MGP Ingredients (MGPI) Q4 2019 Earnings Call Transcript

MGP Ingredients (MGPI -2.09%)
Q4 2019 Earnings Call
Feb 26, 2020, 10:00 a.m. ET

Contents:

• Prepared Remarks
• Questions and Answers
• Call Participants

Prepared Remarks:

Operator

Good day and welcome to the MGP Ingredients fourth quarter and full-year 2019 results conference call. [Operator instructions] Please note that this event is being recorded. I would now like to turn the conference over to Mike Houston. Please go ahead, sir.

Mike Houston -- Investor Relations

Thank you, Chuck. Good morning, everyone, and thank you for joining the MGP Ingredients conference call and webcast to discuss the company's financial results for the fourth quarter and full-year 2019. I'm Mike Houston with Lambert, MGP's investor relations firm. And joining me today are members of their management team, including Gus Griffin, president and chief executive officer; and Brandon Gall, vice president of finance and chief financial officer.

We will begin the call with management's prepared remarks and then open up the call to questions. However, before we begin today's call, it is my responsibility to inform you that this call may involve certain forward-looking statements such as projections of sales, operating income, gross margin and effective tax rate, as well as statements on the plans and objectives of the company's business. The company's actual results could differ materially from any forward-looking statements made today due to a number of factors, including the risk factors described in the company's most recent annual and quarterly reports filed with the Securities and Exchange Commission. The company assumes no obligation to update any forward-looking statements made during the call.

If anyone does not already have a copy of the press release issued by MGP today, you can access it at the company's website, www.mgpingredients.com. At this time, I'd like to turn the call over to MGP's President and chief executive officer, Gus Griffin. Gus?

Gus Griffin -- President and Chief Executive Officer

Thank you, Mike, and thank you all for joining us. On this call, we will provide an overview of our results, updates on key financial performance metrics and a discussion of progress against our strategy. Then we'll take your questions. Now turning to results.

As previously communicated, we fell significantly short of our guidance due to us being unsuccessful in transacting a large portion of the aged whiskey sales we had forecast for the fourth quarter. As a result, consolidated sales for the year decreased 3.5%, gross profit decreased 8.5% and operating income declined 5.8%. We are certainly disappointed in our results, both for the quarter and the year. However, we do not believe these results reflect significant changes in key consumer trends affecting the categories in which we compete or significant changes in our competitive position within those categories.

While we remain very confident about the long-term potential of our business, we also realize we must continually refine the effectiveness of our tactical execution and the pace of our strategic implementation. We believe we have learnings from this year that will help us in both these areas. Looking at each segment individually. In our distillery products segment, fourth-quarter sales decreased 15.1%, reflecting a 20.9% decrease in sales of premium beverage alcohol during the fourth-quarter primarily due to lower new distillate and aged whiskey sales.

Full-year sales of premium beverage alcohol were down 9.8%, with sales of both new distillate and aged whiskey down for the full year. Over the past several years, our growth in sales of brown goods has outpaced the broader market. This was due in part to the subset of the market we serve growing faster than the overall market. While the consumer trends for overall American whiskey remains robust, we now believe that the underlying growth rate for our target market is gradually slowing to come more in line with the long-term trend for the overall category.

It is important to remember that our business is built on supplying all tiers in segments of the market, not just craft and not just rye. Our 2019 results were further negatively impacted by certain of our customers reducing their orders below prior year in order to work through excess inventory. Given the difficulty in accurately projecting consumer demand several years in advance, we view this more as a temporary situation rather than any warning sign regarding the health of the category or our customer base. We also believe that there is an increase in the number of potential competitors for our target market.

We think they are competing with us primarily for sales of new distillate currently but also for sales of aged whiskey going forward. We do not think we are losing existing customers to these competitors, but we are competing with them for the new business we require for growth. While the competitive marketplace has changed and will continue to change, we continue to be well positioned for the future. We still have a significant share and scale advantage and plan to increase our focus toward growing volume share in the global American whiskey category.

