UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C.  20549
 
FORM 10-Q 
(Mark One) 
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 20222023  
or
  TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _________________________ to _________________________________
 
Commission File Number:  0-17196
Image1.jpg 
MGP INGREDIENTS, INC.
(Exact name of registrant as specified in its charter) 
Kansas45-4082531
(State or other jurisdiction of incorporation or organization)(I.R.S. Employer Identification No.)
100 Commercial Street
Atchison,Kansas66002
(Address of principal executive offices)(Zip Code)
(913) 367-1480
(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading SymbolName of each exchange on which registered
Common Stock, no par valueMGPINASDAQ Global Select Market
 
Indicate by check mark whether the registrantregistrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  x Yes No
 
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). x Yes No
 
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an “emergingemerging growth company.  See definitionthe definitions of “large accelerated filer”,filer,” “accelerated filer”filer,” “smaller reporting company,” and “smaller reporting“emerging growth company” in Rule 12b-2 of the Exchange Act.
x Large accelerated filer                                                          Accelerated filer
 Non-accelerated filer                          Smaller Reporting Companyreporting company
Emerging growth company

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes x No

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date: 
21,994,03622,016,113 shares of Common Stock, no par value, as of October 28, 202227, 2023



INDEX
 
Page
  
  
    
 
 
 
 
 
   
 
   
 
   
 
   
 
 
   
 
   
 
   
 
   
 
   
 
   
 

METHOD OF PRESENTATION

Throughout this Quarterly Report on Form 10-Q (this “Report”), when we refer to “the Company,the “Company,” “MGP,” “we,” “us,” “our,” and words of similar import, we are referring to the combined business of MGP Ingredients, Inc. and its consolidated subsidiaries, except to the extent that the context otherwise indicates. In this document,Report, for any references to Note 1 through Note 11,12, refer to the Notes to Unaudited Condensed Consolidated Financial Statements in Item 1.
 
All amounts in this report,Report, except for share, par values, bushels, gallons, pounds, mmbtu, proof gallons, 9-liter cases, per share, per bushel, per gallon, per proof gallon, per 9-liter case, and percentage amounts, are shown in thousands unless otherwise noted.


2


PART I. FINANCIAL INFORMATION 

ITEM 1. FINANCIAL STATEMENTS

MGP INGREDIENTS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
(Dollars in thousands, except share and per share amounts)

 Quarter Ended September 30,Year to Date Ended September 30,
 2022202120222021
Sales$201,146 $176,611 $591,363 $459,873 
Cost of sales142,098 119,525 401,270 313,661 
Gross profit59,048 57,086 190,093 146,212 
Advertising and promotion expenses7,279 5,664 18,848 9,888 
Selling, general and administrative expenses17,904 18,527 52,029 55,266 
Other operating (income) expense, net1 11 (34)11 
Operating income33,864 32,884 119,250 81,047 
Interest expense, net(1,350)(1,116)(4,491)(2,708)
Other income (expense), net(1,353)(421)(2,361)(479)
Income before income taxes31,161 31,347 112,398 77,860 
Income tax expense7,533 7,674 26,037 18,701 
Net income23,628 23,673 86,361 59,159 
Net (income) loss attributable to noncontrolling interest180 203 444 279 
Net income attributable to MGP Ingredients, Inc.23,808 23,876 86,805 59,438 
Income attributable to participating securities(188)(175)(688)(471)
Net income used in Earnings Per Common Share calculation$23,620 $23,701 $86,117 $58,967 
Share information:
Basic weighted average common shares22,008,381 21,981,201 22,000,026 20,293,818 
Diluted weighted average common shares22,228,814 21,981,201 22,000,026 20,293,818 
Basic Earnings Per Common Share$1.07 $1.08 $3.91 $2.91 
Diluted Earnings Per Common Share$1.06 $1.08 $3.91 $2.91 


 Quarter Ended September 30,Year to Date Ended September 30,
 2023202220232022
Sales$211,624 $201,146 $621,635 $591,363 
Cost of sales138,176 142,098 402,068 401,270 
Gross profit73,448 59,048 219,567 190,093 
Advertising and promotion expenses9,505 7,279 25,877 18,848 
Selling, general, and administrative expenses21,570 17,905 65,615 51,995 
Impairment of long-lived assets and other18,334 — 18,334 — 
Change in fair value of contingent consideration4,200 — 4,200 — 
Operating income19,839 33,864 105,541 119,250 
Interest expense, net(2,353)(1,350)(4,630)(4,491)
Other income (expense), net(25)(1,353)5 (2,361)
Income before income taxes17,461 31,161 100,916 112,398 
Income tax expense4,373 7,533 24,832 26,037 
Net income13,088 23,628 76,084 86,361 
Net loss attributable to noncontrolling interest123 180 324 444 
Net income attributable to MGP Ingredients, Inc.13,211 23,808 76,408 86,805 
Income attributable to participating securities(129)(188)(760)(688)
Net income used in earnings per common share calculation$13,082 $23,620 $75,648 $86,117 
Weighted average common shares
Basic22,066,159 22,008,381 22,056,270 22,000,026 
Diluted22,381,516 22,228,814 22,207,031 22,000,026 
Earnings per common share
Basic$0.59 $1.07 $3.43 $3.91 
Diluted$0.58 $1.06 $3.41 $3.91 















See accompanying notes to unaudited condensed consolidated financial statements

3


MGP INGREDIENTS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Unaudited)
(Dollars in thousands)

Quarter Ended September 30,Year to Date Ended September 30,Quarter Ended September 30,Year to Date Ended September 30,
2022202120222021 2023202220232022
Net income attributable to MGP Ingredients, Inc.Net income attributable to MGP Ingredients, Inc.$23,808 $23,876 $86,805 $59,438 Net income attributable to MGP Ingredients, Inc.$13,211 $23,808 $76,408 $86,805 
Other comprehensive loss, net of tax:
Other comprehensive income (loss), net of tax:Other comprehensive income (loss), net of tax:
Unrealized loss on foreign currency translation adjustmentUnrealized loss on foreign currency translation adjustment(467)(141)(1,116)(134)Unrealized loss on foreign currency translation adjustment(317)(467)(6)(1,116)
Change in Company-sponsored post-employment benefit planChange in Company-sponsored post-employment benefit plan(76)(89)(102)(40)Change in Company-sponsored post-employment benefit plan8 (76)(168)(102)
Other comprehensive lossOther comprehensive loss(543)(230)(1,218)(174)Other comprehensive loss(309)(543)(174)(1,218)
Comprehensive income attributable to MGP Ingredients, Inc.Comprehensive income attributable to MGP Ingredients, Inc.23,265 23,646 85,587 59,264 Comprehensive income attributable to MGP Ingredients, Inc.12,902 23,265 76,234 85,587 
Comprehensive loss attributable to noncontrolling interestComprehensive loss attributable to noncontrolling interest(180)(203)(444)(279)Comprehensive loss attributable to noncontrolling interest(123)(180)(324)(444)
Comprehensive incomeComprehensive income$23,085 $23,443 $85,143 $58,985 Comprehensive income$12,779 $23,085 $75,910 $85,143 




































See accompanying notes to unaudited condensed consolidated financial statements

4


       MGP INGREDIENTS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
(Dollars (Dollars in thousands)
 September 30, 2022December 31, 2021
Current Assets  
Cash and cash equivalents$50,674 $21,568 
Receivables (less allowance for credit loss, $175 and $150 at September 30, 2022, and December 31, 2021, respectively)107,653 92,537 
Inventory275,478 245,944 
Prepaid expenses5,833 1,510 
Refundable income taxes1,006 5,539 
Total current assets440,644 367,098 
Property, plant, and equipment430,945 404,149 
Less accumulated depreciation and amortization(210,254)(196,863)
Property, plant, and equipment, net220,691 207,286 
Operating lease right-of-use assets, net14,516 9,671 
Investment in joint ventures6,140 4,944 
Intangible assets, net217,285 218,838 
Goodwill226,294 226,294 
Other assets6,505 7,336 
Total assets$1,132,075 $1,041,467 
Current Liabilities  
Current maturities of long-term debt$4,800 $3,227 
Accounts payable64,858 53,712 
Federal and state excise taxes payable4,713 6,992 
Accrued expenses and other26,420 24,869 
Total current liabilities100,791 88,800 
Long-term debt, less current maturities31,105 35,266 
Convertible senior notes195,146 194,906 
Long-term operating lease liabilities11,327 6,997 
Other noncurrent liabilities4,047 5,132 
Deferred income taxes65,799 66,101 
Total liabilities408,215 397,202 
Commitments and Contingencies (Note 8)
Stockholders’ Equity  
Capital stock  
Preferred, 5% non-cumulative; $10 par value; authorized 1,000 shares; issued and outstanding 437 shares4 
Common stock  
No par value; authorized 40,000,000 shares; issued 23,125,166 shares at September 30, 2022 and December 31, 2021; and 21,993,355 and 21,964,314 shares outstanding at September 30, 2022 and December 31, 2021, respectively6,715 6,715 
Additional paid-in capital317,541 315,802 
Retained earnings423,063 344,237 
Accumulated other comprehensive income(864)354 
Treasury stock, at cost, 1,131,811 and 1,160,852 shares at September 30, 2022 and December 31, 2021, respectively(21,665)(22,357)
Total MGP Ingredients, Inc. stockholders’ equity724,794 644,755 
Noncontrolling interest(934)(490)
Total equity723,860 644,265 
Total liabilities and equity$1,132,075 $1,041,467 
 September 30, 2023December 31, 2022
Current Assets  
Cash and cash equivalents$28,030 $47,889 
Receivables (less allowance for credit loss, $1,475 at both September 30, 2023, and December 31, 2022)126,692 109,267 
Inventory342,401 289,722 
Prepaid expenses4,600 2,957 
Refundable income taxes2,193 4,327 
Total current assets503,916 454,162 
Property, plant, and equipment465,746 450,800 
Less accumulated depreciation and amortization(222,497)(215,168)
Property, plant, and equipment, net243,249 235,632 
Operating lease right-of-use assets, net15,551 15,042 
Investment in joint ventures5,343 5,534 
Intangible assets, net272,520 216,768 
Goodwill321,544 226,294 
Other assets4,242 4,779 
Total assets$1,366,365 $1,158,211 
Current Liabilities  
Current maturities of long-term debt$6,400 $5,600 
Accounts payable54,403 66,432 
Federal and state excise taxes payable2,719 4,627 
Accrued expenses and other26,586 28,716 
Total current liabilities90,108 105,375 
Long-term debt, less current maturities114,812 29,510 
Convertible senior notes195,465 195,225 
Long-term operating lease liabilities12,606 11,622 
Contingent consideration66,300 — 
Other noncurrent liabilities3,888 3,723 
Deferred income taxes65,000 67,112 
Total liabilities548,179 412,567 
Commitments and Contingencies (Note 9)
Stockholders’ Equity  
Capital stock  
Preferred, 5% non-cumulative; $10 par value; authorized 1,000 shares; issued and outstanding 437 shares4 
Common stock  
No par value; 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, respectively6,715 6,715 
Additional paid-in capital323,129 318,839 
Retained earnings511,480 443,061 
Accumulated other comprehensive loss(478)(304)
Treasury stock, at cost, 1,109,970 and 1,131,124 shares at September 30, 2023 and December 31, 2022, respectively(21,260)(21,591)
Total MGP Ingredients, Inc. stockholders’ equity819,590 746,724 
Noncontrolling interest(1,404)(1,080)
Total equity818,186 745,644 
Total liabilities and equity$1,366,365 $1,158,211 
See accompanying notes to unaudited condensed consolidated financial statements
5


MGP INGREDIENTS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(Dollars in thousands)
Year to Date Ended September 30, Year to Date Ended September 30,
20222021 20232022
Cash Flows from Operating ActivitiesCash Flows from Operating Activities  Cash Flows from Operating Activities  
Net incomeNet income$86,361 $59,159 Net income$76,084 $86,361 
Adjustments to reconcile net income to net cash provided by operating activities:Adjustments to reconcile net income to net cash provided by operating activities:  Adjustments to reconcile net income to net cash provided by operating activities:  
Depreciation and amortizationDepreciation and amortization16,257 13,668 Depreciation and amortization16,272 16,257 
Impairment of long-lived assets and otherImpairment of long-lived assets and other18,334 — 
Share-based compensationShare-based compensation3,086 5,247 Share-based compensation5,651 3,086 
Equity method investment lossEquity method investment loss191 1,036 
Deferred income taxes, including change in valuation allowanceDeferred income taxes, including change in valuation allowance(302)465 Deferred income taxes, including change in valuation allowance(2,112)(302)
Change in fair value of contingent considerationChange in fair value of contingent consideration4,200 — 
Other, netOther, net1,462 (231)Other, net376 426 
Changes in operating assets and liabilities, net of effects of acquisition:Changes in operating assets and liabilities, net of effects of acquisition:  Changes in operating assets and liabilities, net of effects of acquisition:  
Receivables, netReceivables, net(15,582)(5,593)Receivables, net(14,980)(15,582)
InventoryInventory(30,599)(7,588)Inventory(42,015)(30,599)
Prepaid expensesPrepaid expenses1,165 1,206 Prepaid expenses(1,517)1,165 
Refundable income taxes(1,006)(2,086)
Income taxes payable (refundable)Income taxes payable (refundable)2,134 (1,006)
Accounts payableAccounts payable12,613 (6,678)Accounts payable(10,069)12,613 
Accrued expenses and otherAccrued expenses and other1,220 15,859 Accrued expenses and other(2,471)1,220 
Federal and state excise taxes payableFederal and state excise taxes payable(2,279)(1,961)Federal and state excise taxes payable(1,908)(2,279)
Other, netOther, net(143)(682)Other, net435 (143)
Net cash provided by operating activitiesNet cash provided by operating activities72,253 70,785 Net cash provided by operating activities48,605 72,253 
Cash Flows from Investing ActivitiesCash Flows from Investing Activities  Cash Flows from Investing Activities  
Additions to property, plant, and equipmentAdditions to property, plant, and equipment(29,217)(37,257)Additions to property, plant, and equipment(42,062)(29,217)
Purchase of business, net of cash acquiredPurchase of business, net of cash acquired (149,613)Purchase of business, net of cash acquired(103,712)— 
Contributions to equity method investmentContributions to equity method investment(2,232)(988)Contributions to equity method investment (2,232)
Other, netOther, net(315)(1,308)Other, net(916)(315)
Net cash used in investing activitiesNet cash used in investing activities(31,764)(189,166)Net cash used in investing activities(146,690)(31,764)
Cash Flows from Financing ActivitiesCash Flows from Financing Activities  Cash Flows from Financing Activities  
Payment of dividends and dividend equivalentsPayment of dividends and dividend equivalents(7,984)(7,362)Payment of dividends and dividend equivalents(8,006)(7,984)
Purchase of treasury stockPurchase of treasury stock(714)(767)Purchase of treasury stock(801)(714)
Loan fees paid related to borrowings (666)
Proceeds from long-term debtProceeds from long-term debt105,000 — 
Principal payments on long-term debtPrincipal payments on long-term debt(2,603)(813)Principal payments on long-term debt(18,000)(2,603)
Proceeds from credit agreement - revolver 242,300 
Payments on credit agreement - revolver (32,300)
Payment on assumed debt as part of the Merger (87,509)
Net cash provided by (used in) financing activitiesNet cash provided by (used in) financing activities(11,301)112,883 Net cash provided by (used in) financing activities78,193 (11,301)
Effect of exchange rate changes on cash(82)(2)
Effect of exchange rate changes on cash and cash equivalentsEffect of exchange rate changes on cash and cash equivalents33 (82)
Increase (decrease) in cash and cash equivalentsIncrease (decrease) in cash and cash equivalents29,106 (5,500)Increase (decrease) in cash and cash equivalents(19,859)29,106 
Cash and cash equivalents, beginning of periodCash and cash equivalents, beginning of period21,568 21,662 Cash and cash equivalents, beginning of period47,889 21,568 
Cash and cash equivalents, end of periodCash and cash equivalents, end of period$50,674 $16,162 Cash and cash equivalents, end of period$28,030 $50,674 
See accompanying notes to unaudited condensed consolidated financial statements
6


