As Filed with the Securities and Exchange Commission on September 6, 2002
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
Annual Report Pursuant to Section 13
of the Securities Exchange Act of 1934
For the Fiscal Year Ended June 30, 2002
MIDWEST GRAIN PRODUCTS, INC.
1300 Main Street
Box 130
Atchison, Kansas 66002
Telephone: (913) 367-1480
Incorporated in the State of Kansas
COMMISSION FILE NO. 0-17196
IRS No. 48-0531200
The Company has no securities registered pursuant to Section 12(b) of the
Act. The only class of common stock outstanding consists of Common Stock having
no par value, 8,066,786 shares of which were outstanding at June 30, 2002. The
Common Stock is registered pursuant to Section 12(g) of the Act.
The aggregate market value of the Common Stock of the Company held by
non-affiliates, based upon the last reported sales price of such stock on August
13, 2002, was $75,716,644.
The Company has filed all reports required to be filed by Section 13 or
15(d) of the Securities Exchange Act of 1934 during the preceding 12 months, and
has been subject to such filing requirements for the past 90 days.
As indicated by the following check mark, disclosure of delinquent filers
pursuant to Rule 405 of Regulation S-K is not contained herein, and will not be
contained, to the best of registrant's knowledge, in a definitive proxy or
information statement incorporated by reference in Part III of this Form
10-K:[ ].
The following documents are incorporated herein by reference:
(1) Portions of Midwest Grain Products, Inc. 2002 Annual Report to
Stockholders, pages 17 through 40 thereof, are incorporated by
reference into Part II and contained in Exhibit 13.
(2) Portions of Midwest Grain Products, Inc. Proxy Statement for the
Annual Meeting of Stockholders to be held on October 10, 2002 are
incorporated by reference into Part III of this report to the extent
set forth herein.
CONTENTS
PAGE
PART I
Item 1. Business.........................................................3
General Information..............................................3
Wheat-Based Products.............................................4
Distillery Products..............................................8
Transportation..................................................11
Raw Materials...................................................11
Energy..........................................................11
Employees.......................................................12
Regulation......................................................12
Item 2. Properties......................................................13
Item 3. Legal Proceedings...............................................14
Item 4. Submission of Matters to a Vote of Security Holders.............14
Item 4A. Executive Officers of the Registrant............................14
PART II
Item 5 Market for the Registrant's Common Equity and Related
Stockholder Matters..........................................16
Item 6. Selected Financial Data.........................................17
Item 7. Management's Discussion and Analysis of Financial Condition
and Results of Operation.....................................17
Item 7A. Quantitative and Qualitative Disclosure About Market Risk.......17
Item 8. Financial Statements and Supplementary Data.....................17
Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure..........................17
PART III
Item 10. Directors of the Registrant.....................................18
Item 11. Executive Compensation..........................................18
Item 12. Security Ownership of Certain Beneficial Owners
and Management...............................................18
Item 13. Certain Relationships and Related Transactions..................18
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on
Form 8-K.....................................................18
SIGNATURES...................................................................22
CERTIFICATIONS...............................................................23
FINANCIAL STATEMENT SCHEDULES...............................................S-1
Report of Independent Public Accountants on Schedules..............S-2
Schedule VIII. Valuation and Qualifying Accounts..................S-3
The calculation of the aggregate market value of the Common Stock of the
Company held by non-affiliates is based on the assumption that non-affiliates do
not include directors. Such assumption does not constitute an admission by the
Company or any director that any director is an affiliate of the Company.
This report, including the portions of the Annual Report incorporated
herein by reference, contains forward-looking statements as well as historical
information. Forward-looking statements are usually identified by or are
associated with such words such 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.
2
PART I
ITEM 1. BUSINESS.
GENERAL INFORMATION
Midwest Grain Products, Inc. (the Company) is a Kansas corporation
headquartered in Atchison, Kansas. It was incorporated in 1957 and is the
successor to a business founded in 1941 by Cloud L. Cray, Sr. On August 27,
2002, the holders of the Company's preferred stock approved an amendment to the
Company's Amended and Restated Articles of Incorporation which, when it becomes
effective on October 10, 2002, will change the Company's name to MGP
Ingredients, Inc.
The Company is a fully integrated producer of wheat-based products and
distillery products and has two reportable segments, wheat-based products and
distillery products. Wheat-based products consist of specialty, or value-added,
ingredients, including wheat starches and proteins, commodity ingredients,
including commodity wheat starches and vital wheat gluten, and mill feeds.
Distillery products consist of food grade alcohol, including beverage alcohol
and industrial alcohol, fuel alcohol, commonly known as ethanol, and distillers
grain and carbon dioxide, which are by-products of the Company's distillery
operations.
The Company processes its products at plants located in Atchison, Kansas
and Pekin, Illinois. The Company also operates a wheat protein and wheat starch
mixing facility in Kansas City, Kansas. Wheat is purchased directly from local
and regional farms and grain elevators and milled into flour and mill feeds. The
flour is processed with water to extract vital wheat gluten, a portion of which
is further processed into specialty wheat proteins. Vital wheat gluten and most
wheat protein products are dried into powder and sold in packaged or bulk form.
The starch slurry which results after the extraction of the gluten and wheat
proteins is further processed to extract premium wheat starch, which is also
dried into powder and sold in packaged or bulk form, either as commodity wheat
starch or, after further processing, as specialty wheat starch. The remaining
slurry is mixed with mill feeds, corn and/or milo and water and then cooked,
fermented and distilled into alcohol. The residue of the distilling operations
is dried and sold as a high protein additive for animal feed. Carbon dioxide
which is produced during the fermentation process is trapped and sold. Mill
feeds not used in the distilling operations are sold to feed manufacturers.
Note 13 of the Company's Notes to Consolidated Financial Statements, which
is incorporated herein by reference, includes information about sales,
depreciation, income before income taxes and identifiable assets for the last
three fiscal years by reportable segment. The following table shows the
Company's sales from continuing operations by each class of similar products
during the past five fiscal years ended June 30, 2002, as well as such sales as
a percent of total sales.
PRODUCT GROUP SALES
Year Ended June 30,
-----------------------------------------------------------------------------------------------
2002 2001 2000 1999 1998
---------------- ------------------ --------------- ---------------- -----------------
(thousands of dollars)
Amount % Amount % Amount % Amount % Amount %
Wheat-based Products
Specialty Ingredients $ 37,396 17.4 $ 32,918 14.4 $ 31,615 13.6 $ 28,445 13.2 $ 23,231 10.4
Commodity Ingredients 27,478 12.8 44,751 19.5 68,483 29.6 54,881 25.3 47,049 21.1
Mill Feed and Other
Mill Products 1,358 0.7 2,034 0.9 2,759 1.2 3,046 1.4 5,017 2.2
------- ------- ------- ------- -------
Total Wheat-based
Products 66,232 30.9 79,703 34.8 102,857 44.4 86,372 39.9 75,297 33.7
Distillery Products:
Food Grade Alcohol 34,402 16.0 42,320 18.4 43,864 18.9 49,649 23.0 63,421 28.4
Fuel Grade Alcohol 86,385 40.3 83,686 36.5 62,066 26.7 54,639 25.3 51,277 23.0
Distillery By-products 27,509 12.8 23,532 10.1 23,093 10.0 25,441 11.8 33,259 14.9
-------- -------- ----- -------- ----- -------- ----- -------- ----
Total Distillery
Products 148,296 69.1 149,538 65.2 129,023 55.6 129,729 60.1 147,957 66.3
-------- ----- -------- ----- -------- ----- -------- ----- -------- ----
Net Sales $214,528 100.0 $229,241 100.0 $231,880 100.0 $216,101 100.0 $223,254 100.0
======== ===== ======== ===== ======== ===== ======== ===== ======== ======
3
The Company's results for fiscal 2002 improved over the prior fiscal year.
Net income was $6.3 million compared to $2.7 million in fiscal 2001, due
principally to funds allocated to the Company through U.S. Department of
Agriculture programs and reduced energy and grain costs.
Approximately 90% of the Company's wheat-based product sales and 23% of its
distillery sales (consisting of food grade alcohol) are made directly to
institutional food and beverage processors and distributors with respect to
which the Company has longstanding relationships. Sales to these customers are
usually evidenced by short term agreements that are cancelable within 30 days
and under which products are usually ordered, produced, sold and shipped within
60 days. However, depending on market conditions, varying amounts of the
Company's fuel alcohol are sold under longer term contracts, primarily to cover
the needs of gasoline refiners during September through April of each year.
During fiscal 2002, two fuel alcohol customers, BP Products North America, Inc.
and Martin Oil Marketing Ltd. accounted for approximately 37% of the Company's
distillery sales and 26% of the Company's consolidated revenues. In fiscal 2002,
approximately 5% of sales, consisting entirely of wheat-based products, were for
export, with the bulk of international sales going to Japan, Mexico, and East
Asian and Southeast Asian countries which do not have wheat-based economies.
Historically, the Company's sales have not been seasonal except for
variations affecting alcohol and vital wheat gluten sales. Fuel alcohol sales
usually increase during the period August through March due to requirements of
the Clean Air Act which inhibit the sale of ethanol in certain areas of the
country during May 1 through September 15 each year. Certain environmental
regulations also favor greater use of ethanol during the winter months of the
year. See "DISTILLERY PRODUCTS - FUEL GRADE ALCOHOL." Food grade alcohol sales
tend to peak in the fall as beverage alcohol distributors order stocks for the
holiday season. In prior years, vital wheat gluten sales have tended to increase
to a minor extent during the second half of the fiscal year as demand increases
for hot dog and hamburger buns and similar bakery products; however, this was
not the case in fiscal 2002 because of the Company's decision to reduce
production of vital wheat gluten. See "WHEAT-BASED PRODUCTS - COMMODITY
INGREDIENTS - VITAL WHEAT GLUTEN."