For obvious competitive reasons, we are not going to provide specifics, but this does not mean we're going to slash our prices but rather refine how we approach the selling process with potential new or infrequent customers. We do not believe this will result in significant changes to our overall pricing since a large portion of our new distillate sales are contracted. We are also going to refine the range of products we offer to attract potential volume we might be missing, increase our focus on export markets due to their long-term growth potential, and work more closely with some new partners to overcome some of the other barriers to transacting sales such as reducing funding delays. This should help further accelerate our recruitment of new customers, and we have already begun implementing these refinements.

We expect our new distillate sales to return to growth in 2020 as we rebound from the softness in 2019. Despite the lower than anticipated sales of aged whiskey in 2019, we still believe in the long-term value of our aged whiskey inventory, which has continued to realize pricing in line with our 3x expectations. Sales of white aged whiskey in earlier years and our older aged whiskey in more recent years have been both a strong customer recruitment pool and a key profit contributor. We believe sales of aged whiskey will continue to play both of those roles going forward.

However, due to the inherent volatility in predicting sales of aged whiskey and our lower projections for the volumetric growth of the aged whiskey market, particularly in the U.S., we are reducing our forecast for predictable ongoing annual volume growth in our sales of aged whiskey. The reduced outlook does not diminish our confidence in the long-term demand for our aged whiskey inventory, but rather reflects the difficulty in forecasting aged whiskey sales in a particular year. We expect our sales of aged whiskey to grow modestly in 2020, driven primarily by growth in export. Combined, we expect total brown goods sales to be comparable to 2018.

Continuing on to other areas of the segment. Sales of premium beverage white goods increased 0.5% for the year with margins slightly down from the prior-year period. Sales of industrial alcohol decreased for the year, down 1%, with slightly compressing margins. Both of these markets continue to be hypercompetitive, and the chronic oversupply dynamic in the industry -- in the industrial market still exists.

We expect the situation to continue for the foreseeable future. Sales of dried distillers grains, or DDG, increased 4.1% reflecting short-term micro factors. Our outlook for DDG pricing continues to be based on the unchanged macro environment that led to lower pricing in the first quarter of 2017. Revenue from warehouse services increased 13.4% reflecting, in part, growth in the number of customer barrels aging in our whiskey warehouses and other services we provide.

Turning to ingredient solutions. Sales for the year grew 5.6%. We finished 2019 with great momentum with the fourth quarter being one of our strongest ever. We faced two significant challenges this year.

The first was the tough comparison created by the loss of a large customer for our textured special wheat protein product line at the end of 2018. We have now completed cycling that comparison and have added new customers with a variety of applications seeking to leverage our plant-based protein. As evidence of our progress in building this customer base, we saw double-digit volume growth on this product line in the fourth quarter, and we expect to continue rebuilding this business in 2020. The second was the uncertainty around FDA approval of our Fibersym RW and FiberRite RW product lines as a source of dietary fiber.

This issue was resolved in the early part of 2019, and we are now seeing increased customer orders for these product lines. Sales were up strong double-digit growth -- double digit for the fourth quarter and up nicely for the full year. Our ingredient solutions product offerings continue to be aligned with strong consumer trends, including plant-based proteins, high-fiber, high-protein, non-GMO and clean label. And we continue to be very effective in recruiting new business.

Overall, both of our business segments continue to benefit from favorable consumer trends, and our strategic plan has us well positioned to fully capture the potential these trends offer. This concludes my initial remarks. Let me now turn things over to Brandon Gall for a review of the key metrics and numbers. Brandon?

Brandon Gall -- Vice President of Finance and Chief Financial Officer

Thanks, Gus. For the quarter, consolidated sales decreased 11.8% to $92.5 million reflecting a decline in distillery products segment sales, which was partially offset by an increase in ingredient solutions segment sales. Gross profit decreased 15.8% to $21.6 million due to lower distillery products segment gross profits, partially offset by an increase in ingredient solutions segment gross profits. Gross margin decreased by 110 basis points to 23.3%.

