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What changed in MGP INGREDIENTS INC's 10-K — 2023 vs 2024

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Paragraph-level year-over-year comparison of MGP INGREDIENTS INC's 2023 and 2024 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 2024 report.

+289 added−275 removedSource: 10-K (2025-02-26) vs 10-K (2024-02-22)

Top changes in MGP INGREDIENTS INC's 2024 10-K

289 paragraphs added · 275 removed · 219 edited across 8 sections

Item 1. Business

Business — how the company describes what it does

48 edited+1 added−13 removed17 unchanged
Biggest changeOur 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.
Biggest changeIn 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 ingredients to better serve the baking and tortilla food segments. During 2024, our five largest Ingredient Solutions customers, combined, accounted for approximately 14 percent of our consolidated sales.
AVAILABLE INFORMATION We make available through our website (www.mgpingredients.com) under “Investors,” free of charge, our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, special reports, and other information, and amendments to those reports as soon as reasonably practicable after we electronically file or furnish such material with the Securities and Exchange Commission (“SEC”).
AVAILABLE INFORMATION We make available through our website (www.mgpingredients.com) under “Investors,” free of charge, our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, special reports, other information, and amendments to those reports, as soon as reasonably practicable after we electronically file or furnish such material with the Securities and Exchange Commission (“SEC”).
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.
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 ingredient products are sold directly, or through distributors, to manufacturers and processors of finished packaged goods or to bakeries. Mission Statement.
METHOD OF PRESENTATION All amounts in this Report, except for shares, par values, bushels, gallons, pounds, mmbtu, proof gallons, 9-liter cases, per share, per bushel, per gallon, per proof gallon, per 9-liter case, and percentage amounts, are shown in thousands unless otherwise noted.
METHOD OF PRESENTATION All amounts in this Report, except for shares, par values, bushels, gallons, pounds, mmbtu, proof gallons, 9-liter cases, per share, per bushel, per gallon, per pound, per mmbtu, per proof gallon, per 9-liter case, and percentage amounts, are shown in thousands unless otherwise noted.
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 have robust equal employment opportunity and anti-discrimination policies, and in 2024 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 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.
We routinely 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.
We use proprietary processing steps to purify and clean impurities from the starch, and then dry the starch using spray, flash, or drum dryers. A substantial portion of our premium wheat starch is processed to produce certain unique specialty wheat starches designed for special applications.
We use proprietary processing steps to purify and clean impurities from the starch, and then dry the starch using spray, flash, or drum dryers. A substantial portion of our premium wheat starch is processed to produce certain unique specialty wheat starches designed for numerous healthy applications.
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.
We 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 premium plus brands.
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.
Our key human capital measures include employee safety, employee retention, rewards and recognition, and professional development. 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.
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.
GENERAL INFORMATION MGP is a leading producer of branded and distilled spirits, as well as food ingredient solutions. Distilled spirits include premium bourbon, rye, and other whiskeys (“brown goods”) and grain neutral spirits (“GNS”), including vodka and gin. Our distilled spirits are either sold directly or indirectly to manufacturers of other branded spirits.
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.
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), which are produced at our distilleries in Lawrenceberg, Indiana, and Bardstown, Kentucky.
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.
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. INFORMATION ABOUT OUR EXECUTIVE OFFICERS Our executive officers as of February 26, 2025: Name Age Principal Occupation and Business Experience Brandon M.
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.
Vice President Human Resources at R1 RCM - Central Operations from February 2018 to May 2021. Vice President Human Resources, North American Operations at Benteler Automotive from January 2015 to February 2018. Amel Pasagic 41 Chief Commercial Officer and Vice President for the Company since January 2024. Chief Information Officer for the Company from July 2021 to January 2024.
In this Report, for any references to Note 1 through Note 16 refer to the Notes to Consolidated Financial Statements in Item 8.
In this Annual Report on Form 10-K (this “Report”), for any references to Note 1 through Note 16 refer to the Notes to Consolidated Financial Statements in Item 8.
We sell our specialty wheat starches on a global basis, primarily to food processors and distributors. We primarily market our specialty wheat starches under the trademarks Fibersym ® Resistant Starch series and FiberRite ® RW Resistant Starch.
We sell our specialty wheat starches on a global basis, primarily to food processors and distributors. 2 We primarily market our specialty wheat starches under the brand name Fibersym ® , a resistant wheat starch.
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.
During 2024, one customer of the Ingredient Solutions segment accounted for approximately 12 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 a starch slurry.
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.
Sales are pursuant to customer contracts and purchase orders. MGP’s branded spirits include a wide spectrum of brands across numerous categories and price tiers. During 2024, our five largest Branded Spirits customers, combined, accounted for approximately 20 percent of our consolidated sales. During 2024, one customer of the Branded Spirits segment accounted for approximately 13 percent of our consolidated sales.
RAW MATERIALS AND PACKAGING MATERIALS Our principal Distilling Solutions segment raw materials, or input costs, are corn and other grains (including rye, barley, wheat, barley malt, and milo), which are processed into food grade alcohol and distillery co-products consisting of distillers feed, fuel grade alcohol, and corn oil.
RAW MATERIALS AND PACKAGING MATERIALS Our principal Distilling Solutions segment raw materials, or input costs, are corn and other grains (including rye, barley, wheat, barley malt, and milo), which are processed into brown goods, white goods and other co-products.
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.
Premium plus branded spirits include brands such as Penelope ® Bourbon, Yellowstone ® Bourbon, Rebel ® Bourbon, Remus ® Bourbon, Blood Oath ® Bourbon, Ezra Brooks ® Bourbon, Minor Case ® Straight Rye Whiskey, Rossville Union ® Straight Rye Whiskey, The Quiet Man ® Irish Whiskey, Green Hat ® Gin, and Everclear ® grain alcohol.
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.
Gall 43 Interim President and Chief Executive Officer since January 1, 2025 and 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.
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.
We have programs for continuing education, professional development at all levels of the organization, and also provide tuition reimbursement assistance. All 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.
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.
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. Other than these product lines, our sales, on average, are generally not seasonal. 3 TRANSPORTATION Historically, our products have been transported to customers by truck and rail, most of which is provided by common carriers.
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.
A collective bargaining agreement, covering 46 employees at the St. Louis facility, expires on 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. We believe our employees are key to achieving our business objectives.
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.
Some of these patent filings cover significant product formulation and processes used to manufacture our products. 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.
The Premium Plus price tiers consist of brands within the Ultra Premium, Super Premium and Premium price tier categories.
Premium plus - The premium plus price tier includes the ultra premium, super premium, and premium price tiers.
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.
In our Branded Spirits segment, competition is based primarily on product innovation, price, brand recognition, product distribution, retail positioning, and quality factors, such as flavor. 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.
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.
HUMAN CAPITAL As of December 31, 2024, we had a total of 660 employees. A collective bargaining agreement, covering 80 employees at the Atchison facility, that was due to expire on August 31, 2024, was successfully renewed until August 31, 2029. A collective bargaining agreement, covering 71 employees at the Lawrenceburg facility, expires on October 24, 2027.
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.
Our entire starch portfolio is also known to provide whiteness, clean flavor, and viscosity. Specialty Wheat Proteins - We have developed numerous specialty wheat proteins for food applications under our Arise brand platform. Specialty wheat proteins are created from vital wheat gluten through a variety of proprietary processes which change its molecular structure.
Our products compete against similar products of many large and small companies. In our Distilling Solutions segment, competition is based primarily on product innovation, product characteristics, functionality, price, service, and quality factors, such as flavor. In our Branded Spirits segment, competition is based primarily on product innovation, price, brand recognition, product distribution, retail positioning, and quality factors, such as flavor.
This wheat protein is also the starter material used to create our textured wheat product line branded under Proterra ® . COMPETITIVE CONDITION Our products compete against similar products of many large and small companies. In our Distilling Solutions segment, competition is based primarily on product innovation, product characteristics, functionality, price, service, and quality factors, such as flavor.
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.
PATENTS, TRADEMARKS, AND LICENSES Our patent-related activities pertain to our Ingredient Solutions 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.
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.
Our notable health, welfare, recognition, and retirement benefits for our U.S. employees include: • Company subsidized health insurance including Company paid life and disability insurance • Wellness program with financial rewards • Enhanced Employee Assistance Programs • 401(k) Plan with Company matching contributions • Tuition assistance program • Paid vacation and holidays, including a floating holiday • Expanded paid parental leave • Charitable giving program with Company matching of employee donations • Professional development employee resource group • Recognition platform to celebrate employee successes and milestone events • Employee referral program with financial incentives Employee safety is one of our top priorities.
Served in a variety of IT leadership roles with increasing responsibility at Luxco, Inc. beginning in June 2011.
Vice President, Information Technology for the Company from April 2021 to July 2021. Served in a variety of IT leadership roles with increasing responsibility at Luxco, Inc. beginning in June 2011.
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.
Specialty wheat proteins for food and pet treat applications include the Arise 5000, 6000, and 5500 products. All of these ingredients are Project Verified Non-Genetically Modified Organisms (“Non-GMO”). We also produce clean label wheat protein isolates under our Arise ® brand, including Arise ® 8100 and 8200. All our wheat proteins are considered Project Verified Non-GMO.
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.
Director of Supply Chain and New Business Development Finance for the Company from May 2014 to May 2018. Erika Lapish 50 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.
The cohesiveness and elasticity of the gluten enables the dough in wheat and other high protein breads to rise and to support added ingredients, such as whole cracked grains, raisins and fibers. This allows bakers to make an array of different breads by varying the gluten content of the dough.
The cohesiveness and elasticity of the gluten enables the dough in wheat and other high protein breads to rise and to support added ingredients, such as whole cracked grains, raisins and fibers. 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 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.
We develop and administer company-wide policies and trainings designed to ensure the safety of each team member and compliance with Occupational Safety and Health Administration (“OSHA”) standards or similar standards for our operations outside of the U.S. 4 Our Company strives for workforce retention.
(“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.
Mid - Mid branded spirits include brands such as Brady’s ® Irish Cream, Saint Brendan’s ® Irish Cream Liqueur, Pearl ® Vodka, and Lord Calvert ® Canadian Whisky. Additionally, mid includes Exotico ® Tequila, which is produced with our joint venture, DGL.
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.
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.
These flagship brands are FDA approved dietary fibers and are useful in creating lower net carb baked goods for many industrial bakers and pasta makers. Our other specialty starches are used primarily for food applications to improve their nutritional profile, appearance, texture, tenderness, taste, palatability, cooking temperature, stability, viscosity, binding, and freeze-thaw characteristics.
This flagship brand is FDA approved as a dietary fiber and is functional in creating lower net carb baked goods for many industrial bakers, tortilla producers, and pasta makers. Our specialty starches are used for food applications to primarily improve their nutritional profiles. However, other benefits include color, texture, fiber content, and taste.
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.
We believe our trademark rights 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.
We also offer a Non-GMO Project Verified food ingredients portfolio of Proterra ® 1000, Proterra ® 2000, and plant protein combinations textured and ready for meat replacement applications. Additionally, we offer gluten-free textured pea proteins within the Proterra ® portfolio of products.
Ingredient Solutions also offers a Non-GMO Project Verified texturized plant proteins under the Proterra ® brand. These proteins are designed for “non-meat” food applications and are marketed in a number of countries throughout the world to provide texture and protein in various food applications. Additionally, we offer gluten-free textured pea proteins within the Proterra ® portfolio of products.
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.
Additionally, premium plus includes El Mayor ® Tequila and Dos Primos ® Tequila, which are 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”, and together with DGL, “LMX” ).
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.
Private label products are processed, bottled, and distributed by us for sales under another company’s brand. We operate visitor centers with retail locations at two of our distilleries, Lux Row Distillers ® in Bardstown, Kentucky, and Limestone Branch Distillery ® in Lebanon, Kentucky.
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.
During 2024, our five largest Distilling Solutions customers, combined, accounted for approximately 21 percent of our consolidated sales. 1 Brown goods - The majority of our distillery capacities are dedicated to the production of high quality, high purity food grade alcohol for beverage applications, including bourbon, rye and other whiskeys.
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.
Value - Value branded spirits include brands such as Arrow ® Cordials, Canada House ® Canadian Whisky, Lady Bligh ® Rum, and Juarez ® Tequila. 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 services.
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.
Our premium brown goods are created by distilling grains, including corn and rye. Our brown goods are sold as aged and unaged distillate, which may be further aged by our customers or warehoused at our facilities for typically two to six years.
Services 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.
The mash is sold primarily to processors of animal feed as a high protein additive primarily as dried distillers feed. 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 or to state governments that directly control the sale of alcohol.
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.
White goods and other co-products - Our white goods consists of GNS, including vodka and gin. Our GNS is sold in bulk quantities. Our gin is primarily created by redistilling GNS together with proprietary formulations of botanicals or botanical oils. The bulk alcohol co-products sales include distillers feed, which is principally derived from the mash from alcohol processing operations.
Removed
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.
Added
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 protein products which are sold to customers pursuant to purchase orders.
Removed
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.
Removed
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.
Removed
Food grade alcohol sold for beverage applications, premium beverage alcohol , consists primarily of premium bourbon, rye, and other whiskeys (“ brown goods ”) and GNS, including vodka and gin (“ white goods ”). Our premium brown goods are created by distilling grains, including corn and rye.
Removed
Food grade industrial alcohol is used as an ingredient in foods (e.g., vinegar and food flavorings), personal care products (e.g., hair sprays and hand sanitizers), cleaning solutions, pharmaceuticals, and a variety of other products. We sell food grade industrial alcohol in tank truck or rail car quantities direct to a number of industrial processing customers.
Removed
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.
Removed
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.
Removed
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.
Removed
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.
Removed
Vital wheat gluten is also added to white breads, hot dog buns, and hamburger buns to improve the strength and cohesiveness of the product.
Removed
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.
Removed
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.
Removed
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.

