What changed in this filing

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Item 1. Financial Statements

2024-05-02 compared with 2023-11-02 · 122 added, 204 removed, 477 unchanged (41% of the section changed)

3 unchanged sentences

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

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

2023 2022 2023 2022

Quarter Ended March 31,

Sales $ 170,563 $ 201,010

26 unchanged sentences

(Dollars in thousands)

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

2023 2022 2023 2022

Quarter Ended March 31,

Net income attributable to MGP Ingredients, Inc.

1 unchanged sentence

Other comprehensive income (loss), net of tax:

Unrealized loss on foreign currency translation adjustment ( 317 ) ( 467 ) ( 6 ) ( 1,116 )

Unrealized gain on foreign currency translation adjustment — 175

Change in Company-sponsored post-employment benefit plan ( 40 ) ( 107 )

Other comprehensive loss ( 309 ) ( 543 ) ( 174 ) ( 1,218 )

Other comprehensive income (loss) ( 40 ) 68

Comprehensive income attributable to MGP Ingredients, Inc.

6 unchanged sentences

(Unaudited) (Dollars in thousands)

September 30, 2023 December 31, 2022

March 31, 2024 December 31, 2023

Current Assets

Cash and cash equivalents $ 19,497 $ 18,388

Receivables (less allowance for credit loss, $ 1,475 at both September 30, 2023, and December 31, 2022)

Receivables (less allowance for credit loss, $ 1,475 at both March 31, 2024, and December 31, 2023)

133,005 144,286

16 unchanged sentences

Federal and state excise taxes payable 3,800 2,251

Income taxes payable 4,340 —

Accrued expenses and other 16,159 31,861

16 unchanged sentences

authorized 40,000,000 shares;

issued 23,125,166 shares at September 30, 2023 and December 31, 2022;

and 22,015,196 and 21,994,042 shares outstanding at September 30, 2023 and December 31, 2022, respectively

issued 23,125,166 shares at March 31, 2024 and December 31, 2023;

and 22,009,057 and 22,016,113 shares outstanding at March 31, 2024 and December 31, 2023, respectively

Additional paid-in capital 329,460 325,453

1 unchanged sentence

Accumulated other comprehensive loss ( 437 ) ( 397 )

Treasury stock, at cost, 1,109,970 and 1,131,124 shares at September 30, 2023 and December 31, 2022, respectively

Treasury stock, at cost, 1,116,109 and 1,109,053 shares at March 31, 2024 and December 31, 2023, respectively

( 26,571 ) ( 21,166 )

8 unchanged sentences

(Dollars in thousands)

Year to Date Ended September 30,

Quarter to Date Ended March 31,

Cash Flows from Operating Activities

2 unchanged sentences

Depreciation and amortization 5,289 5,171

Impairment of long-lived assets and other 18,334 —

Share-based compensation 1,116 1,215

3 unchanged sentences

Other, net 157 99

Changes in operating assets and liabilities, net of effects of acquisition:

Changes in operating assets and liabilities:

Receivables, net 11,257 ( 19,227 )

9 unchanged sentences

Additions to property, plant, and equipment ( 27,026 ) ( 16,237 )

Purchase of business, net of cash acquired ( 103,712 ) —

Contributions to equity method investment — ( 2,232 )

Other, net ( 240 ) ( 708 )

2 unchanged sentences

Payment of dividends and dividend equivalents ( 2,672 ) ( 2,669 )

Purchase of treasury stock ( 801 ) ( 714 )

Repurchase of Common Stock

( 6,961 ) ( 801 )

Proceeds from long-term debt 30,000 —

8 unchanged sentences

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

For Year to Date Ended September 30, 2023

For Quarter to Date Ended March 31, 2024 and 2023

(Dollars in thousands)

9 unchanged sentences

Net income (loss) — — — 20,635 — — ( 51 ) 20,584

Other comprehensive income — — — — 68 — — 68

Other comprehensive loss

— — — — ( 40 ) — — ( 40 )

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

5 unchanged sentences

$ 4 $ 6,715 $ 329,460 $ 557,848 $ ( 437 ) $ ( 26,571 ) $ ( 1,476 ) $ 865,543

Comprehensive income:

Net income (loss) — — — 32,126 — — ( 162 ) 31,964

Other comprehensive income — — — — 67 — — 67

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

— — — ( 2,664 ) — — — ( 2,664 )

Share-based compensation — — 1,808 — — — — 1,808

Stock shares awarded, forfeited or vested — — ( 538 ) — — 538 — —

Balance, June 30, 2023

4 6,715 322,267 500,933 ( 169 ) ( 21,347 ) ( 1,281 ) 807,122

Comprehensive income:

Net income (loss) — — — 13,211 — ( 123 ) 13,088

Other comprehensive loss — — — — ( 309 ) — ( 309 )

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

— — — ( 2,664 ) — — — ( 2,664 )

Share-based compensation — — 949 — — — — 949

Stock shares awarded, forfeited, or vested — — ( 87 ) — — 87 — —

Balance, September 30, 2023

$ 4 $ 6,715 $ 323,129 $ 511,480 $ ( 478 ) $ ( 21,260 ) $ ( 1,404 ) $ 818,186

See accompanying notes to unaudited condensed consolidated financial statements

MGP INGREDIENTS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

For Year to Date Ended September 30, 2022

(Dollars in thousands)

Preferred Issued Common Additional

8 unchanged sentences

Net income (loss) — — — 31,071 — — ( 39 ) 31,032

Other comprehensive loss — — — — ( 232 ) — — ( 232 )

Other comprehensive income — — — — 68 — — 68

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

5 unchanged sentences

$ 4 $ 6,715 $ 320,997 $ 471,471 $ ( 236 ) $ ( 21,885 ) $ ( 1,119 ) $ 775,947

Comprehensive income:

Net income (loss) — — — 25,560 — — ( 198 ) 25,362

Other comprehensive loss — — — — ( 443 ) — — ( 443 )

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

— — — ( 2,658 ) — — — ( 2,658 )

Share-based compensation — — 1,409 — — — — 1,409

Stock shares awarded, forfeited, or vested — — ( 740 ) — — 740 — —

Stock shares repurchased — — — — — ( 2 ) — ( 2 )

Balance, June 30, 2022

4 6,715 317,240 401,915 ( 321 ) ( 21,726 ) ( 754 ) 703,073

Comprehensive income:

Net income (loss) — — — 23,808 — ( 180 ) 23,628

Other comprehensive loss — — — — ( 543 ) — ( 543 )

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

— — — ( 2,660 ) — — — ( 2,660 )

Share-based compensation — — 363 — — — — 363

Stock shares awarded, forfeited, or vested — — ( 62 ) — — 62 — —

Stock shares repurchased — — — — — ( 1 ) — ( 1 )

Balance, September 30, 2022

$ 4 $ 6,715 $ 317,541 $ 423,063 $ ( 864 ) $ ( 21,665 ) $ ( 934 ) $ 723,860

See accompanying notes to unaudited condensed consolidated financial statements

4 unchanged sentences

MGP Ingredients, Inc.

(the “Company” or “MGP”) is a Kansas corporation headquartered in Atchison, Kansas and is a leading producer and supplier of premium distilled spirits, branded spirits, and food ingredients.

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

(the “Company” or “MGP”) is a Kansas corporation headquartered in Atchison, Kansas and is a leading producer of branded and distilled spirits, as well as food ingredient solutions.

Distilled spirits include premium bourbon, rye, and other whiskeys (“brown goods”) and grain neutral spirits (“GNS”), including vodka and gin (“white goods and other co-products”).

The Company’s 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 produced through its 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, with a focus on high-end American whiskey, tequila, and gin.

The Company’s branded spirits products account for a range of price points from value products through premium plus 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 3, Business Combination, for further details.

The Company reports three operating segments:

Distilling Solutions, Branded Spirits, and Ingredient Solutions.

Certain amounts in the 2022 consolidated financial statements have been reclassified to conform to the 2023 presentation.

Certain amounts in the 2023 condensed consolidated financial statements have been reclassified to conform to the 2024 presentation.

Basis of Presentation and Principles of Consolidation.

