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, ~~2021~~2022

☐ 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

MGP INGREDIENTS, INC.

(Exact name of registrant as specified in its charter)


Kansas			45-4082531
(State or other jurisdiction of incorporation or organization)			(I.R.S. Employer Identification No.)


100 Commercial Street
Atchison	Kansas	66002
(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 class	Trading Symbol	Name of each exchange on which registered
Common Stock, no par value	MGPI	NASDAQ Global Select Market

Indicate by check mark whether the registrant (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 “emerging growth company.” See definition of “large accelerated filer”, “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

☐x Large accelerated filer x☐ Accelerated filer

☐ Non-accelerated filer ☐ Smaller Reporting 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:

~~21,964,296~~21,994,036 shares of Common Stock, no par value, as of October ~~29, 2021~~28, 2022

INDEX


PART I. FINANCIAL INFORMATION			Page

	Item 1.	Financial Statements

	Condensed Consolidated Statements of Income (Unaudited)		3
	Condensed Consolidated Statements of Comprehensive Income (Unaudited)		4
	Condensed Consolidated Balance Sheets (Unaudited)		5
	Condensed Consolidated Statements of Cash Flows (Unaudited)		6
	Condensed Consolidated Statements of Changes in Stockholders’ Equity (Unaudited)		7
	Notes to Unaudited Condensed Consolidated Financial Statements		9

	Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	22

	Item 3.	Quantitative and Qualitative Disclosures About Market Risk	3435

	Item 4.	Controls and Procedures	35

PART II. OTHER INFORMATION

	Item 1.	Legal Proceedings	3536

	Item 1A.	Risk Factors	3536

	Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	3536

	Item 3.	Defaults Upon Senior Securities	36

	Item 4.	Mine Safety Disclosures	36

	Item 5.	Other Information	36

	Item 6.	Exhibits	37

METHOD OF PRESENTATION

Throughout this Report, when we refer to “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, for any references to Note 1 through Note 11, refer to the Notes to Unaudited Condensed Consolidated Financial Statements in Item 1.

All amounts in this 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.

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,
2021 2020 2021 2020
Sales $ 176,611 $ 102,964 $ 459,873 $ 294,606
Cost of sales 119,525 79,802 313,661 227,531
Gross profit 57,086 23,162 146,212 67,075
Selling, general and administrative expenses 24,202 9,510 65,165 28,377
Operating income 32,884 13,652 81,047 38,698
Interest expense, net (1,116) (594) (2,708) (1,701)
Other income (loss), net (421) 185 (479) 352
Income before income taxes 31,347 13,243 77,860 37,349
Income tax expense 7,674 2,862 18,701 8,636
Net income 23,673 10,381 59,159 28,713
Net loss attributable to noncontrolling interest 203 — 279 —
Net income attributable to MGP Ingredients, Inc. 23,876 10,381 59,438 28,713
Income attributable to participating securities (175) (69) (471) (192)
Net income used in Earnings Per Share calculation $ 23,701 $ 10,312 $ 58,967 $ 28,521
Basic and diluted weighted average common shares 21,981,201 16,916,675 20,293,818 16,943,130
Basic and diluted Earnings Per Share $ 1.08 $ 0.61 $ 2.91 $ 1.68


	Quarter Ended September 30,				Year to Date Ended September 30,
	2022		2021		2022		2021


Sales	$	201,146	$	176,611	$	591,363	$	459,873
Cost of sales	142,098		119,525		401,270		313,661
Gross profit	59,048		57,086		190,093		146,212
Advertising and promotion expenses	7,279		5,664		18,848		9,888
Selling, general and administrative expenses	17,904		18,527		52,029		55,266
Other operating (income) expense, net	1		11		(34)		11
Operating income	33,864		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 taxes	31,161		31,347		112,398		77,860
Income tax expense	7,533		7,674		26,037		18,701
Net income	23,628		23,673		86,361		59,159
Net (income) loss attributable to noncontrolling interest	180		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 shares	22,008,381		21,981,201		22,000,026		20,293,818
Diluted weighted average common shares	22,228,814		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

See accompanying notes to unaudited condensed consolidated financial statements

MGP INGREDIENTS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Unaudited)

(Dollars in thousands)

Quarter Ended September 30, Year to Date Ended September 30,
2021 2020 2021 2020
Net income attributable to MGP Ingredients, Inc. $ 23,876 $ 10,381 $ 59,438 $ 28,713
Other comprehensive income, net of tax:
Unrealized loss on foreign currency translation adjustment (141) — (134) —
Change in Company-sponsored post-employment benefit plan (89) 74 (40) 89
Other comprehensive income (loss) (230) 74 (174) 89
Comprehensive income attributable to MGP Ingredients, Inc. 23,646 10,455 59,264 28,802
Comprehensive loss attributable to noncontrolling interest 203 — 279 —
Comprehensive income $ 23,443 $ 10,455 $ 58,985 $ 28,802


	Quarter Ended September 30,				Year to Date Ended September 30,
	2022		2021		2022		2021
Net income attributable to MGP Ingredients, Inc.	$	23,808	$	23,876	$	86,805	$	59,438
Other comprehensive loss, net of tax:
Unrealized loss on foreign currency translation adjustment	(467)		(141)		(1,116)		(134)
Change in Company-sponsored post-employment benefit plan	(76)		(89)		(102)		(40)
Other comprehensive loss	(543)		(230)		(1,218)		(174)

Comprehensive income attributable to MGP Ingredients, Inc.	23,265		23,646		85,587		59,264

Comprehensive loss attributable to noncontrolling interest	(180)		(203)		(444)		(279)
Comprehensive income	$	23,085	$	23,443	$	85,143	$	58,985

See accompanying notes to unaudited condensed consolidated financial statements

MGP INGREDIENTS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

~~(Unaudited) (Dollars~~(Dollars in thousands)


		September 30, 2021		December 31, 2020			September 30, 2022		December 31, 2021
Current Assets	Current Assets					Current Assets
Cash and cash equivalents	Cash and cash equivalents	$	16,162	$	21,662	Cash and cash equivalents	$	50,674	$	21,568
Receivables (less allowance for credit losses, $150 and $24 at September 30, 2021, and December 31, 2020, respectively)		92,152		56,966
Receivables (less allowance for credit loss, $175 and $150 at September 30, 2022, and December 31, 2021, respectively)						Receivables (less allowance for credit loss, $175 and $150 at September 30, 2022, and December 31, 2021, respectively)	107,653		92,537
Inventory	Inventory	239,312		141,011		Inventory	275,478		245,944
Prepaid expenses	Prepaid expenses	2,888		2,644		Prepaid expenses	5,833		1,510
Refundable income taxes	Refundable income taxes	1,382		—		Refundable income taxes	1,006		5,539
Total current assets	Total current assets	351,896		222,283		Total current assets	440,644		367,098
Property, plant, and equipment	Property, plant, and equipment	391,111		313,730		Property, plant, and equipment	430,945		404,149
Less accumulated depreciation and amortization	Less accumulated depreciation and amortization	(193,863)		(181,738)		Less accumulated depreciation and amortization	(210,254)		(196,863)
Property, plant, and equipment, net	Property, plant, and equipment, net	197,248		131,992		Property, plant, and equipment, net	220,691		207,286
Operating lease right-of-use assets, net	Operating lease right-of-use assets, net	8,436		5,151		Operating lease right-of-use assets, net	14,516		9,671
Investment in joint ventures	Investment in joint ventures	5,334		—		Investment in joint ventures	6,140		4,944
Intangible assets, net	Intangible assets, net	219,355		890		Intangible assets, net	217,285		218,838
Goodwill	Goodwill	227,588		2,738		Goodwill	226,294		226,294
Other assets	Other assets	7,611		3,521		Other assets	6,505		7,336
Total assets	Total assets	$	1,017,468	$	366,575	Total assets	$	1,132,075	$	1,041,467
Current Liabilities	Current Liabilities					Current Liabilities
Current maturities of long-term debt	Current maturities of long-term debt	$	3,227	$	1,600	Current maturities of long-term debt	$	4,800	$	3,227
Accounts payable	Accounts payable	37,004		30,273		Accounts payable	64,858		53,712
Federal and state liquor taxes payable		6,498		107
Income taxes payable		—		704
Federal and state excise taxes payable						Federal and state excise taxes payable	4,713		6,992

Accrued expenses and other	Accrued expenses and other	39,737		20,645		Accrued expenses and other	26,420		24,869

Total current liabilities	Total current liabilities	86,466		53,329		Total current liabilities	100,791		88,800
Long-term debt, less current maturities	Long-term debt, less current maturities	36,068		38,271		Long-term debt, less current maturities	31,105		35,266
Credit agreement - revolver		208,382		—
Convertible senior notes						Convertible senior notes	195,146		194,906
Long-term operating lease liabilities	Long-term operating lease liabilities	5,999		3,057		Long-term operating lease liabilities	11,327		6,997

Other noncurrent liabilities	Other noncurrent liabilities	5,163		7,094		Other noncurrent liabilities	4,047		5,132
Deferred income taxes	Deferred income taxes	60,479		2,298		Deferred income taxes	65,799		66,101
Total liabilities	Total liabilities	402,557		104,049		Total liabilities	408,215		397,202
Commitments and Contingencies (Note 8)	Commitments and Contingencies (Note 8)	0		0		Commitments and Contingencies (Note 8)
Stockholders’ Equity	Stockholders’ Equity					Stockholders’ Equity
Capital stock	Capital stock					Capital stock
Preferred, 5% non-cumulative; $10 par value; authorized 1,000 shares; issued and outstanding 437 shares	Preferred, 5% non-cumulative; $10 par value; authorized 1,000 shares; issued and outstanding 437 shares	4		4		Preferred, 5% non-cumulative; $10 par value; authorized 1,000 shares; issued and outstanding 437 shares	4		4
Common stock	Common stock					Common stock
No par value; authorized 40,000,000 shares; issued 23,125,166 shares at September 30, 2021 and 18,115,965 shares at December 31, 2020; and 21,963,574 and 16,915,862 shares outstanding at September 30, 2021 and December 31, 2020, respectively		6,715		6,715
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, respectively						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, respectively	6,715		6,715
Additional paid-in capital	Additional paid-in capital	315,543		15,503		Additional paid-in capital	317,541		315,802
Retained earnings	Retained earnings	315,022		262,943		Retained earnings	423,063		344,237
Accumulated other comprehensive income	Accumulated other comprehensive income	312		486		Accumulated other comprehensive income	(864)		354
Treasury stock, at cost, 1,161,592 and 1,200,103 shares at September 30, 2021 and December 31, 2020, respectively		(22,406)		(23,125)
Treasury stock, at cost, 1,131,811 and 1,160,852 shares at September 30, 2022 and December 31, 2021, respectively						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’ equity	Total MGP Ingredients, Inc. stockholders’ equity	615,190		262,526		Total MGP Ingredients, Inc. stockholders’ equity	724,794		644,755
Noncontrolling interest	Noncontrolling interest	(279)		—		Noncontrolling interest	(934)		(490)
Total equity	Total equity	614,911		262,526		Total equity	723,860		644,265
Total liabilities and equity	Total liabilities and equity	$	1,017,468	$	366,575	Total liabilities and equity	$	1,132,075	$	1,041,467

See accompanying notes to unaudited condensed consolidated financial statements

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,
		2021		2020			2022		2021
Cash Flows from Operating Activities	Cash Flows from Operating Activities					Cash Flows from Operating Activities
Net income	Net income	$	59,159	$	28,713	Net income	$	86,361	$	59,159
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 amortization	Depreciation and amortization	13,668		9,618		Depreciation and amortization	16,257		13,668

Gain on sale of assets		5		337

Share-based compensation	Share-based compensation	5,247		2,693		Share-based compensation	3,086		5,247

Deferred income taxes, including change in valuation allowance	Deferred income taxes, including change in valuation allowance	465		460		Deferred income taxes, including change in valuation allowance	(302)		465
Other, net	Other, net	(236)		—		Other, net	1,462		(231)
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, net	Receivables, net	(5,593)		(11,683)		Receivables, net	(15,582)		(5,593)
Inventory	Inventory	(7,588)		(5,673)		Inventory	(30,599)		(7,588)
Prepaid expenses	Prepaid expenses	1,206		(2,032)		Prepaid expenses	1,165		1,206
Income taxes payable		(2,086)		(673)
Refundable income taxes						Refundable income taxes	(1,006)		(2,086)
Accounts payable	Accounts payable	(6,678)		2,057		Accounts payable	12,613		(6,678)
Accrued expenses and other	Accrued expenses and other	15,859		5,647		Accrued expenses and other	1,220		15,859
Federal and state liquor taxes payable		(1,961)		139
Federal and state excise taxes payable						Federal and state excise taxes payable	(2,279)		(1,961)

Other, net	Other, net	(682)		(146)		Other, net	(143)		(682)
Net cash provided by operating activities	Net cash provided by operating activities	70,785		29,457		Net cash provided by operating activities	72,253		70,785

Cash Flows from Investing Activities	Cash Flows from Investing Activities					Cash Flows from Investing Activities
Additions to property, plant, and equipment	Additions to property, plant, and equipment	(37,257)		(13,507)		Additions to property, plant, and equipment	(29,217)		(37,257)

Purchase of business, net of cash acquired	Purchase of business, net of cash acquired	(149,613)		(2,750)		Purchase of business, net of cash acquired	—		(149,613)
Contributions to equity method investment	Contributions to equity method investment	(988)		—		Contributions to equity method investment	(2,232)		(988)
Proceeds from sale of property		—		688

Other, net	Other, net	(1,308)		56		Other, net	(315)		(1,308)
Net cash used in investing activities	Net cash used in investing activities	(189,166)		(15,513)		Net cash used in investing activities	(31,764)		(189,166)

Cash Flows from Financing Activities	Cash Flows from Financing Activities					Cash Flows from Financing Activities
Payment of dividends and dividend equivalents	Payment of dividends and dividend equivalents	(7,362)		(6,144)		Payment of dividends and dividend equivalents	(7,984)		(7,362)
Purchase of treasury stock	Purchase of treasury stock	(767)		(4,395)		Purchase of treasury stock	(714)		(767)
Loan fees paid related to borrowings	Loan fees paid related to borrowings	(666)		(1,148)		Loan fees paid related to borrowings	—		(666)

Principal payments on long-term debt	Principal payments on long-term debt	(813)		(300)		Principal payments on long-term debt	(2,603)		(813)
Proceeds from credit agreement - revolver	Proceeds from credit agreement - revolver	242,300		54,700		Proceeds from credit agreement - revolver	—		242,300
Payments on credit agreement - revolver	Payments on credit agreement - revolver	(32,300)		(40,000)		Payments on credit agreement - revolver	—		(32,300)
Payment on assumed debt as part of the Merger	Payment on assumed debt as part of the Merger	(87,509)		—		Payment on assumed debt as part of the Merger	—		(87,509)
Net cash provided by financing activities		112,883		2,713
Net cash provided by (used in) financing activities						Net cash provided by (used in) financing activities	(11,301)		112,883

Effect of exchange rate changes on cash	Effect of exchange rate changes on cash	(2)		—		Effect of exchange rate changes on cash	(82)		(2)
Increase (decrease) in cash and cash equivalents	Increase (decrease) in cash and cash equivalents	(5,500)		16,657		Increase (decrease) in cash and cash equivalents	29,106		(5,500)
Cash and cash equivalents, beginning of period	Cash and cash equivalents, beginning of period	21,662		3,309		Cash and cash equivalents, beginning of period	21,568		21,662
Cash and cash equivalents, end of period	Cash and cash equivalents, end of period	$	16,162	$	19,966	Cash and cash equivalents, end of period	$	50,674	$	16,162

See accompanying notes to unaudited condensed consolidated financial statements

MGP INGREDIENTS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

For Year to Date Ended September 30, ~~2021~~2022

(Unaudited)

