<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 September 30, 1998 - 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
9,700,172 shares outstanding
as of November 1, 1998
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INDEX
PART I. FINANCIAL INFORMATION Page
Item 1. Financial Statements
Independent Accountants' Review Report.................. 2
Condensed Consolidated Balance Sheets as of
September 30, 1998 and June 30, 1998.................. 3
Condensed Consolidated Statements of Income for
the Three Months Ended September 30, 1998 and 1997.... 5
Condensed Consolidated Statements of Cash Flows for
the Three Months Ended September 30, 1998 and 1997.... 6
Notes 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 4. Submission of Matters to a Vote of Security Holders. 12
Item 6. Exhibits and Reports on Form 8-K................. 12
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[LOGO] Baird, Kurtz & Dobson City Center Square
Certified Public Accountants 1100 Main Street, Suite 2700 http://www.bkd.com
Kansas City, Missouri 64105-2112 Member of
816-221-6300 Fax: 816-221-6380 Moores Rowland
International
- --------------------------------------------------------------------------------
Independent Accountants' Review Report
Board of Directors and Stockholders
Midwest Grain Products, Inc.
Atchison, Kansas 66002
We have reviewed the accompanying condensed consolidated balance sheet of
MIDWEST GRAIN PRODUCTS, INC. and subsidiaries as of September 30, 1998, and the
related condensed consolidated statements of income for the three month periods
ended September 30, 1998 and 1997, and the related condensed consolidated
statements of cash flows for the three-month periods ended September 30, 1998
and 1997. These financial statements are the responsibility of the Company's
management.
We conducted our review in accordance with standards established 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 review, we are not aware of any material modifications that
should be made to the accompanying condensed consolidated financial statements
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, 1998, 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
4, 1998, 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, 1998, 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
October 28, 1998
[BKD Logo}
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MIDWEST GRAIN PRODUCTS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In Thousands)
ASSETS
September 30, June 30,
1998 1998
------------ --------
(Unaudited)
CURRENT ASSETS
Cash and cash equivalents $ 304 $ 4,723
Receivables 24,504 26,369
Inventories 26,097 20,430
Prepaid expenses 1,341 753
Deferred income taxes 2,343 2,343
Income taxes receivable 898 1,334
------------ ------------
Total Current Assets 55,487 55,952
------------ ------------
PROPERTY AND EQUIPMENT, At cost 219,966 218,590
Less accumulated depreciation 116,359 112,976
------------ ------------
103,607 105,614
------------ ------------
OTHER ASSETS 411 412
------------ ------------
$ 159,505 $ 161,978
============ ============
See Accompanying Notes to Condensed Consolidated
Financial Statements and Independent Accountants'
Review Report
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MIDWEST GRAIN PRODUCTS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS (Continued)
(In Thousands)
LIABILITIES AND STOCKHOLDERS' EQUITY
September 30, June 30,
1998 1998
------------- --------
(Unaudited)
CURRENT LIABILITIES
Note payable--bank $ 1,000 $ 1,000
Current maturities of long-term debt 2,296 2,360
Accounts payable 7,511 9,072
Accrued expenses 2,461 3,695
------------ ------------
Total Current Liabilities 13,268 16,127
------------ ------------
LONG-TERM DEBT 25,312 25,536
------------ ------------
POST-RETIREMENT BENEFITS 6,464 6,520
------------ ------------
DEFERRED INCOME TAXES 7,470 7,470
------------ ------------
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 98,579 97,913
------------ ------------
107,783 107,117
Treasury stock, at cost
Common; 1997 - 65,000 shares (792) (792)
------------- -------------
106,991 106,325
------------ ------------
Total liabilities and stockholders' equity $ 159,505 $ 161,978
============ ============
See Accompanying Notes to Condensed Consolidated
Financial Statements and Independent Accountants'
Review Report
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MIDWEST GRAIN PRODUCTS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
THREE MONTHS ENDED SEPTEMBER 30, 1998 AND 1997
(Unaudited)
1998 1997
------------ ------------
(in thousands, except
per share amounts)
NET SALES $ 51,938 $ 57,623
COST OF SALES 47,509 55,012
---------- ----------
GROSS PROFIT 4,429 2,611
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES 2,906 2,644
---------- ----------
1,523 (33)
OTHER OPERATING INCOME 41 14
---------- ----------
INCOME (LOSS) FROM OPERATIONS 1,564 (19)
OTHER INCOME (LOSS) NET
Interest (525) (455)
Other 62 78
---------- ----------
INCOME (LOSS) BEFORE INCOME TAXES 1,101 (396)
PROVISION (CREDIT) FOR INCOME TAXES 435 (161)
---------- -----------
NET INCOME (LOSS) $ 666 $ (235)
========== ===========
EARNINGS (LOSS) PER COMMON SHARE $ 0.07 $(0.02)
========= ===========
See Accompanying Notes to Condensed Consolidated Financial
Statements and Independent Accountants= Review Report
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MIDWEST GRAIN PRODUCTS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
THREE MONTHS ENDED SEPTEMBER 30, 1998 AND 1997
(Unaudited)
1998 1997
------------ -------------
(in thousands)
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) $ 666 $ (235)
Items not requiring (providing) cash:
Depreciation 3,398 3,460
Gain on sale of equipment (3)
Changes in:
Accounts receivable 1,865 (209)
Inventories (5,667) (1,960)
Prepaid expenses (587) (508)
Accounts payable (1,454) 1,146
Accrued expenses (1,290) (1,197)
Income taxes receivable 436 (911)
---------- -----------
Net cash used in operating activities (2,636) (414)
---------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES
Additions to property and equipment (1,499) (1,179)
Proceeds from sale of equipment 5
---------- -----------
Net cash used in investing activities (1,494) (1,179)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES
Net advances (payments) on notes payable 2,000 (4,000)
Net payments of long-term debt (2,289)
----------- ------------
Net cash used in financing activities (289) (4,000)
----------- -----------
DECREASE IN CASH AND CASH EQUIVALENTS (4,419) (5,593)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 4,723 6,005
---------- ----------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 304 $ 412
========== ==========
See Accompanying Notes to Condensed Consolidated Financial
Statements and Independent Accountants= Review Report
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MIDWEST GRAIN PRODUCTS, INC.
NOTE TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
THREE MONTHS ENDED SEPTEMBER 30, 1998
(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 September
30, 1998, and the condensed consolidated results of its operations and its cash
flows for the periods ended September 30, 1998 and 1997, and are of a normal
recurring nature.
