What changed in this filing

/stocks — the workspaceLOADING

Item 2. Management’s Discussion and Analysis

2020-10-29 compared with 2020-07-30 · 113 added, 113 removed, 243 unchanged (48% of the section changed)

12 unchanged sentences

We have continued to operate without any significant negative impacts;

however this could be effected by voluntary or mandatory temporary closures of our facilities, interruptions into to our supply chain or additional efforts to protect the health and safety of our employees.

however this could be effected by voluntary or mandatory temporary closures of our facilities, interruptions to our supply chain or additional efforts to protect the health and safety of our employees.

As of the date of this report, the Company's operations, supply chain and customer demand have not been significantly affected by COVID-19;

2 unchanged sentences

The Company has incurred incremental costs for hourly wage bonuses to the Company's production employees, supplies to implement health screenings, an extended sick leave policy and additional IT related expenses to enable employees to work-from-home.

As of June 30, 2020, such incremental costs have been immaterial to the Company's financial statements.

As of September 30, 2020, such incremental costs have been immaterial to the Company's financial statements.

The Company cannot reasonably estimate the length of time or severity of the pandemic and cannot estimate the impact this pandemic will have on our consolidated financial results for 2020.

15 unchanged sentences

Consolidated results

The table below details the consolidated results for the quarters ended June 30, 2020 and 2019:

Quarter Ended June 30,

The table below details the consolidated results for the quarters ended September 30, 2020 and 2019:

Quarter Ended September 30,

2020 2019 2020 v.

13 unchanged sentences

(a) Percentage points (“pp”).

Sales - Sales for quarter ended June 30, 2020 were $92,560, an increase of 2.3 percent compared to the year-ago quarter, which was the result of increased sales in both the Distillery Products and Ingredient Solutions segments.

Within the Distillery Products segment, sales were up 1.6 percent, primarily due to an increase in industrial alcohol and distillers feed and related co-products.

Sales - Sales for quarter ended September 30, 2020 were $102,964, an increase of 13.5 percent compared to the year-ago quarter, which was the result of increased sales in both the Distillery Products and Ingredient Solutions segments.

Within the Distillery Products segment, sales were up 11.4 percent, primarily due to an increase in the sales of brown goods and white goods within premium beverage alcohol.

Within the Ingredient Solutions segment, sales were up 22.7 percent, primarily due to increased sales of specialty wheat starches and proteins (see Segment Results).

Gross profit - Gross profit for quarter ended June 30, 2020 was $20,702, an increase of 6.0 percent compared to the year-ago quarter.

The increase was driven by an increase in gross profit in the Ingredient Solutions segment partially offset by a decrease in gross profit in the Distillery Products segment.

Gross profit - Gross profit for quarter ended September 30, 2020 was $23,162, an increase of 23.3 percent compared to the year-ago quarter.

The increase was driven by an increase in gross profit in both the Ingredient Solutions and Distillery Products segment.

In the Ingredient Solutions segment, gross profit increased by $2,970, or 102.9 percent.

In the Distillery Products segment, gross profit declined by $501, or 3.0 percent.

Additionally, gross profits for both segments were negatively impacted by increased production costs due to the shutdown of the Atchison facilities as a result of the cyber-attack (see Segment Results).

SG&A expenses - SG&A expenses for quarter ended June 30, 2020 were $9,364, an increase of 8.3 percent compared to the year-ago quarter.

The increase in SG&A was primarily due to higher personnel and incentive compensation costs, inclusive of certain incremental costs incurred relating to the transition at the CEO position.

Operating income - Operating income for quarter ended June 30, 2020 increased to $11,338 from $10,874 for quarter ended June 30, 2019, primarily due to an increase in gross profit in the Ingredient Solutions segment, partially offset by the increase in the previously described SG&A expenses and a decrease in gross profit in the Distillery Products segment.

In the Distillery Products segment, gross profit increased by $1,402, or 8.8 percent.

(see Segment Results).

SG&A expenses - SG&A expenses for quarter ended September 30, 2020 were $9,510, an increase of 32.3 percent compared to the year-ago quarter.

The increase in SG&A was primarily due to higher incentive compensation expense and professional service fees, partially offset by decreased costs related to the EPA settlement discussed in Note 7.

Operating income - Operating income for quarter ended September 30, 2020 increased to $13,652 from $11,604 for quarter ended September 30, 2019, primarily due to an increase in gross profit in both the Ingredient Solutions and Distillery Products segment, partially offset by the increase in the previously described SG&A expenses.

