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, 1999 - 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
9,437,672 shares outstanding
as of November 1, 1999
<PAGE>
INDEX
PART I. FINANCIAL INFORMATION
Page
Item 1. Financial Statements
____________________
Independent Accountants' Review Report................... 2
Condensed Consolidated Balance Sheets as of
September 30, 1999 and June 30, 1999..................... 3
Condensed Consolidated Statements of Income for
the Three Months Ended September 30, 1999 and 1998....... 5
Condensed Consolidated Statements of Cash Flows for
the Three Months Ended September 30, 1999 and 1998....... 6
Notes to Condensed Consolidated Financial Statements..... 7
Item 2. Management's Discussion and Analysis of Financial
_________________________________________________
Condition and Results of Operations............. 8
___________________________________
Item 3. Quantitative and Qualitative Disclosures
________________________________________
About Market Risk............................... 11
_________________
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
________________________________
<PAGE>
[LOGO]
Baird, Kurtz & Dobson
City Center Square
1100 Main, Suite 2700
Kansas City, Missouri 64105
816 221-6300 FAX 816 221-6380
www.bkd.com
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, 1999, and the
related condensed consolidated statements of income for the three month periods
ended September 30, 1999 and 1998, and the related condensed consolidated
statements of cash flows for the three-month periods ended September 30, 1999
and 1998. 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, 1999, 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 July 30, 1999,
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, 1999, 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
Member of
Moores Rowland International
Kansas City, Missouri
October 28, 1999
Solutions for Success
2
<PAGE>
MIDWEST GRAIN PRODUCTS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In Thousands)
<TABLE>
<CAPTION>
ASSETS
<S> <C> <C>
September 30, June 30,
1999 1999
_____________ ____________
(Unaudited)
CURRENT ASSETS
Cash and cash equivalents $ 1,582 $ 4,054
Receivables 28,163 26,656
Inventories 24,598 24,450
Prepaid expenses 1,726 1,174
Deferred income taxes 3,034 3,034
____________ ____________
Total Current Assets 59,103 59,368
____________ ____________
PROPERTY AND EQUIPMENT, At cost 225,644 224,381
Less accumulated depreciation 129,844 126,465
____________ ____________
95,800 97,916
____________ ____________
OTHER ASSETS 137 86
____________ ____________
$ 155,040 $ 157,370
============ ============
</TABLE>
See Accompanying Notes to Condensed Consolidated Financial
Statements and Independent Accountants' Review Report
3
<PAGE>
MIDWEST GRAIN PRODUCTS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS (Continued)
(In Thousands)
<TABLE>
<CAPTION>
LIABILITIES AND STOCKHOLDERS' EQUITY
<S> <C> <C>
September 30, June 30,
1999 1999
______________ __________
(Unaudited)
CURRENT LIABILITIES
Note payable $ 1,000
Current maturities of long-term debt 2,477 $ 2,433
Accounts payable 10,096 9,129
Accrued expenses 1,952 4,296
Income taxes payable 947 457
____________ ____________
Total Current Liabilities 16,472 16,315
____________ ____________
LONG-TERM DEBT 18,764 21,099
____________ ____________
POST-RETIREMENT BENEFITS 6,302 6,312
____________ ____________
DEFERRED INCOME TAXES 8,199 8,199
____________ ____________
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 99,934 99,183
___________ ____________
109,138 108,387
Treasury stock, at cost
Common;
September 30, 1999 - 327,500 shares
June 30, 1999 - 239,100 shares (3,835) (2,942)
____________ _____________
105,303 105,445
____________ _____________
Total liabilities and stockholders' equity $ 155,040 $ 157,370
============ ============
</TABLE>
See Accompanying Notes to Condensed Consolidated Financial
Statements and Independent Accountants' Review Report
4
<PAGE>
MIDWEST GRAIN PRODUCTS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
THREE MONTHS ENDED SEPTEMBER 30, 1999 AND 1998
(Unaudited)
<TABLE>
<S> <C> <C> <C>
1999 1998
_________ __________
(in thousands)
NET SALES $ 54,975 $ 51,938
COST OF SALES 50,750 47,509
__________ __________
GROSS PROFIT 4,225 4,429
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES 2,680 2,906
__________ __________
1,545 1,523
OTHER OPERATING INCOME 20 41
__________ __________
INCOME FROM OPERATIONS 1,565 1,564
OTHER INCOME (LOSS) NET
Interest (389) (525)
Other 65 62
____________ ___________
INCOME BEFORE INCOME TAXES 1,241 1,101
PROVISION FOR INCOME TAXES 490 435
___________ ___________
NET INCOME $ 751 $ 666
=========== ===========
EARNINGS PER COMMON SHARE $ 0.08 $ 0.07
=========== ===========
</TABLE>
See Accompanying Notes to Condensed Consolidated Financial
Statements and Independent Accountants' Review Report
5
<PAGE>
MIDWEST GRAIN PRODUCTS, INC.
