What changed in this filing

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Item 1. Business

2021-02-25 compared with 2020-02-26 · 59 added, 24 removed, 136 unchanged (38% of the section changed)

16 unchanged sentences

Our protein and starch food ingredients provide a host of functional, nutritional, and sensory benefits for a wide range of food products to serve the packaged goods industry.

Our distillery products are derived from corn and other grains, and our ingredient products are derived from wheat flour.

Our distillery products are derived from corn and other grains, and our ingredient products are derived primarily from wheat flour.

The majority of our distillery and ingredient product sales are made directly, or through distributors, to manufacturers and processors of finished packaged goods or to bakeries.

Recent Developments

Acquisition of Luxco.

On January 22, 2021, we entered into a definitive agreement to acquire Luxco, Inc., and its affiliated companies ("Luxco").

Luxco is a leading branded beverage alcohol company across various categories, with a more than 60-year business heritage.

As a result of the Luxco acquisition, we expect to increase our scale and market position in the branded-spirits sector and strengthen our platform for future growth of higher valued-added products.

Under the terms of the agreement, Luxco shareholders will receive $237,500 in cash (less assumed indebtedness) and 5,007,833 shares of MGP Common Stock.

The purchase price is subject to customary purchase price adjustments, including working capital, which adjustments are anticipated to be paid in cash.

The transaction is anticipated to be completed during the first half of 2021, subject to regulatory approvals and customary closing conditions (See Part I, Item 1A - Risk Factors and Note 15 for additional information).

INFORMATION ABOUT SEGMENTS

8 unchanged sentences

Since 2015, our Distillery Products segment includes production and sales of our own branded alcohol products, including sales under the following brands:

TILL ® American Wheat Vodka, George Remus ® Straight Bourbon Whiskey, Remus Repeal Reserve ® Straight Bourbon Whiskey, Remus Volstead Reserve Bottled-in-Bond Straight Bourbon Whiskey, Tanner’s Creek ® Blended Bourbon Whiskey, Rossville Union ® Master Crafted Straight Rye Whiskey, Rossville Union Barrel Proof Straight Rye Whiskey, Rossville Union Barrel Select Straight Rye Whiskey, and Eight & Sand Blended Bourbon Whiskey brands.

TILL ® American Wheat Vodka, George Remus ® Straight Bourbon Whiskey, Remus Repeal Reserve ® Straight Bourbon Whiskey, Tanner’s Creek ® Blended Bourbon Whiskey, Rossville Union ® Straight Rye Whiskey, Eight & Sand Blended Bourbon Whiskey and Green Hat ® Gin.

During 2020, our five largest Distillery Products customers, combined, accounted for 18.9 percent of our consolidated sales.

3 unchanged sentences

Our whiskey is made from fermented grain mash, including rye and corn.

Our whiskeys are primarily sold as unaged new distillate, which are then aged by our customers and are sold at various proof concentrations.

Our whiskeys are sold as aged and unaged distillate, which may be further aged by our customers or warehoused at our facilities, and are sold at various proof concentrations.

Our GNS is sold in bulk quantities at various proof concentrations.

34 unchanged sentences

Specialty wheat proteins are derived from vital wheat gluten through a variety of proprietary processes which change its molecular structure.

Specialty wheat proteins for food applications include the products Arise ® and Trutex ® .

Specialty wheat proteins for food applications include the products Arise ® and Proterra ® .

We produce clean label ingredients under our Arise ® line of wheat protein isolates.

1 unchanged sentence

Each of these ingredients is also Non-Genetically Modified Organism ("Non-GMO") Project Verified.

We also offer a Non-GMO Project Verified food ingredients portfolio of TruTex ® 751, TruTex ® 1501, TruTex ® 2240, and TruTex ® Redishred 65 textured specialty wheat proteins.

We also offer a Non-GMO Project Verified food ingredients portfolio of Proterra ® 1000, Proterra ® 2000, and plant protein combinations textured and ready for meat replacement applications.

Additionally, we offer gluten free textured pea proteins.

Our specialty wheat proteins generally compete with other ingredients and modified proteins having similar characteristics, primarily soy proteins and other wheat proteins, with differentiation being based on factors such as functionality, price, and, in the case of food applications, flavor.

Commodity Wheat Starches - As is the case with value added wheat starches, our commodity wheat starches have both food and non-food applications, but such applications are more limited than those of value added wheat starches and typically sell for a lower price in the marketplace.

Commodity wheat starches compete primarily with corn starches, which dominate the marketplace and prices generally track the fluctuations in the corn starch market.

Commodity Wheat Proteins - Commodity wheat protein, or vital wheat gluten, is a free-flowing light tan powder which contains approximately 70 to 80 percent protein.

Commodity wheat starches compete primarily with other commodity starches, corn starches and tapioca.

Marketplace prices generally track the fluctuations in the overall commodity markets in this category.

Commodity Wheat Proteins - Commodity wheat protein, or vital wheat gluten, is a free-flowing light tan powder which contains approximately 75 percent protein.

When we process wheat flour to derive starch, we also derive vital wheat gluten.

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Additionally, our wheat gluten is being used in more vegan and vegetarian food options than in years past.

This is a new application and is generating additional volume opportunities in this segment.

This is a relatively new application and is generating additional volume opportunities in this segment.

COMPETITIVE CONDITION

While we believe that the overall market environment offers considerable growth opportunities for us in 2020 and beyond , t he markets in which our products are sold are competitive.

While we believe that the overall market environment offers considerable growth opportunities for us in 2021 and beyond, the markets in which our products are sold are competitive.

Our products compete against similar products of many large and small companies.

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We are involved in a number of patent-related activities, primarily within our Ingredient Solutions segment.

We have filed patent applications to protect a range of inventions made in our research and development efforts, including inventions relating to applications for our products.

We have filed patent applications to protect a range of inventions made in our research and development efforts, including inventions relating

to applications for our products.

Some of these patents or licenses cover significant product formulation and processes used to manufacture our products.

Our sales are generally not seasonal.

Sales for some of our products, including brown goods, can fluctuate from period to period due to inherent demands and timing of our customers needs;

however, our sales are generally not seasonal.

TRANSPORTATION

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We purchase oak barrels from multiple suppliers and some customers supply their own barrels.

We also source food grade alcohol from Pacific Ethanol Central, LLC ("Pacific Ethanol"), formerly Illinois Corn Processing, LLC ("ICP"), which was our 30 percent-owned joint venture until July 3, 2017 when it was divested and sold to Pacific Ethanol (see Note 4 and Note 11 for additional information).

We also source food grade alcohol from Pacific Ethanol Central, LLC ("Pacific Ethanol"), formerly Illinois Corn Processing, LLC ("ICP").

Natural gas is an input cost used to operate boilers to make steam heat.

5 unchanged sentences

The wind energy, equal in value to the credits, will then be sourced from wind farms in Kansas and added to the overall energy grid system.

HUMAN CAPITAL

As of December 31, 2020, we had a total of 360 employees.

A collective bargaining agreement, covering 105 employees at the Atchison facility, that was due to expire on August 31, 2019 was renewed until August 31, 2024.

A collective bargaining agreement, covering 103 employees at the Atchison facility, expires on August 31, 2024.

A collective bargaining agreement, covering 64 employees at the Lawrenceburg facility, expires on December 31, 2022.

We consider our relations with our personnel generally to be good.

We have not experienced any recent work stoppages, and we consider our relationship with our employees to be good.

Headcount by facility is as follows:

• Atchison, Kansas - 237

• Lawrenceburg, Indiana - 120

• Washington, D.C.

We believe our employees are key to achieving our business objectives.

Our key human capital measures include employee safety, turnover, absenteeism and productivity.

We frequently benchmark our compensation practices and benefits programs against those of comparable industries and in the geographic areas where our facilities are located.

We believe that our compensation and employee benefits are competitive and allow us to attract and retain skilled and unskilled labor throughout our organization.

Our notable health, welfare and retirement benefits include:

• Company subsidized health insurance

• 401(k) Plan with Company matching contributions

• Tuition assistance program

• Paid time off

Employee safety is one of our top priorities.

We develop and administer company-wide policies designed to ensure the safety of each team member and compliance with Occupational Safety and Health Administration ("OSHA") standards.

This includes a program called Safety Up, which promotes safety from the plant floor up and includes employee-led safety meetings, training and assessments, and weekly safety audits.

Throughout the COVID-19 pandemic we were deemed an essential employer and continued to operate with COVID-19 prevention protocols in place to minimize the risk of the spread of COVID-19 in our workplaces.

Many of our administrative staff were encouraged or required to work from home.

These protocols remain in place and will continue so long as the pandemic continues.

Our Company strives for workforce retention.

We have programs for continuing education through our MGP University and also provide tuition reimbursement.

New and open positions are posted for our current workforce to apply for and internal promotions are encouraged.

We strive to maintain an inclusive environment free from discrimination of any kind, including sexual or other discriminatory harassment.

Our employees have multiple avenues available through which inappropriate behavior can be reported, including a confidential hotline.

Our policies require all reports of inappropriate behavior to be promptly investigated with appropriate action taken.

We are subject to a broad range of federal, state, local, and foreign laws and regulations intended to protect public health and the environment.

Our operations are also subject to regulation by various federal agencies, including the Alcohol and Tobacco Tax Trade Bureau ("TTB"), the Occupational Safety and Health Administration ("OSHA"), the Food and Drug Administration ("FDA"), the United States Environmental Protection Agency ("EPA"), and by various state and local authorities.

Our operations are also subject to regulation by various federal agencies, including the Alcohol and Tobacco Tax Trade Bureau ("TTB"), OSHA, the Food and Drug Administration ("FDA"), the United States Environmental Protection Agency ("EPA"), and by various state and local authorities.

Such laws and regulations cover virtually every aspect of our operations, including production and storage facilities, distillation and maturation requirements, importing ingredients, distribution of beverage alcohol products, marketing, pricing, labeling, packaging, advertising, water usage, waste water discharge, disposal of hazardous wastes and emissions, and other matters.

In addition, beverage alcohol products are subject to customs, duties or excise taxation in many countries, including taxation at the federal, state, and local level in the United States.

EQUITY METHOD INVESTMENTS

Illinois Corn Processing, LLC.

ICP is a producer of high quality food grade alcohol, chemical intermediates and fuel.

In 2017, we completed the sale of our 30 percent equity ownership interest in ICP, to Pacific Ethanol pursuant to an Agreement and Plan of Merger ("Merger Agreement").

Illinois Corn Processing Holdings, Inc., an affiliate of SEACOR Holdings, Inc., held the remaining equity in ICP that was also sold pursuant to the Merger Agreement (see Note 4 for additional information).

INFORMATION ABOUT OUR EXECUTIVE OFFICERS

1 unchanged sentence

Name Age Principal Occupation and Business Experience

Griffin 60 President and Chief Executive Officer for the Company since July 2014 and member of the Board of Directors for the Company since August 2014.

Executive Vice President of Marketing for Next Level Spirits from April 2013 to January 2014.

Brand and Business Consultant for Nelson’s Green Brier Distillery from November 2011 to March 2013.

Senior Vice President, Global Managing Director for Brown Forman Corporation's flagship Jack Daniels business from January 2008 to April 2011.

Colo 58 President and Chief Executive Officer for the Company since May 2020 and member of the Board of Directors for the Company since August 2015.

President, Chief Executive Officer and director of SunOpta from February 2017 to February 2019.

Executive Vice President and Chief Operating Officer of Diamond Foods, Inc.

from 2013 to March 2016.

Executive Vice President of Global Operations and Supply Chain for Diamond Foods, Inc.

from 2012 to 2013.

Gall 39 Vice President, Finance and Chief Financial Officer for the Company since April 2019.

15 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-K

Item 1. Business