Operating income, quarter versus quarter Operating Income Change

Operating income for quarter ended June 30, 2019

Operating income for quarter ended September 30, 2019

Increase in gross profit - Ingredient Solutions segment (a)

2,970 25.6 pp (b)

Decrease in gross profit - Distillery Products segment (a)

Increase in gross profit - Distillery Products segment (a)

1,402 12.1 pp

1 unchanged sentence

(2,324) (20.0) pp

Operating income for quarter ended June 30, 2020

Operating income for quarter ended September 30, 2020

$ 13,652 17.7 %

1 unchanged sentence

(b) Percentage points (“pp”).

Income tax expense - Income tax expense for quarter ended June 30, 2020 was $2,550, for an effective tax rate of 23.1 percent.

Income tax expense for the quarter ended June 30, 2019, was $2,642, for an effective tax rate of 25.0 percent.

The decrease, quarter versus quarter, was primarily due to the impact of certain compensation limits applicable to public companies in the prior year.

Earnings per share (“EPS”) - EPS was $0.50 for quarter ended June 30, 2020, compared to $0.46 for quarter ended June 30, 2019.

The change in EPS, quarter versus quarter, was primarily due to an increase in operations, offset by a change in income tax expense as previously described.

Income tax expense - Income tax expense for quarter ended September 30, 2020 was $2,862, for an effective tax rate of 21.6 percent.

Income tax expense for the quarter ended September 30, 2019, was $3,025, for an effective tax rate of 26.9 percent.

The decrease, quarter versus quarter, was primarily due to the release of a portion of the Company's valuation allowance.

Earnings per share (“EPS”) - EPS was $0.61 for quarter ended September 30, 2020, compared to $0.48 for quarter ended September 30, 2019.

The change in EPS, quarter versus quarter, was primarily due to an increase in operations, and by a change in income tax expense as previously described.

Change in basic and diluted EPS, quarter versus quarter Basic and Diluted EPS Change

Basic and diluted EPS for quarter ended June 30, 2019

Basic and diluted EPS for quarter ended September 30, 2019

Increase in operations (a)

2 unchanged sentences

Decrease in weighted average shares outstanding

Basic and diluted EPS for quarter ended June 30, 2020

Basic and diluted EPS for quarter ended September 30, 2020

$ 0.61 27.2 %

(a) Item is net of tax based on the effective tax rate for the base year (2019).

(b) Percentage points (“pp”).

The table below details the consolidated results for the year to date ended June 30, 2020 and 2019:

Year to Date Ended June 30,

The table below details the consolidated results for the year to date ended September 30, 2020 and 2019:

Year to Date Ended September 30,

2020 2019 2020 v.

6 unchanged sentences

Operating margin % 13.1 % 11.5 % 1.6 pp

Interest expense, net (940) (573) 64.0

Interest expense, net and other (1,349) (937) 44.0

Income before income taxes 37,349 30,054 24.3

4 unchanged sentences

(a) Percentage points (“pp”).

Sales - Sales for year to date ended June 30, 2020, were $191,642, an increase of 6.7 percent compared to the year-ago period, which was the result of increased sales in both the Distillery Products and Ingredient Solutions segments.

Within the Distillery Products segment, sales were up 4.4 percent, primarily due to an increase in the sales of industrial alcohol, brown goods within premium beverage alcohol and warehouse services.

Sales - Sales for year to date ended September 30, 2020 were $294,606, an increase of 9.0 percent compared to the year-ago period, which was the result of increased sales in both the Distillery Products and Ingredient Solutions segments.

Within the Distillery Products segment, sales were up 6.7 percent, primarily due to an increase in the sales of brown goods within premium beverage alcohol, industrial alcohol, white goods within premium beverage alcohol, and warehouse services.

Within the Ingredient Solutions segment, sales were up 19.4 percent, primarily due to increased sales of specialty wheat starches and proteins (see Segment Results).

Gross profit - Gross profit for year to date ended June 30, 2020, was $43,913, an increase of 21.4 percent compared to the year-ago period.

Gross profit - Gross profit for year to date ended September 30, 2020 was $67,075, an increase of 22.0 percent compared to the year-ago period.

The increase was driven by an increase in gross profit in both the Ingredient Solutions and Distillery Products segments.

2 unchanged sentences

SG&A expenses - SG&A expenses for year to date ended June 30, 2020, were $18,867, an increase of 12.3 percent compared to the year-ago period.

SG&A expenses - SG&A expenses for year to date ended September 30, 2020 were $28,377, an increase of 18.3 percent compared to the year-ago period.

The increase in SG&A was due to higher personnel and incentive compensation costs, inclusive of certain incremental costs incurred relating to the transition at the CEO position.

Operating income - Operating income for year to date ended June 30, 2020, increased to $25,046 from $19,387 for year to date period ended June 30, 2019, primarily due to a increase in gross profit in both the Ingredient Solutions and Distillery Products segments.

These increases were partially offset by an increase in above-described SG&A expenses.

Operating income - Operating income for year to date ended September 30, 2020 increased to $38,698 from $30,991 for year to date period ended September 30, 2019, primarily due to a increase in gross profit in both the Ingredient Solutions and Distillery Products segments.

These increases were partially offset by an increase in the above-described SG&A expenses.

Operating income, year to date versus year to date Operating Income Change

Operating income for year to date ended June 30, 2019

Operating income for year to date ended September 30, 2019

Increase in gross profit - Ingredient Solutions segment (a)

4 unchanged sentences

(4,396) (14.1) pp

Operating income for year to date ended June 30, 2020

Operating income for year to date ended September 30, 2020

$ 38,698 24.9 %

1 unchanged sentence

(b) Percentage points (“pp”).

Income tax expense - Income tax expense for year to date ended June 30, 2020, was $5,774, for an effective tax rate of 24.0 percent.

Income tax expense for the year to date ended June 30, 2019, was $1,183, for an effective tax rate of 6.3 percent.

The increase, year to date versus year to date, was primarily due to the tax impacts of vested share-based awards.

Earnings per share - EPS was $1.07 for year to date ended June 30, 2020, compared to $1.03 for year to date ended June 30, 2019.

EPS increased, year to date versus year to date, primarily due to an increase in operations, offset by a change in income tax expense as previously described.

Income tax expense - Income tax expense for year to date ended September 30, 2020 was $8,636, for an effective tax rate of 23.1 percent.

Income tax expense for the year to date ended September 30, 2019, was $4,208, for an effective tax rate of 14.0 percent.

The increase, year to date versus year to date, was primarily due to the tax benefit of vested share-based awards realized in the prior year.

Earnings per share - EPS was $1.68 for year to date ended September 30, 2020, compared to $1.51 for year to date ended September 30, 2019.

EPS increased, year to date versus year to date, primarily due to an increase in operations, partially offset by a change in income tax expense as previously described.

Change in basic and diluted EPS, year to date versus year to date Basic and Diluted EPS Change

Basic and diluted EPS for year to date ended June 30, 2019

Basic and diluted EPS for year to date ended September 30, 2019

Increase in operations (a)

5 unchanged sentences

Change in effective tax rate (excluding above tax item) (0.08) (5.3) pp

Basic and diluted EPS for year to date ended June 30, 2020

Basic and diluted EPS for year to date ended September 30, 2020

$ 1.68 11.2 %

(a) Item is net of tax based on the effective tax rate for the base year (2019).

2 unchanged sentences

Distillery Products

The following tables show selected financial information for the Distillery Products segment for the quarters ended June 30, 2020 and 2019.

The following tables show selected financial information for the Distillery Products segment for the quarters ended September 30, 2020 and 2019.

DISTILLERY PRODUCTS SALES

Quarter Ended June 30, Quarter versus Quarter Sales Change Increase/(Decrease)

Quarter Ended September 30, Quarter versus Quarter Sales Change Increase/(Decrease)

2020 2019 $ Change % Change

12 unchanged sentences

Other Financial Information

Quarter Ended June 30, Quarter versus Quarter Increase / (Decrease)

Quarter Ended September 30, Quarter versus Quarter Increase / (Decrease)

2020 2019 $ Change % Change

5 unchanged sentences

(d) Percentage points (“pp”).

Total sales of Distillery Products for the quarter ended June 30, 2020, increased by $1,166, or 1.6 percent, compared to the prior year quarter.

Sales of industrial alcohol, distillers feed and related co-products, white goods within premium beverage alcohol, and warehouse services increased, while sales of brown goods within premium beverage alcohol and fuel grade alcohol decreased compared to the prior year quarter.

The increase in sales of industrial alcohol and white goods was driven by higher sales volume and favorable average selling price.

The increase in distillers feed and related co-products was driven by favorable average selling prices, partially offset by lower sales volumes.

The decrease in sales of brown goods was driven by a decrease in sales volume, partially offset by favorable average selling price and the decrease in fuel grade alcohol was driven by decreases in average selling price.

These increases were also partially offset by lost sales volume due to the shutdown of the Atchison facilities as a result of the cyber-attack.

Gross profit decreased quarter versus quarter by $501, or 3.0 percent.

Gross margin for the quarter ended June 30, 2020, decreased to 21.3 percent from 22.3 percent for the prior year quarter.

The decrease in gross profit was primarily due to higher input costs of white goods and industrial alcohol as well as increased production costs due to the shutdown of the Atchison facilities as a result of the cyber-attack.

The decrease in gross profit was partially offset by increased average selling price and sales volumes on industrial alcohol and higher gross profit on distillers feed and related co-products.

The following tables show selected financial information for the Distillery Products segment for the year to date ended June 30, 2020 and 2019.

Total sales of Distillery Products for the quarter ended September 30, 2020 increased by $8,327, or 11.4 percent, compared to the prior year quarter.

Sales of brown goods and white goods within premium beverage alcohol and warehouse services increased while distillers feed and related co-products, fuel grade alcohol and industrial alcohol decreased compared to the prior year quarter.

The increase in sales of brown goods was driven by higher sales volume partially offset by lower average selling price.

The increase in white goods was driven by higher sales volume and favorable average selling price.

These increases were slightly offset by a decrease in distillers feed and related co-products and fuel grade alcohol which were driven by lower average selling price and lower sales volumes.

The slight decrease in sales of industrial alcohol was driven by lower sales volume, partially offset by higher sales price.

Gross profit increased quarter versus quarter by $1,402, or 8.8 percent.

Gross margin for the quarter ended September 30, 2020 decreased to 21.2 percent from 21.7 percent for the prior year quarter.

The increase in gross profit was primarily due to higher sales volume on brown goods as well as decreased input costs and favorable average selling price on industrial alcohol.

The increase in gross profit was partially offset by higher costs relating to a reduction in brown goods put-away for aging during the quarter, lower average selling price on brown goods and higher input costs of white goods, as well as lower average selling price and lower sales volume on distillers feed and related co-products.

The following tables show selected financial information for the Distillery Products segment for the year to date ended September 30, 2020 and 2019.

DISTILLERY PRODUCTS SALES

Year to Date Ended June 30, Year to Date versus Year to Date

Year to Date Ended September 30, Year to Date versus Year to Date

Sales Change Increase/(Decrease)

13 unchanged sentences

Other Financial Information

Year to Date Ended June 30, Year to Date versus Year to Date Increase / (Decrease)

Year to Date Ended September 30, Year to Date versus Year to Date Increase / (Decrease)

2020 2019 $ Change % Change

5 unchanged sentences

(d) Percentage points (“pp”).

Total sales of Distillery Products for year to date ended June 30, 2020, increased by $6,591, or 4.4 percent compared to the year-ago period.

Sales of industrial alcohol, brown goods within premium beverage alcohol, warehouse services, distillers feed and related co-products, and white goods within premium beverage alcohol increased, while sales of fuel grade alcohol decreased compared to the year-ago period.

The increase in industrial alcohol is due to increased sales volume and favorable average selling price.

The increase in brown goods is due to increased sales volume, partially offset by decrease in average selling price.

The increase in warehouse services was due to continued increase in customer demand for storage and aging of barrels.

These increases were also partially offset by lost sales volume due to the shutdown of the Atchison facilities as a result of the cyber-attack.

Gross profit for year to date ended June 30, 2020 increased by $2,509, or 7.9 percent compared to the year-ago period.

Gross margin for year to date ended June 30, 2020, increased to 22.1 percent from 21.4 percent for the prior year period.

The increase in gross profit was primarily due to higher sales volumes on brown goods and favorable average selling price on industrial alcohol.

The increase in gross profit was partially offset by higher input costs on white goods and industrial alcohol, lower average selling price on fuel grade alcohol, and increased production costs due to the shutdown of the Atchison facilities as a result of the cyber-attack.

Total sales of Distillery Products for year to date ended September 30, 2020 increased by $14,918, or 6.7 percent compared to the year-ago period.

Sales of brown goods within premium beverage alcohol, industrial alcohol, white goods within premium beverage alcohol, and warehouse services increased, while sales of fuel grade alcohol and distillers feed and related co-products decreased compared to the year-ago period.

The increase in brown goods was due to increased sales volume, partially offset by a decrease in average selling price.

The increase in industrial alcohol and white goods was due to increased sales volume and favorable average selling price.

These increases were partially offset by lost potential sales volume due to the shutdown of the Atchison facilities as a result of the cyber-attack.

Gross profit for year to date ended September 30, 2020 increased by $3,912, or 8.2 percent compared to the year-ago period.

Gross margin for year to date ended September 30, 2020 increased to 21.8 percent from 21.5 percent for the prior year period.