See Independent Accountants= Review Report
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MIDWEST GRAIN PRODUCTS, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
THREE MONTHS ENDED SEPTEMBER 30, 1998
RESULT OF OPERATIONS
General
The Company's net income of $666,000 in the first quarter of fiscal 1999
represented a sizeable improvement over the net loss of $235,000 that was
experienced in the first quarter of fiscal 1998. The upturn resulted primarily
from lower raw material costs for wheat, corn and milo, and increased
productivity in the Company's wheat gluten processing operations. Reduced grain
prices were due to excellent growing conditions and abundant harvests during the
spring, summer and early fall. Gluten production levels were raised partially in
response to heightened market interest, but mainly in preparation to effectively
satisfy future customer requirements resulting from an expected reduction in
imports of subsidized and artificially priced wheat gluten from the European
Union (E.U.).
On June 1, the White House implemented a three-year quota on imports of foreign
wheat gluten following a unanimous recommendation from the United States
International Trade Commission (ITC). The White House additionally announced
that international negotiations would be pursued to address the underlying cause
of the increase in imports of wheat gluten, particularly from the E.U., or to
otherwise alleviate injury to the domestic industry.
During the first year of implementation, the quota will restrict wheat gluten
imports to 126 million pounds, a reduction of approximately 30% compared to the
amount of gluten imported by the U.S. during the Company's 1998 fiscal year. In
each of the two following years, imports will be allowed to increase by 6%.
Within the quota, separate quotas for the E.U., Australia and all other
non-excluded countries were assessed. Countries excluded from the quota are
Canada, Mexico, Israel and the beneficiary countries of the Caribbean Basin
Economic Recovery Act or the Andean Trade Preferences Act.
According to recent government data, by early November 1998, the E.U.'s quota of
54 million pounds for the first 12-month quota period was already filled. The
first year quota period ends May 31, 1998. As a result, the Company expects a
more fair and stable competitive environment to exist in the U.S. wheat gluten
market for much of the remainder of the current fiscal year.
The quota on imported gluten is consistent with the type of remedy requested by
the Company and the Wheat Gluten Industry Council (WGIC) of the U.S. That
request was made in a petition that was filed by the WGIC on September 19, 1997
under Section 201 of the Trade Act of 1974. The petition was filed on the
grounds that the U.S. wheat gluten industry has been seriously injured by the
surge in low priced wheat gluten imports from the E.U. Profits from their highly
subsidized and protected wheat starch business have allowed E.U. producers to
unload huge surpluses of wheat gluten, a co-product, in the U.S. market at
prices below U.S. production costs. In recent years, this has forced domestic
producers to drastically under-utilize production capacities and relinquish
sizeable percentages of market share.
The Company expects the import quota to help establish a more level playing
field in the U.S. wheat gluten market by offsetting lopsided trade advantages
provided by the E.U. to E.U. producers. As a result, the Company increased
gluten production levels to effectively supply future customer needs. In
addition, the Company has intensified efforts to develop and market specialty
wheat gluten products in niches that will be less affected by foreign
competition. -8-
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MIDWEST GRAIN PRODUCTS, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)
THREE MONTHS ENDED SEPTEMBER 30, 1998
The Company's production of food grade alcohol for beverage and industrial
applications declined in the first quarter of fiscal 1999, compared to the prior
year, due to a decline in demand. The production of fuel grade alcohol was
essentially even with the amount produced in the first quarter of fiscal 1998.
Prices for beverage and fuel grade alcohol decreased, compared to the prior
year's first quarter levels. The decrease in beverage alcohol prices was
partially due to the effects of lower costs for corn and milo, the principal raw
materials used in the Company's alcohol production process. Increased supplies
of alcohol throughout the industry also contributed to this decline. The fall in
fuel alcohol prices was caused principally by a decline in gasoline prices.
Although total alcohol production decreased, unit sales of distillers feed, the
principal by-product of the distillation, rose compared to a year ago. This
increase; however, was offset by a fall in selling prices.
While production of the Company's premium wheat starch noticeably increased
above the fiscal 1998 fourth quarter level, it was down compared to last year's
first quarter amount. The average selling price, however, remained approximately
the same.
With consistently lower grain costs, improved conditions in the wheat gluten
market, a realization of stable energy costs and improved production
efficiencies, the Company expects to strengthen its competitive abilities and
improve profitability going forward.
Sales
Net sales in the first quarter of fiscal 1999 were down approximately $5.7
million compared to net sales in the first quarter of fiscal 1998. The decrease
resulted mainly from lower selling prices for beverage and fuel grade alcohol
and reduced alcohol and starch volumes. The drop in selling prices for fuel
grade alcohol tracked a decline in gasoline prices. Sales of food grade alcohol
for beverage and industrial applications during the quarter were down compared
to sales during the first quarter the prior year, due largely to a decrease in
unit sales. The price decrease for beverage alcohol reflected both a decline in
demand and a reduction in raw material prices for corn and milo. Sales of
distillers feed, a by-product of the alcohol production process, were also down
compared with sales a year ago as lower selling prices somewhat offset an
increase in units sold.
Wheat gluten sales were higher than sales during the first quarter of fiscal
1998 as the Company increased production in preparation for satisfying market
requirements resulting from the expected realization of a fair competitive
environment. An increase in wheat gluten selling prices compared to the prior
year's first quarter contributed to the sales improvement.
Sales of wheat starch decreased as the result of lower unit sales, while selling
prices for this product remained essentially unchanged compared to the first
quarter of fiscal 1998.
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MIDWEST GRAIN PRODUCTS, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)
THREE MONTHS ENDED SEPTEMBER 30, 1998
Cost of Sales
The cost of sales in the first quarter of fiscal 1999 decreased by approximately
$7.5 million compared to cost of sales in the first quarter of fiscal 1998. This
occurred principally as the result of lower raw material costs for grain.
Reduced energy costs, lower maintenance and repair costs, and decreased
insurance costs were other major items which contributed to the reduction in
total cost of sales.
In connection with the purchase of raw materials, principally corn and wheat,
for anticipated operating requirements, the Company enters into commodity
contracts to reduce the risk of future grain price increases. The contracts are
accounted for as hedges and, accordingly, gains and losses are deferred and
recognized in cost of sales as part of contract costs when contract positions
are settled and as related products are sold. For the first quarter of fiscal
1999, raw material costs included a net loss of $1,036,000 on contracts settled
during the quarter compared to a net income of $605,000 for the first quarter of
fiscal 1998.