~~(Unaudited) (Dollars~~(Dollars in thousands)


		Capital Stock Preferred		Issued Common		Additional Paid-In Capital		Retained Earnings		Accumulated Other Comprehensive income		Treasury Stock		Non-controlling Interest		Total			Capital Stock Preferred		Issued Common		Additional Paid-In Capital		Retained Earnings		Accumulated Other Comprehensive Income		Treasury Stock		Non-controlling Interest		Total
Balance, December 31, 2020		$	4	$	6,715	$	15,503	$	262,943	$	486	$	(23,125)	$	—	$	262,526
Balance, December 31, 2021																		Balance, December 31, 2021	$	4	$	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 loss																		Other comprehensive loss	—		—		—		—		(232)		—		—		(232)
Dividends and dividend equivalents of $0.12 per common share and per restricted stock unit, net of estimated forfeitures	Dividends 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 compensation	Share-based compensation	—		—		3,229		—		—		—		—		3,229		Share-based compensation	—		—		1,373		—		—		—		—		1,373
Stock shares awarded, forfeited or vested	Stock shares awarded, forfeited or vested	—		—		(716)		—		—		716		—		—		Stock shares awarded, forfeited or vested	—		—		(604)		—		—		604		—		—
Stock shares repurchased	Stock shares repurchased	—		—		—		—		—		(674)		—		(674)		Stock shares repurchased	—		—		—		—		—		(711)		—		(711)
Balance, March 31, 2021		4		6,715		18,016		276,318		541		(23,083)		—		278,511
Balance, March 31, 2022																		Balance, March 31, 2022	4		6,715		316,571		379,013		122		(22,464)		(556)		679,405
Comprehensive income:	Comprehensive income:																	Comprehensive income:
Net income		—		—		—		20,135		—		—		(76)		20,059
Other comprehensive income		—		—		—		—		1		—		—		1
Net income (loss)																		Net income (loss)	—		—		—		25,560		—		—		(198)		25,362
Other comprehensive loss																		Other comprehensive loss	—		—		—		—		(443)		—		—		(443)
Dividends and dividend equivalents of $0.12 per common share and per restricted stock unit, net of estimated forfeitures	Dividends and dividend equivalents of $0.12 per common share and per restricted stock unit, net of estimated forfeitures	—		—		—		(2,653)		—		—		—		(2,653)		Dividends and dividend equivalents of $0.12 per common share and per restricted stock unit, net of estimated forfeitures	—		—		—		(2,658)		—		—		—		(2,658)
Share-based compensation	Share-based compensation	—		—		1,538		—		—		—		—		1,538		Share-based compensation	—		—		1,409		—		—		—		—		1,409
Stock shares awarded, forfeited or vested	Stock shares awarded, forfeited or vested	—		—		(705)		—		—		705		—		—		Stock shares awarded, forfeited or vested	—		—		(740)		—		—		740		—		—
Stock shares repurchased	Stock shares repurchased	—		—		—		—		—		(91)		—		(91)		Stock shares repurchased	—		—		—		—		—		(2)		—		(2)
Equity consideration for Merger		—		—		296,213						—				296,213
Balance, June 30, 2021		4		6,715		315,062		293,800		542		(22,469)		(76)		593,578

Balance, June 30, 2022																		Balance, June 30, 2022	4		6,715		317,240		401,915		(321)		(21,726)		(754)		703,073
Comprehensive income:	Comprehensive income:																	Comprehensive income:
Net income		—		—		—		23,876		—				(203)		23,673
Net income (loss)																		Net income (loss)	—		—		—		23,808		—				(180)		23,628
Other comprehensive loss	Other comprehensive loss	—		—		—		—		(230)				—		(230)		Other comprehensive loss	—		—		—		—		(543)				—		(543)
Dividends and dividend equivalents of $0.12 per common share and per restricted stock unit, net of estimated forfeitures	Dividends 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	—		—		—		(2,660)		—		—		—		(2,660)
Share-based compensation	Share-based compensation	—		—		480		—		—		—		—		480		Share-based compensation	—		—		363		—		—		—		—		363
Stock shares awarded, forfeited, or vested	Stock shares awarded, forfeited, or vested	—		—		(64)		—		—		64		—		—		Stock shares awarded, forfeited, or vested	—		—		(62)		—		—		62		—		—
Stock shares repurchased	Stock shares repurchased	—		—		—		—		—		(1)		—		(1)		Stock shares repurchased	—		—		—		—		—		(1)		—		(1)
Equity consideration for Merger		—		—		65		—		—		—		—		65
Balance, September 30, 2021		$	4	$	6,715	$	315,543	$	315,022	$	312	$	(22,406)	$	(279)	$	614,911

Balance, September 30, 2022																		Balance, September 30, 2022	$	4	$	6,715	$	317,541	$	423,063	$	(864)	$	(21,665)	$	(934)	$	723,860

See accompanying notes to unaudited condensed consolidated financial statements

MGP INGREDIENTS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

For Year to Date Ended September 30, ~~2020~~2021

(Unaudited) ~~(Dollars~~

(Dollars in thousands)

Capital
Stock
Preferred Issued Common Additional
Paid-In
Capital Retained
Earnings Accumulated
Other
Comprehensive
Loss Treasury
Stock Total
Balance, December 31, 2019 $ 4 $ 6,715 $ 14,029 $ 230,784 $ (246) $ (20,242) $ 231,044
Comprehensive income:
Net income — — — 9,842 — — 9,842
Other comprehensive loss — — — — (6) — (6)
Dividends and dividend equivalents of $0.12 per common share and per restricted stock unit, net of estimated forfeitures — — — (2,059) — — (2,059)
Share-based compensation — — 902 — — — 902
Stock shares awarded, forfeited or vested — — (567) — — 804 237
Stock shares repurchased — — — — — (4,395) (4,395)
Balance, March 31, 2020 4 6,715 14,364 238,567 (252) (23,833) 235,565
Comprehensive income:
Net income — — — 8,490 — — 8,490
Other comprehensive income — — — — 21 — 21
Dividends and dividend equivalents of $0.12 per common share and per restricted stock unit, net of estimated forfeitures — — — (2,041) — — (2,041)
Share-based compensation — — 662 — — — 662
Balance, June 30, 2020 4 6,715 15,026 245,016 (231) (23,833) 242,697
Comprehensive income:
Net income — — — 10,381 — — 10,381
Other comprehensive income — — — — 74 — 74
Dividends and dividend equivalents of $0.12 per common share and per restricted stock unit, net of estimated forfeitures — — — (2,043) — — (2,043)
Share-based compensation — — 258 — — — 258
Stock shares awarded, forfeited, or vested — — — — — 634 634
Balance, September 30, 2020 $ 4 $ 6,715 $ 15,284 $ 253,354 $ (157) $ (23,199) $ 252,001


	Capital Stock Preferred		Issued Common		Additional Paid-In Capital		Retained Earnings		Accumulated Other Comprehensive Income		Treasury Stock		Non-controlling Interest		Total
Balance, December 31, 2020	$	4	$	6,715	$	15,503	$	262,943	$	486	$	(23,125)	$	—	$	262,526
Comprehensive income:
Net income	—		—		—		15,427		—		—		—		15,427
Other comprehensive income	—		—		—		—		55		—		—		55
Dividends and dividend equivalents of $0.12 per common share and per restricted stock unit, net of estimated forfeitures	—		—		—		(2,052)		—		—		—		(2,052)
Share-based compensation	—		—		3,229		—		—		—		—		3,229
Stock shares awarded, forfeited or vested	—		—		(716)		—		—		716		—		—
Stock shares repurchased	—		—		—		—		—		(674)		—		(674)
Balance, March 31, 2021	4		6,715		18,016		276,318		541		(23,083)		—		278,511
Comprehensive income:
Net income (loss)	—		—		—		20,135		—		—		(76)		20,059
Other comprehensive income	—		—		—		—		1		—		—		1
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, 2021	4		6,715		315,062		293,800		542		(22,469)		(76)		593,578
Comprehensive income:
Net income (loss)	—		—		—		23,876		—		—		(203)		23,673
Other comprehensive loss	—		—		—		—		(230)		—		—		(230)
Dividends and dividend equivalents of $0.12 per common share and per restricted stock unit, net of estimated forfeitures	—		—		—		(2,654)		—		—		—		(2,654)
Share-based compensation	—		—		480		—		—		—		—		480
Stock shares awarded, forfeited, or vested	—		—		(64)		—		—		64		—		—
Stock shares repurchased	—		—		—		—		—		(1)		—		(1)
Equity consideration for Merger	—		—		65		—		—		—		—		65
Balance, September 30, 2021	$	4	$	6,715	$	315,543	$	315,022	$	312	$	(22,406)	$	(279)	$	614,911

See accompanying notes to unaudited condensed consolidated financial statements

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,” ~~and~~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 and rye whiskeys and grain neutral spirits, including vodka and gin. ~~Our~~The Company’s distilled spirits are either packaged and sold under ~~our~~its own brands to distributors, sold, directly or indirectly to manufacturers of other branded spirits, or direct to consumer. MGP is also a top producer of ~~high quality~~high-quality, industrial alcohol for use in both food and non-food applications. 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. ~~Our~~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 April 1, 2021, the Company acquired Luxco, Inc. and its affiliated companies (“Luxco”), ~~or “Luxco Companies”)~~ which is a leading branded beverage alcohol company across various categories, with a more than 60-year business heritage. Luxco’s operations predominately involve the producing, importing, bottling and rectifying of distilled spirits. See Note 3, Business Combination, for further details.

As a result of the merger with Luxco, during the second quarter 2021, the Company established a new reportable segment structure that separates Branded Spirits from the Distillery Products segment. The Ingredient Solutions segment remains unchanged. The new segment presentation reflects how management is now operating the business and making resource allocations. The Company ~~now~~ reports 3three operating segments: ~~Distillery Products,~~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 ~~2020~~2021 consolidated financial statements have been reclassified to conform to the ~~2021 presentation and prior periods have been revised to reflect the new operating segment structure.~~2022 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, ~~2021,~~2022, 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, ~~2020,~~2021, filed with the Securities and Exchange Commission (“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~~Primos’ activity on the financial statements and ~~backs out~~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 ~~COVID-19.~~the COVID-19 pandemic. For all of these policies, management cautions that future events rarely develop as forecast, and estimates routinely require adjustment and may require material adjustment.

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. ~~Bourbon~~Bourbons and whiskeys, included in inventory, are normally aged in barrels for several years, following industry practice; all barreled bourbon

and whiskey is classified as a current asset. The Company includes warehousing, insurance, and other carrying charges applicable to barreled whiskey in inventory costs.

Inventories are stated at lower of cost or net realizable value on the first-in, first-out, or FIFO, method. Inventory valuations are impacted by constantly changing prices paid for key ~~materials, primarily corn.~~materials. Inventory consists of the following:

September 30, 2021 December 31, 2020
Finished goods $ 44,852 $ 16,414
Barreled distillate (bourbons and whiskeys) 159,897 105,445
Raw materials 22,667 6,954
Work in process 985 1,805
Maintenance materials 9,401 8,634
Other 1,510 1,759
Total $ 239,312 $ 141,011


	September 30, 2022		December 31, 2021
Finished goods	$	49,008	$	35,362
Barreled distillate (bourbons and whiskeys)	185,681		174,080
Raw materials	27,496		24,981
Work in process	1,581		1,261
Maintenance materials	10,020		9,179
Other	1,692		1,081
Total	$	275,478	$	245,944

Revenue Recognition. Revenue is recognized when control of the promised goods or services ~~through performance obligations by the Company,~~ is transferred to the customer in an amount that reflects the consideration it expects to be entitled to receive in exchange for the performance obligations. The term between invoicing and when payment is due is not significant and the period between when the entity transfers the promised good or service to the customer and when the customer pays for that good or service is one year or less.

Revenue is recognized 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 present obligation to pay. ~~For certain international customers, deposits are required in advance of shipment. These deposits are reported as contract liabilities until control passes to the customer and revenue is recognized.~~

The Company’s ~~Distillery Products~~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: 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.

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 includes making timely and accurate excise tax payments. The Company is subject to periodic compliance audits by the TTB. Individual states also impose excise taxes on alcohol beverages in varying amounts. The Company calculates its Federal and state excise tax expense based upon units shipped and on its understanding of the applicable excise tax laws. Excise taxes that are both imposed on and concurrent with a specific revenue-producing transaction, that are collected by the Company from a customer are excluded from revenue.

~~Recognition of Insurance Recoveries.~~ Estimated loss contingencies are recognized as charges to income when they are probable and reasonably estimable. Insurance recoveries are not recognized until all contingencies related to the insurance claim have been resolved and settlement has been reached with the insurer. Insurance recoveries, to the extent of costs and losses, are reported as a reduction to costs on the Condensed Consolidated Statements of Income. Insurance recoveries, in excess of costs and losses, if any, would be reported as a separate caption in Operating income on the Condensed Consolidated

~~Statements of Income. Legally committed recovery amounts obtained prior to contingencies being resolved are recorded in Accrued expenses and other on the Condensed Consolidated Balance Sheets.~~

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 “more likely than not” that at least some portion of the deferred tax asset will not be realized.

Earnings Per Common Share (“EPS”). Basic and diluted EPS ~~are~~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. ~~Per share~~Basic EPS amounts are computed by dividing net income attributable to common shareholders by the weighted average shares outstanding during each ~~year during~~period. Diluted EPS is computed using the ~~period.~~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~~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 Accumulated other comprehensive 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 exceeds the value of the assets acquired and liabilities assumed. The Company uses its best estimate and third party valuation specialists to determine the fair value of the assets acquired and liabilities assumed. During the measurement period, which can be up to one year after the acquisition date, the Company can make adjustments to the fair value of the assets acquired and liabilities assumed, with the offset being an adjustment to goodwill.

Goodwill and Indefinite-Lived 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 amount 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, ~~2021,~~2022, 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.

The Company’s ~~short term~~short-term financial instruments include cash and cash equivalents, accounts receivables and accounts payable. The carrying value of the ~~short term~~short-term financial instruments approximates the fair value due to their ~~short term~~short-term nature. These financial instruments have no stated maturities or the financial instruments have ~~short term~~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. The fair value of the Company’s debt was ~~$251,053~~$178,062 and ~~$44,548~~$272,971 at September 30, ~~2021~~2022 and December 31, ~~2020,~~2021, respectively. The financial statement carrying value of total debt was ~~$247,677~~$231,051 (including unamortized loan fees) and ~~$39,871~~$233,399 (including unamortized loan fees) at September 30, ~~2021~~2022 and December 31, ~~2020,~~2021, respectively. These fair values are considered Level 2 under the fair value hierarchy. Fair value disclosure for deferred compensation plan investments is included in Note 9.

9, 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 condensed consolidated financial statements include the results of Luxco and its affiliated companies since April 1, 2021, when the Company obtained control through the Merger.~~ The Company holds 50 percent interests in DGL Destiladores, S.de R.L. de C.V. (“DGL”) and Agricola LG, S.de R.L. de C.V. (“Agricola”) (combined “LMX”), which are accounted for as equity method investments since the date of ~~acquisition. At September 30, 2021,~~acquisition and are considered affiliates of the Company. The investment in LMX, ~~was $5,334,~~ which is recorded in Investment in joint ventures on the Condensed Consolidated Balance ~~Sheet.~~Sheet, was $6,140 and $4,944 at September 30, 2022 and December 31, 2021, respectively. During the quarter ended September 30, 2022 and 2021, the Company recorded a loss of $856 and $405 from our equity method investments, respectively, which is recorded in Other income (expense), net on the Condensed Consolidated Statement of Income. During the year to date ended September 30, 2022 and 2021, the Company recorded a loss of $1,036 and $739 from our equity method investments, respectively, which is recorded in Other (income) expense, net on the Condensed Consolidated Statement of Income. During the quarter and year to date ended September 30, 2022, the Company purchased $8,265 and $28,194, respectively, of bulk beverage alcohol from LMX, and during the quarter and year to date ended September 30, 2021, the Company ~~recorded a $405~~purchased $8,052 and ~~$739,~~$19,724, respectively, ~~loss~~of bulk beverage alcohol from ~~our equity method investments, which is recorded in Other income (loss), net on the Condensed Consolidated Statement of Income.~~LMX.