The increase in gross profit was primarily due to higher sales volumes on brown goods and favorable average selling price on industrial alcohol and white goods.

The increase in gross profit was partially offset by higher costs relating to a reduction in brown goods put-away for aging, lower average selling price on brown goods, and increased production costs due to the shutdown of the Atchison facilities as a result of the cyber-attack.

Ingredient Solutions

The following tables show selected financial information for the Ingredient Solutions segment for the quarter ended June 30, 2020 and 2019.

The following tables show selected financial information for the Ingredient Solutions segment for the quarter ended September 30, 2020 and 2019.

INGREDIENT SOLUTIONS SALES

Quarter Ended June 30, Quarter versus Quarter Sales Change Increase / (Decrease)

Quarter Ended September 30, Quarter versus Quarter Sales Change Increase / (Decrease)

2020 2019 $ Change % Change

8 unchanged sentences

Other Financial Information

Quarter Ended June 30, Quarter versus Quarter Increase / (Decrease)

Quarter Ended September 30, Quarter versus Quarter Increase / (Decrease)

2020 2019 $ Change % Change

5 unchanged sentences

(d) Percentage points (“pp”).

Total Ingredient Solutions sales for quarter ended June 30, 2020, increased by $893, or 5.4 percent, compared to the prior year quarter.

Total Ingredient Solutions sales for quarter ended September 30, 2020 increased by $3,952, or 22.7 percent, compared to the prior year quarter.

Quarter versus quarter, this increase was driven by higher sales of specialty wheat starches and proteins, partially offset by a decrease in sales of commodity wheat starches and proteins.

The increase in sales of specialty wheat starches and proteins was driven by increased sales volume.

These increases were slightly offset by decreased sales volume of commodity wheat starches and proteins.

Additionally, these increases were partially offset by lost sales volume due to the shutdown of the Atchison facilities as a result of the cyber-attack.

The increase in sales of specialty wheat starches and proteins was primarily driven by increased sales volume.

These increases were partially offset by decreased sales volume of commodity wheat starches and proteins.

Gross profit increased quarter versus quarter by $2,970, or 102.9 percent.

Gross margin for the quarter ended June 30, 2020, increased to 27.1 percent from 18.3 percent for the prior year quarter.

Gross margin for the quarter ended September 30, 2020 increased to 27.4 percent from 16.6 percent for the prior year quarter.

The increase in gross profit was primarily driven by the increased sales volume of specialty wheat starches and proteins and decreased sales volume of commodity wheat starches and proteins (mix).

These increases in gross profit were partially offset by increased production costs due to the shutdown of the Atchison facilities as a result of the cyber-attack.

The following tables show selected financial information for the Ingredient Solutions segment for the year to date June 30, 2020 and 2019.

Additionally, gross profit was positively impacted by the optimization of higher margin specialty products to meet the increased demand of customers' high fiber and high protein products.

The following tables show selected financial information for the Ingredient Solutions segment for the year to date September 30, 2020 and 2019.

INGREDIENT SOLUTIONS SALES

Year to Date Ended June 30, Year to Date versus Year to Date Sales Change Increase/(Decrease)

Year to Date Ended September 30, Year to Date versus Year to Date Sales Change Increase/(Decrease)

2020 2019 $ Change % Change

8 unchanged sentences

Other Financial Information

Year to Date Ended June 30, Year to Date versus Year to Date Increase / (Decrease)

Year to Date Ended September 30, Year to Date versus Year to Date Increase / (Decrease)

2020 2019 $ Change % Change

5 unchanged sentences

(d) Percentage points (“pp”).

Total Ingredient Solutions sales for year to date ended June 30, 2020, increased by $5,454, or 17.6 percent, compared to the prior year period.

Total Ingredient Solutions sales for year to date ended September 30, 2020 increased by $9,406, or 19.4 percent, compared to the prior year period.

The increase in Ingredient Solutions sales was driven by higher sales of specialty wheat starches and proteins, partially offset by a decrease in sales of commodity wheat starches and proteins.

The increase in sales of specialty wheat starches and proteins was driven by increased sales volume and favorable average selling prices.

These increases were slightly offset by decreased sales volume of commodity wheat starches.

Commodity wheat proteins decreased due to decreased sales volume and average selling price.

Additionally, these increases were partially offset by lost sales volume due to the shutdown of the Atchison facilities as a result of the cyber-attack.

Gross profit increased by $5,222, or 117.6 percent for year to date ended June 30, 2020 compared to the prior year period.

