What changed in this filing

/stocks — the workspaceLOADING

Item 2. Management’s Discussion and Analysis

2021-11-03 compared with 2021-08-04 · 120 added, 119 removed, 305 unchanged (44% of the section changed)

17 unchanged sentences

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

During the quarter and year to date ended June 30, 2021, we recorded a $6,230 and $9,840, respectively, partial settlement from our insurance carrier as a reduction of Cost of sales.

During the quarter and year to date ended September 30, 2021, we recorded a $6,404 and $16,244, respectively, partial settlement from our insurance carrier as a reduction of Cost of sales.

We are working to construct a replacement drying system.

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

Our insurance is expected to provide coverage for business interruption and other losses from damage to property, plant and equipment, less deductibles, but there can be no assurance to the amount or timing of possible insurance recoveries.

As the COVID-19 pandemic continues, we are monitoring the guidance from federal, state and local public health authorities and will take the necessary actions to comply with the updated guidelines.

12 unchanged sentences

Consolidated results

The table below details the consolidated results for the quarters ended June 30, 2021 and 2020:

Quarter Ended June 30,

The table below details the consolidated results for the quarters ended September 30, 2021 and 2020:

Quarter Ended September 30,

2021 2020 2021 v.

14 unchanged sentences

(a) Percentage points (“pp”).

Sales - Sales for quarter ended June 30, 2021 were $174,939, an increase of 89.0 percent compared to the year-ago quarter, which was the result of increased sales in the Branded Spirits, Distillery Products, and Ingredient Solutions segments.

Sales - Sales for quarter ended September 30, 2021 were $176,611, an increase of 71.5 percent compared to the year-ago quarter, which was the result of increased sales in the Branded Spirits, Distillery Products, and Ingredient Solutions segments.

Within the Branded Spirits segment, sales were up 2,413.7 percent, due to the additional brands acquired as part of the Merger.

Within the Distillery Products segment, sales were up 15.0 percent, primarily due to an increase in the sales of brown goods within premium beverage alcohol.

Within the Ingredient Solutions segment, sales were up 39.1 percent, primarily due to increased sales of specialty wheat starches and proteins (see Segment Results).

Gross profit - Gross profit for quarter ended June 30, 2021 was $56,827, an increase of 174.5 percent compared to the year-ago quarter.

Within the Ingredient Solutions segment, sales were up 12.5 percent, primarily due to increased sales of commodity wheat starches and specialty wheat proteins (see Segment Results).

Gross profit - Gross profit for quarter ended September 30, 2021 was $57,086, an increase of 146.5 percent compared to the year-ago quarter.

The increase was driven by an increase in gross profit in Branded Spirits, Distillery Products and Ingredient Solutions segments.

2 unchanged sentences

In the Ingredient Solutions segment, gross profit increased by $1,033, or 17.6 percent (see Segment Results).

SG&A expenses - SG&A expenses for quarter ended June 30, 2021 were $29,164, an increase of 211.4 percent compared to the year-ago quarter.

The increase in SG&A expenses was primarily driven by the assumption of Luxco’s SG&A expenses, as well as one-time acquisition related costs.

Operating income - Operating income for quarter ended June 30, 2021 increased to $27,663 from $11,338 for quarter ended June 30, 2020, primarily due to an increase in gross profit in the Branded Spirits, Distillery Products and Ingredient Solutions segments, partially offset by the increase in the previously described SG&A expenses.

SG&A expenses - SG&A expenses for quarter ended September 30, 2021 were $24,202, an increase of 154.5 percent compared to the year-ago quarter.

The increase in SG&A expenses was primarily driven by the assumption of Luxco’s SG&A expenses.

Operating income - Operating income for quarter ended September 30, 2021 increased to $32,884 from $13,652 for quarter ended September 30, 2020, primarily due to an increase in gross profit in the Branded Spirits, Distillery Products and Ingredient Solutions segments, 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, 2020

Operating income for quarter ended September 30, 2020

Increase in gross profit - Branded Spirits segment (a)

3 unchanged sentences

Increase in gross profit - Ingredient Solutions segment (a)

1,708 15.0 pp

Increase in SG&A expenses

(14,692) (107.6) pp

Operating income for quarter ended June 30, 2021

Operating income for quarter ended September 30, 2021

$ 32,884 140.9 %

1 unchanged sentence

(b) Percentage points (“pp”).

