MGP INGREDIENTS INC

Previous wording

MGP is a leading producer of branded and distilled spirits as well as food ingredient solutions. We have an extensive award-winning global portfolio of 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. 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. Our protein and starch food ingredients are predominately wheat based and provide 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.

Current wording

MGP is a leading producer of branded and distilled spirits as well as food ingredient solutions. We have an extensive award-winning global portfolio of 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. 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. Our protein and starch food ingredients are predominantly wheat based and provide 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.

Previous wording

Gross profit -Gross profit for the quarter ended March 31, 2026 was $33,582, a decrease of 22 percent compared to the year-ago quarter. The decrease was driven by decreased gross profit in the Distilling Solutions and Branded Spirits segments, partially offset by increased gross profit in the Ingredient Solutions segment. Within the Distilling Solutions segment, gross profit decreased by $10,055, or 54 percent. Within the Branded Spirits segment, gross profit decreased $1,062, or 5 percent. Within the Ingredient Solutions segment, gross profit increased by $1,369, or 56 percent (see “Segment Results”).

Current wording

Gross profit -Gross profit for the quarter ended June 30, 2026 was $46,471, a decrease of 20 percent compared to the year-ago quarter, which was the result of decreased gross profit in each segment. Within the Distilling Solutions segment, gross profit decreased by $7,510, or 40 percent. Within the Ingredient Solutions segment, gross profit decreased by $4,018, or 53 percent. Within the Branded Spirits segment, gross profit decreased $388, or 1 percent (see “Segment Results”).

Previous wording

Advertising and promotion expenses -Advertising and promotion expenses for the quarter ended March 31, 2026 were $6,191, a decrease of 24 percent compared to the year-ago quarter, primarily driven by realignment of our advertising and promotion spend to brands we believe have the most attractive growth opportunities.

Current wording

Advertising and promotion expenses -Advertising and promotion expenses for the quarter ended June 30, 2026 were $5,683, a decrease of 18 percent compared to the year-ago quarter, primarily driven by timing of advertising and promotion spend.

Previous wording

SG&A expenses -SG&A expenses for the quarter ended March 31, 2026 were $21,066, a decrease of 1 percent compared to the year-ago quarter.

Current wording

SG&A expenses -SG&A expenses for the quarter ended June 30, 2026 were $20,237, a decrease of 13 percent compared to the year-ago quarter, primarily driven by our cost savings initiatives.

Previous wording

Income tax expense (benefit) - Income tax benefit for the quarter ended March 31, 2026 was $39,865, for an effective tax rate of 22.8 percent. Income tax expense for the quarter ended March 31, 2025 was $671, for an effective tax rate of (28.1) percent. The decrease in income tax expense, quarter versus quarter, was due primarily to lower income before income taxes. The increase in tax rate, quarter versus quarter, was primarily due to the tax impact of the goodwill and other long-lived assets impairment.

Current wording

Income tax expense - Income tax expense for the quarter ended June 30, 2026 was $3,063, for an effective tax rate of 20.3 percent. Income tax expense for the quarter ended June 30, 2025 was $4,308, for an effective tax rate of 23.0 percent. The decrease in income tax expense, quarter versus quarter, was due primarily to lower income before income taxes. The decrease in tax rate, quarter versus quarter, was primarily due to the discrete impact of a state law change on the Company’s deferred tax balances.

Previous wording

Earnings per common share (“EPS”) -Basic and Diluted EPS was $(6.30) for the quarter ended March 31, 2026, compared to $(0.14) for the quarter ended March 31, 2025. The change in basic and diluted EPS, quarter versus quarter, was primarily due to a decrease in operating income.

Current wording

Earnings per common share (“EPS”) -Basic and Diluted EPS was $0.55 for the quarter ended June 30, 2026, compared to $0.67 for the quarter ended June 30, 2025. The change in basic and diluted EPS, quarter versus quarter, was primarily due to an increase in interest expense, net and a decrease in operating income.

Previous wording

Sales - Sales for the quarter ended March 31, 2026 were $106,427, a decrease of 13 percent compared to the year-ago quarter, which was the result of decreased sales in the Distilling Solutions and Branded Spirits segments, partially offset by increased sales in the Ingredient Solutions segment. Within the Distilling Solutions segment, sales were down 40 percent primarily due to decreased sales of brown goods. Within the Branded Spirits segment, sales were down 8 percent primarily due to decreased sales volume of our private label bottled products within the other category. Within the Ingredient Solutions segment, sales were up 29 percent, primarily due to increased sales of specialty wheat proteins and starches (see “Segment Results”).

Current wording

Sales - Sales for the year to date ended June 30, 2026 were $230,784, a decrease of 14 percent compared to the year-ago period, which was the result of decreased sales in the Distilling Solutions and Branded Spirits segments, partially offset by increased sales in the Ingredient Solutions segment. Within the Distilling Solutions segment, sales were down 41 percent primarily due to decreased sales volume of brown goods. Sales of Branded Spirits were down 4 percent, primarily due to decreased sales volume of our private label bottled products within the other category. Within the Ingredient Solutions segment, sales were up 13 percent, primarily due to increased sales of specialty wheat proteins and starches (see “Segment Results”).

Previous wording

Operating income (loss) -Operating income for the quarter ended March 31, 2026 decreased to a loss of $173,201 from a loss of $747 for the quarter ended March 31, 2025, primarily due to the $179,526 goodwill and other long-lived assets impairment related to the Branded Spirits segment recorded during first quarter 2026. Additionally, contributing to the operating loss was a decrease in gross profit in the Distilling Solutions and Branded Spirits segments. These decreases were partially offset by an increase in gross profit in the Ingredient Solutions segment, decreases in advertising and promotion expenses and SG&A expenses as well as the change in fair value of contingent consideration.

Current wording

Operating income (loss) -Operating income for the year to date ended June 30, 2026 decreased to a loss of $155,549 from income of $19,571 for the year to date period ended June 30, 2025, primarily due to the $179,526 goodwill and other long-lived assets impairment related to the Branded Spirits segment recorded during the first quarter 2026. Additionally, contributing to the operating loss was decreases in gross profit in each segment and an increase in provision for credit loss related to one of our significant customers filing a voluntary petition for reorganization under Chapter 11 of the Bankruptcy Code during July 2026. These decreases were partially offset by the change in the fair value of the contingent consideration liability, as well as the reduction in advertising and promotion and SG&A expenses.

Previous wording

Gross profit decreased versus the prior year quarter by $1,062, or 5 percent, primarily driven by lower sales volume of private label bottled products within the other category. Gross margin for the quarter ended March 31, 2026 increased to 47.8 percent from 46.0 percent for the prior year quarter, driven primarily by increased sales volume in the premium plus price tier.

Current wording

Gross profit decreased versus the prior year quarter by $388, or 1 percent, primarily driven by lower sales volume of private label bottled products within the other category. Gross margin for the quarter ended June 30, 2026 increased to 53.0 percent from 52.8 percent for the prior year quarter, driven primarily by increased sales volume in the premium plus price tier.

Previous wording

Total sales of the Branded Spirits segment for the quarter ended March 31, 2026 decreased by $3,990, or 8 percent, compared to the prior year quarter, primarily due to a decrease in sales volume of our private label bottled products within the other category. Sales of brands within the value price tier decreased, driven by lower sales volume and net price/mix as we continued to optimize our offerings in these price tiers. These decreases were partially offset by increased sales volume in the premium plus price tier reflecting our continued focus on the American whiskey and tequila categories.

Current wording

Total sales of the Branded Spirits segment for the year to date ended June 30, 2026 decreased by $4,880, or 4 percent, compared to the year-ago period, primarily due to a decrease in sales volume of our private label bottled products within the other category. Sales volume of brands within the value price tier also decreased as we continued to optimize our offerings in this price tier. These decreases were partially offset by increased sales volume in the premium plus and mid price tiers reflecting our continued focus on the American whiskey and tequila categories.