Recently Adopted Accounting Standard Updates. The Company did not adopt any new Accounting Standard Updates during the quarter ended September 30, ~~2021~~2022.

Note 2. Revenue

The Company generates revenues from the ~~Distillery Products~~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 revenues from the Branded Spirits segment by the sale of products and by providing contract bottling services. The Company generates revenues from Ingredient Solutions ~~segments~~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, or the provision of warehouse services or contract bottling services).

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,
		2021		2020		2021		2020			2022		2021		2022		2021
Distillery Products
Distilling Solutions										Distilling Solutions
Brown goods	Brown goods	$	42,793	$	32,068	$	129,600	$	86,038	Brown goods	$	57,423	$	42,793	$	175,899	$	129,600
White goods	White goods	21,187		16,210		56,049		47,922		White goods	20,469		21,187		57,996		56,049
Premium beverage alcohol	Premium beverage alcohol	63,980		48,278		185,649		133,960		Premium beverage alcohol	77,892		63,980		233,895		185,649
Industrial alcohol	Industrial alcohol	14,790		19,461		46,896		64,032		Industrial alcohol	10,761		14,790		35,141		46,896
Food grade alcohol	Food grade alcohol	78,770		67,739		232,545		197,992		Food grade alcohol	88,653		78,770		269,036		232,545
Fuel grade alcohol	Fuel grade alcohol	3,592		1,274		10,862		3,970		Fuel grade alcohol	3,713		3,592		10,307		10,862
Distillers feed and related co-products	Distillers feed and related co-products	4,016		6,119		13,660		19,889		Distillers feed and related co-products	9,943		4,016		30,127		13,660
Warehouse services	Warehouse services	4,666		4,041		12,949		11,641		Warehouse services	6,335		4,666		17,821		12,949
Total Distillery Products		91,044		79,173		270,016		233,492
Total Distilling Solutions										Total Distilling Solutions	108,644		91,044		327,291		270,016

Branded Spirits	Branded Spirits									Branded Spirits
Ultra premium	Ultra premium	13,118		2,365		23,692		3,049		Ultra premium	13,804		11,363		35,836		19,491
Super premium										Super premium	3,350		2,798		9,522		6,393
Premium	Premium	6,310		72		12,692		243		Premium	6,013		5,683		17,928		11,012
Mid	Mid	17,107		—		34,894		—		Mid	20,834		22,992		63,408		48,399
Value	Value	19,057		—		40,001		—		Value	12,097		12,756		36,304		25,984
Other	Other	5,969		12		11,278		29		Other	6,663		5,969		14,080		11,278
Total Branded Spirits	Total Branded Spirits	61,561		2,449		122,557		3,321		Total Branded Spirits	62,761		61,561		177,078		122,557

Ingredient Solutions	Ingredient Solutions									Ingredient Solutions
Specialty wheat starches	Specialty wheat starches	12,231		11,604		35,051		30,938		Specialty wheat starches	16,241		12,231		47,445		35,051
Specialty wheat proteins	Specialty wheat proteins	8,901		7,994		23,299		20,372		Specialty wheat proteins	9,697		8,901		29,225		23,299
Commodity wheat starches	Commodity wheat starches	2,626		1,596		7,572		5,247		Commodity wheat starches	3,803		2,626		10,286		7,572
Commodity wheat proteins	Commodity wheat proteins	248		148		1,378		1,236		Commodity wheat proteins	—		248		38		1,378
Total Ingredient Solutions	Total Ingredient Solutions	24,006		21,342		67,300		57,793		Total Ingredient Solutions	29,741		24,006		86,994		67,300

Total sales	Total sales	$	176,611	$	102,964	$	459,873	$	294,606	Total sales	$	201,146	$	176,611	$	591,363	$	459,873

Note 3. Business Combination

Description of the ~~transaction~~Transaction. On January 22, 2021, the Company entered into a definitive agreement to acquire Luxco, and subsequently completed the merger on April 1, 2021 (the “Merger”). Luxco is a leading branded beverage alcohol company across various categories, with a more than 60-year business heritage. As a result of the Merger, MGP increased its scale and market position in the branded-spirits sector and believes it strengthened its platform for future growth of higher valued-added products.

Following the Merger, ~~the~~ Luxco ~~Companies~~ became ~~wholly-owned subsidiaries~~a wholly owned subsidiary of MGP and ~~are~~is included within the Branded Spirits segment. The aggregate consideration paid by the Company in connection with the Merger was $237,500 in cash (less assumed indebtedness) and 5,007,833 shares of common stock of the Company, subject to adjustment for fractional shares (the “Company Shares,” and together with the cash portion, the “Merger Consideration”). The Company Shares were valued at $296,213 and represented approximately 22.8 percent of the Company’s outstanding common stock immediately following the closing of the Merger. The Merger Consideration was subject to customary purchase price adjustments related to, among other things, net working capital, acquired cash and assumed debt. The consideration paid at ~~the Closing~~closing included a preliminary estimated purchase price adjustment. In September 2021, the parties finalized the purchase price adjustment, which decreased the cash consideration paid by approximately $608 and increased stock consideration by an additional 1,373 shares from the preliminary amounts that were paid at closing.

The cash portion of the Merger Consideration, the repayment of assumed debt, and transaction-related expenses were financed with borrowings under the Company’s existing Credit Agreement which was drawn down on April 1, 2021. See Note 5, Corporate Borrowings, for further details.

For tax purposes, the transaction was structured partially as a tax-free reorganization and partially as a taxable acquisition, as defined in the Internal Revenue Code. The ~~Company anticipates the~~ amount transferred in a tax deferred manner, under the tax-free reorganization rules, ~~will~~did not create additional tax basis for the Company. The taxable component of the transaction ~~will create~~created additional tax basis and a corresponding future tax deduction for the Company.

Purchase Price Allocation. The Merger was accounted for as a business combination in accordance with Financial Accounting Standards Board Accounting Standard Codification 805, Business Combinations (“ASC 805”), and as such, assets acquired, liabilities assumed, and consideration transferred were recorded at their estimated fair values on the acquisition date. The fair value of the assets acquired and liabilities assumed are based upon a preliminary assessment of fair value and may change as valuations for certain tangible assets, intangible assets and contingent liabilities are finalized and the associated income tax impacts are determined. The Company expects to finalize the purchase price allocation as soon as practicable, but no longer than one year from the acquisition date.

~~Purchase Price Allocation.~~ ~~The~~ following table summarizes the ~~preliminary~~ allocation of the consideration paid for Luxco 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	$	~~150,092~~149,484
Value of MGP Common Stock issued at close (a)	296,279
Fair value of total consideration transferred	$	~~446,371~~445,763

Recognized amounts of identifiable assets acquired and liabilities assumed:
Cash	$	479
Receivables	29,675
Inventory	90,854
Prepaid expenses	1,454
Property, plant and equipment, net	41,279
Investments in joint ventures	5,085
Intangible assets (b)	219,500
Other assets	4,257
Total assets	392,583
Current maturities of long-term debt (c)	87,509
Accounts payable	14,453
Federal and state ~~liquor~~excise taxes payable	8,352
Accrued expenses and other	2,832
Other noncurrent liabilities	196
Deferred income taxes	~~57,720~~57,034
Total liabilities	~~171,062~~170,376
Goodwill	~~224,850~~223,556
Total	$	~~446,371~~445,763

(a) ~~The~~On April 1, 2021, the Company issued 5,007,833 shares of MGP Common Stock which was valued at $59.15 per ~~share on April 1, 2021.~~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 ~~includes~~included trade names with an estimated fair value of $178,100 and distributor relationships with an estimated fair value of $41,400.

In accordance with ASC 805 assets acquired, liabilities assumed, and consideration transferred were recorded at their estimated fair values on the acquisition date. The fair value measurements of tangible and intangible assets and liabilities were based on significant inputs not observable in the market and represent Level 3 measurements within the fair value hierarchy. Level 3 inputs include discount rates that would be used by a market participant in valuing these assets and liabilities, projections of revenues and cash flows, distributor attrition rates, royalty rates and market ~~comparable,~~comparables, among others. The fair value of work-in-process and finished goods inventory was determined using the comparative sales method and raw materials was determined using the replacement cost method. The fair value of personal property assets was determined using the market approach and the indirect and direct method of the cost approach, and the fair value of real property was determined using the

cost approach and the sales comparison approach.

Goodwill of ~~$224,850~~$223,556, none of which is deductible for tax purposes, represents the excess of the consideration transferred over the estimated fair value of assets acquired net of liabilities assumed. ~~No Goodwill is expected to be deductible for tax purposes.~~ The Intangible assets acquired ~~includes~~included indefinite-lived intangible assets, trade names, with an estimated fair value of $178,100 and definite-lived intangible assets, distributor relationships, with an estimated fair value of $41,400 and a useful life of 20 years. The trade names and distributor relationships acquired by the Company have been ~~adjusted to~~recorded at the estimated fair values using the relief from royalty method and multi-period earnings method, respectively. Management ~~and~~engaged a third party valuation ~~team performed a preliminarily~~specialist to assist in the valuation analysis ~~to determine the fair value~~ of ~~each~~certain acquired assets including trade ~~name~~names and distributor ~~relationship.~~

~~Operating Results~~. The operating results of Luxco were consolidated with the Company’s operating results subsequent to the merger date. During the quarter and year to date ended September 30, 2021, the Company recorded $59,057 and $118,355, respectively, of Sales and $6,038 and $12,559, respectively, of Income before income taxes, attributable to Luxco on it’s Condensed Consolidated Statement of Income. During the quarter and year to date ended September 30, 2021, the Company has incurred $294 and $8,922, respectively, of transaction related costs, which are included in Selling, general and administrative expenses on the Condensed Consolidated Statements of Income.relationships.

Pro Forma Information. The following table summarizes the unaudited pro forma financial results for the quarter and year to date ended September 30, 2021, ~~and 2020,~~ as if the Merger had occurred on January 1, 2020:


		Pro Forma Financial Information									Pro Forma Financial Information
		Quarter Ended September 30,				Year to Date Ended September 30,					Quarter Ended September 30,		Year to Date Ended September 30,
		2021		2020		2021		2020			2021		2021
Sales	Sales	$	176,611	$	152,090	$	504,243	$	441,984	Sales	$	176,611	$	504,243
Net income	Net income	23,673		14,479		68,934		30,469		Net income	23,673		68,934
Basic and diluted earnings per share		1.08		0.66		3.38		1.39
Basic and diluted earnings per common share										Basic and diluted earnings per common share	1.08		3.38

The pro forma results are adjusted for items that are non-recurring in nature and directly attributable to the Merger, including the income tax effect of the adjustments. Merger related costs incurred by the Company of $294 and $8,922 for the quarter

and year to date ended ~~June~~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 related to the fair value adjustment of finished goods inventory estimated to have been sold was ~~removed and included in the results for the year to date ended September 30, 2020.~~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 summary pro forma financial information is for informational purposes only, is based on estimates and assumptions, and does not purport to represent what the Company’s consolidated results of operations actually would have been if the Merger had occurred at an earlier date, and such data does not purport to project the Company’s results 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.

Note 4. Goodwill and Intangible Assets

Definite-Lived Intangible ~~Assets~~

Assets.

The Company has a definite-lived intangible asset which was acquired as a result of the Merger. The distributor relationships have a carrying value of ~~$40,365,~~$38,295, net of accumulated amortization of ~~$1,035.~~$3,105. The distributor relationships have a useful life of 20 years. The amortization expense for the quarter and year to date ended September 30, 2022 was $518 and $1,553, respectively, and the amortization expense for the quarter and year to date ended September 30, 2021 was $517 and $1,035, respectively.

As of September 30, ~~2021,~~2022, the expected future amortization expense related to definite-lived ~~intangibles~~intangible assets are as follows:


Remainder of 2021		$	518
2022		2,070
Remainder of 2022				Remainder of 2022	$	517
2023	2023	2,070		2023	2,070
2024	2024	2,070		2024	2,070
2025	2025	2,070		2025	2,070
2026				2026	2,070
Thereafter	Thereafter	31,567		Thereafter	29,498
Total	Total	$	40,365	Total	$	38,295

Goodwill and Indefinite-Lived Intangible ~~Assets~~

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.

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

Distillery Products Branded Spirits Ingredient Solutions Total
Balance, December 31, 2020 $ — $ 2,738 $ — $ 2,738
Acquisitions — 224,850 — 224,850
Balance, September 30, 2021 $ — $ 227,588 $ — $ 227,588


	Distilling Solutions		Branded Spirits		Ingredient Solutions		Total
Balance, December 31, 2021	$	—	$	226,294	$	—	$	226,294
Acquisitions	—		—		—		—
Balance, September 30, 2022	$	—	$	226,294	$	—	$	226,294

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

Distillery Products Branded Spirits Ingredient Solutions Total
Balance, December 31, 2020 $ — $ 890 $ — $ 890
Acquisitions — 178,100 — 178,100
Balance, September 30, 2021 $ — $ 178,990 $ — $ 178,990


	Distilling Solutions		Branded Spirits		Ingredient Solutions		Total
Balance, December 31, 2021	$	—	$	178,990	$	—	$	178,990
Acquisitions	—		—		—		—
Balance, September 30, 2022	$	—	$	178,990	$	—	$	178,990

Note 5. Corporate Borrowings

The following table presents the Company’s outstanding indebtedness:


Description(a)	Description(a)	September 30, 2021		December 31, 2020		Description(a)	September 30, 2022		December 31, 2021
Credit Agreement - Revolver, 1.34% (variable rate) due 2025		$	210,000	$	—
Credit Agreement - Revolver, 4.14% (variable rate) due 2025						Credit Agreement - Revolver, 4.14% (variable rate) due 2025	$	—	$	—
Convertible Senior Notes, 1.88% (fixed rate) due 2041						Convertible Senior Notes, 1.88% (fixed rate) due 2041	201,250		201,250

Prudential Note Purchase Agreement, 3.53% (fixed rate) due 2027		19,200		20,000
Prudential Note Purchase Agreement, 3.80% (fixed rate) due 2029		20,000		20,000
Note Purchase Agreement						Note Purchase Agreement
Series A Senior Secured Notes, 3.53% (fixed rate) due 2027						Series A Senior Secured Notes, 3.53% (fixed rate) due 2027	16,000		18,400
Senior Secured Notes, 3.80% (fixed rate) due 2029						Senior Secured Notes, 3.80% (fixed rate) due 2029	20,000		20,000
Other long-term borrowings	Other long-term borrowings	210		—		Other long-term borrowings	—		203
Total indebtedness outstanding	Total indebtedness outstanding	249,410		40,000		Total indebtedness outstanding	237,250		239,853
Less unamortized loan fees(b)	Less unamortized loan fees(b)	(1,733)		(129)		Less unamortized loan fees(b)	(6,199)		(6,454)
Total indebtedness outstanding, net	Total indebtedness outstanding, net	247,677		39,871		Total indebtedness outstanding, net	231,051		233,399
Less current maturities of long-term debt	Less current maturities of long-term debt	(3,227)		(1,600)		Less current maturities of long-term debt	(4,800)		(3,227)
Long-term debt and Credit Agreement - Revolver	Long-term debt and Credit Agreement - Revolver	$	244,450	$	38,271	Long-term debt and Credit Agreement - Revolver	$	226,251	$	230,172

(a) Interest rates are as of September 30, ~~2021.~~2022.