Gross margin for the year to date ended June 30, 2020, increased to 26.5 percent from 14.3 percent for the prior year period.

The increase in sales of specialty wheat starches was driven by increased sales volume and favorable average selling prices.

The increase in sales of specialty wheat proteins was driven by increased sales volume, partially offset by unfavorable average selling prices.

These increases were partially offset by decreased sales volume of commodity wheat starches and proteins, and by lost potential sales volume due to the shutdown of the Atchison facilities as a result of the cyber-attack.

Gross profit increased by $8,191, or 111.8 percent for year to date ended September 30, 2020 compared to the prior year period.

Gross margin for the year to date ended September 30, 2020 increased to 26.8 percent from 15.1 percent for the prior year period.

The increase in gross profit was primarily driven by the increased sales volume and favorable average selling prices of specialty wheat starches and proteins and decreased sales volume of commodity wheat starches and proteins (mix).

Additionally, gross profit was positively impacted by the optimization of higher margin specialty products to meet the increased demand of customers' high fiber and high protein products.

These increases in gross profit were offset by increased production costs due to the shutdown of the Atchison facilities as a result of the cyber-attack.

7 unchanged sentences

Cash Flow Summary

Year to Date Ended June 30, Changes, quarter versus quarter Increase / (Decrease)

Year to Date Ended September 30, Changes, quarter versus quarter Increase / (Decrease)

Cash provided by operating activities $ 29,457 $ 12,413 $ 17,044

Cash used in investing activities (15,513) (11,564) (3,949)

Cash provided by financing activities 14,857 1,436 13,421

Cash provided by (used in) financing activities 2,713 (1,477) 4,190

Increase (decrease) in cash and cash equivalents $ 16,657 $ (628) $ 17,285

Cash increased $8,436 in year to date ended June 30, 2020, compared to a decrease of $2,863 in year to date ended June 30, 2019, for a net increase in cash of $11,299, period versus period.

Cash increased $16,657 for year to date ended September 30, 2020, compared to a decrease of $628 for year to date ended September 30, 2019, for a net increase in cash of $17,285, period versus period.

Operating Activities.

Cash provided by operating activities for year to date ended June 30, 2020 was $5,986.

The cash provided by operating activities during the year to date ended June 30, 2020 resulted primarily from net income of $18,332, adjustments for non-cash or non-operating charges of $8,038 including depreciation and amortization, and share-based compensation, partially offset by uses of cash due to changes in operating assets and liabilities of $20,384.

The primary drivers of the changes in operating assets and liabilities were $13,174 use of cash related to an increase in accounts receivables, net due to the timing of customer payments as well as increased sales during the quarter, $9,983 use of cash related to an increase in inventories, primarily barreled distillate, and $4,218 use of cash related to decrease in accounts payable related to the timing of cash disbursements.

These uses of cash were partially offset by $5,778 cash provided by income taxes payable (refundable) related to a deferral of our income tax payments until July 15, 2020 in accordance with the Coronavirus Aid, Relief, and Economic Security Act .

Cash provided by operating activities for year to date ended June 30, 2019 was $3,070.

The cash provided by operating activities during the year to date ended June 30, 2019 resulted primarily from net income of $17,631, adjustments for non-cash or non-operating charges of $8,278, including depreciation and amortization and share-based compensation, partially offset by uses of cash due to changes in operating assets and liabilities of $22,839.

The primary drivers of the changes in operating assets and liabilities were $9,238 use of cash related to an increase in inventories, primarily barreled distillate, $4,692 use of cash related to refundable income taxes, primarily due to discrete items and lower than expected income before taxes, $2,883 use of cash related to a decline in accounts payable related to the timing of cash disbursement and $2,807 use of cash related to an increase in receivables, due to increased sales and timing of customer payments, and $2,750 use of cash related to accrued expenses.

Cash provided by operating activities for year to date ended September 30, 2020 was $29,457.

The cash provided by operating activities during year to date ended September 30, 2020 resulted primarily from net income of $28,713, adjustments for non-cash or non-operating charges of $13,108 including depreciation and amortization, and share-based compensation, partially offset by uses of cash due to changes in operating assets and liabilities of $12,364.

The primary drivers of the changes in operating assets and liabilities were $11,683 use of cash related to an increase in accounts receivables, net due to the timing of customer payments as well as increased sales during the quarter, $5,673 use of cash related to an increase in inventories, primarily barreled distillate, and $2,032 use of cash related to an increase in prepaid expenses due to an increase in prepaid insurance and vendor deposits.