Selling, General and Administrative Expenses
Selling, general and administrative expenses in the first quarter of fiscal 1999
increased by approximately $262,000 above selling, general and administrative
expenses in the first quarter of fiscal 1998. The majority of this increase
resulted from an additional reserve of $400,000 for bad debts and costs related
to research activities to strengthen the Company's development and sales of
value-added specialty products made from wheat. Those increases were partially
offset by a reduction in costs of employee benefit plans, commissions and
professional services.
The consolidated effective income tax rate is consistent for all periods. The
general effects of inflation were minimal.
Net Income
As the result of the foregoing factors, the Company experienced net income of
$666,000 in the first quarter of fiscal 1999 compared to a net loss of $235,000
in the first quarter of fiscal 1998.
LIQUIDITY AND CAPITAL RESOURCES
The following table is presented as a measure of the Company's liquidity and
financial condition:
September 30, June 30,
1998 1998
------------- ----------
(in thousands)
Cash and cash equivalents $ 304 $ 4,723
Working capital 42,219 39,825
Amounts available under lines of credit 28,000 30,000
Notes payable and long-term debt 28,608 28,896
Stockholders' equity 106,991 106,325
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MIDWEST GRAIN PRODUCTS, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)
THREE MONTHS ENDED SEPTEMBER 30, 1998
The first quarter of fiscal 1999 saw the Company raise its production levels,
building its inventories to meet customer needs for wheat gluten. The increased
customer requirements are a result of the three-year import quota to create a
more fair and stable competitive environment. The planned inventory buildup,
together with ongoing capital improvements, has impacted short-term liquidity.
The Company anticipates higher inventory and receivable levels during the second
quarter as well to meet customer needs.
At September 30, 1998, the Company had $3.7 million committed to improvements
and replacements of existing equipment.
Since 1996, the Company has recognized the need to ensure its operations will
not be adversely impacted by Year 2000 software failures. New hardware and
software has been acquired and installed for the core financial applications.
All core financial modules, except order entry, have been tested successfully.
The order entry module is in final modification and testing. The total costs
incurred to date approximate $200,000. Conversion to the new system is expected
to be completed during fiscal 1999. The Company expects no additional
significant costs to achieve Year 2000 compliance for these applications. Due to
the stage of completion, testing of these applications as well as the
non-complexity of the systems, the Company fully anticipates being compliant far
in advance of December 31, 1999.
The Company also has surveyed its plant operations to determine which electrical
and other instrumentation equipment relies on date-sensitive software and
hardware. For those applications which have been identified, the Company has
received bids to modify the equipment. In some cases, testing of certain
equipment has already been completed. The cost to convert and test the
identified processes is expected to be less than $100,000. The Company
anticipates having the conversions completed and tested during fiscal 1999.
Should these conversions not be completed on a timely basis, the Company would
be able to produce all products except specialty and modified wheat glutens and
starches.
The Company is also in the process of surveying key vendors and customers
regarding their abilities to achieve the Year 2000 compliance. Initial results
of the surveys indicate these companies are knowledgeable of Year 2000 issues
and are in the process of complying or have already complied.
The Company continues to maintain a strong working capital position and a low
debt-to-equity ratio while generating strong earnings before interest, taxes and
depreciation. Management believes this strong financial position and available
lines of credit will allow the Company to effectively supply the increased
customer needs for vital wheat gluten when foreign quotas are reached as well as
its other products.
<PAGE>
FORWARD-LOOKING INFORMATION
This report contains forward-looking statements as well as historical
information. Forward-looking statements are identified by or are associated with
such words as "intend," "believe," "estimate," "expect," "anticipate," "hopeful"
"should," "may" and similar expressions. They reflect management's current
beliefs and estimates of future economic circumstances, industry conditions,
Company performance and financial results and are not guarantees of future
performance. The forward-looking statements are based on many assumptions and
factors including those relating to grain prices, gasoline prices, energy costs,
product pricing, competitive environment and related market conditions,
operating efficiencies, access to capital and actions of governments. Any
changes in the assumptions or factors could produce materially different results
than those predicted and could impact stock values.
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<PAGE>
PART II
OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders
The annual meeting of stockholders of the Company was held on
October 8, 1998. The following actions were taken at the meeting:
1. Tom MacLeod, Jr. was elected to the office of Group A Director for a
term expiring in 2001 with 6,715,491 common share votes for his election and
212,255 votes withheld.
2. Cloud L. Cray, Jr. was elected to the office of Group B Director for
a term expiring in 2001 with 418 preferred share votes for his election and 0
votes withheld.
3. Robert J. Reintjes was elected to the office of Group B Director for
a term expiring in 2000 with 418 preferred share votes for his election and 0
votes withheld.
4. A proposal to approve the Midwest Grain Products, Inc. 1998 Stock
Incentive Plan for Salaried Employees was approved with 5,310,244 common share
votes and 397 preferred share votes for approval, 569,982 common share votes
against approval and 1,047,520 common shares and 21 preferred shares abstaining.
5. A proposal to amend the Midwest Grain Products, Inc. Stock Incentive
Plan of 1996 was approved with 5,294,708 common share votes and 397 preferred
share votes for approval, 562,203 common share votes against approval and
1,070,835 common shares and 21 preferred shares abstaining.
6. A proposal to approve amendments to the Midwest Grain Products, Inc.
1996 Stock Option Plan for Outside Directors and options granted thereunder were
approved with 5,573,505 common share votes and 384 preferred share votes for
approval, 280,586 common share votes and 13 preferred share votes against
approval and 1,073,655 common and 21 preferred shares abstaining.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
10.1 Copy of amendment to Midwest Grain Products, Inc. Stock Incentive Plan
of 1996.
10.2 Copy of amendment to Midwest Grain Products, Inc. 1996 Stock Option
Plan for Outside Directors.
10.3 Copy of amendments to Options granted under Midwest Grain Products,
Inc. Stock Option Plans.
10.4 Form of Option Agreement for the grant of Options under the Midwest
Grain Products, Inc. 1996 Stock Option Plan for Outside Directors, as amended.
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<PAGE>
10.5 Form of Amended Option Agreements for the grant of Options under the
Midwest Grain Products, Inc. 1998 Stock Incentive Plan for Salaried Employees.
10.6 Form of Option Agreement for the grant of Options under the Midwest
Grain Products, Inc. Stock Incentive Plan of 1996, as amended.
15.1 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).
15.2 Letter from independent public accountants concerning the use of its
Review Report in the Company's Registration Statement No. 333-51849.