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

63 edited+24 added−10 removed111 unchanged
Biggest changeIn 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.
Biggest changeSee also Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Critical Accounting Estimates—Goodwill and Indefinite-Lived Intangible Assets” and Part II, Item 8, Note 5, Goodwill and Other Intangible Assets, to our Consolidated Financial Statements. • 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.
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.
In the event that the effects of 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.
Ransomware attacks or other cybersecurity breaches have occurred, either internally or at our third-party technology service providers, and have caused and may in the future cause us to be prevented from accessing our data, resulting in interruptions or delays in our business, and causing us to incur remediation costs or requiring us to pay ransom to a hacker which takes over our systems, or damage our reputation.
Ransomware attacks or other cybersecurity breaches have occurred, either internally or at our third-party technology service providers, and have caused and may in the future cause us to be prevented from accessing our data, 14 resulting in interruptions or delays in our business, and causing us to incur remediation costs or requiring us to pay ransom to a hacker which takes over our systems, or damage our reputation.
The 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.
The 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 ransomware attacks, security breaches, failures in maintenance or development of new IT systems, and errors by employees or vendors.
Similarly, stakeholders and others who disagree with our ESG or sustainability actions, positions, or statements may speak negatively or advocate against us, which could have a material adverse effect on our business, financial condition, or results of operations. A failure to introduce successful new brands and products or have effective marketing or advertising could adversely affect our results of operations.
Similarly, stakeholders and others who disagree with our ESG or sustainability actions, positions, or statements may speak negatively or advocate against us, which could have a material adverse effect on our business, financial condition, or results of operations. 6 A failure to introduce successful new brands and products or have effective marketing or advertising could adversely affect our 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.
Moreover, even if a product liability or other legal or regulatory claim is unsuccessful, has no merit, or is not 11 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.
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.
Our operations are also subject to regulation by various U.S. federal agencies, including the TTB, OSHA, the 9 FDA, and the EPA, by various U.S. state and local authorities, and by various foreign authorities. We are also required to conduct business only with holders of licenses to import, warehouse, transport, distribute, and sell beverage alcohol products.
Any issuance of our Common Stock or securities convertible into our Common Stock to fund an acquisition could substantially dilute the ownership percentage of our current stockholders and negatively impact the market price of our Common stock. For example, in connection with the Merger we issued approximately 5.0 million shares of our Common Stock.
Any issuance of our Common Stock or securities convertible into our Common Stock to fund an acquisition could 15 substantially dilute the ownership percentage of our current stockholders and negatively impact the market price of our Common stock. For example, in connection with the Merger we issued approximately 5.0 million shares of our Common Stock.
Larger retailers may seek to improve their profitability and sales by asking for lower prices or increased trade spending. The efforts of retailers could result in reduced profitability for the distilled spirits industry as a whole and indirectly adversely affect our financial results.
Larger retailers may seek to improve their profitability and sales by asking for lower prices 7 or increased trade spending. The efforts of retailers could result in reduced profitability for the distilled spirits industry as a whole and indirectly adversely affect our financial results.
We may not be able to discover or determine the extent of any unauthorized use of our proprietary rights. Third parties that license our proprietary rights also may take actions that diminish the value of our proprietary rights or reputation. The protection of our intellectual property may require the expenditure of significant financial and managerial resources.
We may not be able to discover or determine the extent of any unauthorized use of our proprietary rights. Third parties that license our proprietary rights also may take actions that diminish the value of our proprietary rights or reputation. The protection of our 10 intellectual property may require the expenditure of significant financial and managerial resources.
Any 8 future accidents or other catastrophic events could result in an extended interruption or reduction of production at our facilities, and we may incur costs or financial losses that are either not insured against or not fully covered through our insurance.
Any future accidents or other catastrophic events could result in an extended interruption or reduction of production at our facilities, and we may incur costs or financial losses that are either not insured against or not fully covered through our insurance.
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.
These matters may have a material adverse effect on our business, financial condition, or results of operations. Tariffs imposed by the U.S. and 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.
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.
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 and would involve risks related to the valuation and terms of any such transaction.
The loss of a significant amount of our aged or aging inventory at these facilities through fire, natural disaster, or otherwise could result in a reduction in supply of the affected product or products and could affect our long-term performance of any affected brands.
The loss of a significant amount of our aged or aging inventory at these facilities through fire, natural disaster, or otherwise could result in a reduction in supply of the affected products and could affect our long-term performance of any affected brands.
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.
Under our Articles of Incorporation, (i) holders of our preferred stock, par value $10.00 per share (“Preferred Stock”), are entitled to elect five of our nine directors and (ii) 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.
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.
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 50 countries. Some of the countries where we do business have a higher risk of corruption than others.
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.
Generally, our Common Stock and Preferred Stock vote as separate classes on all other matters requiring stockholder approval. As of December 31, 2024, 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.
ITEM 1A. RISK FACTORS Our business is subject to certain risks and uncertainties that could cause actual results and events to differ materially from forward looking statements. The following discussion identifies those which we consider to be most important. The following discussion of risks is not all inclusive.
ITEM 1A. RISK FACTORS Our business is subject to certain risks and uncertainties that could cause actual results and events to differ materially from forward looking statements. The following discussion identifies those risks which we consider to be material. The following discussion of risks is not all inclusive.
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.
Customer and consumer preferences and purchases may shift due to a host of factors, many of which are difficult to predict, including: 5 • demographic and social trends; • economic conditions; • product innovations; • public health policies and initiatives (including dietary guidelines and labeling requirements 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 cannabis; and • changes in travel, leisure, dining, entertaining, and beverage consumption trends.
We also store a substantial amount of our own inventory of aged or aging bourbon, rye, and other whiskeys at our warehouses and at the facilities of certain third-party producers. If a catastrophic event were to occur at any of these locations, our business, financial condition, or results of operations could be adversely affected.
We also store a substantial amount of our own inventory of aged or aging bourbon, rye, and other whiskeys at our warehouses and at other facilities, including facilities owned by certain third-party producers. If a catastrophic event were to occur at any of these locations, our business, financial condition, or results of operations could be adversely affected.
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.
In addition, we are subject to potential business disruption caused by military conflicts; the results of elections; 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.
Increases in regulation of this nature could substantially reduce consumer awareness of our products in the affected markets and make the introduction of new products more challenging. Governmental agencies may issue dietary guidelines that recommend reduced alcohol 10 consumption, which could impact consumer behavior.
Increases in regulation of this nature could substantially reduce consumer awareness of our products in the affected markets and m ake the introduction of new products more challenging. Governmental agencies may issue dietary guidelines that recommend reduced alcohol consumption, which could impact consumer behavior.
We have established relationships for our branded spirits with a limited number of wholesale distributors, and one wholesale distributor represented approximately 11 percent of our consolidated net sales for 2023. Failure to maintain those relationships could significantly and adversely affect our business, sales, and growth.
We have established relationships for our branded spirits with a limited number of wholesale distributors, and one wholesale distributor represented approximately 13 percent of our consolidated net sales for 2024. Failure to maintain those relationships could significantly and adversely affect our business, sales, and growth.
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 particular, we and other companies operating 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.
Furthermore, a group of stockholders beneficially owning approximately 21 percent of our Common Stock as of December 31, 2023 (excluding shares controlled by certain other stockholders) have a right to nominate up to two of the four directors to be elected by holders of our Common Stock pursuant to the terms of a shareholders’ agreement, provided they continue to hold a certain amount of our Common Stock, and two other individuals who beneficially own approximately 13 percent of our Common Stock as of December 31, 2023 have agreed to vote in favor of those nominees with respect to any shares of Common Stock over which they have sole voting control.
