What changed in this filing

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Item 1A. Risk Factors

2022-02-24 compared with 2021-02-25 · 169 added, 89 removed, 206 unchanged (56% of the section changed)

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An interruption of operations or a catastrophic event at our facilities could negatively affect our business.

Although we maintain insurance coverage for various property damage and loss events, an interruption in or loss of operations at either of our production facilities could reduce or postpone production of our products, which could have a material adverse effect on our business, results of operations, or financial condition.

Although we maintain insurance coverage for various property damage and loss events, an interruption in or loss of operations at any of our production facilities could reduce or postpone production of our products, which could have a material adverse effect on our business, results of operations, or financial condition.

To the extent that our value added products rely on unique or proprietary processes or techniques, replacing lost production by purchasing from outside suppliers would be difficult.

In November 2020 a dryer at our Atchison facility was destroyed in a fire, resulting in an interruption in operations at our Atchison facility.

We had significant property damage.

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

Our customers store a substantial amount of barreled inventory of aged premium bourbon and rye whiskeys at our Lawrenceburg facility and our nearby warehouses in Williamstown, Kentucky and Sunman, Indiana.

If a catastrophic event were to occur at our Lawrenceburg facility or our warehouses, our customers’ business could be adversely affected.

The loss of a significant amount of aged inventory through fire, natural disaster, or otherwise could result in customer claims against us, liability for customer losses, and a reduction of warehouse services revenue.

We also store a substantial amount of our own inventory of aged premium bourbon and rye whiskeys at our Lawrenceburg facility and our nearby warehouses.

If a catastrophic event were to occur at our Lawrenceburg facility or our nearby warehouses, our business, financial condition, or results of operations could be adversely affected.

The loss of a significant amount of our aged inventory through fire, natural disaster, or otherwise, could result in a reduction in supply of the affected product or products and could affect our long-term growth.

The loss of a significant amount of aged inventory at these facilities through fire, natural disaster, or otherwise could result in customer claims against us, liability for customer losses, and a reduction of warehouse services revenue.

We also store a substantial amount of our own inventory of aged premium bourbon and rye whiskeys at our Lawrenceburg facility and our nearby warehouses, at our Lux Row facility in Bardstown, KY, and at the facilities of certain third party producers.

If a catastrophic event were to occur at any of these locations, our business, financial condition, or results of operations could be adversely affected.

The loss of a significant amount of our aged inventory at these facilities through fire, natural disaster, or otherwise, could result in a reduction in supply of the affected product or products and could affect our long- term performance of any affected brands.

A disruption in transportation services could negatively affect our business.

A disruption in transportation services could result in difficulties supplying materials to our facilities and impact our ability to deliver products to our customers in a timely manner, and our business, financial condition, or results of operations could be adversely affected.

Our profitability is affected by the costs of grain, wheat flour, and natural gas, or input costs, that we use in our business, the availability and costs of which are subject to weather and other factors beyond our control.

Our profitability is affected by the costs of grain, wheat flour, agave, and natural gas, or input costs, that we use in our business, the availability and costs of which are subject to weather and other factors beyond our control.

We may not be able to recover the costs of commodities and energy by increasing our selling prices.

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These include crop conditions, weather, disease, plantings, government programs and policies, competition for acquisition of inputs such as agricultural commodities, purchases by foreign governments, and changes in demand resulting from population growth and customer preferences.

Agave is a key ingredient in the production of tequila and is not a traded commodity.

Prices for agave are set by independent farmers in specified regions of Mexico, and therefore are subject to fluctuation depending on factors outside of our control.

The price of natural gas also fluctuates based on anticipated changes in supply and demand, weather, and the prices of alternative fuels.

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Even where prices can be adjusted, there is likely a lag between when we experience higher commodity or natural gas costs and when we might be able to increase prices.

To the extent we are unable to timely pass increases in the cost of raw materials to our customers under sales contracts, market fluctuations in the cost of grain, natural gas, and ethanol may have a material adverse effect on our business, financial condition, or results of operations.

To the extent we are unable to timely pass increases in the cost of raw materials to our customers under sales contracts, market fluctuations in the cost of grain, agave, natural gas, and ethanol may have a material adverse effect on our business, financial condition, or results of operations.

We have a high concentration of certain raw material and finished goods purchases from a limited number of suppliers which exposes us to risk.

We have signed supply agreements with Bunge and CGB for our grain supply (primarily corn) and with Ardent Mills for our wheat flour.

We have signed supply agreements for our grain supply (primarily corn) and wheat flour.

The Company also procures some textured wheat proteins through a third-party toll manufacturer in the United States.

Additionally, the Company procures barrels, glass, and bottle closures from third-party vendors.

If any of these companies encounters an operational or financial issue, or otherwise cannot meet our supply demands, it could lead to an interruption in supply to us and/or higher prices than those we have negotiated or than are available in the market at the time, and in turn, have a material adverse effect on our business, financial condition, or results of operations.