(b) Loan fees are being amortized over the life of the ~~Credit Agreement and Note Purchase Agreement.~~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 February 14, 2025. 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 to $400,000 and to increase the amount of the revolving credit facility by up to an additional $100,000. ~~The Company incurred $666 new loan fees related to~~On August 31, 2022, the Credit Agreement ~~during 2021.~~was amended to change the interest rate benchmark from LIBOR to SOFR. The Credit Agreement includes certain requirements and covenants, which the Company was in compliance with at September 30, ~~2021. As of September 30, 2021, the Company had $210,000 outstanding borrowings under the Credit Agreement leaving $190,000 available.~~2022. The cash portion of the Merger Consideration, the repayment of assumed debt, and transaction-related expenses were financed with $242,300 borrowings under the Credit Agreement which was drawn down on April 1, 2021. As of September 30, 2022, the Company had no outstanding borrowings under the Credit Agreement leaving $400,000 available.

Convertible Senior Notes. On November 16, 2021, the Company issued $201,250 in aggregate principal of 1.875% convertible senior notes due in 2041 (“2041 Notes”). The 2041 Notes were issued pursuant to an indenture, dated as of November 16, 2021 ( 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% 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. 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.

Note Purchase Agreements. The Company’s Note Purchase and Private Shelf Agreement (the “Note Purchase Agreement”), as amended by the First Amendment to Private Shelf Agreement as of February 14, 2020, the Second Amendment to Private Shelf Agreement as of September 30, 2020, the Third Amendment to Private Shelf Agreement as of January 25, 2021, and the Fourth Amendment to Private Shelf Agreement as of May 14, 2021, with PGIM, Inc.,(“Prudential”), an affiliate of Prudential Financial, Inc., and certain affiliates of ~~PGIM, Inc.,~~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 ~~PGIM, Inc.~~Prudential has provided written notice to the Company of its authorization of such a higher amount) ~~and issuance of $20,000 of Senior Secured Notes.~~

. On July 29, 2021, ~~PGIM, Inc. (“Prudential”)~~Prudential provided the Company notice pursuant to Section 1.2 of the Note Agreement that Prudential has authorized an increase in the amount of ~~the senior promissory notes~~additional Senior Secured Notes that may be issued under the uncommitted shelf facility under the Note Agreement from $105,000 to $140,000, effective as of July 29, 2021. The deadline for issuing the notes under the shelf facility is August 23, 2023.

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, which the Company was in compliance with at September 30, ~~2021.~~2022. As of September 30, 2022, the Company has $16,000 of Series A Senior Secured Notes and $20,000 of additional Senior Secured Notes outstanding under the Note Purchase Agreement leaving $120,000 available of Senior Secured Notes.

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

Note 6. 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, the estimated annual effective tax rate includes both domestic and foreign entities acquired in the Merger. See Note 3, Business Combination, for further details.

Income tax expense for the quarter and year to date ended September 30, 2022, was $7,533 and $26,037 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 federal statutory rate on pretax income primarily due to state and foreign income taxes, partially offset by state and federal tax credits, and the deduction applicable to export activity. The increase in Income tax expense for the year to date ended September 30, 2022 was primarily due to higher Income before income taxes as compared to the prior year periods.

Income tax expense for the quarter and year to date ended September 30, 2021, was $7,674 and $18,701 ~~respectively,~~ 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.

Income tax expense for the quarter and year to date ended September 30, 2020, was $2,862 and $8,636, respectively, for an effective tax rate of 21.6 percent and 23.1 percent, respectively. The effective tax rate for the quarter ended September 30, 2020 differed from the 21 percent federal statutory rate on pretax income, primarily due to state income taxes, partially offset by state and federal tax credits, the release of a portion of the Company’s valuation allowance and the deduction applicable to export activity. The effective tax rate for the year to date ended September 30, 2020, differed from the 21 percent federal statutory rate on pretax income, primarily due to state taxes, partially offset by federal and state credits, and the deduction applicable to income derived from export activity.

Note 7. Equity and EPS

The 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,
		2021		2020		2021		2020			2022		2021		2022		2021
Operations:	Operations:									Operations:
Net income(a)	Net income(a)	$	23,673	$	10,381	$	59,159	$	28,713	Net income(a)	$	23,628	$	23,673	$	86,361	$	59,159
Less: net loss attributable to noncontrolling interest		203		—		279		—
Less: Income attributable to participating securities(b)		(175)		(69)		(471)		(192)
Net loss attributable to noncontrolling interest										Net loss attributable to noncontrolling interest	180		203		444		279
Income attributable to participating securities (unvested shares and units)(b)										Income attributable to participating securities (unvested shares and units)(b)	(188)		(175)		(688)		(471)
Net income used in EPS calculation	Net income used in EPS calculation	$	23,701	$	10,312	$	58,967	$	28,521	Net income used in EPS calculation	$	23,620	$	23,701	$	86,117	$	58,967

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

Diluted weighted average common shares(c)(d)										Diluted weighted average common shares(c)(d)	22,228,814		21,981,201		22,000,026		20,293,818

Basic and diluted weighted average common shares(c)		21,981,201		16,916,675		20,293,818		16,943,130

Basic and diluted EPS		$	1.08	$	0.61	$	2.91	$	1.68
Basic EPS										Basic EPS	$	1.07	$	1.08	$	3.91	$	2.91
Diluted EPS										Diluted EPS	$	1.06	$	1.08	$	3.91	$	2.91

(a)Net income attributable to all shareholders.

(b)Participating securities included ~~163,024~~176,398 and ~~115,399~~163,024 unvested restricted stock units (“RSUs”), at September 30, ~~2021~~2022 and ~~2020,~~2021, respectively.

(c)Under the two-class method, basic and diluted weighted average common shares at September 30, ~~2021~~2022 and ~~2020~~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.

Share Issuance. On April 1, 2021, as part of the consideration for the Merger, the Company issued 5,007,833 shares of common stock. ~~The shares issued represented approximately 22.8 percent of the Company’s outstanding stock immediately~~

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

Share Repurchase. On February 25, 2019, 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 ~~can repurchase~~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. ~~This share repurchase program may be modified, suspended, or terminated by the Company at any time without prior notice.~~ The Company did not repurchase any shares ~~during the year to date ended September 30, 2021 and has $20,947 remaining~~ under the share repurchase ~~plan.~~program during 2022, prior to its expiration on February 27, 2022. The Company did not renew the share repurchase program upon its expiration.

~~During the year to date ended September 30, 2020, the Company repurchased approximately 159,104 shares of MGP~~ Common Stock ~~for $4,053.~~Share Activity.


	Shares Outstanding
	Capital Stock Preferred	Common Stock
Balance, December 31, 2021	437	21,964,314
Issuance of Common Stock	—	29,807
Repurchase of Common Stock (a)	—	(9,021)
Balance, March 31, 2022	437	21,985,100
Issuance of Common Stock	—	7,655
Repurchase of Common Stock(a)	—	(4)
Balance, June 30, 2022	437	21,992,751
Issuance of Common Stock	—	606
Repurchase of Common Stock(a)	—	(2)
Balance, September 30, 2022	437	21,993,355

~~The Common Stock share activity:~~

Shares Outstanding
Capital Stock Preferred Common Stock
Balance, December 31, 2021 437 16,915,862
Issuance of Common Stock — 35,114
Repurchase of Common Stock (a)
— (10,376)
Balance, March 31, 2021 437 16,940,600
Issuance of Common Stock — 5,022,122
Repurchase of Common Stock(a)
— (1,489)
Balance, June 30, 2021 437 21,961,233
Issuance of Common Stock — 2,361
Repurchase of Common Stock(a)
— (20)
Balance, September 30, 2021 437 21,963,574


		Shares Outstanding			Shares Outstanding
		Capital Stock Preferred	Common Stock		Capital Stock Preferred	Common Stock
Balance, December 31, 2020	Balance, December 31, 2020	437	17,028,125	Balance, December 31, 2020	437	16,915,862
Issuance of Common Stock	Issuance of Common Stock	—	36,545	Issuance of Common Stock	—	35,114
Repurchase of Common Stock~~(b)~~(a)	Repurchase of Common Stock~~(b)~~(a)	—	(169,148)	Repurchase of Common Stock~~(b)~~(a)	—	(10,376)
Balance, March 31, 2020		437	16,895,522
Balance, March 31, 2021				Balance, March 31, 2021	437	16,940,600
Issuance of Common Stock	Issuance of Common Stock	—	—	Issuance of Common Stock	—	5,022,122
Repurchase of Common Stock(a)	Repurchase of Common Stock(a)	—	—	Repurchase of Common Stock(a)	—	(1,489)
Balance, June 30, 2020		437	16,895,522
Balance, June 30, 2021				Balance, June 30, 2021	437	21,961,233
Issuance of Common Stock	Issuance of Common Stock	—	17,798	Issuance of Common Stock	—	2,361
Repurchase of Common Stock(a)	Repurchase of Common Stock(a)	—	(7)	Repurchase of Common Stock(a)	—	(20)
Balance, September 30, 2020		437	16,913,313
Balance, September 30, 2021				Balance, September 30, 2021	437	21,963,574

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

~~(b)~~159,104 shares that were repurchased during the quarter ended March 31, 2020 related to the share repurchase program. The remaining shares repurchased were related to tax withholding on equity based compensation

Note 8. Commitments and Contingencies

There are various legal and regulatory proceedings involving the Company and its subsidiaries. The Company accrues estimated costs for a contingency when management believes that a loss is probable and can be reasonably estimated.

~~Dryer Fire Incident.~~During November 2020, the Company experienced a fire at the Atchison facility. The fire damaged certain equipment in the facility’s feed drying operations and caused temporary loss of production time. At September 30, 2021, the Company received a legally binding commitment from their insurance carrier of $11,500 that was recorded as Receivables on the Condensed Consolidated Balance Sheet. During the quarter and year to date ended September 30, 2021, the Company recorded $6,404 and $16,244, respectively, of partial settlement from its insurance carrier as a reduction of Cost of

sales. The Company recorded $16,500 related to legally committed insurance recovery amounts obtained prior to contingencies related to the insurance claim being resolved, in Accrued expenses and other on the Consolidated Balance Sheet at September 30, 2021. The Company is working to construct a replacement drying system. The Company’s insurance is expected to provide coverage for business interruption and other losses from damage to property, plant and equipment, but there can be no assurance to the amount or timing of possible insurance recoveries.

~~Ransomware Cyber-Attack.~~ In May 2020, the Company was affected by a ransomware cyber-attack that temporarily disrupted production at its Atchison facilities. The Company’s financial information was not affected and there is no evidence that any sensitive or confidential company, supplier, customer or employee data was improperly accessed or extracted from our network. The Company has insurance related to this event and is currently evaluating if it will seek further recovery. Following the attack, MGP implemented a variety of measures to further enhance our cybersecurity protections and minimize the impact of any future attack. The Company’s insurance may cover additional losses from this incident, but there can be no assurance as to the amount or timing of any possible insurance recoveries.

Shareholder matters. In 2020, two putative class action lawsuits were filed in the United States District Court for District of Kansas, naming the Company and certain of its current and former executive officers as defendants, asserting claims under Sections 10(b) and 20(a) of the Securities Exchange Act of 1934. The plaintiffs sought to pursue claims on behalf of a class consisting of purchasers or acquirers of the Company’s Common Stock during certain specified periods (the “Class Periods”). On May 28, 2020, the two lawsuits were consolidated and the Court appointed City of Miami Fire Fighters’ and Police Officers’ Retirement Trust as lead plaintiff. The consolidated action is captioned In re MGP Ingredients, Inc. Securities Litigation and the file is maintained under Master File No. 2:20-cv-2090-DDCJPO. On July 22, 2020, the Retirement Trust filed a consolidated Amended Complaint. The Consolidated Complaint alleged that the defendants made false and/or misleading statements regarding the Company’s forecasts of sales of aged whiskey, and that, as a result the Company’s Common Stock traded at artificially inflated prices throughout the Class Periods. The plaintiffs sought compensatory damages, interest, attorneys’ fees, costs, and unspecified equitable relief, but have not specified the amount of damages being sought. On September 8, 2020, defendants filed a Motion to Dismiss the Consolidated Amended Complaint. On August 31, 2021, the court issued a Memorandum and Order granting the Motion to Dismiss dismissing plaintiff’s claims with prejudice. The Plaintiff had until September 30, 2021 to file a notice of appeal and the Plaintiff did not appeal.

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,~~Kearns, derivatively on behalf of MGP Ingredients v. Griffin, et al., Case 2020-CV-000042. The defendants ~~are~~were certain of the Company’s current and former officers and directors. The Company iswas a nominal defendant in each action. Plaintiffs ~~allege~~alleged that the Company was damaged as a result of the ~~conduct~~commencement of ~~the individual~~securities litigation against defendants, ~~alleged in the MGP Ingredients, Inc. Securities Litigation,~~ the repurchase of ~~company~~Company stock at artificially inflated prices, and compensation paid to the individual defendants. The Complaint in Dorfman ~~asserts~~ 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 ~~asserts~~ 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 ~~asserts~~ asserted claims for breach of fiduciary duties, waste of corporate assets, and unjust enrichment. The pleadings ~~pray~~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 July 13, 2020, defendants filed a Motion to Dismiss in Dorfman. On August 13, 2020, defendants filed a Motion to Stay the Kearns action pending the resolution of Dorfman. On November 3, 2020, the court entered an order providing that Defendants’ response to the Carter Complaint shall be due 14 days after a ruling on the Motion to Dismiss filed in Dorfman.

On ~~March~~August 31, 2021, the ~~Dorfman~~ court ~~issued~~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 ~~Memorandum and Order in which it granted defendants’ Motion to Dismiss plaintiff’s~~stipulation of dismissal of the Kearns action. The federal claims alleged in Carter were dismissed ~~those~~with prejudice. All other derivative claims were dismissed without prejudice, denied without prejudice defendants’ Motion to Dismiss plaintiff’s state claims, and stayed the case pending the Kansas Supreme Court’s decision in Herington v. City of Wichita. Herington involves the issue of whether a federal decision that determines federal claims and dismisses pendent state law claims for lack of supplemental jurisdiction precludes the reassertion of the state law claims in state court. The Kearns court has not yet taken any action in response to the court’s Memorandum and Order in Dorfman. On April 14, 2021, defendants in Carter filed a Motion to dismiss plaintiff’s federal claims and to stay plaintiff’s state claims until fourteen days after the Court rules on the state claims in Dorfmanprejudice..

On November 25, 2020, Kenneth Laury filed an action in the District Court of Shawnee County, Kansas under the caption Laury v. MGP Ingredients, Inc., Case Number: 2020-CV-000609. The Petition alleges that plaintiff commenced the action

under K.S.A. 17-6510 to enforce his alleged right to inspect books and records of the Company, in order to enable him to evaluate possible misconduct by the Company’s Board of Directors and management. On January 8, 2021, the Company filed an answer to the Petition, denying that plaintiff has satisfied the statutory requirements for his demand. On May 13, 2021, the parties stipulated to the voluntary dismissal, with prejudice, of the action.

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 ~~have~~ initiated ~~and additional private plaintiffs may initiate,~~ legal proceedings against the Company for damages resulting from the Atchison Chemical ~~Release, but~~Release. The Company reached a settlement with the ~~Company is currently unable to reasonably estimate~~plaintiffs in December 2021 and the amount of any such damages that might result. The Company’s insurance is expected to provide coverage of any damages to private plaintiffs, subject to a deductible, but there can be no assurance to the amount or timing of possible insurance recoveries if ultimately claimed by the Company.legal proceedings were dismissed with prejudice in January 2022.