These uses of cash were partially offset by $5,647 cash provided by accrued expenses primarily related to incentive compensation expenses and $2,196 cash provided by accounts payable related to the timing of cash disbursements.

Cash provided by operating activities for year to date ended September 30, 2019 was $12,413.

The cash provided by operating activities during year to date ended September 30, 2019 resulted primarily from net income of $25,846, adjustments for non-cash or non-operating charges of $12,103, including depreciation and amortization and share-based compensation, partially offset by uses of cash due to changes in operating assets and liabilities of $25,536.

The primary drivers of the changes in operating assets and liabilities were $17,424 use of cash related to an increase in inventories, primarily barreled distillate, $3,236 use of cash related to accrued expenses, $2,138 use of cash related to refundable income taxes, primarily due to discrete items and lower than expected income before taxes, and $1,757 use of cash related to an increase in receivables, due to increased sales and timing of customer payments.

Investing Activities.

Cash used in investing activities for year to date ended June 30, 2020 was $12,407, which resulted from an increase in additions to property, plant and equipment of $10,177 (see Capital Spending) and increase related to the acquisition of a business of $2,750, partially offset by proceeds from sale of property of $688.

Cash used in investing activities for year to date ended June 30, 2019 was $7,369, which primarily resulted from an increase in additions to property, plant and equipment of $6,192 (see Capital Spending).

Cash used in investing activities for year to date ended September 30, 2020 was $15,513, which resulted from additions to property, plant and equipment of $13,507 (see Capital Spending) and the acquisition of a business of $2,750, partially offset by proceeds from sale of property of $688.

Cash used in investing activities for year to date ended September 30, 2019 was $11,564, which primarily resulted from additions to property, plant and equipment of $10,375 (see Capital Spending) and an increase in the deferred compensation plan investments of $1,189.

Capital Spending.

We manage capital spending to support our business growth plans.

Investments in property, plant and equipment were $10,177 and $6,192 for year to date ended June 30, 2020 and 2019, respectively.

Adjusted for the change in capital expenditures in accounts payable for year to date ended June 30, 2020 and 2019, of $(3,865) and $(1,769), respectively, total capital expenditures were $6,312 and $4,423, respectively.

Investments in property, plant and equipment were $13,507 and $10,375 for year to date ended September 30, 2020 and 2019, respectively.

Adjusted for the change in capital expenditures in accounts payable for year to date ended September 30, 2020 and 2019, of $(2,654) and $(832), respectively, total capital expenditures were $10,853 and $9,543, respectively.

We expect approximately $19,600 in capital expenditures in 2020 for facility improvement and expansion (including warehouse expansion), facility sustenance projects, and environmental health and safety projects.

As part of our strategic plan to support the growth of the American Whiskey category, we previously announced a warehouse expansion project.

As of June 30, 2020, we had incurred approximately $49,800 of the total investment.

The current expansion is substantially completed with incremental immaterial investment expected in the third quarter 2020 to finalize the project.

As of September 30, 2020, we had incurred approximately $49,900 of the total investment, which completes our current warehouse expansion project.

Financing Activities.

Cash provided by financing activities for year to date ended June 30, 2020 was $14,857, primarily due to net proceeds from debt of $24,501 (see Long-Term and Short-Term Debt), partially offset by purchases of treasury stock of $4,395 (see Treasury Purchases and Stock Repurchases) and dividends and dividend equivalents of $4,101 (see Dividends and Dividend Equivalents).

Cash provided by financing activities for year to date ended June 30, 2019 was $1,436, primarily due to net proceeds from debt of $10,408 (See Long-Term and Short-Term Debt), offset by purchases of treasury stock for tax withholding on share-based compensation of $5,467 (see Treasury Purchases) and payments of dividends and dividend equivalents of $3,427 (see Dividends and Dividend Equivalents).

Cash provided by financing activities for year to date ended September 30, 2020 was $2,713, primarily due to net proceeds from debt of $13,252 (see Long-Term and Short-Term Debt), partially offset by dividends and dividend equivalents of $6,144 (see Dividends and Dividend Equivalents) and purchases of treasury stock of $4,395 (see Treasury Purchases and Stock Repurchases).

Cash used in financing activities for year to date ended September 30, 2019 was $1,477, primarily due to net proceeds from debt of $9,212 (See Long-Term and Short-Term Debt), offset by purchases of treasury stock for tax withholding on share-based compensation of $5,470 (see Treasury Purchases) and payments of dividends and dividend equivalents of $5,141 (see Dividends and Dividend Equivalents).

Treasury Purchases.