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Our principal competitors in these markets have substantial financial, marketing, and other resources, and several are much larger enterprises than us.

Many of our current and potential competitors have larger customer bases, greater name recognition and broader product offerings.

In recent years, the global beverage alcohol industry has continued to experience consolidation.

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We are dependent on being able to generate sales and other operating income in excess of the costs of products sold in order to obtain margins, profits, and cash flows to meet or exceed our targeted financial performance measures.

Competition is based on such factors as product innovation, product characteristics, product quality, pricing, color, and name.

Competition is based on such factors as product innovation, product characteristics, product taste and quality, pricing, color, and name and brand image.

Pricing of our products is partly dependent upon industry capacity, which is impacted by competitor actions to bring online idled capacity or to build new production capacity.

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Our revenue growth could also be adversely affected if we are not successful in developing new products for our customers or as a result of new product introductions by our competitors.

In addition, more stringent new customer demands may require us to make internal investments to achieve or sustain competitive advantage and meet customer expectations.

addition, more stringent new customer demands may require us to make internal investments to achieve or sustain competitive advantage and meet customer expectations.

Work disruptions or stoppages by our unionized workforce could cause interruptions in our operations.

As of December 31, 2021, approximately 243 of our 672 employees were members of a union.

Although our relations with our two unions are stable, there is no assurance that we will not experience work disruptions or stoppages in the future, which could have a material adverse effect on our business, financial condition, or results of operations and could adversely affect our relationships with our customers.

If we were to lose any of our key management personnel, we may not be able to fully implement our strategic plan, our system of internal controls could be impacted.

Although our relations with our three unions are stable, there is no assurance that we will not experience work disruptions or stoppages in the future, which could have a material adverse effect on our business, financial condition, or results of operations and could adversely affect our relationships with our customers.

If we were to lose any of our key management personnel, we may not be able to fully implement our strategic plan, and our system of internal controls could be impacted.

We rely on the continued services of key personnel involved in management, finance, product development, sales, manufacturing and distribution, and, in particular, upon the efforts and abilities of our executive management team.

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Our failure to comply with covenants in our credit arrangements could result in the acceleration of the debt extended under such agreements, limit our liquidity, and trigger other rights of our lenders.

Our credit arrangements (Note 5) contain a number of financial and other covenants that include provisions which require us, in certain circumstances, to meet certain financial tests.

Our credit arrangements (Note 6, Corporate Borrowings ) contain a number of financial and other covenants that include provisions which require us, in certain circumstances, to meet certain financial tests.

These covenants could hinder our ability to operate and could reduce our profitability.

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Our operations are also subject to regulation by various federal agencies, including the TTB, OSHA, the FDA, the 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.

We are also required to conduct business only with holders of licenses to import, warehouse, transport, distribute and sell beverage alcohol products.

We cannot assure you that these and other governmental regulations applicable to our industry will not change or become more stringent.

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

Violations of any of these laws and regulations may result in administrative, civil, or criminal fines or penalties being levied against us, including temporary or prolonged cessation of production, revocation or modification of permits, performance of environmental investigatory or remedial activities, voluntary or involuntary product recalls, or a cease and desist order against operations that are not in compliance with applicable laws.

These laws and regulations may change in the future and we may incur material costs in our efforts to comply with current or future laws and regulations.

Changes in laws, regulatory measures, or governmental policies, or the manner in which current ones are interpreted, could cause us to incur material additional costs or liabilities, and jeopardize the growth of our business in the affected market.

Specifically, governments may prohibit, impose, or increase limitations on advertising and promotional activities, or times or locations where beverage alcohol may be sold or consumed, or adopt other measures that could limit our opportunities to reach consumers or sell our products.

Certain countries historically have banned all television, newspaper, magazine, and digital commerce/advertising for beverage alcohol products.

Increases in regulation of this nature could substantially reduce consumer awareness of our products in the affected markets and make the introduction of new products more challenging.

These matters may have a material adverse effect on our business, financial condition, or results of operations.

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Any further deterioration of economic relations between the U.S.

and other countries or any increase in existing tariffs or the imposition of additional tariffs could result in an increase in the price of our and our customer's products in those countries and could prompt consumers in those countries to seek alternative products.

Any resulting impact on the continued growth on our or of our customer's business could potentially impact our financial performance and results of operations.

and other countries or any increase in existing tariffs or the imposition of additional tariffs could result in an increase in the price of our and our customer’s products in those countries and could prompt consumers in those countries to seek alternative products and could potentially impact our financial performance and results of operations.

A failure of one or more of our key information technology (“IT”) systems, networks, processes, associated sites, or service providers could have a negative impact on our business.

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Any breach of our data security systems or failure of our IT systems may have a material adverse impact on our business operations and financial results.