CONDENSED CONSOLIDATED STATEMENTS CASH FLOWS
THREE MONTHS ENDED SEPTEMBER 30, 1999 AND 1998
(Unaudited)
<TABLE>
<S> <C> <C> <C> <C>
1998 1997
___________ __________
(in thousands)
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 751 $ 666
Items not requiring (providing) cash:
Depreciation 3,379 3,398
Gain on sale of equipment (3)
Changes in:
Accounts receivable (1,507) 1,865
Inventories (148) (5,667)
Prepaid expenses (552) (587)
Accounts payable 1,118 (1,454)
Accrued expenses (2,344) (1,290)
Income taxes payable 490 436
Other (61)
___________ __________
Net cash provided by (used in) operating activities 1,126 (2,636)
___________ __________
CASH FLOWS FROM INVESTING ACTIVITIES
Additions to property and equipment (1,259) (1,499)
Proceeds from sale of equipment 5
___________ __________
Net cash used in investing activities (1,259) (1,494)
___________ __________
CASH FLOWS FROM FINANCING ACTIVITIES
Purchase of treasury stock (1,048)
Advances on notes payable 1,000 2,000
Payments on of long-term debt (2,291) (2,289)
___________ __________
Net cash used in financing activities (2,339) (289)
___________ __________
DECREASE IN CASH AND CASH EQUIVALENTS (2,472) (4,419)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 4,054 4,723
___________ ___________
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 1,582 $ 304
=========== ===========
</TABLE>
See Accompanying Notes to Condensed Consolidated Financial
Statements and Independent Accountants' Review Report
6
<PAGE>
MIDWEST GRAIN PRODUCTS, INC.
NOTE TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
THREE MONTHS ENDED SEPTEMBER 30, 1999
(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, 1999, and the condensed consolidated results of its operations and
its cash flows for the periods ended September 30, 1999 and 1998, and are of a
normal recurring nature.
See Independent Accountants Review Report
7
<PAGE>
MIDWEST GRAIN PRODUCTS, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
THREE MONTHS ENDED SEPTEMBER 30, 1999
RESULTS OF OPERATIONS
General
The Company's net income of $751,000 in the first quarter of fiscal 2000
represented an increase compared to the net income of $666,000 that was
experienced in the first quarter of fiscal 1999. The increase was principally
due to the effects of heightened demand for the Company's vital wheat gluten and
specialty and modified wheat proteins and wheat starches, together with lower
raw material costs for grain. These conditions partially offset the impact of
reduced selling prices for the Company's alcohol products resulting from the
continuation of excess alcohol supplies throughout the industry. To improve
alcohol production efficiencies long-term, the Company is proceeding with plans
to install new distillation equipment at its Atchison plant. The project is
scheduled for completion by the end of fiscal 2000 and is expected to further
enhance the Company's high quality food grade alcohol.