MGP INGREDIENTS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY
For Year to Date Ended September 30, 20222023
(Unaudited)
(Dollars in thousands)
Capital
Stock
Preferred
Issued CommonAdditional
Paid-In
Capital
Retained
Earnings
Accumulated
Other
Comprehensive
Income
Treasury
Stock
Non-controlling InterestTotalCapital
Stock
Preferred
Issued CommonAdditional
Paid-In
Capital
Retained
Earnings
Accumulated
Other
Comprehensive
Income (loss)
Treasury
Stock
Non-controlling InterestTotal
Balance, December 31, 2021$$6,715 $315,802 $344,237 $354 $(22,357)$(490)$644,265 
Balance, December 31, 2022Balance, December 31, 2022$$6,715 $318,839 $443,061 $(304)$(21,591)$(1,080)$745,644 
Comprehensive income:Comprehensive income:Comprehensive income:
Net income (loss)Net income (loss)   37,437   (66)37,371 Net income (loss)   31,071   (39)31,032 
Other comprehensive loss    (232)  (232)
Other comprehensive incomeOther comprehensive income    68   68 
Dividends and dividend equivalents of $0.12 per common share and per restricted stock unit, net of estimated forfeituresDividends and dividend equivalents of $0.12 per common share and per restricted stock unit, net of estimated forfeitures   (2,661)   (2,661)Dividends and dividend equivalents of $0.12 per common share and per restricted stock unit, net of estimated forfeitures   (2,661)   (2,661)
Share-based compensationShare-based compensation  1,373     1,373 Share-based compensation  2,665     2,665 
Stock shares awarded, forfeited or vestedStock shares awarded, forfeited or vested  (604)  604   Stock shares awarded, forfeited or vested  (507)  507   
Stock shares repurchasedStock shares repurchased     (711) (711)Stock shares repurchased     (801) (801)
Balance, March 31, 20224 6,715 316,571 379,013 122 (22,464)(556)679,405 
Balance, March 31, 2023Balance, March 31, 20234 6,715 320,997 471,471 (236)(21,885)(1,119)775,947 
Comprehensive income:Comprehensive income:Comprehensive income:
Net income (loss)Net income (loss)   25,560   (198)25,362 Net income (loss)   32,126   (162)31,964 
Other comprehensive loss    (443)  (443)
Other comprehensive incomeOther comprehensive income    67   67 
Dividends and dividend equivalents of $0.12 per common share and per restricted stock unit, net of estimated forfeituresDividends and dividend equivalents of $0.12 per common share and per restricted stock unit, net of estimated forfeitures   (2,658)   (2,658)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 compensationShare-based compensation  1,409     1,409 Share-based compensation  1,808     1,808 
Stock shares awarded, forfeited or vestedStock shares awarded, forfeited or vested  (740)  740   Stock shares awarded, forfeited or vested  (538)  538   
Stock shares repurchased     (2) (2)
Balance, June 30, 20224 6,715 317,240 401,915 (321)(21,726)(754)703,073 
Balance, June 30, 2023Balance, June 30, 20234 6,715 322,267 500,933 (169)(21,347)(1,281)807,122 
Comprehensive income:Comprehensive income:Comprehensive income:
Net income (loss)Net income (loss)   23,808  (180)23,628 Net income (loss)   13,211  (123)13,088 
Other comprehensive lossOther comprehensive loss    (543) (543)Other comprehensive loss    (309) (309)
Dividends and dividend equivalents of $0.12 per common share and per restricted stock unit, net of estimated forfeituresDividends and dividend equivalents of $0.12 per common share and per restricted stock unit, net of estimated forfeitures   (2,660)   (2,660)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 compensationShare-based compensation  363     363 Share-based compensation  949     949 
Stock shares awarded, forfeited, or vestedStock shares awarded, forfeited, or vested  (62)  62   Stock shares awarded, forfeited, or vested  (87)  87   
Stock shares repurchased     (1) (1)
Balance, September 30, 2022$4 $6,715 $317,541 $423,063 $(864)$(21,665)$(934)$723,860 
Balance, September 30, 2023Balance, 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





7


MGP INGREDIENTS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY
For Year to Date Ended September 30, 20212022
(Unaudited)
(Dollars in thousands)

Capital
Stock
Preferred
Issued CommonAdditional
Paid-In
Capital
Retained
Earnings
Accumulated
Other
Comprehensive
Income
Treasury
Stock
Non-controlling InterestTotalCapital
Stock
Preferred
Issued CommonAdditional
Paid-In
Capital
Retained
Earnings
Accumulated
Other
Comprehensive
Income (loss)
Treasury
Stock
Non-controlling InterestTotal
Balance, December 31, 2020$$6,715 $15,503 $262,943 $486 $(23,125)$— $262,526 
Balance, December 31, 2021Balance, December 31, 2021$$6,715 $315,802 $344,237 $354 $(22,357)$(490)$644,265 
Comprehensive income:Comprehensive income:Comprehensive income:
Net income— — — 15,427 — — — 15,427 
Other comprehensive income— — — — 55 — — 55 
Net income (loss)Net income (loss)— — — 37,437 — — (66)37,371 
Other comprehensive lossOther comprehensive loss— — — — (232)— — (232)
Dividends and dividend equivalents of $0.12 per common share and per restricted stock unit, net of estimated forfeituresDividends and dividend equivalents of $0.12 per common share and per restricted stock unit, net of estimated forfeitures— — — (2,052)— — — (2,052)Dividends and dividend equivalents of $0.12 per common share and per restricted stock unit, net of estimated forfeitures— — — (2,661)— — — (2,661)
Share-based compensationShare-based compensation— — 3,229 — — — — 3,229 Share-based compensation— — 1,373 — — — — 1,373 
Stock shares awarded, forfeited or vestedStock shares awarded, forfeited or vested— — (716)— — 716 — — Stock shares awarded, forfeited or vested— — (604)— — 604 — — 
Stock shares repurchasedStock shares repurchased— — — — — (674)— (674)Stock shares repurchased— — — — — (711)— (711)
Balance, March 31, 20216,715 18,016 276,318 541 (23,083)— 278,511 
Comprehensive income:
Net income (loss)— — — 20,135 — — (76)20,059 
Other comprehensive income— — — — — — 
Dividends and dividend equivalents of $0.12 per common share and per restricted stock unit, net of estimated forfeitures— — — (2,653)— — — (2,653)
Share-based compensation— — 1,538 — — — — 1,538 
Stock shares awarded, forfeited, or vested— — (705)— — 705 — — 
Stock shares repurchased— — — — — (91)— (91)
Equity consideration for Merger— — 296,213 — — — — 296,213 
Balance, June 30, 20216,715 315,062 293,800 542 (22,469)(76)593,578 
Balance, March 31, 2022Balance, March 31, 20226,715 316,571 379,013 122 (22,464)(556)679,405 
Comprehensive income:Comprehensive income:Comprehensive income:
Net income (loss)Net income (loss)— — — 23,876 — — (203)23,673 Net income (loss)— — — 25,560 — — (198)25,362 
Other comprehensive lossOther comprehensive loss— — — — (230)— — (230)Other comprehensive loss— — — — (443)— — (443)
Dividends and dividend equivalents of $0.12 per common share and per restricted stock unit, net of estimated forfeituresDividends and dividend equivalents of $0.12 per common share and per restricted stock unit, net of estimated forfeitures— — — (2,654)— — — (2,654)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 compensationShare-based compensation— — 480 — — — — 480 Share-based compensation— — 1,409 — — — — 1,409 
Stock shares awarded, forfeited, or vestedStock shares awarded, forfeited, or vested— — (64)— — 64 — — Stock shares awarded, forfeited, or vested— — (740)— — 740 — — 
Stock shares repurchasedStock shares repurchased— — — — — (1)— (1)Stock shares repurchased— — — — — (2)— (2)
Equity consideration for Merger— — 65 — — — — 65 
Balance, September 30, 2021$$6,715 $315,543 $315,022 $312 $(22,406)$(279)$614,911 
Balance, June 30, 2022Balance, June 30, 20226,715 317,240 401,915 (321)(21,726)(754)703,073 
Comprehensive income:Comprehensive income:
Net income (loss)Net income (loss)— — — 23,808 — (180)23,628 
Other comprehensive lossOther comprehensive loss— — — — (543)— (543)
Dividends and dividend equivalents of $0.12 per common share and per restricted stock unit, net of estimated forfeituresDividends and dividend equivalents of $0.12 per common share and per restricted stock unit, net of estimated forfeitures— — — (2,660)— — — (2,660)
Share-based compensationShare-based compensation— — 363 — — — — 363 
Stock shares awarded, forfeited, or vestedStock shares awarded, forfeited, or vested— — (62)— — 62 — — 
Stock shares repurchasedStock shares repurchased— — — — — (1)— (1)
Balance, September 30, 2022Balance, September 30, 2022$$6,715 $317,541 $423,063 $(864)$(21,665)$(934)$723,860 

See accompanying notes to unaudited condensed consolidated financial statements
8


MGP INGREDIENTS, INC.
 NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, unless otherwise noted)

Note 1.  Accounting Policies and Basis of Presentation

The Company. MGP Ingredients, Inc. (“the Company,”(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 ryeother whiskeys and grain neutral spirits (“GNS”), including vodka and gin. The Company’s distilled spirits are either packaged and sold under its own brands to distributors, sold directly or indirectly to manufacturers of other branded spirits, or direct to consumer.spirits. MGP is also a top producer of high-quality,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 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 Company’s industrial alcohol and ingredients products are sold directly, or through distributors, to manufacturers and processors of finished packaged goods or to bakeries. The Company’s distillery products are derived from corn and other grains (including rye, barley, wheat, barley malt, and milo), and its ingredient products are derived primarily from wheat flour.  

On AprilJune 1, 2021,2023, the Company acquired Luxco, Inc. and its affiliated companiesPenelope Bourbon LLC (“Luxco”Penelope”), which, isprior to the Company’s acquisition, was a leading branded beverage alcoholfamily and founder-owned and operated American whiskey company across various categories, with a more than 60-year business heritage.Luxco’s operations predominately involvediverse portfolio of high-quality whiskeys in the producing, importing, bottling and rectifying of distilled spirits.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. During 2022, the Company changed the name of its Distillery Products segment to Distilling Solutions. Certain amounts in the 20212022 consolidated financial statements have been reclassified to conform to the 20222023 presentation.

Basis of Presentation and Principles of Consolidation. The unaudited condensed consolidated financial statements include the accounts of the Company and its wholly owned and majority owned subsidiaries. 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, 2022,2023, 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, 2021,2022, filed with the Securities and Exchange Commission (“SEC”(the “SEC”).  The results of operations for interim periods are not necessarily indicative of the results to be expected for the full year.

In the opinion of management, the accompanying unaudited condensed consolidated financial statements contain all adjustments (consisting of normal and recurring adjustments) necessary to fairly present the results for interim periods in accordance with U.S. generally accepted accounting principles (“GAAP”).  Pursuant to the rules and regulations of the SEC, certain information and note disclosures normally included in the financial statements prepared in accordance with GAAP have been condensed or omitted.

The Company holds a 60 percent interest in Dos Primos Tequila, LLC (“Dos Primos”). The Company consolidated Dos Primos’ activity on the financial statements and presented the 40 percent non-controlling interest portion on a separate line.

Use of Estimates.  The financial reporting policies of the Company conform to GAAP.  The preparation of unaudited condensed consolidated 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 the effects related to the COVID-19 pandemic.uncertain.  For all of these policies, management cautions that future events rarelymay not develop as forecast, and estimates routinely require adjustment and may require material adjustment.

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Immaterial Correction to Prior Period Financial Statements. During the year to date ended September 30, 2022, the Company identified an immaterial correction related to gross amounts of Property, plant and equipment and Accumulated depreciation and amortization in the Condensed 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 on the Condensed Consolidated Balance Sheet reported in this Form 10-Q by equal and offsetting amounts, which resulted in no change to the balance of Property, plant, and equipment, net.

Inventory.  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; allpractice. All barreled bourbon, rye, and whiskey isother 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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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.materials, primarily corn. Inventory consists of the following:

September 30, 2022December 31, 2021September 30, 2023December 31, 2022
Finished goodsFinished goods$49,008 $35,362 Finished goods$53,160 $47,073 
Barreled distillate (bourbons and whiskeys)185,681 174,080 
Barreled distillate (bourbons and other whiskeys)Barreled distillate (bourbons and other whiskeys)239,051 199,040 
Raw materialsRaw materials27,496 24,981 Raw materials36,319 29,931 
Work in processWork in process1,581 1,261 Work in process550 1,645 
Maintenance materialsMaintenance materials10,020 9,179 Maintenance materials10,528 9,931 
OtherOther1,692 1,081 Other2,793 2,102 
TotalTotal$275,478 $245,944 Total$342,401 $289,722 

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 itthe Company 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 generally one year or less.

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 the point control passes to the customer, the customer has legal title and the risk and rewards of ownership have transferred, and the customer has a 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. 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:when the 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 of the following bill and hold criteria have to be met in order for control to be transferred to the customer: the reason for the bill and hold arrangement is substantive, - the customer has requested the product be warehoused, the product has been identified as separately belonging to the customer, the product is currently ready for physical transfer to the customer, and the Company does not have the ability to use the product or direct it to another customer.

Warehouse services revenue is recognized over the time that warehouse services are rendered and as they are rendered. This is a faithful depiction of the satisfaction of the performance obligation because control of the aging products has already passed to the customer and there are no additional performance activities required by the Company, except as requested by the customer. The performance of the service activities, as requested, is invoiced as satisfied and revenue is concurrently recognized. Contract bottling is recognized over the time contract bottling services are rendered and as they are rendered.

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Sales in the Branded Spirits segment reflect reductions attributable to consideration given to customers in incentive programs, including discounts and allowances for certain volume targets. These allowances and discounts are not for distinct goods and are paid only when the depletion volume targets are achieved by the customer. 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
of the U.S. Treasury Department (the “TTB”) regulations, which includesinclude making timely and accurate excise tax payments. The Company is subject to periodic compliance audits by the TTB. Individual U.S. states also impose excise taxes on alcohol beverages in varying amounts. The Company calculates its FederalU.S. federal and state excise tax expense based upon units shipped and on its understanding of the applicable excise tax laws. 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.revenue and expense.

Income Taxes. The Company accounts for income taxes using an asset and liability method, which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax basis. A valuation allowance is recognized if it is “moremore likely than not”not that at least some portion of the deferred tax asset will not be realized.
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Earnings Per Common Share (“EPS”).  Basic and diluted EPS is computed using the two-class method, which is an earnings allocation formula that determines net income per share for each class of Common Stock and participating security according to dividends declared and participation rights in undistributed earnings.  Basic EPS amounts are computed by dividing net income attributable to common shareholders by the weighted average shares outstanding during each period. Diluted EPS is computed using the if-converted method by dividing the net income attributable to common shareholders by the weighted average shares outstanding, inclusive of the impact of the Convertible Senior Notes, except for where the result would be anti-dilutive as of the balance sheet date.

Translation of Foreign Currencies. Assets and liabilities of Niche Drinks Co., Ltd. (“Niche”), a wholly owned subsidiary of the Company whose functional currency is the British pound sterling, are translated to U.S. dollars using the exchange rate in effect at the condensed consolidated balance sheet date. Results of operations are translated using average rates during the period. Adjustments resulting from the translation process are included as a component of Accumulatedaccumulated other comprehensive incomeincome..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. Assets acquired and liabilities assumed during a business combination are generally recorded at fair market value as of the acquisition date. Goodwill is recognized to the extent that the purchase consideration, including contingent consideration, exceeds the value of the assets acquired and liabilities assumed. The Company uses its best estimateinternal estimates and third party valuation specialists to determineassist in determining the fair value of the assets acquired and liabilities assumed. During the measurement period,periods, which can be up to one year after the acquisition date, the Company can make adjustments to the fair value of the assets acquired and liabilities assumed, with the offset being an adjustment to goodwill.

Goodwill and Indefinite-LivedOther Intangible Assets. The Company records goodwill and other indefinite-lived intangible assets in connection with various acquisitions of businesses and allocates the goodwill and other indefinite-lived intangible assets to its respective reporting units. 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 amountvalue 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. The Company separately evaluates indefinite-lived intangible assets for impairment. As of September 30, 2022,2023, the Company determined that goodwill and indefinite-lived intangible assets were not impaired.