If the IT systems, networks or service providers we rely upon fail to function properly, or if we or our third party vendors suffer a loss or disclosure of business or other sensitive information due to any number of causes, including power outages, computer and telecommunications failures, viruses, phishing attempts, cyber-attacks, malware and ransomware attacks, security breaches, natural disasters, and errors by employees, and the disaster recovery plans do not effectively address these failures on a timely basis, we may suffer interruptions in our ability to manage operations and

reputational, competitive, or business harm, which may have a material adverse effect on our business, financial condition, or results of operations.

ransomware attacks, security breaches, natural disasters, and errors by employees, and the disaster recovery plans do not effectively address these failures on a timely basis, we may suffer interruptions in our ability to manage operations and reputational, competitive, or business harm, which may have a material adverse effect on our business, financial condition, or results of operations.

If our critical IT systems or back-up systems or those of our third party vendors were damaged or ceased to function properly, we might have to make a significant investment to repair or replace them.

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Our 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’s insurance is expected to provide coverage for business interruption losses, but there can be no assurance as to the amount or timing of possible insurance recoveries if ultimately claimed by the Company.

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

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Damage to our reputation, or that of any of our key customers or their brands, could affect our business performance.

The success of our products depends in part upon the positive image that consumers have of the third party brands that use our products.

The success of our products depends in part upon the positive image that consumers have of our brands and the third party brands that use our products.

Contamination, whether arising accidentally or through deliberate third party action, or other events that harm the integrity or consumer support for our and/or our customers’ products could affect the demand for our and/or our customers’ products.

Unfavorable media, whether accurate or not, related to our industry, to us, our products, or to the brands that use our products, marketing, personnel, operations, business performance, or prospects could negatively affect our corporate reputation, stock price, ability to attract high quality talent, or the performance of our business.

Unfavorable media, whether accurate or not, related to our industry, to us, our products, our brands, or to the brands that use our products, marketing, personnel, operations, business performance, or prospects could negatively affect our corporate reputation, stock price, ability to attract high quality talent, or the performance of our business.

Negative publicity or commentary on social media outlets could cause consumers to react rapidly by avoiding our brands or by choosing brands offered by our competitors, which could have a material adverse effect on our business, financial condition, or results of operations.

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Increasing concentrations of carbon dioxide and other greenhouse gases in the atmosphere may have an adverse effect on global temperatures, weather patterns, and the frequency and severity of extreme weather events and natural disasters.

In the event that climate change, or legal, regulatory, or market measures enacted to address climate change, has a negative effect on agricultural productivity in the regions from which we procure agricultural products such as corn and wheat, we could be subject to decreased availability or increased prices for a such agricultural products, which could have a material adverse effect on our business, financial condition, or results of operations.

In the event that climate change, or legal, regulatory, or market measures enacted to address climate change, has a negative effect on agricultural productivity in the regions from which we procure agricultural products such as corn and wheat, we could be subject to decreased availability or increased prices for such agricultural products, which could have a material adverse effect on our business, financial condition, or results of operations.

Increasing regulation of emissions could increase the cost of energy, including fuel, required to operate our facilities or transport and distribute our products, thereby substantially increasing the production, distribution, and supply chain costs associated with our products.

Water is the main ingredient in substantially all of our distillery products and is necessary for the production of our food ingredients.

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Part of our strategic business plan is to grow our business through acquisitions, and we continue to evaluate and engage in discussions concerning potential acquisition opportunities, some of which could be material.

Failure to successfully integrate or otherwise realize the anticipated benefits of these acquisitions could adversely impact our long-term competitiveness and profitability.

The integration of any future acquisitions will involve a number of risks that could harm our financial condition, results of operations and competitive position.

For example, in April 2021 we acquired Luxco, Inc.

and its affiliated companies (together referred to as “Luxco” and the merger as the “Luxco Merger”).

Failure to successfully integrate or otherwise realize the anticipated benefits of the Luxco Merger or other acquisitions could adversely impact our long-term competitiveness and profitability.

The integration of any acquisition will involve a number of risks that could harm our financial condition, results of operations and competitive position.

In particular:

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• the execution of our integration plans may divert the attention of our management from other key responsibilities;

• we may assume unanticipated liabilities and contingencies;

• our financial results may be negatively impacted by cash expenses and non-cash charges incurred in connection with an acquisition if goodwill or other intangible assets we acquire become impaired;

• we may enter new markets or markets in which we have limited prior experience;

• we may incur substantial indebtedness to finance an acquisition, enhancing our vulnerability to increased debt service requirements should interest rates rise, reducing the amount of expected cash flow available for other purposes, including capital expenditures and acquisitions, and limiting our flexibility in planning for or reacting to changes in our businesses and industries;

• we may assume unanticipated liabilities and contingencies or other exposures (including regulatory risks) for which we do not have adequate insurance coverage, indemnification or other protection;

• our acquisition targets could fail to perform in accordance with our expectations at the time of purchase.

Future acquisitions may be effected through the issuance of our Common Stock or securities convertible into our Common Stock, which could substantially dilute the ownership percentage of our current stockholders.

Our ability to grow through the acquisition of additional brands is also dependent upon identifying acceptable acquisition targets and opportunities, our ability to consummate prospective transactions on favorable terms, or at all, and the availability of capital to complete the necessary acquisition arrangements.

We intend to finance our brand acquisitions through a combination of our available cash resources, third-party financing and, in appropriate circumstances, the further issuance of equity and/or debt securities.

The issuance of our Common Stock or securities convertible into our Common Stock to fund an acquisition could substantially dilute the ownership percentage of our current stockholders.

For example, in connection with the Luxco Merger we issued approximately 5.0 million shares of Common Stock.

In addition, shares issued in connection with future acquisitions could be publicly tradable, which could result in a material decrease in the market price of our Common Stock.

If we consummate the acquisition of Luxco, Inc.

(the "Luxco Acquisition"), we may face significant disruptions and other risks.

If it is completed, the Luxco Acquisition will involve numerous risks, including the following:

• during the period until and after we consummate the Luxco Acquisition, uncertainty and disruptions may negatively impact Luxco’s relationships with their employees, distributors, vendors, and other business partners, which could harm Luxco’s financial condition and results of operations;

• we may fail to realize the anticipated benefits of the Luxco Acquisition, including the level of revenue and profitability and the expected operational, revenue, and cost synergies that we are expecting;

• we may face difficulties in retaining key management and employees, or we may need to attract and retain additional management resources, which could negatively impact the operations of Luxco, disrupt our ongoing operations, and divert our and Luxco’s management’s attention from ongoing operations and opportunities;

• after we acquire Luxco, our management’s attention may be diverted from the daily operations of our existing businesses;

• our financial results may be negatively impacted by cash expenses and non-cash charges incurred in connection with Luxco or in the future if goodwill or other intangible assets we acquire in the Luxco Acquisition become impaired;

• notwithstanding the due diligence we performed in connection with the Luxco Acquisition, Luxco may have liabilities, losses, or other exposures (including regulatory risks) for which we do not have adequate insurance coverage, indemnification, or other protection;

• we expect to incur substantial additional indebtedness to finance the Luxco Acquisition, enhancing our vulnerability to increased debt service requirements should interest rates rise, reducing the amount of expected cash flow available for other purposes, including capital expenditures and acquisitions, and limiting our flexibility in planning for, or reacting to, changes in our businesses and industries.

Any failure of the pending Luxco Acquisition to be completed may adversely affect our business, financial condition, results of operations, and stock price.

Each of our and Luxco’s obligations to complete the Luxco Acquisition is subject to a number of conditions specified in the Merger Agreement, including, among others (i) the expiration or termination of the waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, (ii) the absence of any order restraining, enjoining, or otherwise prohibiting the consummation of the Luxco Acquisition, (iii) filing of all required notices, transfers, applications, termination or documentation required under applicable law with the Alcohol and Tobacco Tax and Trade Bureau of the United States, and the licensing boards of the states of Kentucky, Missouri and Ohio such that there is continuity and survival of permits held by Luxco for the operation of the business as of the Closing, (iv) the accuracy of the parties’ respective representations and warranties in the Merger Agreement, subject to specified materiality qualifications, (v) compliance by the parties with their respective covenants in the Merger Agreement in all material respects, and (vi) the absence of a material adverse effect (as defined in the Merger Agreement) with respect to either party on or after the date of the Merger Agreement.

There can be no assurance that these conditions to the completion of the Luxco Acquisition will be satisfied within the timeframe specified in the Merger Agreement or at all.

If the Luxco Acquisition is not completed, our stock price could decline to the extent that our current share price reflects an assumption that the Luxco Acquisition will be completed.

Furthermore, if the Luxco Acquisition is not completed, we may suffer other consequences that could adversely affect our business, financial condition, results of operations, and stock price, including the following:

• we have incurred, and will continue to incur, significant costs and expenses, including fees for professional services and other transaction costs in connection with the Luxco Acquisition, and many of these fees and costs are payable by us regardless of whether the Luxco Acquisition is completed;

• the failure to complete the Luxco Acquisition may result in adverse publicity, negatively impact the reputation of the Company in the capital markets and investment community, and result in critical responses from our customers, partners, and other third parties;

• legal proceedings may be instituted against us, our directors and others relating to the Luxco Acquisition and related transactions;

• any disruptions to our business resulting from the announcement and pendency of the Luxco Acquisition, including any adverse changes to our relationships with customers, vendors, distributors, and employees, may continue or intensify in the event the Luxco Acquisition is not completed;

• we may experience employee departures;

• we may not be able to take advantage of alternative business opportunities or effectively respond to competitive pressures.

The Company will incur significant transaction and acquisition-related costs in connection with the Luxco Acquisition.

We expect to incur a number of non-recurring costs associated with the Luxco Acquisition and combining the operations of Luxco’s with our own.

Some of these costs have already been incurred or may be incurred regardless of whether the Luxco Acquisition is completed.

The Company also will incur transaction fees and costs related to formulating and implementing integration plans with respect to the two companies.

We continue to assess the magnitude of these costs, and additional unanticipated costs may be incurred in the Luxco Acquisition and the integration of Luxco’s business with our business.

Although we expect that the elimination of duplicative costs, as well as the realization of other efficiencies related to the integration of the businesses, should allow us to offset integration-related costs over time, this net benefit may not be achieved in the near term, or at all.

The outbreak of the coronavirus ("COVID-19") has negatively impacted and could continue to negatively impact the global economy.

In addition, the COVID-19 pandemic could continue to disrupt or otherwise negatively impact global credit markets and could disrupt or otherwise negatively impact our operations, including the demand for our products and our ability to produce and deliver our products.

The significant outbreak of COVID-19 has resulted in a widespread health crisis, which has negatively impacted and could continue to negatively impact the global economy.

In addition, the global and regional impact of the outbreak, including official or unofficial quarantines and governmental restrictions on activities taken in response to the outbreak, could have a negative impact on our operations, including voluntary or mandatory temporary closures of our facilities or offices;

Acquiring additional brands could have a significant effect on our financial position and could cause substantial fluctuations in our quarterly and yearly operating results.

Also, acquisitions could result in the recording of significant goodwill and intangible

assets on our financial statements, the amortization or impairment of which would reduce reported earnings in subsequent years.

The uncertain and rapidly changing COVID-19 pandemic could disrupt or otherwise negatively impact our operations, including the demand for our products and our ability to produce and deliver our products.

The ongoing COVID-19 global pandemic has resulted in a widespread health crisis, which has negatively impacted and could continue to negatively impact the global economy.

The near and long-term impacts of COVID-19 are unknown and impossible to predict with any level of certainty.

The global and regional impact of the pandemic, including official or unofficial quarantines and governmental restrictions on activities taken in response to the outbreak, could have a negative impact on our operations, including voluntary or mandatory temporary closures of our facilities or offices;

interruptions in our supply chain, which could impact the cost or availability of raw materials;

disruptions or restrictions on our

ability to travel or to market and distribute our products;

disruptions or restrictions on our ability to travel or to market and distribute our products;

reduced consumer demand for our products or those of our customers due to bar and restaurant closures or reduced consumer traffic in bars, restaurants and other locations where our products or those of our customers are sold;

and labor shortages.

More broadly, the outbreak could lead to an economic downturn that could affect future demand for our products and those of our customers.

Furthermore, our facilities and those of our customers and suppliers have been required to comply with additional regulations and may be required to comply with new regulations imposed by state and local governments in response to the COVID-19 pandemic, including COVID-19 safety guidance for production and manufacturing facilities.

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Also, these measures may continue to hamper our efforts to comply with our filing obligations with the Securities and Exchange Commission.

The extent and potential short and long-term impact of the ongoing COVID-19 outbreak on our operational and financial performance will continue to depend on future developments, including the duration, severity and spread of the virus, actions that may be taken by governmental authorities and the impact on our supply chain, customers, operations, workforce and the financial markets, all of which remain highly uncertain and cannot be predicted.

These and other potential impacts of an epidemic, pandemic or other health crisis, such as COVID-19, could therefore materially and adversely affect our business, financial condition and results of operations.

RISKS SPECIFIC TO OUR DISTILLERY PRODUCTS SEGMENT

The extent of the impact on the Company’s business, financial condition, and results of operations is dependent on the length and severity of the pandemic.

Vaccines to prevent COVID-19 were approved by health agencies in the U.S.

and other countries in which the Company operates, which began to be administered near the end of calendar year 2020.

Distribution of the vaccines has been slower than anticipated.

In addition, new strains of the virus appear to have increased transmissibility, which could complicate treatment and vaccination programs.

The COVID-19 pandemic is an unprecedented situation and the Company’s understanding of and response to its impacts is changing and evolving.

The additional risk factors identified here are based upon information known at this time.

The COVID-19 pandemic may adversely impact the Company’s business, financial condition, and results of operations in one or more ways not identified to date.

RISKS SPECIFIC TO OUR DISTILLERY PRODUCTS AND BRANDED SPIRITS SEGMENTS

The relationship between the price we pay for grain and the sales prices of our distillery co-products can fluctuate significantly and negatively impact our business.

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Decisions concerning the quantity of maturing stock of our aged distillate could materially affect our future profitability.

There is an inherent risk in determining the quantity of maturing stock of aged distillate to lay down in a given year for future sales as a result of changes in consumer demand, pricing, new brand launches, changes in product cycles, increase in competitive supply, and other factors.

competitive supply, and other factors.

Demand for products could change significantly between the time of production and the date of sale.