The Company's strategy in recent years has been to focus on the marketing
and development of specialty wheat protein and starch products for use in unique
market niches. As a result of the expiration of the import quota on foreign
wheat gluten, the Company has intensified its efforts to focus on developing
markets for its specialty wheat proteins and starch products. As described
herein, during fiscal 2002 the Company received approximately $17.3 million
under a new government program designed to assist manufacturers of wheat gluten
in their transition from the historical vital wheat gluten business to new
markets and has received an additional $8.3 million in fiscal 2003. See
"Wheat-Based Products - Commodity Ingredients - Vital Wheat Gluten." These funds
are being used for research, marketing, promotional and capital costs related to
specialty wheat protein and starch products and should help accelerate the
Company's growth in these markets.
For further information, see the "CONSOLIDATED FINANCIAL STATEMENTS" of the
Company and "MANAGEMENT'S DISCUSSION AND ANALYSIS OF THE COMPANY'S FINANCIAL
CONDITION AND RESULTS OF OPERATIONS" which appear at pages 18 through 27 of the
Annual Report.
WHEAT-BASED PRODUCTS
Wheat-based products consist of modified and specialty, or value-added,
wheat starches and proteins, commodity starches and proteins, consisting of
commodity wheat starches and vital wheat gluten, and mill feed.
During fiscal 2002, sales of wheat-based products declined by 17% from the
prior year due to a planned reduction in sales of commodity wheat starch and
vital wheat gluten. The Company elected to reduce production of vital wheat
gluten due to pricing pressures from subsidized European Union producers. As
noted above, the Company's overall strategy is to focus on the development and
marketing of specialty wheat protein and starch products for use in unique
market niches, and such products are accounting for an increasing share of the
Company's total wheat-based product sales. During fiscal 2002, specialty
wheat-based ingredient sales increased by nearly 14%, to approximately 56% of
total wheat-based product sales. That share is expected to continue to increase
due to two factors: (i) increased capacity to produce these products and
increased marketing efforts, resulting in greater customer recognition and the
ability to meet anticipated rising demand, and (ii) continuing decline in vital
wheat gluten sales resulting from an increase in supplies and pricing pressures
from European Union producers.
4
SPECIALTY INGREDIENTS
SPECIALTY WHEAT PROTEINS. In recent years the Company began the development
of a number of specialty wheat proteins for food and non-food applications.
Specialty wheat proteins are derived from vital wheat gluten through a variety
of proprietary processes which change the molecular structure of vital wheat
gluten. Food application wheat proteins include gliadin, glutenin, products in
the Wheatex(R), FPTM and AriseTM series and Pasta Power TM. Non-food
applications include wheat proteins designed for use primarily in cosmetics and
personal care products and biodegradable wheat protein that can be molded to
form a variety of biodegradable plastic-like objects. The Company's specialty
wheat proteins generally compete with other ingredients and modified proteins
having similar characteristics., primarily soy proteins and other wheat
proteins, with competition being based on factors such as functionality, price
and, in the case of food applications, flavor. Although a number of the
specialty wheat proteins have been launched, additional products are in the test
marketing or development stage.
FOOD APPLICATIONS
o GLIADIN AND GLUTENIN are the two principal molecules that make up
vital wheat gluten. The Company's patented process enables the
separation of glutenin and gliadin for a variety of end uses without
the use of alcohol, which has been the traditional method of
separating the two. Glutenin, a large molecule responsible for the
elastic character of vital wheat gluten, increases the strength of
bread doughs, improves the freeze-thaw characteristics of frozen
doughs and may be used as a functional protein source in beef
jerky-type products, as well as in meat extension. Gliadin, the
smaller of the two molecules, is soluble in water and other liquids,
including alcohol, and is responsible for the viscous properties of
wheat gluten. Those characteristics make it ideal to improve the
texture of noodles and pastas. Gliadin is also used in a number of
cosmetics and personal care products as described below under
"Non-Food Applications."
o WHEATEX(R)SERIES consists of texturized wheat proteins made from vital
wheat gluten by changing it into a pliable substance through special
processing. The resulting solid food product can be further enhanced
with flavoring and coloring and reconstituted with water. Texturized
wheat proteins are used for meat, poultry and fish substitutes,
extenders and binders. Wheatex(R)mimics the textural characteristics
and appearance of meat, fish and poultry products. It is available in
a variety of sizes and colors and can be easily formed into patties,
links or virtually any other shape the customer requires. Because of
its neutral taste, Wheatex(R)will not alter flavors that are added to
the product. It also has excellent water-binding capacities for the
retention of natural meat juices. Wheatex(R)is presently being sold
for applications in vegetarian and extended meat products.
o FP(TM) SERIES. The FPTM series of products consists of specialty wheat
proteins, each tailored for use in a variety of food applications.
These include proteins that can be used to form barriers to fat and
moisture penetration to enhance the crispness and improve batter
adhesion in fried products, effectively bond other ingredients in
vegetarian patties and extended meat products and fortify nutritional
drinks.
o ARISE (TM) SERIES. The Arise (TM) series of products consists of
specialty wheat proteins that increase the freshness and shelf life of
frozen, refrigerated and fresh dough products after they are baked.
o PASTA POWER (TM) is a specialty wheat protein that is a cost-effective
replacement for whole eggs and egg whites and enhances the strength,
texture, quality and functionality of fresh, frozen and flavored pasta
products. The added strength enables the canning of pasta and its
treatment with spices without significant deterioration of the noodle
or other pasta product, as in the case of canned spaghetti and similar
products.
5
NON-FOOD APPLICATIONS
o COSMETICS AND PERSONAL CARE PRODUCTS. Specialty wheat proteins include
proteins that have been hydrolyzed or otherwise altered to become
soluble in water and other liquids. This enables their use in food as
well as non-food cosmetic applications such as hair sprays, shampoos,
skin lotions and similar products. These include Foam Pro(R), a
hydrolyzed wheat protein that has been developed as a foam booster to
naturally enhance detergent systems such as shampoos, liquid hand
soaps and bath and shower gels; Aqua Pro(R)II WAA, a solution of amino
acids produced from natural wheat proteins that helps provide
excellent moisturizing and film forming properties in both hair and
skin systems; Aqua Pro(R)11 WP, an additive for shampoo; Aqua
Pro(R)QWL, which enhances the functionality of hair conditioners; and
Aqua Pro(R)II WG, which is a gliadin formulation that is used in hair
and skin cleansers and conditioners.
o BIODEGRADABLE GLUTEN/STARCH RESINS. PolytriticumTM 200 and
PolytriticumTM 2000 are the Company's environmentally friendly
biodegradable gluten/starch resins that can be molded to produce a
variety of plastic-like objects. Polytriticum(R) 200 may be used as a
commercial raw material for the production of pet treats and chews.
Polytriticum(R) 2000 has been developed for use in disposable eating
utensils, golf tees, food and feed containers and similar type
vessels.
In July of 2001, the Company received the first $17.3 million out of a
total of approximately $26 million under a Bush Administration program intended
to enable the gluten industry to move forward in the face of subsidized and
protected competition from the European Union. An additional $8.3 million was
received after the start of fiscal 2003. See "COMMODITY INGREDIENTS - VITAL
WHEAT GLUTEN". The Company will use the funds to pay certain capital, research,
marketing and promotional costs incurred in developing products and markets for
value-added wheat gluten, or wheat protein, and wheat starch products.
In October, 2001, the Company's Board approved plans for an $8.3 million
expansion project that is expected to substantially strengthen production and
sales capabilities for certain of the Company's specialty wheat proteins. The
expansion will occur at the Company's Atchison plant and is scheduled for
completion in early fiscal 2003. The project involves the installation of
additional processing and drying equipment for the production of ingredients for
bakery, pasta and noodle and related food markets, both domestically and abroad.
The cost of this project is expected to be offset by funds provided through the
U.S. Department of Agriculture Commodity Credit Corporation program referred to
above.
SPECIALTY WHEAT STARCH. Wheat starch constitutes the carbohydrate-bearing
portion of wheat flour. The Company produces a pure white premium wheat starch
powder by extracting the starch from the starch slurry, substantially free of
all impurities and fibers, and then by spray, flash or drum drying the starch.
Premium wheat starch differs from low grade or B wheat starches, which are
extracted along with impurities and fibers and are used primarily as a binding
agent for industrial applications, such as the manufacture of charcoal
briquettes. The Company does not produce low grade or B starches because its
integrated processing facilities are able to process the slurry remaining after
the extraction of premium wheat starch into alcohol, animal feed and carbon
dioxide. Premium wheat starch differs from corn starch in its granular
structure, color, granular size and name identification.
A substantial portion of the Company's premium wheat starch is altered
during processing to produce certain unique specialty wheat starches designed
for special applications in niche markets. The Company's specialty wheat
starches are used primarily as an additive in a variety of food products to
affect their appearance, texture, tenderness, taste, palatability, cooking
temperature, stability, viscosity, binding and freeze-thaw characteristics.
Important physical properties contributed by wheat starch include whiteness,
clean flavor, viscosity and texture. For example, the Company's starches are
used to improve the taste and mouth feel of cream puffs, eclairs, puddings, pie
fillings, breadings and batters; to improve the size, symmetry and taste of
angel food cakes; to alter the viscosity of soups, sauces and gravies; to
improve the freeze-thaw stability and shelf life of fruit pies and other frozen
foods; to improve moisture retention in microwavable foods; and to add stability
and to improve spreadability in frostings, mixes, glazes and sugar coatings. The
Company's specialty starches are also sold for a number of industrial and
non-food applications, which include uses in the manufacture of adhesives, paper
coatings and carbonless paper.
The Company's specialty wheat starches primarily are sold nationwide to
food processors and distributors.
6
Although wheat starch enjoys a relatively small portion of the total United
States starch market, the market is one which has experienced substantial growth
over the years. The unique characteristics of wheat starch provide it with a
number of advantages over corn and other starches for certain baking and other
end uses. The Company has developed a number of different specialty wheat
starches, and continues to explore the development of additional starch products
with the view to increasing sales of value added specialty starches.
