MGP INGREDIENTS INC

Previous wording

All forward-looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially. For information on these risks and uncertainties and other factors that could affect the Company’s business, see the “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” sections of our Annual Report on Form 10-K for the year ended December 31, 2023, our Quarterly Reports on Form 10-Q for the quarters ended March 31 and June 30, 2024, this Report, and our other filings with the Securities and Exchange Commission (the “SEC”). Forward looking statements in this Report are made as of the date of this Report, and we undertake no obligation to update any forward-looking statements or information made in this Report, except as required by law.

Current wording

All forward-looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially. For information on these risks and uncertainties and other factors that could affect the Company’s business, see the “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” sections of our Annual Report on Form 10-K for the year ended December 31, 2024, this Report, and our other filings with the Securities and Exchange Commission (the “SEC”). Forward looking statements in this Report are made as of the date of this Report, and we undertake no obligation to update any forward-looking statements or information made in this Report, except as required by law.

Previous wording

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 (“white goods and other co-products”). 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. 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 ingredients 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 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. Distilled spirits include premium bourbon, rye, and other American 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 ingredients products are sold directly, or through distributors, to manufacturers and processors of finished packaged goods or to bakeries.

Previous wording

Sales - Sales for the year to date ended September 30, 2024 were $522,829, a decrease of 16 percent compared to the year-ago period, which was the result of decreased sales in each segment. Within the Distilling Solutions segment, sales were down 27 percent primarily due to decreased sales of white goods and other co-products in connection with the December 2023 closure of the Atchison Distillery. Sales of Branded Spirits were down 2 percent, primarily due to decreased sales of brands within the mid and value price tiers. Within the Ingredient Solutions segment, sales were down 3 percent, primarily due to decreased sales of specialty wheat proteins and commodity wheat starches (see “Segment Results”).

Current wording

Sales - Sales for the quarter ended March 31, 2025 were $121,653, a decrease of 29 percent compared to the year-ago quarter, which was the result of decreased sales in each segment. Within the Distilling Solutions segment, sales were down 45 percent primarily due to decreased sales of brown goods. Within the Ingredient Solutions segment, sales were down 26 percent, primarily due to decreased sales of specialty wheat starches and proteins. Within the Branded Spirits segment, sales were down 4 percent due to decreased sales of brands in the value and mid price tiers (see “Segment Results”).

Previous wording

Gross profit -Gross profit for the quarter ended September 30, 2024 was $65,815, a decrease of 10 percent compared to the year-ago quarter. 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. Within the Ingredient Solutions segment, gross profit decreased by $6,403, or 58 percent. Within the Distilling Solutions segment, gross profit declined by $4,636, or 14 percent. Within the Branded Spirits segment, gross profit increased $3,406, or 12 percent (see “Segment Results”).

Current wording

Gross profit -Gross profit for the quarter ended March 31, 2025 was $43,330, a decrease of 31 percent compared to the year-ago quarter. The decrease was driven by a decrease in gross profit in each segment. Within the Distilling Solutions segment, gross profit decreased by $15,403, or 45 percent. Within the Ingredient Solutions segment, gross profit decreased by $3,728, or 60 percent. Within the Branded Spirits segment, gross profit decreased $334, or 1 percent (see “Segment Results”).

Previous wording

Advertising and promotion expenses -Advertising and promotion expenses for the quarter ended September 30, 2024 were $9,647, a slight increase of 1 percent compared to the year-ago quarter.

Current wording

Advertising and promotion expenses -Advertising and promotion expenses for the quarter ended March 31, 2025 were $8,172, a decrease of 6 percent compared to the year-ago quarter.

Previous wording

SG&A expenses -SG&A expenses for the quarter ended September 30, 2024 were $17,204, a decrease of 20 percent compared to the year-ago quarter. The decrease in SG&A expenses was primarily due to reduced incentive compensation expenses.

Current wording

SG&A expenses -SG&A expenses for the quarter ended March 31, 2025 were $21,205, a slight increase of 1 percent compared to the year-ago quarter.

Previous wording

Income tax expense - Income tax expense for the quarter ended September 30, 2024 was $7,554, for an effective tax rate of 24.0 percent. Income tax expense for the quarter ended September 30, 2023 was $4,373, for an effective tax rate of 25.0 percent. The increase in income tax expense, quarter versus quarter, was due to higher income before income taxes. The decrease in effective tax rate, quarter versus quarter, was primarily due to larger tax credits than in the prior year.