Furthermore, a group of stockholders beneficially owning appro ximately 23 percent of our Common Stock as of December 31, 2024 (excluding shares controlled by certain other stockholders) have a right to nominate up to two of the four directors to be elected by holders of our Common Stock pursuant to the terms of a shareholders’ agreement, provided they continue to hold a certain amount of our Common Stock, and two other individuals who beneficially own approximately 13 percent of our Common Stock as of December 31, 2024 have agreed to vote in favor of those nominees with respect to any share s of Common Stock over which they have sole voting control.
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.
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.
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.
A pandemic, such as COVID-19, or another widespread health crisis, could have a negative impact on our operations, including voluntary or mandatory temporary closures of our facilities or offices; interruptions to 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; reductions in 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.
Various jurisdictions have adopted or may seek to adopt significant additional product labeling or warning requirements or limitations on the availability of our products relating to the content or perceived adverse health consequences of some of our products.
Significant additional labeling or warning requirements or limitations on the availability of our products could inhibit sales of affected products. Various jurisdictions have adopted or may seek to adopt significant additional product labeling or warning requirements or limitations on the availability of our products relating to the content or perceived adverse health consequences of some of our products.
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.
Our products are sold in more than 50 countries; accordingly, we are subject to risks associated with doing business globally, including commercial, political, and financial risks.
Our ability to make and sell our products depends upon the availability of raw materials and energy resources. Prices and supply of all products are subject to market forces, such as weather, changes in domestic and global demand and supply, and global political or economic issues, including repercussions from Russia’s invasion of Ukraine.
Our ability to make and sell our products depends upon the availability of raw materials and energy resources. Prices and supply of all products are subject to market forces, such as inflation, weather, changes in domestic and global demand and supply, and global political or economic issues.
If we fail to maintain good relations with a distributor, our branded spirits could, in some instances be frozen out of one or more markets entirely.
If we fail to maintain good relations with a distributor, our branded spirits could, in some instances be excluded from one or more markets entirely.
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.
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.
The payment of dividends, as well as the amount of any dividends, requires approval of our Board of Directors. Future dividend payments are also subject to our financial results, the availability of statutory surplus funds to pay dividends, restrictions in our debt agreements, and our capital allocation strategy.
The payment of dividends, the amount of any dividends, and any share repurchase program require approval of our Board of Directors. Future dividend payments and share repurchases are also subject to our financial results, the availability of statutory surplus funds to pay dividends, restrictions in our debt agreements, and our capital allocation strategy.
Work disruptions or stoppages by our unionized workforce could cause interruptions in our operations. As of December 31, 2023, approximately 209 of our 705 employees were members of a union.
Work disruptions or stoppages by our unionized workforce could cause interruptions in our operations. As of December 31, 2024, approximately 197 of our 660 employees were members of a union.
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.
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. 13 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 our competitors increase their spending on advertising and promotions, if our advertising, media, or marketing expenses increase, if our advertising and promotions become less effective than those of our competitors, or if we do not adequately leverage technology and data analytic capabilities needed to generate concise competitive insight, our business, financial condition, or results of operations could be adversely affected. 7 A change in public opinion about alcohol or our products could reduce demand for our brands and products.
If our competitors increase their spending on advertising and promotions, if our advertising, media, or marketing expenses increase, if our advertising and promotions become less effective than those of our competitors, or if we do not adequately leverage technology and data analytic capabilities needed to generate concise competitive insight, our business, financial condition, or results of operations could be adversely affected.
These tariffs are currently slated to be reinstated and doubled if an agreement is not reached by March 31, 2025. Similar retaliatory tariffs may be implemented in the future.
These tariffs are currently slated to be reinstated and doubled if an agreement is not reached by March 31, 2025.
For example, advocacy groups in Australia, Canada, and the United Kingdom have called for the consideration of requiring the sale of alcohol in plain packaging with more comprehensive health warnings or have launched additional health-related campaigns in an effort to change drinking habits in those countries.
Surgeon General suggested requiring that alcohol products have labels with increased and more prominent warnings regarding the health risks of alcohol consumption and in the past, advocacy groups in Australia, Canada, and the United Kingdom have called for the consideration of requiring the sale of alcohol in plain packaging with more comprehensive health warnings or have launched additional health-related campaigns in an effort to change drinking habits in those countries.
We are dependent on being able to generate sales and other operating income in excess of the costs of products sold in order to obtain margins, profits, and cash flows to meet or exceed our targeted financial performance measures.
Industry consolidation can have varying degrees of impact, including the creation of new and larger competitors. We are dependent on being able to generate sales and other operating income in excess of the costs of products sold in order to obtain margins, profits, and cash flows to meet or exceed our targeted financial performance measures.
Further, we cannot predict whether our products will become subject to increased rules and regulations, which, if enacted, could increase our costs or adversely impact sales.
Further, we cannot predict whether our products will become subject to increased rules and regulations, which, if enacted, could increase our costs or adversely impact sales. For example, in early January 2025, the U.S.
If our customers and consumers shift away from spirits (particularly brown spirits, such as our bourbon, rye, and other whiskeys) or shift from purchasing our higher-margin products to our lower-margin products, our business, financial condition, or results of operations could be adversely affected. 6 The markets for our products are very competitive, and our business could be negatively affected if we do not compete effectively.
If our customers and consumers shift away from spirits (particularly brown spirits, such as our bourbon, rye, and other American whiskeys) or shift from purchasing our higher-margin products to our lower-margin products, our business, financial condition, or results of operations could be adversely affected.
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.
In addition, expansion of our business operations requires additional warehouse capacity. In the event additional warehouse capacity is required, there is the risk of cost overruns, delays, regulatory risks, and the risk of potential changes in laws and regulations, which could have a material adverse effect on our business, financial condition, or results of operations.
The markets for our products are very competitive. Our principal competitors in these markets have substantial financial, marketing, and other resources, and several are much larger enterprises than us. Many of our current and potential competitors have larger customer bases, greater name recognition, and broader product offerings.
Our principal competitors in these markets have substantial financial, marketing, and other resources, and several are much larger enterprises than us. 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.
A pandemic or other widespread health crisis could disrupt or negatively impact credit markets, which could adversely affect the availability and cost of capital. These impacts could limit our ability to fund our operations and satisfy our obligations. We may not pay dividends or may pay smaller dividends on our Common Stock in the future.
A pandemic or other widespread health crisis could disrupt or negatively impact credit markets, which could adversely affect the availability and cost of capital. These impacts could limit our ability to fund our operations and satisfy our obligations. Cash dividends and share repurchases are subject to uncertainties which could affect the price of our Common Stock.
Our failure to comply with covenants in our credit arrangements could result in the acceleration of the debt extended under such agreements, limit our liquidity, and trigger other rights of our lenders.
Our failure to comply with covenants in our credit arrangements could result in the acceleration of the debt extended under such agreements, limit our liquidity, and trigger other rights of our lenders. Our credit arrangements contain a number of financial and other covenants that include provisions which require us, in certain circumstances, to meet certain financial tests.
Demand for products could change significantly between the time of production and the date of sale. It may be more difficult to make accurate predictions regarding new products and brands.
Demand for products could change significantly between the time of production and the date of sale. It has in the past and may continue to be more difficult to accurately predict demand for our products and brands.
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.
See also Part II, Item 8, Note 7, Corporate Borrowings, to our Consolidated Financial Statements. 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.
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.
The loss of service of any of our key personnel could be disruptive to our operations and create uncertainty about our business and future direction, which could have a material adverse effect on our business, financial condition, results of operations, or on our system of internal controls. On December 31, 2024, David S.
The success of our products depends in part upon the positive image that consumers have of our brands and the third-party brands that use our products.
Damage to our reputation, or that of any of our key customers or their brands, could affect our business performance. The success of our products depends in part upon the positive image that consumers have of our brands and the third-party brands that use our products.
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, 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.
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.
If shipments of our products to international markets were to experience significant disruption, it could have a material adverse effect on our financial results.
The lender may also terminate or accelerate our obligations under our credit arrangements upon the occurrence of various events in addition to payment defaults and other breaches. Any acceleration of our debt or termination of our credit arrangements would negatively impact our overall liquidity and might require us to take other actions to preserve any remaining liquidity.
Any acceleration of our debt or termination of our credit 16 arrangements would negatively impact our overall liquidity and might require us to take other actions to preserve any remaining liquidity.
Anti-alcohol groups have, in the past, advocated successfully for more stringent labeling requirements, higher taxes, and other regulations and educational campaigns designed to discourage alcohol consumption.
The attention has focused largely on public health concerns related to alcohol abuse, including drunk driving, underage drinking, and the negative health impacts of beverage alcohol. Anti-alcohol groups have, in the past, advocated successfully for more stringent labeling requirements, higher taxes, and other regulations and educational campaigns designed to discourage alcohol consumption.
Any further deterioration of economic relations between the U.S. and other countries or any increase in existing tariffs or the imposition of additional tariffs could result in an increase in the price of our and our customer’s products in those countries, could prompt consumers in those countries to seek alternative products, could result in a supply imbalance in the U.S if we and our competitors have reduced sales in those countries, and could potentially impact our business, financial condition, or results of operations.
Any new trade agreements, economic sanctions, or new, expanded or retaliatory tariffs could result in an increase in the price of our and our customer’s products, could increase the costs of finished goods and raw materials (including finished goods produced through our joint venture operations in Mexico and our Northern Ireland operations as well as raw materials we procure from outside the U.S.), could prompt consumers to seek alternative products, could result in a supply imbalance in the U.S if we and our competitors have reduced sales in other countries, and could potentially impact our business, financial condition, or results of operations.
These or other factors could result in a change to our current policy of paying dividends on our Common Stock or may result in us paying smaller dividends on our Common Stock in the future. RISKS RELATED TO OUR CAPITAL STRUCTURE Common Stockholders have limited rights under our Articles of Incorporation.
These or other factors could result in a change to our current policy of paying dividends on our Common Stock, us paying smaller dividends on our Common Stock in the future, or a change in the amount, timing and frequency of any share repurchases.
The conflict and related sanctions have resulted and could continue to result in disruptions to global trade, commodity markets (including grain, corn, wheat, energy, and natural gas markets), and supply chain continuity. Class action or other litigation relating to alcohol abuse or the misuse of alcohol could adversely affect our business .
The conflict and related sanctions have resulted and could continue to result in disruptions to global trade, commodity markets (including grain, corn, wheat, energy, and natural gas markets), and supply chain continuity. We are, and from time to time may become, subject to litigation, and adverse outcomes in such litigation could have a material adverse effect on our business.
The issuance of additional shares of Common Stock or Preferred Stock may significantly dilute the equity ownership of our current stockholders and could have an adverse effect on the market price of our Common Stock. ITEM 1B. UNRESOLVED STAFF COMMENTS None.
The issuance of additional shares of Common Stock or Preferred Stock may significantly dilute the equity ownership of our current stockholders and could have an adverse effect on the market price of our Common Stock. GENERAL RISKS Higher costs or unavailability of raw materials, product ingredients, energy resources, or labor could adversely affect our financial results.
If we did not do the same, our revenues could be adversely affected due to the potential loss of sales. Damage to our reputation, or that of any of our key customers or their brands, could affect our business performance.
If our competitors were to decrease their pricing, we may choose to do the same, which could adversely affect our margins and profitability. If we did not do the same, our revenues could be adversely affected due to the potential loss of sales.
Federal Reserve began raising the Federal Funds interest rate in early 2022 and continued to do so throughout the first half of 2023 in response to concerns about inflation. As of December 31, 2023, the Federal Funds interest rate was at the highest level in 22 years.
Federal Reserve began raising the Federal Funds interest rate in early 2022 and continued to do so throughout the first half of 2023. Although the Federal Reserve cut interest rates during 2024, they may again raise interest rates in the future.
Competition is based on such factors as product innovation, product characteristics, product taste and quality, pricing, color, and name and brand image. Pricing of our products is partly dependent upon industry capacity, which is impacted by competitor actions to bring online idled capacity or to build new production capacity.
Pricing of our products is partly dependent upon industry capacity, which is impacted by competitor actions to bring online idled capacity or to build new production capacity, and may lead us to adjust our pricing, which could adversely impact our business, financial condition, or results of operations.
For many years, there has been a high level of social and political attention directed at the beverage alcohol industry. The attention has focused largely on public health concerns related to alcohol abuse, including drunk driving, underage drinking, and the negative health impacts of beverage alcohol.
A change in public opinion about alcohol or our products could reduce demand for our brands and products. For many years, there has been a high level of social and political attention directed at the beverage alcohol industry.
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.
We have been, and may continue to be, adversely impacted by elevated industry-wide barrel inventories of whiskey. In addition, if market conditions make our Branded Spirits products too expensive or our Distilling Solutions or Ingredient Solutions products too expensive for use in consumer goods, our revenues could be affected.
We may not realize the anticipated benefits from the announced planned closure of our Atchison, Kansas distillery. On July 13, 2023, we announced the planned closure of our distillery located in Atchison, Kansas, and we closed this distillery in December 2023.
For example, we may not realize the expected benefits from the mini fuel plant being constructed at our Atchison, Kansas location or from the ultimate disposal of the distillery assets from our distillery in Atchison, Kansas that we closed in December 2023.
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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.
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In addition, consumer pantry, retailer, distributor, or supplier inventory destocking, which we have experienced in the past, could adversely impact our business, financial condition, or results of operations. Additionally, customer contract non-performance, which we have experienced in the past, could adversely impact our business, financial condition, or results of operations.
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Expansion of our business operations requires additional warehouse capacity.
Added
The markets for our products are very competitive, and our business could be negatively affected if we do not compete effectively. We may also be negatively impacted by industry dynamics and market conditions. The markets for our products are very competitive.
Removed
The anticipated future impact of this closure, including with respect to the ultimate disposal of the distillery assets and impacts to our Ingredient Solutions business, is subject to assumptions, estimates, and other uncertainties, some of which are beyond our control.
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Competition is based on such factors as product innovation, product characteristics, product taste and quality, pricing, color, as well as name and brand image.
Removed
If these estimates and assumptions are incorrect, if we experience delays or unanticipated costs associated with the closure, or if other unanticipated events or unintended consequences occur in connection with the closure, our business and financial results could be adversely affected and could differ materially from our expectations.
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The inability to successfully complete our capital projects or fund necessary capital expenditures could adversely impact us. Warehouse expansion issues could negatively impact our operations and our business.
Removed
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.
Added
Any capital project we undertake involves risks, including cost overruns, delays and performance uncertainties, regulatory risks (including our ability to timely obtain necessary approvals and permits), and the risk of potential changes in laws and regulations (including zoning and environmental requirements). The expected benefits from any of our capital or other projects may not be realized.
Removed
For example, the United States, United Kingdom, and other countries imposed significant new sanctions and export controls against Russia, Russian banks and certain Russian individuals following Russia’s invasion of Ukraine and additional sanctions or 12 further punitive actions may be implemented in the future.
Added
Our capital projects may also result in other unanticipated events or unintended consequences, such as the diversion of management’s attention from other operational matters or disruptions to our ongoing operations. 8 Although we currently finance most of our capital expenditures through cash provided by operations, we also may depend on increased borrowing or other financing arrangements to fund future capital expenditures.
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Any class action or other litigation asserted against us could be expensive and time-consuming to defend against, deplete our cash, divert our personnel resources and, if the plaintiffs in such actions were to prevail, could harm our business significantly. GENERAL RISKS Higher costs or unavailability of raw materials, product ingredients, energy resources, or labor could adversely affect our financial results.
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If we are unable to obtain suitable financing on favorable terms, we may not be able to complete future capital projects and our ability to maintain or expand our operations may be limited. The occurrence of these events could have a material adverse effect on our business, financial condition, and results of operations.
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Although the Federal Reserve has held interest rates steady since July 2023 and has pointed to potential interest rate cuts, there is no guarantee that they may again raise interest rates in response to continuing concerns about inflation.
Added
Although our relations with our three unions are stable, our failure to renew our collective bargaining agreements on reasonable terms could result in labor disruptions and increased labor costs, which could adversely affect our financial performance.
Removed
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.

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Item 1C. Cybersecurity

Cybersecurity — threats and controls disclosure

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Biggest changeIn addition, the Audit Committee reviewed cybersecurity risks and mitigation strategies in 2023, as part of their oversight of our enterprise risk management process. Our Vice President of Information Technology and Security has over 25 years of experience in IT and has held a variety of IT roles across multiple business lines within the financial services, aviation, and hospitality industries.
Biggest changeOur Vice President of Information Technology and Security has over 25 years of experience in IT and has held a variety of IT roles across multiple business lines within the financial services, aviation, and hospitality industries. He received both his bachelor’s and master’s degrees in information management and holds Certified Information Systems Security Professional (“CISSP”) certification.
In the event of an incident, our IT team assesses, among other factors, safety impact, supply chain and 17 manufacturing disruption, data and personal information loss, business operations disruption, projected cost, and potential for reputational harm. From time to time, our processes are audited and validated by internal and external experts.
In the event of an incident, our IT team assesses, among other factors, safety impact, supply chain and manufacturing disruption, data and personal information loss, business operations disruption, projected cost, and potential for reputational harm. From time to time, our processes are audited and validated by internal and external experts.
Our Vice President of Information Technology and Security monitors our processes for preventing, detecting, mitigating, and remediating cybersecurity incidents through his management of, and participation in, the cybersecurity risk management and strategy processes described above, including through the operation of our incident response plans, which include escalation to our Chief Executive Officer and Chief Financial Officer, as appropriate. 18
Our Vice President of Information Technology and Security monitors our processes for preventing, detecting, mitigating, and remediating cybersecurity incidents through his management of, and participation in, the cybersecurity risk management and strategy processes described above, including through the operation of our incident response plans, which include escalation to our Interim Chief Executive Officer and Chief Financial Officer, as appropriate. 18
We also engage reputable third-party consultants to help evaluate and test our vulnerability to cybersecurity threats as well as to conduct annual penetration tests to help identify exploitable cybersecurity vulnerabilities. Our IT team assesses these testing results and implements any appropriate measures to mitigate vulnerabilities identified.
We also engage reputable third-party consultants to help evaluate and test our vulnerability to cybersecurity threats as well as to conduct annual penetration 17 tests to help identify exploitable cybersecurity vulnerabilities. Our IT team assesses these testing results and implements any appropriate measures to mitigate vulnerabilities identified.
We maintain technical and organizational safeguards, including employee training, incident response capability reviews and exercises, cybersecurity insurance, and business continuity mechanisms for the protection of our assets. If faced with a cybersecurity incident, our IT team is trained to focus on responding to and containing the threat and minimizing any business impact, as appropriate.
We maintain technical and organizational safeguards, including regular employee training and phishing simulations, incident response capability reviews and exercises, cybersecurity insurance, and business continuity mechanisms for the protection of our assets. If faced with a cybersecurity incident, our IT team is trained to focus on responding to and containing the threat and minimizing any business impact, as appropriate.
ITEM 1C. CYBERSECURITY Risk Management and Strategy We have a multi-pronged approach to assess, identify, and manage material risks from cybersecurity threats. This approach includes system testing and patching, continuous monitoring, end-user training and awareness, multi-layered security, redundancy mechanisms, encryption, and internal audits and assessments.
ITEM 1C. CYBERSECURITY Risk Management and Strategy. We have a multi-pronged approach to assess, identify, and manage material risks from cybersecurity threats that is aligned with the National Institute of Standards and Technology framework. This approach includes system testing and patching, continuous monitoring, end-user training and awareness, multi-layered security, redundancy mechanisms, encryption, and internal audits and assessments.
For more information about our risks from cybersecurity threats, see Item 1A—Risk Factors—A failure of one or more of our key information technology (“IT”) systems, networks, processes, associated sites, or service providers could have a negative impact on our business .
We use each cybersecurity threat or incident as an opportunity to review our protocols and implement enhancements as applicable. For more information about our risks from cybersecurity threats, see Item 1A—Risk Factors—A failure of one or more of our key information technology (“IT”) systems, networks, processes, associated sites, or service providers could have a negative impact on our business .
Governance Our Board of Directors is responsible for overseeing risk assessments and risk management, including cybersecurity risks, and is assisted in these efforts by the Audit Committee of the Board. Our IT team is responsible for assessing and managing our risks from cybersecurity threats.
Governance. The Audit Committee of our Board of Directors is responsible for overseeing risk assessments and risk management, including cybersecurity risks. Our IT team is responsible for assessing and managing our risks from cybersecurity threats. Our IT team is led by our Vice President of Information Technology and Security, who reported to our Chief Financial Officer during 2024.
We have not experienced any material impacts from any cybersecurity threats or incidents in the last three fiscal years. We use each cybersecurity threat or incident as an opportunity to review our protocols and implement enhancements as applicable.
However, we rely on our third-party service providers to implement security programs commensurate with their risk, and we cannot ensure that their efforts will be successful. We have not experienced any material impacts from any cybersecurity threats or incidents in the last three fiscal years.
During 2023, our Chief Information Officer (who has been serving as our Chief Commercial Officer since January 2024) provided updates on cybersecurity threats and risks to our Board of Directors and to the Audit Committee of our Board of Directors.
Our Vice President of Information Technology and Security provides updates on cybersecurity threats and risks to the Audit Committee of our Board of Directors throughout the year. In addition, the Audit Committee reviewed cybersecurity risks and mitigation strategies in 2024 as part of their oversight of our enterprise risk management process.
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Our IT team is led by our Vice President of Information Technology and Security, who reports directly to our Chief Financial Officer.
Added
We rely on various third-party service providers and a cybersecurity incident at any of our third-party service providers could materially adversely impact us.
Removed
He received both his bachelor’s and master’s degrees in information management and holds Certified Information Systems Security Professional (“CISSP”) certification.
Added
We evaluate third-party service providers from a cybersecurity risk perspective using a range of measures, including information security and cybersecurity due diligence assessments, ongoing monitoring and evaluation of our providers, examination of available System and Organization Controls attestation reports, and inclusion security and privacy contractional provisions in our agreements with our providers.

Item 2. Properties

Properties — owned and leased real estate

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Biggest changeThe 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.
Biggest change(b) 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. We also own or lease transportation equipment and facilities and a gas pipeline.
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.
PROPERTIES As of February 26, 2025, our material properties include: Location Principal Activities Segment United States: Atchison, Kansas Wheat flour processing, warehousing, research and quality control laboratories, office space, and a technical innovation center Ingredient Solutions and Corporate Leawood, 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 Springfield, Kentucky (a) Warehousing facilities Distilling Solutions Lebanon, Kentucky Distillery, office space, and retail location Branded Spirits Bardstown, Kentucky Distillery, office space, retail location, and warehousing facilities Branded Spirits and Distilling Solutions St.
Louis, 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.
Louis, Missouri Bottling facility, warehousing facility, office space (a) , and fulfillment center (a) 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.
Removed
We also own or lease transportation equipment and facilities and a gas pipeline.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeThe 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]
Biggest changeThe graph assumes $100 (one hundred dollars) was invested on December 31, 2019, and that all dividends were reinvested.
ITEM 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.
ITEM 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 21, 2025, there were approximately 277 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 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 ).
According to reports received from Nasdaq, the average daily trading volume of our Common Stock (excluding block trades) ranged from 70,688 to 3,398,021 shares during the year ended December 31, 2024. 19 STOCK PERFORMANCE GRAPH The following graph compares the cumulative total return of our Common Stock for the five-year period ended December 31, 2024, 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 ).
Added
PURCHASES OF EQUITY SECURITIES BY ISSUER Share repurchase activity during the quarter ended December 31, 2024 was as follows: Total Number of Shares (or Units) Purchased Average Price Paid per Share (or Unit) Total Number of Shares (or Units) Purchased as Part of Publicly Announced Plans or Programs (1) Maximum Number (or Approximate Dollar Value) of Shares (or Units) that May Yet Be Purchased Under the Plans or Programs (in thousands) (1) October 1, 2024 through October 31, 2024 — $ — — $ 90,000 November 1, 2024 through November 30, 2024 557,552 (2) 49.09 557,552 62,630 December 1, 2024 through December 31, 2024 201,024 (2) 45.86 201,024 53,412 Total 758,576 758,576 (1) On February 29, 2024, we announced that our Board of Directors approved a $100,000 share repurchase program.
Added
The repurchase program has no expiration date and may be modified, suspended, or discontinued at any time by the Company without prior notice. (2) All shares were repurchased under the share repurchase program announced on February 29, 2024. ITEM 6. [Reserved] 20

Item 6. [Reserved]

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

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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
Biggest changeFinancial Statements and Supplementary Data 37 Management’s Report on Internal Control Over Financial Reporting 37 Report of Independent Registered Public Accounting Firm 38 Consolidated Statements of Income - Years Ended December 31, 2024, 2023, and 2022 41 Consolidated Statements of Comprehensive Income - Years Ended December 31, 2024, 2023, and 2022 42 Consolidated Balance Sheets - December 31, 2024 and 2023 43 Consolidated Statements of Cash Flows – Years Ended December 31, 2024, 2023 and 2022 44 Consolidated Statements of Changes in Stockholders’ Equity – Years Ended December 31, 2024, 2023, and 2022 45 Notes to Consolidated Financial Statements – Years Ended December 31, 2024, 2023, and 2022 46
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 6. [Reserved] 20 Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations 21 Item 7A. Quantitative and Qualitative Disclosure About Market Risk 36 Item 8.

Item 7. Management's Discussion & Analysis

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

88 edited+41 added−30 removed24 unchanged
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”).
Biggest changeIngredient Solutions segment sales for 2024 decreased 1 percent over the prior year. 22 RESULTS OF OPERATIONS Consolidated results The table below details the consolidated results for 2024, 2023 and 2022: Year Ended December 31, % Increase (Decrease) 2024 2023 2022 2024 v. 2023 2023 v. 2022 Sales $ 703,625 $ 836,523 $ 782,358 (16) % 7 % Cost of sales 417,308 531,811 529,052 (22) 1 Gross profit 286,317 304,712 253,306 (6) 20 Gross margin % 40.7 % 36.4 % 32.4 % 4.3 pp (a) 4.0 pp (a) Advertising and promotion expenses 40,508 38,213 29,714 6 29 SG&A expenses 81,391 91,395 74,627 (11) 22 Impairment of long-lived assets and other 137 19,391 — (99) N/A Goodwill impairment 73,755 — — N/A N/A Change in fair value of contingent consideration 16,100 7,100 — 127 N/A Operating income 74,426 148,613 148,965 (50) — Operating margin % 10.6 % 17.8 % 19.0 % (7.2) pp (1.2) pp Interest expense, net (8,439) (6,647) (5,451) 27 22 Other income (expense), net 2,455 (220) (3,342) (1,216) (93) Income before income taxes 68,442 141,746 140,172 (52) 1 Income tax expense 33,977 34,616 31,300 (2) 11 Effective tax expense rate % 49.6 % 24.4 % 22.3 % 25.2 pp 2.1 pp Net income $ 34,465 $ 107,130 $ 108,872 (68) % (2) % Net income margin % 4.9 % 12.8 % 13.9 % (7.9) pp (1.1) pp Basic EPS $ 1.56 $ 4.82 $ 4.94 (68) % (2) % Diluted EPS $ 1.56 $ 4.80 $ 4.92 (68) % (2) % (a) Percentage points (“pp”).
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.
Our overall liquidity reflects our strong business results and an effective cash management strategy that takes into account liquidity management, economic factors, and tax considerations. We expect our sources of cash to be adequate to provide for budgeted capital expenditures, potential mergers or acquisitions, and anticipated operating requirements for the next 12 months and beyond.
CRITICAL ACCOUNTING ESTIMATES The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period.
CRITICAL ACCOUNTING ESTIMATES The preparation of consolidated financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the consolidated financial statements, and the reported amounts of revenues and expenses during the reporting period.
Income tax expense for 2022 was $31,300, for an effective tax rate for the year of 22.3 percent. The 2.1 percentage point increase was primarily due to an increase in valuation allowances and lower tax credits. 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 2022 was $31,300, for an effective tax rate for the year of 22.3 percent. The 2.1 percentage point increase was primarily due to an increase in valuation allowances and lower tax credits.
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.
Forward-looking statements in this Report are 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.
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.
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, 2024, we met those covenants and restrictions.
Sales of brands within the premium plus price tiers as well as sales within the other category and the value price tier increased while sales of brands within the mid price tier decreased.
Sales of brands within the premium plus price tier as well as sales within the other category and the value price tier increased while sales of brands within the mid price tier decreased.
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.
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, share repurchases as well as potential mergers or acquisitions.
(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.
(c) Net price/mix change is calculated by taking the difference between current period sales-per-unit and prior period sales-per unit, multiplied by current period sales volume. The product is then divided by prior period sales dollars.
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.
Our branded spirits products account for a range of price points from value products through premium plus brands. 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 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.
Our Distilling Solutions segment is subject to unfavorable macro industry trends, which include increased competition as industry participants seek to capitalize on consumer trends, inflation and interest rate impacts on customers, overall American whiskey supply and consumer consumption patterns, as well as increased commodity prices.
(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.
(b) Includes open purchase order commitments related to raw materials and packaging used in the ordinary course of business of $68,696. (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 Company tests goodwill and indefinite-lived intangible assets for impairment at least annually, in the fourth quarter, or on an interim basis if events and circumstances occur that would indicate it is more likely than not that the fair value of a reporting unit is less than the carrying value.
We test goodwill and indefinite-lived intangible assets for impairment at least annually, in the fourth quarter, or on an interim basis if events and circumstances occur that would indicate it is more likely than not that the fair value of a reporting unit is less than the carrying value.
Gross profit increased year versus year by $17,260, or 18 percent. Gross margin for 2023 increased to 44.4 percent compared to 40.1 percent for 2022. The increase in gross profit was primarily driven by contributions from the acquisition of Penelope as well as by higher average selling price in the premium plus price tiers, value, mid, and other price tiers.
Gross profit increased year versus year by $17,260, or 18 percent. Gross margin for 2023 increased to 44.4 percent compared to 40.1 percent for 2022. The increase in gross profit was primarily driven by contributions from the acquisition and growth of Penelope as well as by higher net price/mix in the premium plus, value, mid, and other price tiers.
See Note 9, Equity and EPS for further discussion. On February 22, 2024, we announced a dividend payable to stockholders of record of our Common Stock, resulting in dividend equivalents payable to RSU holders, of $0.12 per share and per RSU.
See Note 9, Equity and EPS for further discussion. On February 26, 2025, we announced a dividend payable to stockholders of record of our Common Stock, resulting in dividend equivalents payable to RSU holders, of $0.12 per share and per RSU.
(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.
(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.
(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.
(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.
(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.
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.
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. Contingent Consideration .
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.
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, Board-approved dividends and share repurchases) and the overall cost of capital.
These increases were partially offset by decreased sales of brands within the mid price tier, primarily due to decreased sales volume as a result of sales shifting to higher margin accretive brands within the premium plus price tiers, partially offset by an increase in average selling price within the mid price tier.
These increases were partially offset by decreased sales of brands within the mid price tier, primarily due to decreased sales volume as a result of sales shifting to higher margin accretive brands within the premium plus price tier, partially offset by an increase in net price/mix within the mid price tier.
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.
Branded Spirits segment sales for 2024 decreased 5 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.
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, and investments supporting our strategic plan, such as capital expenditures, the aging of barreled distillate primarily to support our branded spirits segment, and potential mergers or acquisitions.
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 decrease in gross profit was also attributable to decreased net price/mix and sales volume of specialty wheat proteins. 30 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.
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.
MGP’s MD&A is presented in the following 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 of branded and distilled spirits as well as food ingredient solutions.
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 favorable macro industry trends we anticipate will benefit our business include more consumer focus on high fiber and lower net carbs, high protein, plant-based protein, and non-GMO products. We continue to provide customer solutions, taking advantage of our position within growing consumer trends.
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.
This increase was primarily driven by increased advertising and promotion investment in the Branded Spirits segment, specifically in the premium plus price tiers. 2023 to 2022 - Advertising and promotion expenses for 2023 were $38,213, an increase of 29 percent compared to 2022.
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”).
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”). Capital Spending. We manage capital spending to support our business growth plans.
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.
We have incurred $73,161, $61,108, and $47,859 of capital expenditures and have paid $71,181, $55,267, and $45,323 for capital expenditures for the years ended December 31, 2024, 2023 and 2022, respectively. The difference between the amount of capital expenditures incurred and amount paid is due to the change in capital expenditures in accounts payable.
The increase in sales of brands within the premium plus price tiers was primarily due to the acquisition of Penelope, an increase in average selling price, and an increase in sales volume. Sales within the value and other categories increased primarily due to an increase in average selling price.
The increase in sales of brands within the premium plus price tier was primarily due to the acquisition of Penelope, an increase in net price/mix, and an increase in sales volume. Sales within the value and other categories increased primarily due to an increase in net price/mix.
Our strategy for the Ingredient Solutions segment is to expand and optimize our dietary fiber, plant proteins, and clean label starches; expand our extruded products platform; and continue to innovate and expand opportunities through research and development. Ingredient Solutions segment sales for 2023 increased 14 percent over the prior year.
Our strategy for the Ingredient Solutions segment is to expand and optimize our dietary fiber, plant proteins, and clean label starches; expand our extruded products platform; and continue to innovate and expand opportunities through research and development.
As of December 31, 2023, approximately $50,000 of our facilities in Nelson County, Kentucky and approximately $30,900 of our facilities in Williamstown, Kentucky were financed with industrial revenue bonds.
As of December 31, 2024, approximately $50,000 of our facilities in Nelson County, Kentucky and approximately $39,300 of our facilities in Williamstown, Kentucky were financed with industrial revenue bonds.
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.
Our Branded Spirits segment is also subject to unfavorable macro industry trends, which include inflation and interest rate impacts on consumers, increased competition as industry participants seek to capitalize on consumer trends, as well as changes in consumer consumption patterns.
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 .
We expect approximately $36,000 in capital expenditures for 2025, which we expect to use for facility improvement and expansion, facility sustenance projects, and environmental health and safety projects. Financing Activities .
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 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.
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.
Basic and diluted EPS 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 income (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) % EPS % Increase (Decrease) Basic EPS for 2023 $ 4.82 Change in operating income (a) (2.53) (52) pp (b) Change in interest expense (a) (0.06) (2) pp Change in other income (expense), net (a) 0.09 2 pp Change in weighted average shares outstanding (c) 0.01 — pp Change in effective tax rate (0.77) (16) pp Basic and diluted EPS for 2024 $ 1.56 (68) % (a) Items are net of tax based on the effective tax rate for each base year.
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).
At December 31, 2024, our cash balance was $25,273, and we have used our various debt agreements for liquidity purposes, with $295,000 available under our Credit Agreement for additional borrowings and $226,800 available under the Note Purchase Agreement (see Note 7, Corporate Borrowings for additional information).
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.
Treasury Purchases. 81,942 RSUs vested and converted to common shares during the year ended December 31, 2024, of which we withheld and purchased for treasury 25,521 shares valued at $2,185 to cover payment of associated withholding taxes. 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.
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.
The increase was also driven by lower average unit cost within the segment. 28 BRANDED SPIRITS SALES Year Ended December 31, Year-versus-Year Sales Change Increase/ (Decrease) 2023 2022 $ Change % Change 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 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.
Total debt was $323,541 (net of unamortized loan fees of $5,909) at December 31, 2024 and $287,249 (net of unamortized loan fees of $6,601) at December 31, 2023. Net borrowing on all debt for 2024 and 2023 were $35,600, and $57,400, respectively (see Note 7, Corporate Borrowings for additional information). Dividends and Dividend Equivalents.
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.
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. Investing Activities.
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.
Our strategy for the Distilling Solutions segment is to further develop our existing customer relationships, expand our core strengths through 21 innovation, services and stability, cultivate additional domestic customers for brown goods sales, and increase our global presence in the American whiskey market.
Cash provided by operating activities was $83,783 during the year ended December 31, 2023.
Cash provided by operating activities was $102,278 during the year ended December 31, 2024.
The dividend and dividend equivalent are payable on March 29, 2024 to stockholders of record and RSU holders on March 15, 2024.
The dividend and dividend equivalent are payable on March 28, 2025 to stockholders of record and RSU holders as of March 14, 2025.
(b) Percentage points (“pp”). 2023 to 2022 - Operating income for 2023 decreased to $148,613 from $148,965 for 2022, primarily due to the impairment of assets and other expenses of $19,391 related to the closure of the Atchison Distillery, increased SG&A expenses and advertising and promotion expenses as discussed above, and the change in fair value of the contingent consideration of $7,100 related to the Penelope acquisition.
These decreases were partially offset by the impact of the impairment of assets and other expenses in the prior year related to the closure of the Atchison Distillery which closed in December 2023, the decrease in SG&A expenses as discussed above, and the increase in gross profit in the Branded Spirits segment. 2023 to 2022 - Operating income for 2023 decreased to $148,613 from $148,965 for 2022, primarily due to the impairment of assets and other expenses of $19,391 related to the closure of the Atchison Distillery, increased SG&A expenses and advertising and promotion expenses as discussed above, and the change in fair value of contingent consideration of $7,100 related to the Penelope acquisition.
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.
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. We have a portfolio of our own high quality branded spirits, which we produce through our distilleries and bottling facilities and sell to distributors.
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.
(c) Net price/mix change is calculated by taking the difference between current period sales-per-unit and prior period sales-per unit, multiplied by current period sales volume. The product is then divided by prior period sales dollars. (d) Percentage points (“pp”). 2023 compared to 2022 Total Distilling Solutions sales for 2023 increased by $22,376, or 5 percent, compared to 2022.
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.
(c) Net price/mix change is calculated by taking the difference between current period sales-per-unit and prior period sales-per unit, multiplied by current period sales volume. The product is then divided by prior period sales dollars. (d) Percentage points (“pp”). 2023 compared to 2022 Total Branded Spirits sales for 2023 increased by $15,994, or 7 percent compared to 2022.
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.
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. 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.
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.
Operating income Operating income % Increase (Decrease) Operating income for 2022 $ 148,965 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 — % Decrease in gross profit - Ingredient Solutions segment (a) (20,773) (14) pp (b) Decrease in gross profit - Distilling Solutions segment (a) (3,037) (2) pp Increase in gross profit - Branded Spirits segment (a) 5,415 4 pp Increase in advertising and promotion expenses (2,295) (2) pp Decrease in SG&A expenses 10,004 7 pp Decrease in impairment of long-lived assets and other 19,254 13 pp Goodwill impairment (73,755) (50) pp Change in fair value of contingent consideration (9,000) (6) pp Operating income for 2024 $ 74,426 (50) % (a) See segment discussion.
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 favorable macro industry trends we anticipate will benefit our business in the long-term include growth in high-end whiskey and tequila brands as well as long-term growth in the U.S. across all spirit categories in the premium plus price tier.
SG&A expenses 2023 to 2022 - SG&A expenses for 2023 were $91,395, an increase of 22 percent compared to 2022.
The decrease in SG&A expenses was primarily due to reduced incentive compensation expenses. 2023 to 2022 - SG&A expenses for 2023 were $91,395, an increase of 22 percent compared to 2022.
The increase in Ingredient Solutions sales was primarily driven by higher sales of specialty wheat starches and proteins primarily due to higher average selling prices and higher sales volume. Additionally, the increase in Ingredient Solutions sales was driven by higher sales of commodity wheat starches primarily due to higher average selling price.
The increase in Ingredient Solutions sales was driven by increases in sales in all product lines. The higher sales of specialty wheat proteins was driven by higher net price/mix and higher sales volume. Additionally, sales of specialty wheat starches and commodity wheat starches increased primarily due to higher net price/mix, partially offset by lower sales volume.
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.
Ingredient Solutions segment sales decreased 1 percent, primarily due to decreased sales of specialty wheat proteins and commodity wheat starches, partially offset by increased sales of specialty wheat starches. 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.
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.
Cash Flow Summary Year Ended December 31, Changes, Year versus Year-Increase / (Decrease) 2024 2023 2022 2024 v. 2023 2023 v. 2022 Cash provided by operating activities $ 102,278 $ 83,783 $ 88,936 $ 18,495 $ (5,153) Cash used in investing activities (71,558) (159,242) (47,813) 87,684 (111,429) Cash provided by (used in) financing activities (23,803) 45,924 (14,764) (69,727) 60,688 Effect of exchange rate changes on cash and cash equivalents (32) 34 (38) (66) 72 Increase (decrease) in cash and cash equivalents $ 6,885 $ (29,501) $ 26,321 $ 36,386 $ (55,822) Operating Activities.
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.
Distilling Solutions segment sales were up 5 percent, primarily due to an increase in sales of brown goods. Branded Spirits segment sales increased 7 percent, primarily due to increased sales of brands in the premium plus price tier. Ingredient Solutions segment sales increased 14 percent due to increased sales across all Ingredient Solutions product lines.
The Distilling Solutions segment gross profit increased by $18,682, or 15 percent. The Branded Spirits segment gross profit increased by $17,260, or 18 percent. The Ingredient Solutions segment gross profit increased by $15,464, or 49 percent. 23 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 the Distilling Solutions, Branded Spirits, and Ingredient Solutions segments. The Distilling Solutions segment gross profit increased by $18,682, or 15 percent. The Branded Spirits segment gross profit increased by $17,260, or 18 percent. The Ingredient Solutions segment gross profit increased by $15,464, or 49 percent.
Advertising and promotion expenses 2023 to 2022 - Advertising and promotion expenses for 2023 were $38,213, an increase of 29 percent compared to 2022.
Advertising and promotion expenses 2024 to 2023 - Advertising and promotion expenses for 2024 were $40,508, an increase of 6 percent compared to 2023.
Gross margin for 2023 increased to 35.7 percent from 27.2 percent for 2022.
Gross profit increased year versus year by $15,464, or 49 percent. Gross margin for 2023 increased to 35.7 percent from 27.2 percent for 2022.
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.
Sales of brown goods and warehouse services increased while white goods and other co-products decreased compared to 2022. The increase in sales of brown goods was driven by an increase in net price/mix and higher sales volume.
At December 31, 2023, our current assets exceeded our current liabilities by $400,191, largely due to our inventories, at cost, of $346,853.
