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What changed in MGP INGREDIENTS INC's 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of MGP INGREDIENTS INC's 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+334 added−321 removedSource: 10-K (2024-02-22) vs 10-K (2023-02-23)

Top changes in MGP INGREDIENTS INC's 2023 10-K

334 paragraphs added · 321 removed · 264 edited across 8 sections

Item 1. Business

Business — how the company describes what it does

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Biggest changeOur Branded Spirits segment consists of a portfolio of high quality brands, which we produce through our distilleries and bottling facilities and sell to distributors pursuant to purchase orders. MGP’s branded spirits include a wide spectrum of brands across numerous segments. During 2022, our five largest Branded Spirits customers, combined, accounted for 17 percent of our consolidated sales.
Biggest changeServices under warehouse agreements include barrel put away, barrel storage, and barrel retrieval, as well as blending services. Branded Spirits Segment. Our Branded Spirits segment consists of a portfolio of high quality brands, which we produce through our distilleries and bottling facilities and sell to distributors pursuant to customer contracts and purchase orders.
Our principal Branded Spirits segment raw materials, or input costs, include corn and other grains (including rye, barley, wheat, barley malt, and milo), agave, and flavoring. Our principal Ingredient Solutions segment raw material is wheat flour, which is processed into starches and proteins. The cost of grain and wheat flour has, at times, been subject to substantial fluctuation.
Our principal Branded Spirits segment raw materials, or input costs, include corn and other grains (including rye, barley, wheat, barley malt, and milo), agave, and flavoring. Our principal Ingredient Solutions segment raw material is wheat flour, which is processed into starches and proteins. The cost of grain has, at times, been subject to substantial fluctuation.
GENERAL INFORMATION MGP is a leading producer and supplier of premium distilled spirits, branded spirits, and food ingredients. Distilled spirits include premium bourbon, rye, and other whiskeys and grain neutral spirits (“GNS”), including vodka and gin. Our distilled spirits are either sold directly or indirectly to manufacturers of other branded spirits.
GENERAL INFORMATION MGP is a leading producer and supplier of premium distilled spirits, branded spirits, and food ingredients. Distilled spirits include premium bourbon, rye, and other whiskeys (“brown goods”) and grain neutral spirits (“GNS”), including vodka and gin. Our distilled spirits are either sold directly or indirectly to manufacturers of other branded spirits.
This wheat protein is also the starter material used to create our textured wheat product line branded under Proterra ® . 3 COMPETITIVE CONDITION While we believe that the overall market environment offers considerable growth opportunities for us in 2023 and beyond, the markets in which our products are sold are competitive.
This wheat protein is also the starter material used to create our textured wheat product line branded under Proterra ® . 3 COMPETITIVE CONDITION While we believe that the overall market environment offers growth opportunities for us in 2024 and beyond, the markets in which our products are sold are competitive.
Our brown goods are sold as aged and unaged distillate, which may be further aged by our customers or warehoused at our facilities, and are sold at various proof concentrations. Our GNS is sold in bulk quantities at various proof concentrations. Our gin is primarily created by redistilling GNS together with proprietary formulations of botanicals or botanical oils.
Our brown goods are sold as aged and unaged distillate, which may be further aged by our customers or warehoused at our facilities. Our GNS is sold in bulk quantities. Our gin is primarily created by redistilling GNS together with proprietary formulations of botanicals or botanical oils.
During 2022, our five largest Ingredient Solutions customers, combined, accounted for 11 percent of our consolidated sales. Specialty Wheat Starches - Wheat starch is the carbohydrate-bearing portion of wheat flour. We produce a premium wheat starch powder by extracting the starch from the starch slurry.
During 2023, our five largest Ingredient Solutions customers, combined, accounted for approximately 11 percent of our consolidated sales. Specialty Wheat Starches - Wheat starch is the carbohydrate-bearing portion of wheat flour. We produce a premium wheat starch powder by extracting the starch from the starch slurry.
Our operations are also subject to regulation by various federal agencies, including the Alcohol and Tobacco Tax Trade Bureau (“TTB”), OSHA, the Food and Drug Administration (“FDA”), the United States Environmental Protection Agency (“EPA”), and by various state and local authorities.
Our operations are also subject to regulation by various U.S. federal agencies, including the Alcohol and Tobacco Tax Trade Bureau (“TTB”), OSHA, the Food and Drug Administration (“FDA”), the United States Environmental Protection Agency (“EPA”), and by various U.S. state and local and foreign authorities.
In this document, for any references to Note 1 through Note 16 refer to the Notes to Consolidated Financial Statements in Item 8.
In this Report, for any references to Note 1 through Note 16 refer to the Notes to Consolidated Financial Statements in Item 8.
We operate retail locations at two of our distilleries, including Limestone Branch Distillery ® in Lebanon, Kentucky, and Lux Row Distillers ® in Bardstown, Kentucky. Contract bottling is a service provided to a customer to process and bottle spirits for brands not owned by the Company. 2 Ingredient Solutions Segment.
We operate visitor centers with retail locations at two of our distilleries, Limestone Branch Distillery ® in Lebanon, Kentucky, and Lux Row Distillers ® in Bardstown, Kentucky. Contract bottling is a service provided to a customer to process and bottle spirits for brands not owned by the Company. Ingredient Solutions Segment.
Our Ingredient Solutions segment consists primarily of specialty wheat starches, specialty wheat proteins, commodity wheat starches, and commodity wheat proteins products which are sold to customers pursuant to purchase orders. In an effort to best serve our customers and maximize returns to shareholders, we have strategically been migrating our sales towards higher price, higher margin specialty wheat products.
Our Ingredient Solutions segment consists primarily of specialty wheat starches, specialty wheat proteins, commodity wheat starches, and commodity wheat proteins products which are sold to customers pursuant to purchase orders. In our efforts to best serve our customers and maximize returns to stockholders, we have strategically been migrating our sales towards higher price, higher margin specialty wheat products.
Ultra Premium - Ultra premium branded spirits include brands such as Yellowstone ® Kentucky Straight Bourbon Whiskey, Remus Repeal Reserve ® Bourbon, Blood Oath ® Bourbon, Rebel ® 10 Year Single Barrel Kentucky Straight Bourbon Whiskey, and Old Ezra ® 7 Year Kentucky Straight Bourbon Whiskey.
Ultra Premium - Ultra premium branded spirits include brands such as Yellowstone ® Kentucky Straight Bourbon Whiskey, Remus ® Gatsby Reserve Bourbon, Penelope ® Private Select Whiskey, Remus Repeal Reserve ® Bourbon, Blood Oath ® Bourbon, Rebel ® 10 Year Single Barrel Kentucky Straight Bourbon Whiskey, and Old Ezra ® 7 Year Kentucky Straight Bourbon Whiskey.
ITEM 1. BUSINESS MGP Ingredients, Inc. was incorporated in 2011 in Kansas, continuing a business originally founded by Cloud L. Cray, Sr. in Atchison, Kansas in 1941. As used herein, the term “MGP,” “Company,” “we,” “our,” or “us” refers to MGP Ingredients, Inc. and its subsidiaries unless the context indicates otherwise.
ITEM 1. BUSINESS MGP Ingredients, Inc. was incorporated in 2011 in Kansas, continuing a business originally founded by Cloud L. Cray, Sr. in Atchison, Kansas in 1941. As used herein, the term “MGP,” “Company,” “we,” “our,” “us,” and words of similar import, refers to MGP Ingredients, Inc. and its consolidated subsidiaries unless the context otherwise indicates.
Premium - Premium branded spirits include brands such as Everclear ® grain alcohol, and Rebel ® 100 Proof Kentucky Straight Bourbon Whiskey. Additionally, premium includes El Mayor ® Tequila, which is produced with our Joint Ventures; DGL Destiladores, S.de R.L. de C.V. (“DGL”) and Agricola LG, S.de R.L. de C.V. (“Agricola”) (combined “LMX”).
Premium - Premium branded spirits include brands such as Everclear ® grain alcohol, Rebel ® 100 Proof Kentucky Straight Bourbon Whiskey, and Saint Brendan’s ® Irish Cream Liqueur. Additionally, premium includes El Mayor ® Tequila, which is produced with our joint ventures, DGL Destiladores, S.de R.L. de C.V. (“DGL”) and Agricola LG, S.de R.L. de C.V.
We have programs for continuing education and also provide tuition reimbursement. New and open positions are posted for our current workforce to apply for and internal promotions are encouraged. We strive to maintain an inclusive environment free from discrimination of any kind, including sexual or other discriminatory harassment.
New and open positions are posted for our current workforce to apply for and internal promotions are encouraged. We strive to maintain an inclusive environment free from discrimination of any kind, including sexual or other discriminatory harassment.
Commodity wheat starches compete primarily with other commodity starches, corn starches and tapioca. Market place prices generally track the fluctuations in the overall starch market in this category. However, wheat starch has unique functions in wheat based food formulations and provides for a cleaner more neutral flavor profile in finished goods.
Market place prices generally track the fluctuations in the overall starch market in this category. However, wheat starch has unique functions in wheat based food formulations and provides for a cleaner more neutral flavor profile in finished goods.
We produce clean label ingredients under our Arise ® line of wheat protein isolates. Along with Arise ® 8000, this series includes Arise ® 8100 and Arise ® 8200. Each of these ingredients is also Non-Genetically Modified Organism (“Non-GMO”) Project Verified.
Specialty wheat proteins for food applications include the products Arise ® and Proterra ® . We produce clean label ingredients under our Arise ® line of wheat protein isolates. Along with Arise ® 8000, this series includes Arise ® 8100 and Arise ® 8200. Each of these ingredients is also Non-Genetically Modified Organism (“Non-GMO”) Project Verified.
Gall 41 Vice President, Finance and Chief Financial Officer for the Company since April 2019. Corporate Controller for the Company from June 2018 to March 2019. Director of Supply Chain and New Business Development Finance for the Company from May 2014 to May 2018. Director of Financial Planning and Analysis for the Company from January 2012 to April 2014.
Gall 42 Chief Financial Officer and Vice President of Finance for the Company since April 2019. Treasurer of the Company since May 2023. Corporate Controller for the Company from June 2018 to March 2019. Director of Supply Chain and New Business Development Finance for the Company from May 2014 to May 2018.
In our Ingredient Solutions segment, competition is based primarily on product innovation, product characteristics, price, name, color, flavor, or other properties that affect how the ingredient is being used. PATENTS, TRADEMARKS, AND LICENSES We are involved in a number of patent-related activities, primarily within our Ingredient Solutions segment.
In our Ingredient Solutions segment, competition is based primarily on product innovation, product characteristics, price, brand, color, flavor, or other properties that affect how the ingredient is being used. PATENTS, TRADEMARKS, AND LICENSES Our patent-related activities exist primarily within our Ingredient Solutions segment.
Super Premium - Super premium branded spirits include brands such as Daviess County ® Kentucky Straight Bourbon Whiskey, Ezra Brooks ® 99 Proof Kentucky Straight Bourbon Whiskey, George Remus ® Straight Bourbon Whiskey, Minor Case ® Straight Rye Whiskey, Rossville Union ® Straight Rye Whiskey, The Quiet Man ® Irish Whiskey, and Green Hat ® Gin.
Super Premium - Super premium branded spirits include brands such as Penelope ® Four Grain Bourbon, Dos Primos ® Tequila, Ezra Brooks ® 99 Proof Kentucky Straight Bourbon Whiskey, Remus ® Straight Bourbon Whiskey, Minor Case ® Straight Rye Whiskey, Rossville Union ® Straight Rye Whiskey, The Quiet Man ® Irish Whiskey, and Green Hat ® Gin.
In addition, beverage alcohol products are subject to customs, duties or excise taxation in many countries, including taxation at the federal, state, and local level in the United States. 5 INFORMATION ABOUT OUR EXECUTIVE OFFICERS Our executive officers as of December 31, 2022 and their ages as of February 23, 2023: Name Age Principal Occupation and Business Experience David J.
In addition, beverage alcohol products are subject to customs, duties, or excise taxation in many countries, including taxation at the federal, state, and local level in the U.S. 5 INFORMATION ABOUT OUR EXECUTIVE OFFICERS Our executive officers as of February 22, 2024: Name Age Principal Occupation and Business Experience David S.
Specialty Wheat Proteins - We have developed a number of specialty wheat proteins for food applications. Specialty wheat proteins are created from vital wheat gluten through a variety of proprietary processes which change its molecular structure. Specialty wheat proteins for food applications include the products Arise ® and Proterra ® .
Important physical properties contributed by specialty wheat starch include whiteness, clean flavor, viscosity, and texture. Specialty Wheat Proteins - We have developed a number of specialty wheat proteins for food applications. Specialty wheat proteins are created from vital wheat gluten through a variety of proprietary processes which change its molecular structure.
We have certain contracts with customers to supply distilled products (or “distillate”), as well as certain contracts with customers to provide barreling and warehousing services. Contracts with customers may be monthly, annual, or multi-year in term with periodic reviews of pricing. Sales to customers may also be made on the spot market with contracts in the form of purchase orders.
Contracts with customers may be monthly, annual, or multi-year in term with periodic reviews of pricing. Sales to customers may also be made on the spot market with contracts in the form of purchase orders. Sales of co-products are primarily made on the spot market.
A collective bargaining agreement, covering 61 employees at the St. Louis facility, expires on February 29, 2024. We have not experienced any recent work stoppages, and we consider our relationship with our employees, both union and non-union, to be good. 4 We believe our employees are key to achieving our business objectives.
Louis facility, that was due to expire on February 29, 2024, was successfully renewed until February 28, 2029. We have not experienced any recent work stoppages, and we consider our relationship with our employees, both union and non-union, to be good. 4 We believe our employees are key to achieving our business objectives.
REGULATION We are subject to a broad range of federal, state, local, and foreign laws and regulations intended to protect public health and the environment.
Our policies require all reports of inappropriate behavior to be promptly investigated with appropriate action taken. REGULATION We are subject to a broad range of federal, state, local, and foreign laws and regulations intended to protect public health and the environment.
Vital wheat gluten is also added to white breads, hot dog buns, and hamburger buns to improve the strength and cohesiveness of the product. Additionally, our wheat gluten is being used in more vegan and vegetarian food options than in years past.
Vital wheat gluten is also added to white breads, hot dog buns, and hamburger buns to improve the strength and cohesiveness of the product.
We have filed patent applications to protect a range of inventions made in our research and development efforts, including inventions relating to applications for our products. Some of these patents or licenses cover significant product formulation and processes used to manufacture our products. We have trademarks on the majority of the brands we produce within our Branded Spirits segment.
We have filed patent applications and have obtained issued patents in several countries to protect a range of inventions developed in our research and development efforts, including inventions relating to our products. Some of these patent filings cover significant product formulation and processes used to manufacture our products.
HUMAN CAPITAL As of December 31, 2022, we had a total of 690 employees. A collective bargaining agreement, covering 103 employees at the Atchison facility, expires on August 31, 2024. A collective bargaining agreement, covering 71 employees at the Lawrenceburg facility, that was due to expire on December 31, 2022, was successfully renewed until October 24, 2027.
HUMAN CAPITAL As of December 31, 2023, we had a total of 705 employees. A collective bargaining agreement, covering 84 employees at the Atchison facility, expires on August 31, 2024. A collective bargaining agreement, covering 73 employees at the Lawrenceburg facility, expires on October 24, 2027. A collective bargaining agreement, covering 52 employees at the St.
Fuel grade alcohol - Fuel grade alcohol is sold primarily for blending with gasoline to increase the octane and oxygen levels of the gasoline. Fuel grade alcohol can serve as a substitute for lead and petroleum-based octane enhancers and has been used in gasoline to meet certain environmental regulations and laws.
Fuel grade alcohol can serve as a substitute for lead and petroleum-based octane enhancers and has been used in gasoline to meet certain environmental regulations and laws. Prior to the closure, we produced fuel grade alcohol as a co-product of our food grade alcohol business at our Atchison Distillery.
We process corn and other grains (including rye, barley, wheat, barley malt, and milo) into food grade alcohol and distillery co-products, such as distillers feed (commonly called dried distillers grain in the industry), fuel grade alcohol, and corn oil. We also provide warehouse services, including barrel put away, barrel storage, and barrel retrieval services, as well as blending services.
We process corn and other grains (including rye, barley, wheat, barley malt, and milo) into food grade alcohol and distillery co-products, such as distillers feed (commonly called dried distillers grain in the industry), fuel grade alcohol, and corn oil, which have historically been produced at our distilleries in Atchison, Kansas, Lawrenceberg, Indiana, and Bardstown, Kentucky.
Our ingredients products are sold directly, or through distributors, to manufacturers and processors of finished packaged goods or to bakeries. Mission Statement. Our mission is to secure our future by consistently delivering superior financial results by more fully participating in all levels of the alcohol and food ingredients segments for the betterment of our shareholders, employees, partners, consumers, and communities.
Our mission is to secure our future by consistently delivering superior financial results by more fully participating in all levels of the alcohol and food ingredients segments for the betterment of our shareholders, employees, partners, consumers, and communities. INFORMATION ABOUT OUR SEGMENTS We report three operating segments: Distilling Solutions, Branded Spirits, and Ingredient Solutions. Distilling Solutions Segment.
We produce fuel grade alcohol as a co-product of our food grade alcohol business at our Atchison facility. Distillers Feed and related Co-Products - The bulk alcohol co-products sales include distillers feed and corn oil. Distillers feed is principally derived from the mash from alcohol processing operations.
Distillers feed and related co-products - The bulk alcohol co-products sales include distillers feed and corn oil. Distillers feed is principally derived from the mash from alcohol processing operations. The mash is sold primarily to processors of animal feed as a high protein additive primarily as dried distillers feed.
We have robust equal employment opportunity and anti-discrimination policies and our employees have multiple avenues available through which inappropriate behavior can be reported, including a confidential hotline. Our policies require all reports of inappropriate behavior to be promptly investigated with appropriate action taken.
We have robust equal employment opportunity and anti-discrimination policies, and in 2023 our U.S. employees completed mandatory training focused on respect in the workplace and our anti-discrimination policies. Our employees have multiple avenues available through which inappropriate behavior can be reported, including a confidential hotline.
We believe that our compensation and employee benefits are competitive and allow us to attract and retain skilled and unskilled labor throughout our organization. Our notable health, welfare, and retirement benefits include: • Company subsidized health insurance • 401(k) Plan with Company matching contributions • Tuition assistance program • Paid time off Employee safety is one of our top priorities.
Our notable health, welfare, and retirement benefits for our U.S. employees include: • Company subsidized health insurance and wellness rewards • Enhanced Employee Assistance Programs • 401(k) Plan with Company matching contributions • Tuition assistance program • Paid time off • Charitable giving program with Company matching of employee donations Employee safety is one of our top priorities.
Senior Vice President and General Counsel at Cirrus Aircraft from August 2014 to October 2022. Erika Lapish 48 Vice President Human Resources for the Company Since May 2021. Vice President Human Resources - Central Operations at R1 RCM from February 2018 to May 2021. Vice President Human Resources, North American Operations at Benteler Automotive from January 2015 to February 2018.
Erika Lapish 49 Chief Human Resources Officer and Vice President for the Company since February 2023. Vice President Human Resources for the Company from May 2021 to February 2023. Vice President Human Resources - Central Operations at R1 RCM from February 2018 to May 2021.
Within our diversified Branded Spirits portfolio, there are certain product lines, limited offerings and categories that experience higher demand certain periods throughout the year. However, our sales, on average, are generally not seasonal. TRANSPORTATION Historically, our output has been transported to customers by truck and rail, most of which is provided by common carriers.
Other than these product lines, our sales, on average, are generally not seasonal. TRANSPORTATION Historically, our products have been transported to customers by truck and rail, most of which is provided by common carriers.
Warehouse Services - Customers who purchase barreled distillate may, and in most cases do, also enter into separate warehouse service agreements with us for the storage and handling of product for aging. Services under warehouse agreements include barrel put away, barrel storage, and barrel retrieval, as well as blending services. Branded Spirits Segment.
Prior to the closure, we produced corn oil as a value added co-product through a corn oil extraction process at our Atchison Distillery. Warehouse services - Customers who purchase barreled distillate may, and in most cases do, also enter into separate warehouse service agreements with us for the storage and handling of product for aging.
We believe our trademarks are critical to the success of the brands we produce and the marketing of those products. SEASONALITY Sales for some of our products, including brown goods and branded spirits, can fluctuate from period to period due to the inherent demands and timing of our customers and consumer needs.
SEASONALITY Sales for some of our products, including brown goods and branded spirits, can fluctuate from period to period due to the inherent demands and timing of our customers and consumer needs. Within our diversified Branded Spirits portfolio, there are certain product lines, limited offerings, and categories that experience varying demand during certain periods throughout the year.
Our key human capital measures include employee safety, employee retention, absenteeism and productivity. We frequently benchmark our compensation practices and benefit programs against those of comparable industries and in the geographic areas where our facilities are located.
We frequently benchmark our compensation practices and benefit programs against those of comparable industries and in the geographic areas where our facilities are located. We believe that our compensation and employee benefits are competitive and allow us to attract and retain skilled and unskilled labor throughout our organization.
MGP is also a producer of high quality industrial alcohol for use in both food and non-food applications. The Company has a portfolio of our own high quality branded spirits, which we produce through our distilleries and bottling facilities and sell to distributors.
We also have a portfolio of our own high quality branded spirits, which we produce through our distilleries and bottling facilities and sell to distributors. Our branded spirits products account for a range of price points from value products through ultra premium brands.
Sales of co-products are primarily made on the spot market. During 2022, our five largest Distilling Solutions customers, combined, accounted for 16 percent of our consolidated sales. 1 Food Grade Alcohol - The majority of our distillery capacities are dedicated to the production of high quality, high purity food grade alcohol for beverage and industrial applications.
Food Grade Alcohol - The majority of our distillery capacities are dedicated to the production of high quality, high purity food grade alcohol for beverage applications and, prior to the Atchison Distillery closure, industrial applications.
We develop and administer company-wide policies designed to ensure the safety of each team member and compliance with Occupational Safety and Health Administration (“OSHA”) standards. This includes a program which promotes safety from the plant floor up and includes employee-led safety meetings, training and assessments, and weekly safety audits. Our Company strives for workforce retention.
We develop and administer company-wide policies designed to ensure the safety of each team member and compliance with Occupational Safety and Health Administration (“OSHA”) standards. Our Company strives for workforce retention. We have programs for continuing education, professional development at all levels of the organization, and also provide tuition reimbursement assistance.
David Bratcher 55 Chief Operating Officer for the Company since July 2021 and President of Branded Spirits for the Company since the merger with Luxco on April 2021. President of Luxco, Inc. from 2013 to April 2021. Curtis Landherr 52 Chief Legal Officer, Vice President and Corporate Secretary for the Company since October 2022.
Bratcher 56 Chief Executive Officer and President for the Company and member of the Company’s Board of Directors since January 2024. Chief Operating Officer for the Company from July 2021 to December 2023. President of Branded Spirits for the Company from April 2021 to December 2023. President of Luxco, Inc. from 2013 to April 2021. Brandon M.
Amel Pasagic 39 Chief Information Officer and Vice President of Information Technology for the Company since July 2021. Vice President, Information Technology for the Company from April 2021 to July 2021. Served in a variety of IT leadership roles with increasing responsibility with Luxco, Inc. beginning in June 2011.
Served in a variety of IT leadership roles with increasing responsibility at Luxco, Inc. beginning in June 2011.
Our branded spirits products account for a range of price points from value products through ultra premium brands, with a focus on high-end American whiskey, tequila and gin. 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 protein and starch food ingredients serve a host of functional, nutritional, and sensory benefits for a wide range of food products to serve the consumer packaged goods industry. Our ingredients products are sold directly, or through distributors, to manufacturers and processors of finished packaged goods or to bakeries. Mission Statement.
Value - Value branded spirits include brands such as Arrow ® Cordials, Canada House ® Canadian Whiskey, Lady Bligh ® Rum, and Juarez ® Tequila. Other - Other includes private and control label products sold primarily through our wholly-owned subsidiary, Niche Drinks, Co., ltd, retail sales at our distilleries, and contract bottling.
Other - Other includes private label products sold primarily through our wholly-owned subsidiary, Niche Drinks, Co., Ltd, retail sales at our distilleries, and contract bottling. Private label products are processed, bottled, and distributed by us for sales under another company’s brand.
Mid - Mid branded spirits include brands such as Saint Brendan’s ® Irish Cream Liqueur, Pearl ® Vodka, Ezra Brooks ® 90 Proof Kentucky Straight Bourbon Whiskey, and Lord Calvert ® Canadian Whiskey. Additionally, mid includes Exotico ® Tequila, which is produced by our joint venture, LMX.
Additionally, mid includes Exotico ® Tequila, which is produced with our joint venture, DGL. 2 Value - Value branded spirits include brands such as Arrow ® Cordials, Canada House ® Canadian Whisky, Lady Bligh ® Rum, and Juarez ® Tequila.
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INFORMATION ABOUT SEGMENTS We report three operating segments; Distilling Solutions, Branded Spirits and Ingredient Solutions. During 2022, we changed the name of our Distillery Products segment to Distilling Solutions. Distilling Solutions Segment.
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MGP was also a producer of high quality industrial alcohol for use in both food and non-food applications, which was primarily produced at our distillery located in Atchison, Kansas, prior to its closure during December 2023.
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The mash is sold primarily to processors of animal feed as a high protein additive primarily as dried distillers feed. In addition, we produce corn oil as a value added co-product through a corn oil extraction process at our Atchison facility.
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We also provide warehouse services, including barrel put away, barrel storage, and barrel retrieval services, as well as blending services. We have certain contracts with customers to supply distilled products (or “distillate”), as well as certain contracts with customers to provide barreling and warehousing services.
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Private label products are distilled, processed, bottled, and distributed by us for sales under another company’s brand. Control label sales are similar to private label, but we own and control the brand name and enter into sales agreements with certain customers to allow them to exclusively sell a branded spirit.
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During 2023, our five largest Distilling Solutions customers, combined, accounted for approximately 17 percent of our consolidated sales. 1 On July 13, 2023, we announced the decision by our Board of Directors to approve the closure of our distillery located in Atchison, Kansas (the “Atchison Distillery”). The Atchison Distillery ceased operations during December 2023.
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Important physical properties contributed by specialty wheat starch include whiteness, clean flavor, viscosity, and texture. Our wheat starches, as a whole, generally compete primarily with cornstarch, potato, and tapioca. However, the unique characteristics of our specialty wheat starches provide a number of advantages over other starches for certain functionality in baking and pasta end uses.
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The decision to close the Atchison Distillery is consistent with our plan to address profitability headwinds associated with our GNS and industrial alcohol products. Future production and sales of white goods, industrial alcohol, fuel grade alcohol, and related co-products will be significantly reduced as a result of this closure.
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Our specialty wheat proteins generally compete with other ingredients and modified proteins having similar characteristics, primarily soy proteins and other wheat proteins, with differentiation being based on factors such as functionality, price, and, in the case of food applications, flavor.
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Prior to the closure, we produced food grade industrial alcohol at our Atchison Distillery. Fuel grade alcohol - Fuel grade alcohol is sold primarily for blending with gasoline to increase the octane and oxygen levels of the gasoline.
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Colo 60 President and Chief Executive Officer for the Company since May 2020 and member of the Board of Directors for the Company since August 2015. President, Chief Executive Officer and director of SunOpta from February 2017 to February 2019. Executive Vice President and Chief Operating Officer of Diamond Foods, Inc. from 2013 to March 2016. Brandon M.
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MGP’s branded spirits include a wide spectrum of brands across numerous categories and price tiers. During 2023, our five largest Branded Spirits customers, combined, accounted for approximately 18 percent of our consolidated sales. During 2023, one customer of the Branded Spirits segment accounted for approximately 11 percent of our consolidated sales.
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The Premium Plus price tiers consist of brands within the Ultra Premium, Super Premium and Premium price tier categories.
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(“Agricola”, and together with DGL, “LMX” ). Mid - Mid branded spirits include brands such as Brady’s ® Irish Cream, Pearl ® Vodka, and Lord Calvert ® Canadian Whisky.
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We have trademark protection, both in terms of registrations and common law rights, for the majority of the brands we produce within our Branded Spirits and Ingredient Solutions segments. We believe our trademark rights are critical to the success of the brands we produce and the marketing of those products.
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Our key human capital measures include employee safety, employee retention, absenteeism, professional development, and productivity. At the Board of Directors level, the Human Resources and Compensation Committee of our Board is responsible for overseeing matters related to human capital management.
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Director of Financial Planning and Analysis for the Company from January 2012 to April 2014. Curtis C. Landherr 53 Chief Legal Officer, Vice President, and Corporate Secretary for the Company since October 2022. Senior Vice President and General Counsel at Cirrus Aircraft from August 2014 to October 2022.
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Vice President Human Resources, North American Operations at Benteler Automotive from January 2015 to February 2018. Amel Pasagic 40 Chief Commercial Officer for the Company since January 2024. Chief Information Officer and Vice President of Technology for the Company from July 2021 to January 2024. Vice President, Information Technology for the Company from April 2021 to July 2021.

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeThe Company has previously experienced, and is expected to continue to be exposed to, failures of our IT systems or those of our third-party vendors due to various causes, including those caused by natural disasters, power outages, computer and telecommunications failures, viruses, phishing attempts, cyber-attacks, malware and ransomware attacks, security breaches, failures in maintenance or development of new IT systems, and errors by employees or vendors. 14 We have technology and processes in place designed to detect and respond to such failures and disruptions; however, because of the techniques used to obtain unauthorized access, disable or degrade service, or sabotage systems, and because of the unpredictable nature of other potential threats such as natural disasters, our detection and response measures may be ineffective or inadequate.
Biggest changeThe Company has previously experienced, and is expected to continue to be exposed to, failures of our IT systems and those of our third-party vendors due to various causes, including those caused by natural disasters, power outages, computer and telecommunications failures, viruses, phishing attempts, cyber-attacks, malware and 13 ransomware attacks, security breaches, failures in maintenance or development of new IT systems, and errors by employees or vendors.
Moreover, even if a product liability or other legal or regulatory claim is unsuccessful, has no merit, or is not pursued, the negative publicity surrounding assertions against our products or processes and the associated legal expenses could have a material adverse effect on our business, financial condition, or results of operations.
Moreover, even if a product liability or other legal or regulatory claim is unsuccessful, has no merit, or is not pursued, the negative publicity surrounding assertions against our products or processes and the associated legal and other expenses could have a material adverse effect on our business, financial condition, or results of operations.
Specifically, we could be required to incur significant additional capital expenditures, increase our operating expenses and/or change the manner in which we conduct our business in response to new environmental, food, health or safety related laws and regulations.
Specifically, we could be required to incur significant additional capital expenditures, increase our operating expenses, or change the manner in which we conduct our business in response to new environmental, food, health, or safety related laws and regulations.
More restrictive regulations, higher taxes, negative publicity regarding alcohol consumption and/or changes in consumer perceptions of the relative healthfulness or safety of beverage alcohol could decrease sales and consumption of alcohol, and thus, the demand for our brands and products.
More restrictive regulations, higher taxes, negative publicity regarding alcohol consumption, or changes in consumer perceptions of the relative healthfulness or safety of beverage alcohol could decrease sales and consumption of alcohol, and thus, the demand for our brands and products.
If the IT systems, networks, or service providers we rely upon fail to function properly, we may suffer disruptions to operations, including order processing, invoicing, and production and distribution of products, as well as reputational, competitive, or business harm, all of which may have a material adverse effect on our business, financial condition, or results of operations.
If the IT systems, networks, or service providers we rely upon fail to function properly, we may suffer disruptions to operations, including order processing, invoicing, and production and distribution of our products, as well as reputational, competitive, or business harm, all of which may have a material adverse effect on our business, financial condition, or results of operations.