Current wording

Income tax expense - Income tax expense for the quarter ended March 31, 2025 was $671, for an effective tax rate of (28.1) percent. Income tax expense for the quarter ended March 31, 2024 was $6,262, for an effective tax rate of 23.3 percent. The decrease in income tax expense, quarter versus quarter, was due primarily to lower income before income taxes, as the Company was in a net loss position for the quarter ended March 31, 2025, primarily due to the change in the fair value of the contingent consideration liability related to the Penelope acquisition. The tax rate for the quarter ended March 31, 2025 was negative primarily due to the net loss position and the discrete tax impact of the vesting of share based awards granted in the prior years during periods of higher stock prices.

Previous wording

Earnings per common share (“EPS”) -Basic and Diluted EPS was $1.07 for the quarter ended September 30, 2024, compared to $0.59 and $0.58, respectively for the quarter ended September 30, 2023. The change in basic and diluted EPS, quarter versus quarter, was primarily due to an increase in operating income and the change in other income (expense), net.

Current wording

Earnings per common share (“EPS”) -Basic and Diluted EPS was $(0.14) for the quarter ended March 31, 2025, compared to $0.92 for the quarter ended March 31, 2024. The change in basic and diluted EPS, quarter versus quarter, was primarily due to a decrease in operating income and the change in effective tax rate.

Previous wording

Cash increased $2,384 for the year to date ended September 30, 2024, compared to a decrease of $19,859 for the year to date ended September 30, 2023, for a net increase in cash of $22,243, period versus period.

Current wording

Cash decreased $5,161 for the quarter ended March 31, 2025, compared to a increase of $1,109 for the quarter ended March 31, 2024, for a net decrease in cash of $6,270, period versus period.

Previous wording

Operating Activities. Cash provided by operating activities for the year to date ended September 30, 2024 was $73,512. The cash provided by operating activities resulted primarily from net income of $76,463, adjustments for non-cash or non-operating charges of $32,845, including depreciation and amortization, the change in fair value of contingent consideration, and share-based compensation, partially offset by cash used in operating assets and liabilities of $35,796. The primary drivers of the changes in operating assets and liabilities were $24,979 use of cash related to an increase in inventories, primarily due to an increase in barreled distillate, $10,627 use of cash related to a decrease in accounts payable due to timing of payments, $9,935 related to accrued expenses and other, which related to a decrease in our incentive compensation accrual, partially offset by $13,979 cash provided by decreased accounts receivables, net, due to the timing of sales and customer payments during the year to date period as well as the closure of the Atchison Distillery in December 2023.

Current wording

Operating Activities. 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 the change 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 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.

Previous wording

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

Current wording

Cash provided by operating activities for the quarter ended March 31, 2024 was $24,623. The cash provided by operating activities resulted primarily from net income of $20,584, adjustments for non-cash or non-operating charges of $11,603, including depreciation and amortization, the changes in fair value of contingent consideration, and share-based compensation, partially offset by cash used in operating assets and liabilities of $7,564. The primary drivers of the changes in operating assets and liabilities were $10,380 use of cash related to accrued expenses and other, which related to the incentive compensation payout during the quarter, and $10,207 use of cash related to a decrease in accounts payable due to timing of payments. These uses of cash were offset by $11,257 of cash provided by a decrease in accounts receivable, net, due to timing of sales and customer payments during the quarter.

Previous wording

Investing Activities. Cash used in investing activities for the year to date ended September 30, 2024 was $53,126, which primarily resulted from additions to property, plant, and equipment of $52,850 (see “Capital Spending”). Cash used in investing activities for the year to date ended September 30, 2023 was $146,690, which primarily resulted from $103,712 related to the acquisition of Penelope, net of cash acquired, and additions to property, plant, and equipment of $42,062 (see “Capital Spending”).

Current wording

Investing Activities. 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”). Cash used in investing activities for the quarter ended March 31, 2024 was $27,266, which primarily resulted from additions to property, plant, and equipment of $27,026 (see “Capital Spending”).

Previous wording

Capital Spending. We manage capital spending to support our business growth plans. We have incurred $43,503 and $36,879 of capital expenditures and have paid $52,850 and $42,062 for capital expenditures for the year to date ended September 30, 2024 and 2023, respectively. The difference between the amount of capital expenditures incurred and amount paid is due to the change in capital expenditures in accounts payable. We expect approximately $78,000 in capital expenditures in 2024, which includes capital expenditures for facility improvement and expansion, facility sustaining projects, and environmental health and safety projects.

