluten and starch processing operations. They consist
of food grade alcohol for beverage, industrial and commercial
applications, and fuel grade alcohol, which is sold as an octane
additive for motor fuel.
The Company operates two processing plants in the United
States. The corporate headquarters and original plant are located
in Atchison, Kan. The plant located in Pekin, Ill., was acquired
from the American Distilling Company in June, 1980. These
facilities are operated 24 hours each day of the year and enable
utilization in the Company's products of approximately 95% (by
weight) of grain processed.
Midwest Grain Products, Inc.
1300 Main Street
PO Box 130
Atchison, Kansas 66002-0130
Phone: 913-367-1480
Symbol/Market: MWGP/NASDAQ
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM MIDWEST
GRAIN PRODUCTS, INC. CONDENSED CONSOLIDATED STATEMENTS OF INCOME FOR THE NINE
MONTHS ENDED MARCH 31, 1995 AND CONDENSED CONSOLIDATED BALANCE SHEET AS AT
MARCH 31, 1995, 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> 9-MOS
<FISCAL-YEAR-END> JUN-30-1995
<PERIOD-START> JUL-01-1994
<PERIOD-END> MAR-31-1995
<CASH> 0
<SECURITIES> 339
<RECEIVABLES> 19,616<F1>
<ALLOWANCES> 0<F2>
<INVENTORY> 15,851
<CURRENT-ASSETS> 39,112
<PP&E> 207,368
<DEPRECIATION> 73,944
<TOTAL-ASSETS> 172,978
<CURRENT-LIABILITIES> 10,708
<BONDS> 35,000
<COMMON> 6,715
0
4
<OTHER-SE> 109,082<F3>
<TOTAL-LIABILITY-AND-EQUITY> 172,978
<SALES> 132,477
<TOTAL-REVENUES> 132,636<F4>
<CGS> 115,120
<TOTAL-COSTS> 115,120
<OTHER-EXPENSES> 8,624<F5>
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0<F6>
<INCOME-PRETAX> 8,892
<INCOME-TAX> 3,601
<INCOME-CONTINUING> 5,291
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 5,291
<EPS-PRIMARY> .54
<EPS-DILUTED> .54
<FN>
<F1>After deduction of allowances and addition of Notes Receivable.
<F2>See Note F1.
<F3>Reflects Retained Earnings and Additional Paid In Capital.
<F4>Reflects net sales plus Other Operating Loss and Other Income.
<F5>Consists of Selling, General and Administrative Expenses.
<F6>Total revenues includes "Other Income." Other Income reflects excess Other
Income after deducting interest expense.
</FN>
<PAGE>
</TABLE>