For the year, consolidated sales decreased 3.5% to $362.7 million as a result of a decline in distillery products segment sales, partially offset by ingredient solutions segment sales growth. Gross profit decreased 8.5% to $76.5 million driven by lower distillery products and ingredient solutions segment gross profits. Gross margin decreased by 110 basis points to 21.1% for 2019. Corporate selling, general and administrative expenses for the quarter decreased $3.7 million or 41% to $5.3 million as compared to the fourth-quarter 2018, primarily driven by lower incentive compensation expense.

For the full year, corporate SG&A expenses of $29.3 million declined by $4.2 million or 12.4% from 2018 due to lower incentive compensation expense, partially offset by increased costs related to the settlement of certain legal matters. Operating income for the quarter decreased 2.2% to $16.3 million due to lower sales and gross profit, partially offset by lower SG&A expenses. For the full year, operating income decreased 5.8% to $47.2 million due to lower sales and gross profit, partially offset by reductions in SG&A expenses. Our corporate effective tax rate for the fourth quarter of 2019 was 18.5% compared with 27.4% a year ago.

For the full year, the corporate effective tax rate was 15.6% compared with 23.9% in 2018. The lower effective tax rate was the result of several favorable discrete items such as the vesting of sizable share-based awards granted in prior years that we do not expect to recur in 2020. Net income for the quarter increased 9.5% to $12.9 million and earnings per share were $0.76 due to lower income taxes, partially offset by lower operating income. For the full year, net income increased 4% to $38.8 million and earnings per share increased to $2.27 from $2.17 per share in the prior year, primarily due to lower income tax expense, which was partially offset by lower operating income.

Cash flow from operations was $19.7 million in 2019, which was lower due to a net year-over-year increase in barrel distillate, bringing the total 2019 net investment in aging whiskey inventory to $27.9 million at cost. While investing in this inventory was a priority for us in 2019, the net year-over-year increase was higher than anticipated due to lower sales of aged whiskey during the period. Accounts receivable for the year ended 2019 at $40.9 million, up slightly from $38.8 million in 2018, reflecting the development of longer sales histories with craft customers and new long-term supply agreements. Despite this year-over-year increase in accounts receivable, fourth-quarter days sales outstanding was the lowest of any quarter during 2019 at 40.7 days.

MGP's balance sheet remains strong, allowing us to continue to invest to grow, as well as return funds to shareholders. We were pleased to announce the new five-year $300 million revolving credit facility with a syndicate of lenders led by Wells Fargo last week. The new facility replaces our $150 million credit facility and increases its credit availability by $150 million.The facility also contains an accordion option, whereby, subject to lender approval, the credit facility may be increased by another $100 million to a total of $400 million. This is in addition to an existing $75 million note purchase and shelf facility with Prudential, which has a remaining shelf facility, subject to lender approval, of $35 million.

This enhanced access to capital provides MGP additional financial flexibility as we execute our strategic growth plan, including evaluating acquisition opportunities that strengthen our position in growing markets. In addition to strategic acquisition opportunities, our capital allocation strategy remains robust with investments and programs, which aim to maximize returns to shareholders. Our investment in inventory of aged whiskey grew to $104.2 million at cost at the end of 2019. While we are reducing our annual volume growth expectations for aged whiskey, we believe our library of various mash bills and vintages will continue to contribute significant levels of profit for the company going forward.

We also believe our inventory set aside for aged whiskey sales in the U.S. market is close to reaching equilibrium on a net basis, and any future inventory increases will be for export sales, new mash bills and to support the growth of our own brands. Our warehouse expansion, program has been another important initiative to support new distillate demand of our customers, as well as our investment in aging inventory. As of December 31st, 2019, we spent approximately $48.4 million on the total warehouse expansion investment.

The program remains on track to be completed later this year. And we're happy to report the full scope of the expansion will be at an estimated $49.8 million, which is below our previous forecast due to efficiencies gained throughout the process. We also remain committed to continuing our investment in our operational capabilities and expect approximately $19.6 million in capital expenditures in 2020 for facility improvement and expansion, including warehouse expansion and facility maintenance. The board recently authorized a 20% increase for the first quarter dividend, which now stands at $0.12 per common share.