Note 9. Employee and Non-Employee Benefit Plans

~~Equity-Based~~Share-Based Compensation Plans. The Company’s ~~equity-based~~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 salaried employees, as well as non-employee directors. The Company has 2two active equity-based compensation plans: the Employee Equity Incentive Plan of 2014 (the “2014 Plan”) and the Non-Employee Director Equity Incentive Plan (the “Directors’ Plan”).

As of September 30, ~~2021, 516,861~~2022, 585,353 RSUs had been granted of the 1,500,000 shares approved under the 2014 Plan, and ~~121,557~~130,982 shares had been granted of the 300,000 shares approved under the Directors’ Plan. As of September 30, ~~2021,~~2022, there were ~~168,074~~178,608 unvested RSUs under the Company’s long-term incentive plans and ~~163,024~~176,398 were participating securities (Note 7).

Deferred Compensation Plan. The Company established an unfunded Executive Deferred Compensation Plan (“EDC Plan”) effective as of June 30, 2018, with a purpose to attract and retain highly-compensated key employees by providing participants with an opportunity to defer receipt of a portion of their salary, bonus, and other specified compensation. The Company’s obligations under this plan will change in conjunction with the performance of the participants’ investments, along with contributions to and withdrawals from the plan. Realized and unrealized gains (losses) on deferred compensation plan investments were included as a component of Other income ~~(loss)~~(expense), net on the Company’s Condensed Consolidated Statements of Income for the quarter and year to date ended September 30, ~~2021.~~2022. For 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. ~~For quarter and year to date ended September 30, 2020, the Company had a gain on deferred compensation plan investments of $185 and $352, respectively.~~

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-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~~Plan deferral ~~were~~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, ~~2021~~2022 and December 31, ~~2020,~~2021, the EDC Plan investments were ~~$3,555~~$2,510 and ~~$2,007,~~$3,072, respectively, which were recorded in Other assets on the Company’s Condensed Consolidated Balance Sheets. The EDC Plan current liabilities were ~~$897~~$617 at both September 30, 2022 and December 31, 2021, ~~and~~which were included in Accrued expenses and other on the Company’s Condensed Consolidated Balance ~~Sheet.~~Sheets. The EDC Plan non-current liabilities were ~~$3,155~~$2,310 and ~~$3,140~~$2,981 at September 30, ~~2021~~2022 and December 31, ~~2020,~~2021, respectively, and were included in Other noncurrent liabilities on the Company’s Condensed Consolidated Balance Sheets.

Note 10. Operating Segments

~~As discussed in Note 1, the Company established a new reportable segment structure as a result of the Merger and prior periods have been revised to reflect the new operating segments.~~ At September 30, ~~2021,~~2022, the Company had 3three segments: ~~Distillery Products,~~Distilling Solutions, Branded Spirits, and Ingredient Solutions. The ~~Distillery Products~~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 ~~Distillery Products~~Distilling Solutions segment also includes warehouse services, including barrel put away, storage, retrieval, and blending services. The Branded Spirits segment consists of producing, importing, bottling and rectifying of distilled spirits. 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.

Quarter Ended September 30, Year to Date Ended September 30,
2021 2020 2021 2020
Sales to Customers
Distillery Products $ 91,044 $ 79,173 $ 270,016 $ 233,492
Branded Spirits 61,561 2,449 122,557 3,321
Ingredient Solutions 24,006 21,342 67,300 57,793
Total $ 176,611 $ 102,964 $ 459,873 $ 294,606
Gross Profit
Distillery Products $ 26,981 $ 15,918 $ 87,211 $ 49,832
Branded Spirits 23,217 1,389 41,737 1,727
Ingredient Solutions 6,888 5,855 17,264 15,516
Total $ 57,086 $ 23,162 $ 146,212 $ 67,075
Depreciation and Amortization
Distillery Products $ 2,695 $ 2,461 $ 7,900 $ 7,269
Branded Spirits 1,743 30 3,481 70
Ingredient Solutions 531 480 1,487 1,402
Corporate 274 303 800 877
Total $ 5,243 $ 3,274 $ 13,668 $ 9,618
Income (loss) before Income Taxes
Distillery Products $ 26,047 $ 15,471 $ 84,225 $ 48,203
Branded Spirits 9,293 236 15,182 $ (1,829)
Ingredient Solutions 6,214 5,191 15,121 13,504
Corporate (10,207) (7,655) (36,668) (22,529)
Total $ 31,347 $ 13,243 $ 77,860 $ 37,349


	Quarter Ended September 30,				Year to Date Ended September 30,
	2022		2021		2022		2021
Sales to Customers
Distilling Solutions	$	108,644	$	91,044	$	327,291	$	270,016
Branded Spirits	62,761		61,561		177,078		122,557
Ingredient Solutions	29,741		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 Spirits	25,067		23,217		70,809		41,737
Ingredient Solutions	8,064		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 Spirits	1,434		1,743		4,618		3,481
Ingredient Solutions	613		531		1,838		1,487
Corporate	357		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 Spirits	9,776		9,293		28,016		15,182
Ingredient Solutions	6,822		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 allocates assets to each segment as of:


		September 30, 2021		December 31, 2020			September 30, 2022		December 31, 2021
Identifiable Assets	Identifiable Assets					Identifiable Assets
Distillery Products		$	299,017	$	281,721
Distilling Solutions						Distilling Solutions	$	330,487	$	314,816
Branded Spirits	Branded Spirits	652,543		6,348		Branded Spirits	699,354		658,826
Ingredient Solutions	Ingredient Solutions	44,494		41,276		Ingredient Solutions	57,061		43,009
Corporate	Corporate	21,414		37,230		Corporate	45,173		24,816
Total	Total	$	1,017,468	$	366,575	Total	$	1,132,075	$	1,041,467

Note 11. Subsequent Events

Dividend. On November ~~1, 2021,~~3, 2022, the Company’s Board of Directors declared a quarterly dividend payable to stockholders of record as of November ~~19, 2021,~~18, 2022, of the Company’s Common Stock, and a dividend equivalent payable to holders of certain RSUs as of November ~~19, 2021,~~18, 2022, of $0.12 per share and per unit, payable on December ~~3, 2021.~~2, 2022.

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 contains 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, forward looking statements are usually identified by or are associated with such words as “intend,” “plan,” “believe,” “estimate,” “expect,” “anticipate,” “hopeful,” “should,” “may,” “will,” “could,” “encouraged,” “opportunities,” “potential,” and/or the negatives or variations of these terms or similar terminology. Forward looking statements are based on current expectations and assumptions that 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 of risks and uncertainties that could cause actual results and events to differ materially from such forward looking statements is included in the section titled “Risk Factors” (Item 1A) of our Annual Report on Form 10-K for the year ended December 31, ~~2020~~2021 and ~~Part II, Item 1A of~~ the additional risk factors included in our Form 10-Q for the quarter ended ~~March 31, 2021.~~June 30, 2022 in Part II, Item 1A. Forward looking statements are made as of the date of this report, and we undertake no obligation to update or revise publicly any forward looking statements, whether because of new information, future events or otherwise.

~~RECENT DEVELOPMENTS~~

~~Merger with Luxco.~~ On January 22, 2021, we entered into a definitive agreement to acquire Luxco, Inc. and its affiliated companies (“Luxco”, or “Luxco Companies”), and subsequently completed the merger on April 1, 2021. Luxco is a leading branded beverage alcohol company across various categories, with a more than 60-year business heritage. Following the merger, the Luxco Companies became wholly-owned subsidiaries of MGP and are included in the Branded Spirits segment.(Note 3, Business Combination for additional information).

~~Dryer Fire Incident.~~During November 2020, we experienced a fire at the Atchison facility. The fire damaged certain equipment in the facility’s feed drying operations and caused temporary loss of production time. During the quarter and year to date ended September 30, 2021, we recorded a $6,404 and $16,244, respectively, partial settlement from our insurance carrier as a reduction of Cost of sales. We are working to construct a replacement drying system. Our insurance is expected to provide coverage for business interruption and other losses from damage to property, plant and equipment, less deductibles, but there can be no assurance to the amount or timing of possible insurance recoveries.

~~COVID-19.~~ As the COVID-19 pandemic continues, we are monitoring the guidance from federal, state and local public health authorities and will take the necessary actions to comply with the updated guidelines. The Company’s business is part of the United States’ critical infrastructure and thus is deemed to be an “essential business.” As such, we continue to take the necessary and appropriate actions designed to protect our workforce as it continues its critical operations. We have continued to operate without any significant negative impacts; however this could be effected by voluntary or mandatory temporary closures of our facilities, interruptions to our supply chain or additional efforts to protect the health and safety of our employees. As of the date of this report, the Company’s operations, supply chain and customer demand have not been significantly affected by COVID-19; however, we are monitoring the situation closely.

OVERVIEW

MGP is a leading producer and supplier of premium distilled spirits, branded spirits and food ingredients. Distilled spirits include premium bourbon and rye whiskeys and grain neutral spirits (“GNS”), including vodka and gin. We are 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 under our own brands to distributors, sold, directly or indirectly, to manufacturers of other branded spirits, or direct to consumer. Our Branded Spirits consist of producing, importing, bottling and rectifying distilled spirits through our distilleries and bottling facilities. 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 packaged goods industry.

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, 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, ~~2020.~~2021.

RESULTS OF OPERATIONS

Consolidated ~~results~~Results

The table below details the consolidated results for the quarters ended September 30, ~~2021~~2022 and ~~2020:~~2021:


		Quarter Ended September 30,									Quarter Ended September 30,
		2021			2020			2021 v. 2020					2022			2021			2022 v. 2021
Sales	Sales	$	176,611		$	102,964		71.5	%			Sales	$	201,146		$	176,611		14	%
Cost of sales	Cost of sales	119,525			79,802			49.8				Cost of sales	142,098			119,525			19
Gross profit	Gross profit	57,086			23,162			146.5				Gross profit	59,048			57,086			3
Gross margin %	Gross margin %	32.3		%	22.5		%	9.8		pp(a)		Gross margin %	29.4		%	32.3		%	(2.9)		pp(a)
Advertising and promotion expenses												Advertising and promotion expenses	7,279			5,664			29
Selling, general, and administrative (“SG&A”) expenses	Selling, general, and administrative (“SG&A”) expenses	24,202			9,510			154.5				Selling, general, and administrative (“SG&A”) expenses	17,904			18,527			(3)

Other operating (income) expense, net												Other operating (income) expense, net	1			11			(91)
Operating income	Operating income	32,884			13,652			140.9				Operating income	33,864			32,884			3
Operating margin %	Operating margin %	18.6		%	13.3		%	5.3		pp		Operating margin %	16.8		%	18.6		%	(1.8)		pp
Interest expense, net	Interest expense, net	(1,116)			(594)			(87.9)				Interest expense, net	(1,350)			(1,116)			(21)
Other income (loss), net		(421)			185			(327.6)
Other income (expense), net												Other income (expense), net	(1,353)			(421)			(221)
Income before income taxes	Income before income taxes	31,347			13,243			136.7				Income before income taxes	31,161			31,347			(1)
Income tax expense	Income tax expense	7,674			2,862			168.1				Income tax expense	7,533			7,674			(2)
Effective tax expense rate %	Effective tax expense rate %	24.5		%	21.6		%	2.9		pp		Effective tax expense rate %	24.2		%	24.5		%	(0.3)		pp
Net income	Net income	$	23,673		$	10,381		128.0	%			Net income	$	23,628		$	23,673		—	%
Net income margin %	Net income margin %	13.4		%	10.1		%	3.3		pp		Net income margin %	11.7		%	13.4		%	(1.7)		pp

(a) Percentage points (“pp”).

Sales - Sales for quarter ended September 30, ~~2021~~2022 were ~~$176,611,~~$201,146, an increase of ~~71.5~~14 percent compared to the year-ago quarter, which was the result of increased sales in the Distilling Solutions, Ingredient Solutions and Branded Spirits ~~Distillery Products, and Ingredient Solutions~~ segments. Within the ~~Branded Spirits~~Distilling Solutions segment, sales were up ~~2,413.7 percent, due to the additional brands acquired as part of the Merger. Within the Distillery Products segment, sales were up 15.0~~19 percent, primarily due to an increase in the sales of brown goods within premium beverage ~~alcohol.~~alcohol and distillers feed and related co-products. Within the Ingredient Solutions segment, sales were up ~~12.5~~24 percent, primarily due to increased sales of ~~commodity~~specialty wheat starches and ~~specialty~~commodity wheat ~~proteins~~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).

Gross profit - Gross profit for quarter ended September 30, ~~2021~~2022 was ~~$57,086,~~$59,048, an increase of ~~146.5~~3 percent compared to the year-ago quarter. The increase was driven by an increase in gross profit in the Branded Spirits ~~Distillery Products~~ and Ingredient Solutions ~~segments.~~segments, partially offset by a decrease in Distilling Solutions segment gross profit. In the Branded Spirits segment, gross profit increased by ~~$21,828~~$1,850, or ~~1,571.5 percent. In the Distillery Products segment, gross profit increased by $11,063, or 69.5~~8 percent. In the Ingredient Solutions segment, gross profit increased by ~~$1,033,~~$1,176, or ~~17.6~~17 percent. In the Distilling Solutions segment, gross profit declined by $1,064, or 4 percent (see Segment Results).

Advertising and promotion expenses - Advertising and promotion expenses for quarter ended September 30, 2022 were $7,279, an increase of 29 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 premium price tiers.

SG&A expenses - SG&A expenses for quarter ended September 30, ~~2021~~2022 were ~~$24,202, an increase~~$17,904, a decrease of ~~154.5~~3 percent compared to the year-ago ~~quarter. The increase~~quarter, primarily due to lower incentive compensation expense and one-time acquisition costs in ~~SG&A expenses was primarily driven by~~2021 related to the ~~assumption of Luxco’s SG&A expenses.~~Merger with Luxco that did not recur in 2022.

Operating income - Operating income for quarter ended September 30, ~~2021~~2022 increased to ~~$32,884~~$33,864 from ~~$13,652~~$32,884 for quarter ended September 30, ~~2020,~~2021, primarily due to an increase in gross profit in the Branded Spirits ~~Distillery Products~~ and Ingredient Solutions segments ~~partially offset by the increase~~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.

Operating income, quarter versus quarter Operating Income Change
Operating income for quarter ended September 30, 2020 $ 13,652
Increase in gross profit - Branded Spirits segment(a)
21,828 159.9
pp(b)
Increase in gross profit - Distillery Products segment(a)
11,063 81.0 pp
Increase in gross profit - Ingredient Solutions segment(a)
1,033 7.6 pp
Increase in SG&A expenses (14,692) (107.6) pp
Operating income for quarter ended September 30, 2021 $ 32,884 140.9 %


Operating income, quarter versus quarter	Operating Income		Change
Operating income for quarter ended September 30, 2021	$	32,884
Increase in gross profit - Branded Spirits segment(a)	1,850		5		pp(b)
Increase in gross profit - Ingredient Solutions segment(a)	1,176		4		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 expenses	623		2		pp
Change in Other operating income (expense), net	10		—		pp
Operating income for quarter ended September 30, 2022	$	33,864	3	%

(a) See segment discussion.

(b) Percentage points (“pp”).

Income tax expense - Income tax expense for 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. ~~Income tax expense for the quarter ended September 30, 2020, was $2,862, for an effective tax rate of 21.6 percent.~~ The ~~increase~~decrease in Income tax expense, quarter versus quarter, was due primarily ~~due~~ to ~~higher~~lower Income before income ~~taxes, which lessened the effects of~~taxes. The decrease in effective tax rate, quarter versus quarter, was due primarily to favorable tax benefits, related to certain tax credits ~~received.~~concerning our capital spend.