Income tax expense - Income tax expense for quarter ended June 30, 2021 was $6,412, for an effective tax rate of 24.2 percent.

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

Income tax expense - Income tax expense for quarter ended September 30, 2021 was $7,674, for an effective tax rate of 24.5 percent.

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

The increase in Income tax expense, quarter versus quarter, was primarily due to higher Income before income taxes, which lessened the effects of tax credits received.

Earnings per share (“EPS”) - EPS was $0.91 for quarter ended June 30, 2021, compared to $0.50 for quarter ended June 30, 2020.

The change in EPS, quarter versus quarter, was primarily due to an increase in Operating income, partially offset by an increase in shares outstanding as a result of shares issued as part of the consideration paid for the Merger.

Earnings per share (“EPS”) - EPS was $1.08 for quarter ended September 30, 2021, compared to $0.61 for quarter ended September 30, 2020.

The change in EPS, quarter versus quarter, was primarily due to an increase in Operating income, partially offset by an increase in shares outstanding.

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

Basic and diluted EPS for quarter ended June 30, 2020

Basic and diluted EPS for quarter ended September 30, 2020

Increase in operations (a)

0.88 144.3 pp (b)

Increase in other income (expense), net (a)

(0.03) (4.9) pp

Change in interest expense, net (a)

2 unchanged sentences

Increase in shares outstanding resulting from the Merger (0.30) (49.2) pp

Basic and diluted EPS for quarter ended June 30, 2021

Basic and diluted EPS for quarter ended September 30, 2021

$ 1.08 77.1 %

1 unchanged sentence

(b) Percentage points (“pp”).

The table below details the consolidated results for year to date ended June 30, 2021 and 2020:

Year to Date Ended June 30,

The table below details the consolidated results for year to date ended September 30, 2021 and 2020:

Year to Date Ended September 30,

2021 2020 2021 v.

14 unchanged sentences

(a) Percentage points (“pp”).

Sales - Sales for year to date ended June 30, 2021 were $283,262, an increase of 47.8 percent compared to the year-ago period, which was the result of increased sales in the Branded Spirits, Distillery Products, and Ingredient Solutions segments.

Sales - Sales for year to date ended September 30, 2021 were $459,873, an increase of 56.1 percent compared to the year-ago period, which was the result of increased sales in the Branded Spirits, Distillery Products, and Ingredient Solutions segments.

Within the Branded Spirits segment, sales were up 3,590.4 percent, due to the additional brands acquired as part of the Merger.

Within the Distillery Products segment, sales were up 15.6 percent, primarily due to an increase in the sales of brown goods within premium beverage alcohol.

Within the Ingredient Solutions segment, sales were up 18.8 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, 2021 was $89,126, an increase of 103.0 percent compared to the year-ago period.

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

In the Distillery Products segment, gross profit increased by $26,317, or 77.6 percent.

Within the Ingredient Solutions segment, sales were up 16.5 percent, primarily due to increased sales of specialty wheat starches and proteins, and commodity wheat starches (see Segment Results).

Gross profit - Gross profit for year to date ended September 30, 2021 was $146,212, an increase of 118.0 percent compared to the year-ago period.

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

In the Branded Spirits segment, gross profit increased by $40,010 or 2,316.7 percent.

In the Distillery Products segment, gross profit increased by $37,379, or 75.0 percent.

In the Ingredient Solutions segment, gross profit increased by $1,748, or 11.3 percent (see Segment Results).

SG&A expenses - SG&A expenses for year to date ended June 30, 2021 were $40,963, an increase of 117.1 percent compared to the year-ago period.

The increase in SG&A expenses was driven by the assumption of Luxco’s SG&A, as well as one-time acquisition related costs.

Operating income - Operating income for year to date ended June 30, 2021 increased to $48,163 from $25,046 for year to date period ended June 30, 2020, primarily due to an increase in gross profit in the Distillery Products, Branded Spirits and Ingredient Solutions segments.

SG&A expenses - SG&A expenses for year to date ended September 30, 2021 were $65,165, an increase of 129.6 percent

compared to the year-ago period.

The increase in SG&A expenses was driven by the assumption of Luxco’s SG&A, one-time acquisition related costs, and higher incentive compensation expense.