1 unchanged sentence

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

These unaudited condensed consolidated financial statements as of and for the quarter and year to date ended September 30, 2023, should be read in conjunction with the consolidated financial statements and notes thereto in the Company’s Annual Report on Form 10-K for the year ended December 31, 2022, filed with the Securities and Exchange Commission (the “SEC”).

These unaudited condensed consolidated financial statements as of and for the quarter ended March 31, 2024, should be read in conjunction with the consolidated financial statements and notes thereto in the Company’s Annual Report on Form 10-K for the year ended December 31, 2023, filed with the Securities and Exchange Commission (the “SEC”).

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

14 unchanged sentences

Inventories are stated at the lower of cost or net realizable value on the first-in, first-out, or FIFO, method.

Inventory valuations are impacted by constantly changing prices paid for key materials, primarily corn.

Inventory valuations are impacted by constantly changing prices paid for key materials.

Inventory consists of the following:

September 30, 2023 December 31, 2022

March 31, 2024 December 31, 2023

Finished goods $ 53,471 $ 55,463

44 unchanged sentences

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

The Company maintains a U.S.

bank account denominated in British pound sterling, which is adjusted for the market exchange rate at the reporting period-end.

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

Business Combinations.

9 unchanged sentences

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

As of September 30, 2023, the Company determined that goodwill and indefinite-lived intangible assets were not impaired.

As of March 31, 2024, the Company determined that goodwill and indefinite-lived intangible assets were not impaired.

Fair Value of Financial Instruments.

11 unchanged sentences

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

Excluding the impact of the conversion feature of the Convertible Senior Notes, the fair value of the Company’s debt was $ 223,030 and $ 150,249 at September 30, 2023 and December 31, 2022, respectively.

The financial statement carrying value of total debt (net of unamortized loan fees) was $ 316,677 and $ 230,335 at September 30, 2023 and December 31, 2022, respectively.

Excluding the impact of the conversion feature of the Convertible Senior Notes, the fair value of the Company’s debt was $ 210,173 and $ 194,440 at March 31, 2024 and December 31, 2023, respectively.

The financial statement carrying value of total debt (net of unamortized loan fees) was $ 300,823 and $ 287,249 at March 31, 2024 and December 31, 2023, respectively.

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

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 fair value calculation of contingent consideration associated with the acquisition of Penelope Bourbon LLC (“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 3, Business Combinations, for more information.

See Note 3, Business Combination, for more information.

Fair value disclosure for deferred compensation plan investments is included in Note 9, Employee and Non-Employee Benefit Plans.

3 unchanged sentences

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

The investment in LMX, which is recorded in investment in joint ventures on the Condensed Consolidated Balance Sheets, was $ 5,343 and $ 5,534 at September 30, 2023 and December 31, 2022, respectively.

During the quarters ended September 30, 2023 and 2022, the Company recorded a gain of $ 388 and a loss of $ 856 , respectively, from its equity method investments, and during the year to date ended September 30, 2023 and 2022, the Company recorded a loss of $ 191 and $ 1,036 , respectively, which is recorded in other income (expense), net on the Condensed Consolidated Statements of Income.

During the quarter and year to date ended September 30, 2023, the Company purchased $ 10,223 and $ 30,178 , respectively, of finished goods from LMX and bulk beverage alcohol from the other 50 percent owner of DGL.

During the quarter and year to date ended September 30, 2022, the Company purchased $ 8,265 and $ 28,194 , respectively, of finished goods from LMX and bulk beverage alcohol from the other 50 percent owner of DGL.

The investment in LMX, which is recorded in investment in joint ventures on the Condensed Consolidated Balance Sheets, was $ 4,901 and $ 5,197 at March 31, 2024 and December 31, 2023, respectively.

During the quarters ended March 31, 2024 and 2023, the Company recorded a loss of $ 296 and $ 260 , respectively, from its equity method investments, which is recorded in other income (expense), net on the Condensed Consolidated Statements of Income.

During the quarters ended March 31, 2024 and 2023, the Company purchased $ 8,092 and $ 8,417 , respectively, of finished goods from LMX and bulk beverage alcohol from the other 50 percent owner of DGL.

Related Party Transaction.

The Company leased bottling and warehousing facilities in St.

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

(“Kemper”), which was 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’ valuations;

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

Recently Adopted Accounting Standard Updates.

The Company did not adopt any new Accounting Standard Updates during the quarter ended September 30, 2023.

The Company did not adopt any new Accounting Standard Updates (“ASUs”) during the quarter ended March 31, 2024.

Recently Issued Accounting Pronouncements.

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 and interim periods within fiscal years beginning after December 15, 2024.

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

The Company does not expect to early adopt this guidance and 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 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.

2 unchanged sentences

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

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

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

Disaggregation of Sales.

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

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

2023 2022 2023 2022

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

Quarter Ended March 31,

Distilling Solutions

Brown goods $ 66,331 $ 68,324

White goods 14,429 20,469 47,199 57,996

Premium beverage alcohol 87,838 77,892 262,056 233,895

Industrial alcohol 9,407 10,761 29,911 35,141

Food grade alcohol 97,245 88,653 291,967 269,036

Fuel grade alcohol 1,509 3,713 5,963 10,307

Distillers feed and related co-products 5,746 9,943 23,053 30,127

Warehouse services 7,956 6,858

White goods and other co-products

10,565 38,041

Total Distilling Solutions 84,852 113,223

Branded Spirits

Ultra premium 20,107 13,804 43,594 35,836

Super premium 3,637 3,350 9,614 9,522

Premium 7,099 6,013 20,144 17,928

Premium plus 20,906 18,746

13 unchanged sentences

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 enhances its presence in the growing American whiskey category and expands its portfolio of premium plus price tier brands.

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 tier.

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.

2 unchanged sentences

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

During the quarter ended September 30, 2023, the Company finalized the net working capital adjustments, which decreased the cash consideration from $ 105,000 at closing to $ 104,638 at September 30, 2023.

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.

2 unchanged sentences

federal tax law.

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

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

income tax purposes.

The Acquisition was accounted for as a business combination in accordance with Financial Accounting Standards Board Accounting Standard Codification 805, Business Combinations (“ASC 805”).

The fair value of the assets acquired and liabilities assumed are based upon a preliminary assessment of fair value and may change as valuations for certain tangible assets, intangible assets, and contingent liabilities are finalized and the associated income tax impacts are determined.

The Company expects to finalize the purchase price allocation as soon as practicable, but no longer than one year from the acquisition date.

Purchase Price Allocation.

The following table summarizes the preliminary allocation of the consideration paid for Penelope to the preliminary 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 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:

22 unchanged sentences

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.

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.

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.

Goodwill of $ 95,250 , all of which is 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, with an estimated fair value of $ 34,000 , and definite-lived intangible assets, distributor relationships, with 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.

2 unchanged sentences

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

During the quarter and year to date ended September 30, 2023, the Company incurred $ 314 and $ 1,814 of costs related to the Acquisition, which are included in selling, general, and administrative expenses on the Condensed Consolidated Statements of Income.

During the quarter ended March 31, 2024, the Company incurred $ 71 of costs related to the Acquisition, which are included in selling, general, and administrative expenses on the Condensed Consolidated Statements of Income.

Contingent Consideration.

2 unchanged sentences

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.

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 quarter ended September 30, 2023 there was a $ 4,200 adjustment to the fair value measurement of the contingent consideration obligation.

During the quarter ended March 31, 2024, there was a $ 4,100 adjustment to the fair value measurement of the contingent consideration obligation, which was included in the change of fair value of contingent consideration on the Condensed Consolidated Statements of Income.

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

5 unchanged sentences

The distributor relationships have a useful life of 20 years.

The amortization expense for the quarter and year to date ended September 30, 2023 was $ 820 and $ 1,948 , respectively.

The amortization expense for the quarter and year to date ended September 30, 2022 was $ 518 and $ 1,553 , respectively.

As of September 30, 2023, the expected future amortization expense related to definite-lived intangible assets is as follows:

The amortization expense for the quarters ended March 31, 2024 and 2023 was $ 813 and $ 518 , respectively.

As of March 31, 2024, the expected future amortization expense related to definite-lived intangible assets is as follows:

Remainder of 2024 $ 2,442

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.