Earnings per common share (“EPS”) - BasicEPS was $1.07 for quarter ended September 30, 2022, compared to $1.08 for quarter ended September 30, ~~2021, compared to $0.61 for quarter ended September 30, 2020.~~2021. The change in Basic EPS, quarter versus quarter, was primarily due to ~~an increase~~a change in ~~Operating~~Other income (expense), net and a change in interest expense, net, partially offset by an increase in Operating income. Dilutive EPS was $1.06 for the quarter ended September 30, 2022, compared to $1.08 for the quarter ended September 30, 2021. The change in Diluted EPS, quarter versus quarter, was primarily due to the same changes as Basic EPS as well as the impact of dilutive shares outstanding.

Change in basic and diluted EPS, quarter versus quarter Basic and Diluted EPS Change
Basic and diluted EPS for quarter ended September 30, 2020 $ 0.61
Increase in operations(a)
0.88 144.3
pp(b)
Increase in other income (expense), net(a)
(0.03) (4.9) pp
Change in interest expense, net(a)
(0.02) (3.3) pp
Tax: Change in effective tax rate (0.06) (9.8) pp
Increase in shares outstanding resulting from the Merger (0.30) (49.2) pp
Basic and diluted EPS for quarter ended September 30, 2021 $ 1.08 77.1 %


Change in basic and diluted EPS, quarter versus quarter	Basic and Diluted EPS		Change
Basic and diluted EPS for quarter ended September 30, 2021	$	1.08
Increase in Operating income(a)	0.03		3		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)	%

(a) Item is net of tax based on the effective tax rate for the base year ~~(2020)~~(2021).

(b) Percentage points (“pp”).

The table below details the consolidated results for year to date ended September 30, ~~2021~~2022 and ~~2020:~~2021:


		Year to Date Ended September 30,									Year to Date Ended September 30,
		2021			2020			2021 v. 2020					2022			2021			2022 v. 2021
Sales	Sales	$	459,873		$	294,606		56.1	%			Sales	$	591,363		$	459,873		29	%
Cost of sales	Cost of sales	313,661			227,531			37.9				Cost of sales	401,270			313,661			28
Gross profit	Gross profit	146,212			67,075			118.0				Gross profit	190,093			146,212			30
Gross margin %	Gross margin %	31.8		%	22.8		%	9.0		pp(a)		Gross margin %	32.1		%	31.8		%	0.3		pp(a)
Advertising and promotion expenses												Advertising and promotion expenses	18,848			9,888			91
SG&A expenses	SG&A expenses	65,165			28,377			129.6				SG&A expenses	52,029			55,266			(6)
Other operating (income) expense, net												Other operating (income) expense, net	(34)			11			(409)
Operating income	Operating income	81,047			38,698			109.4				Operating income	119,250			81,047			47
Operating margin %	Operating margin %	17.6		%	13.1		%	4.5		pp		Operating margin %	20.2		%	17.6		%	2.6		pp
Interest expense, net	Interest expense, net	(2,708)			(1,701)			(59.2)				Interest expense, net	(4,491)			(2,708)			(66)
Other income (loss), net		(479)			352			(236.1)
Other income (expense), net												Other income (expense), net	(2,361)			(479)			(393)
Income before income taxes	Income before income taxes	77,860			37,349			108.5				Income before income taxes	112,398			77,860			44
Income tax expense	Income tax expense	18,701			8,636			116.5				Income tax expense	26,037			18,701			39
Effective tax expense rate %	Effective tax expense rate %	24.0		%	23.1		%	0.9		pp		Effective tax expense rate %	23.2		%	24.0		%	(0.8)		pp
Net income	Net income	$	59,159		$	28,713		106.0	%			Net income	$	86,361		$	59,159		46	%
Net income margin %	Net income margin %	12.9		%	9.7		%	3.2		pp		Net income margin %	14.6		%	12.9		%	1.7		pp

(a) Percentage points (“pp”).

Sales - Sales for year to date ended September 30, ~~2021~~2022 were ~~$459,873,~~$591,363, an increase of ~~56.1~~29 percent compared to the year-ago period, which was the result of increased sales in the Distilling Solutions, Branded Spirits ~~Distillery Products,~~ and Ingredient Solutions segments. Within the ~~Branded Spirits~~Distilling Solutions segment, sales were up ~~3,590.4 percent, due to the additional brands acquired as part of the Merger. Within the Distillery Products segment, sales were up 15.6~~21 percent, primarily due to an increase in the sales of brown goods within premium beverage ~~alcohol.~~alcohol and distillers feed and related co-products. 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 ~~16.5~~29 percent, primarily due to increased sales of specialty wheat starches and proteins, and commodity wheat starches (see Segment Results).

Gross profit - Gross profit for year to date ended September 30, ~~2021~~2022 was ~~$146,212,~~$190,093, an increase of ~~118.0~~30 percent compared to the year-ago period. The increase was driven by an increase in gross profit in the Branded Spirits, ~~Distillery Products,~~Distilling Solutions, and Ingredient Solutions segments. In the Branded Spirits segment, gross profit increased by ~~$40,010~~$29,072, or ~~2,316.7~~70 percent. In the ~~Distillery Products~~Distilling Solutions segment, gross profit increased by ~~$37,379,~~$7,419, or ~~75.0~~9 percent. In the Ingredient Solutions segment, gross profit increased by ~~$1,748,~~$7,390, or ~~11.3~~43 percent (see Segment Results).

Advertising and promotion expenses - Advertising and promotion expenses for year to date ended September 30, 2022 were $18,848, an increase of 91 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 premium price tiers.

SG&A expenses - SG&A expenses for year to date ended September 30, ~~2021~~2022 were ~~$65,165, an increase~~$52,029, a decrease of ~~129.6~~6 percent

compared to the year-ago period. The ~~increase~~decrease in SG&A expenses was driven primarily by the one-time acquisition costs in 2021 related to the Merger with Luxco that did not recur in 2022, partially offset by the assumption of Luxco’s SG&A ~~one-time acquisition related costs, and higher incentive compensation expense.~~expenses.

Operating income - Operating income for year to date ended September 30, ~~2021~~2022 increased to ~~$81,047~~$119,250 from ~~$38,698~~$81,047 for year to date period ended September 30, ~~2020,~~2021, primarily due to an increase in gross profit in the Branded Spirits, ~~Distillery Products,~~Distilling Solutions, and Ingredient Solutions ~~segments.~~segments as well as a decrease in the previously described SG&A expenses. These ~~increases~~ were partially offset by an increase in the ~~above-described SG&A~~previously described Advertising and promotion expenses.

Operating income, year to date versus year to date Operating Income Change
Operating income for year to date ended September 30, 2020 $ 38,698
Increase in gross profit - Branded Spirits segment(a)
40,010 103.4 pp(b)
Increase in gross profit - Distillery Products segment(a)
37,379 96.6 pp
Increase in gross profit - Ingredient Solutions segment(a)
1,748 4.5 pp
Increase in SG&A expenses (36,788) (95.1) pp
Operating income for year to date ended September 30, 2021 $ 81,047 109.4 %


Operating income, year to date versus year to date	Operating 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		9		pp
Increase in gross profit - Ingredient Solutions segment(a)	7,390		9		pp
Increase in Advertising and promotion expenses	(8,960)		(11)		pp
Decrease in SG&A expenses	3,237		4		pp
Change in Other operating income (expense), net	45		—		pp
Operating income for year to date ended September 30, 2022	$	119,250	47	%

(a) See segment discussion.

(b) Percentage points (“pp”).

Income tax expense - Income tax expense for year to date ended September 30, ~~2021~~2022 was ~~$18,701,~~$26,037, for an effective tax rate of ~~24.0~~23.2 percent. Income tax expense for the year to date ended September 30, ~~2020,~~2021, was ~~$8,636,~~$18,701, for an effective tax rate of ~~23.1~~24.0 percent. The increase in Income tax expense, year to date versus year to date, was primarily due to higher Income before income ~~taxes, which lessened the effects of~~taxes. The decrease in effective tax rate, year to date versus year to date, was due to favorable tax benefits, related to certain tax credits ~~received.~~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, compared to $1.68 for year to date ended September 30, 2020.~~2021. EPS increased, year to date versus year to date, primarily due to an increase in ~~operations,~~operating income, partially offset by an increase in shares outstanding as a result of shares issued as part of the consideration paid for the ~~Merger.~~Merger with Luxco.

Change in basic and diluted EPS, year to date versus year to date Basic and Diluted EPS Change
Basic and diluted EPS for year to date ended September 30, 2020 $ 1.68
Increase in operations(a)
1.92 114.3 pp(b)
Decrease in weighted average shares outstanding, excluding the Merger impacts 0.01 0.6 pp
Change in interest expense, net(a)
(0.04) (2.4) pp
Increase in other income (expense), net(a)
(0.03) (1.8) pp
Tax: Change in effective tax rate (0.04) (2.4) pp
Increase in shares outstanding resulting from the Merger (0.59) (35.1) pp
Basic and diluted EPS for year to date ended September 30, 2021 $ 2.91 73.2 %


Change in basic and diluted EPS, year to date versus year to date	Basic and Diluted EPS		Change
Basic and diluted EPS for year to date ended 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 rate	0.02		1		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	%

(a) Item is net of tax based on the effective tax rate for the base year ~~(2020)~~(2021).

(b) Percentage points (“pp”).

2526

SEGMENT RESULTS

~~Distillery Products~~Distilling Solutions

The following tables show selected financial information for the ~~Distillery Products~~Distilling Solutions segment for the quarters ended September 30, ~~2021~~2022 and ~~2020.~~2021.


		DISTILLERY PRODUCTS SALES												DISTILLING SOLUTIONS SALES
		Quarter Ended September 30,						Quarter versus Quarter Sales Change Increase/(Decrease)						Quarter Ended September 30,						Quarter versus Quarter Sales Change Increase/(Decrease)
		2021			2020			$ Change		% Change				2022			2021			$ Change		% Change
Brown goods	Brown goods	$	42,793		$	32,068		$	10,725	33.4	%		Brown goods	$	57,423		$	42,793		$	14,630	34	%
White goods	White goods	21,187			16,210			4,977		30.7			White goods	20,469			21,187			(718)		(3)
Premium beverage alcohol	Premium beverage alcohol	63,980			48,278			15,702		32.5			Premium beverage alcohol	77,892			63,980			13,912		22
Industrial alcohol	Industrial alcohol	14,790			19,461			(4,671)		(24.0)			Industrial alcohol	10,761			14,790			(4,029)		(27)
Food grade alcohol	Food grade alcohol	78,770			67,739			11,031		16.3			Food grade alcohol	88,653			78,770			9,883		13
Fuel grade alcohol	Fuel grade alcohol	3,592			1,274			2,318		181.9			Fuel grade alcohol	3,713			3,592			121		3
Distillers feed and related co-products	Distillers feed and related co-products	4,016			6,119			(2,103)		(34.4)			Distillers feed and related co-products	9,943			4,016			5,927		148
Warehouse services	Warehouse services	4,666			4,041			625		15.5			Warehouse services	6,335			4,666			1,669		36
Total Distillery Products		$	91,044		$	79,173		$	11,871	15.0	%
Total Distilling Solutions													Total Distilling Solutions	$	108,644		$	91,044		$	17,600	19	%

		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 alcohol	Premium beverage alcohol	32.5%			19.9%			12.6%					Premium beverage alcohol	22%			4%			18%

		Other Financial Information												Other Financial Information
		Quarter Ended September 30,						Quarter versus Quarter Increase / (Decrease)						Quarter Ended September 30,						Quarter versus Quarter Increase / (Decrease)
		2021			2020			$ Change		% Change				2022			2021			$ Change		% Change
Gross profit	Gross profit	$	26,981		$	15,918		$	11,063	69.5	%		Gross profit	$	25,917		$	26,981		$	(1,064)	(4)	%
Gross margin %	Gross margin %	29.6		%	20.1		%			9.5		pp(d)	Gross margin %	23.9		%	29.6		%			(5.7)		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 ~~Distillery Products~~Distilling Solutions for ~~the~~ quarter ended September 30, ~~2021~~2022 increased by ~~$11,871,~~$17,600, or ~~15.0~~19 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 ~~fuel grade alcohol, and warehouse services increased while industrial alcohol, and distillers feed and related co-products~~ decreased compared to the prior year quarter. The increase in sales of brown goods ~~white goods and fuel grade alcohol~~ was driven by higher sales volume and higher average selling price. These increases were offset by a decrease in sales of industrial alcohol which was driven by lower sales volume due to the discontinuing of the ICP third party sales and marketing services.volume. The ~~decrease~~increase in sales of distillers feed and related co-products was due to ~~lower~~higher average selling price, partially offset by ~~higher~~lower sales ~~volume,~~volumes, both of which ~~are results~~primarily resulted from the previously disclosed dryer fire at our Atchison facility which occurred in 2020. These increases were partially offset by a decrease in sales of ~~the Dryer Fire Incident (see Note 8, Commitments~~industrial alcohol and ~~Contingencies for further details).~~white goods which were driven primarily by lower sales volume, partially offset by higher average selling price.

Gross profit ~~increased~~decreased quarter versus quarter by ~~$11,063,~~$1,064, or ~~69.5~~4 percent. Gross margin for the quarter ended September 30, ~~2021 increased~~2022 decreased to ~~29.6~~23.9 percent from ~~20.1~~29.6 percent for the prior year quarter. The ~~increase~~decrease in gross profit was primarily due to higher ~~sales volume~~input costs for white goods and ~~higher~~industrial alcohol. The average selling price ~~on brown goods. Additionally,~~for these products also increased, but not enough to offset the ~~increase~~higher input costs. This decrease in gross profit was ~~also due to higher average selling price on industrial alcohol, white goods and fuel grade alcohol,~~ partially offset by ~~higher input costs of industrial alcohol and white goods.~~an increase in brown goods gross profit.

2627

The following tables show selected financial information for the ~~Distillery Products~~Distilling Solutions segment for the year to date ended September 30, ~~2021~~2022 and ~~2020.~~2021.

DISTILLERY PRODUCTS SALES
Year to Date Ended September 30, Year to Date versus Year to Date
Sales Change Increase/(Decrease)
2021 2020 $ Change % Change
Brown Goods $ 129,600 $ 86,038 $ 43,562 50.6 %
White Goods 56,049 47,922 8,127 17.0
Premium beverage alcohol 185,649 133,960 51,689 38.6
Industrial alcohol 46,896 64,032 (17,136) (26.8)
Food grade alcohol 232,545 197,992 34,553 17.5
Fuel grade alcohol 10,862 3,970 6,892 173.6
Distillers feed and related co-products 13,660 19,889 (6,229) (31.3)
Warehouse services 12,949 11,641 1,308 11.2
Total Distillery Products $ 270,016 $ 233,492 $ 36,524 15.6 %
Change in Year to Date versus Year to Date Sales Attributed to:
Total(a)
Volume(b)
Net Price/Mix(c)
Premium beverage alcohol 38.6% 31.1% 7.5%
Other Financial Information
Year to Date Ended September 30, Year to Date versus Year to Date Increase / (Decrease)
2021 2020 $ Change % Change
Gross profit $ 87,211 $ 49,832 $ 37,379 75.0 %
Gross margin % 32.3 % 21.3 % 11.0
pp(d)

~~(a) Total sales 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.~~

~~(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.~~

~~(d) Percentage points (“pp”).~~

Total sales of Distillery Products for year to date ended September 30, 2021 increased by $36,524, or 15.6 percent compared to the year-ago period. Sales of brown goods and white goods within premium beverage alcohol, fuel grade alcohol, and warehouse services increased while industrial alcohol, and distillers feed and related co-products decreased compared to the year-ago period. The increase in sales of brown goods, white goods and fuel grade alcohol was driven by higher sales volume and higher average selling price. These increases were partially offset by a decrease in sales of industrial alcohol which was driven by lower sales volume due to the discontinuing of the ICP third party sales and marketing services, partially offset by higher average selling price. The decrease in sales of distillers feed and related co-products was due to lower average selling price, partially offset by higher sales volume, both of which are results of the Dryer Fire Incident (see Note 8, Commitments and Contingencies for further details).