We are pleased to increase our quarterly dividend in response to continued confidence in our business to deliver strong cash flow from operations. In 2019, the board authorized a $25 million three-year share repurchase program. To date, we have yet to purchase any shares under this authorization, and we'll continue to evaluate this program relative to other opportunities. But we do view this program, as well as our quarterly dividend to be demonstrative of the confidence in our ability to grow, as well as enhance shareholder value.

We believe this capital allocation strategy aligns well with our long-term growth strategy, as well as with the underlying consumer trends our business is uniquely positioned to leverage. Now turning to guidance. As outlined in the press release this morning, MGP has offered the following guidance for fiscal 2020. 2020 sales growth is projected in the low to mid-single-digit percentage range versus 2019.

2020 gross margins are expected to increase modestly as compared to 2019. The company's estimate of growth in operating income in 2020 is 2 to 7%. 2020 effective tax rate is forecasted to be approximately 25% as we do not expect the favorable discrete items to recur in 2020. Earnings per share are forecasted to be in the range of $2.03 to $2.13 per share.

It is important to note that this guidance excludes CEO transition costs and includes normalized incentive compensation expenses. Note also that the shares outstanding and earnings per share guidance do not include any potential impact from possible share repurchases. Let me now turn things back over to Gus for concluding remarks.

Gus Griffin -- President and Chief Executive Officer

Thanks, Brandon. 2019 marked the fifth year of implementing our long-term strategic plan, which has delivered substantial improvements to our financial results and built a strong foundation for future growth. A critical part of that foundation was positioning MGP to benefit from the robust growth of the American whiskey category. Two key components of this effort have been our multiyear warehouse expansion program and our inventory of aging whiskey.

As Brandon mentioned earlier, both of these programs continue on track and have us well positioned. Another critical part of that foundation is building and strengthening our organization to be able to support future growth. We made significant progress on our operational excellence strategy. Though faced with challenges during the year, all of our production facilities had a strong year, delivering the quality, quantity and consistency of product we needed to meet our customers' needs.

Each of our production facilities once again achieved the highest possible score of grade AA from the BRC Global Standards for Food Safety, further strengthening our reputation for quality. We also continue to expand our enhanced comprehensive employee-driven safety program, Safety Up, throughout our organization. People are a key piece of a strong foundation, and we made several key additions to both our organization and board this past year. Next month, we will begin our planned orderly transition of the CEO role.

Our strategic plan also define successive phases of growth and the drivers of that growth. Each of those phases has occurred as anticipated until this past year. We expected increased sales of aged whiskey to be both the key growth driver of 2019 and to provide incremental growth for the next few years. Due to its volatile sales cycle and our reduced forecast for predictable annual volume growth in the U.S., we plan to accelerate the pace of implementation of our next phase of profit and margin expansion, growing our branded initiative.

While we anticipate the key drivers of previous phases to continue to provide incremental growth, we will begin to place a greater emphasis on our MGP brands initiative. In 2019, we added new brands to our portfolio, including Eight & Sand Blended Bourbon and several well-received limited edition offerings. We also expanded our geographic footprint during the year, launching our brands into Texas, Connecticut, Maryland and the District of Columbia. Most importantly, we also started to see strong evidence that our sales and marketing efforts are having a positive impact driving both increased retail distribution and velocity per point of distribution.

While still small, total sales grew by more than 50% as compared to last year, and we expect solid double-digit growth rates again in 2020. Our strong balance sheet and newly enhanced credit facility provide MGP additional financial flexibility as we execute our strategic growth plan, including evaluating acquisition opportunities that strengthen our position in growing markets. We are disappointed in our 2019 results and share investors' desire to deliver both growth and more predictable results. We do believe the tactical refinements we are making will help us better leverage our strengths to help us grow.