Current wording

Capital Spending. We manage capital spending to support our business growth plans. We have incurred $8,094 and $13,134 of capital expenditures and have paid $19,926 and $27,026 for capital expenditures for the quarter ended March 31, 2025 and 2024, respectively. We expect to incur approximately $36,000 in capital expenditures in 2025, which includes capital expenditures for facility improvement and expansion, facility sustaining projects, and environmental, health, and safety projects. The difference between the amount of capital expenditures incurred and amount paid is due to the change in capital expenditures in accounts payable.

Previous wording

Financing Activities. Cash used in financing activities for the year to date ended September 30, 2024 was $18,048, due to repurchases of Common Stock of $12,235 (see “Treasury Purchases” and “Share Repurchase”), and payments of dividends and dividend equivalents of $8,013 (see “Dividends and Dividend Equivalents”), partially offset by net proceeds on debt of $2,200 (see “Long-Term and Short-Term Debt”).

Current wording

Financing Activities. 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 Repurchase”).

Previous wording

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

Current wording

Cash provided by financing activities for the quarter ended March 31, 2024 was $3,767, due to net proceeds on debt of $13,400 (see “Long-Term and Short-Term Debt”), partially offset by repurchase of Common Stock of $6,961 (see “Treasury Purchases” and “Share Repurchases”) and payments of dividends and dividend equivalents of $2,672 (see “Dividends and Dividend Equivalents”).

Previous wording

Treasury Purchases. 81,942 RSUs vested and converted to shares of Common Stock for employees during the year to date ended September 30, 2024, of which we withheld and purchased for treasury 25,521 shares valued at $2,185 to cover payment of associated withholding taxes.

Current wording

Treasury Purchases. 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.

Previous wording

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

Current wording

73,230 RSUs vested and converted to shares of Common Stock for employees during the quarter ended March 31, 2024, of which we withheld and purchased for treasury 22,885 shares valued at $1,961 to cover payment of associated withholding taxes.

Previous wording

Share Repurchase. 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 Common 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 September 30, 2024, we repurchased 128,360 shares of Common Stock for approximately $10,000, resulting in approximately $90,000 remaining under the share repurchase program.

Current wording

Share Repurchase. 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, 2025, we did not repurchase any share of Common Stock under the share repurchase program. During the quarter ended March 31, 2024, the Company repurchased approximately 59,084 shares of Company Stock for approximately $5,000. As of March 31, 2025, there was approximately $53,412 remaining under the share repurchase program.

Previous wording

On October 31, 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. The dividend and dividend equivalent are payable on November 29, 2024 to stockholders of record and RSU holders on November 15, 2024.

Current wording

On May 1, 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. The dividend and dividend equivalent are payable on May 30, 2025 to stockholders of record and certain RSU holders as of May 16, 2025.

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, and share repurchase activities), and the overall cost of capital. Total debt was $289,968 (net of unamortized loan fees of $6,082) at September 30, 2024, and $287,249 (net of unamortized loan fees of $6,601) at December 31, 2023.

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 $297,114 (net of unamortized loan fees of $5,736) at March 31, 2025, and $323,541 (net of unamortized loan fees of $5,909) at December 31, 2024.

Previous wording

At September 30, 2024, our current assets exceeded our current liabilities by $449,670, largely due to our inventories, at cost, of $372,153. At September 30, 2024, our cash balance was $20,772 and we have used our various debt agreements for liquidity purposes, with $330,000 available under our Credit Agreement for additional borrowings and $225,200 available under the Note Purchase Agreement (see Note 5, Corporate Borrowings). 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, and potential mergers and acquisitions. Subject to market conditions, we could also fund future mergers and acquisitions through the issuance of additional shares of Common Stock. In addition, we have strong operating results such that we believe financial institutions should provide sufficient credit funding to meet short-term financing requirements, if needed.

Current wording

At March 31, 2025, our current assets exceeded our current liabilities by $334,384, largely due to our inventories, at cost, of $378,243. At March 31, 2025, our cash balance was $20,112 and we have used our various debt agreements for liquidity purposes, with $320,000 available under our Credit Agreement for additional borrowings and $228,400 available under the Note Purchase Agreement (see Note 4, Corporate Borrowings). 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, and potential mergers and acquisitions. Subject to market conditions, we could also fund future mergers and acquisitions through the issuance of additional shares of Common Stock. In addition, we have strong operating results such that we believe financial institutions should provide sufficient credit funding to meet short-term financing requirements, if needed.