30,388 RSUs vested and converted to common shares for employees during year to date ended June 30, 2020, of which we withheld and purchased for treasury 10,044 shares valued at $342 to cover payment of associated withholding taxes.

233,854 RSUs vested and converted to common shares for employees during year to date ended June 30, 2019, of which we withheld and purchased for treasury 77,002 shares valued at $5,467 to cover payment of associated withholding taxes.

30,404 RSUs vested and converted to common shares for employees during year to date ended September 30, 2020, of which we withheld and purchased for treasury 10,051 shares valued at $342 to cover payment of associated withholding taxes.

245,538 RSUs vested and converted to common shares for employees during year to date ended September 30, 2019, of which we withheld and purchased for treasury 77,014 shares valued at $5,468 to cover payment of associated withholding taxes.

Share Repurchases.

2 unchanged sentences

This share repurchase program may be modified, suspended, or terminated by us at any time without prior notice.

During the year to date ended June 30, 2020, 159,104 shares were repurchased under the program for $4,053.

During the year to date ended September 30, 2020, 159,104 shares were repurchased under the program for $4,053.

Dividends and Dividend Equivalents

4 unchanged sentences

April 28, 2020 May 22, 2020 June 5, 2020 0.12 0.12 2,027 14 2,041

July 28, 2020 August 21, 2020 September 4, 2020 0.12 0.12 2,029 14 2,043

$ 0.36 $ 0.36 $ 6,103 $ 41 $ 6,144

1 unchanged sentence

April 29, 2019 May 15, 2019 May 31, 2019 0.10 0.10 1,702 11 1,713

July 29, 2019 August 14, 2019 August 30, 2019 0.10 0.10 1,703 11 1,714

$ 0.30 $ 0.30 $ 5,106 $ 35 $ 5,141

1 unchanged sentence

(b) Includes estimated forfeitures.

On July 28, 2020, our Board of Directors declared a quarterly dividend payable to stockholders of record as of August 21, 2020, of the Company’s Common Stock, and a dividend equivalent payable to holders of certain RSUs as of August 21, 2020, of $0.12 per share and per unit, payable on September 4, 2020.

On October 27, 2020, our Board of Directors declared a quarterly dividend payable to stockholders of record as of November 20, 2020, of the Company’s Common Stock, and a dividend equivalent payable to holders of certain RSUs as of November 20, 2020, of $0.12 per share and per unit, payable on December 4, 2020.

Long-Term and Short-Term Debt.

We maintain debt levels we consider appropriate after evaluating a number of factors, including cash flow expectations, cash requirements for ongoing operations, investment and financing plans (including brand development and share repurchase activities) and the overall cost of capital.

Total debt was $64,533 (net of unamortized loan fees of $1,477) at June 30, 2020, and $41,060 (net of unamortized loan fees of $448) at December 31, 2019.

Total debt was $54,508 (net of unamortized loan fees of $1,401) at September 30, 2020, and $41,060 (net of unamortized loan fees of $448) at December 31, 2019.

Financial Condition and Liquidity.

Our principal uses of cash in the ordinary course of business are for input costs used in our production processes, salaries, capital expenditures, and investments supporting our strategic plan, such as the aging of barreled distillate.

As part of our strategy, as demand grows for American whiskeys, in both the United States and global markets, we are building our inventories of aged premium whiskeys to fully participate in this growth (see “Barreled distillate (bourbons and whiskeys)” in Note 1).

Generally, during periods when commodities prices are rising, our operations require increased use of cash to support inventory levels.

Our principal sources of cash are product sales and borrowing on our Credit Agreement and Note Purchase Agreement.

Under our Credit Agreement and Note Purchase Agreement, we must meet certain financial covenants and restrictions, and at June 30, 2020, we met those covenants and restrictions.

At June 30, 2020, our current assets exceeded our current liabilities by $177,843, largely due to our inventories, at cost, of $147,108.

At June 30, 2020, our cash balance was $11,745 and we have used our Credit Agreement and Note Purchase Agreement for liquidity purposes, with $275,000 remaining for additional borrowings.

Under our Credit Agreement and Note Purchase Agreement, we must meet certain financial covenants and restrictions, and at September 30, 2020, we met those covenants and restrictions.

At September 30, 2020, our current assets exceeded our current liabilities by $176,679, largely due to our inventories, at cost, of $142,798.

At September 30, 2020, our cash balance was $19,966 and we have used our Credit Agreement and Note Purchase Agreement for liquidity purposes, with $285,000 remaining for additional borrowings.

We anticipate being able to support our short-term liquidity and operating needs largely through cash generated from operations.

4 unchanged sentences

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis