What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2021-05-05 compared with 2020-10-29 · 139 added, 160 removed, 355 unchanged (46% of the section changed)

3 unchanged sentences

(Dollars in thousands, except share and per share amounts)

Quarter Ended September 30, Year to Date Ended September 30,

2020 2019 2020 2019

Quarter Ended March 31,

Sales $ 108,323 $ 99,082

10 unchanged sentences

Basic and diluted weighted average common shares 16,928,003 17,013,925

Basic and diluted earnings per common share $ 0.61 $ 0.48 $ 1.68 $ 1.51

Basic and diluted Earnings Per Share $ 0.90 $ 0.57

See accompanying notes to unaudited condensed consolidated financial statements

2 unchanged sentences

(Dollars in thousands)

Quarter Ended September 30, Year to Date Ended September 30,

2020 2019 2020 2019

Quarter Ended March 31,

Net income $ 15,427 $ 9,842

6 unchanged sentences

(Dollars in thousands)

September 30, 2020 December 31, 2019

March 31, 2021 December 31, 2020

Current Assets

Cash and cash equivalents $ 22,586 $ 21,662

Receivables (less allowance for doubtful accounts at September 30, 2020, and December 31, 2019 - $ 24 )

Receivables (less allowance for credit losses, $ 100 and $ 24 at March 31, 2021, and December 31, 2020, respectively)

67,147 56,966

1 unchanged sentence

Prepaid expenses 3,728 2,644

Refundable income taxes 1,719 987

Total current assets 229,548 222,283

8 unchanged sentences

Accounts payable 28,545 30,273

Accrued expenses 14,938 9,383

Income taxes payable 5,941 704

Accrued expenses and other 18,117 20,752

Total current liabilities 55,003 53,329

Long-term debt, less current maturities 37,476 38,271

Credit agreement - revolver 13,733 1

Long-term operating lease liabilities 2,593 3,057

12 unchanged sentences

authorized 40,000,000 shares;

issued 18,115,965 shares at September 30, 2020 and December 31, 2019;

and 16,913,313 and 17,028,125 shares outstanding at September 30, 2020 and December 31, 2019, respectively

issued 18,115,965 shares at March 31, 2021 and December 31, 2020;

and 16,940,600 and 16,915,862 shares outstanding at March 31, 2021 and December 31, 2020, respectively

Additional paid-in capital 18,016 15,503

Retained earnings 276,318 262,943

Accumulated other comprehensive loss ( 157 ) ( 246 )

Treasury stock, at cost, 1,202,652 and 1,087,840 at September 30, 2020 and December 31, 2019, respectively

Accumulated other comprehensive income 541 486

Treasury stock, at cost, 1,175,365 and 1,200,103 shares at March 31, 2021 and December 31, 2020, respectively

( 23,083 ) ( 23,125 )

5 unchanged sentences

(Dollars in thousands)

Year to Date Ended September 30,

Quarter Ended March 31,

Cash Flows from Operating Activities

2 unchanged sentences

Depreciation and amortization 3,311 3,125

Loss (gain) on sale of assets 337 ( 138 )

Loss on sale of assets — ( 9 )

Share-based compensation 3,229 1,139

4 unchanged sentences

Prepaid expenses ( 1,084 ) ( 2,339 )

Refundable income taxes ( 673 ) ( 2,138 )

Income taxes payable 5,237 3,100

Accounts payable 509 1,635

Accrued expenses 5,647 ( 3,236 )

Accrued expenses and other ( 8,385 ) 1,003

Deferred credits ( 802 ) ( 81 )

3 unchanged sentences

Additions to property, plant, and equipment ( 12,059 ) ( 5,645 )

Deferred compensation plan investments — ( 1,189 )

Acquisition of business — ( 2,750 )

6 unchanged sentences

Loan fees paid related to borrowings — ( 1,148 )

Proceeds from long-term debt — 20,000

Principal payments on long-term debt — ( 100 )

Proceeds from credit agreement - revolver — 54,700

Payments on credit agreement - revolver ( 40,000 ) ( 24,640 )

Other, net — ( 78 )

Net cash provided by (used in) financing activities 2,713 ( 1,477 )

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

Net cash (used in) provided by financing activities ( 2,726 ) 46,997

Increase in cash and cash equivalents 924 39,350

Cash and cash equivalents, beginning of period 21,662 3,309

3 unchanged sentences

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

For Year to Date Ended September 30, 2020

For Quarter Ended March 31, 2021 and 2020

(Unaudited) (Dollars in thousands)

3 unchanged sentences

Comprehensive

Loss Treasury

income Treasury

Balance, December 31, 2020

2 unchanged sentences

Net income — — — 15,427 — — 15,427

Other comprehensive loss — — — — ( 6 ) — ( 6 )