In the event that climate change, or legal, regulatory, or market measures enacted to address climate change, has a negative effect on agricultural productivity in the regions from which we procure agricultural products such as corn and wheat, we could be subject to decreased availability or increased prices for such agricultural products, which could have a material adverse effect on our business, financial condition, or results of operations.
In the event that climate change, or legal, regulatory, or market measures enacted to address climate change, has a negative effect on agricultural productivity in the regions from which we procure agricultural products such as corn and wheat, we could be subject to decreased availability or increased prices for these agricultural products, which could have a material adverse effect on our business, financial condition, or results of operations.
Various provisions of our Articles of Incorporation and bylaws and of Kansas corporate law may discourage, delay or prevent a change in control or takeover attempt of our Company by a third party which our management and Board of Directors opposes. Public stockholders who might desire to participate in such a transaction may not have the opportunity to do so.
Various provisions of our Articles of Incorporation and bylaws and of Kansas corporate law may discourage, delay, or prevent a change in control or takeover attempt of our Company by a third-party which our management and Board of Directors opposes. Stockholders who might desire to participate in such a transaction may not have the opportunity to do so.
The pursuit of potential acquisitions may divert the attention of management and cause us to incur various costs and expenses in identifying, 15 investigating, and pursuing suitable acquisitions, whether or not they are consummated. We may not be able to identify desirable acquisition targets or be successful in entering into an agreement with any particular target.
The pursuit of potential acquisitions may divert the attention of management and cause us to incur various costs and expenses in identifying, investigating, and pursuing suitable acquisitions, whether or not they are consummated. We may not be able to identify desirable acquisition targets or be successful in entering into an agreement with any particular target.
Our two class structure with our Common Stock and Preferred Stock may prevent the inclusion of our common stock in certain stock market indices, may cause stockholder advisory firms to publish negative commentary about our corporate governance practices or otherwise seek to cause us to change our capital structure, and may result in large institutional investors not purchasing shares of our common stock.
Our two class structure with our Common Stock and Preferred Stock may prevent the inclusion of our Common Stock in certain stock market indices, may cause stockholder advisory firms or others to publish negative commentary about our corporate governance practices or otherwise seek to cause us to change our capital structure, and may result in large institutional investors not purchasing shares of our Common Stock.
If market conditions make our branded distilled spirits too expensive or our distilled spirits and/or specialty ingredients products too expensive for use in consumer goods, our revenues could be affected. If our principal competitors were to decrease their pricing, we could choose to do the same, which could adversely affect our margins and profitability.
If market conditions make our Branded Spirits products too expensive or our distilled solutions or specialty ingredients products too expensive for use in consumer goods, our revenues could be affected. If our principal competitors were to decrease their pricing, we could choose to do the same, which could adversely affect our margins and profitability.
REGULATORY RISKS We are subject to extensive regulation and taxation, as well as compliance with existing or future laws and regulations, which may require us to incur substantial expenditures. We are subject to a broad range of federal, state, local, and foreign laws and regulations intended to protect public health and the environment.
LEGAL, REGULATORY, AND COMPLIANCE RISKS We are subject to extensive regulation and taxation, as well as compliance with existing or future laws and regulations, which may require us to incur substantial expenditures. We are subject to a broad range of federal, state, local, and foreign laws and regulations intended to protect public health and the environment.
We regard our trademarks, service marks, copyrights, patents, trade dress, trade secrets, proprietary technology, and similar intellectual property as critical to our success, and we rely on trademark, copyright, and patent law, trade secret protection, and confidentiality and/or license agreements with our employees, customers, and others to protect our proprietary rights.
We regard our trademarks, service marks, copyrights, patents, trade dress, trade secrets, proprietary technology, and similar intellectual property as critical to our success, and we rely on trademark, copyright, and patent law, trade secret protection, and confidentiality and license agreements with our employees, customers, and others to protect our proprietary rights.
Any actions we might pursue to eliminate the Preferred Stock would require the support of the holders of our Preferred Stock and would likely involve payment to the holders of our Preferred Stock for redeeming their shares, the amount of which could be material, which would involve risks related to the valuation and terms of any such transaction.
Any actions we might pursue to eliminate the Preferred Stock would require the support of the holders of our Preferred Stock and would likely involve payment to the holders of our 16 Preferred Stock for redeeming their shares, the amount of which could be material and would involve risks related to the valuation and terms of any such transaction.
If we cannot attract and retain key management personnel, or if our search for qualified personnel is prolonged, our system of internal controls may be affected, which could lead to an adverse effect on our business, financial condition, or results of operations.
If we cannot attract and retain key personnel, or if our search for qualified personnel is prolonged, our system of internal controls may be affected, which could lead to an adverse effect on our business, financial condition, or results of operations.
The loss of a significant amount of aged inventory at these facilities through fire, natural disaster, or otherwise could result in customer claims against us, liability for customer losses, and a reduction of warehouse services revenue.
The loss of a significant amount of aged or aging inventory at these facilities through fire, natural disaster, or otherwise could result in customer claims against us, liability for customer losses, and a reduction of warehouse services revenue.
If we were to lose any of our key management personnel, we may not be able to fully implement our strategic plan, and our system of internal controls could be impacted.
If we were to lose any of our key personnel, we may not be able to fully implement our strategic plan, and our system of internal controls could be impacted.
These antitakeover provisions could substantially impede the ability of public stockholders to benefit from a change of control or change in our management and Board of Directors.
These antitakeover provisions could substantially impede the ability of stockholders to benefit from a change of control or change in our management and Board of Directors.
Such laws and regulations cover virtually every aspect of our operations, including production and storage/warehouse facilities, distillation and maturation requirements, importing ingredients, importing and exporting products, distribution of beverage alcohol products, marketing, pricing, labeling, packaging, advertising, trade practices, water usage, wastewater discharge, disposal of hazardous wastes and emissions, air emissions and quality, and other matters.
These laws and regulations cover virtually every aspect of our operations, including production and storage/warehouse facilities, distillation, and maturation requirements, importing ingredients, importing and exporting our products, distribution of beverage alcohol products, marketing, pricing, labeling, packaging, advertising, trade practices, water usage, wastewater discharge, disposal of hazardous wastes and emissions, air emissions and quality, and other matters.
If they do not, our sales will be harmed, resulting in a decline in our results of operations. Moreover, the retail industry, particularly in Europe, North America and other countries in which we operate, continues to consolidate, resulting in larger retailers with increased purchasing power, which may affect our competitiveness in these markets.
If they do not, our sales will be harmed, resulting in a decline in our results of operations. Moreover, the retail industry, particularly in Europe, North America, and other countries in which we operate or may operate in the future, continues to consolidate, resulting in larger retailers with increased purchasing power, which may affect our competitiveness in these markets.
In addition, increased IT security threats and more sophisticated cyber-crime pose a potential risk to the security of our IT systems, networks, and services, as well as the confidentiality, availability, and integrity of our data. This could lead to outside parties having access to our privileged data or strategic information or information regarding our employees, suppliers or customers.
In addition, increased IT security threats and more sophisticated cyber-crime pose a potential risk to the security of our IT systems, networks, and services, as well as the confidentiality, availability, and integrity of our data. This could lead to outside parties having access to our confidential data, strategic information, or information regarding our employees, suppliers, or customers.
Failure to comply with anti-corruption laws, trade sanctions and restrictions, or similar laws or regulations may have a material adverse effect on our business and financial results. We market and sell our products in over 49 countries. Some of the countries where we do business have a higher risk of corruption than others.
Failure to comply with anti-corruption laws, trade sanctions, and restrictions, or similar laws or regulations may have a material adverse effect on our business and financial results. We market and sell our products in over 45 countries. Some of the countries where we do business have a higher risk of corruption than others.
Any actions or publications by stockholder advisory firms or institutional investors critical of our corporate governance practices or capital structure could also adversely affect the value of our common stock or 13 make it difficult for us to attract and retain qualified directors.
Any actions or publications by stockholder advisory firms, institutional investors, or others critical of our corporate governance practices or capital structure could also adversely affect the value of our Common Stock or make it difficult for us to attract and retain qualified directors.
Any press coverage associated with misconduct under these laws and regulations, even if unwarranted or baseless, could damage our reputation and sales. Further, our continued compliance with applicable anti-corruption or other laws or regulations, our Code of Conduct and our other policies could result in higher operating costs.
Any media coverage associated with misconduct under these laws and regulations, even if unwarranted or baseless, could damage our reputation and sales. Further, our continued compliance with applicable anti-corruption or other laws or regulations, our Code of Conduct, and our other policies could result in higher operating costs.
The increase in interest rates could increase the cost of servicing our variable rate debt and could materially reduce our profitability and cash flows. In addition, higher levels of interest rates could increase the future cost to refinance our convertible notes or the cost of financing any future acquisitions.
Any increase in interest rates would increase the cost of servicing our variable rate debt and could materially reduce our profitability and cash flows. In addition, higher interest rates could increase the future cost to refinance our convertible notes or the cost of financing any future acquisitions.
Although we maintain insurance coverage for various cybersecurity risks, we may incur costs or financial losses that are either not insured against or not fully covered through our insurance. All of these potential failures or disruptions of our data security systems or our IT systems may have a material adverse impact on our business operations and financial results.
Although we maintain insurance coverage for various cybersecurity risks, we may incur costs or financial losses that are either not insured against or not fully covered through our insurance. All of these potential failures or disruptions of our data security systems or our IT systems could have a material adverse impact on our business, financial conditions, or results of operations.
Litigation or assertions of this type have adversely affected companies in the tobacco industry, and it is possible that we, as well as our distributors, Distilling Solutions customers and suppliers, could be named in litigation of this type.
Litigation or assertions of this type have adversely affected companies in the tobacco industry, and it is possible that we, as well as our distributors, customers, or suppliers, could be named in litigation of this type.
Foreign Corrupt Practices Act of 1977, the U.K. Bribery Act 2010, or equivalent local laws.
Foreign Corrupt Practices Act of 1977, the U.K. Bribery Act 2010, or equivalent laws.
Generally, the Common Stock and Preferred Stock vote as separate classes on all other matters requiring stockholder approval. The majority of the outstanding shares of our Preferred Stock is beneficially owned by one individual, who is effectively in control of the election of five of our nine directors under our Articles of Incorporation.
Generally, our Common Stock and Preferred Stock vote as separate classes on all other matters requiring stockholder approval. As of December 31, 2023, the majority of the outstanding shares of our Preferred Stock is beneficially owned by one individual, who is effectively in control of the election of five of our nine directors under our Articles of Incorporation.
Our operations are also subject to regulation by various federal agencies, including the TTB, OSHA, the FDA, the EPA, and by various state and local authorities. We are also required to conduct business only with holders of licenses to import, warehouse, transport, distribute and sell beverage alcohol products.
Our operations are also subject to regulation by various U.S. federal agencies, including the TTB, OSHA, the FDA, the EPA, and by various U.S. state and local and foreign authorities. We are also required to conduct business only with holders of licenses to import, warehouse, transport, distribute, and sell beverage alcohol products.
Contamination, whether arising accidentally or through deliberate third party action, or other events that harm the integrity or consumer support for our and/or our customers’ products could affect the demand for our and/or our customers’ products.
Product contamination, whether arising accidentally or through deliberate third-party action, or other events that harm the integrity or consumer support for our or our customers’ products could affect the demand for our or our customers’ products.
Our focus on higher margin specialty ingredients may make us more reliant on fewer, more profitable customer relationships. Our strategic plan for our Ingredient Solutions segment includes focusing our efforts on the sale of specialty proteins and starches to targeted domestic consumer packaged goods customers.
Our focus on higher margin specialty ingredients may make us more reliant on fewer, more profitable customer relationships. Our strategic plan for our Ingredient Solutions segment includes focusing our efforts on the sale of specialty proteins and starches to targeted consumer packaged goods customers, which may make our Ingredient Solutions segment reliant on these customer relationships.
Our products are sold in more than 49 countries; accordingly, we are subject to risks associated with doing business internationally, including commercial, political, and financial risks.
Our products are sold in more than 45 countries; accordingly, we are subject to risks associated with doing business internationally, including commercial, political, and financial risks.
The loss of service of any of our key personnel could have a material adverse effect on our business, financial condition, results of operations, and on our system of internal controls.
The loss of service of any of our key personnel could have a material adverse effect on our business, financial condition, results of operations, or on our system of internal controls.
Litigation is costly defend and the outcome of any litigation is inherently uncertain.
Litigation is costly to defend and the outcome of any litigation is inherently uncertain.
Our credit arrangements (Note 6, Corporate Borrowings ) contain a number of financial and other covenants that include provisions which require us, in certain circumstances, to meet certain financial tests. These covenants could hinder our ability to operate and could reduce our profitability.
Our credit arrangements (Note 7, Corporate Borrowings) contain a number of financial and other covenants that include provisions which require us, in certain circumstances, to meet certain financial tests. These covenants could hinder our ability 15 to operate and could reduce our profitability.
Changes in laws, regulatory measures, or governmental policies, or the manner in which current ones are interpreted, could cause us to incur material additional costs or liabilities, and jeopardize the growth of our business in the affected market.
Changes in laws, regulatory measures, governmental policies, guidelines, initiatives, or the manner in which current ones are interpreted or applied, could cause us to incur material additional costs or liabilities and jeopardize the growth of our business in the affected market.
Under our Articles of Incorporation, holders of our Preferred Stock are entitled to elect five of our nine directors and only holders of our Preferred Stock are entitled to vote with respect to a merger, dissolution, lease, exchange or sale of substantially all of our assets, or on an amendment to the Articles of Incorporation, unless such action would increase or decrease the authorized shares or par value of the Common or Preferred Stock, or change the powers, preferences or special rights of the Common or Preferred Stock so as to affect the holders of Common Stock adversely.
Under our Articles of Incorporation, holders of our preferred stock, par value $10.00 per share (“Preferred Stock”), are entitled to elect five of our nine directors and only holders of our Preferred Stock are entitled to vote with respect to a merger, dissolution, lease, exchange or sale of substantially all of our assets, or on an amendment to the Articles of Incorporation, unless such action would increase or decrease the authorized shares or par value of the Common or Preferred Stock, or change the powers, preferences or special rights of the Common or Preferred Stock so as to affect the holders of Common Stock adversely.
The various uses of these IT systems, networks, and services include, but are not limited to: hosting our internal network and communication systems; enterprise resource planning; processing transactions; summarizing and reporting results of operations; business planning and financial information; complying with regulatory, legal, or tax requirements; providing and managing data security; and handling other processes necessary to manage our business.
The various uses of these IT systems, networks, and services include hosting our internal network and communication systems; enterprise resource planning; processing transactions; summarizing and reporting results of operations; business planning and financial information; complying with regulatory, legal, and tax requirements; providing and managing data security; and handling other processes necessary to manage our business.
Our industry faces the possibility of class action or similar litigation alleging that the continued excessive use or abuse of beverage alcohol has caused death or serious health problems. It is also possible that governments could assert that the use of alcohol has significantly increased government funded health care costs.
Companies in our industry may face the possibility of class action or similar litigation alleging that the continued excessive use or abuse of beverage alcohol has caused death or serious health problems. It is also possible that governments could assert that the use of alcohol has significantly increased government funded health care costs.
In addition, we are subject to potential business disruption caused by military conflicts; potentially unstable governments or legal systems; civil or political upheaval or unrest; local labor policies and conditions; possible expropriation, nationalization, or confiscation of assets; problems with repatriation of foreign earnings; economic or trade sanctions; closure of markets to imports; anti-American sentiment; terrorism or other types of violence in or outside the United States; and health pandemics.
In addition, we are subject to potential business disruption caused by military conflicts (including the current conflicts in Ukraine and Israel); potentially unstable governments or legal systems; civil or political upheaval or unrest; local labor policies and conditions; possible expropriation, nationalization, or confiscation of assets; problems with repatriation of foreign earnings; economic or trade sanctions; closure of markets to imports; anti-American sentiment; terrorism or other types of violence in or outside the U.S.; and health pandemics.
Changes in excise taxes, incentives and customs duties related to products containing alcohol could adversely affect our business. Products containing alcohol are subject to excise taxation in many markets at the federal, state and/or local level.
Changes in excise taxes, incentives, and customs duties related to products containing alcohol could adversely affect our business. Products containing alcohol are subject to excise taxation in U.S. markets at the federal, state, and local level.
In addition, such events could result in unauthorized disclosure of material confidential information, and we may suffer financial and reputational damage because of lost or misappropriated confidential information belonging to us or to our partners, our employees, customers, and suppliers.
In addition, these events could result in unauthorized disclosure of confidential information, and we may suffer financial and reputational damage because of lost or misappropriated confidential information belonging to us or to our employees, customers, or suppliers.
Customer and consumer preferences and purchases may shift due to a host of factors, many of which are difficult to predict, including: • demographic and social trends; • economic conditions; • product innovations; • public health policies and initiatives; • changes in government regulation and taxation of beverage alcohol products; 10 • the expansion of, legalization of, and increased acceptance or use of, marijuana; and • changes in travel, leisure, dining, entertaining, and beverage consumption trends.
Customer and consumer preferences and purchases may shift due to a host of factors, many of which are difficult to predict, including: • demographic and social trends; • economic conditions; • product innovations; • public health policies and initiatives (including dietary guidelines regarding alcohol consumption); • health and wellness trends (including the use of GLP-1 drugs); • changes in government regulation and taxation of beverage alcohol products; • the expansion of, legalization of, and increased acceptance or use of marijuana; and • changes in travel, leisure, dining, entertaining, and beverage consumption trends.
For example, during the period from 2018 through mid-year 2022, the United Kingdom and the European Union imposed tariffs on the import of American whiskey in response to tariffs imposed by the U.S. on imports from several countries, including those in the European Union. Similar retaliatory tariffs may be implemented in the future.
For example, during the period from 2018 through mid-year 2022, the United Kingdom and the European Union imposed tariffs on the import of American whiskey in response to tariffs imposed by the U.S. on imports from several countries, including those in the European Union.
Changes in U.S. and foreign governments’ trade policies have resulted in, and may continue to result in, tariffs on imports into and exports from the U.S.
Changes in U.S. and foreign governments’ trade policies have resulted in, and may continue to result in, tariffs on imports into and exports from the countries where we operate.
Unfavorable media, whether accurate or not, related to our industry, to us, our products, our brands, or to the brands that use our products, marketing, personnel, operations, business performance, or prospects could negatively affect our corporate reputation, stock price, ability to attract high quality talent, or the performance of our business.
Unfavorable media, whether accurate or not, related to our industry, to us, our products, our brands, our customers’ products, marketing, personnel, operations, business performance, or prospects could negatively affect our reputation, stock price, ability to attract and retain high-quality talent, or the performance of our business.
We have a high concentration of certain raw material and finished goods purchases from a limited number of suppliers, which exposes us to risk. We have signed supply agreements for our grain supply (primarily corn) and wheat flour. The Company also procures some textured wheat proteins through a third-party toll manufacturer in the United States.
We have a high concentration of certain raw material and finished goods purchases from a limited number of suppliers, which exposes us to risk . We have third-party supply agreements for our grain supply (primarily corn) and wheat flour. We also procure some textured wheat proteins through a third-party toll manufacturer in the U.S.
We rely on the continued services of key personnel involved in management, finance, product development, sales, manufacturing and distribution, and, in particular, upon the efforts and abilities of our executive management team.
We rely on the continued services of key personnel involved in management, finance, product development, sales, manufacturing, marketing, human resources, operations, and distribution, and upon the efforts and abilities of our executive management team.
If, in the future, we are unable to maintain our current listings in the control states, or secure and maintain listings in those states for 11 any additional branded spirits we may develop or acquire, sales of our branded spirits could decrease significantly, which would have a material adverse financial effect on our results of operations and financial condition.
If, in the future, we are unable to maintain our current listings in the control states, or secure and maintain listings in those states for any additional branded spirits we may develop or acquire, sales of our branded spirits could decrease significantly, which would have a material adverse financial effect on our results of operations and financial condition. 11 Significant additional labeling or warning requirements or limitations on the availability of our products could inhibit sales of affected products.
Inaccurate decisions and/or estimations could lead to an inability to supply future demand or lead to a future surplus of inventory and consequent write down in the value of maturing stocks of aged distillate. As a result, our business, financial condition, or results of operations could be materially adversely affected.
Inaccurate decisions or estimations could lead to an inability to supply future demand or lead to a future surplus of inventory and consequent write down in the value of aged or aging distillate. As a result, our business, financial condition, or results of operations could be materially adversely affected. Warehouse expansion issues could negatively impact our operations and our business.
As demand for water continues to increase, water becomes more scarce and the quality of available water deteriorates, we may be affected by increasing production costs or capacity constraints, which could have a material adverse effect on our business, financial condition, or results of operations. 7 Product recalls or other product liability claims could materially and negatively affect our business.
As demand for water continues to increase, water becomes more scarce and the quality of available water deteriorates, we may be affected by increasing production costs or capacity constraints, which could have a material adverse effect on our business, financial condition, or results of operations.
In addition, the loss of key employees, customers or vendors of acquired businesses could materially and adversely impact the integration of the acquired businesses; • the execution of our integration plans may divert the attention of our management from other key responsibilities; • our financial results may be negatively impacted by cash expenses and non-cash charges incurred in connection with an acquisition if goodwill or other intangible assets we acquire become impaired; • we may enter new markets or markets in which we have limited prior experience; • we may incur substantial indebtedness to finance an acquisition, enhancing our vulnerability to increased debt service requirements should interest rates rise, reducing the amount of expected cash flow available for other purposes, including capital expenditures and acquisitions, and limiting our flexibility in planning for or reacting to changes in our businesses and industries; • we may assume unanticipated liabilities and contingencies or other exposures (including regulatory risks) for which we do not have adequate insurance coverage, indemnification or other protection; or • our acquisition targets could fail to perform in accordance with our expectations at the time of purchase.
In addition, the loss of key employees, customers, or vendors of acquired businesses could materially and adversely impact the integration of any acquired businesses. • The execution of our integration plans may divert the attention of our management from other key responsibilities; • Our financial results may be negatively impacted by cash expenses and non-cash charges incurred in connection with an acquisition if goodwill or other intangible assets we acquire become impaired. • We may enter new markets or markets in which we have limited prior experience. • We may incur substantial indebtedness to finance an acquisition, enhancing our vulnerability to increased debt service requirements if interest rates rise, reducing the amount of expected cash flow available for other purposes, including capital expenditures and acquisitions, and limiting our flexibility in planning for or reacting to changes in our businesses and industries. • We may assume unanticipated liabilities and contingencies or other exposures (including regulatory risks) for which we do not have adequate insurance coverage, indemnification, or other protection. • Our acquisitions could fail to perform in accordance with our expectations at the time of purchase. 14 Our ability to grow through the acquisition of additional distilled spirits brands or other businesses is also dependent upon identifying acceptable acquisition targets and opportunities, our ability to consummate prospective transactions on favorable terms, or at all, and the availability of capital to complete the acquisition.
Assuming our revolving credit facility was fully drawn up to the current $400 million maximum principal commitment, each 1% increase in interest rates would result in a $4.0 million increase in annual interest expense under the revolving credit facility.
Assuming our revolving credit facility was fully drawn up to the current $400 million maximum principal commitment, for each 1% increase in Secured Overnight Financing Rate (“SOFR”) would result in a $4.0 million increase in annual interest expense under the revolving credit facility.
These provisions include: • Preferred Stock that could be issued by our Board of Directors to make it more difficult for a third party to acquire, or to discourage a third party from acquiring, a majority of our outstanding voting stock; • non-cumulative voting directors; • limitations on the ability of stockholders to call special meetings of stockholders; and • advance notice requirements for nominations of candidates for election to our Board of Directors or for proposing matters that can be acted upon by our stockholders at stockholder meetings.
These provisions include: • the rights of holders of our Preferred Stock under our Articles of Incorporation (see “Common Stockholders have limited rights under our Articles of Incorporation”); • additional shares of Preferred Stock and Common Stock that could be issued by our Board of Directors to make it more difficult for a third-party to acquire, or to discourage a third-party from acquiring, a majority of our outstanding voting stock; • non-cumulative voting in the election of directors; • limitations on the ability of stockholders to call special meetings of stockholders; and • advance notice requirements for nominations of candidates for election to our Board of Directors or for proposing matters that can be acted upon by our stockholders at stockholder meetings.
Tariffs imposed by the U.S. and those imposed in response by other countries, as well as rapidly changing trade relations, could negatively impact our customers and have a material adverse effect on our business and results of operations.
These matters may have a material adverse effect on our business, financial condition, or results of operations. Tariffs imposed by the U.S. and those imposed by other countries, as well as rapidly changing trade relations, could negatively impact our customers and have a material adverse effect on our business and results of operations.
Our Board of Directors may issue the available authorized shares of Common Stock without notice to, or further action by, our stockholders, unless stockholder approval is required by law or the rules of the NASDAQ Global Select Market. The issuance of additional shares of Common Stock may significantly dilute the equity ownership of the current holders of our Common Stock.
Our Board of Directors is authorized to issue additional shares of Common Stock and Preferred Stock and may issue the available authorized shares without notice to, or further action by, our stockholders, unless stockholder approval is required by law or the rules of the Nasdaq Global Select Market.
If shipments of our products to our international markets were to experience significant disruption due to these risks or for other reasons, it could have a material adverse effect on our financial results.
If shipments of our products to international markets were to experience significant disruption due to these risks or for other reasons, it could have a material adverse effect on our financial results. Covenants and other provisions in our credit arrangements could hinder our ability to operate.
The concentrated control of our stock could delay, defer, or prevent a change of control, merger, consolidation, or sale of all or substantially all of our assets that our other stockholders support, or conversely this concentrated control could result in the consummation of such a transaction that our other stockholders do not support.
The concentrated control of our stock and rights of holders of Preferred Stock under our Articles of Incorporation could delay, defer, or prevent a change of control, merger, consolidation, or sale of all or substantially all of our assets that our other stockholders support, or conversely these factors could result in the consummation of such a transaction that our other stockholders do not support.
Part of our strategic business plan is to grow our business through acquisitions, and we continue to evaluate and engage in discussions concerning potential acquisition opportunities, some of which could be material. For example, in April 2021 we acquired Luxco, Inc. and its affiliated companies (together referred to as “Luxco” and the merger as the “Luxco Merger”).
Part of our strategic business plan is to grow our business through acquisitions, and we continue to evaluate and engage in discussions concerning potential acquisition opportunities, some of which could be material. For example, in April 2021 we acquired Luxco, Inc.
We are required by law to use state-licensed distributors or, in 17 states known as “control states,” state-owned agencies performing this function, to distribute our branded spirits to retail outlets, including liquor stores, bars, restaurants and national chains in the United States.
Failure of our distributors to distribute our branded spirits adequately within their territories could adversely affect our business. We are required by law in the U.S. to use state-licensed distributors or, in 17 states known as “control states,” state-owned agencies performing this function, to distribute our branded spirits to retail outlets, including liquor stores, bars, restaurants and national chains.
The launch of a new brand or product can give rise to a variety of costs and an unsuccessful launch, among other things, can affect consumer perception of existing brands or products and our reputation. Unsuccessful implementation or short-lived popularity of our product innovations may result in inventory write-offs and other costs.
An unsuccessful launch or short-lived popularity of our product innovations, among other things, may affect consumer perception of existing brands or products and our reputation and may result in inventory write-offs and other costs.
We are authorized to issue up to a total of 40,000,000 shares of Common Stock, potentially diluting equity ownership of current holders and the share price of our Common Stock We believe that it is necessary to maintain a sufficient number of available authorized shares of our Common Stock in order to provide us with the flexibility to issue Common Stock for business purposes that may arise as deemed advisable by our Board.
We believe that it is necessary to maintain a sufficient number of available authorized shares of our Common Stock in order to provide us with the flexibility to issue Common Stock for business purposes that may arise as deemed advisable by our Board.
We have various mechanisms in place to discourage takeover attempts, which may reduce or eliminate our stockholders’ ability to sell their shares for a premium in a change of control transaction.
We have various mechanisms in place to discourage takeover attempts, which may reduce or eliminate our stockholders’ ability to sell their shares for a premium in a change of control transaction. In addition, we could issue additional shares of Common Stock, which could adversely impact the market price of our Common Stock.
Negative publicity or commentary on social media outlets could cause consumers to react rapidly by avoiding our brands or by choosing brands offered by our competitors, which could have a material adverse effect on our business, financial condition, or results of operations. Adverse public opinion about any of our specialty ingredients could reduce demand for our products.
Negative publicity or commentary on social media outlets, whether accurate or not, could cause consumers to react rapidly by avoiding our products or by choosing products offered by our competitors, which could have a material adverse effect on our business, financial condition, or results of operations.
The global and regional impact of a pandemic or other widespread health crisis, including official or unofficial quarantines and governmental restrictions on activities taken in response to such an outbreak, could have a negative impact on our operations, including voluntary or mandatory temporary closures of our facilities or offices; interruptions in our supply chain, which could impact the cost or availability of raw materials; disruptions or restrictions on our ability to travel or to market and distribute our products; reduced consumer demand for our products or those of our customers due to bar and restaurant closures or reduced consumer traffic in bars, restaurants and other locations where our products or those of our customers are sold; and labor shortages.
A pandemic, such as COVID-19, or another widespread health crisis could negatively impact the global economy which could have a negative impact on our operations, including voluntary or mandatory temporary closures of our facilities or offices; interrupt our supply chain, which could impact the cost or availability of raw materials; cause disruptions or restrictions on our ability to travel or to market and distribute our products; reduce consumer demand for our products or those of our customers due to bar and restaurant closures or reduced consumer traffic in bars, restaurants, and other locations; and labor shortages.
Additionally, the Company procures barrels, glass, PET containers, caps, labels, aluminum cans, cartons, and bottle closures from third-party vendors.
Additionally, we procure barrels, glass, PET containers, caps, labels, aluminum cans, cartons, bottle closures, and other products from third-party vendors.
Although we maintain product recall insurance, product recalls or market withdrawals could result in significant losses due to their costs, the destruction of product inventory, and lost sales due to the unavailability of the product for a period of time.
Although we maintain product recall insurance, product recalls or market withdrawals could result in significant losses due to their costs, the destruction of product inventory, lost sales due to the unavailability of the product for a period of time, and we may incur costs or financial losses that are either not insured against or not fully covered through our insurance.
We also operate our business and market our products in countries that may be subject to export control regulations, embargoes, economic sanctions and other forms of trade restrictions imposed by the United States, the European Union, the United Nations and other participants in the international community.
We also operate our business and market our products in countries that may be subject to export control regulations, embargoes, economic sanctions and other forms of trade restrictions.
In particular: • the integration plans for our acquisitions are based on benefits that involve assumptions as to future events, including our ability to successfully achieve anticipated synergies, leveraging our existing relationships, as well as general business and industry conditions, many of which are beyond our control and may not materialize.
The integration of any acquisition involves a number of risks that could harm our financial condition, results of operations, or competitive position, including: • Integration plans for our acquisitions are based on benefits that involve assumptions as to future events, including our ability to successfully achieve anticipated synergies, leveraging our existing relationships, as well as general business and industry conditions, many of which are beyond our control and may not materialize.
Although our relations with our three unions are stable, there is no assurance that we will not experience work disruptions or stoppages in the future, which could have a material adverse effect on our business, financial condition, or results of operations and could adversely affect our relationships with our customers.
Although our relations with our three unions are stable, there is no assurance that we will not experience work disruptions or stoppages in the future, which could interrupt our operations, adversely affect our relationships with our customers, and could have a material adverse effect on our business, financial condition, or results of operations. 9 Climate change, or legal, regulatory, or market measures to address climate change, may negatively affect our business or operations, and water scarcity or quality could negatively impact our production costs and capacity.
In addition, it could be difficult, time consuming, and expensive to replace any key management member or other critical personnel, and no guarantee exists that we will be able to recruit suitable replacements or assimilate new key management personnel into our organization. 16 Covenants and other provisions in our credit arrangements could hinder our ability to operate.
In addition, it could be difficult, time consuming, and expensive to replace any key management member or other critical personnel, and no guarantee exists that we will be able to recruit suitable replacements or assimilate new key personnel into our organization. Our global business is subject to commercial, political, and financial risks.
Several such labeling regulations or laws require warnings on any product with substances that the jurisdiction lists as potentially associated with cancer or birth defects. Our products already raise health and safety concerns for some regulators, and heightened requirements could be imposed.
Several of these labeling regulations or laws require warnings on any product with substances that the jurisdiction lists as potentially associated with cancer or birth defects and heightened requirements could be imposed.
These studies could result in additional governmental regulations concerning the production, marketing, labeling, or availability of our products, any of which could damage our reputation, make our premium brands unrecognizable, or reduce demand of our products, which could adversely affect our profitability.
This could result in additional governmental regulations concerning the production, marketing, labeling, or availability of our products, any of which could damage our reputation, make our brands unrecognizable, or reduce demand of our products, which could adversely affect our profitability. Product recalls or other product liability claims could materially and negatively affect our business.
Our customers store a substantial amount of barreled inventory of aged premium bourbon, rye, and other whiskeys at our Lawrenceburg facility and our nearby warehouses in Williamstown, Kentucky and Sunman, Indiana. If a catastrophic event were to occur at our Lawrenceburg facility or our warehouses, our customers’ business could be adversely affected.
Our customers store a substantial amount of barreled inventory of aged or aging bourbon, rye, and other whiskeys at our warehouses. If a catastrophic event were to occur at our facilities or our warehouses (including any leased warehouses), our customers’ business could be adversely affected.
This concentrated control could also discourage a potential investor from acquiring our common stock due to the limited voting power of such stock relative to the Preferred Stock and might harm the trading price of our common stock.
The concentrated control of our stock and rights of holders of Preferred Stock could also discourage a potential investor from acquiring our Common Stock due to the limited voting power of such stock relative to the Preferred Stock and could have an adverse effect on the market price of our Common Stock.
Many of our current and potential competitors have larger customer bases, greater name recognition and broader product offerings. In recent years, the industries in which we compete have continued to experience consolidation. Industry consolidation can have varying degrees of impact, including the creation of new and larger competitors.
In recent years, the industries in which we compete have continued to experience consolidation. Industry consolidation can have varying degrees of impact, including the creation of new and larger competitors.
Increasing regulation of emissions could increase the cost of energy, including fuel, required to operate our facilities or transport and distribute our products, thereby substantially increasing the production, distribution, and supply chain costs associated with our products. Water is the main ingredient in substantially all of our distillery products and is necessary for the production of our food ingredients.
Increasing regulation of emissions could increase the cost of energy, including fuel, required to operate our facilities or transport and distribute our products, thereby substantially increasing the production, distribution, and supply chain costs associated with our products. Climate change could also lead to disruptions in the production or distribution of our products.
In the event additional warehouse capacity is required, there is the potential risk of completion delays, including risk of delay associated with required permits and cost overruns, which could have a material adverse effect on our business, financial condition, or results of operations.
In the event additional warehouse capacity is required, there is the risk of completion delays, the risk of cost overruns, and regulatory risks, including our ability to timely obtain necessary approvals and permits, and potential changes in laws and regulations, including zoning and environmental requirements, which could have a material adverse effect on our business, financial condition, or results of operations.
Pandemics or other health crises could disrupt or otherwise negatively impact our operations, including the demand for our products and our ability to produce and deliver our products. A pandemic, such as COVID-19, or another widespread health crisis could negatively impact the global economy.
Pandemics or other health crises could disrupt or otherwise negatively impact our operations, including the demand for our products and our ability to produce and deliver our products.
Our strategic plan involves significant investment in the aging of barreled distillate. Decisions concerning the quantity of maturing stock of our aged distillate could materially affect our future profitability.
Decisions concerning the quantity of maturing stock of our aged distillate could materially affect our future profitability.

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Item 2. Properties

Properties — owned and leased real estate

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Biggest changeLouis, Missouri (a) Bottling facility, warehousing facility, office space and fulfillment center Branded Spirits, and Corporate Cleveland, Ohio Bottling facility and office space Branded Spirits International: Arandas, Mexico (b) Distillery, office space and agave farm Branded Spirits Londonderry, Northern Ireland Bottling and blending facility and office space Branded Spirits (a) Facility is leased (b) This property is owned and operated by our joint venture, LMX These facilities are generally in good operating condition and are generally suitable for the business activity conducted therein.
Biggest changeLouis, Missouri Bottling facility, warehousing facility, office space (b), and fulfillment center (b) Branded Spirits and Corporate Cleveland, Ohio Bottling facility and office space Branded Spirits International: Arandas, Mexico (c) Distillery, office space, and agave farm Branded Spirits Londonderry, Northern Ireland Bottling and blending facility and office space Branded Spirits (a) On July 13, 2023, we announced the decision by our Board of Directors to approve the closure of the Atchison Distillery.
PROPERTIES As of February 23, 2023, our material properties include: Location Principal Activities Segment United States: Atchison, Kansas Grain processing, distillery, warehousing, research and quality control laboratories, office space, and a technical innovation center Distilling Solutions, Ingredient Solutions, and Corporate Lenexa, Kansas (a) Office space Corporate Lawrenceburg and Greendale, Indiana Distillery, warehousing, tank farm, quality control laboratory, and research and development Distilling Solutions Sunman, Indiana Warehousing facility Distilling Solutions Williamstown, Kentucky Warehousing facility Distilling Solutions Lebanon, Kentucky Distillery, office space, and retail location Branded Spirits Bardstown, Kentucky Distillery, office space, retail location, and warehousing facility Branded Spirits St.
PROPERTIES As of February 22, 2024, our material properties include: Location Principal Activities Segment United States: Atchison, Kansas (a) Wheat flour processing, warehousing, research and quality control laboratories, office space, and a technical innovation center Ingredient Solutions and Corporate Leawood, Kansas (b) Office space Corporate Lawrenceburg and Greendale, Indiana Distillery, warehousing, tank farm, quality control laboratory, and research and development Distilling Solutions Sunman, Indiana Warehousing facility Distilling Solutions Williamstown, Kentucky Warehousing facility Distilling Solutions Lebanon, Kentucky Distillery, office space, and retail location Branded Spirits Bardstown, Kentucky Distillery, office space, retail location, and warehousing facility Branded Spirits and Distilling Solutions St.
All of our owned properties are subject to mortgages in favor of one or more of our lenders. We also own or lease transportation equipment and facilities and a gas pipeline.
We also own or lease transportation equipment and facilities and a gas pipeline.
Added
The Atchison Distillery ceased operations during December 2023. (b) Facility is leased. (c) These properties are owned and operated by our joint ventures, Agricola and DGL. These facilities are generally in good operating condition and are generally suitable for the business activity conducted therein. The properties, except as otherwise indicated above, are owned by the Company.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeITEM 3. LEGAL PROCEEDINGS The Company is, from time to time, a party to legal or regulatory proceedings arising in the ordinary course of its business. The discussion regarding litigation in Note 10, Commitments and Contingencies, included elsewhere in this report is incorporated herein by reference. In accordance with U.S.
Biggest changeITEM 3. LEGAL PROCEEDINGS The Company is, from time to time, a party to legal or regulatory proceedings arising in the ordinary course of its business. The discussion regarding litigation in Note 11, Commitments and Contingencies, included elsewhere in this Report is incorporated herein by reference. In accordance with U.S.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeOur Common Stock is traded on the NASDAQ Global Select Market under the ticker symbol MGPI. As of February 17, 2023, there were approximately 309 holders of record of our Common Stock.
Biggest changeITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDERS MATTERS, AND ISSUER PURCHASES OF EQUITY SECURITIES Our Common Stock is traded on the Nasdaq Global Select Market under the ticker symbol MGPI. As of February 16, 2024, there were approximately 293 holders of record of our Common Stock.
According to reports received from NASDAQ, the average daily trading volume of our Common Stock (excluding block trades) ranged from 34,700 to 907,500 shares during the year ended December 31, 2022. 18 STOCK PERFORMANCE GRAPH The following graph compares the cumulative total return of our Common Stock for the five year period ended December 31, 2022, against the cumulative total return of the S&P 500 Stock Index (broad market comparison), Russell 3000 (broad market comparison), and Russell 2000 - Consumer Staples (line of business comparison ).
According to reports received from Nasdaq, the average daily trading volume of our Common Stock (excluding block trades) ranged from 40,700 to 504,700 shares during the year ended December 31, 2023. 19 STOCK PERFORMANCE GRAPH The following graph compares the cumulative total return of our Common Stock for the five-year period ended December 31, 2023, against the cumulative total return of the S&P 500 Stock Index (broad market comparison), Russell 3000 (broad market comparison), and Russell 2000 - Consumer Staples (line of business comparison ).
The graph assumes $100 (one hundred dollars) was invested on December 31, 2017, and that all dividends were reinvested. PURCHASES OF EQUITY SECURITIES BY ISSUER We did not sell equity securities during the quarter ended December 31, 2022.
The graph assumes $100 (one hundred dollars) was invested on December 31, 2018, and that all dividends were reinvested. PURCHASES OF EQUITY SECURITIES BY ISSUER There were no unregistered sale of equity securities during the quarter ended December 31, 2023. ITEM 6. [Reserved]
Removed
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDERS MATTERS, AND ISSUER PURCHASES OF EQUITY SECURITIES Equity compensation plan information is incorporated by reference from Part III, Item 12, “Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters,” of this document and should be considered an integral part of Item 5.
Removed
Issuer Purchases of Equity Securities (a) Total Number of Shares (or Units) Purchased (b) Average Price Paid per Share (or Unit) (c) Total Number of Shares (or Units) Purchased as Part of Publicly Announced Plans or Programs (d) Maximum Number (or Approximate Dollar Value) of Shares (or Units) that May Yet Be Purchased Under the Plans or Programs (b) October 1, 2022 through October 31, 2022 — $ — — $ — November 1, 2022 through November 30, 2022 5 (a) 111.03 — — December 1, 2022 through December 31, 2022 — — — — Total 5 — (a) Vested RSU awards under the 2014 Plan that were purchased to cover employee withholding taxes.
Removed
(b) On February 25, 2019, our Board of Directors approved a $25,000 share repurchase plan commencing February 27, 2019 through February 27, 2022. The share repurchase program was not renewed and expired on the term date of February 27, 2022. ITEM 6. [Reserved] 19

Item 6. [Reserved]

Selected Financial Data — reserved (removed by SEC in 2021)

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Biggest changeFinancial Statements and Supplementary Data 35 Management’s Report on Internal Control Over Financial Reporting 35 Report of Independent Registered Public Accounting Firm 36 Consolidated Statements of Income - Years Ended December 31, 2022, 2021, and 2020 38 Consolidated Statements of Comprehensive Income - Years Ended December 31, 2022, 2021, and 2020 39 Consolidated Balance Sheets - December 31, 2022 and 2021 40 Consolidated Statements of Cash Flows – Years Ended December 31, 2022, 2021 and 2020 41 Consolidated Statements of Changes in Stockholders’ Equity – Years Ended December 31, 2022, 2021, and 2020 42 Notes to Consolidated Financial Statements – Years Ended December 31, 2022, 2021, and 2020 43
Biggest changeFinancial Statements and Supplementary Data 36 Management’s Report on Internal Control Over Financial Reporting 36 Report of Independent Registered Public Accounting Firm 37 Consolidated Statements of Income - Years Ended December 31, 2023, 2022, and 2021 40 Consolidated Statements of Comprehensive Income - Years Ended December 31, 2023, 2022, and 2021 41 Consolidated Balance Sheets - December 31, 2023 and 2022 42 Consolidated Statements of Cash Flows – Years Ended December 31, 2023, 2022 and 2021 43 Consolidated Statements of Changes in Stockholders’ Equity – Years Ended December 31, 2023, 2022, and 2021 44 Notes to Consolidated Financial Statements – Years Ended December 31, 2023, 2022, and 2021 45
Item 6. [Reserved] 19 Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations 20 Item 7A. Quantitative and Qualitative Disclosure About Market Risk 34 Item 8.
Item 6. [Reserved] 20 Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations 20 Item 7A. Quantitative and Qualitative Disclosure About Market Risk 35 Item 8.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest changeIngredient Solutions segment sales for 2022 increased 28 percent over the prior year. 21 RESULTS OF OPERATIONS Consolidated results The table below details the consolidated results for 2022, 2021 and 2020: Year Ended December 31, % Increase (Decrease) 2022 2021 2020 2022 v. 2021 2021 v. 2020 Sales $ 782,358 $ 626,720 $ 395,521 25 % 58 % Cost of sales 529,052 427,755 296,715 24 44 Gross profit 253,306 198,965 98,806 27 101 Gross margin % 32.4 % 31.7 % 25.0 % 0.7 pp (a) 6.7 pp (a) Advertising and promotion expenses 29,714 16,098 2,712 85 494 SG&A expenses 74,627 72,829 41,853 2 74 Insurance recoveries — (16,325) — N/A N/A Operating income 148,965 126,363 54,241 18 133 Operating margin % 19.0 % 20.2 % 13.7 % (1.2) pp 6.5 pp Interest expense, net (5,451) (4,037) (2,267) 35 78 Other income (loss), net (3,342) (1,230) 627 172 (296) Income before income taxes 140,172 121,096 52,601 16 130 Income tax expense 31,300 30,279 12,256 3 147 Effective tax expense rate % 22.3 % 25.0 % 23.3 % (2.7) pp 1.7 pp Net income $ 108,872 $ 90,817 $ 40,345 20 % 125 % Net income margin % 13.9 % 14.5 % 10.2 % (0.6) pp 4.3 pp Basic EPS $ 4.94 $ 4.37 $ 2.37 13 % 84 % Diluted EPS $ 4.92 $ 4.37 $ 2.37 13 % 84 % (a) Percentage points (“pp”).
Biggest changeAdditionally, we recorded $2,279 of expenses related to severance costs, inventory write offs, contract termination fees, consulting fees, and other miscellaneous expenses related to the Atchison Distillery closure, which were recorded in the impairment of long-lived assets and other line on the Consolidated Statement of Income for the year ended December 31, 2023 (see Note 6, Closure of the Atchison Distillery for additional information). 22 RESULTS OF OPERATIONS Consolidated results The table below details the consolidated results for 2023, 2022 and 2021: Year Ended December 31, % Increase (Decrease) 2023 2022 2021 2023 v. 2022 2022 v. 2021 Sales $ 836,523 $ 782,358 $ 626,720 7 % 25 % Cost of sales 531,811 529,052 427,755 1 24 Gross profit 304,712 253,306 198,965 20 27 Gross margin % 36.4 % 32.4 % 31.7 % 4.0 pp (a) 0.7 pp (a) Advertising and promotion expenses 38,213 29,714 16,098 29 85 SG&A expenses 91,395 74,627 72,829 22 2 Impairment of long-lived assets and other 19,391 — — N/A N/A Change in fair value of contingent consideration 7,100 — — N/A N/A Insurance recoveries — — (16,325) N/A N/A Operating income 148,613 148,965 126,363 — 18 Operating margin % 17.8 % 19.0 % 20.2 % (1.2) pp (1.2) pp Interest expense, net (6,647) (5,451) (4,037) 22 35 Other expense, net (220) (3,342) (1,230) (93) 172 Income before income taxes 141,746 140,172 121,096 1 16 Income tax expense 34,616 31,300 30,279 11 3 Effective tax expense rate % 24.4 % 22.3 % 25.0 % 2.1 pp (2.7) pp Net income $ 107,130 $ 108,872 $ 90,817 (2) % 20 % Net income margin % 12.8 % 13.9 % 14.5 % (1.1) pp (0.6) pp Basic EPS $ 4.82 $ 4.94 $ 4.37 (2) % 13 % Diluted EPS $ 4.80 $ 4.92 $ 4.37 (2) % 13 % (a) Percentage points (“pp”).
(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.
(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.
(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.
(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.
(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.
(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.
(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.
(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.
(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.
(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.
Advertising and promotion expenses 2022 to 2021 - Advertising and promotion expenses for 2022 were $29,714, an increase of 85 percent compared to 2021. This was primarily driven by an increased advertising and promotion investment in the Branded Spirits segment, specifically in the premium plus price tiers.