It may be more difficult to make accurate predictions regarding new products and brands.

Inaccurate decisions and/or estimations could lead to an inability to supply future demand or lead to a future surplus of inventory and consequent write-down in the value of maturing stocks of aged distillate.

Inaccurate decisions and/ or estimations could lead to an inability to supply future demand or lead to a future surplus of inventory and consequent writedown in the value of maturing stocks of aged distillate.

As a result, our business, financial condition, or results of operations could be materially adversely affected.

If the brands we develop or acquire do not achieve consumer acceptance, our growth may be limited, which could have a material adverse impact on our business, financial condition, or results of operations.

A component of our strategic plan is to develop or acquire our own portfolio of brands, particularly whiskeys.

Risks related to this strategy include:

• Because our brands, internally developed and acquired, are early in their growth cycle or have not yet been developed, they have not achieved extensive brand recognition.

Accordingly, if consumers do not accept our brands, we will not be able to penetrate our markets and our growth may be limited.

• We depend, in part, on the marketing initiatives and efforts of our independent distributors in promoting our products and creating consumer demand, and we have limited, or no, control regarding their promotional initiatives or the success of their efforts.

• We depend on our independent distributors to distribute our products.

The failure or inability of even a few of our independent distributors to adequately distribute our products within their territories could harm our sales and result in a decline in our results of operations.

• We compete for shelf space in retail stores and for marketing focus by our independent distributors, most of whom carry extensive product portfolios.

• The laws and regulations of several states prohibit changes of independent distributors, except under certain limited circumstances, making it difficult to terminate an independent distributor for poor performance without reasonable cause, as defined by applicable statutes.

Any difficulty or inability to replace independent distributors, poor performance of our major independent distributors or our inability to collect accounts receivable from our major independent distributors could harm our business.

There can be no assurance that the independent distributors and retailers we use will continue to purchase our products or provide our products with adequate levels of promotional support.

• Our brands compete with the brands of our bulk alcohol customers.

Warehouse expansion issues could negatively impact our operations and our business.

In 2015, we announced a major expansion in warehousing capacity, which we completed during 2020.

Our future business operations may require additional warehouse capacity.

In the event additional warehouse capacity is required, there is the potential risk of completion delays, including risk of delay associated with required permits and cost overruns, which could have a material adverse effect on our business, financial condition, or results of operations.

We may be subject to litigation directed at the beverage alcohol industry .

Companies in the beverage alcohol industry are, from time to time, exposed to class action or other litigation relating to alcohol advertising, product liability, alcohol abuse problems or health consequences from the misuse of alcohol.

Such litigation may result in damages, penalties or fines as well as damage to our reputation, which could have a material adverse effect on our business, financial condition, or results of operations.

Class action or other litigation relating to alcohol abuse or the misuse of alcohol could adversely affect our business.

Our industry faces the possibility of class action or similar litigation alleging that the continued excessive use or abuse of beverage alcohol has caused death or serious health problems.

It is also possible that governments could assert that the use of alcohol has significantly increased government funded health care costs.

Litigation or assertions of this type have adversely affected companies in the tobacco industry, and it is possible that we, as well as our customers and suppliers, could be named in litigation of this type.

Also, lawsuits have been brought in a number of states alleging that beverage alcohol manufacturers and marketers have improperly targeted underage consumers in their advertising.

Plaintiffs in these cases allege that the defendants’ advertisements, marketing and promotions violate the consumer protection or deceptive trade practices statutes in each of these states and seek repayment of the family funds expended by the underage consumers.

While we have not been named in these lawsuits, we could be named in similar lawsuits in the future.

Any class action or other litigation asserted against us could be expensive and time-consuming to defend against, depleting our cash and diverting our personnel resources and, if the plaintiffs in such actions were to prevail, our business could be harmed significantly.

A change in public opinion about alcohol could reduce demand for our products.

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• economic conditions;

• product innovations;

• public health policies and initiatives;

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• changes in travel, leisure, dining, entertaining, and beverage consumption trends.

Our success depends in part on fulfilling available opportunities to meet consumer needs and anticipating changes in consumer preferences with successful new products and product innovations.

If our customers and consumers shift away from spirits (particularly brown spirits, such as our premium bourbon and rye whiskeys), our business, financial condition, or results of operations could be adversely affected.

In addition, our continued success depends, in part, on our ability to develop new products.

The launch and ongoing success of new products are inherently uncertain especially with regard to their appeal to consumers.

The launch of a new product can give rise to a variety of costs and an unsuccessful launch, among other things, can affect consumer perception of existing brands and our reputation.

Unsuccessful implementation or short-lived popularity of our product innovations may result in inventory write-offs and other costs.

Changes in excise taxes, incentives and customs duties related to products containing alcohol could adversely affect our business.

Products containing alcohol are subject to excise taxation in many markets at the federal, state and/or local level.

Any increase in federal, state or local excise taxes could have an adverse effect on our business by increasing prices and reducing demand, particularly if excise tax levels increase substantially relative to those for beer and wine.

In addition, products containing alcohol are the subject of customs duties in many countries around the world.

An unanticipated increase in customs duties in the markets where we may sell our products could also adversely affect our results of operations and cash flows.

Failure of our distributors to distribute our products adequately within their territories could adversely affect our business.

We are required by law to use state-licensed distributors or, in 17 states known as “control states,” state-owned agencies performing this function, to sell our products to retail outlets, including liquor stores, bars, restaurants and national chains in the United States.

We have established relationships for our brands with a limited number of wholesale distributors;

however, failure to maintain those relationships could significantly and adversely affect our business, sales and growth.

We currently distribute our products in all 50 states.

Over the past decade there has been increasing consolidation, both intrastate and interstate, among distributors.

As a result, many states now have only two or three significant distributors.

Also, there are several distributors that now control distribution for several states.

If we fail to maintain good relations with a distributor, our products could, in some instances be frozen out of one or more markets entirely.

The ultimate success of our products also depends in large part on our distributors’ ability and desire to distribute our products to our desired U.S.

target markets, as we rely significantly on them for product placement and retail store penetration.

In addition, all of our distributors also distribute competitive brands and product lines.

We cannot assure you that our U.S.

distributors will continue to purchase our products, commit sufficient time and resources to promote and market our brands and product lines, or that they can or will sell them to our desired or targeted markets.

If they do not, our sales will be harmed, resulting in a decline in our results of operations.

Moreover, the retail industry, particularly in Europe, North America and other countries in which we operate, continues to consolidate, resulting in larger retailers with increased purchasing power, which may affect our competitiveness in these markets.

Larger retailers may seek to improve their profitability and sales by asking for lower prices or increased trade spending.

The efforts of retailers could result in reduced profitability for the distilled spirits industry as a whole and indirectly adversely affect our financial results.

Failure of our products to secure and maintain listings in the control states could adversely affect our business.

In the control states, the state liquor commissions act in place of distributors and decide which products are to be purchased and offered for sale in their respective states.

Products selected for listing in control states must generally reach certain volumes and/or profit levels to maintain their listings.

Products in control states are selected for purchase and sale through listing procedures, which are generally made available to new products only at periodically scheduled listing interviews.

Products not selected for listings can only be purchased by consumers in the applicable control state through special orders, if at all.

If, in the future, we are unable to maintain our current listings in the control states, or secure and maintain listings in those states for any additional products we may develop or acquire, sales of our products could decrease significantly, which would have a material adverse financial effect on our results of operations and financial condition.

Significant additional labeling or warning requirements or limitations on the availability of our products could inhibit sales of affected products.

Various jurisdictions have adopted or may seek to adopt significant additional product labeling or warning requirements or limitations on the availability of our products relating to the content or perceived adverse health consequences of some of our products.

Several such labeling regulations or laws require warnings on any product with substances that the jurisdiction lists as potentially associated with cancer or birth defects.

Our products already raise health and safety concerns for some regulators, and heightened requirements could be imposed.

If additional or more severe requirements of this type are imposed on one or more of our major products under current or future health, environmental, or other laws or regulations, they could inhibit sales of such products.

Further, we cannot predict whether our products will become subject to increased rules and regulations, which, if enacted, could increase our costs or adversely impact sales.

For example, advocacy groups in Australia and the United Kingdom have called for the consideration of requiring the sale of alcohol in plain packaging with more comprehensive health warnings in an effort to change drinking habits in those countries.

These studies could result in additional governmental regulations concerning the production, marketing, labeling, or availability of our products, any of which could damage our reputation, make our premium brands unrecognizable, or reduce demand of our products, which could adversely affect our profitability.

International operations, worldwide and domestic economic trends and financial market conditions, geopolitical uncertainty, or changes to international trade agreements and tariffs, import and excise duties, other taxes, or other governmental rules and regulations could adversely affect our business.

Our products are in numerous countries and we have production facilities currently in the U.S., Mexico and Northern Ireland.

Risks associated with international operations, any of which could have a material adverse effect on our business, liquidity, financial condition, and/or results of operations, include:

• changes in local political, economic, social, and labor conditions;

• potential disruption from socio-economic violence, including terrorism and drug-related violence;

• restrictions on foreign ownership and investments or on repatriation of cash earned in countries outside the U.S.;

• import and export requirements and border accessibility;

• currency exchange rate fluctuations;

• a less developed and less certain legal and regulatory environment in some countries, which, among other things, can create uncertainty regarding contract enforcement, intellectual property rights, privacy obligations, real property rights, and liability issues;

• inadequate levels of compliance with applicable anti-bribery laws, including the Foreign Corrupt Practices Act.

Unfavorable global or regional economic conditions, including economic slowdown and the disruption, volatility and tightening of credit and capital markets, as well as unemployment, tax increases, governmental spending cuts, or a return of high levels of inflation, could affect consumer spending patterns and purchases of our products.

These could also create or exacerbate credit issues, cash flow issues, and other financial hardships for us and our suppliers, distributors, retailers, and consumers.

The inability of suppliers, distributors, and retailers to access liquidity could impact our ability to produce and distribute our products.

These international, economic, and political uncertainties could have a material adverse effect on our business, liquidity, financial condition, and/or results of operations, especially to the extent these matters, or the decisions, policies or economic strength of our suppliers and distributors, affect our business, liquidity, financial condition, and/or results of operations.

Our global business is subject to commercial, political, and financial risks.

Our products are sold in more than 48 countries;

accordingly, we are subject to risks associated with doing business internationally, including commercial, political, and financial risks.

In addition, we are subject to potential business disruption caused by military conflicts;

potentially unstable governments or legal systems;

civil or political upheaval or unrest;

local labor policies and conditions;

possible expropriation, nationalization, or confiscation of assets;

problems with repatriation of foreign earnings;

economic or trade sanctions;

closure of markets to imports;

anti-American sentiment;

terrorism or other types of violence in or outside the United States;

and health pandemics (such as COVID-19).

If shipments of our products to our international markets were to experience significant disruption due to these risks or for other reasons, it could have a material adverse effect on our financial results.

Failure to comply with anti-corruption laws, trade sanctions and restrictions, or similar laws or regulations may have a material adverse effect on our business and financial results.

We market and sell our products in over 48 countries.

Some of the countries where we do business have a higher risk of corruption than others.

While we are committed to doing business in accordance with applicable anti-corruption laws, trade sanctions and restrictions, and other similar laws and regulations, along with our Code of Conduct and our other policies, we remain subject to the risk that an employee, or one of our business partners, may take action determined to be in violation of international trade, money laundering, anti-corruption, or other laws, sanctions, or regulations, including the U.S.

Foreign Corrupt Practices Act of 1977, the U.K.

Bribery Act 2010, or equivalent local laws.

Because the COVID-19 pandemic has so negatively impacted local economies, government intervention in local economies and businesses has increased, which in turn can create elevated risk and opportunity for corruption.

Any determination that our operations or activities are not in compliance with applicable laws or regulations, particularly those related to anti-corruption and international trade, could result in investigations, interruption of business, loss of business partner relationships, suspension or termination of licenses and permits (our own or those of our partners), imposition of fines, legal or equitable sanctions, negative publicity, and management distraction.

Any press coverage associated with misconduct under these laws and regulations, even if unwarranted or baseless, could damage our reputation and sales.

Further, our continued compliance with applicable anti-corruption or other laws or regulations, our Code of Conduct and our other policies could result in higher operating costs.

We also operate our business and market our products in countries that may be subject to export control regulations, embargoes, economic sanctions and other forms of trade restrictions imposed by the United States, the European Union, the United Nations and other participants in the international community.

For example, we have a distributor that sells our products in Russia and Ukraine.

We do not sell directly into the Crimea region, but indirect shipments could potentially occur.

New or expanded export control regulations, economic sanctions, embargoes or other forms of trade restrictions imposed on countries in which we or our associates do business may curtail our existing business and may result in serious economic challenges in these geographies, which could have a material adverse effect on our and our associates’ operations, and may result in impairment charges on goodwill or other intangible assets.

Fluctuations in foreign currency exchange rates relative to the U.S.

dollar could have a material adverse effect on our financial results.

The more we expand our business internationally, the more foreign currency exchange rate fluctuations relative to the U.S.

dollar influence our financial results.

In some markets outside the United States, we sell our products and pay for some goods, services, and talent primarily in local currencies.

Because our foreign currency revenues exceed our foreign currency expense, we have a net exposure to changes in the value of the U.S.

dollar relative to those currencies.

Over time, our reported financial results will be hurt by a stronger U.S.

dollar and improved by a weaker one.

We do not attempt to hedge our foreign currency exposure.

RISKS SPECIFIC TO OUR INGREDIENT SOLUTIONS SEGMENT

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Shifting consumer preferences could decrease demand for our specialty ingredients.

This could, in turn, significantly decrease our revenues and revenue growth, which could have a material adverse affect on our business, financial condition, and results of operations.

This could, in turn, significantly decrease our revenues and revenue growth, which could have a material adverse effect on our business, financial condition, and results of operations.

RISKS RELATED TO OUR COMMON STOCK

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Public stockholders who might desire to participate in such a transaction may not have the opportunity to do so.

These anti-takeover provisions could substantially impede the ability of public stockholders to benefit from a change of control or change in our management and Board of Directors.

These antitakeover provisions could substantially impede the ability of public stockholders to benefit from a change of control or change in our management and Board of Directors.

These provisions include:

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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-K

Item 1A. Risk Factors