Other comprehensive income — — — — 55 — 55

Dividends and dividend equivalents of $ 0.12 per common share and per restricted stock unit, net of estimated forfeitures

5 unchanged sentences

$ 4 $ 6,715 $ 18,016 $ 276,318 $ 541 $ ( 23,083 ) $ 278,511

Comprehensive income:

Net income — — — 8,490 — — 8,490

Other comprehensive income — — — — 21 — 21

Dividends and dividend equivalents of $ 0.12 per common share and per restricted stock unit, net of estimated forfeitures

— — — ( 2,041 ) — — ( 2,041 )

Share-based compensation — — 662 — — — 662

Balance, June 30, 2020

4 6,715 15,026 245,016 ( 231 ) ( 23,833 ) 242,697

Comprehensive income:

Net income — — — 10,381 — — 10,381

Other comprehensive income — — — — 74 — 74

Dividends and dividend equivalents of $ 0.12 per common share and per restricted stock unit, net of estimated forfeitures

— — — ( 2,043 ) — — ( 2,043 )

Share-based compensation — — 258 — — — 258

Stock shares awarded, forfeited, or vested — — — — — 634 634

Balance, September 30, 2020

$ 4 $ 6,715 $ 15,284 $ 253,354 $ ( 157 ) $ ( 23,199 ) $ 252,001

See accompanying notes to unaudited condensed consolidated financial statements

MGP INGREDIENTS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

For Year to Date Ended September 30, 2019

(Unaudited) (Dollars in thousands)

Preferred Issued Common Additional

7 unchanged sentences

Net income — — — 9,842 — — 9,842

Other comprehensive income — — — — 14 — 14

Dividends and dividend equivalents of $ 0.10 per common share and per restricted stock unit, net of estimated forfeitures

— — — ( 1,714 ) — — ( 1,714 )

Share-based compensation — — 1,031 — — — 1,031

Stock shares awarded, forfeited or vested — — ( 3,770 ) — — 3,864 94

Stock shares repurchased — — — — — ( 5,467 ) ( 5,467 )

Adjustment related to Accounting Standards Update 2018-02 adoption — — — ( 69 ) 69 — —

Balance, March 31, 2019

4 6,715 12,636 206,851 ( 81 ) ( 21,006 ) 205,119

Comprehensive income:

Net income — — — 7,911 — — 7,911

Other comprehensive loss — — — — ( 6 ) — ( 6 )

3 unchanged sentences

Stock shares awarded, forfeited or vested — — ( 567 ) — — 804 237

Balance, June 30, 2019

4 6,715 13,117 213,049 ( 97 ) ( 20,346 ) 212,442

Comprehensive income:

Net income — — — 8,215 — — 8,215

Other comprehensive loss — — — — ( 7 ) — ( 7 )

Dividends and dividend equivalents of $ 0.10 per common share and per restricted stock unit, net of estimated forfeitures

— — — ( 1,713 ) — — ( 1,713 )

Share-based compensation — — 484 — — — 484

Stock shares repurchased — — — — — ( 4,395 ) ( 4,395 )

Balance, September 30, 2019

Balance, March 31, 2020

$ 4 $ 6,715 $ 14,364 $ 238,567 $ ( 252 ) $ ( 23,833 ) $ 235,565

14 unchanged sentences

All significant intercompany balances and transactions have been eliminated in consolidation.

These unaudited condensed consolidated financial statements as of and for the quarter ended September 30, 2020, should be read in conjunction with the consolidated financial statements and notes thereto in the Company’s Annual Report on Form 10-K for the year ended December 31, 2019, filed with the Securities and Exchange Commission (“SEC”).

These unaudited condensed consolidated financial statements as of and for the quarter ended March 31, 2021, should be read in conjunction with the consolidated financial statements and notes thereto in the Company’s Annual Report on Form 10-K for the year ended December 31, 2020, filed with the Securities and Exchange Commission (“SEC”).

The results of operations for interim periods are not necessarily indicative of the results to be expected for the full year.

Certain amounts in 2019 consolidated financial statements have been reclassified to conform to the 2020 presentation.

In the opinion of management, the accompanying unaudited condensed consolidated financial statements contain all adjustments (consisting of normal and recurring adjustments) necessary to fairly present the results for interim periods in accordance with U.S.

13 unchanged sentences

Inventory consists of the following:

September 30, 2020 December 31, 2019

March 31, 2021 December 31, 2020

Finished goods $ 18,767 $ 16,414

6 unchanged sentences

Revenue Recognition.

Revenue is recognized when control of the promised goods or services, through performance obligations by the Company, is transferred to the customer in an amount that reflects the consideration it expects to be entitled to in exchange for the performance obligations.

The term between invoicing and when payment is due is not significant and the period between when the entity transfers the promised good or service to the customer and when the customer pays for that good or service is one year or less.

6 unchanged sentences

customer acceptance specifications have been met, legal title has transferred, the customer has a present obligation to pay for the product, and the risk and rewards of ownership have transferred to the customer.

Additionally, all the following bill and hold criteria have to be met in order for control to be transferred to the customer:

the customer has requested the product be warehoused, the product has been identified as separately belonging to the customer, the product is currently ready for physical transfer to the customer, and the Company does not have the ability to use the product or direct it to another customer.

Additionally, all of the following bill and hold criteria have to be met in order for control to be transferred to the customer:

the reason for the bill and hold arrangement is substantive - the customer has requested the product be warehoused, the product has been identified as separately belonging to the customer, the product is currently ready for physical transfer to the customer, and the Company does not have the ability to use the product or direct it to another customer.

Warehouse services revenue is recognized over the time that warehouse services are rendered and as they are rendered.

1 unchanged sentence

The performance of the service activities, as requested, is invoiced as satisfied and revenue is concurrently recognized.

Recognition of Insurance Recoveries.

Estimated loss contingencies are recognized as charges to income when they are probable and reasonably estimable.

Insurance recoveries are not recognized until all contingencies related to the insurance claim have been resolved and settlement has been reached with the insurer.

Insurance recoveries, to the extent of costs and losses, are reported as a reduction to costs on the Consolidated Statements of Income.

Insurance recoveries, in excess of costs and losses, if any, would be reported as a separate caption in Operating income on the Consolidated Statements of Income.

Legally committed recovery amounts obtained prior to contingencies being resolved are recorded in Accrued expenses and other on the Consolidated Balance Sheets.

Income Taxes.

2 unchanged sentences

Earnings Per Share (“EPS”).

Basic and diluted EPS are computed using the two-class method, which is an earnings allocation formula that determines net income per share for each class of Common Stock and participating security according to dividends declared and participation rights in undistributed earnings.

dividends declared and participation rights in undistributed earnings.

Per share amounts are computed by dividing net income attributable to common shareholders by the weighted average shares outstanding during each year during the period.

Business Combinations.

Assets acquired and liabilities assumed during a business combination are generally recorded at fair market value as of the acquisition date.

Goodwill is recognized to the extent that the purchase consideration exceeds the assets acquired and liabilities assumed.

The Company uses its best estimate and third party valuation specialists to determine the fair value of the assets acquired and liabilities assumed.

During the measurement period, which can be up to one year after the acquisition date, the Company can make adjustments to the fair value of the assets acquired and liabilities assumed, with the offset being an adjustment to goodwill.

Goodwill and Other Intangible Assets.

5 unchanged sentences

The Company separately evaluates indefinite-lived intangible assets for impairment.

As of September 30, 2020, the Company determined that goodwill was not impaired.

As of March 31, 2021, the Company determined that goodwill and indefinite lived intangible assets were not impaired.

Fair Value of Financial Instruments.

11 unchanged sentences

The fair value of the Company’s debt is estimated based on current market interest rates for debt with similar maturities and credit quality.

The fair value of the Company’s debt was $ 61,698 and $ 42,534 at September 30, 2020 and December 31, 2019, respectively.

The financial statement carrying value of total debt was $ 54,508 (including unamortized loan fees) and $ 41,060 (including unamortized loan fees) at September 30, 2020 and December 31, 2019, respectively.

The fair value of the Company’s debt was $ 44,364 and $ 44,548 at March 31, 2021 and December 31, 2020, respectively.

The financial statement carrying value of total debt was $ 39,876 (including unamortized loan fees) and $ 39,871 (including unamortized loan fees) at March 31, 2021 and December 31, 2020, respectively.

These fair values are considered Level 2 under the fair value hierarchy.

1 unchanged sentence

Recently Adopted Accounting Standard Updates.

The Company adopted Accounting Standards Update (“ASU”) No.

2016-13, Financial Instruments - Credit Losses (Topic 326) and subsequent updates.

The accounting standard changes the methodology for measuring credit losses on financial instruments and the timing when such losses are recorded.

The Company adopted this standard on January 1, 2020 using the modified retrospective approach, and it had no impact on its consolidated financial statements and disclosures.

ASU 2017-04, Simplifying the Test for Goodwill Impairment, which simplifies the accounting for goodwill by eliminating the step 2 from the goodwill impairment test.

An impairment in goodwill is recognized if the carrying amount of the reporting unit exceeds its fair value.

The Company adopted this standard on January 1, 2020 on a prospective basis.

The adoption of this standard had no impact on the Company's consolidated financial statements and disclosures.

ASU 2018-13, Fair Value Measurement (Topic 820), which modifies the disclosure requirements on fair value measurements.

The Company adopted this guidance on January 1, 2020 and it had no impact on its consolidated financial statements and disclosures.

ASU 2019-12, Simplifying the Accounting for Income Taxes , which clarifies and simplifies certain aspects of accounting for income taxes.

This standard requires certain aspects to be adopted on either a retrospective or modified retrospective basis, while others apply prospectively.

This guidance is effective for fiscal years beginning after December 15, 2020 and early adoption is permitted.

The Company elected to early adopt this standard on January 1, 2020 and it had no impact on its consolidated financial statements and disclosures.

The Company did not adopt any new Accounting Standard Updates during the quarter ended March 31, 2021 .

The Company generates revenues from the Distillery Products segment by the sale of products and by providing warehouse services related to the storage and aging of customer products.

The Company generates revenues from the Ingredient Solutions segment by the sale of products.

Revenue related to sales of products is recognized at a point in time whereas revenue generated from warehouse services is recognized over time.

Contracts with customers include a single performance obligation (either the sale of products or the provision of warehouse services).

The following table presents the Company’s sales by segment and major products and services:

Quarter Ended September 30, Year to Date Ended September 30,

2020 2019 2020 2019

Quarter Ended March 31,

Distillery Products

15 unchanged sentences

Total sales $ 108,323 $ 99,082

The Company generates revenues from the Distillery Products segment by the sale of products and by providing warehouse services related to the storage and aging of customer products.

The Company generates revenues from the Ingredient Solutions segment by the sale of products.

Revenue related to sales of products is recognized at a point in time whereas revenue generated from warehouse services is recognized over time.

Contracts with customers in both segments include a single performance obligation (either the sale of products or the provision of warehouse services).

Business Acquisition

On January 22, 2021, the Company entered into a definitive agreement to acquire Luxco, Inc.

and its affiliated companies (“Luxco”, or “Luxco Companies”), and subsequently completed the merger on April 1, 2021.

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, MGP expects to increase its scale and market position in the branded-spirits sector and strengthen its platform for future growth of higher valued-added products.

Following the merger, the Luxco Companies became wholly-owned subsidiaries of the Company.

The aggregate consideration paid by the Company in connection with the merger was $ 237,500 in cash (less assumed indebtedness) and 5,007,833 shares of common stock of the Company, subject to adjustment for fractional shares (the “Company Shares,” and together with the cash portion, the “Merger Consideration”).

The Company Shares were valued at $ 296,213 and represent approximately 22.8 percent of the Company’s outstanding common stock immediately following the closing of the merger.

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

The cash portion of the Merger Consideration, the repayment of assumed debt, and transaction-related expenses were financed with a $ 242,300 borrowing under the Credit Agreement which was drawn down on April 1, 2021.

For tax purposes, the transaction is structured partially as a tax-free reorganization and partially as a taxable acquisition, as defined in the Internal Revenue Code.

The Company anticipates the amount transferred in a tax deferred manner, under the tax-free reorganization rules, will not create additional tax basis for the Company.

The taxable component of the transaction will create additional tax basis and a corresponding future tax deduction for the Company.

The Company is currently evaluating the potential effect of this acquisition on its tax profile.

MGP does not expect the transaction to have a material effect on the Company’s estimates related to the use of the Company’s existing deferred tax assets or its estimates related to its existing unrecognized tax benefits based on the information available to date.

Due to the limited time since the acquisition date and the size and complexity of the transaction, the business combination accounting is still in progress.

The Company is currently in the process of finalizing the accounting for this transaction and expects to have preliminary allocation of the purchase consideration to the assets acquired and liabilities assumed by the end of the second quarter of 2021.

We expect that this will result in goodwill and intangibles as well as other tangibles assets such as accounts receivable, inventories and property, plant and equipment.

The major classes of liabilities assumed include accounts payable, accrued expenses and other long-term liabilities.

We are currently in the process of determining the fair values of the acquired assets and assumed liabilities with the assistance of a third party specialist.

During the quarter ended March 31, 2021, the Company has incurred $ 1,890 of transaction related costs, which are included in Selling, general and administrative expenses on the Condensed Consolidated Statements of Income.

Goodwill and Other Intangible Assets

7 unchanged sentences

Acquisitions — — —

Balance, September 30, 2020

Balance, March 31, 2021

$ 3,628 $ — $ 3,628

(a) Includes $ 890 and $ 350 of trade names at September 30, 2020 and December 31, 2019, respectively.

(a) Includes $ 890 of trade names at March 31, 2021 and December 31, 2020.

Trade names are considered indefinite-lived intangible assets.

2 unchanged sentences

Description (a)

September 30, 2020 December 31, 2019

March 31, 2021 December 31, 2020

Credit Agreement - Revolver, 1.12 % (variable rate) due 2025

Previous Credit Agreement - Revolver, 3.19 % (variable rate) due 2022

Secured Promissory Note, 3.71 % (fixed rate) due 2022

Prudential Note Purchase Agreement, 3.53 % (fixed rate) due 2027

8 unchanged sentences

Long-term debt and Credit Agreement - Revolver $ 37,476 $ 38,271

(a) Interest rates are as of September 30, 2020, except for the Previous Credit Agreement which is as of December 31, 2019.

(a) Interest rates are as of March 31, 2021.

(b) Loan fees are being amortized over the life of the Credit Agreement and Note Purchase Agreement.

Credit Agreements.

On February 14, 2020, the Company entered into a new credit agreement (the "Credit Agreement") with multiple participants lead by Wells Fargo Bank, National Association ("Wells Fargo Bank") that matures on February 14, 2025.

The Credit Agreement replaced the Company's $ 150,000 Credit Agreement ("Previous Credit Agreement) with Wells Fargo Bank.

Credit Agreement.

On February 14, 2020, the Company entered into a credit agreement (the “Credit Agreement”) with multiple participants led by Wells Fargo Bank, National Association (“Wells Fargo Bank”) that matures on February 14, 2025.

The Credit Agreement provides for a $ 300,000 revolving credit facility.

The Company may increase the facility from time to time by an aggregate principal amount of up to $ 100,000 provided certain conditions are satisfied and at the discretion of the lenders.

The Company incurred $ 1,148 of new loan fees related to the Credit Agreement.

The Credit Agreement includes certain requirements and covenants, which the Company was in compliance with at September 30, 2020.

As of September 30, 2020, the Company’s total outstanding borrowings under the Credit Agreement were $ 15,000 leaving $ 285,000 available.

The Credit Agreement includes certain requirements and covenants, which the Company was in compliance with at March 31, 2021.

As of March 31, 2021, the Company had no outstanding borrowings under the Credit Agreement leaving $ 300,000 available.

Note Purchase Agreements.

3 unchanged sentences

During 2019, the Company issued $ 20,000 of additional Senior Secured Notes with a maturity date of April 30, 2029.

The Note Purchase Agreement includes certain requirements and covenants, which the Company was in compliance with at September 30, 2020.

The Note Purchase Agreement includes certain requirements and covenants, which the Company was in compliance with at March 31, 2021.

The Company’s tax provision for interim periods is determined using an estimated annual effective tax rate, adjusted for discrete items arising in that quarter.

1 unchanged sentence

The Company’s quarterly effective tax rate can be subject to significant change due to the effect of discrete items arising in a given quarter.

Income tax expense for the quarter and year to date ended September 30, 2020, was $ 2,862 and $ 8,636 , respectively, for an effective tax rate of 21.6 percent and 23.1 percent, respectively.

The effective tax rate for quarter to date ended September 30, 2020 differed from the 21 percent federal statutory rate on pretax income, primarily due to state taxes, partially offset by state and federal tax credits, the release of a portion of the Company's valuation allowance and the deduction applicable to export activity.

The effective tax rate for year to date ended September 30, 2020, differed from the 21 percent federal statutory rate on pretax income, primarily due to state taxes, partially offset by federal and state credits, and the deduction applicable to income derived from export activity.

Income tax expense for the quarter and year to date ended September 30, 2019, was $ 3,025 and $ 4,208 , respectively, for an effective tax rate of 26.9 percent and 14.0 percent, respectively.

The effective tax rate for quarter ended September 30, 2019, differed from the 21 percent federal statutory rate on pretax income, primarily due to state income taxes and the discrete tax

impact of previously disclosed legal matters, partially offset by state and federal tax credits.

The effective tax rate for year to date ended September 30, 2019, differed from the 21 percent federal statutory rate on pretax income, primarily due to the tax impact of vested share-based awards, the tax impact of state and federal tax credits, partially offset by state taxes, the discrete tax impact of previously disclosed legal matters, and certain compensation being subject to the compensation deduction limitations applicable for public companies.

In response to COVID-19, President Donald Trump signed into law the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”) on March 27, 2020.

The CARES Act along with other guidance issued by the IRS provides for numerous tax provisions and other stimulus measures, including temporary suspension of certain payment requirements for the employer portion of Social Security taxes, deferral of income tax payments until July 15, 2020, and technical corrections from prior tax legislation.

The Company is in the process of monetizing certain parts of the CARES Act, has resumed making estimated corporate income tax payments, and continues to monitor tax legislation for additional potential benefits available to the Company.

Income tax expense for the quarter ended March 31, 2021, was $ 4,615 for an effective tax rate of 23.0 percent.

The effective tax rate differed from the 21 percent federal statutory rate on pretax income, primarily due to state taxes, nondeductible transaction costs, partially offset by state and federal tax credits and the deduction applicable to income derived from export activity.

Income tax expense for the quarter ended March 31, 2020, was $ 3,224 for an effective tax rate of 24.7 percent.

The effective tax rate differed from the 21 percent federal statutory rate on pretax income, primarily due to state income taxes, estimated increase in the Company’s valuation allowance related to state income attributes, and the discrete tax impact of vested share-based awards, partially offset by federal and state credits, and the deduction applicable to income derived from export activity.

Equity and EPS

The computations of basic and diluted EPS:

Quarter Ended September 30, Year to Date Ended September 30,

2020 2019 2020 2019

Quarter Ended March 31,

Net income (a)

1 unchanged sentence

Income attributable to participating securities (b)

69 54 192 171

Net income attributable to common shareholders $ 15,281 $ 9,776

4 unchanged sentences

(a) Net income attributable to all shareholders.

(b) Participating securities included 115,399 and 112,865 unvested restricted stock units (“RSUs”), at September 30, 2020 and 2019, respectively.

(c) Under the two-class method, basic and diluted weighted average common shares at September 30, 2020 and 2019, exclude unvested participating securities.

(b) Participating securities included 162,496 and 116,127 unvested restricted stock units (“RSUs”), at March 31, 2021 and 2020, respectively.

(c) Under the two-class method, basic and diluted weighted average common shares at March 31, 2021 and 2020 exclude unvested participating securities.

Share Repurchase.

2 unchanged sentences

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

During year to date ended September 30, 2020, the Company repurchased approximately 159,104 shares of MGP Common Stock for $ 4,053 , resulting in $ 20,947 remaining under the share repurchase plan.

The shares were repurchased in multiple tranches with the final purchase concluding on March 16, 2020.

The Company did no t repurchase any shares during the quarter ended March 31, 2021 and has $ 20,947 remaining under the share repurchase plan.

During the quarter ended March 31, 2020, the Company repurchased approximately 159,104 shares of MGP Common Stock for $ 4,053 .

Commitments and Contingencies

1 unchanged sentence

The Company accrues estimated costs for a contingency when management believes that a loss is probable and can be reasonably estimated.

Feed Dryer Fire.

During November 2020, the Company experienced a fire at the Atchison facility.

The fire damaged certain equipment in the facility’s feed drying operations and caused temporary loss of production time.

During the quarter ended March 31 2021, the Company received a legally binding commitment from their insurance carrier of $ 8,700 that was recorded as Receivables on the Consolidated Balance Sheet and recorded a $ 3,610 partial settlement from its insurance carrier as a reduction of Cost of sales.

Recorded within Accrued expenses and other on the Consolidated Balance Sheet is $ 5,090 related to legally committed insurance recovery amounts obtained prior to contingencies related to the insurance claim being resolved.

The Company is working to construct a replacement drying system.

The Company’s insurance is expected to provide coverage of any business interruption and other losses from damage to property, plant and equipment, but there can be no assurance to the amount or timing of possible insurance recoveries if ultimately claimed by the Company.

Ransomware Cyber-Attack.

In May 2020, the Company was affected by a ransomware cyber-attack that temporarily disrupted production at its Atchison facilities.

The Company’s financial information was not affected and there is no evidence that any sensitive or confidential company, supplier, customer or employee data was improperly accessed or extracted from our network.

The Company estimates that the ransomware attack adversely impacted gross profit by $ 1,728 , primarily as a result of the business interruption.

The Company has insurance related to this event and is seeking to recover a portion, if not all, of any profit impact including the profit associated with any loss of revenue resulting from this event.

The Company will record insurance recovery when it is probable of collection.

Following the attack, MGP implemented a variety of measures to further enhance our

cybersecurity protections and minimize the impact of any future attack.

The Company has insurance related to this event and currently evaluating if it will seek further recovery.

Following the attack, MGP implemented a variety of measures to further enhance our cybersecurity protections and minimize the impact of any future attack.

The Company’s insurance may cover additional losses from this incident, but there can be no assurance as to the amount or timing of any possible insurance recoveries if ultimately claimed by the Company.