Fair Value of Financial Instruments.  The Company determines the fair values of its financial instruments based on a fair value hierarchy, which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The hierarchy is broken down into three levels based upon the observability of inputs. Fair values determined by Level 1 inputs utilize quoted prices (unadjusted) in active markets for identical assets or liabilities that the Company has the ability to access. Level 2 inputs include quoted prices for similar assets and liabilities in active markets and inputs other than quoted prices that are observable for the asset or liability. Level 3 inputs are unobservable inputs for the asset or liability, and include situations where there is little, if any, market activity for the asset or liability. In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, the level in the fair value hierarchy within which the fair value measurement in its entirety falls has been determined based on the lowest level input that is significant to the fair value measurement in its entirety. The Company’s assessment of the significance of a particular input to the fair value in its entirety requires judgment and considers factors specific to the asset or liability.
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The Company’s short-term financial instruments include cash and cash equivalents, accounts receivablesreceivable, and accounts payable.  The carrying value of the short-term financial instruments approximates the fair value due to their short-term nature. These financial instruments have no stated maturities or the financial instruments have short-term maturities that approximate market.
 
The fair value of the Company’s debt is estimated based on current market interest rates for debt with similar maturities and credit quality. TheExcluding the impact of the conversion feature of the Convertible Senior Notes, the fair value of the Company’s debt was $178,062$223,030 and $272,971$150,249 at September 30, 20222023 and December 31, 2021,2022, respectively. The financial statement carrying value of total debt was $231,051 (including(net of unamortized loan fees) was $316,677 and $233,399 (including unamortized loan fees)$230,335 at September 30, 20222023 and December 31, 2021,2022, respectively.  These fair values are considered Level 2 under the fair value hierarchy.

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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 3, Business Combinations, for more information.

Fair value disclosure for deferred compensation plan investments is included in Note 9,10, Employee and Non-Employee Benefit Plans. See Note 3, Business Combination, for discussion related to the fair value of tangible and intangible assets acquired and liabilities assumed as part of the merger with Luxco.

Equity Method Investments. The Company holds 50 percent interests in DGL Destiladores, S.de R.L. de C.V. (“DGL”) and Agricola LG, S.de R.L. de C.V. (“Agricola”) (combined and together with DGL, “LMX”), which are accounted for as equity method investments since the date of acquisition and are considered affiliates of the Company. The investment in LMX, which is recorded in Investmentinvestment in joint ventures on the Condensed Consolidated Balance Sheet,Sheets, was $6,140$5,343 and $4,944$5,534 at September 30, 20222023 and December 31, 2021,2022, respectively. During the quarterquarters ended September 30, 2023 and 2022, the Company recorded a gain of $388 and 2021,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 $856$191 and $405 from our equity method investments,$1,036, respectively, which is recorded in Otherother income (expense), net on the Condensed Consolidated StatementStatements of Income. During the quarter and year to date ended September 30, 2022 and 2021,2023, the Company recorded a losspurchased $10,223 and $30,178, respectively, of $1,036finished goods from LMX and $739bulk beverage alcohol from our equity method investments, respectively, which is recorded in Other (income) expense, net on the Condensed Consolidated Statementother 50 percent owner of Income.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 LMX, and during the quarter and year to date ended September 30, 2021, the Company purchased $8,052 and $19,724, respectively,other 50 percent owner of bulk beverage alcohol from LMX.DGL.

Recently Adopted Accounting Standard Updates. The Company did not adopt any new Accounting Standard Updates during the quarter ended September 30, 2022.2023.

Note 2.  Revenue

The Company generates revenuesrevenue 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 revenuesrevenue from the Branded Spirits segment by the sale of products and by providing contract bottling services. The Company generates revenuesrevenue from the Ingredient Solutions segment by the sale of products. Revenue related to sales of products is recognized at a point in time whereas revenue generated from warehouse services 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).

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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,Quarter Ended September 30,Year to Date Ended September 30,
20222021202220212023202220232022
Distilling SolutionsDistilling SolutionsDistilling Solutions
Brown goodsBrown goods$57,423 $42,793 $175,899 $129,600 Brown goods$73,409 $57,423 $214,857 $175,899 
White goodsWhite goods20,469 21,187 57,996 56,049 White goods14,429 20,469 47,199 57,996 
Premium beverage alcoholPremium beverage alcohol77,892 63,980 233,895 185,649 Premium beverage alcohol87,838 77,892 262,056 233,895 
Industrial alcoholIndustrial alcohol10,761 14,790 35,141 46,896 Industrial alcohol9,407 10,761 29,911 35,141 
Food grade alcoholFood grade alcohol88,653 78,770 269,036 232,545 Food grade alcohol97,245 88,653 291,967 269,036 
Fuel grade alcoholFuel grade alcohol3,713 3,592 10,307 10,862 Fuel grade alcohol1,509 3,713 5,963 10,307 
Distillers feed and related co-productsDistillers feed and related co-products9,943 4,016 30,127 13,660 Distillers feed and related co-products5,746 9,943 23,053 30,127 
Warehouse servicesWarehouse services6,335 4,666 17,821 12,949 Warehouse services7,353 6,335 20,958 17,821 
Total Distilling SolutionsTotal Distilling Solutions108,644 91,044 327,291 270,016 Total Distilling Solutions111,853 108,644 341,941 327,291 
Branded SpiritsBranded SpiritsBranded Spirits
Ultra premiumUltra premium13,804 11,363 35,836 19,491 Ultra premium20,107 13,804 43,594 35,836 
Super premiumSuper premium3,350 2,798 9,522 6,393 Super premium3,637 3,350 9,614 9,522 
PremiumPremium6,013 5,683 17,928 11,012 Premium7,099 6,013 20,144 17,928 
Premium plusPremium plus30,843 23,167 73,352 63,286 
MidMid20,834 22,992 63,408 48,399 Mid17,650 20,834 55,575 63,408 
ValueValue12,097 12,756 36,304 25,984 Value11,049 12,097 36,048 36,304 
OtherOther6,663 5,969 14,080 11,278 Other7,277 6,663 16,343 14,080 
Total Branded SpiritsTotal Branded Spirits62,761 61,561 177,078 122,557 Total Branded Spirits66,819 62,761 181,318 177,078 
Ingredient SolutionsIngredient SolutionsIngredient Solutions
Specialty wheat starchesSpecialty wheat starches16,241 12,231 47,445 35,051 Specialty wheat starches17,196 16,241 48,977 47,445 
Specialty wheat proteinsSpecialty wheat proteins9,697 8,901 29,225 23,299 Specialty wheat proteins11,440 9,697 35,918 29,225 
Commodity wheat starchesCommodity wheat starches3,803 2,626 10,286 7,572 Commodity wheat starches4,226 3,803 12,870 10,286 
Commodity wheat proteinsCommodity wheat proteins 248 38 1,378 Commodity wheat proteins90 — 611 38 
Total Ingredient SolutionsTotal Ingredient Solutions29,741 24,006 86,994 67,300 Total Ingredient Solutions32,952 29,741 98,376 86,994 
Total salesTotal sales$201,146 $176,611 $591,363 $459,873 Total sales$211,624 $201,146 $621,635 $591,363 


Note 3. Business Combination

Description of the Transaction. On January 22, 2021,May 8, 2023, the Company entered into a definitive agreement to acquire Luxco,100 percent of the equity of Penelope, and subsequently completed the mergeracquisition on AprilJune 1, 20212023 (the “Merger”“Acquisition”). Luxco isPenelope, prior to the Acquisition, was a leading branded beverage alcoholfamily and founder-owned and operated American whiskey company across various categories, with a more than 60-year business heritage.diverse portfolio of high-quality whiskeys in the premium plus price tiers. As a result of the Merger, MGP increasedAcquisition, the Company enhances its scale and market positionpresence in the branded-spirits sectorgrowing American whiskey category and believes it strengthenedexpands its platform for future growthportfolio of higher valued-added products.premium plus price tier brands.

Following the Merger, LuxcoAcquisition, Penelope became a wholly owned subsidiary of MGPthe Company and isits financial results are included within the Branded Spirits segment. The aggregate consideration paid by the Company in connection with the MergerAcquisition was $237,500$105,000 in cash (less assumed indebtedness) and 5,007,833 sharespaid at closing, with further additional potential earn-out consideration of common stockup to a maximum cash payout of the Company, subject to adjustment for fractional shares (the “Company Shares,” and together with the cash portion, the “Merger Consideration”).$110,800 if certain performance conditions, measured through December 31, 2025, are met. 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 wasconsideration is subject to customary purchase price adjustments related to, among other things, net working capital and acquired cash and assumed debt.cash. The consideration paid at closing included a preliminary estimated purchase price adjustment. InDuring the quarter ended September 2021,30, 2023, the partiesCompany finalized the purchase price adjustment,net working capital adjustments, which decreased the cash consideration paid by approximately $608from $105,000 at closing to $104,638 at September 30, 2023. The cash portion of the consideration and increased stock consideration by an additional 1,373 shares from the preliminary amounts thattransaction-related expenses were paid at closing.

using both cash on hand and borrowings under the Company’s existing credit agreement. See Note 6, Corporate Borrowings, for further details.
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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. See Note 5, Corporate Borrowings, for further details.

For tax purposes, the transactionAcquisition was structured partially as a tax-free reorganization and partially as a taxable acquisition, as defined in the Internal Revenue Code. The amount transferred in a tax deferred manner, under the tax-free reorganization rules, did not create additional tax basis for the Company. The taxable component of the transactionan asset purchase which created additional tax basis in the assets acquired as a result of valuing the assets at fair market value and a corresponding futurethe purchase price will be accounted for in accordance with U.S. federal tax deductionlaw. Indefinite-lived intangible assets and goodwill is expected to be deductible for the Company.U.S. income tax purposes.

Purchase Price Allocation. The MergerAcquisition 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,. The fair value of the assets acquired and liabilities assumed are based upon a preliminary assessment of fair value and consideration transferred were recorded at their estimated fair values onmay 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 LuxcoPenelope to the preliminary 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$149,484104,638 
Value of MGP Common Stock issued at closeContingent consideration (a)
296,27962,100 
Fair value of total consideration transferred$445,763166,738 
Recognized amounts of identifiable assets acquired and liabilities assumed:
Cash$479926 
Receivables29,6752,323 
Inventory90,85412,454 
Prepaid expenses and other assets1,45477 
Property, plant and equipment, net41,279 
Investments in joint ventures5,085253 
Intangible assets (b)(a)
219,50057,700 
Operating lease right-of-use assets, net426 
Other assets4,25744 
Total assets392,583 
Current maturities of long-term debt (c)
87,50974,203 
Accounts payable14,453 
Federal and state excise taxes payable8,3522,242 
Accrued expenses and other2,832205 
Other noncurrentLong-term operating lease liabilities196 
Deferred income taxes57,034268 
Total liabilities170,3762,715 
Goodwill223,55695,250 
Total$445,763166,738 

(a)On April 1, 2021, the Company issued 5,007,833 shares of MGP Common Stock which was valued at $59.15 per share. 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$34,000 and distributor relationships with an estimated fair value of $41,400.
(c) The fair value of Luxco’s debt that was assumed by MGP in the transaction and repaid on the closing date.$23,700.

In accordance with ASC 805, assets acquired, liabilities assumed, and consideration transferred were recorded at their estimated fair values on the acquisitionAcquisition 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 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
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cost approach and the sales comparison approach.

Goodwill of $223,556, none$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 Intangibleintangible assets acquired included indefinite-lived intangible assets, trade names, withwhich have an estimated fair value of $178,100$34,000, and definite-lived intangible assets, distributor relationships, withwhich have an estimated fair value of $41,400$23,700 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 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.

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Pro Forma Information
.
The following table summarizesoperating results of Penelope have been included in the unauditedCompany’s condensed consolidated financial statements since the June 1, 2023 acquisition date. The operating results and pro forma financial results forare 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, 2021, as if2023, the Merger had occurredCompany incurred $314 and $1,814 of costs related to the Acquisition, which are included in selling, general, and administrative expenses on January 1, 2020:
Pro Forma Financial Information
Quarter Ended September 30,Year to Date Ended September 30,
20212021
Sales$176,611 $504,243 
Net income23,673 68,934 
Basic and diluted earnings per common share1.08 3.38 
the Condensed Consolidated Statements of Income.

Contingent Consideration. The pro forma resultsestimated 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 adjusted for items that are non-recurring in nature and directly attributableconsidered Level 3 under the fair value hierarchy due to the Merger, including the income tax effectlack 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 adjustments. Merger related costs incurred byobligation resulted from changes in the Company of $294key assumptions between measurement dates, such as projected net sales, discount rates, and $8,922 forvolatility rates. During the quarter
and year to date ended September 30, 2021, respectively, were excluded and $7,032 is assumed to have been incurred on January 1, 2020. Merger related costs incurred by Luxco of $3,132 were excluded from the year to date ended September 30, 2021 pro forma results. A non-recurring expense of $2,529 for the quarter and year to date ended September 30, 2021 related2023 there was a $4,200 adjustment to the fair value adjustmentmeasurement of finished goods inventory estimated to have been sold was removed. Other acquired tangible and intangible assets are assumed to be recorded at estimated fair value on January 1, 2020 and are amortized or depreciated over their estimated useful lives.     

the contingent consideration obligation. The summary pro forma financial information is for informational purposes only,amount payable is based on estimates and assumptions, and does not purport to represent whatupon achievement of certain net sales targets between the Company’s consolidated results of operations actually would have been if the Merger had occurred at an earlierAcquisition date and such data does not purportDecember 31, 2025. The possible payments range from zero to project the Company’s resultsa maximum payout of operations for any future period. The basic and diluted shares outstanding used to calculate the pro forma net income per share amounts presented above have been adjusted to assume shares issued at the closing of the Merger were outstanding since January 1, 2020.$110,800.

Note 4. Goodwill and Intangible Assets

Definite-Lived Intangible Assets. The Company has aacquired definite-lived intangible asset which was acquired as a resultassets in connection with various acquisitions of the Merger.businesses. The distributor relationships have a carrying value of $38,295,$59,530, net of accumulated amortization of $3,105.$5,570. The distributor relationships have a useful life of 20 years. The amortization expense for the quarter and year to date ended September 30, 20222023 was $518$820 and $1,553, respectively, and the$1,948, respectively. The amortization expense for the quarter and year to date ended September 30, 20212022 was $517$518 and $1,035,$1,553, respectively.

As of September 30, 2022,2023, the expected future amortization expense related to definite-lived intangible assets areis as follows:
Remainder of 2022$517 
20232,070 
Remainder of 2023Remainder of 2023$813 
202420242,070 20243,255 
202520252,070 20253,255 
202620262,070 20263,255 
202720273,255 
ThereafterThereafter29,498 Thereafter45,697 
TotalTotal$38,295 Total$59,530 

Goodwill and Indefinite-Lived Intangible Assets. 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.

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Changes in carrying amount of goodwill by business segment were as follows:
Distilling SolutionsBranded SpiritsIngredient SolutionsTotal
Balance, December 31, 2021$— $226,294 $— $226,294 
Acquisitions— — — — 
Balance, September 30, 2022$ $226,294 $ $226,294 
Distilling SolutionsBranded SpiritsIngredient SolutionsTotal
Balance, December 31, 2022$— $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 SolutionsBranded SpiritsIngredient SolutionsTotal
Balance, December 31, 2021$— $178,990 $— $178,990 
Acquisitions— — — — 
Balance, September 30, 2022$ $178,990 $ $178,990 
Distilling SolutionsBranded SpiritsIngredient SolutionsTotal
Balance, December 31, 2022$— $178,990 $— $178,990 
Acquisitions— 34,000 — 34,000 
Balance, September 30, 2023$ $212,990 $ $212,990 

Note 5. 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
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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.