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

Distilling Solutions Branded Spirits Ingredient Solutions Total

Balance, December 31, 2022

$ — $ 226,294 $ — $ 226,294

Acquisitions — 95,250 — 95,250

Balance, September 30, 2023

$ — $ 321,544 $ — $ 321,544

Changes in carrying amount of trade name intangible assets by business segment were as follows:

Distilling Solutions Branded Spirits Ingredient Solutions Total

Balance, December 31, 2022

$ — $ 178,990 $ — $ 178,990

Acquisitions — 34,000 — 34,000

Balance, September 30, 2023

$ — $ 212,990 $ — $ 212,990

Planned Closure of the Atchison Distillery

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 anticipated closure date is January 2024.

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 quarter ended September 30, 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 quarter and year to date ended September 30, 2023, the Company recorded a $ 17,112 impairment of assets, which was recorded in impairment of long-lived assets and other on the Condensed Consolidated Statement of Income.

The impaired assets were recorded within the Distilling Solution segment.

Additionally, the Company recorded $ 1,222 of expenses related to severance costs, contract termination fees, and consulting fees, which were recorded in impairment of long-lived assets and other on the Condensed Consolidated Statement of Income for the quarter and year to date ended September 30, 2023.

The carrying amount of goodwill, which relates to the Branded Spirits segment, was $ 321,544 at both March 31, 2024 and December 31, 2023.

The carrying amount of trade name indefinite-lived intangible assets, which relates to the Branded Spirits segment, was $ 212,990 at both March 31, 2024 and December 31, 2023.

Corporate Borrowings

1 unchanged sentence

Description (a)

September 30, 2023 December 31, 2022

March 31, 2024 December 31, 2023

Credit Agreement - Revolver, 6.43 % (variable rate) due 2026

$ 78,000 $ 63,000

Convertible Senior Notes, 1.88 % (fixed rate) due 2041

11 unchanged sentences

Long-term debt $ 294,423 $ 280,849

(a) Interest rates are as of September 30, 2023.

(b) Loan fees are being amortized over the life of the debt instruments.

(a) Interest rates are as of March 31, 2024.

(b) Loan fees are being amortized over the life of the debt agreements.

Credit Agreement.

On February 14, 2020, the Company entered into a credit agreement (the “Credit Agreement”) with multiple participants led by Wells Fargo Bank, National Association (“Wells Fargo Bank”) that matures on March 14, 2026.

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

On May 14, 2021, the Credit Agreement was amended 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 .

On May 14, 2021, the Company amended the Credit Agreement to extend the terms 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 includes certain requirements and covenants with which the Company was in compliance at September 30, 2023.

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 September 30, 2023, the Company had $ 91,000 outstanding borrowings under the Credit Agreement, leaving $ 309,000 available.

The Credit Agreement includes certain requirements and covenants with which the Company was in compliance at March 31, 2024.

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 during 2023.

As of March 31, 2024, the Company had $ 78,000 outstanding borrowings under the Credit Agreement, leaving $ 322,000 available.

Convertible Senior Notes.

7 unchanged sentences

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 .

2 unchanged sentences

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

The Note Purchase Agreement includes certain requirements and covenants with which the Company was in compliance at September 30, 2023 .

As of September 30, 2023, the Company had $ 12,800 of Series A Senior Secured Notes and $ 18,400 of additional Senior Secured Notes outstanding under the Note Purchase Agreement, leaving $ 218,800 available under the Note Purchase Agreement.

The Note Purchase Agreement includes certain requirements and covenants with which the Company was in compliance at March 31, 2024 .

As of March 31, 2024, the Company had $ 11,200 of Series A Senior Secured Notes and $ 16,800 of additional Senior Secured Notes outstanding under the Note Purchase Agreement, leaving $ 222,000 available under the Note Purchase Agreement.

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

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

Beginning in the second quarter of 2023, the estimated annual tax rate includes the U.S.

entity acquired in the Penelope Acquisition.

Income tax expense for the quarter and year to date ended September 30, 2023 was $ 4,373 and $ 24,832 , respectively, for an effective tax rate of 25.0 percent and 24.6 percent, respectively.

The effective tax rate for the quarter and year to date ended September 30, 2023 differed from the 21 percent U.S.