Shareholder matters.

In 2020, two putative class action lawsuits were filed in the United States District Court for District of Kansas, naming the Company and certain of its current and former executive officers as defendants, asserting claims under Sections 10(b) and 20(a) of the Securities Exchange Act of 1934.

8 unchanged sentences

On September 8, 2020, defendants filed a Motion to Dismiss the Consolidated Amended Complaint.

The Motion is pending.

The Motion has been fully briefed and remains pending.

Discovery is stayed while the motion is pending.

The Company intends to continue to vigorously defend itself in this action.

On May 11, 2020, Mitchell Dorfman, a shareholder in MGP, filed an action in the United States District Court for the District of Kansas, under the caption Dorfman, derivatively on behalf of MGP Ingredients v.

Griffin, et al.

, Case 2:20-cv-02239.

Griffin, et al., Case 2:20-cv-02239.

On June 4, 2020, Justin Carter, a shareholder in MGP, filed an action in the United States District Court for the District of Kansas, under the caption Carter, derivatively on behalf of MGP Ingredients v.

Griffin, et al.

, Case 2:20-cv-02281.

Griffin, et al., Case 2:20-cv-02281.

On June 18, 2020, Alexandra Kearns, a shareholder in MGP, filed an action in the District Court of Atchison County, Kansas, under the caption Kearns, derivatively on behalf of MGP Ingredients v.

Griffin, et al.

, Case 2020-CV-000042 .

Griffin, et al., Case 2020-CV-000042.

The defendants are certain of the Company’s current and former officers and directors.

7 unchanged sentences

On July 13, 2020, defendants filed a Motion to Dismiss in Dorfman.

The Motion is pending.

On August 13, 2020, defendants filed a Motion to Stay the Kearns action pending the resolution of Dorfman.

The Motion is pending.

On November 3, 2020, the court entered an order providing that Defendants’ response to the Carter Complaint shall be due 14 days after a ruling on the Motion to Dismiss filed in Dorfman.

On March 31, 2021, the Dorfman court issued a Memorandum and Order in which it granted defendants’ Motion to Dismiss plaintiff’s federal claims, dismissed those claims without prejudice, denied without prejudice defendants’ Motion to Dismiss

plaintiff’s state claims, and stayed the case pending the Kansas Supreme Court’s decision in Herington v.

City of Wichita.

Herington involves the issue of whether a federal decision that determines federal claims and dismisses pendent state law claims for lack of supplemental jurisdiction precludes the reassertion of the state law claims in state court.

The Kearns court has not yet taken any action in response to the court’s Memorandum and Order in Dorfman.

On April 14, 2021, defendants in Carter filed a Motion to dismiss plaintiff’s federal claims and to stay plaintiff’s state claims until fourteen days after the Court rules on the state claims in Dorfman .

On November 25, 2020, Kenneth Laury filed an action in the District Court of Shawnee County, Kansas under the caption Laury v.

MGP Ingredients., Case Number:

2020-CV-000609.

The Petition alleges that plaintiff commenced the action under K.S.A.

17-6510 to enforce his alleged right to inspect books and records of the Company, in order to enable him to evaluate possible misconduct by the Company’s Board of Directors and management.

On January 8, 2021, the Company filed an answer to the Petition, denying that plaintiff has satisfied the statutory requirements for his demand.

On February 25, 2021 and March 15, 2021, the court entered Orders under which discovery is to close on May 14, 2021 and a pretrial conference is scheduled for May 18, 2021.

2016 Atchison Chemical Release.

A chemical release occurred at the Company’s Atchison facility on October 21, 2016, which resulted in emissions venting into the air (“the Atchison Chemical Release”).

The Company reported the event to the Environmental Protection Agency (“EPA”), the Occupational Safety and Health Administration (“OSHA”), and to Kansas and local authorities on that date, and has cooperated fully to investigate and ensure that all appropriate response actions were taken.

On May 29, 2019, federal charges for alleged violations of the Clean Air Act related to the Atchison Chemical Release were filed against the Company, along with another unaffiliated company.

The Company and the Department of Justice resolved the allegations through a Plea Agreement entered with the Court on November 18, 2019, pursuant to which the Company agreed, among other things, to plead guilty to a misdemeanor negligent violation of the Clean Air Act and pay a fine of $ 1,000 .

On May 27, 2020, the Court accepted the Plea Agreement and sentenced the Company to pay a fine of $ 1,000 consistent with the terms of the parties’ resolution.

The fine has been paid and the matter is terminated.

Private plaintiffs have also initiated, and additional private plaintiffs may initiate, legal proceedings for damages resulting from the Atchison Chemical Release, but the Company is currently unable to reasonably estimate the amount of any such damages that might result.