Note 5.6.  Corporate Borrowings

The following table presents the Company’s outstanding indebtedness:
Description(a)
Description(a)
September 30, 2022December 31, 2021
Description(a)
September 30, 2023December 31, 2022
Credit Agreement - Revolver, 4.14% (variable rate) due 2025$ $— 
Credit Agreement - Revolver, 6.42% (variable rate) due 2026Credit Agreement - Revolver, 6.42% (variable rate) due 2026$91,000 $— 
Convertible Senior Notes, 1.88% (fixed rate) due 2041Convertible Senior Notes, 1.88% (fixed rate) due 2041201,250 201,250 Convertible Senior Notes, 1.88% (fixed rate) due 2041201,250 201,250 
Note Purchase AgreementNote Purchase AgreementNote Purchase Agreement
Series A Senior Secured Notes, 3.53% (fixed rate) due 2027Series A Senior Secured Notes, 3.53% (fixed rate) due 202716,000 18,400 Series A Senior Secured Notes, 3.53% (fixed rate) due 202712,800 15,200 
Senior Secured Notes, 3.80% (fixed rate) due 2029Senior Secured Notes, 3.80% (fixed rate) due 202920,000 20,000 Senior Secured Notes, 3.80% (fixed rate) due 202918,400 20,000 
Other long-term borrowings 203 
Total indebtedness outstandingTotal indebtedness outstanding237,250 239,853 Total indebtedness outstanding323,450 236,450 
Less unamortized loan fees(b)
Less unamortized loan fees(b)
(6,199)(6,454)
Less unamortized loan fees(b)
(6,773)(6,115)
Total indebtedness outstanding, netTotal indebtedness outstanding, net231,051 233,399 Total indebtedness outstanding, net316,677 230,335 
Less current maturities of long-term debtLess current maturities of long-term debt(4,800)(3,227)Less current maturities of long-term debt(6,400)(5,600)
Long-term debt and Credit Agreement - Revolver$226,251 $230,172 
Long-term debtLong-term debt$310,277 $224,735 
(a) Interest rates are as of September 30, 2022.2023.
(b) Loan fees are being amortized over the life of the debt instruments.

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 FebruaryMarch 14, 2025.2026. 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 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 with at September 30, 2022. The2023. Part of the cash portion of the Merger Consideration, the repayment of assumed debt,consideration paid to acquire Penelope and transaction-related expenses were financed with $242,300$105,000 borrowings under the Credit Agreement which was drawn down on April 1, 2021.Agreement. As of September 30, 2022,2023, the Company had no$91,000 outstanding borrowings under the Credit Agreement, leaving $400,000$309,000 available.

Convertible Senior Notes. On November 16, 2021, the Company issued $201,250 in aggregate principal amount of 1.875%1.88% convertible senior notes due in 2041 (“2041(the “2041 Notes”). The 2041 Notes were issued pursuant to an indenture, dated as of November 16, 2021 ( the(the “Indenture”), by and among the Company, as issuer, Luxco, Inc., MGPI Processing, Inc., and MGPI of Indiana, LLC, as subsidiary guarantors, and U.S. Bank National Association, as trustee. The 2041 Notes are senior, unsecured obligations of the Company and interest is payable semi-annually in arrears at a fixed interest rate of 1.875%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.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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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
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higher amount). On July 29, 2021, Prudential provided the Company notice pursuant to Section 1.2 ofEffective August 23, 2023, the Note Purchase Agreement that Prudential has authorized anwas amended to increase in the total amount of additional Senior Secured Notes that may be issued under the uncommitted shelf 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 $105,000 to $140,000, effective as of July 29, 2021. The deadline for issuing the notes under the shelf facility is August 23, 2023.2023 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. 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 with at September 30, 20222023. As of September 30, 2022,2023, the Company has $16,000had $12,800 of Series A Senior Secured Notes and $20,000$18,400 of additional Senior Secured Notes outstanding under the Note Purchase Agreement, leaving $120,000$218,800 available of Senior Secured Notes.

Other long-term borrowings. As part ofunder the Merger, the Company acquired additional long-term notes payable to certain counties in Kentucky and during the quarter ended September 30, 2022, the Company paid off the outstanding balances.Note Purchase Agreement.

Note 6.7. Income Taxes
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. In each quarter, the estimated annual effective tax rate is updated and a year to date adjustment is made to the provision. 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 2021,2023, 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. 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 tax rate includes both domestic and foreign entities acquired in the Merger. See Note 3, Business Combination, for further details.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 Incomeincome tax expense for the year to date ended September 30, 2022 was primarily due to higher Incomeincome before income taxes as compared to the prior year periods.

Income tax expense for the quarter and year to date ended September 30, 2021, was $7,674 and $18,701 for an effective tax rate of 24.5 percent and 24.0 percent, respectively. The effective tax rate for the quarter and year to date ended September 30, 2021 differed from the 21 percent federal statutory rate on pretax income primarily due to state taxes, income taxes on foreign subsidiaries acquired as a result of the Merger, nondeductible transaction costs, partially offset by state and federal credits and the deduction applicable to export activity.

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Note 7.8.  Equity and EPS

The following table presents computations of basic and diluted EPS:
Quarter Ended September 30,Year to Date Ended September 30,Quarter Ended September 30,Year to Date Ended September 30,
20222021202220212023202220232022
Operations:Operations:Operations:
Net income(a)
Net income(a)
$23,628 $23,673 $86,361 $59,159 
Net income(a)
$13,088 $23,628 $76,084 $86,361 
Net loss attributable to noncontrolling interestNet loss attributable to noncontrolling interest180 203 444 279 Net loss attributable to noncontrolling interest123 180 324 444 
Income attributable to participating securities (unvested shares and units)(b)
Income attributable to participating securities (unvested shares and units)(b)
(188)(175)(688)(471)
Income attributable to participating securities (unvested shares and units)(b)
(129)(188)(760)(688)
Net income used in EPS calculationNet income used in EPS calculation$23,620 $23,701 $86,117 $58,967 Net income used in EPS calculation$13,082 $23,620 $75,648 $86,117 
Share information:Share information:Share information:
Basic weighted average common shares(c)
Basic weighted average common shares(c)
22,008,381 21,981,201 22,000,026 20,293,818 
Basic weighted average common shares(c)
22,066,159 22,008,381 22,056,270 22,000,026 
Diluted weighted average common shares(c)(d)
22,228,814 21,981,201 22,000,026 20,293,818 
Diluted weighted average common shares(d)
Diluted weighted average common shares(d)
22,381,516 22,228,814 22,207,031 22,000,026 
Basic EPSBasic EPS$1.07 $1.08 $3.91 $2.91 Basic EPS$0.59 $1.07 $3.43 $3.91 
Diluted EPSDiluted EPS$1.06 $1.08 $3.91 $2.91 Diluted EPS$0.58 $1.06 $3.41 $3.91 
(a)Net income attributable to all shareholders.stockholders.
(b)Participating securities included 176,398226,410 and 163,024176,398 unvested restricted stock units (“RSUs”), at September 30, 2023 and 2022, and 2021, respectively.
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(c)Under the two-class method, basic and diluted weighted average common shares at September 30, 2022 and 2021 exclude unvested participating securities.
(d)The impacts of the Convertible Senior Notes were included in the diluted weighted average common shares if the inclusion was dilutive. 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.

Common Stock Share Issuance.Activity. On April 1, 2021, as part ofThe following table presents the consideration for the Merger, the Company issued 5,007,833 shares of common stock. 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.Company’s share activity:
Shares Outstanding
Capital Stock PreferredCommon Stock
Balance, December 31, 2022437 21,994,042 
Issuance of Common Stock— 23,324 
Repurchase of Common Stock (a)
— (8,437)
Balance, March 31, 2023437 22,008,929 
Issuance of Common Stock 5,445 
Repurchase of Common Stock(a)
 — 
Balance, June 30, 2023437 22,014,374 
Issuance of Common Stock 822 
Repurchase of Common Stock(a)
  
Balance, September 30, 2023437 22,015,196 

Share Repurchase. On February 25, 2019, MGP’s 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 could have repurchased 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.
Shares Outstanding
Capital Stock PreferredCommon Stock
Balance, December 31, 2021437 21,964,314 
Issuance of Common Stock— 29,807 
Repurchase of Common Stock (a)
— (9,021)
Balance, March 31, 2022437 21,985,100 
Issuance of Common Stock— 7,655 
Repurchase of Common Stock(a)
 (4)
Balance, June 30, 2022437 21,992,751 
Issuance of Common Stock— 606 
Repurchase of Common Stock(a)
— (2)
Balance, September 30, 2022437 21,993,355 
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Shares Outstanding
Capital Stock PreferredCommon Stock
Balance, December 31, 2020437 16,915,862 
Issuance of Common Stock— 35,114 
Repurchase of Common Stock (a)
 (10,376)
Balance, March 31, 2021437 16,940,600 
Issuance of Common Stock— 5,022,122 
Repurchase of Common Stock(a)
 (1,489)
Balance, June 30, 2021437 21,961,233 
Issuance of Common Stock— 2,361 
Repurchase of Common Stock(a)
— (20)
Balance, September 30, 2021437 21,963,574 
(a)The Common Stock repurchases were for tax withholding on equity based compensationequity-based compensation.

Note 8.9.  Commitments and Contingencies

ThereThe Company and its subsidiaries are, variousfrom time to time, a party to legal and regulatory proceedings involvingarising in the Company andordinary course of its subsidiaries.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 Kearns, 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.

Note 9.10.  Employee and Non-Employee Benefit Plans

Share-Based Compensation Plans.  The Company’s share-based compensation plans provide for the awarding of stock options, stock appreciation rights, shares of restricted stock, (“Restricted Stock”), and RSUs for senior executives and salariedother employees, as well as non-employee directors. The Company currently has two active equity-based compensation plans: the Employee2014 Equity Incentive Plan of 2014 (the(as amended, the “2014 Plan”) and the 2014 Non-Employee Director Equity Incentive Plan (the “Directors’ Plan”).

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As of September 30, 2022, 585,3532023, 658,081 RSUs had been granted offrom the 1,500,000 shares approved under the 2014 Plan, and 130,982138,662 shares had been granted offrom the 300,000 shares approved under the Directors’ Plan. As of September 30, 2022,2023, there were 178,608226,410 unvested RSUs under the Company’s long-term incentive plans, and 176,398all of which were participating securities (Note 7)(see Note 8).
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Deferred Compensation Plan. The Company established an unfunded Executive Deferred Compensation Plan (“EDC(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 willthe EDC Plan change in conjunction with the performance of the participants’ investments, along with contributions to and withdrawals from the plan.EDC Plan. Realized and unrealized gains (losses) on deferred compensation plan investments were included as a component of Otherother income (expense), net on the Company’s Condensed Consolidated Statements of Income forIncome. For the quarter and year to date ended September 30, 2022.2023, 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 quarter ended September 30, 2021, the Company had a loss on deferred compensation plan investments of $15 and for the year to date ended September 30, 2021, the Company had a gain on deferred compensation plan investments of $261.

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. Participants were able to direct the deferral of a portion of their base salary and a portion of their estimated accrued Short-termshort-term incentive plan (“STI Plan”) amounts that were paid during the first quarter of the following year. Base salary amounts elected for deferral are deposited into the EDC Plan by the Company on a weekly basis and allocated by participants among Company-determined investment options. 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, 20222023 and December 31, 2021,2022, the EDC Plan investments were $2,510$2,878 and $3,072,$2,176, respectively, which were recorded in Otherother assets on the Company’s Condensed Consolidated Balance Sheets. The EDC Plan current liabilities were $617$650 and $510 at both September 30, 20222023 and December 31, 2021,2022, respectively, which were included in Accruedaccrued expenses and other on the Company’s Condensed Consolidated Balance Sheets. The EDC Plan non-current liabilities were $2,310$2,615 and $2,981$2,191 at September 30, 20222023 and December 31, 2021,2022, respectively, and were included in Otherother noncurrent liabilities on the Company’s Condensed Consolidated Balance Sheets.

Note 10.11.  Operating Segments

At September 30, 2022,2023, 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 Distilling Solutions segment also includes warehouse services, includingsuch as barrel put away, barrel storage, retrieval, and blendingbarrel retrieval services. The Branded Spirits segment consists of producing, importing,a portfolio of high quality branded spirits which are produced through the distilleries and bottling and rectifying of distilled spirits.facilities. 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.  Non-direct selling, general, and administrative expenses, interest expense, other special charges, 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.  All other assets are considered as Corporate.

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Quarter Ended September 30,Year to Date Ended September 30,
2022202120222021
Sales to Customers
Distilling Solutions$108,644 $91,044 $327,291 $270,016 
Branded Spirits62,761 61,561 177,078 122,557 
Ingredient Solutions29,741 24,006 86,994 67,300 
Total$201,146 $176,611 $591,363 $459,873 
Gross Profit
Distilling Solutions$25,917 $26,981 $94,630 $87,211 
Branded Spirits25,067 23,217 70,809 41,737 
Ingredient Solutions8,064 6,888 24,654 17,264 
Total$59,048 $57,086 $190,093 $146,212 
Depreciation and Amortization
Distilling Solutions$2,929 $2,695 $8,716 $7,900 
Branded Spirits1,434 1,743 4,618 3,481 
Ingredient Solutions613 531 1,838 1,487 
Corporate357 274 1,085 800 
Total$5,333 $5,243 $16,257 $13,668 
Income (loss) before Income Taxes
Distilling Solutions$25,213 $26,047 $92,332 $84,225 
Branded Spirits9,776 9,293 28,016 15,182 
Ingredient Solutions6,822 6,214 21,770 15,121 
Corporate(10,650)(10,207)(29,720)(36,668)
Total$31,161 $31,347 $112,398 $77,860 
The following table presents summarized financial information for each segment:

Quarter Ended September 30,Year to Date Ended September 30,
2023202220232022
Sales to Customers
Distilling Solutions$111,853 $108,644 $341,941 $327,291 
Branded Spirits66,819 62,761 181,318 177,078 
Ingredient Solutions32,952 29,741 98,376 86,994 
Total$211,624 $201,146 $621,635 $591,363 
Gross Profit
Distilling Solutions$33,280 $25,917 $104,986 $94,630 
Branded Spirits29,040 25,067 79,636 70,809 
Ingredient Solutions11,128 8,064 34,945 24,654 
Total$73,448 $59,048 $219,567 $190,093 
Depreciation and Amortization
Distilling Solutions$3,082 $2,929 $8,803 $8,716 
Branded Spirits1,914 1,434 5,063 4,618 
Ingredient Solutions619 613 1,899 1,838 
Corporate167 357 507 1,085 
Total$5,782 $5,333 $16,272 $16,257 
Income (loss) before Income Taxes
Distilling Solutions$13,930 $25,213 $84,187 $92,332 
Branded Spirits7,199 9,776 25,577 28,016 
Ingredient Solutions9,408 6,822 30,255 21,770 
Corporate(13,076)(10,650)(39,103)(29,720)
Total$17,461 $31,161 $100,916 $112,398 

The following table allocates assets to each segment as of:
September 30, 2022December 31, 2021
Identifiable Assets
Distilling Solutions$330,487 $314,816 
Branded Spirits699,354 658,826 
Ingredient Solutions57,061 43,009 
Corporate45,173 24,816 
Total$1,132,075 $1,041,467 

September 30, 2023December 31, 2022
Identifiable Assets
Distilling Solutions$351,154 $350,068 
Branded Spirits895,139 698,985 
Ingredient Solutions79,828 63,943 
Corporate40,244 45,215 
Total$1,366,365 $1,158,211 

20


Note 11.12.  Subsequent Events

Dividend. On November 3, 2022,2, 2023, the Company’s Board of Directors declaredCompany announced a quarterly dividend payable to stockholders of record as of November 18, 2022, of the Company’s Common Stock, and acommon stock, resulting in dividend equivalentequivalents payable to holders of certain RSUs as of November 18, 2022,RSU holders, of $0.12 per share and per unit,RSU. The dividend and dividend equivalents are payable on December 2, 2022.1, 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.

21


ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(Dollar amounts in thousands, unless otherwise noted)

CAUTIONARY NOTE CONCERNING FACTORS THAT MAY AFFECT FUTURE RESULTS

This Report on Form 10-Q containsmay contain forward looking statements as well as historical information.  All statements, other than statements of historical facts, regarding the prospects of our industry and our prospects, plans, financial position, and strategic plan may constitute forward looking statements.  In addition, forwardstatements within the meaning of the Private Securities Litigation Reform Act of 1995, including without limitation statements about the timing of the Atchison, Kansas distillery closure; our sources of cash being adequate; our capital expenditures; our ability to support our liquidity and operating needs through cash generated from operations; and our ability to obtain credit funding.  Forward looking statements are usually identified by or are associated with such words as “intend,” “plan,” “believe,” “estimate,” “expect,” “anticipate,” “project,” “forecast,” “hopeful,” “should,” “may,” “will,” “could,” “encouraged,” “opportunities,” “potential,” and/or the negatives or variations of these terms orand similar terminology.  Forward lookingThese forward-looking statements reflect management’s current beliefs and estimates of future economic circumstances, industry conditions, our performance, our financial results, and our financial condition and are based on current expectations and assumptions thatnot guarantees of future performance.

All forward-looking statements are subject to risks and uncertainties which may cause actual results to differ materially from those expressed or implied in the forward looking statements. A detailed discussion ofcertain risks and uncertainties that could cause actual results and events to differ materially from such forward looking statements is included inmaterially. For information on these risks and uncertainties and other factors that could affect the section titledCompany’s business, see the “Risk Factors” (Item 1A)and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” sections of our Annual Report on Form 10-K for the year ended December 31, 2021 and the additional risk factors included in2022, our Quarterly Reports on Form 10-Q for the quarterquarters ended March 31 and June 30, 2022 in Part II, Item 1A.2023, this Report, and our other filings with the Securities and Exchange Commission (the “SEC”). Forward looking statements in this Report are made as of the date of this report,Report, and we undertake no obligation to update any forward-looking statements or revise publicly any forward looking statements, whether becauseinformation made in this Report, except as required by law.

RECENT DEVELOPMENTS

Acquisition of new information, future events or otherwise.Penelope. On May 8, 2023, we entered into a definitive agreement to acquire 100 percent of the equity of Penelope Bourbon LLC (“Penelope”), and subsequently completed the acquisition on June 1, 2023. Penelope, prior to our 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, we enhance our presence in the growing American whiskey category and expand our 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 in the Branded Spirits segment (see Note 3, Business Combination for additional information).

Planned Closure of the Atchison Distillery. On July 13, 2023, we announced the decision by our Board of Directors to approve the closure of our 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 our plan to address profitability headwinds associated with our grain neutral spirits (“GNS”) and industrial alcohol products within the Distilling Solutions segment. During the quarter and year to date ended September 30, 2023, we recorded a $17,112 impairment of assets, which was recorded in impairment of long-lived assets and other line on the Condensed Consolidated Statement of Income. The impaired assets were recorded within the Distilling Solution segment. Additionally, we 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 line on the Condensed Consolidated Statement of Income for the quarter and year to date ended September 30, 2023 (see Note 5, Planned Closure of the Atchison Distillery for additional information).


OVERVIEW

MGP is a leading producer and supplier of premium distilled spirits, branded spirits, and food ingredients. Distilled spirits include premium bourbon, rye, and ryeother whiskeys (“brown goods”) and grain neutral spirits (“GNS”),GNS, including vodka and gin. WeOur distilled spirits are either sold directly or indirectly to manufacturers of other branded spirits. MGP is also a top producer of high quality industrial alcohol for use in both food and non-food applications. Our distilled spirits are either packaged and sold underWe have a portfolio of our own brands to distributors, sold, directly or indirectly, to manufacturers of otherhigh quality branded spirits, or direct to consumer. Our Branded Spirits consist of producing, importing, bottling and rectifying distilled spiritswhich we produce through our distilleries and bottling facilities. The Company’sfacilities and sell to distributors. Our 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. Our protein and starch food ingredients provideserve a host of functional, nutritional, and sensory benefits for a wide range of food products to serve the consumer packaged goods industry. Our ingredients products are sold directly, or through distributors, to manufacturers and processors of finished packaged goods or to bakeries.

22


The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our unaudited condensed consolidated financial statements and accompanying notes included in this Form 10-Q,Report, as well as our audited consolidated financial statements and accompanying notes and Management’s Discussion and Analysis of Financial Condition and Results of Operations - General, set forth in our Annual Report on Form 10-K for the year ended December 31, 2021.2022.


22


RESULTS OF OPERATIONS

Consolidated Results

The table below details the consolidated results for the quarters ended September 30, 20222023 and 2021:
Quarter Ended September 30,
202220212022 v. 2021
Sales$201,146 $176,611 14 %
Cost of sales142,098 119,525 19 
Gross profit59,048 57,086 
   Gross margin %29.4 %32.3 %(2.9)
pp(a)
Advertising and promotion expenses7,279 5,664 29 
Selling, general, and administrative (“SG&A”) expenses17,904 18,527 (3)
Other operating (income) expense, net1 11 (91)
Operating income33,864 32,884 
   Operating margin %16.8 %18.6 %(1.8)pp
Interest expense, net(1,350)(1,116)(21)
Other income (expense), net(1,353)(421)(221)
Income before income taxes31,161 31,347 (1)
Income tax expense7,533 7,674 (2)
   Effective tax expense rate %24.2 %24.5 %(0.3)pp
Net income$23,628 $23,673 — %
   Net income margin %11.7 %13.4 %(1.7)pp
2022:
Quarter Ended September 30,
202320222023 v. 2022
Sales$211,624 $201,146 %
Cost of sales138,176 142,098 (3)
Gross profit73,448 59,048 24 
   Gross margin %34.7 %29.4 %5.3 
pp(a)
Advertising and promotion expenses9,505 7,279 31 
Selling, general, and administrative (“SG&A”) expenses21,570 17,905 20 
Impairment of long-lived assets and other18,334 — N/A
Change in fair value of contingent consideration4,200 — N/A
Operating income19,839 33,864 (41)
   Operating margin %9.4 %16.8 %(7.4)pp
Interest expense, net(2,353)(1,350)(74)
Other expense, net(25)(1,353)98 
Income before income taxes17,461 31,161 (44)
Income tax expense4,373 7,533 (42)
   Effective tax expense rate %25.0 %24.2 %0.8 pp
Net income$13,088 $23,628 (45)%
   Net income margin %6.2 %11.7 %(5.5)pp
(a) Percentage points (“pp”).

Sales - Sales for the quarter ended September 30, 20222023 were $201,146,$211,624, an increase of 145 percent compared to the year-ago quarter, which was the result of increased sales in the Distilling Solutions,Branded Spirits, Ingredient Solutions, and Distilling Solutions segments. Within the Branded Spirits segments.segment, sales were up 6 percent, primarily due to increased sales of brands in the ultra premium price tier. Within the Ingredient Solutions segment, sales were up 11 percent, primarily due to increased sales of specialty wheat proteins and starches. Within the Distilling Solutions segment, sales were up 193 percent, primarily due to an increase in the sales of brown goods within premium beverage alcohol and distillers feed and related co-products. Within the Ingredient Solutions segment, sales were up 24 percent, primarily due to increased sales of specialty wheat starches and commodity wheat starches. Within the Branded Spirits segment, sales were up 2 percent, primarily due to increased sales of brands in the ultra premium price tier (see Segment Results)“Segment Results”).

Gross profit - Gross profit for the quarter ended September 30, 20222023 was $59,048,$73,448, an increase of 324 percent compared to the year-ago quarter. The increase was driven by an increase in gross profit in the Distilling Solutions, Branded Spirits, and Ingredient Solutions segments, partially offset by a decrease insegments. Within the Distilling Solutions segment, gross profit. Inprofit increased by $7,363, or 28 percent. Within the Branded Spirits segment, gross profit increased by $1,850,$3,973, or 816 percent. InWithin the Ingredient Solutions segment, gross profit increased by $1,176,$3,064, or 17 percent. In the Distilling Solutions segment, gross profit declined by $1,064, or 438 percent (see Segment Results)“Segment Results”).

Advertising and promotion expenses - Advertising and promotion expenses for the quarter ended September 30, 20222023 were $7,279,$9,505, an increase of 2931 percent compared to the year-ago quarter, primarily driven by increased advertising and promotion investment in the Branded Spirits segment, specifically in the ultra premium super premium and premiumplus price tiers.

SG&A expenses - SG&A expenses for the quarter ended September 30, 20222023 were $17,904, a decrease$21,570, an increase of 320 percent compared to the year-ago quarter, primarily due to lower incentive compensation expense and one-time acquisition costs in 2021 related to the Merger with Luxco that did not recur in 2022.higher personnel expenses.

23


Operating income - Operating income for the quarter ended September 30, 2023 decreased to $19,839 from $33,864 for the quarter ended September 30, 2022, increased to $33,864 from $32,884 for quarter ended September 30, 2021, primarily due to an increasethe impairment of assets and other expenses of $18,334 related to the planned closure of the Atchison Distillery and the change in fair value of the contingent consideration of $4,200 related to the Penelope acquisition. These decreases were partially offset by increases in gross profit in the Branded Spirits and Ingredient Solutions segments as well as a decrease in the previously described SG&A expenses. These were partially offset by an increase in the previously described Advertising and promotion expenses and a decrease in gross profit in the Distilling Solutions segment.all three segments.

Operating income, quarter versus quarterOperating Income Change
Operating income for quarter ended September 30, 2021$32,884 
Increase in gross profit - Branded Spirits segment(a)
1,850 
pp(b)
Increase in gross profit - Ingredient Solutions segment(a)
1,176 pp
Decrease in gross profit - Distilling Solutions segment(a)
(1,064)(3)pp
Increase in Advertising and promotion expenses(1,615)(5)pp
Decrease in SG&A expenses623 pp
Change in Other operating income (expense), net10 — pp
Operating income for quarter ended September 30, 2022$33,864 3 %

Operating income, quarter versus quarterOperating Income Change
Operating income for the quarter ended September 30, 2022$33,864 
Increase in gross profit - Distilling Solutions segment(a)
7,363 22 %
Increase in gross profit - Branded Spirits segment(a)
3,973 12 
pp(b)
Increase in gross profit - Ingredient Solutions segment(a)
3,064 pp
Increase in advertising and promotion expenses(2,226)(7)pp
Increase in SG&A expenses(3,665)(11)pp
Impairment of long-lived assets and other(18,334)(54)pp
Change in fair value of contingent consideration(4,200)(12)pp
Operating income for the quarter ended September 30, 2023$19,839 (41)%
(a) See segment discussion.“Segment Results.”
(b) Percentage points (“pp”).

Income tax expense - Income tax expense for the quarter ended September 30, 2023 was $4,373, for an effective tax rate of 25.0 percent. Income tax expense for the quarter ended September 30, 2022 was $7,533, for an effective tax rate of 24.2 percent. Income tax expense for the quarter ended September 30, 2021, was $7,674, for an effective tax rate of 24.5 percent. The decrease in Incomeincome tax expense, quarter versus quarter, was due primarily to lower Incomeincome before income taxes. The decrease in effective tax rate, quarter versus quarter, was due primarily to favorable tax benefits, related to certain tax credits concerning our capital spend.

Earnings per common share (“EPS”) - BasicEPS was $1.07$0.59 for the quarter ended September 30, 2022,2023, compared to $1.08$1.07 for the quarter ended September 30, 2021.2022. The change in Basicbasic EPS quarter versus quarter, was primarily due to a changedecrease in Other income (expense), net and a change in interest expense, net, partially offset by an increase in Operatingoperating income. DilutiveDiluted EPS was $0.58 for the quarter ended September 30, 2023, compared to $1.06 for the quarter ended September 30, 2022, compared to $1.08 for the quarter ended September 30, 2021.2022. The change in Diluteddiluted EPS, quarter versus quarter, was primarily due to the same changeschange as Basicbasic EPS as well as the impact of dilutive shares outstanding.outstanding related to the conversion feature of the Convertible Senior Notes.

Change in basic and diluted EPS, quarter versus quarterBasic and Diluted EPSChange
Basic and diluted EPS for quarter ended September 30, 2021$1.08 
Increase in Operating income(a)
0.03 
pp(b)
Change in Other income (expense), net(a)
(0.03)(3)pp
Change in Interest expense, net(a)
(0.01)(1)pp
Basic EPS for quarter ended September 30, 2022$1.07 (1)%
Impact of dilutive shares outstanding(0.01)(1)pp
Diluted EPS for quarter ended September 30, 2022$1.06 (2)%
Change in EPS , quarter versus quarterEPSChange
Basic EPS for the quarter ended September 30, 2022$1.07 
Change in operating income(a)
(0.48)(45)%
Change in other income (expense), net(a)
0.05 
pp(b)
Change in interest expense, net(a)
(0.03)(3)pp
Change in effective tax rate(0.02)(2)pp
Basic EPS for the quarter ended September 30, 2023$0.59 (45)%
Impact of dilutive shares outstanding(0.01)(1)pp
Diluted EPS for the quarter ended September 30, 2023$0.58 (46)%
(a) Item is netNet of tax based on the effective tax rate for the base year (2021)(2022).
(b) Percentage points (“pp”).


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The table below details the consolidated results for the year to date ended September 30, 20222023 and 2021:2022:
Year to Date Ended September 30,
202220212022 v. 2021
Sales$591,363 $459,873 29 %
Cost of sales401,270 313,661 28 
Gross profit190,093 146,212 30 
   Gross margin %32.1 %31.8 %0.3 
pp(a)
Advertising and promotion expenses18,848 9,888 91 
SG&A expenses52,029 55,266 (6)
Other operating (income) expense, net(34)11 (409)
Operating income119,250 81,047 47 
   Operating margin %20.2 %17.6 %2.6 pp
Interest expense, net(4,491)(2,708)(66)
Other income (expense), net(2,361)(479)(393)
Income before income taxes112,398 77,860 44 
Income tax expense26,037 18,701 39 
   Effective tax expense rate %23.2 %24.0 %(0.8)pp
Net income$86,361 $59,159 46 %
   Net income margin %14.6 %12.9 %1.7 pp

Year to Date Ended September 30,
202320222023 v. 2022
Sales$621,635 $591,363 %
Cost of sales402,068 401,270 — 
Gross profit219,567 190,093 16 
   Gross margin %35.3 %32.1 %3.2 
pp(a)
Advertising and promotion expenses25,877 18,848 37 
SG&A expenses65,615 51,995 26 
Impairment of long-lived assets and other18,334 — N/A
Change in fair value of contingent consideration4,200 — N/A
Operating income105,541 119,250 (11)
   Operating margin %17.0 %20.2 %(3.2)pp
Interest expense, net(4,630)(4,491)(3)
Other income (expense), net5 (2,361)100 
Income before income taxes100,916 112,398 (10)
Income tax expense24,832 26,037 (5)
   Effective tax expense rate %24.6 %23.2 %1.4 pp
Net income$76,084 $86,361 (12)%
   Net income margin %12.2 %14.6 %(2.4)pp
(a) Percentage points (“pp”).

Sales - Sales for the year to date ended September 30, 20222023 were $591,363,$621,635, an increase of 295 percent compared to the year-ago period, which was the result of increased sales in the Distilling Solutions, Ingredient Solutions, and Branded Spirits and Ingredient Solutions segments. Within the Distilling Solutions segment, sales were up 214 percent, primarily due to an increase in the sales of brown goods within premium beverage alcohol and distillers feed and related co-products.alcohol. Within the Ingredient Solutions segment, sales were up 13 percent, primarily due to increased sales across all Ingredient Solutions product lines. Within the Branded Spirits segment, sales were up 44 percent, primarily due to the additional brands acquired as part of the April 1, 2021 Merger. Within the Ingredient Solutions segment, sales were up 292 percent, primarily due to increased sales of specialty wheat starches and proteins, and commodity wheat starchesbrands in the ultra premium price tiers (see Segment Results)“Segment Results”).

Gross profit - Gross profit for the year to date ended September 30, 20222023 was $190,093,$219,567, an increase of 3016 percent compared to the year-ago period. The increase was driven by an increase in gross profit in the Distilling Solutions, Ingredient Solutions, and Branded Spirits Distilling Solutions, and Ingredient Solutions segments. In the Branded Spirits segment, gross profit increased by $29,072, or 70 percent. In the Distilling Solutions segment, gross profit increased by $7,419,$10,356, or 911 percent. In the Ingredient Solutions segment, gross profit increased by $7,390,$10,291, or 4342 percent. In the Branded Spirits segment, gross profit increased by $8,827, or 12 percent (see Segment Results)“Segment Results”).

Advertising and promotion expenses - Advertising and promotion expenses for the year to date ended September 30, 20222023 were $18,848,$25,877, an increase of 9137 percent compared to the year-ago period, primarily driven by the assumption of Luxco’s Advertising and promotion expenses as well as increased advertising and promotion investment in the Branded Spirits segment, specifically in the ultra premium super premium and premiumplus price tiers.