This increase was primarily driven by increased advertising and promotion investment in the Branded Spirits segment, primarily in the premium plus price tiers. 2022 to 2021 - Advertising and promotion expenses for 2022 were $29,714, an increase of 85 percent compared to 2021.
Sales of brown goods and white goods within premium beverage alcohol, fuel grade alcohol, and warehouse services increased, while sales of industrial alcohol and distillers feed and related co-products decreased compared to 2020. The increase in brown goods, white goods and fuel grade alcohol was driven by higher sales volume and higher average selling price.
Sales of brown goods within premium beverage alcohol and warehouse services increased while white goods within premium beverage alcohol, distillers feed and related co-products, industrial alcohol, and fuel grade alcohol decreased compared to 2022. The increase in sales of brown goods was driven by higher average selling price and higher sales volume.
The primary drivers of the changes in operating assets and liabilities were $44,350 use of cash related to an increase in inventories, primarily barreled distillate, and $16,786 use of cash related to an increase in receivables, partially offset by $10,626 of cash provided by an increase in accounts payable related to the timing of cash disbursements.
The primary drivers of the changes in operating assets and liabilities were $44,350 use of cash related to an increase in inventories, primarily barreled distillate, and $16,786 use of cash related to an increase in receivables, partially offset by $10,626 of cash provided by an increase in accounts payable related to the timing of cash disbursements. Investing Activities.
No amount for our obligation under the capital lease is reflected on our Consolidated Balance Sheets, nor do we reflect an amount for the corresponding industrial revenue bond asset (see Note 10, Commitments and Contingencies for additional information).
No amount for our obligation under the capital lease is reflected on our Consolidated Balance Sheets, nor do we reflect an amount for the corresponding industrial revenue bond asset (see Note 11, Commitments and Contingencies for additional information).
Distilling Solutions Segment Our Distilling Solutions segment mission is to cultivate lasting partnerships with customers across all product categories by leveraging our strong sales and operating platform, aging whiskey inventory, and unique project development skills.
Distilling Solutions Segment Our Distilling Solutions segment mission is to cultivate lasting partnerships with customers across all product categories by leveraging our technical distilling expertise, strong sales and operating platform, aging whiskey inventory, and unique project development skills.
Based on the impairment tests performed by the Company during the fourth quarter 2022, we believe none of our goodwill or indefinite-lived intangible assets are impaired and are not currently at risk of impairment.
Based on the impairment tests performed by the Company during the fourth quarter 2023, we believe none of our goodwill or indefinite-lived intangible assets are impaired and are not currently at risk of impairment.
Cash used in financing activities for year ended December 31, 2022 was $14,764, primarily due to payments of dividends and dividend equivalents of $10,646 (see Note 8, Equity and EPS for additional information), and principal payments on long-term debt of $3,403 (see Long-Term and Short-Term Debt).
Cash used in financing activities for the year ended December 31, 2022 was $14,764, primarily due to payments of dividends and dividend equivalents of $10,646 (see Note 9, Equity and EPS for additional information), and principal payments on long-term debt of $3,403 (see 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 Board-approved dividends) and the overall cost of capital.
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 Board-approved dividends) and the overall cost of capital.
The Branded Spirits segment sales for 2022 increased 30 percent over the prior year. Ingredient Solutions Segment Our Ingredient Solutions segment mission is to remain a strategic business partner of choice earning meaningful relationships through collaboration, innovation, and dedication to best-in-class customer service.
Branded Spirits segment sales for 2023 increased 7 percent over the prior year. Ingredient Solutions Segment Our Ingredient Solutions segment mission is to remain a strategic business partner of choice earning meaningful relationships through collaboration, innovation, and dedication to best-in-class customer service.
MGP’s MD&A is presented in eight sections: • Overview • Results of Operations • Distilling Solutions Segment • Branded Spirits Segment • Ingredient Solutions Segment • Cash Flow, Financial Condition and Liquidity • Critical Accounting Estimates • New Accounting Pronouncements OVERVIEW MGP is a leading producer and supplier of premium distilled spirits, branded spirits and food ingredients.
MGP’s MD&A is presented in the following sections: • Overview • Recent Developments • Results of Operations • Distilling Solutions Segment • Branded Spirits Segment • Ingredient Solutions Segment • Cash Flow, Financial Condition and Liquidity • Critical Accounting Estimates • New Accounting Pronouncements OVERVIEW MGP is a leading producer and supplier of premium distilled spirits, branded spirits, and food ingredients.
The favorable macro industry trends benefiting our business include growth and focus on high fiber, high protein, meat alternatives, plant-based protein, and non-GMO Products. We continue to provide outstanding customer solutions, taking advantage of our position within growing consumer trends.
The favorable macro industry trends we anticipate will benefit our business include growth and focus on high fiber, high protein, meat alternatives, plant-based protein, and non-GMO products. We continue to provide customer solutions, taking advantage of our position within growing consumer trends.
The application of certain of these policies places demands on management’s judgment, with financial reporting results relying on estimation about the effects of matters that are inherently uncertain, inclusive of effects related to the COVID-19 pandemic. For all of these policies, management cautions that future events rarely develop as forecast, and estimates routinely require adjustment and may require material adjustment.
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. For all of these policies, management cautions that future events rarely develop as forecast, and estimates routinely require adjustment and may require material adjustment.
Operating cash flow and borrowings through our Credit Agreement, Convertible Senior Notes and Note Purchase Agreement (Note 6, Corporate Borrowings) 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.
Operating cash flow and borrowings through our Credit Agreement, Convertible Senior Notes and Note Purchase Agreement (see Note 7, Corporate Borrowings) provide the primary sources of cash to fund operating needs and capital expenditures. These same sources of cash are used to fund stockholder dividends and other discretionary uses.
The 2.7 percentage point decrease was primarily due to an increase in state tax credits due to capital expenditures investments. 2021 to 2020 - Income tax expense for 2021 was $30,279, for an effective tax rate for the year of 25.0 percent. Income tax expense for 2020 was $12,256, for an effective tax rate for the year of 23.3 percent.
Income tax expense for 2021 was $30,279, for an effective tax rate for the year of 25.0 percent. The 2.7 percentage point decrease was primarily due to an increase in state tax credits due to capital expenditures investments.
The increase in SG&A was driven by the assumption of Luxco’s SG&A expenses for the full year of 2022, as well as higher personnel and incentive compensation expense, partially offset by a decrease in advisory and other transaction costs in 2021 related to the merger with Luxco that did not recur in 2022. 2021 to 2020 - SG&A expenses for 2021 were $72,829, an increase of 74 percent compared to 2020.
The increase in SG&A was driven by the assumption of Luxco’s SG&A expenses for the full year of 2022, as well as higher personnel and incentive compensation expense, partially offset by a decrease in advisory and other transaction costs in 2021 related to the merger with Luxco that did not recur in 2022.
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS CAUTIONARY NOTE CONCERNING FACTORS THAT MAY AFFECT FUTURE RESULTS This Report on Form 10-K contains forward looking statements as well as historical information.
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS CAUTIONARY NOTE CONCERNING FACTORS THAT MAY AFFECT FUTURE RESULTS This Report may contain forward looking statements as well as historical information.
These increases were partially offset by higher input costs. 30 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.
These increases were partially offset by higher input costs for all product lines within the segment. 31 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.
Our overall liquidity reflects our strong business results and an effective cash management strategy that takes into account liquidity management, economic factors, and tax considerations. We expect our sources of cash to be adequate to provide for budgeted capital expenditures, potential merger or acquisitions, and anticipated operating requirements for the foreseeable future.
Our overall liquidity reflects our strong business results and an effective cash management strategy that takes into account liquidity management, economic factors, and tax considerations. We expect our sources of cash to be adequate to provide for budgeted capital expenditures, potential mergers and acquisitions, and anticipated operating requirements for the next 12 months and beyond.
The increase in gross profit was partially offset by lower average selling price on distillers feed and related co-products and higher input costs of industrial alcohol, white goods and brown goods. 26 BRANDED SPIRITS SEGMENT BRANDED SPIRITS SALES Year Ended December 31, Year-versus-Year Sales Change Increase/ (Decrease) 2022 2021 $ Change % Change Ultra Premium $ 48,245 $ 27,722 $ 20,523 74 % Super Premium 12,274 8,937 3,337 37 Premium 24,211 17,626 6,585 37 Premium Plus 84,730 54,285 30,445 56 Mid 82,530 71,292 11,238 16 Value 47,395 38,520 8,875 23 Other 23,284 19,469 3,815 20 Total Branded Spirits $ 237,939 $ 183,566 $ 54,373 30 % Change in Year-versus-Year Sales Attributed to: Total (a) Volume (b) Net Price/Mix (c) Branded Spirits 30% 17% 13% Other Financial Information Year Ended December 31, Year-versus-Year Increase/(Decrease) 2022 2021 Change % Change Gross profit $ 95,521 $ 62,644 $ 32,877 52 % Gross margin % 40.1 % 34.1 % 6.0 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.
These increases were partially offset by increased input costs across all categories. 28 BRANDED SPIRITS SALES Year Ended December 31, Year-versus-Year Sales Change Increase/ (Decrease) 2022 2021 $ Change % Change Ultra Premium $ 48,245 $ 27,722 $ 20,523 74 % Super Premium 12,274 8,937 3,337 37 Premium 24,211 17,626 6,585 37 Premium Plus 84,730 54,285 30,445 56 Mid 82,530 71,292 11,238 16 Value 47,395 38,520 8,875 23 Other 23,284 19,469 3,815 20 Total Branded Spirits $ 237,939 $ 183,566 $ 54,373 30 % Change in Year-versus-Year Sales Attributed to: Total (a) Volume (b) Net Price/Mix (c) Branded Spirits 30% 17% 13% Other Financial Information Year Ended December 31, Year-versus-Year Increase/(Decrease) 2022 2021 Change % Change Gross profit $ 95,521 $ 62,644 $ 32,877 52 % Gross margin % 40.1 % 34.1 % 6.0 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.
We have identified the most critical accounting policies which involve the most complex and subjective judgments. These should be read in conjunction with the significant accounting policies discussed in Note 1, Nature of Operations and Summary of Significant Accounting Policies. 33 Goodwill and Other Intangible Assets.
We have identified the most critical accounting policies which involve the most complex and subjective judgments. These should be read in conjunction with the significant accounting policies discussed in Note 1, Nature of Operations and Summary of Significant Accounting Policies. Business Combinations.
Branded Spirits Segment Our Branded Spirits segment mission is to align our product offering and enhance focus on growing spirits categories and price tiers. The favorable macro industry trends benefiting our business include growth in high-end whiskey and tequila brands as well as growth across all spirit categories in the high-end price tiers.
Branded Spirits Segment Our Branded Spirits segment mission is to align our product offering and enhance focus on growing spirits categories and price tiers. The favorable macro industry trends we anticipate will benefit our business include growth in high-end whiskey and tequila brands as well as growth in the U.S. across all spirit categories in the premium plus price tiers.
The dividend payment and dividend equivalent payment will occur on March 24, 2023. Financial Condition and Liquidity Our principal uses of cash in the ordinary course of business are for input costs used in our production processes, salaries, capital expenditures, and investments supporting our strategic plan, such as the aging of barreled distillate and potential mergers and acquisitions.
Financial Condition and Liquidity Our principal uses of cash in the ordinary course of business are for input costs used in our production processes, salaries, capital expenditures, and investments supporting our strategic plan, such as the aging of barreled distillate and potential mergers and acquisitions.
We continued to focus on attracting and developing customers for our premium beverage alcohol products during 2022 as well as shifting our focus from industrial alcohol to white beverage alcohol. Distilling Solutions segment sales for 2022 increased 22 percent over the prior year.
During 2023, we continued to focus on attracting customers and developing customer relationships for our premium beverage alcohol products as well as shifting our focus away from industrial alcohol, fuel grade alcohol, and white beverage alcohol. Distilling Solutions segment sales for 2023 increased 5 percent over the prior year.
We have incurred $47,859, $51,691, and $18,646 of capital expenditures and have paid $45,323, $47,389, and $19,701 for capital expenditures for the years ended December 31, 2022, 2021 and 2020, respectively. The difference between the amount of capital expenditures incurred and amount paid is due to the change in capital expenditures in accounts payable.
We have incurred $61,108, $47,859, and $51,691 of capital expenditures and have paid $55,267, $45,323, and $47,389 for capital expenditures for the years ended December 31, 2023, 2022 and 2021, respectively. The difference between the amount of capital expenditures incurred and amount paid is due to the change in capital expenditures in accounts payable.
Total Ingredient Solutions segment sales increased 16 percent primarily due to increased sales of specialty wheat starches and proteins. Gross profit 2022 to 2021 - Gross profit for 2022 was $253,306, an increase of 27 percent compared to 2021. The increase was driven by an increase in gross profit in Branded Spirits, Distilling Solutions and Ingredient Solutions segments.
Total Ingredient Solutions segment sales increased 28 percent, primarily due to increased sales of specialty wheat starches and proteins. Gross profit 2023 to 2022 - Gross profit for 2023 was $304,712, an increase of 20 percent compared to 2022. The increase was driven by an increase in gross profit in the Distilling Solutions, Branded Spirits, and Ingredient Solutions segments.
Diluted EPS increased to $4.92 in 2022 from $4.37 in 2021, primarily due to the above described changes in Basic EPS, partially offset by the impact of dilutive shares outstanding related to the conversion feature of the Convertible Senior Notes. 2021 to 2020 - Basic and Diluted EPS increased to $4.37 in 2021 from $2.37 in 2020, primarily due to the increase in 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. 24 DISTILLING SOLUTIONS SEGMENT DISTILLING SOLUTIONS SALES Year Ended December 31, Year-versus-Year Sales Change Increase/ (Decrease) 2022 2021 $ Change % Change Brown Goods $ 229,523 $ 162,074 $ 67,449 42 % White Goods 74,510 75,818 (1,308) (2) Premium beverage alcohol 304,033 237,892 66,141 28 Industrial alcohol 46,812 62,628 (15,816) (25) Food grade alcohol 350,845 300,520 50,325 17 Fuel grade alcohol 13,681 14,916 (1,235) (8) Distillers feed and related co-products 40,354 19,545 20,809 106 Warehouse services 23,598 17,523 6,075 35 Total Distilling Solutions $ 428,478 $ 352,504 $ 75,974 22 % Change in Year-versus-Year Sales Attributed to: Total (a) Volume (b) Net Price/Mix (c) Premium beverage alcohol 28% 12% 16% Other Financial Information Year Ended December 31, Year-versus-Year Increase/(Decrease) 2022 2021 Change % Change Gross profit $ 126,282 $ 114,106 $ 12,176 11 % Gross margin % 29.5 % 32.4 % (2.9) 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.
This increase was partially offset by larger gross profit losses in the Atchison Distillery. 26 DISTILLING SOLUTIONS SALES Year Ended December 31, Year-versus-Year Sales Change Increase/ (Decrease) 2022 2021 $ Change % Change Brown Goods $ 229,523 $ 162,074 $ 67,449 42 % White Goods 74,510 75,818 (1,308) (2) Premium beverage alcohol 304,033 237,892 66,141 28 Industrial alcohol 46,812 62,628 (15,816) (25) Food grade alcohol 350,845 300,520 50,325 17 Fuel grade alcohol 13,681 14,916 (1,235) (8) Distillers feed and related co-products 40,354 19,545 20,809 106 Warehouse services 23,598 17,523 6,075 35 Total Distilling Solutions $ 428,478 $ 352,504 $ 75,974 22 % Change in Year-versus-Year Sales Attributed to: Total (a) Volume (b) Net Price/Mix (c) Premium beverage alcohol 28% 12% 16% Other Financial Information Year Ended December 31, Year-versus-Year Increase/(Decrease) 2022 2021 Change % Change Gross profit $ 126,282 $ 114,106 $ 12,176 11 % Gross margin % 29.5 % 32.4 % (2.9) 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.
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 usually identified by or are associated with such words as “intend,” “plan,” “believe,” “estimate,” “expect,” “anticipate,” “project,” “forecast,” “hopeful,” “should,” “may,” “will,” “could,” “encouraged,” “opportunities,” “potential,” and similar terminology.
Investing Activities. Cash used in investing activities for year ended December 31, 2022 was $47,813, which primarily resulted from additions to property, plant and equipment of $45,323 (see Capital Spending).
Cash used in investing activities for the year ended December 31, 2022 was $47,813, which primarily resulted from additions to property, plant and equipment of $45,323 (see “Capital Spending”). Capital Spending. We manage capital spending to support our business growth plans.
Sales 2022 to 2021 - Sales for 2022 were $782,358, an increase of 25 percent compared to 2021, which was the result of increased sales in the Distilling Solutions, Branded Spirits, and Ingredient Solutions segments. Within the Distilling Solutions segment, sales were up 22 percent primarily due to an increase in sales of brown goods within premium beverage alcohol.
Sales 2023 to 2022 - Sales for 2023 were $836,523, an increase of 7 percent compared to 2022, which was the result of increased sales in the Distilling Solutions, Branded Spirits, and Ingredient Solutions segments. Distilling Solutions segment sales increased 5 percent, primarily due to an increase in the sales of brown goods within premium beverage alcohol.
Basic and diluted EPS EPS % Increase (Decrease) Basic and Diluted EPS for 2020 $ 2.37 Change in operating income (a) 3.24 137 pp (b) Change in income attributable to participating securities (c) 0.03 1 pp Change in interest expense (a) (0.08) (3) pp Change in other income (expense), net (a) (0.08) (3) pp Change in weighted average shares outstanding (d) (0.98) (41) pp Change in effective tax rate (0.10) (4) pp Change in noncontrolling interest (0.03) (1) pp Basic and diluted EPS for 2021 4.37 84 % Change in operating income (a) 1.12 26 pp (b) Change in interest expense (a) (0.06) (1) pp Change in other income (expense), net (a) (0.08) (2) pp Change in weighted average shares outstanding (d) (0.51) (12) pp Change in effective tax rate 0.10 2 pp Basic EPS for 2022 4.94 13 % Impact of dilutive shares outstanding (0.02) — pp Diluted EPS for 2022 $ 4.92 13 % (a) Items are net of tax based on the effective tax rate for each base year.
Basic and diluted EPS EPS % Increase (Decrease) Basic and Diluted EPS for 2021 $ 4.37 Change in operating income (a) 1.12 26 pp (b) Change in interest expense (a) (0.06) (1) pp Change in other expense, net (a) (0.08) (2) pp Change in weighted average shares outstanding (c) (0.51) (12) pp Change in effective tax rate 0.10 2 pp Basic EPS for 2022 4.94 13 % Impact of dilutive shares outstanding (0.02) — pp Diluted EPS for 2022 $ 4.92 13 % EPS % Increase (Decrease) Basic EPS for 2022 $ 4.94 Change in operating income (a) (0.02) — pp (b) Change in interest expense (a) (0.04) (1) pp Change in other expense, net (a) 0.11 2 pp Change in weighted average shares outstanding (c) (0.02) — pp Change in effective tax rate (0.15) (3) pp Basic EPS for 2023 4.82 (2) % Impact of dilutive shares outstanding (0.02) (1) pp Diluted EPS for 2023 $ 4.80 (3) % (a) Items are net of tax based on the effective tax rate for each base year.
Treasury Purchases. 29,376 RSUs vested and converted to common shares during year ended December 31, 2022, of which we withheld and purchased for treasury 9,031 shares valued at $715 to cover payment of associated withholding taxes. 38,079 RSUs vested and converted to common shares during year ended December 31, 2021, of which we withheld and purchased for treasury 11,887 shares valued at $767 to cover payment of associated withholding taxes.
Treasury Purchases. 22,592 RSUs vested and converted to common shares during the year ended December 31, 2023, of which we withheld and purchased for treasury 8,437 shares valued at $801 to cover payment of associated withholding taxes. 29,376 RSUs vested and converted to common shares during the year ended December 31, 2022, of which we withheld and purchased for treasury 9,031 shares valued at $715 to cover payment of associated withholding taxes.
Our Distilling Solutions segment is also subject to unfavorable macro trends which include increased competition as industry participants seek to capitalize on consumer trends as well as increased commodity prices.
Our Distilling Solutions segment is also subject to unfavorable macro industry trends, which include increased competition as industry participants seek to capitalize on consumer trends, inflation impacts on customers, overall American whiskey supply and consumer consumption patterns, as well as increased commodity prices.
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 year and is not expected to recur in the future periods. 28 INGREDIENT SOLUTIONS SEGMENT INGREDIENT SOLUTIONS SALES Year Ended December 31, Year-versus-Year Sales Change Increase/ (Decrease) 2022 2021 $ Change % Change Specialty wheat starches $ 62,567 $ 47,758 $ 14,809 31 % Specialty wheat proteins 39,313 31,485 7,828 25 Commodity wheat starches 14,023 10,014 4,009 40 Commodity wheat proteins 38 1,393 (1,355) (97) Total Ingredient Solutions $ 115,941 $ 90,650 $ 25,291 28 % Change in Year-versus-Year Sales Attributed to: Total (a) Volume (b) Net Price/Mix (c) Total Ingredient Solutions 28% 9% 19% Other Financial Information Year Ended December 31, Year-versus-year Increase/(Decrease) 2022 2021 Change % Change Gross profit $ 31,503 $ 22,215 $ 9,288 42 % Gross margin % 27.2 % 24.5 % 2.7 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.
The increase in gross profit was primarily driven by higher average selling price across all product categories, partially offset by higher input costs for specialty wheat starches and proteins. 30 INGREDIENT SOLUTIONS SALES Year Ended December 31, Year-versus-Year Sales Change Increase/ (Decrease) 2022 2021 $ Change % Change Specialty wheat starches $ 62,567 $ 47,758 $ 14,809 31 % Specialty wheat proteins 39,313 31,485 7,828 25 Commodity wheat starches 14,023 10,014 4,009 40 Commodity wheat proteins 38 1,393 (1,355) (97) Total Ingredient Solutions $ 115,941 $ 90,650 $ 25,291 28 % Change in Year-versus-Year Sales Attributed to: Total (a) Volume (b) Net Price/Mix (c) Total Ingredient Solutions 28% 9% 19% Other Financial Information Year Ended December 31, Year-versus-year Increase/(Decrease) 2022 2021 Change % Change Gross profit $ 31,503 $ 22,215 $ 9,288 42 % Gross margin % 27.2 % 24.5 % 2.7 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.
The product is then divided by prior period sales dollars. (d) Percentage points (“pp”). 2021 compared to 2020 Total Distilling Solutions sales for 2021 increased by $39,195, or 13 percent compared to 2020.
The product is then divided by prior period sales dollars. (d) Percentage points (“pp”). 2023 compared to 2022 Total Distilling Solutions sales for 2023 increased by $22,376, or 5 percent, compared to 2022.
(d) Weighted average shares outstanding change primarily due to our repurchases of Common Stock, the vesting of employee RSUs, our purchase of vested RSUs from employees to pay withholding taxes, and the granting of Common Stock to directors.
(b) Percentage points (“pp”). (c) Weighted average shares outstanding change primarily related to the vesting of employee restricted stock units (“RSUs”), our withholding and purchase of vested RSUs from employees to pay withholding taxes, and the granting of Common Stock to directors.
The Branded Spirits segment gross profit increased by $32,877 or 52 percent. The Distilling Solutions segment gross profit increased by $12,176, or 11 percent and the Ingredient Solutions segment gross profit increased by $9,288, or 42 percent. 22 2021 to 2020 - Gross profit for 2021 was $198,965, an increase of 101 percent compared to 2020.
The increase was driven by an increase in gross profit in Branded Spirits, Distilling Solutions, and Ingredient Solutions segments. The Branded Spirits segment gross profit increased by $32,877, or 52 percent. The Distilling Solutions segment gross profit increased by $12,176, or 11 percent, and the Ingredient Solutions segment gross profit increased by $9,288, or 42 percent.
Cash provided by operating activities was $88,936 during the year ended December 31, 2022.
Cash provided by operating activities was $83,783 during the year ended December 31, 2023.
(b) Percentage points (“pp”). 23 2022 to 2021 - Operating income for 2022 increased to $148,965 from $126,363 for 2021, due to increases in gross profit in the Branded Spirits, Distilling Solutions and Ingredient Solutions segments.
These impacts were mostly offset by increased gross profit in all three segments. 24 2022 to 2021 - Operating income for 2022 increased to $148,965 from $126,363 for 2021, due to increases in gross profit in the Branded Spirits, Distilling Solutions, and Ingredient Solutions segments.
Distilled spirits include premium bourbon, rye, and other whiskeys (“brown goods”) and grain neutral spirits (“GNS”), including vodka and gin. Our distilled spirits are either sold directly or indirectly to manufacturers of other branded spirits. MGP is also a producer of high quality industrial alcohol for use in both food and non-food applications.
Distilled spirits include premium bourbon, rye, and other whiskeys (“brown goods”) and grain neutral spirits (“GNS”), including vodka and gin. Our distilled spirits are either sold directly or indirectly to manufacturers of other branded spirits.
Generally, during periods when commodities prices are rising, our operations require increased use of cash to support inventory levels. Our principal sources of cash are product sales and borrowing on our various debt agreements.
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 borrowings on our various debt agreements. Under these agreements, we must meet certain financial covenants and restrictions, and at December 31, 2023, we met those covenants and restrictions.
Additionally, during 2021, the weighted average shares outstanding were impacted by the issuance of shares as part of the Merger consideration. 2022 to 2021 - Basic EPS increased to $4.94 in 2022 from $4.37 in 2021, primarily due to the increase in 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.
Additionally, during 2021, the weighted average shares outstanding were impacted by the issuance of shares as part of the Merger consideration. 2023 to 2022 - Basic EPS decreased to $4.82 in 2023 from $4.94 in 2022, primarily due to the increase in effective tax rate, partially offset by a decrease in other expenses, net.
We expect approximately $58,000, in capital expenditures for 2023 which will be used for facility improvement and expansion, facility sustenance projects and environmental health and safety projects. Financing Activities .
We expect approximately $85,800 in capital expenditures for 2024, which we expect to use for facility improvement and expansion, facility sustenance projects, and environmental health and safety projects. 32 Financing Activities .
Cash Flow Summary Year Ended December 31, Changes, Year versus Year-Increase / (Decrease) 2022 2021 2020 2022 v. 2021 2021 v. 2020 Cash provided by operating activities $ 88,936 $ 88,263 $ 53,255 $ 673 $ 35,008 Cash used in investing activities (47,813) (182,619) (19,647) 134,806 (162,972) Cash provided by (used in) financing activities (14,764) 94,287 (15,255) (109,051) 109,542 Effect of exchange rate changes on cash and cash equivalents (38) (25) — (13) (25) Increase (decrease) in cash and cash equivalents $ 26,321 $ (94) $ 18,353 $ 26,415 $ (18,447) Operating Activities.
Cash Flow Summary Year Ended December 31, Changes, Year versus Year-Increase / (Decrease) 2023 2022 2021 2023 v. 2022 2022 v. 2021 Cash provided by operating activities $ 83,783 $ 88,936 $ 88,263 $ (5,153) $ 673 Cash used in investing activities (159,242) (47,813) (182,619) (111,429) 134,806 Cash provided by (used in) financing activities 45,924 (14,764) 94,287 60,688 (109,051) Effect of exchange rate changes on cash and cash equivalents 34 (38) (25) 72 (13) Increase (decrease) in cash and cash equivalents $ (29,501) $ 26,321 $ (94) $ (55,822) $ 26,415 Operating Activities.
During 2022, the Company changed the name of its Distillery Products segment to Distilling Solutions. Our strategic plan is designed to leverage our history and strengths as well as to leverage the positive macro trends we see in the industries in which we compete while providing better insulation from outside factors, including swings in commodity pricing.
Our ingredients products are sold directly, or through distributors, to manufacturers and processors of finished packaged goods or to bakeries. Our strategic plan is designed to leverage our history and strengths as well as the positive macro trends we see in the industries in which we compete, while providing better insulation from outside factors, including swings in commodity pricing.
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.
Forward-looking statements in this Report are 20 made as of the date of this Report, and we undertake no obligation to update any forward-looking statements or information made in this Report, except as required by law.
The increase in specialty wheat starches was primarily due to higher sales volume. The increase in specialty wheat proteins was primarily due to higher sales volume and higher average selling prices. The increase in commodity wheat starches was due to higher sales volume. Gross profit increased year versus year by $1,369, or 7 percent.
The higher sales of specialty wheat proteins was driven by higher average selling price and higher sales volume. Additionally, sales of specialty wheat starches and commodity wheat starches increased primarily due to higher average selling price, partially offset by lower sales volume. Gross profit increased year versus year by $15,464, or 49 percent.
Because we own all outstanding bonds, have a legal right to set-off, and intend to set-off the corresponding lease and interest payment, we have netted the capital lease obligation with the bond asset.
We recorded the land and buildings as assets in property, plant, and equipment, net, on our Consolidated Balance Sheets. Because we own all outstanding bonds, have a legal right to set-off, and intend to set-off the corresponding lease and interest payments, we have netted the capital lease obligation with the bond asset.
These increases were partially offset by increases in SG&A expenses and advertising and promotion expenses. Income tax expense 2022 to 2021 - Income tax expense for 2022 was $31,300, for an effective tax rate for the year of 22.3 percent. Income tax expense for 2021 was $30,279, for an effective tax rate for the year of 25.0 percent.
These increases were partially offset by a decrease in insurance recoveries as well as increases in advertising and promotion expenses and SG&A expenses. Income tax expense 2023 to 2022 - Income tax expense for 2023 was $34,616, for an effective tax rate for the year of 24.4 percent.
We regularly assess our cash needs and the available sources to fund these needs. We utilize short-term and long-term debt to fund discretionary items, such as capital investments, dividend payments as well as potential mergers and acquisitions. Subject to market conditions, we could also fund future mergers and acquisitions through the issuance of additional shares of common stock.
We anticipate being able to support our short-term liquidity and operating needs largely through cash generated from operations. We regularly assess our cash needs and the available sources to fund these needs. We utilize short-term and long-term debt to fund discretionary items, such as capital investments, dividend payments as well as potential mergers and acquisitions.
Cash provided by financing activities for year ended December 31, 2021 was $94,287, primarily due to net debt proceeds of $192,580 (see Long-Term and Short-Term Debt), primarily resulting from the issuance of the Convertible Senior Notes, partially offset by $87,509 payment on assumed debt as part of the Merger, and payments of dividends and dividend equivalents of $10,017 (see Note 8, Equity and EPS for additional information).
Cash provided by financing activities for the year ended December 31, 2023 was $45,924, primarily due to net proceeds on long-term debt of $57,400 (see Long-Term and Short-Term Debt), partially offset by payments of dividends and dividend equivalents of $10,675 (see Note 9, Equity and EPS for additional information).
The cash provided by operating activities during 2021 resulted primarily from net income of $90,817, adjustments for non-cash or non-operating charges of $16,850 including depreciation and amortization, deferred income taxes, share-based compensation, and partially offset by a gain on insurance recoveries, and by uses of cash due to changes in operating assets and liabilities of $19,404.
The cash provided by operating activities during 2023 resulted primarily from net income of $107,130 and adjustments for non-cash or non-operating charges of $56,263, including depreciation and amortization, impairment of long-lived assets and other, share-based compensation, partially offset by uses of cash due to changes in operating assets and liabilities of $79,610.
Total Branded Spirits segment sales increased 4,324 percent, due to the additional brands acquired as part of the Merger. Within the Distillery Solutions segment, sales were up 13 percent primarily due to an increase in sales of brown goods within premium beverage alcohol.
Within the Distilling Solutions segment, sales were up 22 percent, primarily due to an increase in sales of brown goods within premium beverage alcohol. Total Branded Spirits segment sales increased 30 percent, due to an increase in sales across all price tier categories.
The favorable macro trends benefiting our business include the expansion of the distilled spirits’ share within beverage alcohol, particularly growth of the American whiskey category that has continued to expand over the past several years.
The favorable macro industry trends we anticipate will benefit our business include the expansion in the U.S. of the distilled spirits’ share within beverage alcohol, particularly growth of the American whiskey category that has continued to expand over the past several years. These macro industry trends also include shifting sales mix to higher margin products, such as premium brown goods.
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 ingredients products are sold directly, or through distributors, to manufacturers and processors of finished packaged goods or to bakeries.
Our branded spirits products account for a range of price points from value products through ultra premium brands. Our 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.
Total Ingredient Solutions segment sales increased 28 percent primarily due to increased sales of specialty wheat starches and proteins. 2021 to 2020 - Sales for 2021 were $626,720, an increase of 58 percent compared to 2020, which was the result of increased sales in the Branded Spirits, Distilling Solutions and Ingredient Solutions segments.
Ingredient Solutions segment sales increased 14 percent due to increased sales across all Ingredient Solutions product lines. 2022 to 2021 - Sales for 2022 were $782,358, an increase of 25 percent compared to 2021, which was the result of increased sales in the Distilling Solutions, Branded Spirits, and Ingredient Solutions segments.
Operating income Operating income % Increase (Decrease) Operating income for 2020 $ 54,241 Increase in gross profit - Branded Spirits segment (a) 60,457 111 pp (b) Increase in gross profit - Distilling Solutions segment (a) 38,333 71 pp Increase in gross profit - Ingredient Solutions segment (a) 1,369 3 pp Increase in advertising and promotion expenses (13,386) (25) pp Increase in SG&A expenses (30,976) (57) pp Increase in insurance recoveries 16,325 30 pp Operating income for 2021 126,363 133 % Increase in gross profit - Branded Spirits segment (a) 32,877 26 pp (b) Increase in gross profit - Distilling Solutions segment (a) 12,176 10 pp Increase in gross profit - Ingredient Solutions segment (a) 9,288 7 pp Increase in advertising and promotion expenses (13,616) (11) pp Increase in SG&A expenses (1,798) (1) pp Decrease in insurance recoveries (16,325) (13) pp Operating income for 2022 $ 148,965 18 % (a) See segment discussion.
Operating income Operating income % Increase (Decrease) Operating income for 2021 $ 126,363 Increase in gross profit - Branded Spirits segment (a) 32,877 26 pp (b) Increase in gross profit - Distilling Solutions segment (a) 12,176 10 pp Increase in gross profit - Ingredient Solutions segment (a) 9,288 7 pp Increase in advertising and promotion expenses (13,616) (11) pp Increase in SG&A expenses (1,798) (1) pp Decrease in insurance recoveries (16,325) (13) pp Operating income for 2022 148,965 18 % Increase in gross profit - Distilling Solutions segment (a) 18,682 13 pp (b) Increase in gross profit - Branded Spirits segment (a) 17,260 12 pp Increase in gross profit - Ingredient Solutions segment (a) 15,464 10 pp Increase in advertising and promotion expenses (8,499) (6) pp Increase in SG&A expenses (16,768) (11) pp Impairment of long-lived assets and other (19,391) (13) pp Change in fair value of contingent consideration (7,100) (5) pp Operating income for 2023 $ 148,613 — % (a) See segment discussion.
Our Branded Spirits segment is also subject to unfavorable macro trends, which include increased competition as industry participants seek to capitalize on consumer trends. Our strategy for the Branded Spirits segment is to focus on the categories, brands, price points, bottle size and market support that will maximize profit for the Company.
Our Branded Spirits segment is also subject to unfavorable macro industry trends, which include inflation impacts on consumers, and increased 21 competition as industry participants seek to capitalize on consumer trends.
The bonds allow a 15 to 40 year real property tax abatement on our renovated and newly-constructed warehouse buildings and distilleries in Kentucky. We have been approved for $55,500 of industrial revenue bonds with the City of Williamstown Kentucky, and have used approximately $21,000.
Traditionally, industrial revenue bonds have been used as an economic development tool in the state to attract desirable businesses, including business in the bourbon industry, and have allowed a 15 to 40 year real property tax abatement on our renovated and newly-constructed warehouse buildings and distilleries in Kentucky.
The product is then divided by prior period sales dollars. (d) Percentage points (“pp”). 2021 compared to 2020 Total Branded Spirits sales for 2021 increased by $179,417, or 4,324 percent compared to 2020. Sales across all price tiers increased compared to 2020, primarily due to the additional brands acquired as part of the Merger.
The product is then divided by prior period sales dollars. (d) Percentage points (“pp”). 2023 compared to 2022 Total Branded Spirits sales for 2023 increased by $15,994, or 7 percent, compared to 2022.
At the bonds’ maturity the facilities will revert to us without costs. If we were to present the bonds for cancellation prior to maturity, a nominal fee could be incurred. We recorded the land and buildings as assets in property, plant, and equipment, net, on our Consolidated Balance Sheets.
At the bonds’ maturity, the facilities will revert to us without costs. If we were to present the bonds for cancellation prior to maturity, a nominal fee could be incurred. We may not be able to use industrial revenue bonds in the future due to legislative, regulatory, and related changes in the state of Kentucky.
At December 31, 2022, our cash balance was $47,889 and we have used our various debt agreements for liquidity purposes, with $400,000 remaining for additional 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.
At December 31, 2023, our cash balance was $18,388, and we have used our various debt agreements for liquidity purposes, with $337,000 available under our Credit Agreement for additional borrowings and $220,400 available under the Note Purchase Agreement (see Note 7, Corporate Borrowings for additional information).
The product is then divided by prior period sales dollars. (d) Percentage points (“pp”). 2021 compared to 2020 Total Ingredient Solutions sales for 2021 increased by $12,587, or 16 percent compared to 2020. Sales of specialty wheat starches and proteins and commodity wheat starches increased, while sales of commodity wheat proteins decreased.
The product is then divided by prior period sales dollars. (d) Percentage points (“pp”). 2023 compared to 2022 Total Ingredient Solutions sales for 2023 increased by $15,795, or 14 percent, compared to 2022. The increase in Ingredient Solutions sales was driven by increases in sales in all product lines.
(b) Includes open purchase order commitments related to raw materials and packaging used in the ordinary course of business of $238,969. Industrial Revenue Bonds We are in various stages of financing projects with industrial revenue bond transactions for our facilities located in Kentucky.
(b) Includes open purchase order commitments related to raw materials and packaging used in the ordinary course of business of 101,872. (c) Excludes variable interest on long-term debt Industrial Revenue Bonds We are in the process of completing several projects that have been financed using industrial revenue bonds in the state of Kentucky.
The increase was also driven by the assumption of Luxco’s advertising and promotion expenses for the full year of 2022. 2021 to 2020 - Advertising and promotion expenses for 2021 were $16,098, an increase of 494 percent compared to 2020.
This was primarily driven by an increased advertising and promotion investment in the Branded Spirits segment, specifically in the premium plus price tiers. The increase was also driven by the assumption of Luxco’s advertising and promotion expenses for the full year of 2022.
Net borrowings / (payments) on all debt for 2022 and 2021 were $(3,403), and $192,580, respectively (see Note 6, Corporate Borrowings for additional information). Dividends and Dividend Equivalents. See Note 8, Equity and EPS for further discussion.
Total debt was $287,249 (net of unamortized loan fees of $6,601) at December 31, 2023 and $230,335 (net of unamortized loan fees of $6,115) at December 31, 2022. Net borrowings / (payments) on all debt for 2023 and 2022 were $57,400, and $(3,403), respectively (see Note 7, Corporate Borrowings for additional information). Dividends and Dividend Equivalents.
Gross profit increased year versus year by $38,333, or 51 percent. Gross margin for 2021 increased to 32.4 percent from 24.2 percent for 2020. The increase in gross profit was primarily due to higher sales volume on brown goods as well as higher average selling price on industrial, white goods and fuel grade alcohol.
The decreases in sales volume of white goods, distillers feed and related co-products, and industrial alcohol were partially offset by higher average selling price. Gross profit increased year versus year by $18,682, or 15 percent. Gross margin for 2023 increased to 32.2 percent from 29.5 percent for 2022.
The increase in advertising and promotion expenses were primarily driven by the assumption of Luxco’s advertising and promotion expenses during 2021. SG&A expenses 2022 to 2021 - SG&A expenses for 2022 were $74,627, an increase of 2 percent compared to 2021.
The increase in SG&A expenses was primarily due to higher personnel expenses and incentive compensation, inclusive of certain incremental costs incurred relating to our CEO transition, and business acquisition expenses related to the acquisition of Penelope. 2022 to 2021 - SG&A expenses for 2022 were $74,627, an increase of 2 percent compared to 2021.
The primary drivers of the changes in operating assets and liabilities were $14,214 use of cash related to an increase in inventories, primarily barrel distillate, $6,242 use of cash related to income taxes refundable, and $6,031 use of cash related to an increase in receivables, inclusive of insurance receivables, partially offset by $5,301 of cash provided by an increase in accounts payable related to the timing of cash disbursements.
The primary drivers of the changes in operating assets and liabilities were $46,921 use of cash related to an increase in inventories, primarily barreled distillate, and $32,397 use of cash related to an increase in receivables. Cash provided by operating activities was $88,936 during the year ended December 31, 2022.
Cash used in investing activities for year ended December 31, 2021 was $182,619, which primarily resulted from $149,005 related to the Merger with Luxco and additions to property, plant and equipment of $47,389 (see Capital Spending), partially offset by cash proceeds of $16,325 from property insurance recoveries. 31 Capital Spending. We manage capital spending to support our business growth plans.
Cash used in investing activities for the year ended December 31, 2023 was $159,242, which primarily resulted from $103,712 related to the acquisition of Penelope and additions to property, plant and equipment of $55,267 (see “Capital Spending”).
Our strategy within the Distilling Solutions segment is to continue migrating away from industrial alcohol to white beverage alcohol, cultivate additional multi-national and craft customers for brown goods sales, enhance offerings to 20 become a beverage alcohol “solution provider”, and develop an export market for our aged brown goods.
Our strategy for the Distilling Solutions segment is to further develop our existing customer relationships, expand our Kentucky whiskey sales platform, cultivate additional multi-national and craft customers for brown goods sales, and increase our global presence in the American whiskey market.
Additionally, gross profit increased due to increased sales of American whiskey brands within our premium plus price tiers. 27 BRANDED SPIRITS SALES Year Ended December 31, Year-versus-Year Sales Change Increase/ (Decrease) 2021 2020 $ Change % Change Ultra Premium $ 27,722 $ 1,785 $ 25,937 1,453 % Super Premium 8,937 2,196 6,741 307 Premium 17,626 125 17,501 14,001 Premium Plus 54,285 4,106 50,179 1,222 Mid 71,292 — 71,292 N/A Value 38,520 — 38,520 N/A Other 19,469 43 19,426 45,177 Total Branded Spirits $ 183,566 $ 4,149 $ 179,417 4,324 % Change in Year-versus-Year Sales Attributed to: Total (a) Volume (b) Net Price/Mix (c) Branded Spirits 4,324% 29,320% (24,996)% Other Financial Information Year Ended December 31, Year-versus-Year Increase/(Decrease) 2021 2020 Change % Change Gross profit $ 62,644 $ 2,187 $ 60,457 2,764 % Gross margin % 34.1 % 52.7 % (18.6) 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.
Additionally, gross profit increased due to increased sales of American whiskey brands within our premium plus price tiers. 29 INGREDIENT SOLUTIONS SEGMENT INGREDIENT SOLUTIONS SALES Year Ended December 31, Year-versus-Year Sales Change Increase/ (Decrease) 2023 2022 $ Change % Change Specialty wheat starches $ 66,050 $ 62,567 $ 3,483 6 % Specialty wheat proteins 48,291 39,313 8,978 23 Commodity wheat starches 16,413 14,023 2,390 17 Commodity wheat proteins 982 38 944 2,484 Total Ingredient Solutions $ 131,736 $ 115,941 $ 15,795 14 % Change in Year-versus-Year Sales Attributed to: Total (a) Volume (b) Net Price/Mix (c) Total Ingredient Solutions 14% (6)% 20% Other Financial Information Year Ended December 31, Year-versus-year Increase/(Decrease) 2023 2022 Change % Change Gross profit $ 46,967 $ 31,503 $ 15,464 49 % Gross margin % 35.7 % 27.2 % 8.5 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.
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. 25 DISTILLING SOLUTIONS SALES Year Ended December 31, Year-versus-Year Sales Change Increase/ (Decrease) 2021 2020 $ Change % Change Brown Goods $ 162,074 $ 121,384 $ 40,690 34 % White Goods 75,818 63,873 11,945 19 Premium beverage alcohol 237,892 185,257 52,635 28 Industrial alcohol 62,628 80,682 (18,054) (22) Food grade alcohol 300,520 265,939 34,581 13 Fuel grade alcohol 14,916 5,630 9,286 165 Distillers feed and related co-products 19,545 26,109 (6,564) (25) Warehouse services 17,523 15,631 1,892 12 Total Distilling Solutions $ 352,504 $ 313,309 $ 39,195 13 % Change in Year-versus-Year Sales Attributed to: Total (a) Volume (b) Net Price/Mix (c) Premium beverage alcohol 28% 21% 7% Other Financial Information Year Ended December 31, Year-versus-Year Increase/(Decrease) 2021 2020 Change % Change Gross profit $ 114,106 $ 75,773 $ 38,333 51 % Gross margin % 32.4 % 24.2 % 8.2 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.
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. 27 BRANDED SPIRITS SEGMENT BRANDED SPIRITS SALES Year Ended December 31, Year-versus-Year Sales Change Increase/ (Decrease) 2023 2022 $ Change % Change Ultra Premium $ 63,748 $ 48,245 $ 15,503 32 % Super Premium 13,424 12,274 1,150 9 Premium 28,293 24,211 4,082 17 Premium Plus 105,465 84,730 20,735 24 Mid 75,676 82,530 (6,854) (8) Value 47,907 47,395 512 1 Other 24,885 23,284 1,601 7 Total Branded Spirits $ 253,933 $ 237,939 $ 15,994 7 % Change in Year-versus-Year Sales Attributed to: Total (a) Volume (b) Net Price/Mix (c) Branded Spirits 7% (6)% 13% Other Financial Information Year Ended December 31, Year-versus-Year Increase/(Decrease) 2023 2022 Change % Change Gross profit $ 112,781 $ 95,521 $ 17,260 18 % Gross margin % 44.4 % 40.1 % 4.3 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.
Total Branded Spirits segment sales increased 30 percent, due to an increase in sales across all price tier categories.
Branded Spirits segment sales increased 7 percent, primarily due to increased sales of brands in the premium plus price tiers.
Under these agreements, we must meet certain financial covenants and restrictions, and at December 31, 2022, we met those covenants and restrictions. 32 At December 31, 2022, our current assets exceeded our current liabilities by $348,787, largely due to our inventories, at cost, of $289,722.
At December 31, 2023, our current assets exceeded our current liabilities by $400,191, largely due to our inventories, at cost, of $346,853.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Biggest changeBased on weighted average outstanding variable-rate borrowings at December 31, 2022, a 100 basis point increase over the current rates actually in effect at such date would have a minimal impact on interest expense.
Biggest changeBased on weighted average outstanding variable-rate borrowings at December 31, 2023, a 100 basis point increase over the current rates actually in effect at such date would increase our interest expense on an annual basis by $630.
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.
Through our grain supply contracts for our Lawrenceburg facility, 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.
Our Credit Agreement, Convertible Senior Notes and Note Purchase Agreement (Note 6, Corporate Borrowings) 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 to increase and earnings before income taxes to decrease.
Our Credit Agreement, Convertible Senior Notes and Note Purchase Agreement (Note 7, Corporate Borrowings) 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 to increase and earnings before income taxes to decrease.
Based on weighted average outstanding fixed-rate borrowings at December 31, 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 $29,537, 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 $37,243. 34
Based on weighted average outstanding fixed-rate borrowings at December 31, 2023, a 100 basis point increase in market rates would result in a decrease in the fair value of our outstanding fixed-rate debt of $17,134, 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 $13,000. 35

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