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the Employee Equity Incentive Plan of 2014 (the “2014 Plan”) and the Non-Employee Director Equity Incentive Plan (the “Directors’ Plan”).

As of September 30, 2020, 421,220 RSUs had been granted of the 1,500,000 shares approved under the 2014 Plan, and 107,622 shares had been granted of the 300,000 shares approved under the Directors’ Plan.

As of September 30, 2020, there were 123,439 unvested RSUs under the Company’s long-term incentive plans and 115,399 were participating securities (Note 6).

As of March 31, 2021, 507,549 RSUs had been granted of the 1,500,000 shares approved under the 2014 Plan, and 110,505 shares had been granted of the 300,000 shares approved under the Directors’ Plan.

As of March 31, 2021, there were 170,336 unvested RSUs under the Company’s long-term incentive plans and 162,496 were participating securities (Note 7).

Deferred Compensation Plan.

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The Company’s obligations under this plan will change in conjunction with the performance of the participants’ investments, along with contributions to and withdrawals from the plan.

Realized and unrealized gains (losses) on deferred compensation plan investments were included as a component of Interest expense, net and other in the Company’s Condensed Consolidated Statements of Income for the quarter ended September 30, 2020.

For quarter and year to date ended September 30, 2020, the Company had a gain on deferred compensation plan investments of $ 185 and $ 352 , respectively.

For quarter ended September 30, 2019, the Company had a loss on deferred compensation plan investments of $ 30 and for year to date ended September 30, 2019 a gain on deferred compensation plan investments of $ 50 .

Realized and unrealized gains (losses) on deferred compensation plan investments were included as a component of Interest expense, net and other on the Company’s Condensed Consolidated Statements of Income for the quarter ended March 31, 2021.

For quarter ended March 31, 2021, the Company had a gain on deferred compensation plan investments of $ 30 .

For quarter ended March 31, 2020, the Company had a loss on deferred compensation plan investments of $ 164 .

Plan investments are classified as Level 1 in the fair value hierarchy since the investments trade with sufficient frequency and volume to enable the Company to obtain pricing information on an ongoing basis.

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STI plan deferral were deposited, at the time of payment, into the EDC Plan by the Company and allocated by participants among Company-determined investment options.

At September 30, 2020 and December 31, 2019, the EDC Plan investments were $ 1,707 and $ 1,185 , respectively, which were recorded in Other assets on the Company’s Condensed Consolidated Balance Sheets.

The EDC Plan non-current liabilities were $ 2,222 and $ 1,337 at September 30, 2020 and December 31, 2019, respectively, and were included in Other noncurrent liabilities on the Company’s Condensed Consolidated Balance Sheets.

At March 31, 2021 and December 31, 2020, the EDC Plan investments were $ 3,299 and $ 2,007 , respectively, which were recorded in Other assets on the Company’s Condensed Consolidated Balance Sheets.

The EDC Plan current liabilities were $ 483 at March 31, 2021 and were included in Accrued expenses and other on the Company’s Condensed Consolidated Balance Sheet.

The EDC Plan non-current liabilities were $ 2,890 and $ 3,140 at March 31, 2021 and December 31, 2020, respectively, and were included in Other noncurrent liabilities on the Company’s Condensed Consolidated Balance Sheets.

Operating Segments

At September 30, 2020 and 2019, the Company had two segments:

At March 31, 2021 and 2020, the Company had two segments:

Distillery Products and Ingredient Solutions.

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All other assets are considered as Corporate.

Quarter Ended September 30, Year to Date Ended September 30,

2020 2019 2020 2019

Quarter Ended March 31,

Sales to Customers

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The following table allocates assets to each segment as of:

September 30, 2020 December 31, 2019

March 31, 2021 December 31, 2020

Identifiable Assets

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Subsequent Events

On October 27, 2020, the Company’s 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.

Business Combination.

On April 1, 2021, the Company completed the acquisition of Luxco.

Luxco is a leading branded beverage alcohol company across various categories.

See Note 3, Business Acquisition for further details.

As a result of the acquisition of Luxco, the Company will report the Luxco brands in a new reporting segment:

Branded Spirits.

Beginning in the second quarter 2021, the Company will report three operating segments;

Distillery Products, Branded Spirits and Ingredient Solutions.

On May 3, 2021, the Company’s Board of Directors declared a quarterly dividend payable to stockholders of record as of May 21, 2021, of the Company’s Common Stock, and a dividend equivalent payable to holders of certain RSUs as of May 21, 2021, of $ 0.12 per share and per unit, payable on June 4, 2021.

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 1. Financial Statements