SG&A expenses - SG&A expenses for the year to date ended September 30, 20222023 were $52,029, a decrease$65,615, an increase of 626 percent compared to the year-ago period. The decreaseincrease in SG&A expenses was driven primarily by the one-timedue to higher personnel expenses and business acquisition costs in 2021expenses related to the Merger with Luxco that did not recur in 2022, partially offset by the assumptionacquisition of Luxco’s SG&A expenses.Penelope.

Operating income - Operating income for the year to date ended September 30, 2022 increased2023 decreased to $105,541 from $119,250 from $81,047 for the year to date period ended September 30, 2021,2022, primarily due to an increasethe impairment of assets and other expenses of $18,334 related to the planned closure of the Atchison Distillery and the change in gross profit infair value of the Branded Spirits, Distilling Solutions, and Ingredient Solutions segmentscontingent consideration of $4,200 related to the Penelope acquisition, as well as a decrease in the previously describedincreased SG&A expenses.and advertising and promotion expenses as discussed above. These decreases were partially offset by an increaseincreased gross profit in the previously described Advertising and promotion expenses.all three segments.
25


Operating income, year to date versus year to dateOperating Income Change
Operating income for year to date ended September 30, 2021$81,047 
Increase in gross profit - Branded Spirits segment(a)
29,072 36 pp(b)
Increase in gross profit - Distilling Solutions segment(a)
7,419 pp
Increase in gross profit - Ingredient Solutions segment(a)
7,390 pp
Increase in Advertising and promotion expenses(8,960)(11)pp
Decrease in SG&A expenses3,237 pp
Change in Other operating income (expense), net45 — pp
Operating income for year to date ended September 30, 2022$119,250 47 %
Operating income, year to date versus year to dateOperating Income Change
Operating income for the year to date ended September 30, 2022$119,250 
Increase in gross profit - Distilling Solutions segment(a)
10,356 %
Increase in gross profit - Ingredient Solutions segment(a)
10,291 pp(b)
Increase in gross profit - Branded Spirits segment(a)
8,827 pp
Increase in advertising and promotion expenses(7,029)(6)pp
Increase in SG&A expenses(13,620)(11)pp
Impairment of long-lived assets and other(18,334)(15)pp
Change in fair value of contingent consideration(4,200)(4)pp
Operating income for the year to date ended September 30, 2023$105,541 (11)%
(a) See segment discussion.“Segment Results.”
(b) Percentage points (“pp”).

Income tax expense - Income tax expense for the year to date ended September 30, 2023 was $24,832, for an effective tax rate of 24.6 percent. Income tax expense for the year to date ended September 30, 2022, was $26,037, for an effective tax rate of 23.2 percent. IncomeThe decrease in income tax expense, year to date versus year to date, was due to lower income before income taxes.
Earnings per common share - BasicEPS was $3.43 for the year to date ended September 30, 2021, was $18,701,2023, compared to $3.91 for an effective tax rate of 24.0 percent.the year to date ended September 30, 2022. The increasechange in Income tax expense,basic EPS, year to date versus year to date, was primarily due to higher Income before income taxes. Thea decrease in effective tax rate,operating income. Diluted EPS was $3.41 for the year to date ended September 30, 2023, compared to $3.91 for the year to date ended September 30, 2022. The change in diluted EPS, year to date versus year to date, was due to favorable tax benefits, related to certain tax credits concerning our capital spend.

Earnings per common share - EPS was $3.91 for year to date ended September 30, 2022, compared to $2.91 for year to date ended September 30, 2021. EPS increased, year to date versus year to date, primarily due to an increase in operating income, partially offset by an increase inthe same change as basic EPS as well as the impact of dilutive shares outstanding as a result of shares issued as partrelated to the conversion feature of the consideration paid for the Merger with Luxco.Convertible Senior Notes.
Change in basic and diluted EPS, year to date versus year to dateBasic and Diluted EPSChange
Basic and diluted EPS for year to date ended September 30, 2021$2.91 
Increase in operating income(a)
1.63 56 pp(b)
Change in interest expense, net(a)
(0.08)(3)pp
Change in other income (expense), net(a)
(0.06)(2)pp
Tax: Change in effective tax rate0.02 pp
Change in weighted average shares outstanding(0.51)(18)pp
Basic and diluted EPS for year to date ended September 30, 2022$3.91 34 %
Change in EPS, year to date versus year to dateEPSChange
Basic EPS for the year to date ended September 30, 2022$3.91 
Change in operating income(a)
(0.47)(12)%
Change in other income (expense), net(a)
0.08 pp(b)
Change in effective tax rate(0.08)(2)pp
Change in weighted average shares outstanding(0.01)— pp
Basic EPS for the year to date ended September 30, 2023$3.43 (12)%
Impact of dilutive shares outstanding(0.02)(1)pp
Diluted EPS for the year to date ended September 30, 2023$3.41 (13)%
(a) Item is netNet of tax based on the effective tax rate for the base year (2021)(2022).
(b) Percentage points (“pp”).

26


SEGMENT RESULTS

Distilling Solutions

The following tables show selected financial information for the Distilling Solutions segment for the quarters ended September 30, 20222023 and 2021.2022.
DISTILLING SOLUTIONS SALESDISTILLING SOLUTIONS SALES
Quarter Ended September 30,Quarter versus Quarter Sales Change Increase/(Decrease)Quarter Ended September 30,Quarter versus Quarter Sales Change Increase/(Decrease)
20222021$ Change% Change20232022$ Change% Change
Brown goodsBrown goods$57,423 $42,793 $14,630 34 %Brown goods$73,409 $57,423 $15,986 28 %
White goodsWhite goods20,469 21,187 (718)(3)White goods14,429 20,469 (6,040)(30)
Premium beverage alcoholPremium beverage alcohol77,892 63,980 13,912 22 Premium beverage alcohol87,838 77,892 9,946 13 
Industrial alcoholIndustrial alcohol10,761 14,790 (4,029)(27)Industrial alcohol9,407 10,761 (1,354)(13)
Food grade alcoholFood grade alcohol88,653 78,770 9,883 13 Food grade alcohol97,245 88,653 8,592 10 
Fuel grade alcoholFuel grade alcohol3,713 3,592 121 Fuel grade alcohol1,509 3,713 (2,204)(59)
Distillers feed and related co-productsDistillers feed and related co-products9,943 4,016 5,927 148 Distillers feed and related co-products5,746 9,943 (4,197)(42)
Warehouse servicesWarehouse services6,335 4,666 1,669 36 Warehouse services7,353 6,335 1,018 16 
Total Distilling SolutionsTotal Distilling Solutions$108,644 $91,044 $17,600 19 %Total Distilling Solutions$111,853 $108,644 $3,209 %
Change in Quarter versus Quarter Sales Attributed to:Change in Quarter versus Quarter Sales Attributed to:
Total (a)
Volume(b)
Net Price/Mix(c)
Total (a)
Volume(b)
Net Price/Mix(c)
Premium beverage alcoholPremium beverage alcohol22%4%18%Premium beverage alcohol13%(15)%28%
Other Financial InformationOther Financial Information
Quarter Ended September 30,Quarter versus Quarter Increase / (Decrease)Quarter Ended September 30,Quarter versus Quarter Increase / (Decrease)
20222021$ Change% Change20232022$ Change% Change
Gross profitGross profit$25,917 $26,981 $(1,064)(4)%Gross profit$33,280 $25,917 $7,363 28 %
Gross margin %Gross margin %23.9 %29.6 %(5.7)
pp(d)
Gross margin %29.8 %23.9 %5.9 
pp(d)
(a) Total sales change is calculated by taking the difference between current period sales dollars and prior period sales dollars, divided by prior period sales dollars.
(b) Volume change is calculated by taking the difference between current period sales volume and prior period sales volume, multiplied by prior period sales per unit. The product is then divided by prior period sales dollars.
(c) Price/Mix change is calculated by taking the difference between current period sales-per-unit and prior period sales-per unit, multiplied by current period sales volume. The product is then divided by prior period sales dollars.
(d) Percentage points (“pp”).

Total sales of the Distilling Solutions segment for the quarter ended September 30, 20222023 increased by $17,600,$3,209, or 193 percent, compared to the prior year quarter. Sales of brown goods within premium beverage alcohol distillers feed and related co-products, warehouse services and fuel grade alcohol increased while industrial alcohol and white goods within premium beverage alcohol, decreased compared to the prior year quarter.distillers feed and related co-products, fuel grade alcohol, and industrial alcohol decreased. The increase in sales of brown goods was primarily driven by higher sales volume. The increase in sales of distillers feed and related co-products was due to higher average selling price, partially offset by lowerdecreased sales volumes, both of which primarily resulted from the previously disclosed dryer fire at our Atchison facility which occurred in 2020. These increases werevolume. This increase was partially offset by a decrease in sales of white goods, distillers feed and related co-products, fuel grade alcohol, and industrial alcohol, and white goods which werewas driven primarily by lower sales volume, partially offset by higher average selling price.volume.

Gross profit decreasedincreased quarter versus quarter by $1,064,$7,363, or 428 percent. Gross margin for the quarter ended September 30, 2022 decreased2023 increased to 23.929.8 percent from 29.623.9 percent for the prior year quarter. The decreaseincrease in gross profit was primarily due to higher input costs for white goods and industrial alcohol. The average selling price for these products also increased, but not enough to offset the higher input costs. This decreasebrown goods. These increases in gross profit waswere partially offset by an increase in brown goods gross profit.higher input costs across all product categories.






27


The following tables show selected financial information for the Distilling Solutions segment for the year to date ended September 30, 20222023 and 2021.2022.

DISTILLING SOLUTIONS SALESDISTILLING SOLUTIONS SALES
Year to Date Ended September 30,Year to Date versus Year to Date
 Sales Change Increase/(Decrease)
Year to Date Ended September 30,Year to Date versus Year to Date
 Sales Change Increase/(Decrease)
20222021$ Change% Change20232022$ Change% Change
Brown GoodsBrown Goods$175,899 $129,600 $46,299 36 %Brown Goods$214,857 $175,899 $38,958 22 %
White GoodsWhite Goods57,996 56,049 1,947 White Goods47,199 57,996 (10,797)(19)
Premium beverage alcoholPremium beverage alcohol233,895 185,649 48,246 26 Premium beverage alcohol262,056 233,895 28,161 12 
Industrial alcoholIndustrial alcohol35,141 46,896 (11,755)(25)Industrial alcohol29,911 35,141 (5,230)(15)
Food grade alcoholFood grade alcohol269,036 232,545 36,491 16 Food grade alcohol291,967 269,036 22,931 
Fuel grade alcoholFuel grade alcohol10,307 10,862 (555)(5)Fuel grade alcohol5,963 10,307 (4,344)(42)
Distillers feed and related co-productsDistillers feed and related co-products30,127 13,660 16,467 121 Distillers feed and related co-products23,053 30,127 (7,074)(23)
Warehouse servicesWarehouse services17,821 12,949 4,872 38 Warehouse services20,958 17,821 3,137 18 
Total Distilling SolutionsTotal Distilling Solutions$327,291 $270,016 $57,275 21 %Total Distilling Solutions$341,941 $327,291 $14,650 %
Change in Year to Date versus Year to Date Sales Attributed to:Change in Year to Date versus Year to Date Sales Attributed to:
Total(a)
Volume(b)
Net Price/Mix(c)
Total(a)
Volume(b)
Net Price/Mix(c)
Premium beverage alcoholPremium beverage alcohol26%6%20%Premium beverage alcohol12%(13)%25%
Other Financial InformationOther Financial Information
Year to Date Ended September 30,Year to Date versus Year to Date Increase / (Decrease)Year to Date Ended September 30,Year to Date versus Year to Date Increase / (Decrease)
20222021$ Change% Change20232022$ Change% Change
Gross profitGross profit$94,630 $87,211 $7,419 %Gross profit$104,986 $94,630 $10,356 11 %
Gross margin %Gross margin %28.9 %32.3 %(3.4)
pp(d)
Gross margin %30.7 %28.9 %1.8 
pp(d)

(a) Total sales change is calculated by taking the difference between current period sales dollars and prior period sales dollars, divided by prior period sales dollars.
(b) Volume change is calculated by taking the difference between current period sales volume and prior period sales volume, multiplied by prior period sales per unit. The product is then divided by prior period sales dollars.
(c) Price/Mix change is calculated by taking the difference between current period sales-per-unit and prior period sales-per unit, multiplied by current period sales volume. The product is then divided by prior period sales dollars.
(d) Percentage points (“pp”).

Total sales of the Distilling Solutions segment for the year to date ended September 30, 20222023 increased by $57,275,$14,650, or 214 percent compared to the year-ago period. Sales of brown goods within premium beverage alcohol distillers feed and related co-products, warehouse services andincreased while white goods within premium beverage alcohol, increased whiledistillers feed and related co-products, industrial alcohol, and fuel grade alcohol decreased compared to the prior year to date period. The increase in sales of brown goods was driven by higher sales volume and higher average selling price. The increase in sales of distillers feed and related co-products was due to higher average selling price, partially offset by lower sales volumes, both of which primarily resulted from the previously disclosed dryer fire at our Atchison facility which occurred in 2020. The increase in sales of white goods was driven by higher average selling price, partially offset by lower sales volume. These increases wereThis increase was partially offset by a decrease in sales of white goods, distillers feed and related co-products, industrial alcohol and fuel grade alcohol, which was driven primarily by lower sales volume,volume. The decreases in white goods, distillers feed and related co-products, and industrial alcohol were partially offset by higher average selling price.

Gross profit for the year to date ended September 30, 20222023 increased by $7,419,$10,356, or 911 percent compared to the year-ago period. Gross margin for the year to date ended September 30, 2022 decreased2023 increased to 28.930.7 percent from 32.328.9 percent for the prior year period. The increase in gross profit was due primarily to higher average selling price for brown goods and higher sales volume on brownwhite goods. These increases wereThis increase was partially offset by higher input costs for industrial alcohol, white goods, and fuel grade alcohol. The average selling price for these products also increased, but not enough to offset the higher input costs which caused a decrease in the gross margin percentage.across all product categories.





28



Branded Spirits

The following tables show selected financial information for the Branded Spirits segment for the quarters ended September 30, 20222023 and 2021.2022.
BRANDED SPIRITS SALESBRANDED SPIRITS SALES
Quarter Ended September 30,Quarter versus Quarter Sales Change Increase/(Decrease)Quarter Ended September 30,Quarter versus Quarter Sales Change Increase/(Decrease)
20222021$ Change% Change20232022$ Change% Change
Ultra premiumUltra premium$13,804 $11,363 $2,441 21 %Ultra premium$20,107 $13,804 $6,303 46 %
Super premiumSuper premium3,350 2,798 552 20 Super premium3,637 3,350 287 
PremiumPremium6,013 5,683 330 Premium7,099 6,013 1,086 18 
Premium plusPremium plus30,843 23,167 7,676 33 
MidMid20,834 22,992 (2,158)(9)Mid17,650 20,834 (3,184)(15)
ValueValue12,097 12,756 (659)(5)Value11,049 12,097 (1,048)(9)
OtherOther6,663 5,969 694 12 Other7,277 6,663 614 
Total Branded SpiritsTotal Branded Spirits$62,761 $61,561 $1,200 %Total Branded Spirits$66,819 $62,761 $4,058 %
Change in Quarter versus Quarter Sales Attributed to:Change in Quarter versus Quarter Sales Attributed to:
Total (a)
Volume(b)
Net Price/Mix(c)
Total (a)
Volume(b)
Net Price/Mix(c)
Total Branded SpiritsTotal Branded Spirits2%(6)%8%Total Branded Spirits6%(16)%22%
Other Financial InformationOther Financial Information
Quarter Ended September 30,Quarter versus Quarter Increase / (Decrease)Quarter Ended September 30,Quarter versus Quarter Increase / (Decrease)
20222021$ Change% Change20232022$ Change% Change
Gross profitGross profit$25,067 $23,217 $1,850 %Gross profit$29,040 $25,067 $3,973 16 %
Gross margin %Gross margin %39.9 %37.7 %2.2 
pp(d)
Gross margin %43.5 %39.9 %3.6 
pp(d)
(a) Total sales change is calculated by taking the difference between current period sales dollars and prior period sales dollars, divided by prior period sales dollars.
(b) Volume change is calculated by taking the difference between current period sales volume and prior period sales volume, multiplied by prior period sales per unit. The product is then divided by prior period sales dollars.
(c) Price/Mix change is calculated by taking the difference between current period sales-per-unit and prior period sales-per unit, multiplied by current period sales volume. The product is then divided by prior period sales dollars.
(d) Percentage points (“pp”).