Gross profit for year to date ended September 30, 2021 increased by $37,379, or 75.0 percent compared to the year-ago period. Gross margin for year to date ended September 30, 2021 increased to 32.3 percent from 21.3 percent for the prior year period. The increase in gross profit was primarily due to higher sales volume on brown goods as well as higher average selling price on industrial alcohol, white goods and fuel grade alcohol. The increase in gross profit was partially offset by higher input costs of industrial alcohol, white goods and brown goods as well as lower average selling price on distillers feed and related co-products.

~~Branded Spirits~~

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

BRANDED SPIRITS SALES
Quarter Ended September 30, Quarter versus Quarter Sales Change Increase/(Decrease)
2021 2020 $ Change % Change
Ultra premium $ 13,118 $ 2,365 $ 10,753 454.7 %
Premium 6,310 72 6,238 8,663.9
Mid 17,107 — 17,107 n/a
Value 19,057 — 19,057 n/a
Other 5,969 12 5,957 49,641.7
Total Branded Spirits $ 61,561 $ 2,449 $ 59,112 2,413.7 %
Change in Quarter versus Quarter Sales Attributed to:
Total (a)
Volume(b)
Net Price/Mix(c)
Total Branded Spirits 2,413.7% 16,253.1% (13,839.4)%
Other Financial Information
Quarter Ended September 30, Quarter versus Quarter Increase / (Decrease)
2021 2020 $ Change % Change
Gross profit $ 23,217 $ 1,389 $ 21,828 1,571.5 %
Gross margin % 37.7 % 56.7 % (19.0)
pp(d)

~~(a) Total sales 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.~~

~~(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.~~

~~(d) Percentage points (“pp”).~~

Total sales of Branded Spirits for the quarter ended September 30, 2021 increased by $59,112, or 2,413.7 percent compared to the prior year quarter. Sales of value, mid, ultra premium, premium, and other increased compared to the prior year quarter, primarily due to the additional brands acquired as part of the Merger.

Gross profit increased quarter versus quarter by $21,828, or 1,571.5 percent. Gross margin for the quarter ended September 30, 2021 decreased 19.0 percent to 37.7 percent from 56.7 percent for the prior year quarter. The increase in gross profit was primarily due to the additional brands acquired as part of the Merger. The decrease in gross margin was due to sales price mix, as the vast majority of the Company’s branded spirits sales pre-merger were in the ultra premium category.

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

BRANDED SPIRITS SALES
Year to Date Ended September 30, Year to Date versus Year to Date Sales Change Increase/(Decrease)
2021 2020 $ Change % Change
Ultra Premium $ 23,692 $ 3,049 $ 20,643 677.0 %
Premium 12,692 243 12,449 5,123.1 %
Mid 34,894 — 34,894 n/a
Value 40,001 — 40,001 n/a
Other 11,278 29 11,249 38,789.7 %
Total Branded Spirits $ 122,557 $ 3,321 $ 119,236 3,590.4 %
Change in Year to Date versus Year to Date Sales Attributed to:
Total (a)
Volume(b)
Net Price/Mix(c)
Total Branded Spirits 3,590.4% 22,743.4% (19,153.0)%
Other Financial Information
Year to Date Ended June 30, Year to Date versus Year to Date Increase / (Decrease)
2021 2020 $ Change % Change
Gross profit $ 41,737 $ 1,727 $ 40,010 2,316.7 %
Gross margin % 34.1 % 52.0 % (17.9)
pp(d)

~~(a) Total sales 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.~~

~~(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.~~

~~(d) Percentage points (“pp”).~~

Total sales of Branded Spirits for year to date ended September 30, 2021 increased by $119,236, or 3,590.4 percent compared to the year-ago period. Sales of value, mid, ultra premium, premium, and other increased compared to the year-ago period, primarily due to the additional brands acquired as part of the Merger.

Gross profit for year to date ended September 30, 2021 increased by $40,010, or 2,316.7 percent. Gross margin for year to date ended September 30, 2021 decreased 17.9 percent to 34.1 percent from 52.0 percent for the prior year. The increase in gross profit was primarily due to the additional brands acquired as part of the Merger. The decrease in gross margin was due to sales price mix, as the vast majority of the Company’s branded spirits sales pre-merger were in the ultra premium category. Gross profit was reduced during year to date ended September 30, 2021, due to a required step up in value due to purchase accounting related to the Merger. Of the purchase accounting step up, $2,529 was associated with marking the finished goods inventory to fair value, which fully flowed through in the second quarter and is not expected to recur in future periods.

~~Ingredient Solutions~~

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

INGREDIENT SOLUTIONS SALES
Quarter Ended September 30, Quarter versus Quarter Sales Change Increase / (Decrease)
2021 2020 $ Change % Change
Specialty wheat starches $ 12,231 $ 11,604 $ 627 5.4 %
Specialty wheat proteins 8,901 7,994 907 11.4
Commodity wheat starches 2,626 1,596 1,030 64.5
Commodity wheat proteins 248 148 100 67.6
Total Ingredient Solutions $ 24,006 $ 21,342 $ 2,664 12.5 %
Change in Quarter versus Quarter Sales Attributed to:
Total(a)
Volume(b)
Net Price/Mix(c)
Total Ingredient Solutions 12.5% 9.1% 3.4%
Other Financial Information
Quarter Ended September 30, Quarter versus Quarter Increase / (Decrease)
2021 2020 $ Change % Change
Gross profit $ 6,888 $ 5,855 $ 1,033 17.6 %
Gross margin % 28.7 % 27.4 % 1.3
pp(d)


	DISTILLING SOLUTIONS SALES
	Year to Date Ended September 30,						Year to Date versus Year to Date Sales Change Increase/(Decrease)
	2022			2021			$ Change		% Change
Brown Goods	$	175,899		$	129,600		$	46,299	36	%
White Goods	57,996			56,049			1,947		3
Premium beverage alcohol	233,895			185,649			48,246		26
Industrial alcohol	35,141			46,896			(11,755)		(25)
Food grade alcohol	269,036			232,545			36,491		16
Fuel grade alcohol	10,307			10,862			(555)		(5)
Distillers feed and related co-products	30,127			13,660			16,467		121
Warehouse services	17,821			12,949			4,872		38
Total Distilling Solutions	$	327,291		$	270,016		$	57,275	21	%

	Change in Year to Date versus Year to Date Sales Attributed to:
	Total(a)			Volume(b)			Net Price/Mix(c)
Premium beverage alcohol	26%			6%			20%

	Other Financial Information
	Year to Date Ended September 30,						Year to Date versus Year to Date Increase / (Decrease)
	2022			2021			$ Change		% Change
Gross profit	$	94,630		$	87,211		$	7,419	9	%
Gross margin %	28.9		%	32.3		%			(3.4)		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~~unit. The product is then divided by prior period sales dollars.

(d) Percentage points (“pp”).

Total sales of Distilling Solutions for year to date ended September 30, 2022 increased by $57,275, or 21 percent compared to the year-ago period. Sales of brown goods within premium beverage alcohol, distillers feed and related co-products, warehouse services and white goods within premium beverage alcohol increased while 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 were partially offset by a decrease in sales of industrial alcohol which was driven by lower sales volume, partially offset by higher average selling price.

Gross profit for year to date ended September 30, 2022 increased by $7,419, or 9 percent compared to the year-ago period. Gross margin for year to date ended September 30, 2022 decreased to 28.9 percent from 32.3 percent for the prior year period. The increase in gross profit was due primarily to higher average selling price and higher sales volume on brown goods. These increases were 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.

Branded Spirits

The following tables show selected financial information for the Branded Spirits segment for the quarters ended September 30, 2022 and 2021.


	BRANDED SPIRITS SALES
	Quarter Ended September 30,						Quarter versus Quarter Sales Change Increase/(Decrease)
	2022			2021			$ Change		% Change
Ultra premium	$	13,804		$	11,363		$	2,441	21	%
Super premium	3,350			2,798			552		20
Premium	6,013			5,683			330		6
Mid	20,834			22,992			(2,158)		(9)
Value	12,097			12,756			(659)		(5)
Other	6,663			5,969			694		12
Total Branded Spirits	$	62,761		$	61,561		$	1,200	2	%

	Change in Quarter versus Quarter Sales Attributed to:
	Total (a)			Volume(b)			Net Price/Mix(c)
Total Branded Spirits	2%			(6)%			8%

	Other Financial Information
	Quarter Ended September 30,						Quarter versus Quarter Increase / (Decrease)
	2022			2021			$ Change		% Change
Gross profit	$	25,067		$	23,217		$	1,850	8	%
Gross margin %	39.9		%	37.7		%			2.2		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.

(d) Percentage points (“pp”).

Total sales of Branded Spirits for quarter ended September 30, 2022 increased by $1,200, or 2 percent compared to the prior year quarter. Sales increased primarily due to an increase in the ultra premium price tier due primarily to increased sales of American whiskey brands as well as an increase in the other tier due to timing of certain contracted private label sales. These increases were partially offset by a decrease in sales of brands within the mid price tier as a result of a change in the product mix towards more premium brands as well as the re-opening of on-premise locations during the prior year period.

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.

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)
	2022			2021			$ Change		% Change
Ultra premium	$	35,836		$	19,491		$	16,345	84	%
Super premium	9,522			6,393			3,129		49
Premium	17,928			11,012			6,916		63
Mid	63,408			48,399			15,009		31
Value	36,304			25,984			10,320		40
Other	14,080			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 Spirits	44%			31%			13%

	Other Financial Information
	Year to Date Ended September 30,						Year to Date versus Year to Date Increase / (Decrease)
	2022			2021			$ 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 calculated by taking the difference between current period sales dollars and prior period sales dollars, 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, 2022 increased to 40.0 percent from 34.1 percent for the prior year. The increase in gross profit was primarily driven by 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 fair value and fully flowed through in the prior year period.

Ingredient Solutions

The following tables show selected financial information for the Ingredient Solutions segment for the quarters ended September 30, 2022 and 2021.


	INGREDIENT SOLUTIONS SALES
	Quarter Ended September 30,						Quarter versus Quarter Sales Change Increase / (Decrease)
	2022			2021			$ Change		% Change
Specialty wheat starches	$	16,241		$	12,231		$	4,010	33	%
Specialty wheat proteins	9,697			8,901			796		9
Commodity wheat starches	3,803			2,626			1,177		45
Commodity wheat proteins	—			248			(248)		(100)
Total Ingredient Solutions	$	29,741		$	24,006		$	5,735	24	%

	Change in Quarter versus Quarter Sales Attributed to:
	Total(a)			Volume(b)			Net Price/Mix(c)
Total Ingredient Solutions	24%			5%			19%

	Other Financial Information
	Quarter Ended September 30,						Quarter versus Quarter Increase / (Decrease)
	2022			2021			$ Change		% Change
Gross profit	$	8,064		$	6,888		$	1,176	17	%
Gross margin %	27.1		%	28.7		%			(1.6)		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.

(d) Percentage points (“pp”).

Total Ingredient Solutions sales for quarter ended September 30, ~~2021~~2022 increased by ~~$2,664,~~$5,735, or ~~12.5~~24 percent, compared to the prior year quarter. ~~Quarter versus quarter, this~~The increase was primarily driven by higher sales of ~~commodity wheat starches,~~ specialty wheat ~~proteins and~~ starches due to higher sales volume and higher average selling prices. Commodity wheat starches and specialty wheat proteins increased due primarily to higher average selling price.

Gross profit increased quarter versus quarter by ~~$1,033,~~$1,176, or ~~17.6~~17 percent. Gross margin for the quarter ended September 30, ~~2021 increased~~2022 decreased to ~~28.7~~27.1 percent from ~~27.4~~28.7 percent for the prior year quarter. The increase in gross profit was primarily driven by higher average selling price of specialty wheat ~~proteins~~starches and ~~starches,~~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.

3031

The following tables show selected financial information for the Ingredient Solutions segment for the year to date September 30, ~~2021~~2022 and ~~2020.~~2021.


		INGREDIENT SOLUTIONS SALES												INGREDIENT 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)
		2021			2020			$ Change		% Change				2022			2021			$ Change		% Change
Specialty wheat starches	Specialty wheat starches	$	35,051		$	30,938		$	4,113	13.3	%		Specialty wheat starches	$	47,445		$	35,051		$	12,394	35	%
Specialty wheat proteins	Specialty wheat proteins	23,299			20,372			2,927		14.4			Specialty wheat proteins	29,225			23,299			5,926		25
Commodity wheat starches	Commodity wheat starches	7,572			5,247			2,325		44.3			Commodity wheat starches	10,286			7,572			2,714		36
Commodity wheat proteins	Commodity wheat proteins	1,378			1,236			142		11.5			Commodity wheat proteins	38			1,378			(1,340)		(97)
Total Ingredient Solutions	Total Ingredient Solutions	$	67,300		$	57,793		$	9,507	16.5	%		Total Ingredient Solutions	$	86,994		$	67,300		$	19,694	29	%

		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 Solutions	Total Ingredient Solutions	16.5%			13.0%			3.5%					Total Ingredient Solutions	29%			9%			20%

		Other Financial Information												Other 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)
		2021			2020			$ Change		% Change				2022			2021			$ Change		% Change
Gross profit	Gross profit	$	17,264		$	15,516		$	1,748	11.3	%		Gross profit	$	24,654		$	17,264		$	7,390	43	%
Gross margin %	Gross margin %	25.7		%	26.8		%			(1.1)		pp(d)	Gross margin %	28.3		%	25.7		%			2.6		pp(d)

(a) Total ~~sales~~sale changes is calculated by taking the difference between current period sales dollars and prior period sales dollars, divided by prior period sales dollars.

(d) Percentage points (“pp”).

Total Ingredient Solutions sales for year to date ended September 30, ~~2021~~2022 increased by ~~$9,507,~~$19,694, or ~~16.5~~29 percent, compared to the prior year period. The increase in Ingredient Solutions sales was primarily driven by higher sales of specialty wheat starches ~~and proteins and commodity wheat starches,~~ primarily due to higher sales volume and higher average selling 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. Sales of commodity wheat starches were also up due to higher average selling price. These increases were partially offset by a decrease in sales of commodity wheat proteins due to lower sales volume.

Gross profit increased by ~~$1,748,~~$7,390, or ~~11.3~~43 percent for year to date ended September 30, ~~2021~~2022 compared to the prior year period. Gross margin for the year to date ended September 30, ~~2021 decreased~~2022 increased to ~~25.7~~28.3 percent from ~~26.8~~25.7 percent for the prior year period. The increase in gross profit was primarily driven by higher ~~sales volumes and~~ average selling price and higher sales volumes of specialty wheat starches and proteins and commodity wheat starches. These increases were partially offset by higher input ~~costs.~~costs for all 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.

3132

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 ~~debt~~borrowings through our Credit Agreement, Convertible Senior Notes and Note Purchase Agreement (Note 5) provide the primary sources of cash to fund operating needs and capital expenditures. These same sources of cash are used to fund shareholder 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 ~~including our Credit Agreement and Note Purchase Agreement,~~ to be adequate to provide for budgeted capital expenditures, potential mergers or acquisitions, and anticipated operating requirements for the foreseeable future.

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)
		2021		2020					2022		2021

Cash provided by operating activities	Cash provided by operating activities	$	70,785	$	29,457	$	41,328	Cash provided by operating activities	$	72,253	$	70,785	$	1,468

Cash used in investing activities	Cash used in investing activities	(189,166)		(15,513)		(173,653)		Cash used in investing activities	(31,764)		(189,166)		157,402

Cash provided by financing activities		112,883		2,713		110,170
Cash provided by (used in) financing activities								Cash provided by (used in) financing activities	(11,301)		112,883		(124,184)

Effect of exchange rate changes on cash	Effect of exchange rate changes on cash	(2)		—		(2)		Effect of exchange rate changes on cash	(82)		(2)		(80)

Increase (decrease) in cash and cash equivalents	Increase (decrease) in cash and cash equivalents	$	(5,500)	$	16,657	$	(22,157)	Increase (decrease) in cash and cash equivalents	$	29,106	$	(5,500)	$	34,606

Cash ~~decreased~~increased $29,106 for year to date ended September 30, 2022, compared to a decrease of $5,500 for year to date ended September 30, 2021, ~~compared to an increase of $16,657 for year to date ended September 30, 2020,~~ for a net ~~decrease~~increase in cash of ~~$22,157,~~$34,606, period versus period.

Operating Activities. Cash provided by operating activities for 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 ~~provided by operating~~used in investing activities for year to date ended September 30, ~~2020~~2022 was ~~$29,457. The cash provided by operating activities~~$31,764, which primarily resulted ~~primarily~~ from ~~net income~~additions to property, plant and equipment of $28,713, adjustments for non-cash or non-operating charges of $13,108, including depreciation and amortization and share-based compensation, partially offset by uses of cash due to changes in operating assets and liabilities of $12,364. The primary drivers of the changes in operating assets and liabilities were $11,683 use of cash related to an increase in accounts receivables, net due to timing of customer payments as well as increased sales during the year, $5,673 use of cash related to an increase in inventories, primarily barreled distillate, and $2,032 use of cash related to an increase in prepaid expenses due to an increase in prepaid insurance and vendor deposits. These uses of cash were partially offset by $5,647 cash provided by accrued expenses primarily related to incentive compensation expenses and $2,057 cash provided by accounts payable related to the timing cash disbursements.

~~Investing Activities.~~ $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 ofwith Luxco, and additions to property, plant and equipment of $37,257 (see Capital Spending). Cash used in investing activities for year to date ended September 30, 2020 was $15,513, which resulted from additions to property, plant and equipment of $13,507 (see Capital Spending) and an increase related to the acquisition of a business of $2,750, partially offset by proceeds from sale of property of $688.

3233

Capital Spending. We manage capital spending to support our business growth plans. ~~Investments in property, plant~~We have incurred $28,524 and ~~equipment were~~$33,882 of capital expenditures and have paid $29,217 and $37,257 ~~and $13,507~~for capital expenditures for year to date ended September 30, 2022 and 2021, respectively. The difference between the amount of capital expenditures incurred and ~~2020, respectively. Adjusted for~~amount paid is due to the change in capital expenditures in accounts ~~payable~~payable. We expect approximately $47,200 in capital expenditures in 2022, which will be used for facility improvement and expansion, facility sustaining projects, and environmental health and safety projects.

Financing Activities. Cash used in financing activities for year to date ended September 30, ~~2021~~2022 was $11,301, due to payments of dividends and ~~2020,~~dividend equivalents of ~~$(3,375)~~$7,984 (see Dividends and ~~$(2,654)~~Dividend Equivalents), ~~respectively, total capital expenditures were $33,882~~net payments on debt of $2,603 (see Long-Term and ~~$10,853, respectively.~~Short-Term Debt) and purchases of treasury stock of $714 (see Treasury Purchases).

We expect approximately $51,500 in capital expenditures in 2021, excluding any insurance recoveries. Of the $51,500 expected capital expenditures $31,400 is allocated for the replacement of the feed dryer system. The remainder is for facility improvement and expansion, facility sustenance projects, and environmental health and safety projects.

~~Financing Activities.~~ 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~~Long-term and ~~Short-Term~~Short-term Debt), partially offset by $87,509 payment on assumed debt as part of the Merger, payments of dividends and dividend equivalents of $7,362 (see Dividends and Dividend Equivalents) and purchases of treasury stock of $767 (see Treasury ~~Purchases and Share Repurchases).~~

Cash provided by financing activities for year to date ended September 30, 2020 was $2,713, primarily due to net proceeds from debt of $13,252 (See Long-Term and Short-Term Debt), payments of dividends and dividend equivalents of $6,144 (see Dividends and Dividend Equivalents) and purchases of treasury stock of $4,395 (see Treasury Purchases and Share Repurchases)Purchases).

Treasury Purchases. 29,366 RSUs vested and converted to common shares for employees during 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.

30,404 RSUs vested and converted to common shares for employees during year to date ended September 30, 2020, of which we withheld and purchased for treasury 10,051 shares valued at $342 to cover payment of associated withholding taxes.

Share Repurchases. On February 25, 2019, our Board of Directors approved a $25,000 share repurchase authorization commencing February 27, 2019, through February 27, 2022. Under the share repurchase program, we can repurchase stock from time to time for cash in open market purchases, block transactions, and privately negotiated transactions in accordance with applicable federal securities laws. This share repurchase program may be modified, suspended, or terminated by us at any time without prior notice. The Company did not repurchase any shares during 2022 prior to the ~~year to date ended September 30, 2021 and has $20,947 remaining under~~expiration of the ~~share repurchase plan.~~program on February 27, 2022.

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

Dividends and Dividend Equivalents


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 date	Declaration date	Record date	Payment date	Declared		Paid		Dividend payment		Dividend equivalent payment(a)(b)		Total payment(b)		Declaration date	Record date	Payment date	Declared(c)		Paid(c)		Dividend payment		Dividend equivalent payment(a)(b)		Total payment(b)
2022														2022
February 22, 2022														February 22, 2022	March 11, 2022	March 25, 2022	$	0.12	$	0.12	$	2,638	$	23	$	2,661
May 5, 2022														May 5, 2022	May 20, 2022	June 3, 2022	0.12		0.12		2,638		23		2,661
August 4, 2022														August 4, 2022	August 19, 2022	September 2, 2022	0.12		0.12		2,639		23		2,662
																	$	0.36	$	0.36	$	7,915	$	69	$	7,984

2021	2021													2021
February 23, 2021	February 23, 2021	March 12, 2021	March 26, 2021	$	0.12	$	0.12	$	2,033	$	19	$	2,052	February 23, 2021	March 12, 2021	March 26, 2021	$	0.12	$	0.12	$	2,033	$	19	$	2,052
May 3, 2021	May 3, 2021	May 21, 2021	June 4, 2021	0.12		0.12		2,635		20		2,655		May 3, 2021	May 21, 2021	June 4, 2021	0.12		0.12		2,635		20		2,655
August 2, 2021	August 2, 2021	August 20, 2021	September 3, 2021	0.12		0.12		2,635		20		2,655		August 2, 2021	August 20, 2021	September 3, 2021	0.12		0.12		2,635		20		2,655
				$	0.36	$	0.36	$	7,303	$	59	$	7,362				$	0.36	$	0.36	$	7,303	$	59	$	7,362

2020
February 24, 2020		March 13, 2020	March 27, 2020	$	0.12	$	0.12	$	2,047	$	13	$	2,060
April 28, 2020		May 22, 2020	June 5, 2020	0.12		0.12		2,027		14		2,041
July 28, 2020		August 21, 2020	September 4, 2020	0.12		0.12		2,029		14		2,043
				$	0.36	$	0.36	$	6,103	$	41	$	6,144

(a) Dividend equivalent payments on unvested participating securities.

(b) Includes estimated forfeitures.

On November ~~1, 2021,~~3, 2022, our Board of Directors declared a quarterly dividend payable to stockholders of record as of November ~~19, 2021,~~18, 2022, of the Company’s Common Stock, and a dividend equivalent payable to holders of certain RSUs as of November ~~19, 2021,~~18, 2022, of $0.12 per share and per unit, payable on December ~~3, 2021.~~2, 2022.

Long-Term and Short-Term Debt. We maintain debt levels we consider appropriate after evaluating a number of factors, including cash flow expectations, cash requirements for ongoing operations, investment and financing plans (including brand development and share repurchase activities) and the overall cost of capital. Total debt was ~~$247,677~~$231,051 (net of unamortized loan fees of ~~$1,733)~~$6,199) at September 30, ~~2021,~~2022, and ~~$39,871~~$233,399 (net of unamortized loan fees of ~~$129)~~$6,454) at December 31, ~~2020.~~2021.

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.~~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 ~~Credit Agreement and Note Purchase Agreement.~~various debt agreements. Under our ~~Credit Agreement and Note Purchase Agreement,~~debt agreements, we must meet certain financial covenants and restrictions, and at September 30, ~~2021,~~2022, we met those covenants and restrictions.

At September 30, ~~2021,~~2022, our current assets exceeded our current liabilities by ~~$265,430,~~$339,853, largely due to our inventories, at cost, of ~~$239,312.~~$275,478. At September 30, ~~2021,~~2022, our cash balance was ~~$16,162~~$50,674 and we have used our ~~Credit Agreement and Note Purchase Agreement~~various debt agreements for liquidity purposes, with ~~$190,000~~$400,000 under our Credit Agreement remaining for additional ~~borrowings.~~borrowings and up to $120,000 potentially available under the Note Purchase Agreement. 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. ~~While we currently believe we are well positioned with our credit agreement, we will continue to monitor the impact of the COVID-19 pandemic on our operations and liquidity needs.~~ We utilize short-term and long-term debt to fund discretionary items, such as capital investments, dividend payments as well as potential mergers and ~~dividend payments.~~acquisitions. Subject to market conditions, we could also fund future mergers and acquisitions through the issuance of additional shares of common 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.

On April 1, 2021, the Company completed the merger with Luxco. The aggregate consideration paid by the Company in connection with the merger was $237,500 in cash (less assumed indebtedness) and 5,007,833 shares of common stock of the Company, subject to adjustment for fractional shares (the “Company Shares,” and together with the cash portion, the “Merger Consideration”). The Merger Consideration is subject to customary purchase price adjustments, including working capital, a portion of which may be paid in common stock. The cash portion of the Merger Consideration, the repayment of assumed debt and transaction-related expenses were financed with a $242,300 borrowing under the Credit Agreement. We anticipate having sufficient cash flows to support our short-term liquidity and operating needs.

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 seeks to reduce the potentially adverse effects that the volatility of these markets may have on our operating results.

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 ~~Credit Agreement and Note Purchase Agreement~~various debt agreements (Note 5) 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, ~~2021,~~2022, a 100 basis point increase over the ~~non-default~~current rates actually in effect at such date would ~~increase our~~have a minimal impact on interest ~~expense on an annualized basis by $2,235.~~expense. Based on weighted average outstanding fixed-rate

borrowings at September 30, ~~2021,~~2022, a 100 basis point increase in market rates would result in a decrease in the fair value of our outstanding fixed-rate debt of ~~$1,385,~~$28,936, 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 ~~$1,454.~~$38,728.

ITEM 4. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures. As of the quarter ended September 30, ~~2021,~~2022, 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 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 Commission 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 the Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. On April 1, 2021, we completed the acquisition of Luxco, Inc. and its affiliated companies (“Luxco”). We are currently integrating Luxco into our operations and internal control processes and, pursuant to the Securities and Exchange Commission staff interpretative guidance that assessment of a recently acquired business may be omitted from the scope of an assessment for a period not to exceed one year from the date of acquisition, the scope of our assessment of our internal controls over financial reporting at September 30, 2021 does not include Luxco.

Changes in Internal Controls. ~~Except for internal controls related to integration activities associated with our acquisition of Luxco, there~~There were no changes in the Company’s internal controls over financial reporting during the fiscal quarter ended September 30, ~~2021,~~2022, that have materially affected, or are reasonably likely to materially affect, the Company’s internal controls over financial reporting.

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, ~~2020,~~2021, and Note 8 to this Report on Form 10-Q for information on certain proceedings to which we are subject.

ITEM 1A. RISK FACTORS

~~There have been no material changes to the~~The risk factors ~~disclosed under~~are described in “Item 1A. Risk Factors” of our ~~Quarterly~~Annual Report on Form 10-K for the year ended December 31, 2021 as updated in Part II, Item 1A. Risk Factors on the Form 10-Q for the quarter ended ~~September~~June 30, ~~2021.~~2022, have not materially changed.

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, ~~2021.~~2022.

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, 2021 through July 31, 2021 12 (a) $ 66.16 $ — $ 20,947,113 (b)
August 1, 2021 through August 31, 2021 — (a) $ — $ — $ 20,947,113 (b)
September 1, 2021 through September 30, 2021 8 (a) $ 61.55 $ — $ 20,947,113 (b)
Total 20 $ —


	(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	2	(a)	$	101.44	$	—	$	—
August 1, 2022 through August 31, 2022	—		$	—	$	—	$	—
September 1, 2022 through September 30, 2022	—		$	—	$	—	$	—
Total	2				$	—

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

(b) On February 25, 2019, our Board of Directors approved a $25,000 share repurchase authorization commencing February 27, 2019 through February 27, 2022. Under the share repurchase program, we can repurchase stock from time to time for cash in open market purchases, block transactions, and privately negotiated transactions in accordance with applicable federal securities laws. This share repurchase program may be modified, suspended, or terminated by us at any time without prior notice.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4. MINE SAFETY DISCLOSURES

Not applicable.

ITEM 5. OTHER INFORMATION

None.

ITEM 6. EXHIBITS


Exhibit Number			Description of Exhibit
** * 10.1			~~10.1~~Letter agreement dated August 5, 2022 between MGP Ingredients, Inc. and David Dykstra
** *10.2			~~Notice of Shelf Notes Upsize Authorization dated July 29, 2021 between PGIM, Inc. and~~ MGP Ingredients, Inc. ~~(Incorporated by reference~~Amended and Restated Short-Term Incentive Plan for years beginning January 1, 2022
*10.3			Amendment No. 3 to ~~Exhibit 10.8 of the Company’s Quarterly Report on Form 10-Q filed~~Credit Agreement between MGP Ingredients, Inc. and Wells Fargo Bank, National Association, dated August ~~4, 2021 (File number 000-17196))~~31, 2022
*31.1			CEO Certification pursuant to Rule 13a-14(a)
*31.2			CFO Certification pursuant to Rule 13a-14(a)
*32.1			CEO Certification furnished pursuant to Rule 13a-14(b) and 18 U.S.C. 1350
*32.2			CFO Certification furnished pursuant to Rule 13a-14(b) and 18 U.S.C. 1350
*101			The following financial information from MGP Ingredients, Inc.’s Quarterly Report on Form 10-Q for the quarter ended September 30, ~~2021,~~2022, formatted in iXBRL (Inline Extensible Business Reporting Language) includes: (i) Condensed Consolidated Balance Sheets as of September 30, ~~2021,~~2022, and December 31, ~~2020,~~2021, (ii) Condensed Consolidated Statements of Income for the three and nine months ended September 30, ~~2021~~2022 and ~~2020,~~2021, (iii) Condensed Consolidated Statements of Comprehensive Income for the three and nine months ended September 30, ~~2021~~2022 and ~~2020,~~2021, (iv) Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, ~~2021~~2022 and ~~2020,~~2021, (v) Condensed Consolidated Statement of Changes in Stockholders’ Equity for the three and nine months ended September 30, ~~2021~~2022 and ~~2020,~~2021, and (vi) the Notes to Unaudited Condensed Consolidated Financial Statements.
*104			Cover Page Interactive Data Filed - formatted in iXBRL (Inline Extensible Business Reporting Language ) and contained in Exhibit 101

Filed herewith * Management contract or compensatory plan or arrangement

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, ~~2021~~2022	By	/s/ David J. Colo
			David J. Colo, President and Chief Executive Officer

Date:	November 3, ~~2021~~2022	By	/s/ Brandon M. Gall
			Brandon M. Gall, Vice President, Finance and Chief Financial Officer