Income tax expense for the quarter ended March 31, 2024 was $ 6,262 for an effective tax rate of 23.3 percent.

The effective tax rate for the quarter ended March 31, 2024 differed from the 21 percent U.S.

federal statutory rate on pretax income primarily due to state income taxes and income taxes on foreign subsidiaries, partially offset by U.S.

state and federal tax credits and the deduction applicable to export activity.

As a result of the planned closure of the Atchison Distillery, the Company incurred impairment expenses (see Note 5 for more details on the planned closure).

For the quarter ended September 30, 2023, the impairment had an immaterial impact on the effective tax rate;

however, it did result in a reduced income tax expense due to the decrease in income before income taxes when using the estimated annual effective rate calculation.

Income tax expense for the quarter and year to date ended September 30, 2022 was $ 7,533 and $ 26,037 , respectively, for an effective tax rate of 24.2 percent and 23.2 percent, respectively.

The effective tax rate for the quarter and year to date ended September 30, 2022 differed from the 21 percent U.S.

federal statutory rate on pretax income primarily due to state and foreign income taxes, partially offset by state and federal tax credits, and the deduction applicable to export activity.

The increase in income tax expense for the year to date ended September 30, 2022 was primarily due to higher income before income taxes as compared to the prior year periods.

Income tax expense for the quarter ended March 31, 2023 was $ 9,655 for an effective tax rate of 23.7 percent.

The effective tax rate for the quarter ended March 31, 2023 differed from the 21 percent U.S.

federal statutory rate on pretax income primarily due to state and foreign income taxes, partially offset by state and federal tax credits, the deduction applicable to export activity, and the discrete impact of certain items related to equity compensation.

Equity and EPS

The following table presents computations of basic and diluted EPS:

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

2023 2022 2023 2022

Quarter Ended March 31,

Net income (a)

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(a) Net income attributable to all stockholders.

(b) Participating securities included 226,410 and 176,398 unvested restricted stock units (“RSUs”) at September 30, 2023 and 2022, respectively.

(b) Participating securities included 260,651 and 227,810 unvested restricted stock units (“RSUs”) at March 31, 2024 and 2023, respectively.

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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.

Share Repurchase.

On February 29, 2024, the Company announced that its Board of Directors approved a $ 100,000 share repurchase program.

Under the share repurchase program, the Company can repurchase stock from time to time for cash in open market purchases, privately negotiated transactions, or by other means, in accordance with applicable securities laws and other legal requirements.

The repurchase program has no expiration date and may be modified, suspended, or discontinued at any time by the Company without prior notice.

During the quarter ended March 31, 2024, the Company repurchased 59,084 shares of Common Stock for approximately $ 5,000 , resulting in approximately $ 95,000 remaining under the share repurchase program.

Common Stock Share Activity.

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Balance, March 31, 2024 437 22,009,057

Issuance of Common Stock — 5,445

Repurchase of Common Stock (a)

Balance, June 30, 2023 437 22,014,374

Issuance of Common Stock — 822

Repurchase of Common Stock (a)

Balance, September 30, 2023 437 22,015,196

Shares Outstanding

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Issuance of Common Stock — 23,324

Repurchase of Common Stock (a)

Repurchase of Common Stock (b)

Balance, March 31, 2023 437 22,008,929

Issuance of Common Stock — 7,655

Repurchase of Common Stock (a)

Balance, June 30, 2022 437 21,992,751

Issuance of Common Stock — 606

Repurchase of Common Stock (a)

Balance, September 30, 2022 437 21,993,355

(a) The Common Stock repurchases were for tax withholding on equity-based compensation.

(a) 59,084 shares that were repurchased during the quarter ended March 31, 2024 pursuant to the Company’s share repurchase program.

The remaining shares repurchased were related to the tax withholding on equity-based compensation.

(b) The Common Stock repurchases were for tax withholding on equity-based compensation.

Commitments and Contingencies

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

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

The Company had two equity-based compensation plans:

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

As of September 30, 2023, 658,081 RSUs had been granted from the 1,500,000 shares approved under the 2014 Plan, and 138,662 shares had been granted from the 300,000 shares approved under the Directors’ Plan.