Total sales of the Branded Spirits segment for the quarter ended September 30, 2023 increased by $4,058, or 6 percent compared to the prior year quarter. The increase was driven by sales of brands within the premium plus price tiers, partially offset by a decrease in sales of brands within the mid and value price tiers. The increase in sales of brands within the ultra premium price tier was primarily due to an increase in sales of our American whiskey brands, including the additional brands acquired as part of the acquisition of Penelope. The increase in sales of brands within the premium price tier was primarily due to an increase in sales of our tequila brands. These increases were partially offset by decreased sales of brands within the mid and value price tiers due to a decrease in sales volume.

Gross profit increased quarter versus quarter by $3,973, or 16 percent. Gross margin for the quarter ended September 30, 2023 increased to 43.5 percent from 39.9 percent for the prior year quarter. The increase in gross profit was primarily driven by an increase in sales volume and average selling price in the ultra premium price tier.










29


The following tables show selected financial information for the Branded Spirits segment for the year to date ended September 30, 2023 and 2022.
BRANDED SPIRITS SALES
Year to Date Ended September 30,Year to Date versus Year to Date Sales Change Increase/(Decrease)
20232022$ Change% Change
Ultra premium$43,594 $35,836 $7,758 22 %
Super premium9,614 9,522 92 
Premium20,144 17,928 2,216 12 
Premium plus73,352 63,286 10,066 16 
Mid55,575 63,408 (7,833)(12)
Value36,048 36,304 (256)(1)
Other16,343 14,080 2,263 16 
Total Branded Spirits$181,318 $177,078 $4,240 %
Change in Year to Date versus Year to Date Sales Attributed to:
Total (a)
Volume(b)
Net Price/Mix(c)
Total Branded Spirits2%(8)%10%
Other Financial Information
Year to Date Ended September 30,Year to Date versus Year to Date Increase / (Decrease)
20232022$ Change% Change
Gross profit$79,636 $70,809 $8,827 12 %
Gross margin %43.9 %40.0 %3.9 
pp(d)
(a) Total sales change is calculated by taking the difference between current period sales dollars and prior period sales dollars, divided by prior period sales dollars.
(b) Volume change is calculated by taking the difference between current period sales volume and prior period sales volume, multiplied by prior period sales per unit. The product is then divided by prior period sales dollars.
(c) Price/Mix change is calculated by taking the difference between current period sales-per-unit and prior period sales-per unit, multiplied by current period sales volume. The product is then divided by prior period sales dollars.
(d) Percentage points (“pp”).

Total sales of Branded Spirits for quarterthe year to date ended September 30, 20222023 increased by $1,200,$4,240, or 2 percent compared to the prior year quarter.year-ago period. Sales of brands within the premium plus price tiers as well as sales within the other category increased while sales of brands within the mid and value price tiers decreased. The increase in sales of brands within the ultra premium and premium price tiers was primarily due to an increase in average selling price as well as the ultra premium price tieradditional brands acquired as part of the acquisition of Penelope. Sales within the other category increased primarily due primarily to increased sales volume of American whiskey brands as well as an increase in the other tier due to timing of certain contracted private label sales.brands. These increases were partially offset by a decrease indecreased sales of brands within the mid price tier, primarily due to decreased sales volume as a result of a changeshifting to higher margin accretive brands within the premium plus price tiers, partially offset by an increase in the product mix towards more premium brands as well as the re-opening of on-premise locations during the prior year period.average selling price.

Gross profit increased quarter versus quarter by $1,850, or 8 percent. Gross margin for the quarter ended September 30, 2022 increased to 39.9 percent from 37.7 percent for the prior year quarter. The increase in gross profit was primarily driven by increased sales volume and higher average selling price of brands within the ultra premium price tier. These increases were partially offset by increased inputs costs in the mid and value price tier categories.











29


The following tables show selected financial information for the Branded Spirits segment for year to date ended September 30, 2022 and 2021.
BRANDED SPIRITS SALES
Year to Date Ended September 30,Year to Date versus Year to Date Sales Change Increase/(Decrease)
20222021$ Change% Change
Ultra premium$35,836 $19,491 $16,345 84 %
Super premium9,522 6,393 3,129 49 
Premium17,928 11,012 6,916 63 
Mid63,408 48,399 15,009 31 
Value36,304 25,984 10,320 40 
Other14,080 11,278 2,802 25 
Total Branded Spirits$177,078 $122,557 $54,521 44 %
Change in Year to Date versus Year to Date Sales Attributed to:
Total (a)
Volume(b)
Net Price/Mix(c)
Total Branded Spirits44%31%13%
Other Financial Information
Year to Date Ended September 30,Year to Date versus Year to Date Increase / (Decrease)
20222021$ Change% Change
Gross profit$70,809 $41,737 $29,072 70 %
Gross margin %40.0 %34.1 %5.9 
pp(d)
(a) Total sales change is calculated2023 increased by taking$8,827, or 12 percent compared to the difference between current period sales dollars and prior period sales dollars, divided by prior period sales dollars.
(b) Volume change is calculated by takingyear-ago period. Gross margin for the difference between current period sales volume and prior period sales volume, multiplied by prior period sales per unit. The product is then divided by prior period sales dollars.
(c) Price/Mix change is calculated by taking the difference between current period sales-per-unit and prior period sales-per unit, multiplied by current period sales volume. The product is then divided by prior period sales dollars.
(d) Percentage points (“pp”).

Total sales of Branded Spirits for year to date ended September 30, 2022 increased by $54,521, or 44 percent compared to the year-ago period. Sales across all pricing tiers increased compared to the year-ago period, primarily due to the additional brands acquired as part of the Merger.

Gross profit for year to date ended September 30, 2022 increased by $29,072, or 70 percent. Gross margin for year to date ended September 30, 20222023 increased to 40.043.9 percent from 34.140.0 percent for the prior year. The increase in gross profit was primarily driven by an increase in average selling price in the additional brands acquired as part of the Merger as well as a required step up in value of certain assets due to purchase accounting related to the Merger in 2021 that did not recur in 2022. Of the purchase accounting step ups, $2,529 was associated with marking the finished goods inventory to fairpremium plus, mid, value, and fully flowed throughother price tiers. These increases were partially offset by increased costs in the prior year period.


ultra premium price tier, the other category, and mid price tiers.
30


Ingredient Solutions

The following tables show selected financial information for the Ingredient Solutions segment for the quarters ended September 30, 20222023 and 2021.2022.
INGREDIENT SOLUTIONS SALESINGREDIENT SOLUTIONS SALES
Quarter Ended September 30,Quarter versus Quarter Sales Change Increase / (Decrease)Quarter Ended September 30,Quarter versus Quarter Sales Change Increase / (Decrease)
20222021$ Change% Change20232022$ Change% Change
Specialty wheat starchesSpecialty wheat starches$16,241 $12,231 $4,010 33 %Specialty wheat starches$17,196 $16,241 $955 %
Specialty wheat proteinsSpecialty wheat proteins9,697 8,901 796 Specialty wheat proteins11,440 9,697 1,743 18 
Commodity wheat starchesCommodity wheat starches3,803 2,626 1,177 45 Commodity wheat starches4,226 3,803 423 11 
Commodity wheat proteinsCommodity wheat proteins 248 (248)(100)Commodity wheat proteins90 — 90 N/A
Total Ingredient SolutionsTotal Ingredient Solutions$29,741 $24,006 $5,735 24 %Total Ingredient Solutions$32,952 $29,741 $3,211 11 %
Change in Quarter versus Quarter Sales Attributed to:Change in Quarter versus Quarter Sales Attributed to:
Total(a)
Volume(b)
Net Price/Mix(c)
Total(a)
Volume(b)
Net Price/Mix(c)
Total Ingredient SolutionsTotal Ingredient Solutions24%5%19%Total Ingredient Solutions11%(8)%19%
Other Financial InformationOther Financial Information
Quarter Ended September 30,Quarter versus Quarter Increase / (Decrease)Quarter Ended September 30,Quarter versus Quarter Increase / (Decrease)
20222021$ Change% Change20232022$ Change% Change
Gross profitGross profit$8,064 $6,888 $1,176 17 %Gross profit$11,128 $8,064 $3,064 38 %
Gross margin %Gross margin %27.1 %28.7 %(1.6)
pp(d)
Gross margin %33.8 %27.1 %6.7 
pp(d)

(a) Total sales change is calculated by taking the difference between current period sales dollars and prior period sales dollars, divided by prior period sales dollars.
(b) Volume change is calculated by taking the difference between current period sales volume and prior period sales volume, multiplied by prior period sales per unit. The product is then divided by prior period sales dollars.
(c) Price/Mix change is calculated by taking the difference between current period sales-per-unit and prior period sales-per unit, multiplied by current period sales volume. The product is then divided by prior period sales dollars.
(d) Percentage points (“pp”).

Total sales of the Ingredient Solutions salessegment for the quarter ended September 30, 20222023 increased by $5,735,$3,211, or 2411 percent, compared to the prior year quarter.quarter, reflecting an increase across all product categories. The increase was primarily driven by higher sales of specialty wheat starches due to higher sales volume and higher average selling prices. Commodityproteins, specialty wheat starches, and specialtycommodity wheat proteins increasedstarches primarily due primarily to higher average selling price.prices, partially offset by lower sales volume.
Gross profit increased quarter versus quarter by $1,176,$3,064, or 1738 percent. Gross margin for the quarter ended September 30, 2022 decreased2023 increased to 27.133.8 percent from 28.727.1 percent for the prior year quarter. The increase in gross profit was primarily driven by higher average selling price of specialty wheat starchesstarch and proteins, and commodity wheat starches, partially offset by higher input costs for specialty wheat starches and proteins, and commodity starches. These increased input costs are the primary driver for the decrease in gross margin percentage.across all product categories.
31



The following tables show selected financial information for the Ingredient Solutions segment for the year to date September 30, 20222023 and 2021.2022.
INGREDIENT SOLUTIONS SALESINGREDIENT SOLUTIONS SALES
Year to Date Ended September 30,Year to Date versus Year to Date Sales Change Increase/(Decrease)Year to Date Ended September 30,Year to Date versus Year to Date Sales Change Increase/(Decrease)
20222021$ Change% Change20232022$ Change% Change
Specialty wheat starchesSpecialty wheat starches$47,445 $35,051 $12,394 35 %Specialty wheat starches$48,977 $47,445 $1,532 %
Specialty wheat proteinsSpecialty wheat proteins29,225 23,299 5,926 25 Specialty wheat proteins35,918 29,225 6,693 23 
Commodity wheat starchesCommodity wheat starches10,286 7,572 2,714 36 Commodity wheat starches12,870 10,286 2,584 25 
Commodity wheat proteinsCommodity wheat proteins38 1,378 (1,340)(97)Commodity wheat proteins611 38 573 1,508 
Total Ingredient SolutionsTotal Ingredient Solutions$86,994 $67,300 $19,694 29 %Total Ingredient Solutions$98,376 $86,994 $11,382 13 %
Change in Year to Date versus Year to Date Sales Attributed to:Change in Year to Date versus Year to Date Sales Attributed to:
Total(a)
Volume(b)
Net Price/Mix(c)
Total(a)
Volume(b)
Net Price/Mix(c)
Total Ingredient SolutionsTotal Ingredient Solutions29%9%20%Total Ingredient Solutions13%(7)%20%
Other Financial InformationOther Financial Information
Year to Date Ended September 30,Year to Date versus Year to Date Increase / (Decrease)Year to Date Ended September 30,Year to Date versus Year to Date Increase / (Decrease)
20222021$ Change% Change20232022$ Change% Change
Gross profitGross profit$24,654 $17,264 $7,390 43 %Gross profit$34,945 $24,654 $10,291 42 %
Gross margin %Gross margin %28.3 %25.7 %2.6 
pp(d)
Gross margin %35.5 %28.3 %7.2 
pp(d)

(a) Total sale changes is calculated by taking the difference between current period sales dollars and prior period sales dollars, divided by prior period sales dollars.
(b) Volume change is calculated by taking the difference between current period sales volume and prior period sales volume, multiplied by prior period sales per unit. The product is then divided by prior period sales dollars.
(c) Price/Mix change is calculated by taking the difference between current period sales-per-unit and prior period sales-per unit, multiplied by current period sales volume. The product is then divided by prior period sales dollars.
(d) Percentage points (“pp”).

Total sales of the Ingredient Solutions salessegment for the year to date ended September 30, 20222023 increased by $19,694,$11,382, or 2913 percent, compared to the prior year period.period, reflecting an increase across all product categories. The increase in Ingredient Solutions sales was primarily driven by higher sales of specialty wheat starches primarily due to higher sales volume and higher average selling prices. Additionally, the increase in Ingredient Solutions sales was driven by higher sales of specialty wheat proteins primarily due to higher average selling price and higher sales volume. SalesAdditionally, sales of commodity wheat starches were also upand specialty wheat starches increased primarily due to higher average selling price. These increases wereprice, partially offset by a decrease in sales of commodity wheat proteins due to lower sales volume.
Gross profit increased by $7,390,$10,291, or 4342 percent for the year to date ended September 30, 20222023 compared to the prior year period. Gross margin for the year to date ended September 30, 20222023 increased to 28.335.5 percent from 25.728.3 percent for the prior year period. The increase in gross profit was primarily driven by higher average selling price and higher sales volumes of specialty wheat starches and proteins and commodity wheat starches. These increases wereacross all product categories, partially offset by higher input costs for allacross those same product lines within the segment. Gross profit in the prior year to date period was impacted by a temporary curtailment of natural gas usage due to extreme weather conditions which caused the Company to shut down the Atchison facilities for several days.categories.


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CASH FLOW, FINANCIAL CONDITION, AND LIQUIDITY

We believe our financial condition continues to be of high quality, as evidenced by our ability to generate adequate cash from operations while having ready access to capital at competitive rates.

Operating cash flow and borrowings through our Credit Agreement, Convertible Senior Notes, and Note Purchase Agreement (Note 5)(see Note 6) provide the primary sources of cash to fund operating needs and capital expenditures. These same sources of cash are used to fund shareholderstockholder dividends and other discretionary uses. Our overall liquidity reflects our strong business results and an effective cash management strategy that takes into account liquidity management, economic factors, and tax considerations. We expect our sources of cash to be adequate to provide for budgeted capital expenditures, potential mergers or acquisitions, and anticipated operating requirements for the foreseeable future.next 12 months and beyond.

Cash Flow Summary
Year to Date Ended September 30,Changes, year versus year Increase / (Decrease)Year to Date Ended September 30,Changes, year versus year Increase / (Decrease)
2022202120232022
Cash provided by operating activitiesCash provided by operating activities$72,253 $70,785 $1,468 Cash provided by operating activities$48,605 $72,253 $(23,648)
Cash used in investing activitiesCash used in investing activities(31,764)(189,166)157,402 Cash used in investing activities(146,690)(31,764)(114,926)
Cash provided by (used in) financing activitiesCash provided by (used in) financing activities(11,301)112,883 (124,184)Cash provided by (used in) financing activities78,193 (11,301)89,494 
Effect of exchange rate changes on cashEffect of exchange rate changes on cash(82)(2)(80)Effect of exchange rate changes on cash33 (82)115 
Increase (decrease) in cash and cash equivalentsIncrease (decrease) in cash and cash equivalents$29,106 $(5,500)$34,606 Increase (decrease) in cash and cash equivalents$(19,859)$29,106 $(48,965)

Cash increaseddecreased $19,859 for the year to date ended September 30, 2023, compared to an increase of $29,106 for the year to date ended September 30, 2022, compared to a decrease of $5,500 for year to date ended September 30, 2021, for a net increasedecrease in cash of $34,606,$48,965, period versus period.