The realization of even greater demand for wheat gluten in the first quarter was
prevented by a huge surge of gluten imports from the European Union (E.U.) just
before the start of the quarter. During the month of June 1999, which marked the
opening of the second year of a three-year annual quota on imports of foreign
gluten, the E.U.'s entire second year allocation of 45 million pounds entered
the United States market. This situation reduced the Company's potential to
increase gluten sales at a more accelerated rate in the first quarter. However,
conditions allowing the Company to build a greater presence in the gluten market
during much of the remainder of fiscal 2000 should materialize. In addition, the
Company expects to realize continued growth in sales of its specialty wheat
proteins, which are derived from wheat gluten and marketed for use in a variety
of value-added food and non-food applications.
First quarter sales of wheat starch were boosted largely by heightened demand
for the Company's modified and specialty starches. To further serve customers'
requirements for these unique ingredients, the Company has just completed the
installation of additional production capacity in Atchison.
Sales
Net sales in the first quarter of fiscal 2000 increased by approximately $3.0
million compared to net sales in the first quarter of fiscal 1999. The increase
resulted from higher sales of fuel grade alcohol, vital wheat gluten and premium
wheat starch. The rise in fuel grade alcohol sales occurred as the result of a
significant jump in unit sales as the Company shifted more of its alcohol
production to this area due to decreased demand for food grade alcohol for
beverage and industrial applications. However, the impact of the increased unit
sales was softened by lower selling prices for fuel alcohol. The decline in
demand for food grade alcohol was caused mainly by the continuation of excess
supplies throughout the industry. Sales of distillers' feed, the principal
by-product of the alcohol production process, also dropped below sales a year
ago. This was due to both lower selling prices and lower unit sales.
The increase in wheat gluten sales in the first quarter occurred as the result
of higher unit sales of vital wheat gluten and specialty wheat proteins together
with a modest improvement in selling prices.
8
<PAGE>
MIDWEST GRAIN PRODUCTS, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
THREE MONTHS ENDED SEPTEMBER 30, 1999
Sales of wheat starch increased as the result of higher unit sales, while
selling prices for this product remained essentially unchanged compared to the
first quarter of fiscal 1999.
Cost of Sales
The cost of sales in the first quarter of fiscal 2000 increased by approximately
$3.2 million compared to cost of sales in the first quarter of fiscal 1999. This
occurred principally as a result of higher energy and manufacturing costs
associated with increased volume sales, largely of alcohol and wheat gluten. The
cost increase was partially offset by lower raw material costs.
In connection with the purchase of raw materials, principally corn and wheat,
for anticipated operating requirements, the Company enters into commodity
contracts to reduce or hedge 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 2000, raw material costs included a net hedging loss of $674,000 on
contracts settled during the quarter compared to a net hedging loss of
$1,036,000 for the first quarter of fiscal 1999.
Selling, General and Administrative Expenses
Selling, general and administrative expenses in the first quarter of fiscal 2000
decreased by approximately $227,000 below selling, general and administrative
expenses in the first quarter of fiscal 1999. The decrease was due largely to a
reduction in expenses related to bad debt, more than offsetting increased costs
related to research and marketing activities to strengthen the Company's
development and sales of value-added specialty products made from wheat.
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
$751,000 in the first quarter of fiscal 2000 compared to a net income of
$666,000 in the first quarter of fiscal 1999.
9
<PAGE>
MIDWEST GRAIN PRODUCTS, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
THREE MONTHS ENDED SEPTEMBER 30, 1999
LIQUIDITY AND CAPITAL RESOURCES
The following table is presented as a measure of the Company's liquidity and
financial condition:
September 30, June 30,
1999 1999
_____________ __________
Cash and cash equivalents $ 1,582 $ 4,054
Working capital 42,631 43,053
Amounts available under lines of credit 32,000 33,000
Notes payable and long-term debt 22,241 23,532
Stockholders= equity 105,303 105,445
Short-term liquidity continues to be impacted by the high inventory requirements
to meet anticipated customer needs for wheat gluten. As expected, the increased
customer requirements result from the three-year import quota to create a more
fair and stable competitive environment. The Company anticipates maintaining
this high level to satisfy customer needs throughout fiscal 2000. Additionally,
alcohol inventories are also high due to excess supplies throughout the
industry.
Short-term liquidity was also impacted by open market purchases of 88,400 shares
of the Company's common stock. These purchases were made to fund the Company's
stock option plans and for other corporate purposes.
At September 30, 1999, the Company had $7.7 million committed to improvements in
production efficiencies and replacements of existing equipment, which includes
the equipment described in the first and third paragraphs on page 8.
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 as market demand increases due to the
effects of the quotas on imports of foreign wheat gluten, as well as its other
products.
YEAR 2000 READINESS DISCLOSURE
Since 1996, the Company has recognized the need to configure its operations so
that they will not be adversely impacted by internal Year 2000 software
failures. New hardware and software have been acquired and installed for the
core financial applications. All core financial modules have been tested
successfully, installed and are currently in use. The total costs incurred
approximated $225,000.
10
<PAGE>
MIDWEST GRAIN PRODUCTS, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
THREE MONTHS ENDED SEPTEMBER 30, 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
modified and tested the equipment. The external cost to convert and test the
identified processes was less than $100,000.
The Company has also surveyed key vendors and customers regarding their
abilities to achieve Year 2000 compliance. Results of the surveys indicated
these companies are knowledgeable of Year 2000 issues and are in the process of
complying or have already complied.
Although the Company believes that it is taking appropriate steps to address the
Year 2000 readiness issue internally, there can be no assurance that its
operations will not be negatively impacted in the Year 2000 by the lack of Year
2000 readiness by others. Additional actions that may be required cannot
presently be anticipated.
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"
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, 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.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
The Company produces its products from wheat, corn and milo and, as such, is
sensitive to changes in commodity prices. Grain futures and/or options are used
as a hedge to protect against fluctuations in the market. The information
regarding inventories and futures contracts at June 30, 1999, as presented in
the annual report, is not significantly different from September 30, 1999.
11
<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 13,
1999. The following actions were taken at the meeting:
Michael R. Haverty was elected to the office of Group A Director for a term
expiring in 2002 with 8,327,134 votes for his election and nominal votes
withheld.
Randall M. Schrick was elected to the office of Group B Director for a term
expiring in 2002 with 409 votes for his election and no votes withheld.
Laidacker M. Seaberg was elected to the office of Group B Director for a term
expiring in 2002 with 409 votes for his election and no votes withheld.
Item 6 Exhibits and Reports on Form 8-K
(a) Exhibits
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.
27 Financial Data Schedule for the quarter ending
September 30, 1999.
99 Press Release dated November 10, 1999.
(b) Reports on Form 8-K
The Company has filed no reports on Form 8-K during the
quarter ended September 30, 1999.
12
<PAGE>
SIGNATURES
Pursuant to the requirements on 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.
Date: November 11, 1999 By S/ Ladd M. Seaberg
Ladd M. Seaberg, President
and Chief Executive Officer
Date: November 11, 1999 By S/ Robert G. Booe
Robert G. Booe, Vice President
and Chief Financial Officer
13
<PAGE>
EXHIBIT INDEX
Exhibit No. Description
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.
27 Financial Data Schedule for the quarter ending September 30, 1999.
99 Press Release dated November 10, 1999.
Exhibit 15.2
[LOGO]
Baird, Kurtz & Dobson
City Center Square
1100 Main, Suite 2700
Kansas City, Missouri 64105
816 221-6300 FAX 816 221-6380
www.bkd.com
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549
We are aware that our report dated October 28, 1999 on our review of the interim
financial information of Midwest Grain Products, Inc. for the periods ended
September 30, 1999 and 1998 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 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
Member of
Moores Rowland International
Kansas City, Missouri
October 28, 1999
Solutions for Success
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
Exhibit 27
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-30-2000
<PERIOD-START> JUL-1-1999
<PERIOD-END> SEP-30-1999
<CASH> 1,582
<SECURITIES> 0
<RECEIVABLES> 28,163<F1>
<ALLOWANCES> 285
<INVENTORY> 24,598
<CURRENT-ASSETS> 59,103
<PP&E> 225,644
<DEPRECIATION> 129,844
<TOTAL-ASSETS> 155,040
<CURRENT-LIABILITIES> 16,472
<BONDS> 18,764
<COMMON> 6,715
0
4
<OTHER-SE> 98,584<F2>
<TOTAL-LIABILITY-AND-EQUITY> 155,040
<SALES> 54,975
<TOTAL-REVENUES> 54,975
<CGS> 50,750
<TOTAL-COSTS> 53,430<F3>
<OTHER-EXPENSES> 20
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (389)
<INCOME-PRETAX> 1,241
<INCOME-TAX> 490
<INCOME-CONTINUING> 751
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 751
<EPS-BASIC> .08
<EPS-DILUTED> .08
<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>
Exhibit 99
FOR IMMEDIATE RELEASE: MIDWEST GRAIN SHOWS FIRST QUARTER EARNINGS INCREASE
ATCHISON, Kan., November 10, 1999--Results released today by Midwest Grain
Products, Inc. show that the company's earnings for the first quarter of fiscal
2000 rose slightly above the same period the prior year and were up
substantially over the fourth quarter of fiscal 1999.
The company had net income of $751,000, or 8 cents per share, on sales of
$54,975,000 for the current year's first quarter, which ended Sept. 30. That
compares to last year's first quarter net income of $666,000, or 7 cents per
share, on sales of $51,938,000, and marks a sizeable turnaround compared to the
net loss of $1,059,000 that was incurred in the final quarter of fiscal 1999.
"While our profitability in this year's first quarter was just above the
level we reached during the same period a year ago, we have come a long way
since the start of fiscal 2000," said Ladd Seaberg, president and chief
executive officer. "Furthermore," he added, "we currently are experiencing
strong indications of more significant improvements to our bottom line,
principally as the result of increased growth in our specialty and modified
wheat starch and wheat protein markets, together with improved operational
efficiencies."
The increase in first quarter earnings compared to a year ago resulted
principally from the effects of increased demand for the company's vital wheat
gluten, specialty wheat proteins and wheat starches combined with lower raw
material costs for grain, according to Seaberg. These factors partially offset
the impact of reduced selling prices for the company's alcohol products, a
situation resulting from the continuation of excess supplies throughout the
industry, he noted.
"The realization of even greater demand for our wheat gluten in the first
quarter was prevented by a huge wave of gluten imports from the European Union
(E.U.) just prior to the start of the quarter," Seaberg said. He explained that
during the month of June, 1999, which marked the opening of the second year of a
three-year annual quota on imports of foreign gluten, the E.U.'s entire
allocation of 45 million pounds entered the United States market. "This lowered
our potential to increase gluten sales more rapidly in the first quarter," he
said. "However, conditions allowing us to strengthen our presence in the gluten
market during much of the remainder of fiscal 2000 should materialize," he
added.
Seaberg reiterated that the company also expects to realize continued
growth in sales of its specialty wheat proteins and specialty and modified wheat
starches, which are produced and marketed for use in a variety of value-added
food and non-food applications. The company currently is completing the
installation of additional equipment at its Atchison, Kansas plant to increase
wheat starch production capacity. Work is also underway at the Atchison plant to
enhance the company's alcohol distillation process and further improve alcohol
production cost efficiencies. This project is expected to be completed by the
end of fiscal 2000.
<PAGE>
This release 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 marketing
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.
###