Operating income - Operating income for year to date ended September 30, 2021 increased to $81,047 from $38,698 for year to date period ended September 30, 2020, primarily due to an increase in gross profit in the Branded Spirits, Distillery Products, and Ingredient Solutions 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, 2020

Increase in gross profit - Distillery Products segment (a)

26,317 105.1 pp(b)

Operating income for year to date ended September 30, 2020

Increase in gross profit - Branded Spirits segment (a)

40,010 103.4 pp(b)

Increase in gross profit - Distillery Products segment (a)

37,379 96.6 pp

2 unchanged sentences

(36,788) (95.1) pp

Operating income for year to date ended June 30, 2021

Operating income for year to date ended September 30, 2021

$ 81,047 109.4 %

1 unchanged sentence

(b) Percentage points (“pp”).

Income tax expense - Income tax expense for year to date ended June 30, 2021 was $11,027, for an effective tax rate of 23.7 percent.

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

Income tax expense - Income tax expense for year to date ended September 30, 2021 was $18,701, for an effective tax rate of 24.0 percent.

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

The increase in Income tax expense, year to date versus year to date, was primarily due to higher Income before income taxes, which lessened the effects of tax credits received.

Earnings per share - EPS was $1.81 for year to date ended June 30, 2021, compared to $1.07 for year to date ended June 30, 2020.

Earnings per share - EPS was $2.91 for year to date ended September 30, 2021, compared to $1.68 for year to date ended September 30, 2020.

EPS increased, year to date versus year to date, primarily due to an increase in operations, partially offset by an increase in shares outstanding as a result of shares issued as part of the consideration paid for the Merger.

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, 2020

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

Increase in operations (a)

3 unchanged sentences

(0.04) (2.4) pp

Increase in other income (expense), net (a)

(0.03) (1.8) pp

Change in effective tax rate (0.04) (2.4) pp

Increase in shares outstanding resulting from the Merger (0.59) (35.1) pp

Basic and diluted EPS for year to date ended June 30, 2021

Basic and diluted EPS for year to date ended September 30, 2021

$ 2.91 73.2 %

3 unchanged sentences

Distillery Products

The following tables show selected financial information for the Distillery Products segment for the quarters ended June 30, 2021 and 2020.

The following tables show selected financial information for the Distillery Products segment for the quarters ended September 30, 2021 and 2020.

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)

2021 2020 $ 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)

2021 2020 $ Change % Change

5 unchanged sentences

(d) Percentage points (“pp”).

Total sales of Distillery Products for the quarter ended June 30, 2021 increased by $15,543, or 20.8 percent, compared to the prior year quarter.

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

The increase in sales of brown goods was driven by higher sales volume.

The increase in fuel grade alcohol was driven by higher average selling price as well as higher sales volume.

The increase in white goods was primarily driven by higher average selling price.

These increases were offset by a decrease in sales of industrial alcohol which was driven by lower sales volume due to the discontinuing of the ICP third party sales and marketing services, partially offset by higher average selling price.

Total sales of Distillery Products for the quarter ended September 30, 2021 increased by $11,871, or 15.0 percent, compared to the prior year quarter.

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

The increase in sales of brown goods, white goods and fuel grade alcohol was driven by higher sales volume and higher average selling price.

These increases were offset by a decrease in sales of industrial alcohol which was driven by lower sales volume due to the discontinuing of the ICP third party sales and marketing services.

The decrease in sales of distillers feed and related co-products was due to lower average selling price, partially offset by higher sales volume, both of which are results of the Dryer Fire Incident (see Note 8, Commitments and Contingencies for further details).

Gross profit increased quarter versus quarter by $11,063, or 69.5 percent.

Gross margin for the quarter ended June 30, 2021 increased to 35.4 percent from 21.2 percent for the prior year quarter.

The increase in gross profit was primarily due to higher sales volume on brown goods as well as higher average selling price on industrial alcohol, white goods and fuel grade alcohol.

The increase in gross profit was partially offset by higher input costs of industrial alcohol and white goods.

The following tables show selected financial information for the Distillery Products segment for the year to date ended June 30, 2021 and 2020.

Gross margin for the quarter ended September 30, 2021 increased to 29.6 percent from 20.1 percent for the prior year quarter.

The increase in gross profit was primarily due to higher sales volume and higher average selling price on brown goods.

Additionally, the increase in gross profit was also due to higher average selling price on industrial alcohol, white goods and fuel grade alcohol, partially offset by higher input costs of industrial alcohol and white goods.

The following tables show selected financial information for the Distillery Products segment for the year to date ended September 30, 2021 and 2020.

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)

2021 2020 $ Change % Change

5 unchanged sentences

(d) Percentage points (“pp”).

Total sales of Distillery Products for year to date ended June 30, 2021 increased by $24,653, or 16.0 percent compared to the year-ago period.

The increase in sales of brown goods was driven by higher sales volume.

The increase in sales of fuel grade alcohol was driven by higher average selling price and higher sales volume.

The increase in sales of white goods was primarily a result of higher average selling price, partially offset by lower sales volume.

Total sales of Distillery Products for year to date ended September 30, 2021 increased by $36,524, or 15.6 percent compared to the year-ago period.

The increase in sales of brown goods, white goods and fuel grade alcohol was driven by higher sales volume and higher average selling price.

These increases were partially offset by a decrease in sales of industrial alcohol which was driven by lower sales volume due to the discontinuing of the ICP third party sales and marketing services, partially offset by higher average selling price.

Gross profit for year to date ended June 30, 2021 increased by $26,317, or 77.6 percent compared to the year-ago period.

Gross margin for year to date ended June 30, 2021 increased to 33.7 percent from 22.0 percent for the prior year period.

Gross profit for year to date ended September 30, 2021 increased by $37,379, or 75.0 percent compared to the year-ago period.

Gross margin for year to date ended September 30, 2021 increased to 32.3 percent from 21.3 percent for the prior year period.

The increase in gross profit was primarily due to higher sales volume on brown goods as well as higher average selling price on industrial alcohol, white goods and fuel grade alcohol.

The increase in gross profit was partially offset by higher input costs of industrial alcohol, white goods and brown goods.

The increase in gross profit was partially offset by higher input costs of industrial alcohol, white goods and brown goods as well as lower average selling price on distillers feed and related co-products.

Branded Spirits

The following tables show selected financial information for the Branded Spirits segment for the quarters ended June 30, 2021 and 2020.

The following tables show selected financial information for the Branded Spirits segment for the quarters ended September 30, 2021 and 2020.

BRANDED SPIRITS SALES

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

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

2021 2020 $ Change % Change

9 unchanged sentences

Other Financial Information

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

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

2021 2020 $ Change % Change

5 unchanged sentences

(d) Percentage points (“pp”).

Total sales of Branded Spirits for the quarter ended June 30, 2021 increased by $60,042, or 15,635.9 percent compared to the prior year quarter.

Sales of ultra premium, premium, mid, value, and other increased compared to the prior year quarter, primarily due to the additional brands acquired as part of the Merger.

Total sales of Branded Spirits for the quarter ended September 30, 2021 increased by $59,112, or 2,413.7 percent compared to the prior year quarter.

Sales of value, mid, ultra premium, premium, and other increased compared to the prior year quarter, primarily due to the additional brands acquired as part of the Merger.

Gross profit increased quarter versus quarter by $21,828, or 1,571.5 percent.

Gross margin for the quarter ended June 30, 2021 decreased 8.0 percent to 30.5 percent from 38.5 percent for the prior year quarter.

Gross margin for the quarter ended September 30, 2021 decreased 19.0 percent to 37.7 percent from 56.7 percent for the prior year quarter.

The increase in gross profit was primarily due to the additional brands acquired as part of the Merger.

Gross profit was reduced by $3,116 in the quarter due to a required step up in value due to purchase accounting related to the Merger.

This decreased margin by 5.2 percentage points.

Of the purchase accounting step up, $2,529 was associated with marking the finished goods inventory to fair value and fully flowed through in the period and is not expected to recur in future periods.

The following tables show selected financial information for the Branded Spirits segment for year to date ended June 30, 2021 and 2020.

The decrease in gross margin was due to sales price mix, as the vast majority of the Company’s branded spirits sales pre-merger were in the ultra premium category.

The following tables show selected financial information for the Branded Spirits segment for year to date ended September 30, 2021 and 2020.

BRANDED SPIRITS 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)

2021 2020 $ Change % Change

17 unchanged sentences

(d) Percentage points (“pp”).

Total sales of Branded Spirits for year to date ended June 30, 2021 increased by $60,124, or 6,895 percent compared to the year-ago period.

Sales of ultra premium, premium, mid, value, and other increased compared to the year-ago period, primarily due to the additional brands acquired as part of the Merger.

Gross profit for year to date ended June 30, 2021 increased by $18,182, or 5,379 percent.

Gross margin for year to date ended June 30, 2021 decreased 8.4 percent to 30.4 percent from 38.8 percent for the prior year.

Total sales of Branded Spirits for year to date ended September 30, 2021 increased by $119,236, or 3,590.4 percent compared to the year-ago period.

Sales of value, mid, ultra premium, premium, and other increased compared to the year-ago period, primarily due to the additional brands acquired as part of the Merger.

Gross profit for year to date ended September 30, 2021 increased by $40,010, or 2,316.7 percent.

Gross margin for year to date ended September 30, 2021 decreased 17.9 percent to 34.1 percent from 52.0 percent for the prior year.

The increase in gross profit was primarily due to the additional brands acquired as part of the Merger.

Gross profit was reduced by $3,116 in the quarter due to a required step up in value due to purchase accounting related to the Merger.

This decreased margin by 5.2 percentage points.

The decrease in gross margin was due to sales price mix, as the vast majority of the Company’s branded spirits sales pre-merger were in the ultra premium category.

Gross profit was reduced during year to date ended September 30, 2021, due to a required step up in value due to purchase accounting related to the Merger.

Of the purchase accounting step up, $2,529 was associated with marking the finished goods inventory to fair value, which fully flowed through in the second quarter and is not expected to recur in future periods.

Ingredient Solutions

The following tables show selected financial information for the Ingredient Solutions segment for the quarter ended June 30, 2021 and 2020.

The following tables show selected financial information for the Ingredient Solutions segment for the quarter ended September 30, 2021 and 2020.

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)

2021 2020 $ 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)

2021 2020 $ Change % Change

5 unchanged sentences

(d) Percentage points (“pp”).

Total Ingredient Solutions sales for quarter ended June 30, 2021 increased by $6,794, or 39.1 percent, compared to the prior year quarter.

Quarter versus quarter, this increase was primarily driven by higher sales of specialty wheat starches and proteins due to higher sales volume and higher average selling prices.

Total Ingredient Solutions sales for quarter ended September 30, 2021 increased by $2,664, or 12.5 percent, compared to the prior year quarter.

Quarter versus quarter, this increase was primarily driven by higher sales of commodity wheat starches, specialty wheat proteins and starches due to higher sales volume and higher average selling price.

Gross profit increased quarter versus quarter by $1,033, or 17.6 percent.

Gross margin for the quarter ended June 30, 2021 decreased to 26.5 percent from 27.1 percent for the prior year quarter.

The increase in gross profit was primarily driven by higher sales volumes of specialty wheat proteins and starches partially offset by higher input costs.

The following tables show selected financial information for the Ingredient Solutions segment for the year to date June 30, 2021 and 2020.

Gross margin for the quarter ended September 30, 2021 increased to 28.7 percent from 27.4 percent for the prior year quarter.

The increase in gross profit was primarily driven by higher average selling price of specialty wheat proteins and starches, and commodity wheat starches, partially offset by higher input costs for specialty wheat proteins and starches.

The following tables show selected financial information for the Ingredient Solutions segment for the year to date September 30, 2021 and 2020.

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)

2021 2020 $ 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)

2021 2020 $ Change % Change

5 unchanged sentences

(d) Percentage points (“pp”).

Total Ingredient Solutions sales for year to date ended June 30, 2021 increased by $6,843, or 18.8 percent, compared to the prior year period.

The increase in Ingredient Solutions sales was primarily driven by higher sales of specialty wheat starches and proteins due to higher sales volume and higher average selling prices.

Gross profit increased by $714, or 7.4 percent for year to date ended June 30, 2021 compared to the prior year period.

Gross margin for the year to date ended June 30, 2021 decreased to 24.0 percent from 26.5 percent for the prior year period.

The increase in gross profit was primarily driven by higher sales volumes of specialty wheat starches and proteins partially offset by higher input costs.

Total Ingredient Solutions sales for year to date ended September 30, 2021 increased by $9,507, or 16.5 percent, compared to the prior year period.

The increase in Ingredient Solutions sales was primarily driven by higher sales of specialty wheat starches and proteins and commodity wheat starches, primarily due to higher sales volume and higher average selling price.

Gross profit increased by $1,748, or 11.3 percent for year to date ended September 30, 2021 compared to the prior year period.

Gross margin for the year to date ended September 30, 2021 decreased to 25.7 percent from 26.8 percent for the prior year period.

The increase in gross profit was primarily driven by higher sales volumes and average selling price of specialty wheat starches and proteins partially offset by higher input costs.

CASH FLOW, FINANCIAL CONDITION AND LIQUIDITY

5 unchanged sentences

Cash Flow Summary

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

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

Cash provided by operating activities $ 70,785 $ 29,457 $ 41,328

2 unchanged sentences

Effect of exchange rate changes on cash (2) — (2)

Increase in cash and cash equivalents $ 15,581 $ 8,436 $ 7,145

Cash increased $15,581 for year to date ended June 30, 2021, compared to an increase of $8,436 for year to date ended June 30, 2020, for a net increase in cash of $7,145, period versus period.

Increase (decrease) in cash and cash equivalents $ (5,500) $ 16,657 $ (22,157)

Cash decreased $5,500 for year to date ended September 30, 2021, compared to an increase of $16,657 for year to date ended September 30, 2020, for a net decrease in cash of $22,157, period versus period.

Operating Activities.

Cash provided by operating activities for year to date ended June 30, 2021 was $47,454.

The cash provided by operating activities resulted primarily from net income of $35,486, adjustments for non-cash or non-operating charges of $11,555 including, depreciation and amortization, and share-based compensation as well as cash provided by operating assets and liabilities of $413.

The primary drivers of the changes in operating assets and liabilities were $7,987 cash provided by accrued expenses and other primarily related to legally committed insurance recovery amounts obtained prior to contingencies related to the insurance claim being resolved, and $7,531 cash provided by accounts receivables, net due to increased sales during the quarter as well as an increase in insurance recoveries receivable.

These sources of cash were partially offset by $12,996 use of cash related to decrease in accounts payable.

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

Cash provided by operating activities for year to date ended September 30, 2021 was $70,785.

The cash provided by operating activities resulted primarily from net income of $59,159, adjustments for non-cash or non-operating charges of $19,149 including, depreciation and amortization, and share-based compensation as well as cash used in operating assets and liabilities of $7,523.

The primary drivers of the changes in operating assets and liabilities were $7,588 use of cash related to an increase in inventories, primarily barreled distillate, $6,678 use of cash related to decrease in accounts payable, and $5,593 use of cash related to accounts receivables, net due to increased sales during the quarter as well as an increase in insurance recoveries receivable.

These uses of cash were partially offset by $15,859 cash provided by accrued expenses and other primarily related to legally committed insurance recovery amounts obtained prior to contingencies related to the insurance claim being resolved.

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

The cash provided by operating activities 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 $13,174 use of cash related to an increase in receivables, net due to timing of customer payments as well as increased sales during the year, $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 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.

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 timing of customer payments as well as increased sales during the year, $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 $2,057 cash provided by accounts payable related to the timing cash disbursements.

Investing Activities.

Cash used in investing activities for year to date ended June 30, 2021 was $170,235, which primarily resulted from $149,599 related to the Merger of Luxco and additions to property, plant and equipment of $18,336 (see Capital Spending).

Cash used in investing activities for year to date ended June 30, 2020 was $12,407, which resulted from additions to property, plant and equipment of $10,177 (see Capital Spending) and an 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 September 30, 2021 was $189,166, which primarily resulted from $149,613 related to the Merger of Luxco and additions to property, plant and equipment of $37,257 (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 an increase related to the acquisition of a business of $2,750, partially offset by proceeds from sale of property of $688.

Capital Spending.

We manage capital spending to support our business growth plans.

Investments in property, plant and equipment were $18,336 and $10,177 for year to date ended June 30, 2021 and 2020, respectively.

Adjusted for the change in capital expenditures in accounts payable for year to date ended June 30, 2021 and 2020, of $(3,375) and $(3,865), respectively, total capital expenditures were $14,961 and $6,312, respectively.

Investments in property, plant and equipment were $37,257 and $13,507 for year to date ended September 30, 2021 and 2020, respectively.

Adjusted for the change in capital expenditures in accounts payable for year to date ended September 30, 2021 and 2020, of $(3,375) and $(2,654), respectively, total capital expenditures were $33,882 and $10,853, respectively.

We expect approximately $51,500 in capital expenditures in 2021, excluding any insurance recoveries.

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Financing Activities.

Cash provided by financing activities for year to date ended June 30, 2021 was $138,359, due to net proceeds from debt of $231,328 (see Long-Term and Short-Term Debt, partially offset by $87,497 payment on assumed debt as part of the Merger, payments of dividends and dividend equivalents of $4,707 (see Dividends and Dividend Equivalents) and purchases of treasury stock of $765 (see Treasury Purchases and Share Repurchases).

Cash provided 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), offset by purchases of treasury stock of $4,395 (see Treasury Purchases and Share Repurchases) and payments of dividends and dividend equivalents of $4,101 (see Dividends and Dividend Equivalents).

Cash provided by financing activities for year to date ended September 30, 2021 was $112,883, due to net proceeds from debt of $208,521 (see Long-Term and Short-Term Debt), partially offset by $87,509 payment on assumed debt as part of the Merger, payments of dividends and dividend equivalents of $7,362 (see Dividends and Dividend Equivalents) and purchases of treasury stock of $767 (see Treasury Purchases and Share Repurchases).

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), payments of dividends and dividend equivalents of $6,144 (see Dividends and Dividend Equivalents) and purchases of treasury stock of $4,395 (see Treasury Purchases and Share Repurchases).

Treasury Purchases.

38,009 RSUs vested and converted to common shares for employees during year to date ended June 30, 2021, of which we withheld and purchased for treasury 11,865 shares valued at $765 to cover payment of associated withholding taxes.

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.

38,059 RSUs vested and converted to common shares for employees during year to date ended September 30, 2021, of which we withheld and purchased for treasury 11,885 shares valued at $767 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.

Share Repurchases.

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

The Company did not repurchase any shares during the year to date ended June 30, 2021 and has $20,947 remaining under the share repurchase plan.

During year to date ended June 30, 2020, we repurchased approximately 159,104 shares of MGP Common Stock for $4,053.

The Company did not repurchase any shares during the year to date ended September 30, 2021 and has $20,947 remaining under the share repurchase plan.

During year to date ended September 30, 2020, we repurchased approximately 159,104 shares of MGP Common Stock for $4,053.

Dividends and Dividend Equivalents

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May 3, 2021 May 21, 2021 June 4, 2021 0.12 0.12 2,635 20 2,655

August 2, 2021 August 20, 2021 September 3, 2021 0.12 0.12 2,635 20 2,655

$ 0.36 $ 0.36 $ 7,303 $ 59 $ 7,362

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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

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(b) Includes estimated forfeitures.

On August 2, 2021, our Board of Directors declared a quarterly dividend payable to stockholders of record as of August 20, 2021, of the Company’s Common Stock, and a dividend equivalent payable to holders of certain RSUs as of August 20, 2021, of $0.12 per share and per unit, payable on September 3, 2021.

On November 1, 2021, our Board of Directors declared a quarterly dividend payable to stockholders of record as of November 19, 2021, of the Company’s Common Stock, and a dividend equivalent payable to holders of certain RSUs as of November 19, 2021, of $0.12 per share and per unit, payable on December 3, 2021.

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 $270,391 (net of unamortized loan fees of $1,825) at June 30, 2021, and $39,871 (net of unamortized loan fees of $129) at December 31, 2020.

Total debt was $247,677 (net of unamortized loan fees of $1,733) at September 30, 2021, and $39,871 (net of unamortized loan fees of $129) at December 31, 2020.

Financial Condition and Liquidity.

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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, 2021, we met those covenants and restrictions.

At June 30, 2021, our current assets exceeded our current liabilities by $270,203, largely due to our inventories, at cost, of $232,292.

At June 30, 2021, our cash balance was $37,243 and we have used our Credit Agreement and Note Purchase Agreement for liquidity purposes, with $168,000 remaining for additional borrowings.

Under our Credit Agreement and Note Purchase Agreement, we must meet certain financial covenants and restrictions, and at September 30, 2021, we met those covenants and restrictions.

At September 30, 2021, our current assets exceeded our current liabilities by $265,430, largely due to our inventories, at cost, of $239,312.

At September 30, 2021, our cash balance was $16,162 and we have used our Credit Agreement and Note Purchase Agreement for liquidity purposes, with $190,000 remaining for additional borrowings.

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

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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