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Item 8. Financial Statements and Supplementary Data

2024-02-22 compared with 2023-02-23 · 289 added, 286 removed, 764 unchanged (43% of the section changed)

1 unchanged sentence

MANAGEMENT’S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING

The management of MGP Ingredients, Inc.

(the “Company”) is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Exchange Act Rules 13a-15(f).

Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Exchange Act Rule 13a-15(f).

Internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles.

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As a result of this assessment, management has concluded that the Company’s internal control over financial reporting as of December 31, 2023 was effective.

KPMG, LLP, the independent registered public accounting firm that audited the Company’s financial statements contained herein, has issued an audit report on the Company’s internal control over financial reporting as of December 31, 2022.

The combined report on the consolidated financial statements of MGP Ingredients, Inc.

and subsidiaries and audit report is included in Item 8 of this Form 10-K.

KPMG, LLP, the independent registered public accounting firm that audited the Company’s financial statements contained herein, has issued an audit report on our internal control over financial reporting as of December 31, 2023, which is included in Item 8 of this Form 10-K.

Report of Independent Registered Public Accounting Firm

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A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles.

A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company;

dispositions of the assets of the company;

(2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company;

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Critical Audit Matters

The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that:

(1) relates to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments.

The communication of a critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

The critical audit matters communicated below are matters arising from the current period audit of the consolidated financial statements that were communicated or required to be communicated to the audit committee and that:

(1) relate to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments.

The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

Revenue recognition under bill and hold arrangements

As discussed in Note 1 to the consolidated financial statements, the Company’s Distilling Solutions segment routinely enters into bill and hold arrangements, whereby the Company produces and sells aged and unaged distillate to customers.

As discussed in Note 3 to the consolidated financial statements, brown goods premium beverage alcohol revenue was $229,523 thousands for the year ended December 31, 2022, a portion of which was for bill and hold arrangements.

As discussed in Note 3 to the consolidated financial statements, brown goods premium beverage alcohol revenue was $289,191 thousand for the year ended December 31, 2023, a portion of which was for bill and hold arrangements.

We identified the evaluation of revenue recognized under bill and hold arrangements as a critical audit matter because of the extent of additional audit effort required to test the incremental bill and hold revenue recognition criteria.

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Also, to evaluate that the Company does not have the ability to use the product or direct to another customer, we inspected underlying documentation for the same sample of bill and hold transactions to determine legal title to the product had transferred to the customer.

Acquisition-date fair value measurement of contingent consideration liability

As discussed in Note 1 and 4 to the consolidated financial statements, on June 1, 2023, the Company acquired Penelope Bourbon LLC (Penelope) in a business combination for cash consideration of $104,638 thousand and contingent consideration of up to $110,800 thousand if the Penelope business achieves certain net sales targets between the acquisition date and December 31, 2025.

At the acquisition date, management estimated the fair value of the contingent consideration liability to be $62,100 thousand using a Monte Carlo simulation based on certain assumptions including projected net sales over the term of the earn-out period and volatility rate.

We identified the assessment of the acquisition-date fair value measurement of the contingent consideration liability as a critical audit matter.

A high degree of subjective auditor judgment was required to evaluate the projected net sales and volatility rate used in the Monte Carlo simulation.

Changes in these assumptions could have had a significant impact on the fair value of the contingent consideration liability.

The following are the primary procedures we performed to address this critical audit matter.

We evaluated the design and tested the operating effectiveness of certain internal controls over the Company’s acquisition-date valuation of the contingent consideration liability, including controls related to the determination of projected net sales and volatility rate.

We performed sensitivity analyses over the projected net sales and volatility rate to assess the impact of changes in those assumptions on the Company’s determination of the acquisition-date fair value of the contingent consideration liability.

We assessed the projected net sales by comparing them to Penelope’s historical actual results, actual results since the acquisition, and industry data.

We also involved valuation professionals with specialized skills and knowledge, who assisted us in evaluating the volatility rate used in the Monte Carlo simulation model by comparing it to comparable companies.

We have served as the Company’s auditor since 2008.

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Selling, general, and administrative expenses 91,395 74,627 72,829

Impairment of long-lived assets and other 19,391 — —

Change in fair value of contingent consideration 7,100 — —

Insurance recoveries — — ( 16,325 )

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Interest expense, net ( 6,647 ) ( 5,451 ) ( 4,037 )

Other income (loss), net ( 3,342 ) ( 1,230 ) 627

Other expense, net ( 220 ) ( 3,342 ) ( 1,230 )

Income before income taxes 141,746 140,172 121,096

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$ 107,475 $ 109,462 $ 91,307

Other comprehensive income (loss), net of tax:

Unrealized loss on foreign currency translation adjustment ( 676 ) ( 151 ) —

Other comprehensive loss, net of tax:

Unrealized gain (loss) on foreign currency translation adjustment 236 ( 676 ) ( 151 )

Changes in Company-sponsored post-employment benefit plan ( 329 ) 18 19

Other comprehensive income (loss) ( 658 ) ( 132 ) 732

Other comprehensive loss ( 93 ) ( 658 ) ( 132 )

Comprehensive income attributable to MGP Ingredients, Inc.

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Cash and cash equivalents $ 18,388 $ 47,889

Receivables (less allowance for credit loss of $ 1,475 and $ 150 at December 31, 2022 and 2021, respectively)

Receivables (less allowance for credit loss of $ 1,475 at both December 31, 2023 and 2022)

144,286 109,267

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Long-term operating lease liabilities 11,292 11,622

Contingent consideration 69,200 —

Other noncurrent liabilities 4,763 3,723

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Depreciation and amortization 22,113 21,455 19,092

Impairment of long-lived assets and other 19,391 — —

Gain on insurance recoveries — — ( 16,325 )

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Deferred income taxes, including change in valuation allowance ( 4,041 ) 1,011 6,772

Change in fair value of contingent consideration 7,100 — —

Other, net 728 194 145

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Proceeds from property insurance recoveries — — 16,325

Proceeds from sale of property and other 150 — 2,906

Other, net ( 263 ) 320 ( 1,080 )

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Balance, December 31, 2020 $ 4 $ 6,715 $ 15,503 $ 262,943 $ 486 $ ( 23,125 ) $ — $ 262,526

Comprehensive income:

Net income — — — 40,345 — — — 40,345

Other comprehensive income — — — — 732 — — 732

Comprehensive income (loss):

Net income (loss) — — — 91,307 — — ( 490 ) 90,817

Other comprehensive loss — — — — ( 132 ) — — ( 132 )

Dividends and dividend equivalents of $ 0.48 per common share and per restricted stock unit, net of estimated forfeitures

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Stock shares repurchased — — — — — ( 767 ) — ( 767 )

Equity consideration for Merger — — 296,279 — — — — 296,279

Balance, December 31, 2021

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Stock shares repurchased — — — — — ( 715 ) — ( 715 )

Equity consideration for Merger — — 296,279 — — — — 296,279

Balance, December 31, 2022

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Distilled spirits include premium bourbon, rye, and other whiskeys and grain neutral spirits (“GNS”), including vodka and gin.

Our distilled spirits are either sold directly or indirectly to manufacturers of other branded spirits.

MGP is also a producer of high quality industrial alcohol for use in both food and non-food applications.

The Company has a portfolio of its own high quality branded spirits which are produce through the distilleries and bottling facilities and sell to distributors.

The Company’s branded spirits products account for a range of price points from value products through ultra premium brands, with a focus on high-end American whiskey, tequila and gin.

The Company’s distilled spirits are either sold directly or indirectly to manufacturers of other branded spirits.

MGP was also a producer of high quality industrial alcohol for use in both food and non-food applications, which was primarily produced at the Company’s distillery located in Atchison, Kansas, prior to its closure during December 2023.

The Company has a portfolio of its own high quality branded spirits which are produced through the distilleries and bottling facilities and sold to distributors.

The Company’s branded spirits products account for a range of price points from value products through ultra premium brands.

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

The ingredients products are sold directly, or through distributors, to manufacturers and processors of finished packaged goods or to bakeries.

On June 1, 2023, the Company acquired Penelope Bourbon LLC (“Penelope”), which, prior to the Company’s acquisition, was a family and founder-owned and operated American whiskey company with a diverse portfolio of high-quality whiskeys in the premium plus price tiers.

See Note 4, Business Combination, for further details.

The Company reports three operating segments:

Distilling Solutions, Branded Spirits, and Ingredient Solutions.

During 2022, the Company changed the name of its Distillery Products segment to Distilling Solutions.

Principles of Consolidation.

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The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period.

The application of certain of these policies places demands on management’s judgment, with financial reporting results relying on estimation about the effects of matters that are inherently uncertain, inclusive of effects related to the COVID-19 pandemic.

For all of these policies, management cautions that future events rarely develop as forecast, and estimates routinely require adjustment and may require material adjustment.