As of September 30, 2023, there were 226,410 unvested RSUs under the Company’s long-term incentive plans, all of which were participating securities (see Note 8).

As of March 31, 2024, 773,492 RSUs had been granted from the 1,500,000 shares approved under the 2014 Plan, and 141,262 shares had been granted from the 300,000 shares approved under the Directors’ Plan.

As of March 31, 2024, there were 260,651 unvested RSUs under the Company’s long-term incentive plans, all of which were participating securities (see Note 7, Equity and EPS).

Deferred Compensation Plan.

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Realized and unrealized gains (losses) on deferred compensation plan investments were included as a component of other income (expense), net on the Company’s Condensed Consolidated Statements of Income.

For the quarter and year to date ended September 30, 2023, the Company had a loss on deferred compensation plan investments of $ 118 and a gain on deferred compensation plan investments of $ 272 , respectively.

For the quarter and year to date ended September 30, 2022, the Company had a loss on deferred compensation plan investments of $ 103 and $ 931 , respectively.

For the quarters ended March 31, 2024 and 2023, the Company had a gain on deferred compensation plan investments of $ 252 and $ 179 , respectively.

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

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

At September 30, 2023 and December 31, 2022, the EDC Plan investments were $ 2,878 and $ 2,176 , respectively, which were recorded in other assets on the Company’s Condensed Consolidated Balance Sheets.

The EDC Plan current liabilities were $ 650 and $ 510 at September 30, 2023 and December 31, 2022, respectively, which were included in accrued expenses and other on the Company’s Condensed Consolidated Balance Sheets.

The EDC Plan non-current liabilities were $ 2,615 and $ 2,191 at September 30, 2023 and December 31, 2022, respectively, and were included in other noncurrent liabilities on the Company’s Condensed Consolidated Balance Sheets.

At March 31, 2024 and December 31, 2023, the EDC Plan investments were $ 3,419 and $ 2,916 , respectively, which were recorded in other assets on the Company’s Condensed Consolidated Balance Sheets.

The EDC Plan current liabilities were $ 1,071 and $ 74 at March 31, 2024 and December 31, 2023, respectively, which were included in accrued expenses and other on the Company’s Condensed Consolidated Balance Sheets.

The EDC Plan non-current liabilities were $ 2,489 and $ 3,314 at March 31, 2024 and December 31, 2023, respectively, and were included in other noncurrent liabilities on the Company’s Condensed Consolidated Balance Sheets.

Operating Segments

At September 30, 2023, the Company had three segments:

At March 31, 2024, the Company had three segments:

Distilling Solutions, Branded Spirits, and Ingredient Solutions.

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 Company’s reportable segments are based on the financial information the chief operating decision maker, the Company’s Chief Executive Officer, uses to allocate resources and evaluate performance of the business.

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

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.

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

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

Intersegment sales and transfers are recorded at cost and are treated as a transfer of inventory.

All intercompany revenues are eliminated in consolidation and are not reviewed when evaluating segment performance.

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

Non-direct selling, general, and administrative expenses, interest expense, and other general miscellaneous expenses are excluded from segment operations and are classified as Corporate.

Receivables, inventories, property, plant and equipment, leases, goodwill, and intangible assets have been identified with the segments to which they relate.

Receivables, inventories, property, plant and equipment, leases, goodwill, and intangible assets

have been identified with the segments to which they relate.

All other assets are considered as Corporate.

The following table presents summarized financial information for each segment:

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

2023 2022 2023 2022

Quarter Ended March 31,

Sales to Customers

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The following table allocates assets to each segment as of:

September 30, 2023 December 31, 2022

March 31, 2024 December 31, 2023

Identifiable Assets

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Subsequent Events

On November 2, 2023, the Company announced a quarterly dividend payable to stockholders of record of the Company’s common stock, resulting in dividend equivalents payable to certain RSU holders, of $ 0.12 per share and per RSU.

The dividend and dividend equivalents are payable on December 1, 2023 to stockholders of record and certain RSU holders on November 17, 2023.

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 approval and the transaction is expected to close during the first quarter of 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.

On May 2, 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 May 31, 2024 to stockholders of record and RSU holders on May 17, 2024.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements