MGPI moves to reduce financial losses

By Anna Austin | October 06, 2008
Web exclusive posted Oct. 27, 2008 at 4:29 p.m. CST

Kansas-based MGP Ingredients Inc., a developer and producer of grain-based products such as ethanol, mill feed and distillers grains, announced it is taking new initiatives to correct 2008 net losses.

In late August, MGPI released its 2008 fiscal results, which showed the company's first net loss in more than 10 years. The company reported a net loss of $9.9 million for the fourth quarter of fiscal year 2008, which ended June 30. For fiscal year 2008, MGPI reported a net loss of $11.7 million, compared to a net income of $17.5 million for fiscal year 2007. During 2008, the following items adjusted the financial figures: a $4.6 million litigation settlement, and a $2 million tax credit. These items were offset by a $4.9 million impairment charge net of tax, $929,000 of inventory write-downs, and a $1 million write-off of fixed assets.

On Oct. 16, during the company's annual meeting of stockholders, MGPI's President and Chief Executive Officer Tim Newkirk said the company continues to transform itself to a more customer-driven provider of value-added ingredients and world class alcohol products.

The financial losses were due to rising cost inputs, particularly for corn, wheat and natural gas, as well as greatly reduced selling prices for ethanol, Newkirk said.

Additionally, he suggested that MGPI has faced a competitive disadvantage in several areas. "For example, we typically placed greater emphasis on pounds and gallons instead of problem solving; on production instead of asset utilization, and on invention instead of commercialization," Newkirk said.

MGPI's plans for growth are straightforward, Newkirk said. "In food-grade alcohol, we aim to optimize the profit margin from corn. In fuel-grade ethanol, we will be opportunistic with production and pricing while continuing to offset commodity swings with hedging and contracting. Our ingredient solutions segment offers the most promising upside, based on growing demand for healthy foods. This is why we continue to enhance our capabilities through investments in new product development and customer relationships. Since most of our customers are big companies, we're setting out to solve big-company' problems around the globe."

Also at the stockholders meeting, Ladd Seaberg, chairman of the MGPI's board of directors was elected to a new term on the board. Company president and chief executive officer Tim Newkirk was elected to fill a seat on the board previously held by Randy Schrick, who serves as the company's vice president of engineering and corporate director of distillery manufacturing. Seaberg and Newkirk were elected by holders of preferred stock. MGPI's common stockholders re-elected Gary Gradinger, chairman and chief executive officer of Kansas, Mo.-based Golden Star Inc., to another term on the board. The terms of all three expire in 2011.

Seaberg joined MGPI in 1969 as distillery production manager, becoming vice president and manager of the company's starch division in 1970. He has been a member of the MGPI board of directors since 1979. He served as the company's president from 1980 to 2006, and as its chief executive officer from 1998 to March 2008.

In 1968 Gradinger joined MGPI's sales and marketing team; he served as the company's president in 1978. He has been a member of MGPI's board of directors since 2005, and a chairman and chief executive officer of textile cleaning, communication and safety-product company Golden Star, Inc. for more than 25 years.

Tim Newkirk has served as president of MGP Ingredients since October 2006, and as chief executive officer since March 5, succeeding Seaberg in both of these capacities. From March 2006 to March 2008, he served as chief operating officer of the company. Newkirk began his career with MGPI in 1991, serving initially as a distillery shift manager and later as a process engineer, project engineer and quality control manager at the company's Atchison plant.