For all of these policies, management cautions that future events may not develop as forecast, and estimates routinely require adjustment and may require material adjustment.

Inventory includes finished goods, raw materials in the form of agricultural commodities used in the production process, as well as bottles, caps, and labels used in the bottling process, and certain maintenance and repair items.

Bourbons, ryes, and other whiskeys, included in inventory, are normally aged in barrels for several years, following industry practice;

all barreled bourbon, rye, and other whiskeys is classified as a current asset.

all barreled bourbon, rye, and other whiskeys are classified as a current asset.

The Company includes warehousing, insurance, and other carrying charges applicable to barreled whiskey in inventory costs.

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Motor vehicles 5 years

(a) Leasehold improvements are the shorter of economic useful life or life of lease

(a) Leasehold improvements are the shorter of economic useful life or life of the lease

Maintenance costs are expensed as incurred.

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Revenue Recognition.

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

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

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

Revenue is recognized for the sale of products at the point in time finished products are delivered to the customer in accordance with shipping terms.

This is a faithful depiction of the satisfaction of the performance obligation because, at that point control passes to the customer, the customer has legal title and the risk and rewards of ownership have transferred, and the customer has present obligation to pay.

The Company’s Distilling Solutions segment routinely enters into bill and hold arrangements, whereby the Company produces and sells aged and unaged distillate to customers, and the product is barreled at the customer’s request and warehoused at a Company location for an extended period of time in accordance with directions received from the Company’s customers.

The Distilling Solutions segment routinely enters into bill and hold arrangements, whereby the Company produces and sells aged and unaged distillate to customers, and the product is barreled at the customer’s request and warehoused at a Company location for an extended period of time in accordance with directions received from the Company’s customers.

Even though the aged and unaged distillate remains in the Company’s possession, a sale is recognized at the point in time when the customer obtains control of the product.

Control is transferred to the customer in bill and hold transactions when:

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

Control is transferred to the customer in bill and hold transactions when customer acceptance specifications have been met, legal title has transferred, the customer has a present obligation to pay for the product and the risk and rewards of ownership have transferred to the customer.

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

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The amounts reimbursed to customers are determined based on agreed-upon amounts and are recorded as a reduction of revenue.

Excise Taxes.

The Company is responsible for compliance with the Alcohol and Tobacco Tax and Trade Bureau

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The Company is subject to periodic compliance audits by the TTB.

Individual states also impose excise taxes on alcohol beverages in varying amounts.

The Company calculates its Federal and state excise tax expense based upon units shipped and on its understanding of the applicable excise tax laws.

Excise taxes that are both imposed on and concurrent with a specific revenue-producing transaction, that are collected by the Company from a customer are excluded from revenue and expense.

Individual U.S.

states also impose excise taxes on alcohol beverages in varying amounts.

The Company calculates its U.S.

federal and state excise tax expense based upon units shipped and on its understanding of the applicable excise tax laws.

Excise taxes that are both imposed on and concurrent with a specific revenue-producing transaction, and that are collected by the Company from a customer, are excluded from revenue and expense.

Impairment of Long-Lived Assets.

The Company reviews long lived assets for impairment when events or changes in circumstances indicate the carrying amount of the asset group may not be fully recoverable.

The Company determines the carrying amount of the asset group using the future projected cash flows as well as quantitative and qualitative factors.

An impairment loss is recognized when the carrying value exceeds the fair value of the asset group.

For the year ended December

31, 2023, the Company recognized impairment of long-lived assets and other of $ 19,391 .

See Note 6, Closure of the Atchison Distillery, for more information.

Recognition of Insurance Recoveries.

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At December 31, 2021, the Company received a legally binding commitment from its insurance carrier for final settlement of $ 43,688 , $ 27,363 related to business interruption and $ 16,325 for the damaged dryer.

As of December 31, 2021, $ 7,188 of the insurance recovery was recorded as receivables on the Consolidated Balance Sheet.

The Company recorded a settlement related to business interruption from its insurance carrier of $ 23,583 and $ 3,780 for the years ended December 31, 2021 and 2020, respectively.

The Company recorded a settlement related to business interruption from its insurance carrier of $ 23,583 for the year ended December 31, 2021.

The business interruption portion of the settlement was recorded as a reduction of cost of sales on the Consolidated Statements of Income and the insurance recoveries for the replacement of the damaged dryer was recorded as insurance recoveries on the Consolidated Statements of Income.

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Adjustments resulting from the translation process are included as a component of accumulated other comprehensive income.

The Company maintains a US bank account denominated in British pound sterling and is adjusted for the market exchange rate at the reporting period-end.

Any impacts of the adjustment for the exchange rate applied to the financial asset is reported in other income (loss), net on the Consolidated Statements of Income.

The Company maintains a U.S.

bank account denominated in British pounds sterling and it is adjusted for the market exchange rate at the reporting period-end.

Any impacts of the adjustment for the exchange rate applied to the financial asset is reported in other expense, net on the Consolidated Statements of Income.

Business Combinations.

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

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

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

Goodwill is recognized to the extent that the purchase consideration, including contingent consideration, exceeds the value of the assets acquired and liabilities assumed.

The Company uses its internal estimates and third-party valuation specialists to assist in determining the fair value of the assets acquired and liabilities assumed.

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

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The Company evaluates goodwill for impairment at least annually, in the fourth quarter, or on an interim basis if events and circumstances occur that would indicate it is more likely than not that the fair value of a reporting unit is less than the carrying value.

To the extent that the carrying amount exceeds fair value, an impairment of goodwill is recognized and allocated to the reporting units.

To the extent that the carrying value exceeds fair value, an impairment of goodwill is recognized.

Judgment is required in the determination of reporting units, the assignment of assets and liabilities to reporting units, including goodwill, and the determination of fair value of the reporting units.

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

Excluding the impact of the conversion feature of the convertible note, the fair value of the Company’s debt was $ 150,249 and $ 272,971 at December 31, 2022 and 2021, respectively.

The financial statement carrying value (including unamortized loan fees) was $ 230,335 and $ 233,399 at December 31, 2022 and 2021, respectively.

Excluding the impact of the conversion feature of the Convertible Senior Notes, the fair value of the Company’s debt was $ 194,440 and $ 150,249 at December 31, 2023 and 2022, respectively.

The financial statement carrying value (net of unamortized loan fees) was $ 287,249 and $ 230,335 at December 31, 2023 and 2022, respectively.

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

See Note 4, Business Combination, for discussion related the the fair value of tangible and intangible assets acquired and liabilities assumed as part of the merger with Luxco.

The fair value calculation of contingent consideration associated with the acquisition of Penelope uses unobservable inputs, such as estimated net sales over the term of the earn-out period, discount rates, and volatility rates.

The contingent consideration is measured using the Monte Carlo simulation approach.

The inputs used in the calculation of the contingent consideration liability are considered Level 3 under the fair value hierarchy due to the lack of relevant market activity.

See Note 4, Business Combination, for more information.

Fair value disclosure for deferred compensation plan investments is included in Note 12, Employee Benefit Plans.

Derivative Instruments.

Certain commodities the Company uses in its production process, or input costs, expose it to market price risk due to volatility in the prices for those commodities.

Through the Company’s grain supply contracts for its Atchison and Lawrenceburg facilities, its wheat flour supply contract for the Atchison facility, and its natural gas contracts for both facilities, it purchases grain, wheat flour, and natural gas, respectively, for delivery from one to 24 months into the future at negotiated fixed prices.

The Company has determined that the firm commitments to purchase grain, wheat flour, and natural gas under the terms of its supply contracts meets the normal purchases and sales exception as defined under ASC 815, Derivatives and Hedging , because the quantities involved are for amounts to be consumed within the normal expected production process.

Through the Company’s grain supply contracts, its wheat flour supply contract, and its natural gas contracts, it purchases grain, wheat flour, and natural gas, respectively, for delivery from one to 24 months into the future at negotiated fixed prices.

The Company has determined that the firm commitments to purchase grain, wheat flour, and natural gas under the terms of its supply contracts meet the normal purchases and sales exception as defined under ASC 815, Derivatives and Hedging , because the quantities involved are for amounts to be consumed within the normal expected production process.

Equity Method Investments.

The consolidated financial statements include the results of Luxco and its affiliated companies since April 1, 2021, when the Company obtained control through the Merger.

The Company holds 50 percent interest in DGL Destiladores, S.de R.L.

(“DGL”) and Agricola LG, S.de R.L.

(“Agricola”) (combined “LMX”), which are accounted for as equity method investments.

(“Agricola” and together with DGL, “LMX”), which are accounted for as equity method investments.

At December 31, 2023 and 2022, the investment in LMX was $ 5,197 and $ 5,534 , respectively, which is recorded in investment in joint ventures on the Consolidated Balance Sheets.

During the years ended December 31, 2022 and 2021, the Company recorded a $ 2,220 and $ 1,611 loss from equity method investments, respectively, which is recorded in other income (loss), net on the Consolidated Statements of Income.

Immaterial Correction to Prior Period Financial Statements.

During the year ended December 31, 2022, the Company identified an immaterial correction related to gross amounts of property, plant and equipment and accumulated depreciation and amortization in the Consolidated Balance Sheet as of December 31, 2021.

The Company performed a materiality assessment, considering both quantitative and qualitative factors, which resulted in the determination that the correction to the financial statements was immaterial.

As such, the Company corrected the December 31, 2021 gross balances for property, plant, and equipment and accumulated depreciation and amortization in Note 2, Other Balance Sheet Captions, in this Form 10-K by equal and offsetting amounts, which resulted in no change to the balance of property, plant, and equipment, net.

During the year ended December 31, 2022, the Company identified an immaterial correction related to the calculation of diluted earnings per share within the year ended December 31, 2021 financial statements filed on Form 10-K.

Other than as follows, this correction had no impact on the financial statements for the year ended December 31, 2021.

For the period ended December 31, 2021, diluted earnings per share should have been $ 4.37 instead of $ 4.34 .

As such, the Company corrected the December 31, 2021 diluted earnings per share on the Consolidated Statements of Income in this Form 10-K.

During the years ended December 31, 2023 and 2022, the Company recorded a $ 337 and $ 2,220 loss from equity method investments, respectively, which is recorded in other income (expense), net on the Consolidated Statements of Income.

Recently Adopted Accounting Standard Updates.

ASU 2021-08, Accounting for Contract Assets and Contract Liabilities from Contracts with Customers , which requires an entity to recognize and measure contract assets and contract liabilities acquired in a business combination in accordance with Topic 606, Revenue Recognition .

This ASU is effective for annual and interim periods beginning after December 15, 2022.

Early adoption is permitted.

The Company has adopted this standard and it did not have an impact to the Company’s consolidated financial statements and related disclosures.

ASU 2020-04, Facilitation of Effects of Reference Rate Reform on Financial Reporting , which provide optional expedients

and exceptions for a period of time to help facilitate the adoption of reference rate reform and the impact on financial

This guidance was effective for all entities as of March 12, 2020 through December 31, 2022.

ASU 2022-06 , Deferral of the Sunset Date of Topic 848, which extends the effective date fro December 31, 2022 to December 31, 2024.

The Company has adopted these standards and it did not have an impact to the Company’s consolidated financial statements and related disclosures.

The Company did not adopt any new Accounting Standard Updates (“ASU”) during the year ended December 31, 2023.

Recently Issued Accounting Pronouncements.

The other recent accounting pronouncements issued by the FASB are not expected to have a significant impact on the Company’s consolidated financial statements and related disclosures.

ASU 2023-07, Improvements to Reportable Segment Disclosures , which requires improved disclosures related to significant segment expenses.

This ASU requires companies to disclose significant segment expenses provided to the chief operating decision maker (“CODM”), a description of other segment items and all existing annual disclosures must be provided on an interim basis.

This ASU is effective for annual periods beginning after December 15, 2023.

Early adoption is permitted and must be applied retrospectively to all prior periods presented in the financial statements.

The Company is currently evaluating the impact to the Company’s financial statements.

ASU 2023-09, Improvements to Income Tax Disclosures, requires improved disclosures related to the rate reconciliation and income taxes paid.

This ASU requires companies to reconcile the income tax expense attributable to continuing operations to the statutory federal income tax rate applied to pre-tax income from continuing operations.

Additionally, this ASU requires

companies to disclose the total amount of income taxes paid during the period.

This ASU is effective for annual periods beginning after December 15, 2024 with early adoption permitted.

The guidance is required to be applied on a prospective basis with the option to apply retrospectively to all prior periods presented in the financial statements.

The Company is currently evaluating the impact to the Company’s financial statements.

The other recent accounting pronouncements issued by the Financial Accounting Standards Board (“FASB”) are not expected to have a significant impact on the Company’s consolidated financial statements and related disclosures.

OTHER BALANCE SHEET CAPTIONS

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Property, plant, and equipment, net $ 262,303 $ 235,632

Accrued expenses.

Accrued expenses and other.

Employee benefit plans $ 5,140 $ 2,389

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Total $ 31,861 $ 28,716

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

The Company generates revenue from the Distilling Solutions segment by the sale of products and by providing warehouse services related to the storage and aging of customer products.

The Company generates revenue from the Branded Spirits segment by the sale of products and by providing contract bottling services.

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Total Ingredient Solutions 131,736 115,941 90,650

Total sales $ 782,358 $ 626,720 $ 395,521

$ 836,523 $ 782,358 $ 626,720

BUSINESS COMBINATION

Acquisition of Penelope

Description of the Transaction .

On January 22, 2021, the Company entered into a definitive agreement to acquire Luxco, and subsequently completed the merger on April 1, 2021 (the “Merger”).

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

As a result of the Merger, MGP increased its scale and market position in the branded-spirits sector and believes it strengthened its platform for future growth of higher valued-added products.

Following the Merger, Luxco became a wholly-owned subsidiary of MGP and is included within the Branded Spirits segment.

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

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

The Merger Consideration was subject to customary purchase price adjustments related to, among other things, net working capital, acquired cash and assumed debt.

On May 8, 2023, the Company entered into a definitive agreement to acquire 100 percent of the equity of Penelope, and subsequently completed the acquisition on June 1, 2023 (the “Acquisition”).

Penelope, prior to the Acquisition, was a family and founder-owned and operated American whiskey company with a diverse portfolio of high-quality whiskeys in the premium plus price tiers.

As a result of the Acquisition, the Company enhanced its presence in the growing American whiskey category and expanded its portfolio of premium plus price tier brands.

Following the Acquisition, Penelope became a wholly owned subsidiary of the Company and its financial results are included within the Branded Spirits segment.

The aggregate consideration paid by the Company in connection with the Acquisition was $ 105,000 in cash paid at closing, with further additional potential earn-out consideration of up to a maximum cash payout of $ 110,800 if certain performance conditions, measured through December 31, 2025, are met.

The consideration is subject to customary purchase price adjustments related to, among other things, net working capital and acquired cash.

The consideration paid at closing included a preliminary estimated purchase price adjustment.

In September 2021, the parties finalized the purchase price adjustment, which decreased

the cash consideration paid by approximately $ 608 and increased stock consideration by an additional 1,373 shares from the preliminary amounts that were paid at closing.

The cash portion of the Merger Consideration, the repayment of assumed debt, and transaction-related expenses were financed with borrowings under the Company’s existing Credit Agreement which was drawn down on April 1, 2021.

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

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

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

During the year ended December 31, 2023, the

Company finalized the net working capital adjustments, which decreased the cash consideration from $ 105,000 at closing to $ 104,638 at December 31, 2023.

The cash portion of the consideration and transaction-related expenses were paid using both cash on hand and borrowings under the Company’s existing credit agreement.

See Note 7, Corporate Borrowings, for further details.

For tax purposes, the Acquisition was structured as an asset purchase which created additional tax basis in the assets acquired as a result of valuing the assets at fair market value and the purchase price will be accounted for in accordance with U.S.

federal tax law.

Indefinite-lived intangible assets and goodwill is expected to be deductible for U.S.

income tax purposes.

Purchase Price Allocation.

The Merger was accounted for as a business combination in accordance with Financial Accounting Standards Board Accounting Standard Codification 805, Business Combinations (“ASC 805”), and as such, assets acquired, liabilities assumed, and consideration transferred were recorded at their estimated fair values on the acquisition date.

The following table summarizes the allocation of the consideration paid for Luxco to the estimated fair value of the assets acquired and liabilities assumed at the acquisition date, with the excess recorded to goodwill.

The Acquisition was accounted for as a business combination in accordance with FASB Accounting Standard Codification 805, Business Combinations (“ASC 805”), and as such, assets acquired, liabilities assumed, and consideration transferred were recorded at their estimated fair values on the acquisition date.

The following table summarizes the allocation of the consideration paid for Penelope to the estimated fair value of the assets acquired and liabilities assumed at the acquisition date, with the excess recorded to goodwill.

Consideration:

Cash, net of assumed debt $ 149,484

Value of MGP Common Stock issued at close (a)

Cash $ 104,638

Contingent consideration 62,100

Fair value of total consideration transferred $ 166,738

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Inventory 12,454

Prepaid expenses 1,454

Prepaid expenses and other assets 77

Property, plant and equipment, net 253

Investments in joint ventures 5,085

Intangible assets (b)

Intangible assets (a)

Operating lease right-of-use assets, net 426

Other assets 44

Total assets 74,203

Current maturities of long-term debt (c)

Accounts payable 2,242

Federal and state excise taxes payable 8,352

Accrued expenses and other 205

Other noncurrent liabilities 196

Deferred income taxes 57,034

Long-term operating lease liabilities 268

Total liabilities 2,715

1 unchanged sentence

Total $ 166,738

(a) The Company issued 5,007,833 shares of MGP Common Stock which was valued at $ 59.15 per share on April 1, 2021.