Previous wording

Total sales of the Distilling Solutions segment for the quarter ended March 31, 2026 decreased by $18,943, or 40 percent, compared to the prior year quarter, primarily driven by lower brown goods sales. Brown goods sales volume decreased due to reduced customer demand resulting primarily from continued elevated industry-wide barrel inventory levels. This decrease was partially offset by an increase in net price/mix of brown goods compared to the prior year quarter.

Current wording

Total sales of the Distilling Solutions segment for the quarter ended June 30, 2026 decreased by $20,780, or 42 percent, compared to the prior year quarter, primarily driven by lower brown goods sales volume. Brown goods sales decreased due to reduced customer volume demand resulting primarily from continued elevated industry-wide barrel inventory levels. This decrease was partially offset by an increase in net price/mix of brown goods compared to the prior year quarter.

Previous wording

Total sales of the Ingredient Solutions segment for the quarter ended March 31, 2026 increased by $7,707, or 29 percent, compared to the prior year quarter. The increase was primarily driven by increased sales volume and net price/mix of specialty wheat proteins and starches due to cycling against the supply challenges resulting from adverse weather during the prior year quarter, complexities associated with the closure of the Atchison distillery, as well as cycling against the timing of commercialization of new customers during the prior year quarter.

Current wording

Total sales of the Ingredient Solutions segment for the year to date ended June 30, 2026 increased by $8,240, or 13 percent, compared to the prior year period. The increase was primarily driven by increased net price/mix and sales volume of specialty wheat proteins and starches due to cycling against the supply challenges resulting from adverse weather during the prior year, complexities associated with the closure of the Atchison distillery, as well as cycling against the timing of commercialization of new customers during the prior year.

Previous wording

Our primary sources of liquidity have been cash flow from operating activities and borrowings through our Credit Agreement, Convertible Senior Notes and Note Purchase Agreement (see Note 4, Corporate Borrowings). These sources of cash are used to fund our operating needs, capital expenditures, stockholder dividends and other discretionary uses. We continue to monitor market conditions which may create credit and economic challenges that could adversely impact our cash flow from operating activities and cash provided by borrowings. Our overall liquidity reflects our 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.

Current wording

Our primary sources of liquidity have been cash flow from operating activities and borrowings through our Credit Agreement, Convertible Senior Notes, and Note Purchase Agreement (see Note 4, Corporate Borrowings). These sources of cash are used to fund our operating needs, capital expenditures, stockholder dividends, and other discretionary uses. We continue to monitor market conditions which have created, and may continue to create, credit and economic challenges that could adversely impact our cash flow from operating activities and cash provided by borrowings. In the past, this has included consumer, distributor, retailer, and supplier inventory destocking, increases in our provision for credit loss, and customer contract non-performance, and we continue to face these risks (see “Operating Activities”). Our overall liquidity reflects our 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.

Previous wording

At March 31, 2026, our current assets exceeded our current liabilities by $321,058, largely due to our inventories, at cost, of $403,107. At March 31, 2026, our cash balance was $10,357 and we have used our various debt agreements for liquidity purposes, with $464,000 available under our credit agreement for additional borrowings and $234,800 available under the Note Purchase Agreement (see Note 4, Corporate Borrowings). Under these agreements (including the Credit Agreement amendment and the Note Purchase Agreement amendment we entered into on February 20, 2026), we must meet certain financial covenants and restrictions, and at March 31, 2026, we met those covenants and restrictions.

Current wording

At June 30, 2026, our current assets exceeded our current liabilities by $458,355, largely due to our inventories, at cost, of $408,416. At June 30, 2026, our cash balance was $17,794 and we have used our various debt agreements for liquidity purposes, with $338,000 available under our credit agreement for additional borrowings and $236,400 available under the Note Purchase Agreement (see Note 4, Corporate Borrowings). Under these agreements (including the Credit Agreement amendment and the Note Purchase Agreement amendment we entered into on February 20, 2026), we must meet certain financial covenants and restrictions, and at June 30, 2026, we met those covenants and restrictions.

Previous wording

We anticipate being able to support our short-term liquidity and operating needs largely through cash generated from operations and borrowings under our various debt agreements. We expect some holders of the Convertible Senior Notes to require the Company to repurchase the Convertible Senior Notes during the fourth quarter of 2026. We have sufficient availability to repurchase the Convertible Senior Notes under our Credit Agreement, Note purchase Agreement, new financing instruments, or a combination thereof. Additionally, in accordance with the terms of the agreement, we paid out the full contingent consideration related to the Penelope acquisition on April 28, 2026. 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. Subject to market conditions, we could also fund future mergers and acquisitions through the issuance of additional shares of Common Stock or preferred stock.

Current wording

We anticipate being able to support our short-term liquidity and operating needs largely through cash generated from operations and borrowings under our various debt agreements. We expect some holders of the Convertible Senior Notes to require the Company to repurchase the Convertible Senior Notes during the fourth quarter of 2026. We have sufficient availability to repurchase the Convertible Senior Notes that are tendered for repurchase utilizing borrowings under our Credit Agreement, the Note Purchase Agreement, or a combination thereof. Additionally, in accordance with the terms of the agreement, we paid out the full contingent consideration related to the Penelope acquisition on April 28, 2026. 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. Subject to market conditions, we could also fund future mergers and acquisitions through the issuance of additional shares of Common Stock or preferred stock.

Previous wording

Cash decreased $8,103 for the quarter ended March 31, 2026, compared to a decrease of $5,161 for the quarter ended March 31, 2025, for a net decrease in cash of $2,942, period versus period.

Current wording

Cash decreased $666 for the year to date ended June 30, 2026, compared to a decrease of $7,953 for the year to date ended June 30, 2025, for a net decrease in cash of $7,287, period versus period.

Previous wording

Operating Activities. Cash provided by operating activities for the quarter ended March 31, 2026 was $6,955. The cash provided by operating activities resulted primarily from net loss of $134,807, adjustments for non-cash or non-operating charges of $143,619, including goodwill and other long-lived assets impairment, depreciation and amortization, and share-based compensation and cash used in operating assets and liabilities of $1,857. The primary drivers of the changes in operating assets and liabilities were $29,441 of cash provided by decreased accounts receivables, net, due to timing of customer payments and lower sales during the quarter. This was partially offset by $20,299 use of cash related to an increase in inventories, primarily due to an increase in barreled distillate, and $6,792 use of cash related accrued expenses and other primarily related to an incentive compensation payout during the quarter.

Current wording

Operating Activities. Cash used in operating activities for the year to date ended June 30, 2026 was $40,732. The cash used in operating activities resulted primarily from net loss of $122,798, adjustments for non-cash or non-operating charges of $102,533, including goodwill and other long-lived assets impairment, a portion of the contingent consideration payment related to the Penelope acquisition and deferred income taxes, and cash used in operating assets and liabilities of $20,467. The primary drivers of the changes in operating assets and liabilities were $25,631 use of cash related to an increase in inventories, primarily due to an increase in barreled distillate, and $7,001 use of cash related to accrued expenses and other primarily related to an incentive compensation payout during the year to date period. These decreases were partially offset by $12,520 of cash provided by decreased accounts receivables, net, due to timing of customer payments, lower sales during the quarter, and a provision for credit loss recorded during the quarter.

Previous wording

Cash provided by operating activities for the quarter ended March 31, 2025 was $44,684. The cash provided by operating activities resulted primarily from cash provided by operating assets and liabilities of $26,611, adjustments for non-cash or non-operating charges of $21,130, including changes in fair value of contingent consideration, depreciation and amortization, and share-based compensation, partially offset by a net loss of $3,057. The primary drivers of the changes in operating assets and liabilities were $40,594 of cash provided by decreased accounts receivables, net, due to the timing of customer payments and lower sales during the quarter, this was partially offset by $13,439 use of cash related to an increase in inventories, primarily due to an increase in barreled distillate.

Current wording

Cash provided by operating activities for the year to date ended June 30, 2025 was $56,357. The cash provided by operating activities resulted primarily from adjustments for non-cash or non-operating charges of $35,419, including changes in fair value of contingent consideration, depreciation and amortization, and share-based compensation, net income of $11,370, and cash provided by operating assets and liabilities of $9,568. The primary drivers of the changes in operating assets and liabilities were $31,103 of cash provided by decreased accounts receivables, net, due to the timing of customer payments and lower sales during the quarter. This was partially offset by $15,224 use of cash related to an increase in inventories, primarily due to an increase in barreled distillate, and $10,687 use of cash related to a decrease in accounts payable due to timing of vendor payments and lower costs during the year to date period.

Previous wording

Investing Activities. Cash used in investing activities for the quarter ended March 31, 2026 was $3,773, which resulted primarily from additions to property, plant, and equipment of $5,722 (see “Capital Spending”), partially offset by distributions from equity method investments of $1,500. Cash used in investing activities for the quarter ended March 31, 2025 was $19,926, which resulted from additions to property, plant, and equipment (see “Capital Spending”).

Current wording

Investing Activities. Cash used in investing activities for the year to date ended June 30, 2026 was $8,397, which resulted primarily from additions to property, plant, and equipment of $10,219 (see “Capital Spending”), partially offset by distributions from equity method investments of $1,500. Cash used in investing activities for the year to date ended June 30, 2025 was $32,167, which resulted primarily from additions to property, plant, and equipment of $32,156 (see “Capital Spending”).

Previous wording

Capital Spending. We manage capital spending to support our business growth plans. We have incurred $2,003 and $8,094 of capital expenditures and have paid $5,722 and $19,926 for capital expenditures for the years to date ended March 31, 2026 and 2025, respectively. The difference between the amount of capital expenditures incurred and amount paid is due to the change in capital expenditures in accounts payable. We expect to incur approximately $20,000 in capital expenditures in 2026, which we expect to use for facility improvement and facility sustenance projects, and environmental health and safety projects.

Current wording

Capital Spending. We manage capital spending to support our business growth plans. We have incurred $6,433 and $18,691 of capital expenditures and have paid $10,219 and $32,156 for capital expenditures for the years to date ended June 30, 2026 and 2025, respectively. The difference between the amount of capital expenditures incurred and amount paid is due to the change in capital expenditures in accounts payable. We expect to incur approximately $20,000 in capital expenditures in 2026, which we expect to use for facility improvement and facility sustenance projects and environmental health and safety projects.

Previous wording

Financing Activities. Cash used in financing activities for the quarter ended March 31, 2026 was $11,084, due to net payments on debt of $7,600 (see “Long-Term and Short-Term Debt”), payments of dividends and dividend equivalents of $2,598 (see “Dividends and Dividend Equivalents”), and repurchases of Common Stock of $886 (see “Treasury Purchases” and “Share Repurchases”).

Current wording

Financing Activities. Cash provided by financing activities for the year to date ended June 30, 2026 was $48,618, due to net proceeds on debt of $116,800 (see “Long-Term and Short-Term Debt”), partially offset by a portion of the contingent consideration payment of $62,100, payments of dividends and dividend equivalents of $5,196 (see “Dividends and Dividend Equivalents”), and repurchases of Common Stock of $886 (see “Treasury Purchases” and “Share Repurchases”).

Previous wording

Cash used in financing activities for the quarter ended March 31, 2025 was $30,213, due to net payments on debt of $26,600 (see “Long-Term and Short-Term Debt”), payments of dividends and dividend equivalents of $2,578 (see “Dividends and Dividend Equivalents”), and repurchases of Common Stock of $1,035 (see “Treasury Purchases” and “Share Repurchases”).

Current wording

Cash used in financing activities for the year to date ended June 30, 2025 was $33,103, due to net payments on debt of $24,200 (see “Long-Term and Short-Term Debt”), payments of dividends and dividend equivalents of $5,156 (see “Dividends and Dividend Equivalents”), payments of loan fees related to borrowings of $2,712, and repurchases of Common Stock of $1,035 (see “Treasury Purchases” and “Share Repurchases”).

Previous wording

Treasury Purchases. 107,631 RSUs vested and converted to shares of Common Stock for employees during the quarter ended March 31, 2026, of which we withheld and purchased for treasury 34,415 shares valued at $886 to cover payment of associated withholding taxes.

Current wording

Treasury Purchases. 150,350 RSUs vested and converted to shares of Common Stock for employees during the year to date ended June 30, 2026, of which we withheld and purchased for treasury 34,415 shares valued at $886 to cover payment of associated withholding taxes.

Previous wording

105,776 RSUs vested and converted to shares of Common Stock for employees during the quarter ended March 31, 2025, of which we withheld and purchased for treasury 31,631 shares valued at $1,035 to cover payment of associated withholding taxes.

Current wording

105,776 RSUs vested and converted to shares of Common Stock for employees during the year to date ended June 30, 2025, of which we withheld and purchased for treasury 31,631 shares valued at $1,035 to cover payment of associated withholding taxes.

Previous wording

Share Repurchases. On February 29, 2024, we announced that our Board of Directors approved a $100,000 share repurchase program. Under the share repurchase program, we can repurchase stock from time to time for cash in open market purchases, privately negotiated transactions, or by other means, in accordance with applicable securities laws and other legal requirements. The repurchase program has no expiration date and may be modified, suspended, or discontinued at any time by the Company without prior notice. During the quarter ended March 31, 2026 and 2025 we did not repurchase any shares of Common Stock under the share repurchase program. As of March 31, 2026, there was approximately $53,412 remaining under the share repurchase program.

Current wording

Share Repurchases. On February 29, 2024, we announced that our Board of Directors approved a $100,000 share repurchase program. Under the share repurchase program, we can repurchase stock from time to time for cash in open market purchases, privately negotiated transactions, or by other means, in accordance with applicable securities laws and other legal requirements. The repurchase program has no expiration date and may be modified, suspended, or discontinued at any time by the Company without prior notice. During the year to date ended June 30, 2026 and 2025 we did not repurchase any shares of Common Stock under the share repurchase program. As of June 30, 2026, there was approximately $53,412 remaining under the share repurchase program.

Previous wording

Long-Term and Short-Term Debt. We maintain debt levels we consider appropriate after evaluating a number of factors, including cash flow expectations, cash requirements for ongoing operations, investment and financing plans (including brand development, merger and acquisition, Board-approved dividends, and share repurchase activities), and the overall cost of capital. Total debt was $244,958 (net of unamortized loan fees of $7,492) at March 31, 2026, and $252,318 (net of unamortized loan fees of $7,732) at December 31, 2025. We had net payments on debt of $7,600 and $26,600 for quarter ended March 31, 2026 and 2025, respectively.

Current wording

Long-Term and Short-Term Debt. We maintain debt levels we consider appropriate after evaluating a number of factors, including cash flow expectations, cash requirements for ongoing operations, investment and financing plans (including brand development, merger and acquisition, Board-approved dividends, and share repurchase activities), and the overall cost of capital. Total debt was $369,596 (net of unamortized loan fees of $7,254) at June 30, 2026, and $252,318 (net of unamortized loan fees of $7,732) at December 31, 2025. We had net proceeds on debt of $116,800 and net payment on debt of $24,200 for year to date ended June 30, 2026 and 2025, respectively.