MGP Ingredients considers 'strategic alternatives' for KCK plant

MGP Ingredients Inc. is "pursuing strategic alternatives" for its pet resin manufacturing business and its Kansas City, Kan., plant, including possibly selling the plant or its assets.

In a release Thursday, the Atchison-based company (Nasdaq: MGPI) reported a loss of $6.6 million, or 39 cents a share, for its third quarter, which ended March 31. This compares with earnings of $2.1 million, or 13 cents a share, last year.

The loss included an impairment charge of $4.9 million, or 29 cents a share, for "efforts to rationalize certain manufacturing capacity," the company said in the release. Seventy-five percent of the loss was related to the KCK plant's impairment, company officials said in a conference call Thursday morning. Record wheat prices also contributed to the loss.

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Company CFO Robert Zonneveld said in an interview that the company could consider a partnership, outsourcing or a different product mix at the facility, in addition to possibly selling it. The plant has 40 employees.

Zonneveld said he doesn't anticipate further writedowns for the plant.

Revenue for the quarter was $106.7 million, up 13.7 percent from $93.8 million last year.

Company CEO Tim Newkirk said in the release that the loss of a significant pet treat customer at the end of fiscal 2006 and the inability to get anticipated new business reduced the company's protein-based resin volumes to an unprofitable level. Also, the weak consumer environment prompted pet owners to spend less on premium treats. These factors led the company to seek alternatives for its KCK plant and pet resin manufacturing business.

MGP sued Mars Inc. in 2006 after the company bought North Kansas City-based S&M NuTec and allegedly canceled purchase agreements for ingredients that NuTec had bought from MGP to manufacture Greenies pet treats.

MGP Ingredients develops and produces grain-based products. It has plants in Atchison; Kansas City, Kan.; Onaga, Kan.; and Pekin, Ill.