20 Letter to stockholders for the three months ended September 30, 1998.
27 Financial data schedule.
(b) Reports on Form 8-K
The Company has filed no reports on Form 8-K during the quarter ended
September 30, 1998.
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.
s/ Laidacker M. Seaberg
By _________________________________
Date: November 12, 1998 Ladd M. Seaberg, President
and Chief Executive Officer
s/Robert G. Booe
By _________________________________
Date: November 12, 1998 Robert G. Booe, Vice President
and Chief Financial Officer
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<PAGE>
EXHIBIT INDEX
Exhibit
Number Description
------ -----------
10.1 Copy of amendment to Midwest Grain Products, Inc. Stock Incentive
Plan of 1996.
10.2 Copy of amendment to Midwest Grain Products, Inc. 1996 Stock
Option Plan for Outside Directors.
10.3 Copy of amendments to Options granted under Midwest Grain
Products, Inc. Stock Option Plans.
10.4 Form of Option Agreement for the grant of Options under the
Midwest Grain Products, Inc. 1996 Stock Option Plan for Outside
Directors, as amended.
10.5 Form of Amended Option Agreements for the grant of Options under
the Midwest Grain Products, Inc. 1998 Stock Incentive Plan for
Salaried Employees.
10.6 Form of Option Agreement for the grant of Options under the
Midwest Grain Products, Inc. Stock Incentive Plan of 1996, as
amended.
15.1 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).
15.2 Letter from independent public accountants concerning the use of
its Review Report in the Company's Registration Statement No.
333-51849.
20 Letter to stockholders for the three months ended September 30,
1998.
27 Financial data schedule.
<PAGE>
Exhibit 10.1
CERTIFICATE OF AMENDMENT TO
MIDWEST GRAIN PRODUCTS, INC.
STOCK INCENTIVE PLAN OF 1996
The undersigned Secretary of Midwest Grain Products, Inc., a Kansas
corporation (the "Company") hereby certifies that the 1998 Annual Meeting of the
Stockholders of the Company was held at the Mount Conference Center, 710 South
9th Street, Atchison, Kansas 66002, at 10:00 a.m. local time on October 8, 1998,
that the meeting was properly called and noticed, that a quorum of Common and
Preferred Stock was present, that the meeting was otherwise convened and held in
accordance with the applicable laws of the State of Kansas and the Company's
Articles of Incorporation and Bylaws, and that at such meeting the following
resolution was duly adopted and approved by the affirmative vote of the holders
of a majority of the shares of Common Stock and a majority of the shares of
Preferred Stock represented at the meeting, thereby amending the MIDWEST GRAIN
PRODUCTS, INC. STOCK INCENTIVE PLAN OF 1996, in the respects set forth in said
resolution:
"RESOLVED that Section 4(a) of the Midwest Grain Products, Inc. Stock
Incentive Plan of 1996 be amended to increase the aggregate number of
shares of Common Stock of the Company which may be issued or
transferred pursuant to stock incentives granted under the plan from
450,000 to 600,000."
The undersigned further certifies that the said amendment remains in
full force and effect as of the date hereof.
IN WITNESS WHEREOF, the undersigned has executed this instrument on
this 12th day of November, 1998.
s/ Marta L. Myers
------------------------------
Marta L. Myers, Secretary
Midwest Grain Products, Inc.
<PAGE>
Exhibit 10.2
CERTIFICATE OF AMENDMENT TO
MIDWEST GRAIN PRODUCTS, INC.
1996 STOCK OPTION PLAN FOR OUTSIDE DIRECTORS
The undersigned Secretary of Midwest Grain Products, Inc., a Kansas
corporation (the "Company") hereby certifies that the 1998 Annual Meeting of the
Stockholders of the Company was held at the Mount Conference Center, 710 South
9th Street, Atchison, Kansas 66002, at 10:00 a.m. local time on October 8, 1998,
that the meeting was properly called and noticed, that a quorum of Common and
Preferred Stock was present, that the meeting was otherwise convened and held in
accordance with the applicable laws of the State of Kansas and the Company's
Articles of Incorporation and Bylaws, and that at such meeting the following
resolution was duly adopted and approved by the affirmative vote of the holders
of a majority of the shares of Common Stock and a majority of the shares of
Preferred Stock represented at the meeting, thereby approving action taken by
the Board of Directors on September 4, 1998, amending, subject to subsequent
stockholder approval, Section 5(b)(4) of the MIDWEST GRAIN PRODUCTS, INC. 1996
STOCK OPTION PLAN FOR OUTSIDE DIRECTORS to read as follows: "(4)
Each Stock Option shall cease to be exercisable on the date that is ten years
following the date of grant."
RESOLVED that actions of the Board of Directors amending Section
5(b)(4) of the Midwest Grain Products, Inc. 1996 Stock Option Plan for
Outside Directors and the maximum terms of options granted thereunder
are hereby approved.
The undersigned further certifies that the said amendment remains in
full force and effect as of the date hereof.
IN WITNESS WHEREOF, the undersigned has executed this instrument on
this 12th day of November, 1998.
s/ Marta L. Myers
-----------------------------
Marta L. Myers, Secretary
Midwest Grain Products, Inc.
<PAGE>
Exhibit 10.3
[Logo] Midwest Grain Products, Inc.
1300 Main, P.O. Box 130, Established 1941
Atchison, Ks 66002-0130 * 913-367-1480 * 800-255 0302
Fax 913-367-0192
November 11, 1998
MEMORANDUM
TO: Outside Directors Holding Options Under the:
Midwest Grain Products, Inc. 1996 STOCK OPTION PLAN FOR
OUTSIDE DIRECTORS
FROM: Ladd Seaberg
Re: Amendments to Option Agreements
This is to advise you that on September 4, 1998, the Board of Directors of the
Company adopted amendments to the Midwest Grain Products, Inc. 1996 Stock Option
Plan for Outside Directors so as to revise paragraph 5(b)(4) of the Plan to read
as follows:
"(4) Each Stock Option shall cease to be exercisable on the date that is
ten years following the date of grant."
The directors also took action to cause the amendment to be applied to options
theretofore granted under the plan.
The above actions of the Board were made subject to subsequent stockholder
approval, which approval was given at the October 8, 1998, annual meeting of
stockholders.
This memo is intended to evidence the change in the maximum term of options
awarded to you under the Plan prior to October 8, 1998. Options automatically
granted to you under the Plan on October 9, 1998, also reflect this change. A
form of option agreement reflecting the most recent grant is attached. Please
sign and return a copy for our records.
You should keep this memo with the original of your option agreement or
agreements as evidence of the amendment.
Please contact Marta Myers or Bob Booe if you have any questions.
s/Laidacker M. Seaberg
---------------------------
Laidacker M. Seaberg, President
<PAGE>
[Logo] Midwest Grain Products, Inc.
1300 Main, P.O. Box 130, Established 1941
Atchison, Ks 66002-0130 * 913-367-1480 * 800-255 0302
Fax 913-367-0192
November 11, 1998
MEMORANDUM
TO: All Persons Holding Options Under the: Midwest Grain Products,
Inc. Stock Incentive Plan of 1996; and the Midwest Grain
Products, Inc. 1998 Stock Incentive Plan For Salaried Employees
FROM: Ladd Seaberg
Re: Amendments to Option Agreements
This is to advise you that on September 4, 1998, outstanding options previously
granted to you under the Midwest Grain Products, Inc. Stock Incentive Plan of
1996 and the Midwest Grain Products, Inc.1998 Stock Incentive Plan For Salaried
Employees were amended by the Human Resources Committee of the Board of
Directors to increase the maximum term of the options from five years to ten
years. The amendment states:
"Effective immediately as of this fourth day of September, 1998, the provision
contained in the instrument evidencing the grant of each option heretofore
granted under the Midwest Grain Products, Inc. Stock Incentive Plan of 1996 and
the Midwest Grain Products, Inc. 1998 Stock Incentive Plan for Salaried
Employees (the "Plans") which state:
"All options granted to you under this grant must be exercised, if at
all, within five years after the date of this grant. "
"is hereby amended to read:
"All options granted to you under this grant must be exercised, if at
all, within ten years after the date of this grant."
You should keep this memo with the original of your option agreement or
agreements as evidence of the amendment.
Please contact Marta Myers or Bob Booe if you have any questions.
s/Laidacker M. Seaberg
---------------------------
Laidacker M. Seaberg, President
<PAGE>
Exhibit 10.4
MIDWEST GRAIN PRODUCTS, INC.
INCENTIVE STOCK OPTION
GRANTED UNDER THE STOCK INCENTIVE PLAN OF 1996
Date of Grant:______________ ________ Shares
Time of Grant: 10:15 a.m. CST
THIS OPTION IS NOT ASSIGNABLE
Grant. Midwest Grain Products, Inc., a Kansas corporation (the
"Company"), hereby grants to the optionee named below an option to purchase, in
accordance with and subject to the terms and restrictions set forth in the
Midwest Grain Products, Inc. Stock Incentive Plan of 1996 (the "Plan"), as
amended and in this option, the number of shares of Common Stock, no par value,
of the Company ("Shares") set forth below, at the price set forth below and
expiring at the date set forth below:
Optionee: _________________________________
Number of Shares subject to option: _______
Number of such Shares to be Incentive Options: _________
Number of such Shares to be Nonqualified Options: _________
Option price per Share: $__.__
Incentive Stock Option. This option is intended to qualify as an
incentive stock option under Section 422 of the Code, as amended from time to
time ("Incentive Option") as to the shares specified above to be Incentive
Options and as a nonqualified option as to the remainder of such shares
("Nonqualified Option"); provided that to the extent that the aggregate fair
market value (as defined in the Code), of Common Stock with respect to which
Incentive Stock Options are exercisable for the first time by you during any
calendar year under the Plan or any other Company plan exceeds $100,000, this
Option shall be treated as a Nonqualified Option in accordance with the
provisions of Section 422 of the Code, as amended.
Exercisability.
(a) Incentive Option Installments. Subject to the $100,000
limitation, the Incentive options shall become exercisable as to all or any part
of _______ shares upon the first anniversary of the Date of Grant, _______
shares upon the second anniversary of the Date of Grant, _______ shares on the
third anniversary of the Date of Grant and ________ shares on the fourth
anniversary of the Date of Grant.
(b) Nonqualified Option Installments. The Nonqualified options
shall become exercisable as to all or any part of _______ shares upon the first
anniversary of the Date of Grant, _______ shares upon the second anniversary of
the Date of Grant, _______ shares on the third anniversary of the Date of Grant
and ________ shares on the fourth anniversary of the Date of Grant.
<PAGE>
(c) Other Provision concerning Exercisability. The options shall
otherwise be exercisable to the extent permitted in the Plan, including
provisions therein relating to a Change In Control, death, retirement or other
termination of employment. Installments or portions thereof not exercised in
earlier periods shall be cumulative and shall be available for exercise in later
periods.
Term. All options granted to you under this grant must be exercised, if at
all, within ten years after the date of this grant. In the event of your death,
retirement from the Company or other termination of employment, whether
voluntary or involuntary, the options will expire and may be exercised in the
manner specified in Section 6 of the Plan.
Exercise. Upon exercise of an option, you may pay all or any part of
the option price in cash, by check satisfactory to the Company or by transfer to
the Company of shares of Mature Stock or other Common Stock which was not
obtained through the exercise of a stock option owned by the Optionee. Common
Stock transferred to the Company or withheld from shares to be distributed in
payment of the option price or withholding taxes shall be valued at the Fair
Market Value of the Common Stock on the date of the exercise.
Option Not Assignable. This Option is not transferable by you otherwise
than by will or the laws of descent and distribution, and is exercisable, during
your lifetime, only by you; provided, however, to the extent that the options
covered hereby constitute nonqualified stock options, you may assign such
options to the extent that such assignment is hereafter approved in writing by
the Committee..
Not a 10% Owner. You hereby certify that, at the date hereof, you
believe that you do not own stock of the Company that possesses more than 10
percent of the total combined voting power of all classes of stock of the
Company or of any parent or subsidiary of the Company.
Payment of Taxes. The Plan grants the Company the authority to make
such provision as the Company deems appropriate for the collection of any taxes
which the Company may withhold in connection with the grant or exercise of
options. Pursuant to that authority, the Company authorizes you to settle
withholding taxes generated upon the exercise of Nonqualified Options by
allowing you to pay the taxes with cash or shares of the Company's Common Stock
in accordance with the following guidelines:
1. You may satisfy obligations to pay to the Company the amount of any
federal, state or local income tax imposed on you as a result of the exercise of
this option by either:
(a) Delivering to the Company a personal check satisfactory to the
Company in the amount of the tax liability on the date that the amount of the
tax to be withheld is to be determined (the "Tax Date"); or by
(b) Electing to pay the tax liability in shares of the Company's Common
Stock ("Stock Payment Election") by
(1) directing the Company at or prior to the Tax Date to withhold
from the number of shares to be issued to the optionee in connection with the
exercise of a Nonqualified Option that number of shares equal to the amount of
the tax liability divided by the fair market value (as defined by the Plans) of
one share of the Company's common stock on the Tax Date; or
-2-
<PAGE>
(2) delivering to the Company on the Tax Date good and marketable
title to that number of shares of Mature Stock (as defined in the Plan) or other
Stock which was not obtained through the exercise of a stock option owned by
you, as shall equal the amount of the tax liability divided by the fair market
value of one share of the Company's common stock on the Tax Date.
2. No fractional shares will be issued in connection with any election to
satisfy a tax liability by paying in shares. The balance of any tax liability
representing a fraction of a share will be settled in cash.
3. The amount of tax which may be paid by an optionee pursuant to a Stock
Payment Election will be the federal, state and local income taxes (including
FICA taxes) applicable to the exercise of the option determined by applying the
higher of either (a) the rate normally applied to the optionee's regular wages
by the Company or (b) the employee's highest applicable maximum marginal tax
rate, such rate to be selected by the optionee at the time of the election to
pay the taxes with surrendered or withheld shares.
4. The provisions of these rules relating to the use of stock to satisfy
obligations may be unilaterally revised by the Committee from time to time to
conform the same to any applicable laws or regulations.
Compliance With Law. When the issue or transfer of the shares covered
by this option may, in the opinion of the Company, conflict or be inconsistent
with any applicable law or regulation of any governmental agency having
jurisdiction, the Company reserves the right to refuse to issue or transfer said
stock. The Company may also legend certificates covering shares purchase
hereunder with usual and customary transfer restrictions to insure compliance
with applicable securities laws, and may issue the same subject to its prior
receipt of written representations from optionee in form and substance
satisfactory to the Company.
IN WITNESS WHEREOF, this instrument has been executed by the Company as
of this __ day of _____, 199_.
MIDWEST GRAIN PRODUCTS, INC.
By
Laidacker M. Seaberg
President and Chief Executive Officer
ACKNOWLEDGMENT
I hereby acknowledge receipt of the above option and a copy of the Plan
referred to in said option. I am familiar with the terms of the Plan, and I
understand my rights under the option are subject to and governed by the terms
of the Plan, as well as by the terms set forth in the foregoing option itself.
- -------------------------------- ----------------------------------
Date Acknowledged Signature of Optionee
-3-
<PAGE>
Exhibit 10.5
MIDWEST GRAIN PRODUCTS, INC.
INCENTIVE STOCK OPTION
GRANTED UNDER THE 1998 STOCK INCENTIVE PLAN
FOR SALARIED EMPLOYEES
Date of Grant: _______________
Time of Grant: _______________
Shares: _______________
THIS OPTION IS NOT ASSIGNABLE
Grant. Midwest Grain Products, Inc., a Kansas corporation (the "Company"),
hereby grants to the optionee named below an option to purchase, in accordance
with and subject to the terms and restrictions set forth in the Midwest Grain
Products, Inc. 1998 Stock Incentive Plan for Salaried Employees (the "Plan") and
in this option, the number of shares of Common Stock, no par value, of the
Company ("Shares") set forth below, at the prices set forth below and expiring
at the date set forth below:
Optionee: _____________________
Number of Shares subject to option: __________________
Number of such Shares to be Incentive Options: _____________
Option price per Share: _____________
Expiration Date: ___________________
Incentive Stock Option. This option is intended to qualify as an incentive stock
option under Section 422 of the Code, as amended from time to time ("Incentive
Option") as to the shares specified above to be Incentive Options provided that
to the extent that the aggregate fair market value (as defined in the Code), of
Common Stock with respect to which Incentive Stock Options are exercisable for
the first time by you during any calendar year under the Plan or any other
company plan exceeds $100,000, this Option shall be treated as a Nonqualified
Option in accordance with the provisions of Section 422 of the Code, as amended.
Exercisability.
(a) Incentive Option Installments. Subject to the $100,000 limitation, the
Incentive options shall become exercisable as to all or any part of
_______________ shares upon ______________, as to all or any part of an
additional _____________ shares upon ______________, as to all or any part of an
additional ______________ shares on _______________, and as to all or any part
of an additional ___________ shares on _______________.
<PAGE>
(b) Other Provision concerning Exercisability. The options shall otherwise
be exercisable to the extent permitted in the Plan, including provisions
therein relating to death, retirement or other termination of employment.
Installments or portions thereof not exercised in earlier periods shall be
cumulative and shall be available for exercise in later periods.
Term. All options granted to you under this grant must be exercised, if at all,
within ten years after the date of this grant. In the event of your death,
retirement from the Company or other termination of employment, whether
voluntary or involuntary, the options will expire and may be exercised in the
manner specified in Section 6 of the Plan.
Exercise. Upon exercise of an option, you may pay all or any part of the option
price in cash, by check satisfactory to the Company, or by transfer to the
Company of shares of Mature Stock or other Common Stock which was not obtained
through the exercise of a stock option owned by the Optionee. Common stock
transferred to the Company in payment of the option price or withholding taxes
shall be valued at the Fair Market Value of the Common Stock on the date of the
exercise.
Option Not Assignable. This option is not transferable by you otherwise than by
will or the laws of descent and distribution, and is exercisable, during your
lifetime, only by you; provided, however, to the extent that the options covered
hereby constitute nonqualified stock options, you may assign such options to the
extent that such assignment is hereafter approved in writing by the Committee.
Not a 10% Owner. You hereby certify that, at the date hereof, you believe that
you do not own stock of the Company that possesses more than 10 percent of the
total combined voting power of all classes of stock of the Company or of any
parent or subsidiary of the Company.
Payment of Taxes. The Plan grants the Company the authority to make such
provision as the Company deems appropriate for the collection of any taxes which
the Company may withhold in connection with the grant or exercise of options.
