ATCHISON, KAS. — Significant gains in sales and operating profits propelled second-quarter results at MGP Ingredients, Inc. Net income in the quarter ended Dec. 31, 2010, was $3,242,000, equal to 18c per share on the common stock, down 32% from $4,778,000, or 29c per share, in the second quarter of fiscal 2010. Last year’s results included several one-time items, including an income tax benefit of $4,659,000 and a loss of $3,047,000 related to the formation of the company’s distillery joint venture, Illinois Corn Processing, L.L.C.

Income from operations, meanwhile, climbed to $4,344,000 from $504,000 in the same period a year ago, while sales rose 20% to $57,951,000, up from $48,094,000 in the same period a year ago.

“The key to our improved performance lies in our operating profits,” said Tim Newkirk, president and chief executive officer. “We are pleased to report significant increases in sales and operating profits from a year ago. We also realize that we have further to go before we are executing at our highest level.

“On the distillery side, our growth continues to be driven by demand for high quality food grade alcohol. Further improvements to our performance in this segment were affected by higher corn and energy costs. We also experienced longer-than-anticipated production slowdowns at our Atchison distillery during the quarter. These slowdowns were related to a water supply disruption, along with distillery equipment repairs and upgrades, which have recently been completed.

“Going forward we see stronger production rates. Our ICP joint venture is approaching peak capacity in food grade alcohol. Start-up issues at ICP are largely behind us, but our contribution from the joint venture was impacted from higher costs during the quarter as the facility has continued to step up its total capacity utilization levels. We are squarely focused on maintaining our gross margins in this segment, where the general trend is positive.”

Mr. Newkirk added the company’s ingredients business remains “a work in progress.”

“We’re consistently profitable at the current level of business, and there are a number of key customer projects in the pipeline,” he said. “We are seeing increased demand for our unique specialty value-added ingredients and continue to concentrate much focus and resources on growing this area of our business. This includes methods to continually enhance our operational efficiencies, which experienced a decrease in the second quarter and contributed to higher production costs and affected segment profits.”

Pre-tax income in the Ingredient Solutions segment fell to $443,000, which compared with $2.8 million in the second quarter of fiscal 2010. The earnings decline primarily reflected higher raw material costs, which were offset partially by higher average selling prices for starches, the company said.

Net sales in the segment totaled $14.5 million, down 6% from the same period a year ago. MGPI said the majority of the sales decline was due to the planned reduction of commodity starches and proteins.

Distillery Products posted pre-tax income of $7.3 million, up 74% from $4.2 million in the same period a year ago. Net sales in the Distillery Products segment were $43.2 million, up 35% from the same period a year ago. MGPI attributed the majority of the increase to a 30% gain in volume of high quality food grade alcohol.

For the six months ended Dec. 31, 2010, overall net income at MGPI was $8,244,000, or 46c per share, down narrowly from $8,516,000, or 51c per share, in the same period of fiscal 2010. Income from operations was $7,909,000, up 54% from $5,148,000, while sales were $114,929,000, up 17% from $98,343,000.