At December 31, 2024, our current assets exceeded our current liabilities by $453,686, largely due to our inventories, at cost, of $364,944.
The contingent consideration liability is measured on a quarterly basis and recorded at fair value. The changes in fair value of the obligation result from changes in the key assumptions between measurement dates, such as projected net sales, discount rates, and volatility rates.
The changes in fair value of the obligation result from changes in the key assumptions between measurement dates, such as projected net sales, discount rates, and volatility rates. The adjustment to fair value is recorded in the change in fair value of contingent consideration line on the Consolidated Statements of Income. 34 Goodwill and Indefinite-Lived Intangible Assets.
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.
Cash used in investing activities for the year ended December 31, 2024 was $71,558, which primarily resulted from additions to property, plant and equipment of $71,181 (see “Capital Spending”).
The increase in gross profit was due primarily to increased average selling price and volume of higher margin brown goods.
Gross margin for 2023 increased to 32.2 percent from 29.5 percent for 2022. The increase in gross profit was due primarily to increased net/price mix and increased volume of higher margin brown goods.
In addition, we have strong operating results such that we believe financial institutions should provide sufficient credit funding to meet our short-term financing requirements, if needed. 33 Contractual Obligations The following table provides information on the amounts and payments of our contractual obligations at December 31, 2023: Payments due by period Total Short-Term (a) Long-Term Long-term debt $ 293,850 $ 6,400 $ 287,450 Interest on long-term debt (c) 71,677 4,841 66,836 Operating leases 16,092 3,702 12,390 Purchase commitments 126,893 115,011 (b) 11,882 Other 863 205 658 Total $ 509,375 $ 130,159 $ 379,216 (a) Short-term obligation payments are due within 12 months from the current year end.
In addition, we have strong operating results such that we believe financial institutions should provide sufficient credit funding to meet our short-term financing requirements, if needed. 33 Contractual Obligations The following table provides information on the amounts and payments of our contractual obligations at December 31, 2024: Payments due by period Total Short-Term (a) Long-Term Long-term debt $ 329,450 $ 6,400 $ 323,050 Interest on long-term debt (c) 66,836 4,606 62,230 Operating leases 17,891 4,777 13,114 Purchase commitments 83,029 79,355 (b) 3,674 Other 7,307 455 6,852 Total $ 504,513 $ 95,593 $ 408,920 (a) Short-term obligation payments are due within 12 months from the current year end.
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.
(c) Net price/mix change is calculated by taking the difference between current period sales-per-unit and prior period sales-per unit, multiplied by current period sales volume. The product is then divided by prior period sales dollars. (d) Percentage points (“pp”). 2023 compared to 2022 Total Ingredient Solutions sales for 2023 increased by $15,795, or 14 percent, compared to 2022.
This increase was partially offset by a decrease in sales of white goods, distillers feed and related co-products, industrial alcohol and fuel grade alcohol, which was driven primarily by lower sales volume in connection with the Atchison Distillery closure.
This increase was partially offset by a decrease in sales of white goods and other co-products which was driven primarily by lower sales volume in connection with the Atchison Distillery closure, partially offset by higher net price/mix. Gross profit increased year versus year by $18,682, or 15 percent.
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 continue to focus on attracting customers and developing customer relationships for our brown goods as well as shifting our focus away from industrial alcohol, fuel grade alcohol, and white beverage alcohol.
The cash provided by operating activities during 2022 resulted primarily from net income of $108,872, adjustments for non-cash or non-operating charges of $30,382, including depreciation and amortization, share-based compensation, equity method investment loss, and by uses of cash due to changes in operating assets and liabilities of $50,318.
The cash provided by operating activities during 2024 resulted primarily from net income of $34,465 and adjustments for non-cash or non-operating charges of $114,994, including goodwill impairment, depreciation and amortization, the change in fair value of contingent consideration, and share-based compensation, partially offset by uses of cash due to changes in operating assets and liabilities of $47,181.
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.
This increase was primarily driven by increased advertising and promotion investment in the Branded Spirits segment, primarily in the premium plus price tiers. SG&A expenses 2024 to 2023 - SG&A expenses for 2024 were $81,391, a decrease of 11 percent compared to 2023.
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).
Cash used in financing activities for the year ended December 31, 2024 was $23,803, due to repurchases of Common Stock of $48,773 (see “Treasury Purchases” and “Share Repurchases”), and payments of dividends and dividend 32 equivalents of $10,630 (see Note 9, Equity and EPS for additional information), partially offset by net proceeds on long-term debt of $35,600 (see Long-Term and Short-Term Debt).
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.
These decreases were partially offset by the change other income (expense), net related to equity method investment income. 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 income (expense), net.
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. 25 DISTILLING SOLUTIONS SEGMENT DISTILLING SOLUTIONS SALES Year Ended December 31, Year-versus-Year Sales Change Increase/ (Decrease) 2023 2022 $ Change % Change Brown Goods $ 289,191 $ 229,523 $ 59,668 26 % White Goods 58,645 74,510 (15,865) (21) Premium beverage alcohol 347,836 304,033 43,803 14 Industrial alcohol 38,010 46,812 (8,802) (19) Food grade alcohol 385,846 350,845 35,001 10 Fuel grade alcohol 7,798 13,681 (5,883) (43) Distillers feed and related co-products 28,578 40,354 (11,776) (29) Warehouse services 28,632 23,598 5,034 21 Total Distilling Solutions $ 450,854 $ 428,478 $ 22,376 5 % Change in Year-versus-Year Sales Attributed to: Total (a) Volume (b) Net Price/Mix (c) Premium beverage alcohol 14% (8)% 22% Other Financial Information Year Ended December 31, Year-versus-Year Increase/(Decrease) 2023 2022 Change % Change Gross profit $ 144,964 $ 126,282 $ 18,682 15 % Gross margin % 32.2 % 29.5 % 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.
Diluted EPS decreased to $4.80 in 2023 from $4.92 in 2022, primarily due to the above described changes in basic EPS as well as the impact of dilutive shares outstanding related to the conversion feature of the Convertible Senior Notes. 25 DISTILLING SOLUTIONS SEGMENT DISTILLING SOLUTIONS SALES Year Ended December 31, Year-versus-Year Sales Change Increase/ (Decrease) 2024 2023 $ Change % Change Brown goods $ 265,873 $ 289,191 $ (23,318) (8) % Warehouse services 33,430 28,632 4,798 17 White goods and other co-products 32,901 133,031 (100,130) (75) Total Distilling Solutions $ 332,204 $ 450,854 $ (118,650) (26) % Change in Year-versus-Year Sales Attributed to: Total (a) Volume (b) Net Price/Mix (c) Brown goods (8)% 5% (13)% Other Financial Information Year Ended December 31, Year-versus-Year Increase/(Decrease) 2024 2023 Change % Change Gross profit $ 141,927 $ 144,964 $ (3,037) (2) % Gross margin % 42.7 % 32.2 % 10.5 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.
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.
Gross profit 2024 to 2023 - Gross profit for 2024 was $286,317, a decrease of 6 percent compared to 2023. The decrease was driven by a decrease in gross profit in the Ingredient Solutions and Distilling Solutions segments, partially offset by an increase in gross profit in the Branded Spirits segment.
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.
The 25.2 percentage point increase was primarily due to the nondeductible impairment of goodwill, partially offset by a decrease in valuation allowance. 2023 to 2022 - Income tax expense for 2023 was $34,616, for an effective tax rate for the year of 24.4 percent.
Management engaged a third-party valuation specialist to assist in the valuation analysis of certain acquired assets including trade name and distributor relationship. Contingent Consideration . The estimated fair value of the contingent consideration obligation at the Acquisition date was determined using a Monte Carlo simulation approach. This approach requires significant assumptions, including projected net sales, discount rates, and volatility rates.
The estimated fair value of the contingent consideration obligation associated with the acquisition of Penelope Bourbon LLC (“Penelope”) was determined using a Monte Carlo simulation approach at the acquisition date. This approach requires significant assumptions, including projected net sales, discount rates, and volatility rates. The contingent consideration liability is measured on a quarterly basis and recorded at fair value.
The product is then divided by prior period sales dollars. (d) Percentage points (“pp”). 2022 compared to 2021 Total Ingredient Solutions sales for 2022 increased by $25,291, or 28 percent, compared to 2021.
(c) Net price/mix change is calculated by taking the difference between current period sales-per-unit and prior period sales-per unit, multiplied by current period sales volume. The product is then divided by prior period sales dollars. (d) Percentage points (“pp”). 2024 compared to 2023 Total Ingredient Solutions sales for 2024 decreased by $1,131, or 1 percent, compared to 2023.
Gross profit increased year versus year by $12,176, or 11 percent. Gross margin for 2022 decreased to 29.5 percent from 32.4 percent for 2021. The increase in gross profit was due primarily to higher average selling price and higher sales volume on brown goods.
Gross profit decreased year versus year by $3,037, or 2 percent. Gross margin for 2024 increased to 42.7 percent from 32.2 percent for 2023. The decrease in gross profit was due primarily to a decrease in brown goods sales due to net price/mix as we sold younger barrels on average in 2024 compared to 2023.

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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 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
Biggest changeBased on weighted average outstanding fixed-rate borrowings at December 31, 2024, a 100 basis point increase in market rates would result in a decrease in the fair value of our outstanding fixed-rate debt of $25,467, 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 $9,138. 36
Based 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.
Based on weighted average outstanding variable-rate borrowings at December 31, 2024, 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 $1,050.

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