Pursuant to that authority, the Company authorizes you to settle withholding
taxes generated upon the exercise of Nonqualified Options by allowing you to pay
the taxes with cash or shares of the Company's Common Stock in accordance with
the following guidelines:
1. You may satisfy obligations to pay to the Company the amount of any
federal, state or local income tax imposed on you as a result of the exercise of
this option by either:
(a) Delivering to the Company a personal check satisfactory to the
Company in the amount of the tax liability on the date that the amount of the
tax to be withheld is to be determined (the "Tax Date"); or by
(b) Electing to pay the tax liability in shares of the Company's Common
Stock ("Stock Payment Election") by
(1) directing the Company at or prior to the Tax Date to withhold
from the number of shares to be issued to the optionee in connection with the
exercise of a Nonqualified Option that number of shares equal to the amount of
the tax liability divided by the fair market value (as defined by the Plans) of
one share of the Company's common stock on the Tax Date; or
(2) delivering to the Company on the Tax Date good and marketable
-2-
<PAGE>
title to that number of shares of Mature Stock (as defined in the Plan) or other
Stock which was not obtained through the exercise of a stock option owned by
you, as shall equal the amount of the tax liability divided by the fair market
value of one share of the Company's common stock on the Tax Date.
2. No fractional shares will be issued in connection with any election to
satisfy a tax liability by paying in shares. The balance of any tax liability
representing a fraction of a share will be settled in cash.
3. The amount of tax which may be paid by an optionee pursuant to a Stock
Payment Election will be the federal, state, and local taxes (including FICA
taxes) applicable to the exercise of the option determined by applying the
higher of either (a) the rate normally applied to the optionee's regular wages
by the Company or (b) the employee's highest applicable maximum marginal tax
rate, such rate to be selected by the optionee at the time of the election to
pay the taxes with surrendered or withheld shares.
4. The provisions of these rules relating to the use of stock to satisfy
obligations may be unilaterally revised by the Committee from time to time to
conform the same to any applicable laws or regulations.
Compliance With Law. When the issue or transfer of the shares covered by this
option may, in the opinion of the Company, conflict or be inconsistent with any
applicable law or regulation of any governmental agency having jurisdiction, the
Company reserves the right to refuse to issue or transfer said stock. The
Company may also legend certificates governing shares purchased hereunder with
usual and customary transfer restrictions to insure compliance with applicable
securities laws, and may issue the same subject to its prior receipt of written
representations from optionee in form and substance satisfactory to the Company.
IN WITNESS WHEREOF, this instrument has been executed by the Company as of this
__ day of _______, 199_.
MIDWEST GRAIN PRODUCTS, INC.
By _____________________________
Laidacker M. Seaberg
President and CEO
ACKNOWLEDGMENT
I hereby acknowledge receipt of the above option and a copy of the Plan referred
to in said option. I am familiar with the terms of the Plan, and I understand my
rights under the option are subject to and governed by the terms of the Plan, as
well as by the terms set forth in the foregoing option itself.
- ----------------- --------------------------------
Date Acknowledged Signature of Optionee
-3-
<PAGE>
Exhibit 10.6
MIDWEST GRAIN PRODUCTS, INC.
NONQUALIFIED STOCK OPTION
GRANTED UNDER THE 1996 STOCK OPTION PLAN FOR
OUTSIDE DIRECTORS
Date of Grant:_______________ 1,000 Shares
Time of Grant: 12:01 a.m. CST
THIS OPTION IS NOT ASSIGNABLE
Grant. Midwest Grain Products, Inc., a Kansas corporation (the "Company"),
hereby grants to the optionee named below an option to purchase, in accordance
with and subject to the terms and restrictions set forth in the Midwest Grain
Products, Inc. 1996 Stock Option Plan For Outside Directors (the "Plan"), and in
this option, the number of shares of Common Stock, no par value, of the Company
("Shares") set forth below, at the price set forth below and expiring at the
date set forth below:
Optionee: _________________________________
Number of Shares subject to option: 1,000
Number of such Shares to be Incentive Options: 0
Number of such Shares to be Nonqualified Options: 1,000
Option price per Share: $__.__
Incentive Stock Option. This option is NOT intended to qualify as an incentive
stock option under Section 422 of the Code, as amended from time to time and is
therefore deemed to be a Nonqualified Option.
Exercisability. Subject to the terms of the Plan this Option shall become
exercisable in full on -------------.
Term. The option granted to you under this grant must be exercised, if at all,
within ten years after the Date of Grant. In the event of your death, retirement
from the Company or other termination of employment, whether voluntary or
involuntary, the options will expire and may be exercised in the manner
specified in Section 5 of the Plan.
Exercise. Upon exercise of an option, you may pay all or any part of the option
price in cash, by check satisfactory to the Company or by transfer to the
Company of shares of Mature Stock or other Common Stock which was not obtained
through the exercise of a stock option owned by the Optionee. Common Stock
transferred to the Company or withheld from shares to be distributed in payment
of the option price or withholding taxes shall be valued at the Fair Market
Value of the Common Stock on the date of the exercise.
<PAGE>
Option Not Assignable. This Option is not transferable by you otherwise than by
will or the laws of descent and distribution, and is exercisable, during your
lifetime, only by you.
Payment of Taxes. The Plan grants the Company the authority to make such
provision as the Company deems appropriate for the collection of any taxes which
the Company may withhold in connection with the grant or exercise of options.
Pursuant to that authority, the Company authorizes you to settle withholding
taxes generated upon the exercise of Nonqualified Options by allowing you to pay
the taxes with cash or shares of the Company's Common Stock in accordance with
the following guidelines:
1. You may satisfy obligations to pay to the Company the amount of any
federal, state or local income tax imposed on you as a result of the exercise of
this option by either:
(a) Delivering to the Company a personal check satisfactory to the
Company in the amount of the tax liability on the date that the amount of the
tax to be withheld is to be determined (the "Tax Date"); or by
(b) Electing to pay the tax liability in shares of the Company's Common
Stock ("Stock Payment Election") by
(1) directing the Company at or prior to the Tax Date to withhold
from the number of shares to be issued to the optionee in connection with the
exercise of a Nonqualified Option that number of shares equal to the amount of
the tax liability divided by the fair market value (as defined by the Plans) of
one share of the Company's common stock on the Tax Date; or
(2) delivering to the Company on the Tax Date good and marketable
title to that number of shares of Mature Stock (as defined in the Plan) or other
Stock which was not obtained through the exercise of a stock option owned by
you, as shall equal the amount of the tax liability divided by the fair market
value of one share of the Company's common stock on the Tax Date.
2. No fractional shares will be issued in connection with any election to
satisfy a tax liability by paying in shares. The balance of any tax liability
representing a fraction of a share will be settled in cash.
3. The provisions of these rules relating to the use of stock to satisfy
obligations may be unilaterally revised by the Committee from time to time to
conform the same to any applicable laws or regulations.
-2-
<PAGE>
Compliance With Law. When the issue or transfer of the shares covered by this
option may, in the opinion of the Company, conflict or be inconsistent with any
applicable law or regulation of any governmental agency having jurisdiction, the
Company reserves the right to refuse to issue or transfer said stock. The
Company may also legend certificates covering shares purchase hereunder with
usual and customary transfer restrictions to insure compliance with applicable
securities laws, and may issue the same subject to its prior receipt of written
representations from optionee in form and substance satisfactory to the Company.
IN WITNESS WHEREOF, this instrument has been executed by the Company as of this
11th day of October, 1996.
MIDWEST GRAIN PRODUCTS, INC.
By
Laidacker M. Seaberg
President and Chief Executive
Officer
ACKNOWLEDGMENT
I hereby acknowledge receipt of the above option and a copy of the Plan referred
to in said option. I am familiar with the terms of the Plan, and I understand my
rights under the option are subject to and governed by the terms of the Plan, as
well as by the terms set forth in the foregoing option itself.
- ------------------------ -----------------------------
Date Acknowledged Signature of Optionee
-3-
<PAGE>
Exhibit 15.2
Baird,
Kurtz &
Dobson
Certified Public City Center Square
Accountants 1100 Main Street, Suite 2700 http://www.bkd.com
Kansas City, MO 64105-2112 Member of
816 221-6300 Fax 816 221-6380 Moores Rowland
International
-----------------------------------------------------------------------------
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549
We are aware that our report dated October 28, 1998 on our review of the
interim financial information of Midwest Grain Products, Inc. for the periods
ended September 30, 1998 and 1997 is incorporated by reference in this
registration statement. Pursuant to Rule 436(c) under the Securities Act of
1933, this report should not be considered a part of the registration statement
prepared or certified by us within the meaning of Sections 7 and 11 of that Act.
/s/Baird, Kurtz, Dobson
BAIRD, KURTZ & DOBSON
October 24, 1998
BKD
We Deliver Results
------------------ 75
1923-1998
<PAGE>
Exhibit 20
November 10, 1998
Dear Stockholder:
I am pleased to report that our Company's performance in the first quarter of
fiscal 1999 resulted in a substantial improvement over the same period the prior
year. In addition, the most recent government statistics indicate that in the
five months since the implementation of a three-year quota on imports of foreign
wheat gluten on June 1, the European Union (E.U.) has essentially met its first
year quota of 54 million pounds. That amount is equivalent to just over half the
record annual amount which the E.U. shipped into the United States in fiscal
1998.
With the E.U.'s quota for the initial 12-month quota period that ends May 31,
1999 now filled, a more fair and stable competitive environment should exist in
the U.S. wheat gluten market for much of the remainder of our current fiscal
year.
We ended this year's first quarter with net income of $666,000, or $0.07 per
share, on sales of $51,938,000 versus a net loss of $235,000, or $0.02 per
share, on sales of $57,623,000 for the first quarter of fiscal 1998. Lower grain
costs and increased productivity, which was influenced by heightened market
interest in our wheat gluten products, were mainly responsible for this
turnaround.
Prices for wheat, corn and milo, our principal raw materials, declined as the
result of this year's bumper harvests in the U.S. Productivity improved as the
result of increased wheat gluten production in response to strengthened demand
and in preparation for effectively satisfying customer needs following the
expected reduction in imports of subsidized and artificially-priced E.U. gluten.
Additionally, our sales of specialty wheat gluten products experienced growth
during the quarter, contributing to our overall increase in gluten output.
Although our production of wheat starch was down compared to a year ago, it
was considerably higher than the amount produced in the fourth quarter of fiscal
1998. While this increase resulted from a rise in sales of non-modified wheat
starch, we currently are experiencing strengthened sales of our value-added
modified starches as well.
Demand for our food grade alcohol fell below last year's first quarter level,
resulting in price and volume decreases in the beverage category and reduced
unit sales for industrial applications. Beverage alcohol selling prices
primarily followed the decline in raw material costs for grain, but were also
affected by increased alcohol supplies throughout the industry. Unit sales of
our fuel grade alcohol were essentially even with sales a year ago. However,
selling prices for this product declined, keeping pace with a downturn in
gasoline prices. Optimizing our distillery operations to achieve improved
efficiencies and increasing sales of food grade alcohol as conditions allow are
among our top priorities at this time.
Our other principal priorities are to steadily increase our production and
sales of vital wheat gluten as the effects of the import quota continue to
materialize; make major market penetrations for our new specialty wheat gluten
products through extensive marketing and promotional programs; and expand our
sales of modified wheat starch to new areas of the food market. By meeting these
goals and realizing stable or lower raw material costs for grain, favorable
results should continue in the current quarter and beyond.
Sincerely,
s/Ladd M. Seaberg
Ladd M. Seaberg
President and CEO
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM
MIDWEST GRAIN PRODUCTS, INC. CONSOLIDATED STATEMENT OF INCOME FOR
THE THREE MONTHS ENDED SEPTEMBER 30, 1998 AND CONSOLIDATED BALANCE
SHEET AS AT SEPTEMBER 30, 1998, 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> 3-MOS
<FISCAL-YEAR-END> JUN-30-1999
<PERIOD-START> JUL-1-1998
<PERIOD-END> SEP-30-1998
<CASH> 304
<SECURITIES> 0
<RECEIVABLES> 24,504<F1>
<ALLOWANCES> 285
<INVENTORY> 26,097
<CURRENT-ASSETS> 55,487
<PP&E> 219,966
<DEPRECIATION> 116,359
<TOTAL-ASSETS> 159,505
<CURRENT-LIABILITIES> 13,268
<BONDS> 25,312
<COMMON> 6,715
0
4
<OTHER-SE> 100,272<F2>
<TOTAL-LIABILITY-AND-EQUITY> 159,505
<SALES> 51,938
<TOTAL-REVENUES> 51,938
<CGS> 47,509
<TOTAL-COSTS> 50,415<F3>
<OTHER-EXPENSES> 41
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (525)
<INCOME-PRETAX> 1,101
<INCOME-TAX> 435
<INCOME-CONTINUING> 666
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 666
<EPS-PRIMARY> .07
<EPS-DILUTED> .07
<FN>
<F1> Reflects Receivables less Allowances.
<F2> Reflects retained earnings and additional paid in captial
less cost of Treasury Stock.
<F3> Reflects cost of sales and selling, general &
administrative expenses.
</FN>
</TABLE>