Due to the inherent volatility of parts of our business, there is no silver bullet to improving predictability. However, we believe that our continual focus on improving in this area and the establishment of clearer expectations regarding our growth and key growth drivers will help. We continue to be focused on the long term. We are confident that we have built a strong foundation to support future growth and have the strategy and resources to deliver against our 2020 guidance and beyond.

That concludes our prepared remarks. Operator, we are ready to begin the question-and-answer portion of the call.

Questions & Answers:

Operator

[Operator instructions] And our first question will come from Alex Fuhrman of Craig-Hallum Capital Group. Please go ahead.

Alex Fuhrman -- Craig-Hallum Capital Group -- Analyst

Thanks, guys, for taking my question. I wanted to ask about the aged whiskey transactions that failed to materialize in the fourth quarter. Can you give us a little bit more color on the nature of those transactions and in terms of how many customers there were, why they were not transacted and what types of customers they might have been, whether it be smaller craft brands or larger multinationals?

Gus Griffin -- President and Chief Executive Officer

Yes. Thanks, Alex. A couple of points I'd like to clarify there. First of all, 2019 was our first year of selling four-year-old products.

So we're really starting on a new venture there. Obviously, we learned some things along the way. When we -- at the end of the third quarter, we've stated very confidently that we thought we were going to transact the required number of sales to hit our guidance for the full year. We said it was less than a dozen.

Some of them -- most of them were established customers. We were very confident we were further along in the transaction process and so forth. We learned some hard lessons in December. Some of the issues we've had in the past, funding came up, delays, people pushing off, things that we thought they were certainly going to -- do happen.

We had one sale just evaporate. Sometimes, we sell to a company who sells to somebody else. Some of the smaller customers might like to deal only with one supplier. So in essence, it's a customer of a customer.

And we had one that just evaporated, so we don't know what -- since it was a customer of a customer, was that really a viable sale to begin with? We certainly thought so. And then we've had people -- we had people put off because they'd found other temporary solutions. I can't get too much into specifics because several of those customers that didn't transact, we have ongoing business relationships with them, and so we can't go into too much more detail than that. I think the key takeaway from that was we realized that there's continual things that we can't control, and so that we are not going to include things that are unpredictable in our forecast.

Alex Fuhrman -- Craig-Hallum Capital Group -- Analyst

OK. That makes a lot of sense. And then just turning to new fill for a minute. It sounds like, if I heard you correctly, that new distillate sales were also down in the fourth quarter, but it's your expectation that that segment will return to growth in 2020, if I heard that all correctly.

Can you give us a sense of just why the new fill sales would have been down in the fourth quarter? And what gives you confidence that that segment will return to growth?

Gus Griffin -- President and Chief Executive Officer

One of the larger impacts on our new distillate sales during 2019 was certain customers working through excess inventory. And as we've said before, even some of these contracts -- these customers who had contracts had always been ordering above their contractual requirement and they simply drop down to their contractual requirement because they found themselves in a temporary situation where they had excess inventory. And really, the only thing they can do is back off on their ordering a little bit. So that doesn't show up too much in the marketplace, but for us, it shows up as a rather big drop.

So we think we're getting toward the end of that. We hope we're getting toward the end of that. And so I think it's important to look at the underlying trend of our new distillate sales as opposed to year-to-year drops and recoveries. But we do think our new distillate sales will grow in 2020 as we rebound from that softness of '19, again, one are the primary drivers being that -- people working through the excess inventory.

Alex Fuhrman -- Craig-Hallum Capital Group -- Analyst

OK that's very helpful. Thank you.

Operator

And our next question will come from Bill Chappell with SunTrust. Please go ahead, sir.

Bill Chappell -- SunTrust Robinson Humphrey -- Analyst

Thanks, good morning. I want to go back to the new distillate. I'm just trying to understand, one, why it took until December before you realized, that the company realized that things were following it? Because we heard numerous different kind of explanations of why new distillate was down throughout the year now and the filing in the fourth quarter, it seems that it's in-sourcing and competition. And so why did you not see that? Do you not have any forecasting abilities internally? And with that in mind, what should give us confidence that you think it's going to rebound this year? I mean it didn't seem like you caught it until December of last year.

Why should we get comfortable that it's going to rebound this year?

Brandon Gall -- Vice President of Finance and Chief Financial Officer

Yes. And Bill, this is Brandon. The December realization was really all around aged. And as Gus already spoke through, that's when a lot of the transactions either took place or failed to transact.

Even on the call in Q3, when asked about new distillate in Q4, our response at the time was we expect total brown to be up for the year based almost completely on the performance of aged in the fourth quarter. So the fact that new distillate was soft to down in Q4 did not surprise us. It was just a continuation of the rightsizing that we had seen already up to that point in the year. What's different is, as we go into 2020, we have had conversations with our customers.

There are some that we have ratcheted back and then there are some that have communicated that they are going to ramp up for various reasons. And that's what gives us confidence going into the year. We also do have a large portion of our new distillate sales that are under contract, and -- but there are sales that we still have to go out and get. But all those things put together does give us the confidence that after a down year, that a lot of those customers who hit the pause button are looking to get back in.

Bill Chappell -- SunTrust Robinson Humphrey -- Analyst

But just to be clear. You were confident this time last year that it would grow. And so based on conversations and commitments, and that didn't happen. So is there anything different from this time last year?

Gus Griffin -- President and Chief Executive Officer

Are you talking new distillate?

Bill Chappell -- SunTrust Robinson Humphrey -- Analyst

New distillate.

Gus Griffin -- President and Chief Executive Officer

Yes. I think this time last year, we were very confident. And as the year went through, we began to realize the impact of those customers working through the excess inventory. We also, over the last part of the year and certainly through January with our analysis, got a better handle on the -- as opposed to the overall market, what the subset that we actually target is.

And again, I think it's important for everybody to understand, it's not just craft and it's not just rye. We supply all tiers, all segments. So it's a much bigger -- it's a much broader category than I think most people realize. As Brandon said, we -- so going into the fourth quarter, the missed guidance was aged.

We talked third in -- excuse me, second and third quarter, we talked about the excess inventory. We said we weren't -- we didn't give any confidence that that was going to grow during the year. And then what probably exaggerated the optics was the fourth quarter of 2018 was a particularly big quarter for us for new distillate. So the quarter-to-quarter comparison looks particularly bad.

But -- so versus -- to your question, versus where we were last year, during the year of 2019, the people working through excess inventories, customers working through excess inventories came to light, we were aware of that, trying to figure out how to project that. So we certainly have a better handle on that and we have a better handle on the growth rate of the underlying subset that we addressed than we did at this point last year.

Bill Chappell -- SunTrust Robinson Humphrey -- Analyst

And I've got some questions on aged, but I want to stick again on new distillate. The other thing you said in the release is you don't believe your competitive position has changed. And so I'm just trying to understand, if -- as you've said in the past, you're the lowest cost player because you have the scale advantage and you have such quality. Then why aren't you winning more than your fair share of new business out there? Why are other upstarts taking that business from you? I'm not talking about losing existing customers.

But why aren't you winning more new customers?

Gus Griffin -- President and Chief Executive Officer

Yes. Great question. And I'm glad you were specific about that because, again, we don't -- it's not we're losing customers, we're not winning as many new customers as we would like. And we are putting our focus, increasing our focus toward gaining volume share.

I don't think we were -- we may have been a little bit late to realize that this has turned into more of a share fight, and we weren't leveraging our advantages to the full -- as we will going forward. It's really a change in our understanding and our position and focus. And now we're going to focus much more on making sure that we are being very competitive in the marketplace to make sure we gain volume share.

Bill Chappell -- SunTrust Robinson Humphrey -- Analyst

And then on the aged side, so I just want to clarify, is there an expectation of any fully aged sales in your 2020 guidance? And if so, how do I get confident that that will happen?

Gus Griffin -- President and Chief Executive Officer

Yes. Yes. Again, in 2019, there were sales of fully aged, too. So I think it's important to people to understand that we have sold four-year-old.

We will four-year-old and we will continue to sell four-year-old going forward. Obviously, we have 2015 leftover. In the third quarter, we said if all these sales come through that we had projected for the fourth quarter of 2019, we wouldn't have much, if any, 2015 leftover. Obviously, those sales didn't come through as forecast, so we do have 2015 leftover.

So we have not only four-year-old, we also have some five-year-old. We are taking a very -- I guess learning from our experience. We are making sure that we are basing things on what we feel is most predictable and not getting -- not overly -- being overly confident in what we're projecting for aged. So we've said we think it will increase modestly, and most of that increase coming from export, being powered by increase in export.

You've heard us talk about us increasing our investment, our manpower investment in export, and we think that will begin to bear fruit this year. And so we're taking a, I think, a very cautious approach to volumetric increases, annual volumetric increases in the U.S. market. Again, not saying they won't happen, but are acknowledging they aren't predictable, and we want to make sure that our forecast is we can reduce the volatility as much as possible.

Bill Chappell -- SunTrust Robinson Humphrey -- Analyst

And then I might have missed it. Did you put away aged inventory in the fourth quarter? And are there plans to put away a meaningful amount in 2020?

Gus Griffin -- President and Chief Executive Officer

Yes. So because -- remember, that inventory number is a net number, right, what we put away versus what we sold. And the simple fact that we didn't sell as much as we had forecasted for, for the fourth quarter meant we ended up with a higher net put away. So that was -- that net put away, that increase in the fourth quarter was higher than we had anticipated, higher than we had forecast simply because we didn't transact the sales that we had planned.

We have said that we were approaching equilibrium for aged sales in the U.S. So we think we're getting pretty close there. Again, a part of that is due to us reducing -- our forecast for aged sales into the U.S. market are reducing, and that's important.

It's reducing our forecast versus our prior forecast. So we still think the demand is there. What you've heard us talked in the past about expecting pretty much standard incremental increases every year in sales of our aged -- the quantity of aged we sell. And we're reducing that forecast.

But we do think we will sell more export, which would require a put away. We were going to put away some new mash bills. And we're also always going to continue to put away whiskey to support the long-term growth of our own brands.

Bill Chappell -- SunTrust Robinson Humphrey -- Analyst

Last one for me. So I'm just trying to understand. I mean we went through the past year, and you even said customers were kind of playing off of your guidance and trend and negotiating tools. You have the valuation of the stock where it is right now and you have no debt.

Why does it make sense to be a public company, to be honest? I mean why not -- because it seems like you have more than enough capital to -- and assets that the valuation doesn't make as much sense. So I'm just trying to understand why it does.

Gus Griffin -- President and Chief Executive Officer

I think that really goes back to uses of capital. And we believe in our long-term strategy. The phases of growth that we have laid out starting in 2015 have all played out pretty much as anticipated, except for this last phase of growth with aged where we thought it was going to give us both more growth and a longer bump of incremental growth. We feel very strongly in the next phase of growth of our own brands.

And we think that accelerating that, the implementation of that phase is really -- will pay off for investors and our long-term growth, and that's where we think we'll -- one of the primary uses of funds.

Bill Chappell -- SunTrust Robinson Humphrey -- Analyst

OK, thank you.

Gus Griffin -- President and Chief Executive Officer

Thanks, Bill.

Operator

This concludes our question-and-answer session. I would like to turn the conference back over to Gus Griffin, chief executive officer, for any closing remarks. Please go ahead, sir.

Gus Griffin -- President and Chief Executive Officer

Thank you for your interest in our company and for joining us today for our fourth quarter and full-year call. We look forward to talking with you again after the first quarter.Operator[Operator signoff]

Duration: 41 minutes

Call participants:

Mike Houston -- Investor Relations

Gus Griffin -- President and Chief Executive Officer

Brandon Gall -- Vice President of Finance and Chief Financial Officer

Alex Fuhrman -- Craig-Hallum Capital Group -- Analyst

Bill Chappell -- SunTrust Robinson Humphrey -- Analyst

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