Both commodity and specialty wheat starches compete primarily with corn
starch, which dominates the United States market. Competition is based upon
price, name, color and differing granular and chemical characteristics which
affect the food product in which it is used. Specialty wheat starches usually
enjoy a price premium over corn starches and low grade wheat starches. Commodity
wheat starch price fluctuations generally track the fluctuations in the corn
starch market. The specialty wheat starch market usually permits pricing
consistent with costs which affect the industry in general, including increased
grain costs. The Company's strategy is to market its specialty wheat starches in
special market niches where the unique characteristics of these starches are
better suited to a customer's requirements for a specific use.
COMMODITY INGREDIENTS
VITAL WHEAT GLUTEN. Vital wheat gluten is a free-flowing light tan powder
which contains approximately 75% to 80% protein. Its vitality, water absorption
and retention and film-forming properties make vital wheat gluten desirable as
an ingredient in many food products. It appears to be the only commercially
available high protein food additive which possesses vitality. "Vitality" is a
term used to indicate the relative viscoelasticity of gluten, which enables an
end product containing gluten to maintain a cohesive texture and withstand
stretching or tearing. For example, it is the vitality of the wheat gluten used
in making hot dog buns that gives greater "hinge" strength to the buns, thus
allowing consumers to open and close the buns without breaking them.
Vital wheat gluten is added by bakeries and food processors to baked goods,
such as breads, and to pet foods, cereals, processed meats, fish, and poultry to
improve the nutritional content, texture, strength, shape, and volume of the
product. The neutral flavor and color of wheat gluten also enhances, but does
not change, the flavor and color of food. The cohesiveness and elasticity of the
gluten enables the dough in wheat and other high protein breads to rise and to
support added ingredients, such as whole cracked grains, raisins and fibers.
This allows the baker to make an array of different breads by varying the gluten
content of the dough. Vital wheat gluten is also added to white breads, hot dog
buns and hamburger buns to improve the strength and cohesiveness of the product.
The Company produces vital wheat gluten from modernized facilities at the
Atchison and Pekin plants. It is shipped throughout the continental United
States in bulk and in 50 to 100 pound bags to distributors and also is sold
directly to major food processors and bakeries.
Vital wheat gluten is considered a commodity and therefore competition is
based primarily upon price. The Company's principal competitors in the U.S.
vital wheat gluten market consist primarily of three other domestic producers
and producers in the European Union, Australia and certain other regulated
countries (the "Foreign Exporters").
Between June 30, 1994 and June 30, 1998, the European Union took an
increasingly large share of the U.S. gluten market. As a result of the
increasing surge of large, subsidized volumes of European Union wheat gluten
into the U.S., vital wheat gluten prices have been primarily affected by (i)
excess European Union capacity, (ii) high tariff barriers, subsidies and other
protective measures ("Subsidies") provided to European Union exporters by their
host governments, (iii) low U.S. tariffs and (iv) gluten import quotas. The
Subsidies and low U.S. tariffs encouraged European Union producers to expand
wheat starch and wheat gluten production capacity and to continue the
development of even greater capacities. On May 30, 1998, the Clinton
administration imposed annual quantitative limitations for three years on
imports of wheat gluten from the European Union and other Foreign Exporters at
an amount equal to the total average imports of wheat gluten shipped into the
United States by the Foreign Exporters during the three crop years ended June
30, 1995. In lieu of extending the quota when it expired in June, 2001, the Bush
Administration announced a program to provide the wheat gluten industry up to
$40 million over two years to help it complete its transition to
competitiveness. Administered by the U.S. Department of Agriculture's Commodity
Credit Corporation, the program is scheduled to end May 31, 2003. Under the
program, the Company is eligible for
7
approximately $26 million of the program total of $40 million. On June 29, 2001,
the Company received approximately $17,280,000 for the first year of the
program. The Company received the balance of the award for the second year of
the program in July, 2002. The funds are to be used for capital, research,
marketing and promotional costs related to value-added wheat protein and wheat
starch products and are not intended to be used to reduce production and
marketing related costs for commodity vital wheat gluten and wheat starches that
could extend the U.S. industry's participation in those markets. The Company
must submit quarterly reports to the Commodity Credit Corporation listing costs
incurred and activities conducted to date and an annual performance report after
each year of the program explaining its activities. The Commodity Credit
Corporation may ask for a refund with interest of some or all of the funds
allocated to the Company if it determines that the Company has not made
significant progress in completing its stated activities. Based on its contacts
with Commodity Credit Corporation personnel through the quarterly reporting
process, the Company believes that it is making satisfactory progress.
Since the imposition of the quota, the Company has focused its efforts on
developing and increasing the production and sales of specialty wheat products.
These are niche products that the Company expects will be able to compete more
effectively with increased foreign imports. Although additional quota relief
would have been helpful, the Commodity Credit program supports the Company's
strategy and should strengthen its efforts to move increasingly into the
development, production and marketing of value-added wheat proteins and
starches. However, there can be no assurance that the Company will be able to
compete effectively in a market that is inundated with low cost, subsidized
foreign gluten.
COMMODITY WHEAT STARCH. In addition to specialty wheat starches, the
Company's premium wheat starches include commodity wheat starches. As is the
case with specialty wheat starches, commodity wheat starches have both food and
non-food applications, but such applications are more limited than those of
specialty wheat starches and commodity wheat starches command a lower price in
the marketplace. As noted above, commodity wheat starches compete primarily with
corn starches, which dominate the marketplace, and commodity wheat starch price
fluctuations generally track the fluctuations in the corn starch market.
MILL FEED AND OTHER MILL PRODUCTS
The Company owns and operates a flour mill at the Atchison plant. The
mill's output of flour is used internally to satisfy a majority of the raw
material needed for the production of vital wheat gluten and premium wheat
starch.
In addition to flour, the wheat milling process generates mill feeds or
"midds." Midds are sold to processors of animal feeds as a feed additive.
DISTILLERY PRODUCTS
The Company's Atchison and Pekin plants process mill feeds and corn and/or
milo, mixed with the starch slurry from gluten and starch processing operations,
into food grade alcohol, fuel grade alcohol, distiller's feed and carbon
dioxide.
Food grade alcohol, or grain neutral spirits, consists of beverage alcohol
and industrial food grade alcohol that are distilled to remove all impurities
and all but approximately 5% of the water content to yield high quality 190
proof alcohol. Fuel grade alcohol, or "ethanol," is a lower grade of grain
alcohol that is distilled to remove all water to yield 200 proof alcohol
suitable for blending with gasoline.
During fiscal 2002, distillery product sales were slightly lower than the
prior year. Sales of food grade alcohol were lower, notwithstanding higher
selling prices, due to decreased unit sales of both beverage and industrial
grade alcohol. Sales of fuel grade alcohol were higher in fiscal 2002 due to
higher unit sales and higher selling prices in the first half of the fiscal
year. However, as a result of increased industry capacity and a delay in
implementing an MTBE ban in California, prices declined in the second half of
the year and, although prices had improved somewhat by fiscal year end, the
average price of fuel alcohol for the year as a whole was lower than the prior
year. Sales of distillers' feeds increased modestly due to increase unit sales.
The Company uses gasoline futures to hedge fuel alcohol sales made under
contracts with price terms based on gasoline futures.
8
In fiscal 2001, the Company's Board of Directors approved a $2.1 million
distillery improvement project at the Atchison plant to enhance the Company's
production capabilities for both food grade and fuel grade alcohol. In May 2002,
the Company completed the installation of a new feed drier at its Pekin,
Illinois plant at a cost of approximately $5 million. The new drier should
improve alcohol production efficiencies at the Pekin plant
FOOD GRADE ALCOHOL
BEVERAGE ALCOHOL. Food grade beverage alcohol consists primarily of grain
neutral spirits and gin. Grain neutral spirits is sold in bulk or processed into
vodka and gin and sold in bulk quantities at various proof concentrations to
bottlers and rectifiers, which further process the alcohol for sale to consumers
under numerous labels.
The Company believes that in terms of fiscal 2002 net sales, it is one of
the three largest bulk sellers of grain neutral spirits, vodka and gin in the
United States. The Company's principal competitors in the beverage alcohol
market are Grain Processing Company of Muscatine, Iowa and Archer Daniels
Midland of Decatur, Illinois. Competition is based primarily upon price and
service, and in the case of gin, formulation. The Company believes that the
centralized location of its Illinois and Kansas distilleries and the capacity of
its dual production facilities combine to provide the Company with a customer
service advantage within the industry.
INDUSTRIAL ALCOHOL. Food grade alcohol which is not sold as beverage
alcohol is marketed as food grade industrial alcohol. Food grade industrial
alcohol is sold as an ingredient in foods (e.g., vinegar and food flavorings),
personal care products (e.g., hair sprays and deodorants), cleaning solutions,
biocides, insecticides, fungicides, pharmaceuticals, and a variety of other
products. Although grain alcohol is chemically the same as petroleum-based or
synthetic alcohol, certain customers prefer a natural grain-based alcohol. Food
grade industrial alcohol is sold in tank truck or rail car quantities direct to
a number of industrial processors from both the Atchison and Pekin plants.
The Company is a minor competitor in the total United States market for
food grade industrial alcohol, which is dominated by petroleum-based or
synthetic alcohol. Food grade industrial alcohol prices are normally consistent
with prices for synthetic industrial alcohol.
FUEL GRADE ALCOHOL
Fuel grade alcohol, which is commonly referred to as ethanol, is sold
primarily for blending with gasoline to increase the oxygen and octane levels of
the gasoline. As an octane enhancer, ethanol can serve as a substitute for lead
and petroleum based octane enhancers. As an oxygenate, ethanol permits gasoline
to meet certain environmental regulations and laws that regulate air quality by
reducing carbon monoxide, hydrocarbon particulates and other toxic emissions
generated from the burning of gasoline ("toxics"). Because ethanol is produced
from grain, a renewable resource, it also provides a fuel alternative that tends
to reduce the country's dependence on foreign oil.
Although ethanol can be blended directly with gasoline as an oxygenate to
enable it to reduce toxic air emissions, it also increases the volatility of
gasoline or its tendency to evaporate and release volatile organic compounds
("VOC's"). This latter characteristic has precluded it from meeting certain
Clean Air Act requirements for gasoline that pertain to nine of the smoggiest U.
S. metropolitan areas during the summer months (May 1 through September 15). As
a consequence, the demand for ethanol typically increases during the period from
August through March of each fiscal year as gasoline blenders acquire stocks for
blending with gasoline to be marketed in the period September 16 through April
30.
Since the adoption of the Clean Air Act, the gasoline industry has relied
primarily upon methyl tertiary butyl ether (MTBE) to reduce toxic emissions of
air pollutants to meet the requirements of the Act and related EPA regulations.
Ethanol is also used to a lesser extent during the cooler months of the year.
However, the EPA has concluded that the use of MTBE has created a "significant
and unacceptable risk to drinking water and groundwater resources." Concerns
have also been raised as to the effectiveness of MTBE versus the effectiveness
of Ethanol as a reducer of air pollutants. As the result of these concerns, the
EPA commissioned a "Blue Ribbon Panel" to investigate the matter and recommend
solutions. In March 2000, the EPA announced the recommendations of the Panel.
The recommendations proposed that the Clean Air Act be amended to provide the
EPA with authority to significantly
9
reduce or eliminate the use of MTBE, and to "replace the 2 percent oxygenate
requirement in the Clean Air Act with a renewable fuel annual average content
for all gasoline at a level that maintains the current level of renewable fuel
(1.2 percent of the gasoline supply) and allows for sustained growth over the
next decade ."
According to the Renewable Fuels Association, several states also have
begun to take action to curb the use of MTBE. These states include California,
Connecticut, Illinois, Michigan, New York and Ohio. In June of 2001, the Bush
Administration denied California's request for a waiver from the clean octane
provisions of the Clean Air Act that require oxygenates in gasoline. As a result
of such actions, certain producers increased capacity and/or built inventories
of ethanol in anticipation of the expanded market for ethanol in California and
elsewhere. However, the governor of California delayed the state's ban on MTBE
for a year, from January 2003 to January 2004, causing a surplus of fuel alcohol
and the resulting softening in prices At the end of fiscal 2002, prices began to
improve as various gasoline suppliers to California announced plans to switch to
ethanol-blended fuels prior to the effective date of the delayed ban on MTBE.
In the long-term, the Company believes the future for ethanol remains
promising. This expectation is partially based on the U.S. Senate's passage of a
comprehensive energy bill in April of 2002 that includes a provision for
establishing a renewable fuels standard. Based on information published by the
Renewable Fuels Association, this provision could triple the use of ethanol to 5
billion gallons annually by 2012. The energy bill must now be considered by the
U.S. House-Senate Conference Committee and could be forwarded to the President
by the end of 2002. However, there can be no assurance that the bill will be
enacted in its present form, if at all.
The cost of producing ethanol has historically exceeded the cost of
producing gasoline and gasoline additives, such as MTBE, all of which are
derived from fossil non-renewable fuels such as petroleum. Accordingly, to
encourage the production of ethanol for use in gasoline, the Federal government
and various states have enacted tax and other incentives designed to make
ethanol competitive with gasoline and gasoline additives. In December, 2000, the
U.S. Department of Agriculture initiated a program to provide a cash incentive
for ethanol producers who increase their grain usage over comparable quarters in
the prior year to raise fuel alcohol production. The Company presently satisfies
the program's eligibility requirements and began receiving payments in the third
quarter of fiscal 2001. It received payments of approximately $1.6 million in
fiscal 2001 and approximately $4.1 million in fiscal 2002 under this program.
The program extends through September 2006, with funding determined annually.
The Company's eligibility to participate in the program is determined quarter to
quarter.
Under the internal revenue code, and until the end of 2007, gasoline that
has been blended in qualifying proportions with ethanol provide sellers of the
blend with certain income tax credits and excise tax reductions that amount to
up to $0.54 per gallon of ethanol that is mixed with the gasoline (the "Federal
Tax Credit"). A mix of at least 10% ethanol by volume is required to receive the
maximum credit. Although the Federal Tax Credit is not directly available to the
Company, it allows the Company to sell its ethanol at prices competitive with
less expensive additives and gasoline. From time to time, legislation is
proposed to eliminate, reduce or extend the tax benefits enjoyed by the ethanol
industry and indirectly by producers of the grain that is converted into
ethanol. During 1998, legislation was enacted that extended the credit through
2007, with the credit being reduced to $0.51 per gallon beginning in 2005.
The Kansas Qualified Agricultural Ethyl Alcohol Producer Incentive Fund,
which has been extended to 2011, provides incentives for sales of ethanol
produced in Kansas to gasoline blenders. After 2004, incentives will be paid
only for increased production over base year (calendar year 2000) sales. No
producer may receive payments for more than seven years under the program.
Fiscal 2002 payments to the Company out of the fund totaled $544,000 for the
ethanol produced by the Company at the Atchison plant during that year.
The fuel grade alcohol market is dominated by Archer Daniels Midland, with
the Company being among the smaller of a few other larger second tier ethanol
producers. The Company competes with other producers of fuel grade alcohol on
the basis of price and delivery service.
DISTILLERY BY-PRODUCTS. The bulk of fiscal 2002 sales of alcohol
by-products consisted of distillers feeds. Distillers feeds are the residue of
corn, milo and wheat from alcohol processing operations. The residue is dried
and sold primarily to processors of animal feeds as a high protein additive. The
Company competes with other distillers of alcohol as well as a number of other
producers of animal food additives in the sale of distillers feeds and mill
feeds.
10
The balance of alcohol by-products consists primarily of carbon dioxide.
During the production of alcohol, the Company traps carbon dioxide gas that is
emitted in the fermentation process. The gas is purchased and liquefied on site
by two principal customers, one at the Atchison Plant and one at the Pekin
Plant, who own and operate the carbon dioxide processing and storage equipment
under long term contracts with the Company. The liquefied gas is resold by these
processors to a variety of industrial customers and producers of carbonated
beverages.
TRANSPORTATION
The Company's output is transported to customers by truck, rail and barge
transportation equipment, most of which is provided by common carriers through
arrangements made by the Company. The Company leases 244 rail cars which may be
dispatched on short notice. Shipment by barge is offered to customers through
barge loading facilities on the Missouri and Illinois Rivers. The barge facility
on the Illinois River is adjacent to the Pekin plant and owned by the Company.
The facility on the Missouri River, which is not company-owned, is approximately
one mile from the Atchison plant.
RAW MATERIALS
The Company's principal raw material is grain, consisting of wheat, which
is processed into all of the Company's products, and corn and milo, which are
processed into alcohol, animal feed and carbon dioxide. Grain is purchased
directly from surrounding farms, primarily at harvest time, and throughout the
year from grain elevators. The Company purchases approximately 70% of its grain
at spot market prices. To assure supplies, the Company may enter into contracts
to take future delivery within 30 days. These are fixed price contracts which
are based on prices of future contracts and specify the amount, type and class
of grain and the price. The Company can call for delivery at any time within
thirty days of the contract. The Company does not have any long-term contracts
with any suppliers.
Historically, the cost of grain is subject to substantial fluctuations
depending upon a number of factors which affect commodity prices in general,
including crop conditions, weather, government programs, and purchases by
foreign governments. Such variations in grain prices have had and are expected
to have from time to time significant adverse effects on the results of the
Company's operations. This is primarily due to a variety of factors. From time
to time it has been difficult for the Company to compensate for increases in
grain costs through adjustments in prices charged for the Company's vital wheat
gluten due to the surge of subsidized European Union wheat gluten, whose
artificially low prices are not affected by such costs. Now that the quota has
been lifted, the Company expects it will be more difficult to do so. Also, fuel
grade alcohol prices, which historically have tracked the cost of gasoline, do
not usually adjust to rising grain costs. Similarly, prices of commodity wheat
starches generally track the prices of corn starch and usually do not adjust to
rising wheat prices.
During fiscal 2002, market prices for grain remained reasonable. The
average Kansas City market price per bushel for corn and milo was $1.96 during
2002 and $1.88 during 2001 while the average Kansas City market price for a
bushel of wheat was $2.90 during 2002 versus $2.87 during 2001.
The Company engages in the purchase of commodity futures to hedge economic
risks associated with fluctuating grain and grain products prices. During fiscal
2002, the Company hedged approximately 48% of corn processed, compared to 8% in
2001. Of the wheat processed by the Company, none was hedged in fiscal 2002
compared to 9% in fiscal 2001. 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 related products
are sold. For fiscal 2002, raw material costs included a net hedging loss of
approximately $1.8 million on contracts settled during the year compared to a
net loss of $1.2 million for fiscal 2001. See "MANAGEMENT'S DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - MARKET RISK" in the
Annual Report.
ENERGY
Because energy comprises a major cost of operations, the Company seeks to
assure the availability of fuels for the Pekin and Atchison plants at
competitive prices.
11
The Company needs fuel to operate boilers that it uses to make steam heat.
In Atchison, the Company can use either oil or natural gas and switch from one
to the other when prices dictate. Natural gas for the Atchison plant is procured
in the open market from various suppliers. The Company can purchase contracts
for the delivery of gas in the future or can purchase future contracts on the
exchange. Depending on existing market conditions, the Company has the ability
to transport the gas through a gas pipeline owned by a wholly-owned subsidiary
of the Company. In Pekin, the Company only uses natural gas, which it can either
procure through Central Illinois Light Company or through other suppliers. The
Company has a multi-year agreement with Central Illinois Light Company under
which the utility will transport gas to the Company's plant on the utility's
pipeline. The Company may purchase gas from Central Illinois Light Company on a
negotiated basis or on a fixed price basis for up to 24 months. In order to
control energy costs, the Company has a risk management program whereby, at
pre-determined prices, the Company will purchase a portion of its natural gas
requirements for future delivery.
In 1995, the Company entered into a long-term arrangement with Central
Illinois Light Company and its subsidiary, CILCORP Development Services Inc.
(collectively "CILCO"), with respect to its Pekin, Illinois plant. Under the
arrangement, the Company has leased a portion of its plant facility to CILCO for
a term ending in December 2009. CILCO constructed a new gas fired electric and
steam generating facility on ground leased from the Company and agreed to
provide steam heat to the Company's plant. If the Company fails to renew the
lease for 19 years at the end of the lease term, it must pay CILCO the book
value of the boiler plant and cogeneration facility, which the Company estimates
will be $10.6 million. Under a related steam heat service agreement, the Company
has agreed to purchase its requirements for steam heat from CILCO until no
earlier than December 2009. Either party may terminate the service agreement at
the end of the initial term or thereafter upon two years notice. Also, if gas
prices have risen to a level such that operating a steam facility with
alternative fuel would be more attractive and the payback period for a new
facility would be five years or less, the Company may terminate the service
agreement prior to the end of the initial term upon two years notice by making a
specified payment to CILCO, currently approximately approximately $1.5 million.
The Company must make adjustable minimum monthly payments over the term of the
service agreement, currently $70,265, with declining fixed charges for purchases
in excess of minimum usage, and is responsible for fuel costs and certain other
expenses. However, CILCO also uses the boilers to run electric generating units
that it constructed on the leased site and pays the Company for a portion of the
fuel costs that the Company incurs for the production of steam, based on savings
realized by CILCO from generating electricity at the facility.
The Company also has a one year contract, which expires in April 2003, to
purchase electricity from Central Illinois Light Company at fixed rates.
EMPLOYEES
As of June 30, 2002, the Company had 436 employees, 273 of whom are covered
by two collective bargaining agreements with one labor union. One agreement,
which was schedule to expire on August 31, 2002 but which has been extended to
September 16, 2002, covers 185 employees at the Atchison Plant. The other
agreement, which expires on October 31, 2003, covers 88 employees at the Pekin
plant. As of June 30, 2001, the Company had 416 employees.
The Company considers its relations with its personnel to be good and has
not experienced a work stoppage since 1978.
REGULATION
The Company's beverage and industrial alcohol business is subject to
regulation by the Bureau of Alcohol, Tobacco and Firearms ("BATF") and the
alcoholic beverage agencies in the States of Kansas and Illinois. Such
regulation covers virtually every aspect of the Company's alcohol operations,
including production facilities, marketing, pricing, labeling, packaging, and
advertising. Food products are also subject to regulation by the Food and Drug
Administration. BATF regulation includes periodic BATF audits of all production
reports, shipping documents, and licenses to assure that proper records are
maintained. The Company is also required to file and maintain monthly reports
with the BATF of alcohol inventories and shipments.
The Company is subject to extensive environmental regulation at the
federal, state and local levels. The
12
regulations include the regulation of water usage, waste water discharge,
disposal of hazardous wastes and emissions of volatile organic compounds,
particulates and other substances into the air. Under these regulations the
Company is required to obtain operating permits and to submit periodic reports
to regulating agencies. For the Atchison and Kansas City, Kansas plants, the air
quality is regulated by both the U.S. Environmental Protection Agency ("EPA")
and the Division of Environment of the Kansas Department of Health and
Environment (the "KDHE"). The KDHE regulates all air emissions. The Company
tests volatile organic compound emissions on a monthly basis at the Atchison
plant, and must submit semi-annual reports regarding these emissions tests to
the KDHE. The Company also was required to obtain an air operating permit from
the KDHE and must obtain KDHE approval to make plant alterations that could
modify the emission levels. The KDHE also regulates the discharge water quality
at the Atchison plant. This includes process water, cooling water and storm
water. The Company monitors process water and cooling water discharge on a daily
basis and submits monthly reports to the KDHE documenting the test results from
these water discharges. The EPA and KDHE also monitor hazardous waste disposal
for the Atchison and Kansas City plants. The Company also is required to submit
annual reports pursuant to the Kansas and Federal Emergency Planning Community
Right-to-Know Acts. Local officials, such as the local emergency planning
committees in the Atchison and Kansas City communities, also receive copies of
these annual reports.
Similar environmental regulations apply to the Pekin, Illinois facility.
Air quality at the Pekin plant is regulated by both the EPA and the Illinois
Environmental Protection Agency (the "IEPA"). The IEPA regulates all air
emissions. The Company has permits to make certain emissions, and the IPEA has
the right to do on-site testing to verify that the Company's emissions comply
with its permits. Also, the IEPA regulates waste water, cooling water and storm
water discharge at the Pekin plant. The Company tests wastewater effluent
quality twice each week and files monthly reports with the IEPA. The Company
also files an Annual Emissions Report and a Toxic Release Inventory annually
with the IEPA. The Pekin facility is also required to submit periodic reports
pursuant to the Illinois and Federal Emergency Planning Community Right-to-Know
Acts.
During 1997 the Illinois Environmental Protection Agency commenced an
action against the Company with respect to alleged noncompliance of the Pekin
Plant with certain air quality regulations. This action is further described
under "Item 3. Legal Proceedings."
ITEM 2. PROPERTIES.
The Company maintains the following principal plants, warehouses and office
facilities:
Plant Area Tract Area
Location Purpose (in sq. ft.) (in acres)
-------- ------- ------------ ----------
Atchison, Kansas Principal executive offices, 494,640 25
grain processing, warehousing,
and research and quality
control laboratories.
Kansas City, Kansas Specialty protein and starch 83,200 12.5
mixing facility and warehouse
Pekin, Illinois Grain processing, warehousing, 462,926 49
and quality control laboratories.
The facilities mentioned above are generally in good operating condition, are
currently in normal operation, are generally suitable and adequate for the
business activity conducted therein, and have productive capacities sufficient
to maintain prior levels of production. The Atchison and Pekin facilities are
owned, and the Kansas City facility is leased from the Unified Government of
Wyandotte County, Kansas City, Kansas pursuant to an industrial revenue bond
financing consummated in August 2001. The Company has entered into loan
agreements which contain covenants that limit its ability to pledge its
facilities to others. The Company also owns transportation equipment and a gas
pipeline described under "BUSINESS - TRANSPORTATION" and "ENERGY."
13
ITEM 3. LEGAL PROCEEDINGS.
On April 13, 1997, an administrative proceeding was filed against the
Company's Illinois subsidiary before the Illinois Pollution Control Board (the
"Board"), by the Illinois Attorney General on behalf of the Illinois
Environmental Protection Agency (the "Agency"). The proceeding relates to the
Company's installation and operation of two feed dryers at its facility in
Pekin, Illinois. The Complaint alleges that the dryers exceed the particulate
emission limitations specified in the construction permits for the units; that
the dryers are being operated without operating permits; and that the dryers
were constructed without a Prevention of Significant Deterioration (PSD)
construction permit setting forth a best available control technology ("BACT")
emission limitation. The Complaint seeks a Board order ordering the Company to
cease and desist from violations of the Illinois Environmental Protection Act
and associated regulations, assessing a civil penalty, and awarding the state
its attorneys fees.
The Company has filed an Answer before the Board admitting that compliance
tests have shown particulate emissions in excess of the limits set forth in the
construction permits, but denying the remainder of the State's claims. Since the
time operational problems were discovered with the dryers' pollution control
equipment, the Company has been conferring and negotiating with the Agency on
the issues involved in the Complaint. The Company and the Agency have been
conducting air modeling to support the construction of new pollution control
equipment for the dryers, which the Company estimates will cost approximately $1
million. It is anticipated that the new equipment will bring emissions into
compliance with all applicable limitations. Currently, the modeling indicates
that the addition of the pollution control equipment plus raising certain air
emission stacks will be sufficient to bring emissions into compliance with all
applicable limitations.
Proceedings under the Complaint are being held in abeyance by agreement of
the parties pending completion of the air modeling and completion of the
Company's compliance activities. The Company anticipates negotiating a
settlement of the remainder of the State's claims shortly, including any
penalties. The state has recently indicated that it may be asking for some
penalty associated with the economic benefit of not installing the new pollution
control equipment sooner. No penalty amount has been discussed, and the Company
intends to contest any request for a penalty because the State's difficulty in
completing its modeling has contributed to the delay in bringing emissions into
compliance.
There are no other legal proceedings pending as of June 30, 2002 which the
Company believes to be material.
ITEM 4. SUBMISSIONS OF MATTERS TO A VOTE OF SECURITY HOLDERS.
No matters have been submitted to a vote of stockholders during the fourth
quarter of fiscal year covered by this report.
ITEM 4A. EXECUTIVE OFFICERS OF THE REGISTRANT.
Executive officers of the Company are as follows:
Name Age Position
- ---- --- --------
Cloud L. Cray, Jr. 79 Chairman of the Board
Laidacker M. Seaberg 56 President, Chief Executive Officer
Sukh Bassi, Ph.D. 61 Vice President, New Products Innovation and Technology
Robert G. Booe 65 Vice President, Finance and Administration. Controller,
Treasurer and Chief Financial Officer
Gerald Lasater 64 Vice President, International Marketing and Sales
14
Clodualdo "Ody" Maningat, Ph.D. 47 Vice President, Application Technology and Technical
Services
Marta L. Myers 42 Secretary and Administrative Assistant to the President
Steven J. Pickman 49 Vice President, Corporate Communications and Marketing
Services
David E. Rindom 47 Vice President, Human Resources
Randy M. Schrick 52 Vice President, Manufacturing and Engineering
Dennis E. Sprague 56 Vice President, Operations Services and Resource Planning
William R. Thornton 50 Vice President, Quality Management
Michael J. Trautschold 54 Executive Vice President, Marketing and Sales
Mr. Cray, Jr. has served as Chairman of the Board since 1980. He served as
Chief Executive Officer from 1980 to September, 1988, and has been an officer of
the Company and its affiliates for more than thirty years.
Mr. Seaberg joined the Company in 1969 and has served as the President of
the Company since 1980 and as Chief Executive Officer since September, 1988. He
is the son-in-law of Mr. Cray, Jr.
Dr. Bassi has served as Vice President, New Products, Innovations and
Technology since July 2002. He was Vice President, Research and Development from
1985 until July 2002 and Vice President Specialty Ingredients Marketing and
Sales between 1998 and 2000. He also previously served as Technical Director
from 1989 to 1998 and Vice President - Vital Wheat Gluten Marketing from 1992 to
1998. From 1981 to 1992 he was Manager of the Vital Wheat Gluten Strategic
Business Unit. He was previously a professor of biology at Benedictine College
for ten years.
Mr. Booe has served as Vice President, Treasurer and Chief Financial
Officer of the Company since 1988. He joined the Company in 1966 as its
Treasurer and became the Controller and Treasurer in 1980. In 1992 he was
assigned the additional task of Vice President - Administration.
Mr. Lasater joined the Company in 1962. He has served as Vice President -
International Marketing and Sales since 1998. Previously, he served as Vice
President - Starch Marketing from 1992 to 1998. Prior to that he served as Vice
President in charge of the Wheat Starch Strategic Business Unit.
Dr. Maningat joined the Company in 1986. He has served as Vice President of
Application Technology and Technical Services since June 2002. Previously, he
was Corporate Director of Research and Development and Technical Marketing from
1997 to 2002. He served as Corporate Director of Research and Development and
Quality Control for the Company from 1993 to 1997.
Ms. Myers joined the Company in 1996. She has served as Secretary since
October 1996 and as Administrative Assistant to the President since 1999.
Previously she was executive secretary for Superintendent of Schools for Unified
School District 409, Atchison, Kansas.
Mr. Pickman joined the Company in 1985. He has served as Vice President,
Corporate Communications and Marketing Services since July 2002. He was Vice
President, Corporate Relations from June 2000 until July 2002. Previously he was
Executive Director of Corporate Relations from 1999 to June 2000 and prior to
that Corporate Director of Public and Investor Relations. Between 1985 and 1989
he served as the Director of Public Relations and Marketing Administration for
the Company's former subsidiary, McCormick Distilling Company, Weston, Missouri.
Mr. Rindom joined the Company in 1980. He has served as Vice President,
Human Resources since June 2000. He was Corporate Director of Human Relations
from 1992 to June 2000, Personnel Director from 1988 to 1992
15
and Assistant Personnel Director from 1984 to 1988.
Mr. Schrick, a Director since 1987, joined the Company in 1973. He has
served as Vice President, Manufacturing and Engineering since July 2002. He
served as Vice President - Operations from 1992 until July 2002. From 1984 to
1992 he served as Vice President and General Manager of the Pekin plant. From
1982 to 1984 he was the Plant Manager of the Pekin Plant. Prior to 1982, he was
Production Manager at the Atchison plant.
Mr. Sprague joined the Company in October 1998. He has served as Vice
President, Operations Services and Resource Planning since July 2002. He served
as Vice President, Alcohol and Feed Products Sales from June 2000 until July
2002. Previously, he served as Vice President, Heritage Product Sales from June
1999 to June 2000 and as Vice President, Corporate Marketing and Sales from
October 1998 to June 1999. Prior to joining the Company, he held a variety of
management, sales and plant operations positions with Joseph E. Seagrams & Sons,
Inc., last serving as Director of Production Operations and Planning from 1993
to 1998.
Mr. Thornton joined the Company in 1994. He has served as Vice President of
Quality Management since June 2000. He was Corporate Director of Quality
Management from 1997 to June 2000 and Corporate Director of Continuous Quality
Improvement from 1994 to 1997.
Mr. Trautschold joined the Company in September 2000. He has served since
then as Executive Vice President of Marketing and Sales. He was Vice President
of Product Strategy in the Consumer Direct Division of Schwan's Sales
Enterprises, Inc. from 1999 to September 2000, Vice President of Corporate
Marketing Services for ConAgra, Inc. from 1994 to 1999 and President of ConAgra
Brands, Inc. from 1997 to 1999.
PART II
ITEM 5. MARKET FOR REGISTRANTS COMMON EQUITY AND RELATED STOCKHOLDERS MATTERS.
The Common Stock of the Company has been traded on the NASDAQ National
Market System under the symbol MWGP since November 1988. Following the effective
date of its name change to MGP Ingredients, Inc. on October 10, 2002, the
Company's trading symbol will be MGPI. There will be no need for holders of
Common Stock to exchange their existing shares as a result of the name change.
Certificates bearing the name Midwest Grain Products, Inc. will continue to be
valid.
The following table below reflects the high and low closing prices of the
Common Stock for each quarter of fiscal 2001 and 2002. The Company paid a cash
dividend of $.10 per share in November 2000 and a dividend of $.15 per share in
November 2001. Previously, cash dividends had not been paid since the end of
1995. Any future dividends will be paid at the discretion of the Board of
Directors, which will consider various factors, including the Company's
operating results and cash requirements, in making any decision respecting
dividends.
Sales Price
-----------
High Low
---- ---
2002:
First Quarter $ 11.05 $ 8.65
Second Quarter 12.18 9.01
Third Quarter 14.73 11.50
Fourth Quarter 14.60 12.40
2001:
First Quarter $ 11.00 $ 8.25
Second Quarter 10.25 8.75
Third Quarter 9.00 8.25
Fourth Quarter 11.25 8.13
16
At June 30, 2002 there were approximately 790 holders of record of the
Company's Common Stock. It is believed that the Common Stock is held by
approximately 1,960 beneficial owners.
The following is a summary of securities authorized for issuance under
equity compensation plans as of June 30, 2002:
Number of securities
remaining available for
Number of shares to be future issuance under
issued upon exercise of Weighted average of equity compensation
outstanding options, exercise price of plans (excluding
warrants and rights outstanding options, securities reflected in
warrants and rights column (a) (1)
(a) (b) (c)
- ----------------------------------- ---------------------------- ---------------------------- -------------------------
Equity compensation plans
approved by shareholders 805,560 $11.54 136,500
Equity compensation plans not
approved by security holders - - -
Total 805,560 $11.54 136,500
(1) Of these securities, as of June 30, 2002 an aggregate of 86,500 shares may
also be issued as performance or restricted stock awards under the terms of
Stock Incentive Plan of 1996 and the 1998 Stock Incentive Plan for Salaried
Employees.
ITEM 6. SELECTED FINANCIAL DATA.
Incorporated by reference to the information under "Selected Financial
Information" on page 17 of the Annual Report, a copy of which page is included
in Exhibit 13 to this Report.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
Incorporated by reference to the information under "MANAGEMENT'S DISCUSSION
AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS" on pages 18
through 27 of the Annual Report, copies of which pages are included in Exhibit
13 to this Report.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
Incorporated by reference to the information under "MANAGEMENT'S DISCUSSION
AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - MARKET RISK" on
page 26 of the Annual Report, a copy of which page is included in Exhibit 13 to
this Report.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
Incorporated by reference to the consolidated financial statements and
related notes on pages 28 through 40 of the Annual Report, copies of which pages
are included in Exhibit 13 to this Report.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
Not applicable.
17
PART III
ITEM 10. DIRECTORS OF THE REGISTRANT.
Incorporated by reference to the information under "ELECTION OF DIRECTORS"
at pages 2 through 5 and "SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING
COMPLIANCE" at page 18 of the Proxy Statement.
ITEM 11. EXECUTIVE COMPENSATION.
Incorporated by reference to the information in the second paragraph under
"CERTAIN INFORMATION CONCERNING THE BOARD AND ITS COMMITTEES" at page 5 of the
Proxy Statement and under "EXECUTIVE COMPENSATION" on pages 8 through 11 of the
Proxy Statement; the material under the captions "REPORT OF THE HUMAN RESOURCES
COMMITTEE" on pages 13 to 15 and "PERFORMANCE OF THE COMPANY'S COMMON STOCK" on
page 11 and 12 is not incorporated by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
RELATED STOCKHOLDER MATTERS.
Incorporated by reference to the information under "PRINCIPAL STOCKHOLDERS"
beginning on page 16 of the Proxy Statement and to the table in the last
paragraph of Item 5 of this Report.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
None.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K.
The following documents are filed as part of this report:
(a) Financial Statements:
Auditors' Report on Financial Statements.
Consolidated Balance Sheets at June 30, 2002, 2001 and 2000.
Consolidated Statements of Income - for the Three Years Ended
June 30, 2002, 2001 and 2000. Consolidated Statements of
Stockholders' Equity for the Three Years Ended June 30, 2002,
2001 and 2000. Consolidated Statements of Cash Flow - for the
Three Years Ended June 30, 2002, 2001 and 2000. Notes to
Consolidated Financial Statements.
The foregoing have been incorporated by reference to the Annual Report as
indicated under Item 8.
(b) Financial Statement Schedules:
Auditors' Report on Financial Statement Schedules:
VIII - Valuation and Qualifying Accounts
All other schedules are omitted because they are not applicable or the
information is contained in the Consolidated Financial Statements or notes
thereto.
(c) Exhibits:
Exhibit No. Description
3(a) Articles of Incorporation of the Company (Incorporated by
reference to Exhibit
18
3(a) of the Company's Registration Statement No. 33-24398 on
Form S-1).
3(b) Bylaws of the Company (Incorporated by reference to Exhibit
3(b) of the Company's Registration Statement No. 33-24398
on Form S-1).
4(a) Copy of Note Agreement dated as of August 1, 1993,
providing for the issuance and sale of $25 million of 6.68%
term notes ("Term Notes") (incorporated by reference to
Exhibit 4.1 to the Company's Report on Form 10-Q for the
quarter ended September 30, 1993 (file number 0-17196)).
4(b) Copy of Term Notes dated August 27, 1993 (incorporated by
reference to Exhibit 4.2 to the Company's Report on Form
10-Q for the quarter ended September 30, 1993 (file number
0-17196)).
4(c) Copy of Sixth Amended Line of Credit Loan Agreement
providing for the Issuance of a Line of Credit Note in the
amount of $20,000,000 (incorporated by reference to Exhibit
4.1 to the Company's Report on Form 10-Q for the quarter
ended December 31, 1999 (file number 0-17196)).
4(d) Copy of Line of Credit Note Under Sixth Amended Line of
Credit Loan Agreement (incorporated by reference to Exhibit
4.2 to the Company's Report on Form 10-Q for the quarter
ended December 31, 1999 (file number 0-17196)).
4(e) In accordance with Item 601(b)(4)(iii)(A) of Regulation
S-K, certain instruments respecting long-term debt of the
Registrant have been omitted but will be furnished to the
Commission upon request.
9(a) Copy of Cray Family Trust (incorporated by reference to
Exhibit 1 of Amendment No. 1 to Schedule 13D of Cloud L.
Cray, Jr. dated November 17, 1995).
10(a) Summary of informal cash bonus plan (incorporated by
reference to Exhibit 10(a) to the Company's Form 10-K for
the year ended June 30, 2001 (file number 0-17196).
10(b) Executive Stock Bonus Plan as amended June 15, 1992
(incorporated by reference to Exhibit 10(b) to the
Company's Form 10-K for the year ended June 30, 1992 (file
number 0-17196)).
10(c) Copy of Midwest Grain Products, Inc. Stock Incentive Plan
of 1996, as amended as of August 26, 1996 (incorporated by
reference to Exhibit A to the Company's Notice of Annual
Meeting and Proxy Statement filed September 17, 1996).
10(d) Copy of amendment to Midwest Grain Products, Inc. Stock
Incentive Plan of 1996 (incorporated by reference to
Exhibit 10.1 to the Company's Form 10-Q for the quarter
ended September 30, 1998 (file number 0-17196)).
10(e) Form of Stock Option with respect to stock options granted
under the Midwest Grain Products, Inc. Stock Incentive Plan
of 1996 (incorporated by reference to Exhibit 10(e) to the
Company's Form 10-K for the year ended June 30, 1996 (file
number 0-17196)).
10(f) Copy of Midwest Grain Products, Inc. 1996 Stock Option Plan
for Outside Directors, as amended as of August 26, 1996
(incorporated by reference to Exhibit B to the Company's
Notice of Annual Meeting and Proxy Statement filed
September 17, 1996).
19
10(g) Copy of amendment to Midwest Grain Products, Inc. 1996
Stock Option Plan for Outside Directors (incorporated by
reference to Exhibit 10.2 to the Company's Form 10-Q for
the quarter ended September 30, 1998 (file number
0-17196)).
10(h) Copy of Midwest Grain Products, Inc. 1998 Stock Incentive
Plan for Salaried Employees (incorporated by reference to
Appendix A to the Company's Notice of Annual Meeting and
Proxy Statement dated September 17, 1998, filed with the
Securities and Exchange Commission on September 15, 1998).
10(i) Form of Stock Option with respect to stock options granted
under the Midwest Grain Products, Inc. 1998 Stock Incentive
Plan for Salaried Employees (incorporated by reference to
Exhibit 10(e) to the Company's Form 10-K for the year ended
June 30, l996 (file number 0-17196)).
10(j) Copy of amendments to Options granted under Midwest Grain
Products, Inc. Stock Option Plans (incorporated by
reference to Exhibit 10.3 to the Company's Form 10-Q for
the quarter ended September 30, 1998 (file number
0-17196)).
10(k) Form of Option Agreement for the grant of Options under the
Midwest Grain Products, Inc. 1996 Stock Option Plan for
Outside Directors, as amended (incorporated by reference to
Exhibit 10.4 to the Company's Form 10-Q for the quarter
ended September 30, 1998 (file number 0-17196)).
10(l) Form of Amended Option Agreements for the grant of Options
under the Midwest Grain Products, Inc. 1998 Stock Incentive
Plan for Salaried Employees (incorporated by reference to
Exhibit 10.5 to the Company's Form 10-Q for the quarter
ended September 30, 1998 (file number 0-17196)).
10(m) Form of Option Agreement for the grant of Options under the
Midwest Grain Products, Inc. Stock Incentive Plan of 1996,
as amended (incorporated by reference to Exhibit 10.6 to
the Company's Form 10-Q for the quarter ended September 30,
1998 (file number 0-17196)).
10(n) Form of Incentive Stock Option Agreement approved on
December 7, 2000, for use thereafter under the Stock
Incentive Plan of 1996 (incorporated by reference to
Exhibit 10.1 to the Company's Form 10-Q for the quarter
ended December 31, 2000 (file number 0-17196)).
10(o) Form of Incentive Stock Option Agreement approved on
December 7, 2000 for use thereafter under the 1998 Stock
Incentive Plan for Salaried Employees (incorporated by
reference to Exhibit 10.2 to the Company's Form 10-Q for
the quarter ended December 31, 2000 (file number 0-17196)).
10(p) Form of Memorandum of Agreement Concerning Options approved
on December 7, 2000 between the Company and certain members
of senior management, including the following named
executive officers: Ladd M. Seaberg, Randall M. Schrick,
Robert G. Booe, Dennis E. Sprague and Dr. Sukh Bassi
(incorporated by reference to Exhibit 10.3 to the Company's
Form 10-Q for the quarter ended December 31, 2000 (file
number 0-17196)).
10(q) Form of Lease Agreement dated as of August 1, 2001 among GE
Public Finance, Inc., The Unified Government of Wyandotte
County, Kansas City, Kansas, and Midwest Grain Products,
Inc. (incorporated by reference to Exhibit 10.10 to the
Company's Form 10-K for the year ended June 30, 2001 (file
number 0-17196).
20
10(r) Form of Memorandum of Agreement Concerning Options approved
on December 10, 2001 between the Company and certain
members of senior management, including the following named
executive officers: Ladd M. Seaberg, Robert G. Booe,
Randall M. Schrick and Dr. Sukh Bassi (incorporated by
reference to Exhibit 10 to the Company's form 10-Q for the
quarter ended December 31, 2001 (file number 0-17196)).
*10(s) Lease dated December 16, 1993 between Midwest Grain
Products, Inc. and Cilcorp Development Services Inc.
*10(t) Steam Heat Service Agreement dated December 16, 1993
between Midwest Grain Products, Inc. and Cilcorp
Development Services Inc.
*10(u) Cogeneration Agreement dated December 16, 1993 among
Midwest Grain Products, Inc., Central Illinois Light
Company and Cilcorp Development Services Inc.
*13 Information contained in the Midwest Grain Products, Inc.
2001 Annual Report to Stockholders that is incorporated
herein by reference.
22 Subsidiaries of the Company other than insignificant
subsidiaries:
State of Incorporation
Subsidiary or Organization
---------- ---------------
Midwest Grain Pipeline, Inc. Kansas
Midwest Grain Products of Illinois, Inc. Illinois
Kansas City Ingredient Technologies, Inc. Kansas
*23 Consent of BKD, LLP.
25 Powers of Attorney executed by all officers and directors
of the Company who have signed this report on Form 10-K
(incorporated by reference to the signature pages of this
report).
*99.1 CEO Certification pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002
*99.2 CFO Certification pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002
- ------------
* Filed herewith
The Company filed reports on Form 8-K on May 6 and May 7, 2002 reporting
information under Item 9.
21
SIGNATURES
Pursuant to requirements of Section 13 of the Securities Exchange Act of
1934, the Registrant has duly caused this report to be signed on its behalf by
the undersigned, thereunto duly authorized, in the city of Atchison, State of
Kansas, on this 6th day of September, 2002.
MIDWEST GRAIN PRODUCTS, INC.
By /s/ Laidacker M. Seaberg
Laidacker M. Seaberg, President
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Cloud L. Cray, Jr., Laidacker M. Seaberg and
Robert G. Booe and each of them, his true and lawful attorneys-in-fact and
agents, with full power of substitution and re-substitution, for him and in his
name, place and stead, in any and all capacities, to sign any and all reports of
the Registrant on Form 10-K and to sign any and all amendments to such reports
and to file the same with all exhibits thereto, and other documents in
connection therewith, with the Securities & Exchange Commission, granting unto
said attorneys-in-fact and agents, and each of them, full power and authority to
do and perform each and every act and thing requisite or necessary to be done in
and about the premises, as fully to all intents and purposes as he might or
could do in person, hereby ratifying and confirming all that said
attorneys-in-fact and agents or any of them, or their or his substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant in the capacities indicated on the dates indicated.
Name Title Date
---- ----- ----
/s/Laidacker M. Seaberg President (Principal September 6, 2002
Laidacker M. Seaberg Executive Officer) and Director
/s/Robert G. Booe Vice President, Treasurer September 6, 2002
Robert G. Booe and Controller (Principal
Financial and Accounting Officer)
/s/Michael Braude Director September 6, 2002
Michael Braude
/s/Cloud L. Cray, Jr. Director September 6, 2002
Cloud L. Cray, Jr.
/s/Michael R. Haverty Director September 6, 2002
Michael R. Haverty
/s/Linda E. Miller Director September 6, 2002
Linda E. Miller
/s/Robert J. Reintjes Director September 6, 2002
Robert J. Reintjes
/s/Randy M. Schrick Director September 6, 2002
Randy M. Schrick
22
/s/Daryl R. Schaller Director September 6, 2002
Daryl R. Schaller
/s/James A. Schlindwein Director September 6, 2002
James A. Schlindwein
CERTIFICATIONS
I, Laidacker M. Seaberg, certify that:
1. I have reviewed this annual report on Form 10-K of Midwest Grain
Products, Inc.;
2. Based on my knowledge, this annual report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this annual
report;
3. Based on my knowledge, the financial statements, and other financial
information included in this annual report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this annual report;
Date: September 6, 2002
/s/ Laidacker M. Seaberg
Laidacker M. Seaberg
President and Chief Executive
Officer
I, Robert G. Booe, certify that:
1. I have reviewed this annual report on Form 10-K of Midwest Grain
Products, Inc.;
2. Based on my knowledge, this annual report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this annual
report;
3. Based on my knowledge, the financial statements, and other financial
information included in this annual report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this annual report;
Date: September 6, 2002
/s/ Robert G. Booe
Robert G. Booe
Vice President and Chief
Financial Officer
23
MIDWEST GRAIN PRODUCTS, INC.
Consolidated Financial Statement Schedules
(Form 10-K)
June 30, 2002, 2001, and 2000
(With Auditors' Report Thereon)
S-1
BKD, LLP Twelve Wyandotte Plaza
120 West 12th Street, Suite 1200
Kansas City, MO 64105-1936
- --------------------------------------------------------------------------------
bkd.com
REPORT OF INDEPENDENT ACCOUNTANTS
ON FINANCIAL STATEMENT SCHEDULE
Board of Directors and Stockholders
Midwest Grain Products, Inc.
Atchison, Kansas
In connection with our audit of the consolidated financial statements of
MIDWEST GRAIN PRODUCTS, INC. for each of the three years in the period ended
June 30, 2002, we have also audited the following financial statement schedule.
This financial statement schedule is the responsibility of the Company's
management. Our responsibility is to express an opinion on this financial
statement schedule based on our audits of the basic financial statements. The
schedule is presented for purposes of complying with the Securities and Exchange
Commission's rules and regulations and is not a required part of the
consolidated financial statements.
In our opinion, the financial statement schedule referred to above, when
considered in relation to the basic financial statements taken as a whole,
presents fairly, in all material respects, the information required to be
included therein.
/s/ BKD, LLP
Kansas City, Missouri
August 2, 2002
Member of Moores Rowland International
S-2
MIDWEST GRAIN PRODUCTS, INC.
VIII. VALUATION AND QUALIFYING ACCOUNTS
Balance, Charged to Charged Balance,
Beginning Costs and to Other End of
Of Period Expenses Accounts Write-Offs Period
--------- -------- -------- ---------- ------
(In Thousands)
Year Ended
June 30, 2002
Allowance for
doubtful
accounts $252 $473 -- $473 $252
Year Ended
June 30, 2001
Allowance for
doubtful
accounts 252 82 --- 82 252
Year Ended
June 30, 2000
Allowance for
doubtful
accounts 285 202 --- 235 252
S-3
EXHIBIT INDEX
Exhibit No. Description
----------- -----------
3(a) Articles of Incorporation of the Company (Incorporated by
reference to Exhibit 3(a) of the Company's Registration
Statement No. 33-24398 on Form S-1).
3(b) Bylaws of the Company (Incorporated by reference to Exhibit
3(b) of the Company's Registration Statement No. 33-24398
on Form S-1).
4(a) Copy of Note Agreement dated as of August 1, 1993,
providing for the issuance and sale of $25 million of 6.68%
term notes ("Term Notes") (incorporated by reference to
Exhibit 4.1 to the Company's Report on Form 10-Q for the
quarter ended September 30, 1993 (file number 0-17196)).
4(b) Copy of Term Notes dated August 27, 1993 (incorporated by
reference to Exhibit 4.2 to the Company's Report on Form
10-Q for the quarter ended September 30, 1993 (file number
0-17196)).
4(c) Copy of Sixth Amended Line of Credit Loan Agreement
providing for the Issuance of a Line of Credit Note in the
amount of $20,000,000 (incorporated by reference to Exhibit
4.1 to the Company's Report on Form 10-Q for the quarter
ended December 31, 1999 (file number 0-17196)).
4(d) Copy of Line of Credit Note Under Sixth Amended Line of
Credit Loan Agreement (incorporated by reference to Exhibit
4.2 to the Company's Report on Form 10-Q for the quarter
ended December 31, 1999 (file number 0-17196)).
4(e) In accordance with Item 601(b)(4)(iii)(A) of Regulation
S-K, certain instruments respecting long-term debt of the
Registrant have been omitted but will be furnished to the
Commission upon request.
9(a) Copy of Cray Family Trust (incorporated by reference to
Exhibit 1 of Amendment No. 1 to Schedule 13D of Cloud L.
Cray, Jr. dated November 17, 1995).
10(a) Summary of informal cash bonus plan. (incorporated by
reference to Exhibit 10(a) to the Company's Form 10-K for
the year ended June 30, 2001 (file number 0-17196).
10(b) Executive Stock Bonus Plan as amended June 15, 1992
(incorporated by reference to Exhibit 10(b) to the
Company's Form 10-K for the year ended June 30, 1992 (file
number 0-17196)).
10(c) Copy of Midwest Grain Products, Inc. Stock Incentive Plan
of 1996, as amended as of August 26, 1996 (incorporated by
reference to Exhibit A to the Company's Notice of Annual
Meeting and Proxy Statement filed September 17, 1996.
10(d) Copy of amendment to Midwest Grain Products, Inc. Stock
Incentive Plan of 1996 (incorporated by reference to
Exhibit 10.1 to the Company's Form 10-Q for the quarter
ended September 30, 1998 (file number 0-17196)).
10(e) Form of Stock Option with respect to stock options granted
under the Midwest Grain Products, Inc. Stock Incentive Plan
of 1996 (incorporated by reference to Exhibit 10(e) to the
Company's Form 10-K for the year ended June 30, 1996 (file
number 0-17196)).
10(f) Copy of Midwest Grain Products, Inc. 1996 Stock Option Plan
for Outside Directors, as amended as of August 26, 1996
(incorporated by reference to Exhibit B to the Company's
Notice of Annual Meeting and Proxy Statement filed
September 17, 1996.
10(g) Copy of amendment to Midwest Grain Products, Inc. 1996
Stock Option Plan for Outside Directors (incorporated by
reference to Exhibit 10.2 to the Company's Form 10-Q for
the quarter ended September 30, 1998 (file number
0-17196)).
10(h) Copy of Midwest Grain Products, Inc. 1998 Stock Incentive
Plan for Salaried Employees (incorporated by reference to
Appendix A to the Company's Notice of Annual Meeting and
Proxy Statement dated September 17, 1998, filed with the
Securities and Exchange Commission on September 15, 1998).
10(i) Form of Stock Option with respect to stock options granted
under the Midwest Grain Products, Inc. 1998 Stock Incentive
Plan for Salaried Employees (incorporated by reference to
Exhibit 10(e) to the Company's Form 10-K for the year ended
June 30, l996 (file number 0-17196)).
10(j) Copy of amendments to Options granted under Midwest Grain
Products, Inc. Stock Option Plans (incorporated by
reference to Exhibit 10.3 to the Company's Form 10-Q for
the quarter ended September 30, 1998 (file number
0-17196)).
10(k) Form of Option Agreement for the grant of Options under the
Midwest Grain Products, Inc. 1996 Stock Option Plan for
Outside Directors, as amended (incorporated by reference to
Exhibit 10.4 to the Company's Form 10-Q for the quarter
ended September 30, 1998 (file number 0-17196)).
10(l) Form of Amended Option Agreements for the grant of Options
under the Midwest Grain Products, Inc. 1998 Stock Incentive
Plan for Salaried Employees (incorporated by reference to
Exhibit 10.5 to the Company's Form 10-Q for the quarter
ended September 30, 1998 (file number 0-17196)).
10(m) Form of Option Agreement for the grant of Options under the
Midwest Grain Products, Inc. Stock Incentive Plan of 1996,
as amended (incorporated by reference to Exhibit 10.6 to
the Company's Form 10-Q for the quarter ended September 30,
1998 (file number 0-17196)).
10(n) Form of Incentive Stock Option Agreement approved on
December 7, 2000 for use thereafter under the 1998 Stock
Incentive Plan of 1996 (incorporated by reference to
Exhibit 10.1 to the Company's Form 10-Q for the quarter
ended December 31, 2000 (file number 0-17196)).
10(o) Form of Incentive Stock Option Agreement approved on
December 7, 2000 for use thereafter under the 1998 Stock
Incentive Plan for Salaried Employees (incorporated by
reference to Exhibit 10.2 to the Company's Form 10-Q for
the quarter ended December 31, 2000 (file number 0-17196)).
10(p) Form of Memorandum of Agreement Concerning Options approved
on December 7, 2000 between the Company and certain members
of senior management, including the following named
executive officers: Ladd M. Seaberg, Randall M. Schrick,
Robert G. Booe, Dennis E. Sprague and Dr. Sukh Bassi
incorporated by reference to Exhibit 10.3 to the Company's
Form 10-Q for the quarter ended December 31, 2000 (file
number 0-17196)).
10(q) Form of Lease Agreement dated as of August 1, 2001 among GE
Public Finance, Inc., The Unified Government of Wyandotte
County, Kansas City, Kansas, and Midwest Grain Products,
Inc. (incorporated by reference to Exhibit 10.10 to the
Company's Form 10-K for the year ended June 30, 2001 (file
number (0-17196)).
10(r) Form of Memorandum of Agreement Concerning Options approved
on December 10, 2001 between the Company and certain
members of senior management, including the following named
executive officers: Ladd M. Seaberg, Robert G. Booe,
Randall M. Schrick and Dr. Sukh Bassi (incorporated by
reference to Exhibit 10 to the Company's form 10-Q for the
quarter ended December 31, 2001 (file number 0-17196)).
*10(s) Lease dated December 16, 1993 between Midwest Grain
Products, Inc. and Cilcorp Development Services Inc.
*10(t) Steam Heat Service Agreement dated December 16, 1993
between Midwest Grain Products, Inc. and Cilcorp
Development Services Inc.
*10(u) Cogeneration Agreement dated December 16, 1993 among
Midwest Grain Products, Inc., Central Illinois Light
Company and Cilcorp Development Services Inc.
*13 Information contained in the Midwest Grain Products, Inc.
2001 Annual Report to Stockholders that is incorporated
herein by reference.
22 Subsidiaries of the Company other than insignificant
subsidiaries:
State of
Incorporation
Subsidiary or Organization
---------- ---------------
Midwest Grain Pipeline, Inc. Kansas
Midwest Grain Products of Illinois, Inc. Illinois
Kansas City Ingredient Technologies, Inc Kansas
*23 Consent of BKD, LLP.
25 Powers of Attorney executed by all officers and directors
of the Company who have signed this report on Form 10-K
(incorporated by reference to the signature pages of this
report).
*99.1 CEO Certification pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002
*99.2 CFO Certification pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002
- ------------
* Filed herewith
The Company filed reports on Form 8-K on May 6 and May 7, 2002 reporting
information under Item 9.