Operating Activities. Cash provided by operating activities for the year to date ended September 30, 2023 was $48,605. The cash provided by operating activities resulted primarily from net income of $76,084, adjustments for non-cash or non-operating charges of $42,912, including impairment of long-lived assets and other, depreciation and amortization, share-based compensation, and the change in fair value of contingent consideration, partially offset by cash used in operating assets and liabilities, net of the effects of acquisition, of $70,391. The primary drivers of the changes in operating assets and liabilities were $42,015 use of cash related to an increase in inventories, primarily due to an increase in barreled distillate, $14,980 use of cash related to increased accounts receivable, net due to timing of sales and customer payments during the quarter, and $10,069 use of cash related to a decrease in accounts payable due to timing of payments.

Cash provided by operating activities for the year to date ended September 30, 2022 was $72,253. The cash provided by operating activities resulted primarily from net income of $86,361, adjustments for non-cash or non-operating charges of $20,503, including depreciation and amortization, and share-based compensation, partially offset by cash used in operating assets and liabilities of $34,611. The primary drivers of the changes in operating assets and liabilities were $30,599 use of cash related to an increase in inventories, primarily due to an increase in finished goods inventory and barreled distillate, as well as $15,582 use of cash related to increased accounts receivables, net, due to increased sales during the year to date period as well as timing of customer payments. These uses of cash were partially offset, primarily by $12,613 cash provided by an increase in accounts payable.

Cash provided by operating activities for year to date ended September 30, 2021 was $70,785. The cash provided by operating activities resulted primarily from net income of $59,159, adjustments for non-cash or non-operating charges of $19,149, including depreciation and amortization, and share-based compensation, as well as cash used in operating assets and liabilities of $7,523. The primary drivers of the changes in operating assets and liabilities, excluding the asset and liability balances acquired as part of the Merger, were $7,588 use of cash related to an increase in inventories, primarily barreled distillate, $6,678 use of cash related to a decrease in accounts payable, and $5,593 use of cash related to accounts receivables, net due to increased sales during the quarter as well as an increase in insurance recoveries receivable. These uses of cash were partially offset by $15,859 cash provided by accrued expenses and other primarily related to legally committed insurance recovery amounts obtained prior to contingencies related to the insurance claim being resolved.

Investing Activities. Cash used in investing activities for the year to date ended September 30, 2023 was $146,690, which primarily resulted from $103,712 related to the acquisition of Penelope, net of cash acquired, and additions to property, plant, and equipment of $42,062 (see “Capital Spending”). Cash used in investing activities for the year to date ended September 30, 2022 was $31,764, which primarily resulted from additions to property, plant, and equipment of $29,217 (see Capital Spending). Cash used in investing activities for year to date ended September 30, 2021 was $189,166, which primarily resulted from $149,613 related to the Merger with Luxco, and additions to property, plant and equipment of $37,257 (see Capital Spending)“Capital Spending”).

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Capital Spending. We manage capital spending to support our business growth plans. We have incurred $28,524$36,879 and $33,882$28,524 of capital expenditures and have paid $29,217$42,062 and $37,257$29,217 for capital expenditures for the year to date ended September 30, 20222023 and 2021,2022, respectively. The difference between the amount of capital expenditures incurred and amount paid is due to the change in capital expenditures in accounts payable. We expect approximately $47,200$63,000 in capital expenditures in 2022,2023, which will be usedincludes capital expenditures for facility improvement and expansion, facility sustaining projects, and environmental health and safety projects.projects, as well as the planned closure of the Atchison Distillery.

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Financing Activities. Cash provided by financing activities for the year to date ended September 30, 2023 was $78,193, due to net proceeds on debt of $87,000 (see “Long-Term and Short-Term Debt”), partially offset by payments of dividends and dividend equivalents of $8,006 (see “Dividends and Dividend Equivalents”), and purchases of treasury stock of $801 (see “Treasury Purchases”).

Cash used in financing activities for the year to date ended September 30, 2022 was $11,301, due to payments of dividends and dividend equivalents of $7,984 (see Dividends“Dividends and Dividend Equivalents)Equivalents”), net payments on debt of $2,603 (see Long-Term“Long-Term and Short-Term Debt)Debt”), and purchases of treasury stock of $714 (see Treasury Purchases).

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

Treasury Purchases. 22,592 RSUs vested and converted to shares of common stock for employees during the year to date ended September 30, 2023, of which we withheld and purchased for treasury 8,437 shares valued at $801 to cover payment of associated withholding taxes.

29,366 RSUs vested and converted to shares of common sharesstock for employees during the year to date ended September 30, 2022, of which we withheld and purchased for treasury 9,027 shares valued at $714 to cover payment of associated withholding taxes.

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

Share Repurchases. On February 25, 2019, our Board of Directors approved a $25,000 share repurchase authorization commencing February 27, 2019, through February 27, 2022. The Company did not repurchase any shares during 2022 prior to the expiration of the program on February 27, 2022.

Dividends and Dividend Equivalents
Dividend and Dividend Equivalent Information (per Share and Unit)Dividend and Dividend Equivalent Information (per Share and Unit)Dividend and Dividend Equivalent Information (per Share and Unit)
Declaration dateDeclaration dateRecord datePayment date
Declared(c)
Paid(c)
Dividend payment
Dividend equivalent payment(a)(b)
Total payment(b)
Declaration dateRecord datePayment date
Declared(c)
Paid(c)
Dividend payment
Dividend equivalent payment(a)(b)
Total payment(b)
20232023 
February 23, 2023February 23, 2023March 10, 2023March 24, 2023$0.12 $0.12 $2,640 $29 $2,669 
May 4, 2023May 4, 2023May 19, 2023June 2, 20230.12 0.12 2,641 27 2,668 
August 3, 2023August 3, 2023August 18, 2023September 1, 20230.12 0.12 2,642 27 2,669 
$0.36 $0.36 $7,923 $83 $8,006 
20222022 2022
February 22, 2022February 22, 2022March 11, 2022March 25, 2022$0.12 $0.12 $2,638 $23 $2,661 February 22, 2022March 11, 2022March 25, 2022$0.12 $0.12 $2,638 $23 $2,661 
May 5, 2022May 5, 2022May 20, 2022June 3, 20220.12 0.12 2,638 23 2,661 May 5, 2022May 20, 2022June 3, 20220.12 0.12 2,638 23 2,661 
August 4, 2022August 4, 2022August 19, 2022September 2, 20220.12 0.12 2,639 23 2,662 August 4, 2022August 19, 2022September 2, 20220.12 0.12 2,639 23 2,662 
$0.36 $0.36 $7,915 $69 $7,984 $0.36 $0.36 $7,915 $69 $7,984 
2021
February 23, 2021March 12, 2021March 26, 2021$0.12 $0.12 $2,033 $19 $2,052 
May 3, 2021May 21, 2021June 4, 20210.12 0.12 2,635 20 2,655 
August 2, 2021August 20, 2021September 3, 20210.12 0.12 2,635 20 2,655 
$0.36 $0.36 $7,303 $59 $7,362 
(a) Dividend equivalent payments on unvested participating securities.
(b) Includes estimated forfeitures.
(c) Per share amountamount.

On November 3, 2022, our Board of Directors declared2, 2023, we announced a quarterly dividend payable to stockholders of record as of November 18, 2022, of the Company’s Common Stock, and aour common stock, resulting in dividend equivalentequivalents payable to holders of certain RSUs as of November 18, 2022,RSU holders, of $0.12 per share and per unit,RSU. The dividend and dividend equivalent are payable on December 2, 2022.1, 2023 to stockholders of record and certain RSU holders on November 17, 2023.

Long-Term and Short-Term Debt. We maintain debt levels we consider appropriate after evaluating a number of factors, including cash flow expectations, cash requirements for ongoing operations, investment and financing plans (including brand development, merger and acquisition, and share repurchase activities), and the overall cost of capital. Total debt was $231,051$316,677 (net of unamortized loan fees of $6,199)$6,773) at September 30, 2022,2023, and $233,399$230,335 (net of unamortized loan fees of $6,454)$6,115) at December 31, 2021.2022.

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Financial Condition and Liquidity. Our principal uses of cash in the ordinary course of business are for input costs used in our production processes, salaries, capital expenditures, and investments supporting our strategic plan, such as the aging of barreled distillate and potential mergers and acquisitions.  Generally, during periods when commodities prices are rising, our operations require increased use of cash to support inventory levels.

Our principal sources of cash are product sales and borrowing on our various debt agreements. Under our debt agreements, we must meet certain financial covenants and restrictions, and at September 30, 2022,2023, we met those covenants and restrictions.

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At September 30, 2022,2023, our current assets exceeded our current liabilities by $339,853,$413,808, largely due to our inventories, at cost, of $275,478.$342,401. At September 30, 2022,2023, our cash balance was $50,674$28,030 and we have used our various debt agreements for liquidity purposes, with $400,000$309,000 available under our Credit Agreement remaining for additional borrowings and up to $120,000 potentially$218,800 available under the Note Purchase Agreement.Agreement (see Note 6). We anticipate being able to support our short-term liquidity and operating needs largely through cash generated from operations. We regularly assess our cash needs and the available sources to fund these needs. We utilize short-term and long-term debt to fund discretionary items, such as capital investments, dividend payments, as well asand potential mergers and acquisitions. Subject to market conditions, we could also fund future mergers and acquisitions through the issuance of additional shares of our common stock or preferred stock. In addition, we have strong operating results such that we believe financial institutions should provide sufficient credit funding to meet short-term financing requirements, if needed.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

We are exposed to commodity price and interest rate market risks. We monitor and manage these exposures as part of our overall risk management program. Our risk management program focuses on the unpredictability of financial markets and seekswith the goal to reduce the potentially adverse effects that the volatility of these markets may have on our operating results.results and financial condition.

Commodity Costs. Certain commodities we use in our production process, or input costs, expose us to market price risk due to volatility in the prices for those commodities.  Through our grain supply contracts for our Atchison and Lawrenceburg facilities, our wheat flour supply contract for our Atchison facility, and our natural gas contracts for both facilities, we purchase grain, wheat flour, and natural gas, respectively, for delivery from one to 24 months into the future at negotiated prices.  We have determined that the firm commitments to purchase grain, wheat flour, and natural gas under the terms of our supply contracts meet the normal purchases and sales exception as defined under Accounting Standards Codification (“ASC”) 815, Derivatives and Hedging, because the quantities involved are for amounts to be consumed within the normal expected production process.

Interest Rate Exposures. Our various debt agreements (Note 5)(see Note 6) expose us to market risks arising from adverse changes in interest rates. Established procedures and internal processes govern the management of this market risk.

Increases in market interest rates would cause interest expense under our variable interest rate debt to increase and earnings before income taxes to decrease. The change in interest expense and earnings before income taxes would be dependent upon the weighted average outstanding borrowings under variable interest rate debt during the reporting period following an increase in market interest rates. Based on weighted average outstanding variable-rate borrowings at September 30, 2022,2023, a 100 basis point increase over the current rates actually in effect at such date would have a minimal impactincrease our interest expense on interest expense.an annual basis by $980. Based on weighted average outstanding fixed-rate borrowings at September 30, 2022,2023, a 100 basis point increase in market rates would result in a decrease in the fair value of our outstanding fixed-rate debt of $28,936,$28,723, and a 100 basis point decrease in market rates would result in an increase in the fair value of our outstanding fixed-rate debt of $38,728.$36,143.

ITEM 4. CONTROLS AND PROCEDURES
 
Evaluation of Disclosure Controls and Procedures. As of the quarter ended September 30, 2022,2023, our Chief Executive Officer and Chief Financial Officer have each reviewed and evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act)Act of 1934 (as amended, the “Exchange Act”)). Based on that evaluation, the Chief Executive Officer and Chief Financial Officer have each concluded that our current disclosure controls and procedures are effective to ensure that information required to be disclosed by us in reports that we file or submit under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the Securities and Exchange CommissionSEC rules and forms, and include controls and procedures designed to ensure that information required to be disclosed by us in such reports is accumulated and communicated to our management, including theour Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.
  
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Changes in Internal Controls.Control. There were no changes in the Company’sour internal controlscontrol over financial reporting during the fiscal quarter ended September 30, 2022,2023, that have materially affected, or are reasonably likely to materially affect, the Company’sour internal controlscontrol over financial reporting.
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PART II. OTHER INFORMATION

ITEM 1.    LEGAL PROCEEDINGS

Reference is made to Part I, Item 3, Legal Proceedings of our Annual Report on Form 10-K for the year ended December 31, 2021,2022, and Note 8 to9 in this Report on Form 10-Q for information on certain proceedings to which we are subject.

ITEM 1A.    RISK FACTORS

The riskRisk factors are described in “Item 1A. Risk Factors” of our Annual Report on Form 10-K for the year ended December 31, 2021 as updated in Part II, Item 1A. Risk Factors2022 and our Quarterly Report on the Form 10-Q for the quarter ended June 30, 2022, have not materially changed.2023.


ITEM 2.      UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

There was no unregistered sale of equity securities during the quarter ended September 30, 2022.2023.

ISSUER PURCHASES OF EQUITY SECURITIES
(1) Total Number of Shares (or Units) Purchased(2) Average Price Paid per Share (or Unit)(3) Total Number of Shares (or Units) Purchased as Part of Publicly Announced Plans or Programs(4) Maximum
Number (or Approximate
Dollar Value) of
Shares (or Units)
that May Yet Be
Purchased Under
the Plans or Programs
July 1, 2022 through July 31, 2022(a)$101.44 $— $— 
August 1, 2022 through August 31, 2022— $— $— $— 
September 1, 2022 through September 30, 2022— $— $— $— 
Total$— 
(1) Total Number of Shares (or Units) Purchased(2) Average Price Paid per Share (or Unit)(3) Total Number of Shares (or Units) Purchased as Part of Publicly Announced Plans or Programs(4) Maximum
Number (or Approximate
Dollar Value) of
Shares (or Units)
that May Yet Be
Purchased Under
the Plans or Programs
July 1, 2023 through July 31, 2023— $— $— $— 
August 1, 2023 through August 31, 2023— $— $— $— 
September 1, 2023 through September 30, 2023— $— $— $— 
Total— $— 

(a) Vested RSUs awarded under the 2014 Plan purchased to cover employee withholding taxes.


ITEM 3.    DEFAULTS UPON SENIOR SECURITIES

None.None.

ITEM 4.  MINE SAFETY DISCLOSURES

Not applicable.

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ITEM 5.  OTHER INFORMATION

None.During the quarter ended September 30, 2023, none of our directors or officers adopted, modified, or terminated a “Rule 10b5-1 trading arrangement” or “non-Rule 10b5-1 trading arrangement” (each as defined in Item 408(a) of Regulation S-K).
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ITEM 6.   EXHIBITS

Exhibit NumberDescription of Exhibit
** * 10.1
** *10.2
*10.3
*31.1
*31.2
**32.1
**32.2
*101
The following financial information from MGP Ingredients, Inc.’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2022,2023, formatted in iXBRL (Inline Extensible Business Reporting Language) includes: (i) Condensed Consolidated Balance Sheets as of September 30, 2022,2023, and December 31, 2021,2022, (ii) Condensed Consolidated Statements of Income for the threequarter and nine monthsyear to date ended September 30, 20222023 and 2021,2022, (iii) Condensed Consolidated Statements of Comprehensive Income for the threequarter and nine monthsyear to date ended September 30, 20222023 and 2021,2022, (iv) Condensed Consolidated Statements of Cash Flows for the nine monthsyear to date ended September 30, 20222023 and 2021,2022, (v) Condensed Consolidated StatementStatements of Changes in Stockholders’ Equity for the three and nine monthsyear to date ended September 30, 20222023 and 2021,2022, and (vi) the Notes to Unaudited Condensed Consolidated Financial Statements.
*104Cover Page Interactive Data Filed - formatted in iXBRL (Inline Extensible Business Reporting Language )Language) and contained in Exhibit 101
* Filed herewith
*Filed*Furnished herewith
** Management contract or compensatory plan or arrangement

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SIGNATURES

Pursuant to the requirements on the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

MGP INGREDIENTS, INC.
Date:November 3, 20222, 2023By/s/ David J. Colo
David J. Colo, President and Chief Executive Officer
Date:November 3, 20222, 2023By/s/ Brandon M. Gall
Brandon M. Gall, Vice President, Finance and Chief Financial Officer

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