In September 2021, the parties finalized the purchase price adjustments which increased stock consideration by an additional 1,373 shares from the preliminary amounts that were paid at closing.

(b) Intangible assets acquired included trade names with an estimated fair value of $ 178,100 and distributor relationships with an estimated fair value of $ 41,400 .

(a) Intangible assets acquired included trade names with an estimated fair value of $ 34,000 and distributor relationships with an estimated fair value of $ 23,700 .

In accordance with ASC 805, assets acquired, liabilities assumed, and consideration transferred were recorded at their estimated fair values on the Acquisition date.

The fair value measurements of tangible and intangible assets and liabilities were based on significant inputs not observable in the market and represent Level 3 measurements within the fair value hierarchy.

Level 3 inputs include discount rates that would be used by a market participant in valuing these assets and liabilities, projections of

revenues and cash flows, distributor attrition rates, royalty rates and market comparable, among others.

Level 3 inputs include discount rates that would be used by a market participant in valuing these assets and liabilities, projections of revenues and cash flows, distributor attrition rates, royalty rates, and market comparables, among others.

The fair value of work-in-process and finished goods inventory was determined using the comparative sales method and raw materials was determined using the replacement cost method.

The fair value of personal property assets was determined using the market approach and the indirect and direct method of the cost approach, and the fair value of real property was determined using the cost approach and and the sales comparison approach.

Goodwill of $ 223,556 , none of which is expected to be deductible for tax purposes, represents the excess of the consideration transferred over the estimated fair value of assets acquired net of liabilities assumed.

The intangible assets acquired include indefinite-lived intangible assets, trade names, with an estimated fair value of $ 178,100 and definite-lived intangible assets, distributor relationships, with an estimated fair value of $ 41,400 and a useful life of 20 years.

The trade names and distributor relationships acquired by the Company have been recorded at the estimated fair values using the relief from royalty method and multi-period earnings method, respectively.

Management engaged a third party valuation specialist to assist in the valuation analysis of certain acquired assets including trade name and distributor relationship.

Goodwill of $ 95,250 , all of which is expected to be deductible for tax purposes, represents the excess of the consideration transferred over the estimated fair value of assets acquired net of liabilities assumed.

Additionally, the goodwill is representative of the strength of the Penelope brand within the American whiskey category, and the synergies expected to be achieved by the combined company.

The intangible assets acquired included indefinite-lived intangible assets, trade names, which have an estimated fair value of $ 34,000 , and definite-lived intangible assets, distributor relationships, which have an estimated fair value of $ 23,700 and a useful life of 20 years.

The trade names and distributor relationships acquired by the Company have been recorded at estimated fair values using the relief from royalty method and multi-period excess earnings method, respectively.

Management engaged a third-party valuation specialist to assist in the valuation analysis of certain acquired assets including trade names and distributor relationships.

The operating results of Penelope have been included in the Company’s consolidated financial statements since the date of the Acquisition, June 1, 2023.

The operating results and pro forma results are not disclosed due to the immaterial impact to the Company’s Consolidated Statements of Income.

During the year ended December 31, 2023, the Company incurred $ 2,060 of costs related to the Acquisition, which are included in selling, general, and administrative expenses on the Consolidated Statements of Income.

Contingent Consideration.

The estimated fair value of the contingent consideration obligation at the Acquisition date was $ 62,100 , which was determined using a Monte Carlo simulation approach.

This approach requires significant assumptions, including projected net sales, discount rates, and volatility rates.

The inputs used in the calculation of the contingent consideration liability are considered Level 3 under the fair value hierarchy due to the lack of relevant market activity.

The contingent consideration liability is measured on a quarterly basis and recorded at fair value.

The changes in fair value of the obligation resulted from changes in the key assumptions between measurement dates, such as projected net sales, discount rates, and volatility rates.

During the year ended December 31, 2023, there was a $ 7,100 adjustment to the fair value measurement of the contingent consideration obligation, which was included in the change in fair value of contingent consideration on the Consolidated Statements of Income.

The amount payable is based upon achievement of certain net sales targets between the Acquisition date and December 31, 2025.

The possible payments range from zero to a maximum payout of $ 110,800 .

Merger with Luxco

Description of the transaction .

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

(“Luxco”) and subsequently completed the merger on April 1, 2021 (the “Merger”).

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

As a result of the Merger, MGP increased its scale and market position in the branded-spirits sector and believes it strengthened its platform for future growth of higher valued-added products.

Following the Merger, Luxco became a wholly-owned subsidiary of MGP and is included within the Branded Spirits segment.

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

The Company Shares were valued at $ 296,213 and represented approximately 22.8 percent of the Company’s outstanding Common Stock immediately following the closing of the Merger.

The Merger Consideration was subject to customary purchase price adjustments related to, among other things, net working capital, acquired cash and assumed debt.

The consideration paid at closing included a preliminary estimated purchase price adjustment.

In September 2021, the parties finalized the purchase price adjustment, which decreased the cash consideration paid by approximately $ 608 and increased stock consideration by an additional 1,373 shares from the preliminary amounts that were paid at closing.

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

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

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

Operating Results .

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Pro Forma Information .

The following table summarizes the unaudited pro forma financial results for the year ended December 31, 2021 and 2020, as if the Merger had occurred on January 1, 2020:

The following table summarizes the unaudited pro forma financial results for the year ended December 31, 2021 as if the Merger had occurred on January 1, 2020:

Pro Forma Financial Information

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The pro forma results are adjusted for items that are non-recurring in nature and directly attributable to the Merger, including the income tax effect of the adjustments.

Merger related costs incurred by the Company of $ 8,927 for the year ended December 31, 2021 were excluded and $ 7,037 is assumed to have been incurred on January 1, 2020.

Merger related costs incurred by the Company of $ 8,927 for the year ended December 31, 2021 were excluded.

Merger related costs incurred by Luxco of $ 3,132 were excluded from the year ended December 31, 2021 pro forma results.

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Definite-Lived Intangible Assets.

The Company has a definite-lived intangible asset which was acquired as a result of the Merger.

The Company acquired definite-lived intangible asset in connection with various acquisitions of businesses.

The distributor relationships have a carrying value of $ 58,716 , net of accumulated amortization of $ 6,384 .

1 unchanged sentence

The amortization expense for the years ended December 31, 2023 and 2022 was $ 2,761 and $ 2,070 , respectively.

The weighted average amortization period at December 31, 2023 for definite-lived intangible assets is 18.1 years

As of December 31, 2023, the expected future amortization expense related to definite-lived intangibles assets are as follows:

3 unchanged sentences

The Company records goodwill and indefinite-lived intangible assets in connection with various acquisitions of businesses and allocates the goodwill and indefinite-lived intangible assets to its respective reporting units.

The carrying amount of goodwill, which relates to the Branded Spirits segment was $ 226,294 at both December 31, 2022 and 2021.

The carrying amount of indefinite-lived intangible assets, which relates to the Branded Spirits segment was $ 178,990 at both December 31, 2022 and 2021.

Changes in carrying amount of goodwill by business segment were as follows:

Distilling Solutions Branded Spirits Ingredient Solutions Total

Balance at December 31, 2022

$ — $ 226,294 $ — $ 226,294

Acquisitions — 95,250 — 95,250

Balance at December 31, 2023

$ — $ 321,544 $ — $ 321,544

Changes in carrying amount of trade names by business segment were as follows:

Distilling Solutions Branded Spirits Ingredient Solutions Total

Balance at December 31, 2022

$ — $ 178,990 $ — $ 178,990

Acquisitions — 34,000 — 34,000

Balance at December 31, 2023

$ — $ 212,990 $ — $ 212,990

CLOSURE OF THE ATCHISON FACILITY

On July 13, 2023, the Company announced the decision by its Board of Directors to approve the closure of the Company’s distillery located in Atchison, Kansas (the “Atchison Distillery”).

The Atchison Distillery ceased operations in December 2023.

The decision to close the Atchison Distillery is consistent with the Company’s plan to address profitability headwinds associated with its GNS and industrial alcohol products within the Distilling Solutions segment.

As a result of the decision to close the Atchison Distillery, the Company, with the assistance of a third-party valuation specialist, completed a fair value analysis of the assets associated with the Atchison Distillery during the year ended December 31, 2023.

The fair value of the assets associated with the Atchison Distillery were determined using a combination of the cost and market approach.

During the year ended December 31, 2023, the Company recorded a $ 17,112 impairment of assets, which was recorded in impairment of long-lived assets and other on the Consolidated Statement of Income.

The impaired assets were recorded within the Distilling Solution segment.

Additionally, the Company recorded $ 2,279 of expenses related to severance costs, inventory write offs, contract termination fees, consulting fees, and other miscellaneous expenses, which were recorded in impairment of long-lived assets and other on the Consolidated Statement of Income for the year ended December 31, 2023.

CORPORATE BORROWINGS

10 unchanged sentences

17,600 20,000

Other long-term borrowings — 203

Total indebtedness outstanding 293,850 236,450

8 unchanged sentences

On February 14, 2020, the Company entered into a credit agreement (the “Credit Agreement”) with multiple participants led by Wells Fargo Bank, National Association (“Wells Fargo Bank”), which provided for a $ 300,000 revolving credit facility.

On May 14, 2021, the Company amended the Credit Agreement to increase the principal amount to $ 400,000 and to increase the amount of the revolving credit facility by up to an additional $ 100,000 provided certain conditions are satisfied and at the discretion of the lender.

On May 14, 2021, the Company amended the Credit Agreement to extend the term and to increase the principal amount available to $ 400,000 and to permit the Company, subject to obtaining lender approval, to increase the amount of the revolving credit facility by up to an additional $ 100,000 provided certain conditions are satisfied and at the discretion of the lender.

On August 31, 2022, the Credit Agreement was amended to change the interest rate benchmark from LIBOR to SOFR.

The Credit Agreement matures on February 14, 2025.

The Credit Agreement matures on May 14, 2026.

The Credit Agreement is secured by substantially all assets, excluding real property.

The Credit Agreement includes certain requirements and covenants, which the Company was in compliance with at December 31, 2022.

The Credit Agreement includes certain requirements and covenants, with which the Company was in compliance at December 31, 2023.

The Company incurred no new loan fees related to the Credit Agreement during 2023.

The unamortized balance of total loan fees related to the Credit Agreement was $ 1,177 at December 31, 2022, which were included in other assets, net on the Consolidated Balance Sheet.

The unamortized balance of total loan fees related to the Credit Agreement was $ 824 at December 31, 2023.

The unamortized loan fees are being amortized over the life of the Credit Agreement.

As of December 31, 2022, the Company had no outstanding borrowings under the Credit Agreement leaving $ 400,000 available.

Part of the cash portion of the consideration paid to acquire Penelope and transaction-related expenses were financed with $ 105,000 borrowings under the Credit Agreement.

As of December 31, 2023, the Company had $ 63,000 outstanding borrowings under the Credit Agreement, leaving $ 337,000 available.

The interest rate for the borrowings of the Credit Agreement at December 31, 2023 was 6.46 %.

Note Purchase Agreements .

The Company’s Note Purchase and Private Shelf Agreement (the “Note Purchase Agreement”),

with PGIM, Inc., (“Prudential”), an affiliate of Prudential Financial, Inc., and certain affiliates of Prudential, provides for the issuance of $ 20,000 of Series A Senior Secured Notes and the issuance of up to $ 105,000 of additional Senior Secured Notes (or any higher amount solely to the extent Prudential has provided written notice to the Company of its authorization of such a higher amount).

On July 29, 2021, Prudential provided the Company notice pursuant to Section 1.2 of the Note Agreement that Prudential has authorized an increase in the amount of additional Senior Secured Notes that may be issued under the uncommitted shelf facility under the Note Agreement from $ 105,000 to $ 140,000 , effective as of July 29, 2021.

The deadline for issuing the notes under the shelf facility is August 23, 2023.

On August 23, 2017, the Company initially issued $ 20,000 of Series A Senior Secured Notes with a maturity date of August 23, 2027.

The Company’s Note Purchase and Private Shelf Agreement (the “Note Purchase Agreement”), with PGIM, Inc.

(“Prudential”), an affiliate of Prudential Financial, Inc., and certain affiliates of Prudential, provides for the issuance of $ 20,000 of Series A Senior Secured Notes and the issuance of up to $ 105,000 of additional Senior Secured Notes (or any higher amount solely to the extent Prudential has provided written notice to the Company of its authorization of such a higher amount).

Effective August 23, 2023, the Note Purchase Agreement was amended to increase the total amount of Senior Secured Notes that may be issued under the facility of the Note Purchase Agreement to $ 250,000 .

Additionally, the period for issuing senior secured promissory notes under the Note Purchase Agreement was extended from August 23, 2023 to August 31, 2026.

During 2017, the Company issued $ 20,000 of Series A Senior Secured Notes with a maturity date of August 23, 2027.

The Series A Senior Secured Notes bear interest at a rate of 3.53 percent per year.

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

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

The Senior Secured Notes bear interest at a rate of 3.80 percent per year.

As of December 31, 2022, the Company has $ 15,200 of Series A Senior Secured Notes and $ 20,000 of additional Senior Secured Notes outstanding under the Note Purchase Agreement leaving $ 120,000 available of Senior Secured Notes.

The Company incurred no new loan fees related to the Note Purchase Agreement during 2022.

As of December 31, 2023, the Company had $ 12,000 of Series A Senior Secured Notes and $ 17,600 of additional Senior Secured Notes outstanding under the Note Purchase Agreement, leaving $ 220,400 available of under the Note Purchase Agreement.

The Company did not capitalize any new loan fees related to the Note Purchase Agreement during 2023.

The unamortized balance of total loan fees related to the Note Purchase Agreement was $ 71 at December 31, 2023 and is being amortized over the life of the Note Purchase Agreement.

The Note Purchase Agreement is secured by substantially all assets, excluding real property.

The Note Purchase Agreement includes certain requirements and covenants, which the Company was in compliance with at December 31, 2022.

The Note Purchase Agreement includes certain requirements and covenants, with which the Company was in compliance at December 31, 2023.

Convertible Senior Notes .

On November 16, 2021, the Company issued $ 201,250 in aggregate principal amount of 1.88 % convertible senior notes due in 2041 (“2041 Notes”).

On November 16, 2021, the Company issued $ 201,250 in aggregate principal amount of 1.88 % convertible senior notes due in 2041 (the “2041 Notes”).

The total aggregate principal amount includes $ 26,250 aggregate principal amount of 2041 Notes purchased by the initial purchasers in the offering pursuant to their exercise in full of their option to purchase additional notes under the purchase agreement for the offering.

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The 2041 Notes are senior, unsecured obligations of the Company and interest is payable semi-annually in arrears at a fixed interest rate of 1.88 % on May 15 and November 15 of each year.

The 2041 Notes mature on November 15, 2041 (“Maturity Date”) unless earlier repurchased, redeemed or converted, per the agreement.

The 2041 Notes mature on November 15, 2041 (“Maturity Date”) unless earlier repurchased, redeemed, or converted, per the terms of the Indenture.

Upon conversion, the Company will pay cash up to the aggregate principal amount of the 2041 Notes to be converted and pay or deliver, as the case may be, cash, shares of the Company’s Common Stock, or a combination of cash and shares of the Company’s Common Stock, at its election, in respect to the remainder, if any, of the Company’s conversion obligation in excess of the aggregate principal amount of the 2041 Notes being converted.

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• During any calendar quarter commencing after the quarter ending March 31, 2022, if the closing sale price of Common Stock for at least 20 trading days in the period of 30 consecutive trading days is more than 130 % of the conversion price;

• during the 5 consecutive business days following any 10 consecutive trading day period in which the trading price per $1 principal amount of the notes for each trading day was less than 98 % of the product of the closing sale price of common stock on such trading day and the conversion rate on such trading day;

Common Stock on such trading day and the conversion rate on such trading day;

• upon the occurrence of specified corporate events, as defined in the Indenture;

1 unchanged sentence

• during the period July 15, 2026 ending close of business day immediately preceding November 20, 2026 or the period July 15, 2041 and close of business day immediately preceding the Maturity Date.

Other long-term borrowings .

As part of the Merger, the Company acquired additional long-term notes payable to certain counties in Kentucky and during the year ended December 31, 2022, the Company paid off the outstanding balances.

Debt Maturities.

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Share-based compensation $ 4,453 $ 2,462

State tax credit carryforwards 3,991 2,343

Operating loss carryforwards 3,040 2,416

state and foreign tax credit carryforwards

Mexico and U.S.

state loss carryforwards

Inventories 2,656 1,936

1 unchanged sentence

Deferred compensation 848 691

Section 174 timing difference 2,032 —

Other 4,279 3,002

14 unchanged sentences

Balance at December 31, 2022

Increase 1,135

Balance at December 31, 2023

As of December 31, 2022, the Company’s total valuation allowance of $ 2,073 related to net operating loss in states and foreign countries in which it is not “more likely than not” to create enough taxable income to fully utilize the carryforwards before expiration of the carryforward periods.

As of December 31, 2021, the Company’s total valuation allowance of $ 1,657 related to net operating loss and tax credits carryforwards in states and foreign countries in which it is not “more likely than not” to create enough taxable income to fully utilize the carryforwards before expiration of the carryforward periods.

The Merger with Luxco during 2021 was largely structured as a non-taxable merger for U.S.

income tax purposes.

This merger required the Company to book an additional $ 57,034 in deferred tax liabilities to its opening balance sheet.

In addition, at December 31, 2021, the Company had book tax differences resulting in a net deferred tax liability balance of $ 66,101 .

This increase in the Company’s deferred tax balances could make the Company more susceptible to the tax impact of tax rate changes and its effect on earnings and earnings per share in the future.

As of December 31, 2022 and 2021, the Company had $ 21,537 and $ 19,823 in gross state net operating loss carryforwards, respectively.

Due to varying state carryforward periods, the state net operating loss carryforwards will primarily expire in varying years between calendar years 2022 and 2042.

As of December 31, 2022 and 2021, the Company had gross state tax credit carryforwards of $ 5,052 and $ 2,966 , respectively.

As of December 31, 2023, the Company’s total valuation allowance of $ 3,208 related to net operating loss in U.S.

states and foreign countries in which it is not “more likely than not” to create enough taxable income to fully utilize the carryforwards before expiration of the carryforward periods and certain foreign tax credit carryforwards.

As of December 31, 2022, the Company’s total valuation allowance of $ 2,073 , related to net operating loss in U.S.

states and foreign countries in which it is not “more likely than not” to create enough taxable income to fully utilize the carryforwards before expiration of the carryforward periods.

As of December 31, 2023 and 2022, the Company had $ 23,590 and $ 21,537 in gross U.S.

state net operating loss carryforwards, respectively.

Due to varying U.S.

state carryforward periods, the state net operating loss carryforwards will primarily expire in varying years between calendar years 2024 and 2044.

As of December 31, 2023 and 2022, the Company had gross U.S.

state tax credit carryforwards of $ 3,890 and $ 5,052 , respectively.

state credits, if not used to offset income tax expense in their respective jurisdictions, will expire in varying years between 2024 and 2040.

8 unchanged sentences

Reduction for prior year tax positions ( 60 ) ( 34 ) ( 30 )

Reductions for settlements — — ( 165 )

End of year balance $ 424 $ 156 $ 113

1 unchanged sentence

The Company reasonably expects that the amount of unrecognized tax benefit will not change significantly over the next 12 months.

The Company is not under any federal, state or foreign income tax audits.

For federal tax purpose, all tax years after 2018 remain open to adjustment.

The Company is not under any U.S.

federal, state or foreign income tax audits.

federal tax purpose, all tax years after 2019 remain open to examination.

Amounts paid for income tax in foreign jurisdictions are not material to the financial statements.

2 unchanged sentences

Capital Stock.

Common Stockholders are entitled to elect four of the nine members of the Board of Directors, while Preferred Stockholders are entitled to elect the remaining five members.

Common stockholders are entitled to elect four of the nine members of the Company’s Board of Directors, while preferred stockholders are entitled to elect the remaining five members.

All directors are elected annually for a one year term.

Any vacancies on the Board are to be filled only by the shareholders and not by the Board.

Shareholders who own 10 percent or more of the outstanding Common or Preferred Stock have the right to call a special meeting of stockholders.

Common Stockholders are not entitled to vote with respect to a merger, dissolution, lease, exchange or sale of substantially all of the Company’s assets, or on an amendment to the Articles of Incorporation, unless such action would increase or decrease the authorized shares or par value of the Common or Preferred Stock, or change the powers, preferences or special rights of the Common or Preferred Stock so as to affect the Common Stockholders adversely.

Any vacancies on the Board may only be filled by the stockholders and not by the Board.

Stockholders who own 10 percent or more of the outstanding Common Stock or Preferred Stock have the right to call a special meeting of stockholders.

Common stockholders are not entitled to vote with respect to a merger, dissolution, lease, exchange or sale of substantially all of the Company’s assets, or on an amendment to the Articles of Incorporation, unless such action would increase or decrease the authorized shares or par value of the Common Stock or Preferred Stock, or change the powers, preferences or special rights of the Common Stock or preferred stock so as to affect the Common stockholders adversely.

Generally, Common stockholders and Preferred stockholders vote as separate classes on all other matters requiring shareholder approval.

The computations of basic and diluted EPS:

The following table presents the computations of basic and diluted EPS:

Year Ended December 31,

13 unchanged sentences

Diluted EPS $ 4.80 $ 4.92 $ 4.37

(a) Net income attributable to all shareholders.

(a) Net income attributable to all stockholders.

(b) Participating securities included 226,410 , 177,398 , and 163,024 unvested restricted stock units (“RSUs”) for the years ended December 31, 2023, 2022, and 2021, respectively.

2 unchanged sentences

The Convertible Senior Notes would only have a dilutive impact if the average market price per share during the quarter and year to date period exceeds the conversion price of $ 96.24 per share.

There was no dilutive impact for the years ended December 31, 2021, and 2020.

There was no dilutive impact for the year ended December 31, 2021.

Share Issuance.

On April 1, 2021, as part of the consideration for the Merger, the Company issued 5,007,833 shares of common stock.

Additionally, in September 2021, the parties finalized the purchase price adjustments, which increased stock consideration by an additional 1,373 shares from the preliminary amounts that were paid at closing.

Share Repurchase.

On February 25, 2019, the Board of Directors approved a $ 25,000 share repurchase authorization commencing February 27, 2019 through February 27, 2022.

Under the share repurchase program, the company can repurchase stock from time to time for cash in open market purchases, block transactions, and privately negotiated transactions in accordance with applicable federal securities laws.

The Company did not repurchase any shares under the share repurchase program during 2022, prior to its expiration on February 27, 2022.

The Company did not renew the share repurchase program upon its expiration.

Common Stock Share Activity.

On April 1, 2021, as part of the consideration for the Merger with Luxco, the Company issued 5,007,833 shares of Common Stock.

Additionally, in September 2021, the Merger parties finalized the purchase price adjustments, which increased stock consideration by an additional 1,373 shares from the preliminary amounts that were paid at closing.

Shares Outstanding Activity.

The following table presents the Company’s share activity:

Shares Outstanding

Capital Stock Preferred Common Stock

Balance, December 31, 2020

Preferred Stock

Balance at December 31, 2021

437 21,964,314

1 unchanged sentence

Repurchase of Common Stock — ( 9,032 )

Balance, December 31, 2021

Balance at December 31, 2022

437 21,994,042

1 unchanged sentence

Repurchase of Common Stock — ( 8,436 )

Balance, December 31, 2022

Balance at December 31, 2023

437 22,016,113

Dividends and Dividend Equivalents.

The following table presents the Company’s dividend and dividend equivalent information:

Dividend and Dividend Equivalent Information (per Share and Unit)

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February 23 March 12 March 26 $ 0.12 $ 0.12 $ 2,033 $ 19 $ 2,052

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

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

October 27 November 20 December 4 0.12 0.12 2,030 14 2,044

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

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

November 1 November 19 December 3 0.12 0.12 2,635 20 2,655

$ 0.48 $ 0.48 $ 9,938 $ 79 $ 10,017

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Lease components are accounted for separately from non-lease components, such as common-area maintenance, based on the relative, observable stand-alone prices of the components.

The Company’s leases have remaining lease terms of one year to six years , some of which may include options to extend the lease.

The Company’s leases have remaining lease terms of less than one year to ten years , some of which may include options to extend the lease.

Options to renew the Company’s leases were not considered when assessing the value of the right-of-use assets because the Company is not reasonably certain that it will assert the options to renew the leases.

13 unchanged sentences

Short-term lease costs 446 415

Sublease income — ( 4 )

Net lease costs (a)

14 unchanged sentences

Operating leases 5.1 years 4.6 years

As of December 31, 2022, the maturities of operating lease liabilities were as follows:

As of December 31, 2023, the future payments under operating leases having initial terms of one year or more were as follows:

Thereafter 2,163

3 unchanged sentences

COMMITMENTS AND CONTINGENCIES

We are in various stages of financing projects with industrial revenue bond transactions for our facilities located in Kentucky.

The bonds allow a 15 or 40 year real property tax abatement on our renovated and newly-constructed warehouse buildings and distilleries in Kentucky.

We have been approved for $ 55,500 of industrial revenue bonds with the City of Williamstown Kentucky, and have used approximately $ 21,000 .

Additionally, we have been approved for $ 175,000 of industrial revenue bonds with Nelson County Kentucky and have used approximately $ 48,000 .

The City of Williamstown and Nelson County issued the industrial revenue bonds to us.

The Company recorded as property, plant, and equipment, net, on its Consolidated Balance Sheets under a capital lease.

The Company is in the process of completing several projects that have been financed using industrial revenue bonds in the state of Kentucky.

Traditionally, industrial revenue bonds have been used as an economic development tool in the state to attract desirable businesses, including business in the bourbon industry, and have allowed a 15 to 40 year real property tax abatement on the Company’s renovated and newly-constructed warehouse buildings and distilleries in Kentucky.

As of December 31, 2023, approximately $ 50,000 of the Company’s facilities in Nelson County Kentucky and approximately $ 30,900 of the Company’s facilities in Williamstown Kentucky were financed with industrial revenue bonds.

The city then leased the facilities back to the Company under a capital lease, the terms of which provide for the payment of basic rent in an amount sufficient to pay principal and interest on the bonds.

The Company’s obligation to pay rent under the lease is in the same amount and due on the same date as the obligation to pay debt service on the bonds which the Company holds.

The lease permits the Company to present the bonds at any time for cancellation, upon which our obligation to pay basic rent would be canceled.

At the bonds’ maturity the facilities will revert to the Company without costs.

If the Company were to present the bonds for cancellation prior to maturity, a nominal fee could be incurred.

The Company may not be able to use industrial revenue bonds in the future due to legislative, regulatory, and related changes in the state of Kentucky.

The Company recorded the land and building assets as property, plant, and equipment, net, on its Consolidated Balance Sheets under a capital lease.

The lease payment on the facilities is sufficient to pay principal and interest on the bonds.

1 unchanged sentence

Contingencies.

There are various legal and regulatory proceedings involving the Company and its subsidiaries.

The Company and its subsidiaries are, from time to time, a party to legal and regulatory proceedings arising in the ordinary course of business.

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

Shareholder matters.

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

Griffin, et al.

, Case 2:20-cv-02239.

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

Griffin, et al.

, Case 2:20-cv-02281.

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

Griffin, et al.

, Case 2020-CV-000042.

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

The Company was a nominal defendant in each action.

Plaintiffs alleged that the Company was damaged as a result of the commencement of securities litigation against defendants, the repurchase of Company stock at artificially inflated prices, and compensation paid to the individual defendants.

The Complaint in Dorfman asserted claims for violations of Sections 14(a), 10(b), and 20(a) of the Securities Exchange Act of 1934, breach of fiduciary duties, waste of corporate assets, and unjust enrichment.

The Complaint in Carter asserted claims for violations of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934, breach of fiduciary duties, waste of corporate assets, and unjust enrichment.

The Petition in Kearns asserted claims for breach of fiduciary duties, waste of corporate assets, and unjust enrichment.

The pleadings prayed for an award of compensatory damages, including interest, in favor of the Company, for equitable relief related to the Company’s corporate governance, for disgorgement of compensation, and for an award of attorneys’ fees and costs.

On August 31, 2021, the court dismissed with prejudice the securities litigation on which some of the derivative claims were based.

On January 4, 2022, the court dismissed the Carter action.

On January 11, 2022, the court dismissed the Dorfman action.

On February 2, 2022, the plaintiffs and defendants entered into a stipulation of dismissal of the Kearns action.

The federal claims alleged in Carter were dismissed with prejudice.

All other derivative claims were dismissed without prejudice.

2016 Atchison Chemical Release.

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

Private plaintiffs initiated legal proceedings against the Company for damages resulting from the Atchison Chemical Release.

The Company reached a settlement with the plaintiffs in December 2021 and the legal proceedings were dismissed with prejudice in January 2022.

EMPLOYEE BENEFIT PLANS

401(k) Plans.

The Company has established 401(k) plans covering all employees after certain eligibility requirements are met.

The Company has established 401(k) plans covering all U.S.

employees after certain eligibility requirements are met.

Amounts charged to operations for employer contributions related to the plans totaled $ 2,810 , $ 2,517 , and $ 1,826 for 2023, 2022, and 2021, respectively.

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In 2014, the Company made a change to the plan to terminate post-employment health care and life insurance benefits for retirees and employees, except for a specified grandfathered group.

As of December 31, 2022 and 2021, total current benefit obligation recorded in accrued expense on the Consolidated Balance Sheets was $ 190 and $ 232 , respectively.

As of December 31, 2022 and 2021, total noncurrent benefit obligation was $ 847 and $ 1,159 , which was recorded in other noncurrent liabilities on the Consolidated Balance Sheets, respectively.

As of December 31, 2023 the total current and non-current benefit obligations are immaterial.

Share-Based Compensation Plans.

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The Company currently has two active share-based compensation plans:

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

The plans were approved by shareholders at the Company’s annual meeting in May 2014.

Detail of activities in both plans follows below.

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

The plans were approved by stockholders at the Company’s annual meeting in May 2014.

The Company’s share-based compensation plans provide for the awarding of stock options, stock appreciation rights, and shares of restricted stock and RSUs for senior executives and salaried employees, as well as for outside directors.

Compensation expense related to restricted stock awards is based on the market price of the stock on the date the Board of Directors communicates the approved award and is amortized over the vesting period of the restricted stock award.

Compensation expense related to RSU awards is based on the market price of the stock on the date the Board of Directors

communicates the approved award and is amortized over the vesting period of the restricted stock award.

The Consolidated Statements of Income for 2023, 2022, and 2021 reflect total share-based compensation costs and director fees for awarded grants of $ 5,425 , $ 3,487 , and $ 2,346 , respectively, related to these plans.

For long-term incentive awards to be granted in the form of RSUs in 2024 based on 2023 results, the Human Resources and Compensation Committee (“HRCC”) determined that the grants would have performance conditions that would be based on the same performance metrics as the Short-Term Incentive Plan (the “STI Plan”).

The performance metrics are operating income, earnings before interest, taxes, depreciation, and amortization (“EBITDA”), and EPS.

The performance metrics are adjusted operating income, adjusted earnings before interest, taxes, depreciation, and amortization (“EBITDA”), and adjusted EPS.

Because management determined at the beginning of 2023 that the performance metrics would more likely than not be met, amortization of the estimated dollar pool of RSUs to be awarded based on 2023 results was started in the first quarter over an estimated 48 month period, including 12 months to the grant date and an additional 36 months to the vesting date.

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The 2014 Plan, with 1,500,000 shares registered for future grants, provides that vesting occurs pursuant to the time period specified in the particular award agreement approved for that issuance of RSUs, which is to be not less than three years unless vesting is accelerated due to the occurrence of certain events.

As of December 31, 2022, 586,353 RSUs had been granted of the 1,500,000 shares approved for under the 2014 Plan.

As of December 31, 2023, 658,081 RSUs had been granted from the 1,500,000 shares approved for under the 2014 Plan.

Directors’ Plan.

The Director’s Plan, with 300,000 shares registered for future grants, provides that vesting occurs pursuant to the time period specified in the particular award agreement approved for that issuance of equity.

As of December 31, 2022, 131,663 shares were granted of the 300,000 shares approved for grants under the Directors’ Plan and all 131,663 shares were vested.

Summary of unvested RSUs under the Company’s share-based compensation plans for 2022, 2021, and 2020:

As of December 31, 2023, 139,579 shares were granted from the 300,000 shares approved for grants under the Directors’ Plan and all 139,579 shares were vested.

The following table presents the summary of unvested RSUs under the Company’s share-based compensation plans for 2023, 2022, and 2021:

Year Ended December 31,

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As of December 31, 2023, there was $ 2,716 of total estimated unrecognized compensation costs (net of estimated forfeitures) related to granted RSU awards.

These costs are expected to be recognized over a weighted average period of approximately 1.3 years.

These costs are expected to be recognized over a weighted average period of approximately 1.0 year.

Upon their vesting, the Company purchased restricted stock and RSUs from employees to cover associated withholding taxes.

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Annual Cash Incentive Plan.

Pursuant to the STI Plan, short-term incentive compensation is dependent on the achievement of certain performance metrics by the Company, established by the Board of Directors.

Each performance metric is calculated in accordance with the rules approved by the HRCC, which may adjust the results to eliminate unusual items.

For 2022, 2021, and 2020, the performance metrics were operating income, EBITDA, and EPS.

Operating income for the performance metric was defined as reported GAAP operating income adjusted for certain discretionary items as determined by the Company’s management, if applicable (“adjusted operating income”).

The HRCC determines the officers and employees eligible to participate under the STI Plan for the plan year as well as the target annual incentive compensation for each participant for each plan year.

Additionally, certain employees within the Branded Spirits segment have an incentive plan that is based on performance metrics of number of depleted cases and gross margin.

Pursuant to the STI Plan, short-term incentive compensation is dependent on the achievement of certain performance metrics, which are established by the HRCC.

The degree of achievement of each financial performance metric for each plan year is calculated in accordance with the STI Plan.

These calculations are approved by the HRCC, which may adjust results to eliminate unusual items.

For 2023, 2022, and 2021, the financial performance metrics were adjusted operating income, adjusted EBITDA, and adjusted EPS.

The HRCC also approves the amount of short-term incentive compensation paid for the plan year to officers and employees eligible to participate under the STI Plan.

Additionally, certain employees within the Branded Spirits segment participate in incentive plans that are based on performance metrics, including the number of depleted cases and gross profit.

Amounts expensed under the STI Plan totaled $ 13,443 , $ 13,370 , and $ 11,155 for 2023, 2022, and 2021, respectively.

Deferred Compensation Plan.

The Company established an unfunded Executive Deferred Compensation Plan (“EDC Plan”) effective as of June 30, 2018, with a purpose to attract and retain highly-compensated key employees by providing participants with an opportunity to defer receipt of a portion of their salary, bonus, and other specified compensation.

The Company established an unfunded Executive Deferred Compensation Plan (the “EDC Plan”) effective as of June 30, 2018, with a purpose to attract and retain highly-compensated key employees by providing participants with an opportunity to defer receipt of a portion of their salary, bonus, and other specified compensation.

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

Realized and unrealized gains (losses) on deferred compensation plan

investments were insignificant and were included as a component of operating income in the Company’s Consolidated Statements of Income, because the Company’s deferred compensation investments consist of mutual funds that are considered trading securities.

Realized and unrealized gains (losses) on the EDC plan investments were insignificant and were included as a component of operating income in the Company’s Consolidated Statements of Income, because the Company’s deferred compensation investments consist of mutual funds that are considered trading securities.

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

The current portion of deferred compensation plan deferrals is comprised of estimated amounts to be paid within one year depending on timing of planned disbursements.

The current portion of the EDC Plan deferrals is comprised of estimated amounts to be paid within one year depending on timing of planned disbursements.

At December 31, 2023 and 2022, the EDC Plan investments were $ 2,916 and $ 2,176 , respectively, which were recorded in other assets on the Company’s Consolidated Balance Sheets.

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Significant customers.

For 2023, the Company had sales to one customer that accounted for approximately 11 percent of consolidated sales.

For 2022 and 2021, the Company had no sales to an individual customer that accounted for more than 10 percent of consolidated sales.

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Related Parties.

For the years ended December 31, 2022 and 2021, the Company purchased $ 37,274 and $ 23,463 , respectively, of bulk beverage alcohol from LMX.

The Company holds 50 percent interest in LMX, which is accounted for as equity method investments.

For the years ended December 31, 2023 and 2022, the Company purchased $ 41,520 and $ 37,274 , respectively, of finished goods from LMX and bulk beverage alcohol from the other 50 percent owner of DGL.

The Company holds 50 percent interest in DGL and Agricola, which is accounted for as equity method investments.

See Note 1, Nature of Operations and Summary of Significant Accounting Policies.

For the year ended December 31, 2021, the Company purchased $ 2,718 of finished goods from Meier’s Wine Cellars, Inc.

(“Meier’s”) and sold $ 2,411 of bulk beverage alcohol to Meier’s.

The Lux Family Group owns approximately 22.8 percent of the outstanding shares of MGP at December 31, 2021.

One member of the Lux Family Group has a relative that was the president of Meier’s and majority owner of Meier’s.

The members of the Lux Family Group did not have any involvement in the negotiation of transactions for either party.

In January 2022, Meier’s was sold to Vintage Estates and is no longer considered a related party to the Company.

OPERATING SEGMENTS

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The Distilling Solutions segment consists of food grade alcohol and distillery co-products, such as distillers feed (commonly called dried distillers grain in the industry) and fuel grade alcohol.

The Distilling Solutions segment also includes warehouse services, including barrel put away, barrel storage, and barrel retrieval services.

The Distilling Solutions segment also includes warehouse services, such as barrel put away, barrel storage, and barrel retrieval services.

The Branded Spirits segment consists of a portfolio of high quality branded spirits which are produced through the distilleries and bottling facilities.

Ingredient Solutions segment consists of specialty starches and proteins and commodity starches and proteins.

The Ingredient Solutions segment consists of specialty starches and proteins and commodity starches and proteins.

Operating profit for each segment is based on sales less identifiable operating expenses.

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All other assets are considered as Corporate.

The following table presents summarized financial information for each segment:

Year Ended December 31,

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Total $ 141,746 $ 140,172 $ 121,096

(a) Sales revenue from foreign sources totaled $ 56,719 , $ 42,593 , and $ 23,905 for the years ended December 31, 2022, 2021, and 2020, respectively, and is largely derived from the United Kingdom, Japan, Thailand, Canada, and Mexico.

(a) Sales revenue from foreign sources totaled $ 49,822 , $ 56,719 , and $ 42,593 for the years ended December 31, 2023, 2022, and 2021, respectively, and is largely derived from the United Kingdom, Japan, Canada, Mexico, and Australia.

The balance of total sales revenue is from domestic sources.

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$ 1,392,348 $ 1,158,211

(a) As of December 31, 2022, the Company had $ 14,209 of assets located in Northern Ireland, $ 3,042 of which were long-lived assets.

As of December 31, 2021, the Company had $ 12,758 of assets located in Northern Ireland, $ 2,930 of which were long-lived assets.

(a) As of December 31, 2023 and 2022, the Company had $ 3,524 and $ 3,042 , respectively, of long-lived assets located in Northern Ireland.

SUPPLEMENTAL CASH FLOW INFORMATION

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See Note 10, Leases for operating lease supplemental cash flow information.

QUARTERLY FINANCIAL DATA (UNAUDITED)

Summary of selected quarterly financial data for years ended December 31, 2022 and 2021:

Year Ended December 31, 2022

Quarter Third

Quarter Second

Quarter First

Sales $ 190,995 $ 201,146 $ 194,982 $ 195,235

Cost of sales 127,782 142,098 135,758 123,414

Gross profit 63,213 59,048 59,224 71,821

Advertising and promotion expenses 10,866 7,279 6,065 5,504

SG&A expenses 22,632 17,905 17,853 16,237

Operating income 29,715 33,864 35,306 50,080

Interest expense, net ( 960 ) ( 1,350 ) ( 1,543 ) ( 1,598 )

Other income (loss), net ( 981 ) ( 1,353 ) ( 1,062 ) 54

Income before income taxes 27,774 31,161 32,701 48,536

Income tax expense 5,263 7,533 7,339 11,165

Net income $ 22,511 $ 23,628 $ 25,362 $ 37,371

Basic EPS data (a)

$ 1.02 $ 1.07 $ 1.15 $ 1.69

Diluted EPS data (a)

$ 1.01 $ 1.06 $ 1.15 $ 1.69

Year Ended December 31, 2021

Quarter Third

Quarter Second

Quarter First

Sales $ 166,847 $ 176,611 $ 174,939 $ 108,323

Cost of sales 114,094 119,525 118,112 76,024

Gross profit 52,753 57,086 56,827 32,299

Advertising and promotion expenses 6,210 5,664 3,371 853

SG&A expenses 17,552 18,538 25,793 10,946

Insurance recoveries ( 16,325 ) — — —

Operating income 45,316 32,884 27,663 20,500

Interest expense, net ( 1,329 ) ( 1,116 ) ( 1,104 ) ( 488 )

Other income (loss), net ( 751 ) ( 421 ) ( 88 ) 30

Income before income taxes 43,236 31,347 26,471 20,042

Income tax expense 11,578 7,674 6,412 4,615

Net income $ 31,658 $ 23,673 $ 20,059 $ 15,427

Basic and diluted EPS data (a)

$ 1.44 $ 1.08 $ 0.91 $ 0.90

(a) Quarterly EPS amounts may not add to amounts for the year because quarterly and annual EPS calculations are performed separately.

SUBSEQUENT EVENTS

Related Party Transaction.

The Company leases bottling and warehousing facilities in St.

Louis, Missouri from Kemper-Themis, L.L.C.

(“Kemper”), which is owned by Donn Lux, a member of the Company’s Board of Directors.

On October 31, 2023, the Company’s Audit Committee and Board of Directors approved the purchase of the Kemper bottling and warehousing facilities from Kemper for $ 9,000 .

The purchase and sales agreement was entered into by both parties subsequent to Board approval and the transaction closed in February 2024.

The transaction was entered into at fair value based on two independent appraisers’ valuation;

therefore, the transaction is deemed to have been conducted at an arm’s length.

Dividend Declaration.

On February 23, 2023, the Board of Directors declared a quarterly dividend payable to stockholders of record as of March 10, 2023, of our Common Stock and a dividend equivalent payable to holders of certain RSUs as of March 10, 2023, of $ 0.12 per share and per unit.

The dividend payment and dividend equivalent payment will occur on March 24, 2023.

On February 22, 2024, the Company announced a quarterly dividend payable to stockholders of record of the Company’s Common Stock, resulting in dividend equivalents payable to RSU holders, of $ 0.12 per share and per RSU.

The dividend and dividend equivalents are payable on March 29, 2024, to stockholders of record and RSU holders on March 15, 2024.

CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

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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 8. Financial Statements and Supplementary Data