UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC 20549 FORM 10-K ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 (Mark One) ☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2023 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from _______ to _______ Commission file number 0-17196 MGP Ingredients, Inc. (Exact N ...

MGP INGREDIENTS REPORTS STRONG FOURTH QUARTER AND FULL YEAR 2023 RESULTS Record full year gross profit increased 20% from prior year period ATCHISON, Kan., February 22, 2024 - MGP Ingredients, Inc. (Nasdaq:MGPI), a leading provider of distilled spirits, branded spirits, and food ingredient solutions, today reported results for the fourth quarter and full year ended December 31, 2023. 2023 fourth quarter consolidated results compared to 2022 fourth quarter 2023 full year consolidated results compared to 2022 ...

MGP Ingredients, Inc. (NASDAQ:MGPI) Q3 2023 Earnings Conference Call November 2, 2023 10:00 AM ET Company Participants Mike Houston - Lambert Global, Investor Relations Dave Colo - President and CEO Brandon Gall - Vice President, Finance and CFO Conference Call Participants Marc Torrente - Wells Fargo Gerald Pascarelli - Wedbush Bill Chappell - Truist Securities Vivien Azer - TD Cowen Operator Good morning. And welcome to the MGP Ingredients Third Quarter 2023 Financial Results Conference Call. All particip ...

Financial Performance - Sales for the quarter ended September 30, 2023, were $211,624, an increase of 5% compared to the same quarter in 2022[103]. - Gross profit for the quarter ended September 30, 2023, was $73,448, a 24% increase year-over-year[105]. - Operating income for the quarter ended September 30, 2023, decreased to $19,839, a decline of 41% compared to the prior year[108]. - Net income for the quarter ended September 30, 2023, was $13,088, representing a 45% decrease from $23,628 in the same quarter of 2022[103]. - For the year to date ended September 30, 2023, sales were $621,635, a 5% increase compared to the same period in 2022[114]. - Gross profit for the year to date ended September 30, 2023, was $219,567, a 16% increase year-over-year[116]. - Operating income for the year to date ended September 30, 2023 decreased to $105,541 from $119,250 for the same period in 2022, a decline of 11 percent[119]. - Basic EPS for the year to date ended September 30, 2023 was $3.43, down 12 percent from $3.91 for the same period in 2022[122]. Expenses - Advertising and promotion expenses for the quarter ended September 30, 2023, were $9,505, an increase of 31% year-over-year[106]. - SG&A expenses for the quarter ended September 30, 2023, were $21,570, a 20% increase compared to the same quarter in 2022[107]. - Advertising and promotion expenses for the year to date ended September 30, 2023 were $25,877, an increase of 37 percent compared to the year-ago period[117]. - SG&A expenses for the year to date ended September 30, 2023 were $65,615, an increase of 26 percent compared to the year-ago period, primarily due to higher personnel and acquisition expenses related to Penelope[118]. Segment Performance - Total sales of the Distilling Solutions segment for the quarter ended September 30, 2023 increased by $3,209, or 3 percent, compared to the prior year quarter[128]. - Gross profit for the Distilling Solutions segment increased by $7,363, or 28 percent, for the quarter ended September 30, 2023[129]. - Total sales of the Distilling Solutions segment for the year to date ended September 30, 2023 increased by $14,650, or 4 percent compared to the year-ago period[134]. - Gross profit for the year to date ended September 30, 2023 increased by $10,356, or 11 percent compared to the year-ago period[135]. - Total sales of the Branded Spirits segment for the quarter ended September 30, 2023 increased by $4,058, or 6 percent compared to the prior year quarter[139]. - Gross profit for the quarter ended September 30, 2023 increased by $3,973, or 16 percent, with gross margin rising to 43.5 percent from 39.9 percent[140]. - Year-to-date sales of Branded Spirits for the period ended September 30, 2023 increased by $4,240, or 2 percent compared to the year-ago period[147]. - Year-to-date gross profit for Branded Spirits increased by $8,827, or 12 percent, with gross margin rising to 43.9 percent from 40.0 percent[148]. - Year-to-date sales of the Ingredient Solutions segment increased by $11,382, or 13 percent, reflecting an increase across all product categories[161]. - Year-to-date gross profit for Ingredient Solutions increased by $10,291, or 42 percent, with gross margin rising to 35.5 percent from 28.3 percent[162]. - Total sales of the Ingredient Solutions segment for the quarter ended September 30, 2023 increased by $3,211, or 11 percent, driven by higher sales across all product categories[153]. - Gross profit for the Ingredient Solutions segment increased by $3,064, or 38 percent, with gross margin rising to 33.8 percent from 27.1 percent[154]. - Sales in the ultra premium price tier for Branded Spirits increased by $6,303, or 46 percent, while sales in the mid price tier decreased by $3,184, or 15 percent[139]. - The increase in sales of brands within the ultra premium price tier was primarily due to an increase in sales of American whiskey brands, including those acquired from Penelope[139]. Asset and Cash Flow - The company recorded a $17,112 impairment of assets related to the planned closure of the Atchison Distillery[100]. - Operating cash flow for the year to date ended September 30, 2023 was $48,605, a decrease of $23,648 compared to $72,253 for the same period in 2022[166]. - Cash used in investing activities increased significantly to $146,690 for the year to date ended September 30, 2023, primarily due to the acquisition of Penelope for $103,712[169]. - Cash provided by financing activities for the year to date ended September 30, 2023 was $78,193, driven by net proceeds on debt of $87,000[171]. - Total debt as of September 30, 2023 was $316,677, an increase from $230,335 at December 31, 2022[177]. - Cash and cash equivalents decreased by $19,859 for the year to date ended September 30, 2023, compared to an increase of $29,106 for the same period in 2022, resulting in a net decrease of $48,965[166]. - The company anticipates being able to support short-term liquidity and operating needs largely through cash generated from operations[180]. Tax and Interest - Income tax expense for the year to date ended September 30, 2023 was $24,832, with an effective tax rate of 24.6 percent[121]. - The change in fair value of contingent consideration related to the Penelope acquisition was $4,200, impacting operating income negatively[119]. - A 100 basis point increase in market interest rates would increase annual interest expense on variable-rate debt by $980[184]. Dividends and Capital Expenditures - The company declared a dividend of $0.12 per share, payable on December 1, 2023, totaling $8,006 for the year to date ended September 30, 2023[175][176]. - The company expects approximately $63,000 in capital expenditures for 2023, including facility improvements and the planned closure of the Atchison Distillery[170]. Current Assets and Liabilities - Current assets exceeded current liabilities by $413,808 as of September 30, 2023, largely due to inventories valued at $342,401[180].

MGP Ingredients, Inc. (NASDAQ:MGPI) Q2 2023 Results Conference Call August 3, 2023 10:00 AM ET Company Participants Mike Houston - Investor Relations Dave Colo - President & Chief Executive Officer Brandon Gall - Vice President-Finance & Chief Financial Officer Conference Call Participants Gerald Pascarelli - Wedbush Vivien Azer - Cowen & Company Sean McGowan - ROTH MKM Marc Torrente - Wells Fargo Bill Chappell - Truist Securities Mitch Pinheiro - Sturdivant Operator Good morning, and welcome to the MGP Ing ...

[PART I. FINANCIAL INFORMATION](index=3&type=section&id=PART%20I.%20FINANCIAL%20INFORMATION) [Item 1. Financial Statements](index=3&type=section&id=Item%201.%20Financial%20Statements) This section presents the unaudited condensed consolidated financial statements for MGP Ingredients, Inc., including statements of income, comprehensive income, balance sheets, cash flows, and changes in stockholders' equity, along with detailed notes on accounting policies, business combinations, debt, and segment information [Condensed Consolidated Statements of Income (Unaudited)](index=3&type=section&id=Condensed%20Consolidated%20Statements%20of%20Income%20(Unaudited)) **Condensed Consolidated Statements of Income (Unaudited) - Quarter Ended June 30:** | Metric | Q2 2023 ($ thousands) | Q2 2022 ($ thousands) | | :--- | :--- | :--- | | Sales | 209,001 | 194,982 | | Gross profit | 76,295 | 59,224 | | Operating income | 44,143 | 35,306 | | Net income attributable to MGP Ingredients, Inc. | 32,126 | 25,560 | | Basic EPS | 1.44 | 1.15 | | Diluted EPS | 1.44 | 1.15 | **Condensed Consolidated Statements of Income (Unaudited) - Year to Date Ended June 30:** | Metric | YTD 2023 ($ thousands) | YTD 2022 ($ thousands) | | :--- | :--- | :--- | | Sales | 410,011 | 390,217 | | Gross profit | 146,119 | 131,045 | | Operating income | 85,702 | 85,386 | | Net income attributable to MGP Ingredients, Inc. | 63,197 | 62,997 | | Basic EPS | 2.84 | 2.84 | | Diluted EPS | 2.83 | 2.84 | [Condensed Consolidated Statements of Comprehensive Income (Unaudited)](index=4&type=section&id=Condensed%20Consolidated%20Statements%20of%20Comprehensive%20Income%20(Unaudited)) **Condensed Consolidated Statements of Comprehensive Income (Unaudited) - Quarter Ended June 30:** | Metric | Q2 2023 ($ thousands) | Q2 2022 ($ thousands) | | :--- | :--- | :--- | | Net income attributable to MGP Ingredients, Inc. | 32,126 | 25,560 | | Other comprehensive income (loss) | 67 | (443) | | Comprehensive income attributable to MGP Ingredients, Inc. | 32,193 | 25,117 | | Comprehensive income | 32,031 | 24,919 | **Condensed Consolidated Statements of Comprehensive Income (Unaudited) - Year to Date Ended June 30:** | Metric | YTD 2023 ($ thousands) | YTD 2022 ($ thousands) | | :--- | :--- | :--- | | Net income attributable to MGP Ingredients, Inc. | 63,197 | 62,997 | | Other comprehensive income (loss) | 135 | (675) | | Comprehensive income attributable to MGP Ingredients, Inc. | 63,332 | 62,322 | | Comprehensive income | 63,131 | 62,058 | [Condensed Consolidated Balance Sheets (Unaudited)](index=6&type=section&id=Condensed%20Consolidated%20Balance%20Sheets%20(Unaudited)) **Condensed Consolidated Balance Sheets (Unaudited):** | Metric | June 30, 2023 ($ thousands) | December 31, 2022 ($ thousands) | | :--- | :--- | :--- | | Total current assets | 520,849 | 454,162 | | Total assets | 1,395,129 | 1,158,211 | | Total current liabilities | 118,651 | 105,375 | | Total liabilities | 588,007 | 412,567 | | Total equity | 807,122 | 745,644 | [Condensed Consolidated Statements of Cash Flows (Unaudited)](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows%20(Unaudited)) **Condensed Consolidated Statements of Cash Flows (Unaudited) - Year to Date Ended June 30:** | Metric | YTD 2023 ($ thousands) | YTD 2022 ($ thousands) | | :--- | :--- | :--- | | Net cash provided by operating activities | 20,156 | 43,019 | | Net cash used in investing activities | (135,589) | (19,484) | | Net cash provided by (used in) financing activities | 89,462 | (7,649) | | Increase (decrease) in cash and cash equivalents | (25,930) | 15,847 | | Cash and cash equivalents, end of period | 21,959 | 37,415 | [Condensed Consolidated Statements of Changes in Stockholders' Equity (Unaudited)](index=8&type=section&id=Condensed%20Consolidated%20Statements%20of%20Changes%20in%20Stockholders'%20Equity%20(Unaudited)) - Total MGP Ingredients, Inc. stockholders' equity increased from **$745,644 thousand** at December 31, 2022, to **$808,403 thousand** at June 30, 2023, driven by net income and share-based compensation, partially offset by dividends and treasury stock repurchases[21](index=21&type=chunk) - For the year to date ended June 30, 2023, net income contributed **$63,197 thousand** to equity, while dividends and dividend equivalents resulted in a reduction of **$5,325 thousand**[21](index=21&type=chunk)[19](index=19&type=chunk) [Notes to Unaudited Condensed Consolidated Financial Statements](index=10&type=section&id=Notes%20to%20Unaudited%20Condensed%20Consolidated%20Financial%20Statements) [Note 1. Accounting Policies and Basis of Presentation](index=10&type=section&id=Note%201.%20Accounting%20Policies%20and%20Basis%20of%20Presentation) This note outlines MGP Ingredients, Inc.'s core business segments and details key accounting policies for financial statement presentation, including inventory, revenue, income taxes, and business combinations - MGP Ingredients, Inc. operates in three segments: Distilling Solutions, Branded Spirits, and Ingredient Solutions[27](index=27&type=chunk) - On June 1, 2023, the Company acquired Penelope Bourbon LLC, enhancing its presence in the premium plus American whiskey category[26](index=26&type=chunk)[54](index=54&type=chunk) **Inventory Composition (in thousands):** | Category | June 30, 2023 | December 31, 2022 | | :--- | :--- | :--- | | Finished goods | $56,807 | $47,073 | | Barreled distillate | $234,566 | $199,040 | | Raw materials | $37,200 | $29,931 | | Total | $343,826 | $289,722 | [Note 2. Revenue](index=13&type=section&id=Note%202.%20Revenue) This note details the Company's revenue recognition policies and disaggregates sales across its Distilling Solutions, Branded Spirits, and Ingredient Solutions segments - Revenue from product sales is recognized at the point of delivery when control transfers to the customer, while revenue from warehouse and contract bottling services is recognized over time as services are rendered[34](index=34&type=chunk)[36](index=36&type=chunk)[51](index=51&type=chunk) **Sales by Segment - Quarter Ended June 30 (in thousands):** | Segment | Q2 2023 | Q2 2022 | | :--- | :--- | :--- | | Distilling Solutions | $116,865 | $107,138 | | Branded Spirits | $57,616 | $58,566 | | Ingredient Solutions | $34,520 | $29,278 | | Total Sales | $209,001 | $194,982 | **Sales by Segment - Year to Date Ended June 30 (in thousands):** | Segment | YTD 2023 | YTD 2022 | | :--- | :--- | :--- | | Distilling Solutions | $230,088 | $218,647 | | Branded Spirits | $114,499 | $114,317 | | Ingredient Solutions | $65,424 | $57,253 | | Total Sales | $410,011 | $390,217 | [Note 3. Business Combination](index=14&type=section&id=Note%203.%20Business%20Combination) This note details the June 1, 2023, acquisition of Penelope Bourbon LLC, including the cash consideration, potential earn-out, and preliminary purchase price allocation for goodwill and intangible assets - MGP acquired Penelope Bourbon LLC on June 1, 2023, for **$105,000 thousand** in cash, plus potential earn-out consideration up to **$110,800 thousand**[54](index=54&type=chunk)[55](index=55&type=chunk) - The acquisition resulted in **$99,419 thousand** in goodwill and **$55,800 thousand** in identifiable intangible assets, including trade names (**$33,700 thousand**) and distributor relationships (**$22,100 thousand**)[60](index=60&type=chunk)[62](index=62&type=chunk) - The estimated fair value of the contingent consideration obligation at acquisition was **$63,900 thousand**, determined using a Monte Carlo simulation with Level 3 unobservable inputs[60](index=60&type=chunk)[65](index=65&type=chunk) [Note 4. Goodwill and Intangible Assets](index=16&type=section&id=Note%204.%20Goodwill%20and%20Intangible%20Assets) This note details definite-lived intangible assets, primarily distributor relationships, and outlines changes in goodwill and indefinite-lived intangible assets, significantly impacted by the Penelope acquisition - Definite-lived intangible assets, primarily distributor relationships, have a carrying value of **$58,750 thousand** (net of **$4,750 thousand** accumulated amortization) and a useful life of **20 years**[66](index=66&type=chunk)[67](index=67&type=chunk) **Changes in Goodwill by Business Segment (in thousands):** | Segment | December 31, 2022 | Acquisitions | June 30, 2023 | | :--- | :--- | :--- | :--- | | Branded Spirits | $226,294 | $99,419 | $325,713 | | Total | $226,294 | $99,419 | $325,713 | **Changes in Trade Name Intangible Assets by Business Segment (in thousands):** | Segment | December 31, 2022 | Acquisitions | June 30, 2023 | | :--- | :--- | :--- | :--- | | Branded Spirits | $178,990 | $33,700 | $212,690 | | Total | $178,990 | $33,700 | $212,690 | [Note 5. Corporate Borrowings](index=17&type=section&id=Note%205.%20Corporate%20Borrowings) This note details the Company's increased outstanding indebtedness, including revolver draws for the Penelope acquisition, Convertible Senior Notes, and Senior Secured Notes, confirming compliance with debt covenants **Outstanding Indebtedness (in thousands):** | Description | June 30, 2023 | December 31, 2022 | | :--- | :--- | :--- | | Credit Agreement - Revolver | $98,000 | $— | | Convertible Senior Notes | $201,250 | $201,250 | | Note Purchase Agreement (Series A & Senior Secured Notes) | $32,800 | $35,200 | | Total indebtedness outstanding | $332,050 | $236,450 | - The Company utilized **$105,000 thousand** from its Credit Agreement revolver to finance the Penelope acquisition, resulting in **$98,000 thousand** outstanding borrowings as of June 30, 2023, with **$302,000 thousand** still available[71](index=71&type=chunk) - MGP has **$201,250 thousand** in 1.88% Convertible Senior Notes due 2041 and **$32,800 thousand** in Senior Secured Notes under a Note Purchase Agreement, with **$120,000 thousand** available under the shelf facility[72](index=72&type=chunk)[74](index=74&type=chunk) [Note 6. Income Taxes](index=18&type=section&id=Note%206.%20Income%20Taxes) This note details the Company's income tax expense and effective tax rates, noting an increase in 2023 primarily due to higher income before taxes and lower tax credits **Income Tax Expense and Effective Tax Rate:** | Period | Income Tax Expense ($ thousands) | Effective Tax Rate | | :--- | :--- | :--- | | Q2 2023 | $10,804 | 25.3% | | Q2 2022 | $7,339 | 22.4% | | YTD 2023 | $20,459 | 24.5% | | YTD 2022 | $18,504 | 22.8% | - The increase in the effective tax rate for both the quarter and year-to-date periods in 2023 compared to 2022 was primarily driven by higher income before income taxes and lower tax credits, partially offset by state income taxes and foreign subsidiary income taxes[76](index=76&type=chunk)[77](index=77&type=chunk) [Note 7. Equity and EPS](index=18&type=section&id=Note%207.%20Equity%20and%20EPS) This note presents basic and diluted EPS computations, showing an increase in Q2 2023 EPS and a slight year-to-date diluted EPS decrease due to Convertible Senior Notes **Earnings Per Common Share (EPS):** | Period | Basic EPS | Diluted EPS | | :--- | :--- | :--- | | Q2 2023 | $1.44 | $1.44 | | Q2 2022 | $1.15 | $1.15 | | YTD 2023 | $2.84 | $2.83 | | YTD 2022 | $2.84 | $2.84 | - Diluted EPS for YTD 2023 was slightly lower than YTD 2022 due to the dilutive impact of the Convertible Senior Notes, as the average market price per share exceeded the conversion price of **$96.24**[80](index=80&type=chunk) - Common shares outstanding increased from **21,994,042** at December 31, 2022, to **22,014,374** at June 30, 2023, reflecting issuance of common stock and repurchases for tax withholding on equity-based compensation[82](index=82&type=chunk) [Note 8. Commitments and Contingencies](index=19&type=section&id=Note%208.%20Commitments%20and%20Contingencies) This note briefly states that the Company is involved in various legal and regulatory proceedings and accrues estimated costs for contingencies when a loss is probable and can be reasonably estimated - The Company accrues estimated costs for contingencies when management believes a loss is probable and can be reasonably estimated, related to various legal and regulatory proceedings[83](index=83&type=chunk) [Note 9. Employee and Non-Employee Benefit Plans](index=19&type=section&id=Note%209.%20Employee%20and%20Non-Employee%20Benefit%20Plans) This note describes the Company's share-based compensation plans and the Executive Deferred Compensation Plan, detailing unvested RSUs and EDC plan investment gains - As of June 30, 2023, **226,684** unvested RSUs were outstanding under the Company's long-term incentive plans[85](index=85&type=chunk) - The Executive Deferred Compensation Plan (EDC Plan) generated a gain on investments of **$211 thousand** for Q2 2023 and **$390 thousand** year-to-date, compared to losses in the prior year[86](index=86&type=chunk) **EDC Plan Investments and Liabilities (in thousands):** | Metric | June 30, 2023 | December 31, 2022 | | :--- | :--- | :--- | | EDC Plan investments (Other assets) | $2,979 | $2,176 | | EDC Plan current liabilities (Accrued expenses and other) | $650 | $510 | | EDC Plan non-current liabilities (Other noncurrent liabilities) | $2,621 | $2,191 | [Note 10. Operating Segments](index=20&type=section&id=Note%2010.%20Operating%20Segments) This note details the Company's three operating segments: Distilling Solutions, Branded Spirits, and Ingredient Solutions, providing summarized financial information including sales and gross profit - The Company operates through three segments: Distilling Solutions, Branded Spirits, and Ingredient Solutions, with Corporate covering non-direct expenses[89](index=89&type=chunk)[90](index=90&type=chunk) **Sales to Customers by Segment - Quarter Ended June 30 (in thousands):** | Segment | Q2 2023 | Q2 2022 | | :--- | :--- | :--- | | Distilling Solutions | $116,865 | $107,138 | | Branded Spirits | $57,616 | $58,566 | | Ingredient Solutions | $34,520 | $29,278 | | Total | $209,001 | $194,982 | **Gross Profit by Segment - Quarter Ended June 30 (in thousands):** | Segment | Q2 2023 | Q2 2022 | | :--- | :--- | :--- | | Distilling Solutions | $38,678 | $29,780 | | Branded Spirits | $26,003 | $20,960 | | Ingredient Solutions | $11,614 | $8,484 | | Total | $76,295 | $59,224 | [Note 11. Subsequent Events](index=21&type=section&id=Note%2011.%20Subsequent%20Events) This note discloses a quarterly dividend declaration and the Board's approval to close the Atchison, Kansas distillery by January 2024, with expected pre-tax charges - On August 3, 2023, a quarterly dividend of **$0.12 per share** and per RSU was announced, payable September 1, 2023[93](index=93&type=chunk) - The Company's Board of Directors approved the closure of the Atchison, Kansas distillery, anticipated by January 2024, with expected pre-tax charges of **$23,000 to $31,000 thousand** in 2023[94](index=94&type=chunk)[98](index=98&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=21&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section provides management's perspective on the Company's financial performance and condition, discussing consolidated and segment-specific results for the quarter and year-to-date periods ended June 30, 2023, compared to 2022. It also covers recent developments, liquidity, cash flows, and capital spending, highlighting the impact of the Penelope acquisition and the planned Atchison distillery closure [CAUTIONARY NOTE CONCERNING FACTORS THAT MAY AFFECT FUTURE RESULTS](index=22&type=section&id=CAUTIONARY%20NOTE%20CONCERNING%20FACTORS%20THAT%20MAY%20AFFECT%20FUTURE%20RESULTS) - The report contains forward-looking statements regarding industry prospects, financial plans, and strategic initiatives, including the Atchison distillery closure, capital expenditures, and liquidity, which are subject to risks and uncertainties[95](index=95&type=chunk)[96](index=96&type=chunk) [RECENT DEVELOPMENTS](index=22&type=section&id=RECENT%20DEVELOPMENTS) - The Company completed the acquisition of Penelope Bourbon LLC on June 1, 2023, expanding its premium plus American whiskey portfolio[97](index=97&type=chunk) - The Board approved the closure of the Atchison, Kansas distillery by January 2024 to address profitability challenges in grain neutral spirits and industrial alcohol products, with expected pre-tax charges of **$23,000 to $31,000 thousand** in 2023[98](index=98&type=chunk) [OVERVIEW](index=22&type=section&id=OVERVIEW) - MGP is a leading producer and supplier of premium distilled spirits (bourbon, rye, GNS), branded spirits (value to ultra-premium), and food ingredients (protein and starch) for consumer packaged goods[99](index=99&type=chunk) [RESULTS OF OPERATIONS](index=23&type=section&id=RESULTS%20OF%20OPERATIONS) This section analyzes the Company's consolidated financial performance, including sales, gross profit, operating income, and net income, for the quarter and year-to-date periods [Consolidated Results (Quarter Ended June 30)](index=23&type=section&id=Consolidated%20Results%20(Quarter%20Ended%20June%2030)) Consolidated sales increased 7% to **$209,001 thousand** in Q2 2023, with gross profit up 29% to **$76,295 thousand**, and net income growing 26% to **$31,964 thousand** **Consolidated Financial Highlights - Quarter Ended June 30 (in thousands, except percentages):** | Metric | Q2 2023 | Q2 2022 | Change (%) | | :--- | :--- | :--- | :--- | | Sales | $209,001 | $194,982 | 7% | | Gross profit | $76,295 | $59,224 | 29% | | Gross margin % | 36.5% | 30.4% | +6.1 pp | | Operating income | $44,143 | $35,306 | 25% | | Net income | $31,964 | $25,362 | 26% | | Basic/Diluted EPS | $1.44 | $1.15 | 25% | | Advertising and promotion expenses | $8,639 | $6,065 | 42% | | SG&A expenses | $23,513 | $17,853 | 32% | - The increase in operating income was primarily due to higher gross profit across all segments, partially offset by increased advertising and promotion expenses (up **42%**) and SG&A expenses (up **32%**), including Penelope acquisition costs[104](index=104&type=chunk)[105](index=105&type=chunk)[107](index=107&type=chunk)[108](index=108&type=chunk) [Consolidated Results (Year to Date Ended June 30)](index=25&type=section&id=Consolidated%20Results%20(Year%20to%20Date%20Ended%20June%2030)) Year-to-date consolidated sales increased 5% to **$410,011 thousand**, gross profit grew 12% to **$146,119 thousand**, while operating income and net income remained stable **Consolidated Financial Highlights - Year to Date Ended June 30 (in thousands, except percentages):** | Metric | YTD 2023 | YTD 2022 | Change (%) | | :--- | :--- | :--- | :--- | | Sales | $410,011 | $390,217 | 5% | | Gross profit | $146,119 | $131,045 | 12% | | Gross margin % | 35.6% | 33.6% | +2.0 pp | | Operating income | $85,702 | $85,386 | —% | | Net income | $62,996 | $62,733 | —% | | Basic EPS | $2.84 | $2.84 | —% | | Diluted EPS | $2.83 | $2.84 | —% | | Advertising and promotion expenses | $16,372 | $11,569 | 42% | | SG&A expenses | $44,045 | $34,090 | 29% | - Operating income remained flat year-over-year despite increased gross profit, primarily due to a **42%** increase in advertising and promotion expenses and a **29%** rise in SG&A expenses, including business acquisition costs[114](index=114&type=chunk)[115](index=115&type=chunk)[116](index=116&type=chunk)[117](index=117&type=chunk) [SEGMENT RESULTS](index=27&type=section&id=SEGMENT%20RESULTS) This section provides a detailed analysis of the financial performance for each of the Company's operating segments: Distilling Solutions, Branded Spirits, and Ingredient Solutions [Distilling Solutions](index=27&type=section&id=Distilling%20Solutions) Distilling Solutions sales increased 9% to **$116,865 thousand** in Q2 2023, with gross profit up 30% to **$38,678 thousand**, driven by brown goods and warehouse services **Distilling Solutions Sales - Quarter Ended June 30 (in thousands):** | Product/Service | Q2 2023 | Q2 2022 | Change (%) | | :--- | :--- | :--- | :--- | | Brown goods | $73,124 | $56,331 | 30% | | White goods | $16,816 | $17,441 | (4)% | | Industrial alcohol | $10,065 | $12,885 | (22)% | | Warehouse services | $6,747 | $5,902 | 14% | | Total Distilling Solutions | $116,865 | $107,138 | 9% | **Distilling Solutions Gross Profit - Quarter Ended June 30 (in thousands):** | Metric | Q2 2023 | Q2 2022 | Change (%) | | :--- | :--- | :--- | :--- | | Gross profit | $38,678 | $29,780 | 30% | | Gross margin % | 33.1% | 27.8% | +5.3 pp | - Year-to-date sales for Distilling Solutions increased **5%** to **$230,088 thousand**, primarily from brown goods and warehouse services, while gross profit increased **4%** to **$71,706 thousand**, with gross margin slightly decreasing to **31.2%** due to higher input costs[129](index=129&type=chunk)[131](index=131&type=chunk)[132](index=132&type=chunk) [Branded Spirits](index=29&type=section&id=Branded%20Spirits) Branded Spirits sales decreased 2% to **$57,616 thousand** in Q2 2023, despite a 52% rise in ultra-premium sales, while gross profit increased 24% to **$26,003 thousand** **Branded Spirits Sales - Quarter Ended June 30 (in thousands):** | Price Tier | Q2 2023 | Q2 2022 | Change (%) | | :--- | :--- | :--- | :--- | | Ultra premium | $14,372 | $9,435 | 52% | | Mid | $17,090 | $23,301 | (27)% | | Value | $11,578 | $12,908 | (10)% | | Total Branded Spirits | $57,616 | $58,566 | (2)% | **Branded Spirits Gross Profit - Quarter Ended June 30 (in thousands):** | Metric | Q2 2023 | Q2 2022 | Change (%) | | :--- | :--- | :--- | :--- | | Gross profit | $26,003 | $20,960 | 24% | | Gross margin % | 45.1% | 35.8% | +9.3 pp | - Year-to-date sales for Branded Spirits were in line with the prior year, but gross profit increased **11%** to **$50,596 thousand**, with gross margin improving to **44.2%**, driven by higher average selling prices in the ultra-premium and premium tiers, including the newly acquired Penelope brands[140](index=140&type=chunk)[144](index=144&type=chunk)[145](index=145&type=chunk) [Ingredient Solutions](index=31&type=section&id=Ingredient%20Solutions) Ingredient Solutions sales increased 18% to **$34,520 thousand** in Q2 2023, with gross profit surging 37% to **$11,614 thousand**, driven by higher prices and volumes in specialty proteins and starches **Ingredient Solutions Sales - Quarter Ended June 30 (in thousands):** | Product | Q2 2023 | Q2 2022 | Change (%) | | :--- | :--- | :--- | :--- | | Specialty wheat proteins | $12,588 | $10,109 | 25% | | Commodity wheat starches | $4,837 | $3,130 | 55% | | Total Ingredient Solutions | $34,520 | $29,278 | 18% | **Ingredient Solutions Gross Profit - Quarter Ended June 30 (in thousands):** | Metric | Q2 2023 | Q2 2022 | Change (%) | | :--- | :--- | :--- | :--- | | Gross profit | $11,614 | $8,484 | 37% | | Gross margin % | 33.6% | 29.0% | +4.6 pp | - Year-to-date sales for Ingredient Solutions increased **14%** to **$65,424 thousand**, and gross profit increased **44%** to **$23,817 thousand**, with gross margin improving to **36.4%**, primarily driven by higher average selling prices across all product categories[154](index=154&type=chunk)[158](index=158&type=chunk)[159](index=159&type=chunk) [CASH FLOW, FINANCIAL CONDITION, AND LIQUIDITY](index=33&type=section&id=CASH%20FLOW,%20FINANCIAL%20CONDITION,%20AND%20LIQUIDITY) This section analyzes the Company's cash flow activities, financial condition, and liquidity, including operating, investing, and financing cash flows, debt, and capital spending [Cash Flow Summary](index=33&type=section&id=Cash%20Flow%20Summary) Cash and cash equivalents decreased by **$25,930 thousand** year-to-date, primarily due to increased cash used in investing activities, largely for the Penelope acquisition **Cash Flow Summary - Year to Date Ended June 30 (in thousands):** | Activity | YTD 2023 | YTD 2022 | Change | | :--- | :--- | :--- | :--- | | Operating activities | $20,156 | $43,019 | $(22,863) | | Investing activities | $(135,589) | $(19,484) | $(116,105) | | Financing activities | $89,462 | $(7,649) | $97,111 | | Increase (decrease) in cash | $(25,930) | $15,847 | $(41,777) | [Operating Activities](index=33&type=section&id=Operating%20Activities) Cash from operating activities decreased to **$20,156 thousand** year-to-date, mainly due to increased cash used for inventories and accounts receivable - Net cash provided by operating activities decreased by **$22,863 thousand** year-over-year, primarily due to a **$59,881 thousand** use of cash in operating assets and liabilities[163](index=163&type=chunk)[164](index=164&type=chunk) - Key drivers of cash use in operating assets and liabilities included a **$41,020 thousand** increase in inventories and a **$35,833 thousand** increase in receivables, partially offset by a **$22,328 thousand** increase in accounts payable[164](index=164&type=chunk) [Investing Activities](index=33&type=section&id=Investing%20Activities) Cash used in investing activities significantly increased to **$135,589 thousand** year-to-date, primarily driven by the Penelope acquisition and capital expenditures - Cash used in investing activities increased by **$116,105 thousand** year-over-year, primarily due to the **$104,398 thousand** acquisition of Penelope and **$30,055 thousand** in capital expenditures[163](index=163&type=chunk)[166](index=166&type=chunk) [Capital Spending](index=33&type=section&id=Capital%20Spending) Capital expenditures for YTD 2023 were **$30,055 thousand**, with full-year 2023 projections of **$63,000 thousand** for facility improvements, expansion, and the Atchison Distillery closure **Capital Expenditures Paid (in thousands):** | Period | Amount | | :--- | :--- | | YTD June 30, 2023 | $30,055 | | YTD June 30, 2022 | $18,087 | - Expected capital expenditures for 2023 are approximately **$63,000 thousand**, covering facility improvements, expansion, sustaining projects, EHS, and the Atchison Distillery closure[167](index=167&type=chunk) [Financing Activities](index=34&type=section&id=Financing%20Activities) Cash from financing activities significantly increased to **$89,462 thousand** year-to-date, primarily due to net proceeds from debt, partially offset by dividends and treasury stock purchases - Net cash provided by financing activities increased by **$97,111 thousand** year-over-year, primarily due to **$95,600 thousand** in net proceeds from debt[163](index=163&type=chunk)[168](index=168&type=chunk) - Financing activities included **$5,337 thousand** in dividend payments and **$801 thousand** in treasury stock purchases for YTD 2023[168](index=168&type=chunk) [Treasury Purchases](index=34&type=section&id=Treasury%20Purchases) The Company repurchased **8,437** common shares for **$801 thousand** year-to-date to cover tax withholding on vested equity-based compensation, comparable to the prior year **Treasury Stock Purchases for Tax Withholding:** | Period | Shares Repurchased | Value ($ thousands) | | :--- | :--- | :--- | | YTD June 30, 2023 | 8,437 | $801 | | YTD June 30, 2022 | 9,025 | $713 | [Dividends and Dividend Equivalents](index=34&type=section&id=Dividends%20and%20Dividend%20Equivalents) Total dividends and dividend equivalents paid year-to-date were **$5,337 thousand**, consistent with the prior year, with a subsequent quarterly dividend of **$0.12 per share** announced **Total Dividends and Dividend Equivalents Paid (in thousands):** | Period | Amount | | :--- | :--- | | YTD June 30, 2023 | $5,337 | | YTD June 30, 2022 | $5,322 | - A quarterly dividend of **$0.12 per share** and per RSU was declared on August 3, 2023, payable on September 1, 2023[173](index=173&type=chunk) [Long-Term and Short-Term Debt](index=34&type=section&id=Long-Term%20and%20Short-Term%20Debt) Total debt, net of unamortized loan fees, increased to **$325,104 thousand** at June 30, 2023, reflecting funding for operations, investments, and the Penelope acquisition **Total Indebtedness Outstanding, Net (in thousands):** | Date | Amount | | :--- | :--- | | June 30, 2023 | $325,104 | | December 31, 2022 | $230,335 | [Financial Condition and Liquidity](index=34&type=section&id=Financial%20Condition%20and%20Liquidity) The Company maintains strong liquidity with current assets exceeding liabilities by **$402,198 thousand** and significant borrowing capacity, expected to fund operations, capital, and M&A - At June 30, 2023, current assets exceeded current liabilities by **$402,198 thousand**, with inventories at **$343,826 thousand**[177](index=177&type=chunk) - The Company has **$21,959 thousand** in cash and cash equivalents, **$302,000 thousand** available under its Credit Agreement, and up to **$120,000 thousand** potentially available under the Note Purchase Agreement for liquidity[177](index=177&type=chunk) - Management anticipates that current cash sources and borrowing capacity will be adequate to meet budgeted capital expenditures, potential M&A, and operating requirements for the next 12 months and beyond[162](index=162&type=chunk)[177](index=177&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=34&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) This section addresses the Company's exposure to market risks, specifically commodity price risk and interest rate risk. It outlines how these risks are monitored and managed, noting that commodity supply contracts meet the normal purchases and sales exception, and details the potential impact of interest rate changes on variable-rate debt and the fair value of fixed-rate debt [Commodity Costs](index=35&type=section&id=Commodity%20Costs) - The Company is exposed to commodity price risk from grain, wheat flour, and natural gas used in production, which are managed through supply contracts meeting the normal purchases and sales exception under ASC 815[179](index=179&type=chunk) [Interest Rate Exposures](index=35&type=section&id=Interest%20Rate%20Exposures) - A **100 basis point** increase in market interest rates would increase annual interest expense on variable-rate debt by **$361 thousand**, based on June 30, 2023, outstanding borrowings[181](index=181&type=chunk) - A **100 basis point** increase in market rates would decrease the fair value of outstanding fixed-rate debt by **$28,795 thousand**, while a **100 basis point** decrease would increase it by **$36,219 thousand**[181](index=181&type=chunk) [Item 4. Controls and Procedures](index=34&type=section&id=Item%204.%20Controls%20and%20Procedures) This section confirms the effectiveness of the Company's disclosure controls and procedures as of June 30, 2023, based on evaluations by the CEO and CFO. It also states that there were no material changes in internal control over financial reporting during the fiscal quarter [Evaluation of Disclosure Controls and Procedures](index=35&type=section&id=Evaluation%20of%20Disclosure%20Controls%20and%20Procedures) - The CEO and CFO concluded that the Company's disclosure controls and procedures were effective as of June 30, 2023, ensuring timely and accurate reporting[182](index=182&type=chunk) [Changes in Internal Control](index=35&type=section&id=Changes%20in%20Internal%20Control) - There were no changes in internal control over financial reporting during the fiscal quarter ended June 30, 2023, that materially affected or are reasonably likely to materially affect it[183](index=183&type=chunk) [PART II. OTHER INFORMATION](index=36&type=section&id=PART%20II.%20OTHER%20INFORMATION) [Item 1. Legal Proceedings](index=36&type=section&id=Item%201.%20Legal%20Proceedings) This section refers to the Company's Annual Report on Form 10-K for further information on legal and regulatory proceedings, as well as Note 8 in the current report - Information on legal and regulatory proceedings is referenced to the Annual Report on Form 10-K for the year ended December 31, 2022, and Note 8 of this report[185](index=185&type=chunk) [Item 1A. Risk Factors](index=36&type=section&id=Item%201A.%20Risk%20Factors) This section updates the risk factors previously disclosed in the Company's Annual Report on Form 10-K, specifically highlighting the risk that the planned closure of the Atchison, Kansas distillery may not achieve anticipated benefits, could disrupt business, and adversely affect financial results - A new risk factor highlights that the planned closure of the Atchison, Kansas distillery by January 2024 may not achieve anticipated profitability improvements or other benefits, potentially disrupting business and adversely affecting financial results[187](index=187&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=36&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) This section reports that there were no unregistered sales of equity securities during the quarter ended June 30, 2023. It also details issuer purchases of equity securities, which were solely for tax withholding on vested Restricted Stock Units (RSUs) - No unregistered sales of equity securities occurred during the quarter ended June 30, 2023[188](index=188&type=chunk) - Issuer purchases of equity securities during the quarter were exclusively for tax withholding on vested RSUs awarded under the 2014 Plan[190](index=190&type=chunk) [Item 3. Defaults Upon Senior Securities](index=36&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) This section states that there were no defaults upon senior securities during the reporting period - There were no defaults upon senior securities[191](index=191&type=chunk) [Item 4. Mine Safety Disclosures](index=36&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This section indicates that mine safety disclosures are not applicable to the Company - Mine safety disclosures are not applicable to the Company[192](index=192&type=chunk) [Item 5. Other Information](index=38&type=section&id=Item%205.%20Other%20Information) This section reports that none of the Company's directors or officers adopted, modified, or terminated a Rule 10b5-1 trading arrangement or non-Rule 10b5-1 trading arrangement during the quarter ended June 30, 2023 - No directors or officers adopted, modified, or terminated Rule 10b5-1 or non-Rule 10b5-1 trading arrangements during the quarter ended June 30, 2023[193](index=193&type=chunk) [Item 6. Exhibits](index=38&type=section&id=Item%206.%20Exhibits) This section lists the exhibits filed with the Quarterly Report on Form 10-Q, including CEO and CFO certifications (Rule 13a-14(a) and 18 U.S.C. 1350), and financial information formatted in iXBRL - Exhibits include CEO and CFO Certifications (31.1, 31.2, 32.1, 32.2) and financial information formatted in iXBRL (101, 104)[194](index=194&type=chunk)

MGP Ingredients, Inc. (NASDAQ:MGPI) Q1 2023 Earnings Conference Call May 4, 2023 10:00 AM ET Company Participants Mike Houston - Investor Relations Dave Colo - President & Chief Executive Officer Brandon Gall - Vice President-Finance & Chief Financial Officer Conference Call Participants Bill Chappell - Truist Securities Vivien Azer - TD Cowen Marc Torrente - Wells Fargo Sean McGowan - Roth MKM Partners Gerald Pascarelli - Wedbush Securities Ben Klieve - Lake Street Mitch Pinheiro - Sturdivant & Company Ope ...

[PART I. FINANCIAL INFORMATION](index=3&type=section&id=PART%20I.%20FINANCIAL%20INFORMATION) Presents MGP Ingredients, Inc.'s unaudited condensed consolidated financial statements and management's discussion and analysis for the quarter [Item 1. Financial Statements](index=3&type=section&id=Item%201.%20Financial%20Statements) Presents MGP Ingredients, Inc.'s unaudited condensed consolidated financial statements and detailed notes [Condensed Consolidated Statements of Income (Unaudited)](index=3&type=section&id=Condensed%20Consolidated%20Statements%20of%20Income%20(Unaudited)) Summarizes MGP Ingredients, Inc.'s unaudited consolidated income statement for Q1 2023 and Q1 2022 | Metric | Q1 2023 (in thousands) | Q1 2022 (in thousands) | Change (%) | | :--- | :--- | :--- | :--- | | Sales | $201,010 | $195,235 | 3.0% | | Gross profit | $69,824 | $71,821 | (2.8%) | | Operating income | $41,559 | $50,080 | (17.0%) | | Net income attributable to MGP Ingredients, Inc. | $31,071 | $37,437 | (17.0%) | | Diluted EPS | $1.39 | $1.69 | (17.7%) | [Condensed Consolidated Statements of Comprehensive Income (Unaudited)](index=4&type=section&id=Condensed%20Consolidated%20Statements%20of%20Comprehensive%20Income%20(Unaudited)) Presents MGP Ingredients, Inc.'s unaudited consolidated comprehensive income statement for Q1 2023 and Q1 2022 | Metric | Q1 2023 (in thousands) | Q1 2022 (in thousands) | Change (%) | | :--- | :--- | :--- | :--- | | Net income attributable to MGP Ingredients, Inc. | $31,071 | $37,437 | (17.0%) | | Other comprehensive income (loss) | $68 | $(232) | N/A | | Comprehensive income attributable to MGP Ingredients, Inc. | $31,139 | $37,205 | (16.3%) | [Condensed Consolidated Balance Sheets (Unaudited)](index=5&type=section&id=Condensed%20Consolidated%20Balance%20Sheets%20(Unaudited)) Details MGP Ingredients, Inc.'s unaudited consolidated balance sheet as of March 31, 2023, and December 31, 2022 | Metric | March 31, 2023 (in thousands) | December 31, 2022 (in thousands) | Change (%) | | :--- | :--- | :--- | :--- | | Total current assets | $475,439 | $454,162 | 4.7% | | Total assets | $1,184,186 | $1,158,211 | 2.2% | | Total current liabilities | $102,315 | $105,375 | (2.9%) | | Total liabilities | $408,239 | $412,567 | (1.0%) | | Total equity | $775,947 | $745,644 | 4.1% | [Condensed Consolidated Statements of Cash Flows (Unaudited)](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows%20(Unaudited)) Outlines MGP Ingredients, Inc.'s unaudited consolidated cash flow activities for Q1 2023 and Q1 2022 | Metric | Q1 2023 (in thousands) | Q1 2022 (in thousands) | Change (in thousands) | | :--- | :--- | :--- | :--- | | Net cash provided by operating activities | $5,021 | $22,230 | $(17,209) | | Net cash used in investing activities | $(16,945) | $(12,033) | $(4,912) | | Net cash used in financing activities | $(4,270) | $(4,182) | $(88) | | Cash and cash equivalents, end of period | $31,728 | $27,295 | $4,433 | [Condensed Consolidated Statements of Changes in Stockholders' Equity (Unaudited)](index=8&type=section&id=Condensed%20Consolidated%20Statements%20of%20Changes%20in%20Stockholders'%20Equity%20(Unaudited)) Presents MGP Ingredients, Inc.'s unaudited consolidated changes in stockholders' equity for Q1 2023 | Metric | March 31, 2023 (in thousands) | December 31, 2022 (in thousands) | | :--- | :--- | :--- | | Total MGP Ingredients, Inc. stockholders' equity (end of period) | $775,947 | $745,644 | | Net income (loss) | $31,071 | N/A (from Dec 31, 2022 to Mar 31, 2023) | | Dividends and dividend equivalents | $(2,661) | N/A | | Share-based compensation | $2,665 | N/A | | Stock shares repurchased | $(801) | N/A | [Notes to Unaudited Condensed Consolidated Financial Statements](index=9&type=section&id=Notes%20to%20Unaudited%20Condensed%20Consolidated%20Financial%20Statements) Provides detailed notes explaining MGP Ingredients, Inc.'s accounting policies and financial statement components [Note 1. Accounting Policies and Basis of Presentation](index=9&type=section&id=Note%201.%20Accounting%20Policies%20and%20Basis%20of%20Presentation) Outlines MGP's business, accounting policies, and basis of financial statement presentation - MGP operates in three segments: Distilling Solutions, Branded Spirits, and Ingredient Solutions, producing premium distilled spirits, branded spirits, and food ingredients[22](index=22&type=chunk)[23](index=23&type=chunk) - Inventory includes finished goods, barreled distillate (bourbons and other whiskeys aged for years), raw materials, work in process, and maintenance materials, valued at the lower of cost or net realizable value using FIFO[28](index=28&type=chunk)[29](index=29&type=chunk) - Revenue is recognized when control of goods or services is transferred to the customer, with specific criteria for "bill and hold" arrangements in the Distilling Solutions segment[29](index=29&type=chunk)[30](index=30&type=chunk)[31](index=31&type=chunk) | Inventory Category | March 31, 2023 (in thousands) | December 31, 2022 (in thousands) | | :--- | :--- | :--- | | Finished goods | $50,730 | $47,073 | | Barreled distillate | $210,615 | $199,040 | | Raw materials | $33,524 | $29,931 | | Total Inventory | $308,558 | $289,722 | [Note 2. Revenue](index=12&type=section&id=Note%202.%20Revenue) Details MGP's revenue generation by segment and product/service categories - Revenue is generated from product sales (point in time) and services like warehouse and contract bottling (over time) across three segments[45](index=45&type=chunk) | Segment/Product | Q1 2023 (in thousands) | Q1 2022 (in thousands) | Change (%) | | :--- | :--- | :--- | :--- | | Distilling Solutions | $113,223 | $111,509 | 1.5% | | Branded Spirits | $56,883 | $55,751 | 2.0% | | Ingredient Solutions | $30,904 | $27,975 | 10.5% | | Total Sales | $201,010 | $195,235 | 3.0% | [Note 3. Goodwill and Intangible Assets](index=13&type=section&id=Note%203.%20Goodwill%20and%20Intangible%20Assets) Reports carrying values and amortization of MGP's goodwill and intangible assets - Goodwill and indefinite-lived intangible assets, primarily related to the Branded Spirits segment, remained stable at **$226,294 thousand** and **$178,990 thousand**, respectively, as of March 31, 2023[48](index=48&type=chunk) | Period | Amortization Expense (in thousands) | | :--- | :--- | | Remainder of 2023 | $1,553 | | 2024 | $2,070 | | 2025 | $2,070 | | 2026 | $2,070 | | 2027 | $2,070 | | Thereafter | $27,427 | | Total | $37,260 | [Note 4. Corporate Borrowings](index=13&type=section&id=Note%204.%20Corporate%20Borrowings) Details MGP's outstanding debt, credit facilities, and compliance with debt covenants | Debt Instrument | March 31, 2023 (in thousands) | December 31, 2022 (in thousands) | | :--- | :--- | :--- | | Convertible Senior Notes, 1.88% due 2041 | $201,250 | $201,250 | | Series A Senior Secured Notes, 3.53% due 2027 | $14,400 | $15,200 | | Senior Secured Notes, 3.80% due 2029 | $20,000 | $20,000 | | Total indebtedness outstanding, net | $229,619 | $230,335 | - The company had no outstanding borrowings under its **$400,000 revolving credit facility** as of March 31, 2023, with **$400,000 available**[51](index=51&type=chunk) - The company was in compliance with all requirements and covenants of its Credit Agreement and Note Purchase Agreement as of March 31, 2023[51](index=51&type=chunk)[55](index=55&type=chunk) [Note 5. Income Taxes](index=14&type=section&id=Note%205.%20Income%20Taxes) Explains MGP's income tax accounting and effective tax rates for the quarter | Metric | Q1 2023 (in thousands) | Q1 2022 (in thousands) | | :--- | :--- | :--- | | Income tax expense | $9,655 | $11,165 | | Effective tax rate | 23.7% | 23.0% | - The effective tax rate for Q1 2023 (**23.7%**) differed from the **21% federal statutory rate** primarily due to state and foreign income taxes, partially offset by state and federal tax credits and export activity deductions[57](index=57&type=chunk) [Note 6. Equity and EPS](index=15&type=section&id=Note%206.%20Equity%20and%20EPS) Provides computations for MGP's basic and diluted EPS and common stock activity | Metric | Q1 2023 | Q1 2022 | | :--- | :--- | :--- | | Net income used in EPS calculation (in thousands) | $30,760 | $37,119 | | Basic weighted average common shares | 22,040,224 | 21,989,100 | | Diluted weighted average common shares | 22,072,271 | 21,989,100 | | Basic EPS | $1.40 | $1.69 | | Diluted EPS | $1.39 | $1.69 | - Dilutive impact from Convertible Senior Notes only occurs if the average market price exceeds the conversion price of **$96.24 per share**; there was no dilutive impact in Q1 2022[62](index=62&type=chunk) - Common stock repurchases were for tax withholding on equity-based compensation, totaling **8,437 shares** (**$801 thousand**) in Q1 2023 and **9,021 shares** (**$711 thousand**) in Q1 2022[63](index=63&type=chunk) [Note 7. Commitments and Contingencies](index=15&type=section&id=Note%207.%20Commitments%20and%20Contingencies) Outlines MGP's policy for accruing costs related to legal and regulatory contingencies - The company accrues estimated costs for contingencies when a loss is probable and can be reasonably estimated, related to various legal and regulatory proceedings[64](index=64&type=chunk) [Note 8. Employee and Non-Employee Benefit Plans](index=15&type=section&id=Note%208.%20Employee%20and%20Non-Employee%20Benefit%20Plans) Describes MGP's share-based compensation and deferred compensation plans - As of March 31, 2023, **227,810 unvested RSUs** were outstanding under the company's long-term incentive plans[66](index=66&type=chunk) | Metric | March 31, 2023 (in thousands) | December 31, 2022 (in thousands) | | :--- | :--- | :--- | | EDC Plan investments | $2,751 | $2,176 | | EDC Plan current liabilities | $470 | $510 | | EDC Plan non-current liabilities | $2,445 | $2,191 | [Note 9. Operating Segments](index=16&type=section&id=Note%209.%20Operating%20Segments) Defines MGP's operating segments and presents their summarized financial information - The company operates three segments: Distilling Solutions (food/fuel alcohol, co-products, warehouse services), Branded Spirits (portfolio of branded spirits), and Ingredient Solutions (specialty/commodity starches and proteins)[70](index=70&type=chunk) | Segment | Q1 2023 Sales (in thousands) | Q1 2022 Sales (in thousands) | Sales Change (%) | Q1 2023 Gross Profit (in thousands) | Q1 2022 Gross Profit (in thousands) | Gross Profit Change (%) | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Distilling Solutions | $113,223 | $111,509 | 1.5% | $33,028 | $38,933 | (15.2%) | | Branded Spirits | $56,883 | $55,751 | 2.0% | $24,593 | $24,782 | (0.8%) | | Ingredient Solutions | $30,904 | $27,975 | 10.5% | $12,203 | $8,106 | 50.5% | | Total | $201,010 | $195,235 | 3.0% | $69,824 | $71,821 | (2.8%) | | Segment | Q1 2023 Income Before Taxes (in thousands) | Q1 2022 Income Before Taxes (in thousands) | Q1 2023 Identifiable Assets (in thousands) | Dec 31, 2022 Identifiable Assets (in thousands) | | :--- | :--- | :--- | :--- | :--- | | Distilling Solutions | $32,301 | $37,992 | $369,447 | $350,068 | | Branded Spirits | $9,157 | $10,786 | $706,854 | $698,985 | | Ingredient Solutions | $10,846 | $7,471 | $72,827 | $63,943 | [Note 10. Subsequent Events](index=17&type=section&id=Note%2010.%20Subsequent%20Events) Reports a quarterly dividend declared by MGP's Board of Directors after the reporting period - On May 4, 2023, the Board declared a quarterly dividend of **$0.12 per share and per unit**, payable on June 2, 2023[74](index=74&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=17&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Provides a detailed discussion and analysis of MGP's financial condition and results of operations for Q1 2023 [Overview](index=18&type=section&id=Overview) Introduces MGP as a producer of distilled spirits, branded spirits, and food ingredients - MGP is a leading producer of premium distilled spirits (bourbon, rye, whiskey, GNS), branded spirits (value to ultra-premium American whiskey, tequila, gin), and protein/starch food ingredients[76](index=76&type=chunk) - Products are sold directly or indirectly to manufacturers, distributors, and consumer packaged goods industries[76](index=76&type=chunk) [Consolidated Results](index=19&type=section&id=Consolidated%20Results) Analyzes MGP's consolidated financial performance, including sales, gross profit, and net income | Metric | Q1 2023 (in thousands) | Q1 2022 (in thousands) | Change (%) | | :--- | :--- | :--- | :--- | | Sales | $201,010 | $195,235 | 3% | | Gross profit | $69,824 | $71,821 | (3%) | | Gross margin % | 34.7% | 36.8% | (2.1) pp | | Advertising and promotion expenses | $7,733 | $5,504 | 41% | | SG&A expenses | $20,532 | $16,237 | 26% | | Operating income | $41,559 | $50,080 | (17%) | | Operating margin % | 20.7% | 25.7% | (5.0) pp | | Net income | $31,032 | $37,371 | (17%) | | Diluted EPS | $1.39 | $1.69 | (17.7%) | - The decrease in operating income was primarily driven by a **$5,905 thousand (12 pp)** decrease in gross profit from Distilling Solutions, a **$189 thousand** decrease from Branded Spirits, and increases in advertising (**$2,229 thousand, 4 pp**) and SG&A expenses (**$4,295 thousand, 9 pp**), partially offset by a **$4,097 thousand (8 pp)** increase in Ingredient Solutions gross profit[84](index=84&type=chunk)[85](index=85&type=chunk) [Segment Results](index=21&type=section&id=Segment%20Results) Examines the financial performance of MGP's Distilling Solutions, Branded Spirits, and Ingredient Solutions segments [Distilling Solutions Segment](index=21&type=section&id=Distilling%20Solutions%20Segment) Analyzes sales and gross profit performance for MGP's Distilling Solutions segment | Product/Service | Q1 2023 (in thousands) | Q1 2022 (in thousands) | Change (%) | | :--- | :--- | :--- | :--- | | Brown goods | $68,324 | $62,145 | 10% | | White goods | $15,954 | $20,086 | (21%) | | Industrial alcohol | $10,439 | $11,495 | (9%) | | Warehouse services | $6,858 | $5,584 | 23% | | Total Distilling Solutions Sales | $113,223 | $111,509 | 2% | | Metric | Q1 2023 (in thousands) | Q1 2022 (in thousands) | Change (%) | | :--- | :--- | :--- | :--- | | Gross profit | $33,028 | $38,933 | (15%) | | Gross margin % | 29.2% | 34.9% | (5.7) pp | - The decrease in gross profit was primarily due to higher input costs and lower sales volume for brown goods, white goods, and industrial alcohol, which were not fully offset by increased average selling prices[93](index=93&type=chunk) [Branded Spirits Segment](index=22&type=section&id=Branded%20Spirits%20Segment) Analyzes sales and gross profit performance for MGP's Branded Spirits segment | Price Tier | Q1 2023 (in thousands) | Q1 2022 (in thousands) | Change (%) | | :--- | :--- | :--- | :--- | | Ultra premium | $9,115 | $12,597 | (28%) | | Premium plus | $18,746 | $21,683 | (14%) | | Mid | $20,835 | $19,273 | 8% | | Value | $13,421 | $11,299 | 19% | | Total Branded Spirits Sales | $56,883 | $55,751 | 2% | | Metric | Q1 2023 (in thousands) | Q1 2022 (in thousands) | Change (%) | | :--- | :--- | :--- | :--- | | Gross profit | $24,593 | $24,782 | (1%) | | Gross margin % | 43.2% | 44.5% | (1.3) pp | - Sales increases in value and mid-price tiers were primarily due to a distributor realignment, while the decrease in ultra-premium was due to timing of American whiskey brand sales[98](index=98&type=chunk) [Ingredient Solutions Segment](index=23&type=section&id=Ingredient%20Solutions%20Segment) Analyzes sales and gross profit performance for MGP's Ingredient Solutions segment | Product Category | Q1 2023 (in thousands) | Q1 2022 (in thousands) | Change (%) | | :--- | :--- | :--- | :--- | | Specialty wheat starches | $14,686 | $15,203 | (3%) | | Specialty wheat proteins | $11,890 | $9,419 | 26% | | Commodity wheat starches | $3,807 | $3,353 | 14% | | Commodity wheat proteins | $521 | $0 | N/A | | Total Ingredient Solutions Sales | $30,904 | $27,975 | 10% | | Metric | Q1 2023 (in thousands) | Q1 2022 (in thousands) | Change (%) | | :--- | :--- | :--- | :--- | | Gross profit | $12,203 | $8,106 | 51% | | Gross margin % | 39.5% | 29.0% | 10.5 pp | - The significant increase in gross profit was primarily due to higher average selling prices across all product categories, partially offset by higher input costs for specialty wheat starches and proteins[105](index=105&type=chunk) [Cash Flow, Financial Condition and Liquidity](index=24&type=section&id=Cash%20Flow,%20Financial%20Condition%20and%20Liquidity) Discusses MGP's cash flow, financial condition, and liquidity position [Cash Flow Summary](index=24&type=section&id=Cash%20Flow%20Summary) Summarizes MGP's cash flow activities from operations, investing, and financing | Activity | Q1 2023 (in thousands) | Q1 2022 (in thousands) | Change (in thousands) | | :--- | :--- | :--- | :--- | | Cash provided by operating activities | $5,021 | $22,230 | $(17,209) | | Cash used in investing activities | $(16,945) | $(12,033) | $(4,912) | | Cash used in financing activities | $(4,270) | $(4,182) | $(88) | | Increase (decrease) in cash and cash equivalents | $(16,161) | $5,727 | $(21,888) | - The decrease in operating cash flow was driven by increased receivables (**$19,227 thousand** use), inventory (**$18,707 thousand** use), and a decrease in accrued expenses (**$10,208 thousand** use), partially offset by cash provided by income taxes payable and accounts payable[110](index=110&type=chunk) [Capital Spending](index=24&type=section&id=Capital%20Spending) Details MGP's capital expenditures and future spending expectations | Metric | Q1 2023 (in thousands) | Q1 2022 (in thousands) | | :--- | :--- | :--- | | Capital expenditures paid | $16,237 | $10,642 | - The company expects approximately **$58,000 thousand** in capital expenditures in 2023 for facility improvement, expansion, sustaining projects, and environmental health and safety[113](index=113&type=chunk) [Financing Activities](index=25&type=section&id=Financing%20Activities) Outlines MGP's cash usage for financing activities, including dividends and debt payments | Activity | Q1 2023 (in thousands) | Q1 2022 (in thousands) | | :--- | :--- | :--- | | Payment of dividends and dividend equivalents | $2,669 | $2,661 | | Purchase of treasury stock | $801 | $714 | | Principal payments on long-term debt | $800 | $807 | | Net cash used in financing activities | $4,270 | $4,182 | [Dividends and Dividend Equivalents](index=25&type=section&id=Dividends%20and%20Dividend%20Equivalents) Reports MGP's declared quarterly dividends and total payments | Metric | Q1 2023 | Q1 2022 | | :--- | :--- | :--- | | Declared per share/unit | $0.12 | $0.12 | | Total payment (in thousands) | $2,669 | $2,661 | - A subsequent quarterly dividend of **$0.12 per share and per unit** was declared on May 4, 2023, payable on June 2, 2023[119](index=119&type=chunk) [Long-Term and Short-Term Debt](index=25&type=section&id=Long-Term%20and%20Short-Term%20Debt) Details MGP's total outstanding debt and debt management strategy | Metric | March 31, 2023 (in thousands) | December 31, 2022 (in thousands) | | :--- | :--- | :--- | | Total debt (net of unamortized loan fees) | $229,619 | $230,335 | [Financial Condition and Liquidity (Overall)](index=25&type=section&id=Financial%20Condition%20and%20Liquidity%20(Overall)) Assesses MGP's overall financial health, liquidity, and capital access - Current assets exceeded current liabilities by **$373,124 thousand** at March 31, 2023, largely due to **$308,558 thousand** in inventories[123](index=123&type=chunk) - The company has **$400,000 thousand** available under its Credit Agreement and up to **$120,000 thousand** potentially available under the Note Purchase Agreement for additional borrowings[123](index=123&type=chunk) - Principal uses of cash include input costs, salaries, capital expenditures, and investments in strategic plans like aging barreled distillate and potential M&A[121](index=121&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=26&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) Discusses MGP's exposure to commodity price and interest rate market risks [Commodity Costs](index=26&type=section&id=Commodity%20Costs) Explains MGP's management of commodity price risk for key raw materials - The company manages commodity price risk for grain, wheat flour, and natural gas through supply contracts for delivery from one to 24 months, which meet the normal purchases and sales exception under ASC 815[125](index=125&type=chunk) [Interest Rate Exposures](index=26&type=section&id=Interest%20Rate%20Exposures) Analyzes the potential impact of interest rate changes on MGP's debt and interest expense - A **100 basis point increase** in market interest rates would have a minimal impact on interest expense for variable-rate debt[127](index=127&type=chunk) - A **100 basis point increase** in market rates would decrease the fair value of outstanding fixed-rate debt by **$29,461 thousand**, while a **100 basis point decrease** would increase it by **$37,162 thousand**[127](index=127&type=chunk) [Item 4. Controls and Procedures](index=26&type=section&id=Item%204.%20Controls%20and%20Procedures) Reports on the effectiveness of MGP's disclosure controls and internal control over financial reporting [Evaluation of Disclosure Controls and Procedures](index=26&type=section&id=Evaluation%20of%20Disclosure%20Controls%20and%20Procedures) Details the CEO and CFO's conclusion on the effectiveness of MGP's disclosure controls - The CEO and CFO concluded that disclosure controls and procedures were effective as of March 31, 2023, for ensuring timely and accurate reporting[128](index=128&type=chunk) [Changes in Internal Control](index=26&type=section&id=Changes%20in%20Internal%20Control) Reports on any material changes to MGP's internal control over financial reporting - No material changes to internal control over financial reporting occurred during the quarter ended March 31, 2023[129](index=129&type=chunk) [PART II. OTHER INFORMATION](index=26&type=section&id=PART%20II.%20OTHER%20INFORMATION) Presents additional information not covered in the financial statements, including legal, risk, and equity matters [Item 1. Legal Proceedings](index=26&type=section&id=Item%201.%20Legal%20Proceedings) References information on MGP's legal proceedings from previous reports - Information on legal proceedings is referenced in Part I, Item 3 of the Annual Report on Form 10-K for December 31, 2022, and Note 7 of this 10-Q[131](index=131&type=chunk) [Item 1A. Risk Factors](index=26&type=section&id=Item%201A.%20Risk%20Factors) Confirms no material changes to MGP's previously disclosed risk factors - No material changes to risk factors were reported since the Annual Report on Form 10-K for December 31, 2022[132](index=132&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=27&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) Reports on MGP's unregistered equity sales and issuer purchases of equity securities [Issuer Purchases of Equity Securities](index=27&type=section&id=Issuer%20Purchases%20of%20Equity%20Securities) Details MGP's equity security repurchases for tax withholding on vested RSUs | Period | Total Number of Shares Purchased | Average Price Paid per Share | | :--- | :--- | :--- | | January 1, 2023 through January 31, 2023 | 4 | $106.38 | | February 1, 2023 through February 28, 2023 | 4,079 | $96.29 | | March 1, 2023 through March 31, 2023 | 4,354 | $93.66 | | Total | 8,437 | N/A | - All shares purchased were for tax withholding on vested RSUs awarded under the 2014 Plan[135](index=135&type=chunk) [Item 3. Defaults Upon Senior Securities](index=27&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) Confirms no defaults on MGP's senior securities during the reporting period - No defaults upon senior securities were reported[136](index=136&type=chunk) [Item 4. Mine Safety Disclosures](index=27&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) States that this disclosure item is not applicable to MGP's operations - This item is not applicable[137](index=137&type=chunk) [Item 5. Other Information](index=27&type=section&id=Item%205.%20Other%20Information) Indicates no additional information to report under this section - No other information to report[138](index=138&type=chunk) [Item 6. Exhibits](index=27&type=section&id=Item%206.%20Exhibits) Lists the exhibits filed with MGP's Form 10-Q, including certifications and iXBRL data - The report includes CEO and CFO certifications (Exhibits 31.1, 31.2, 32.1, 32.2) and financial information formatted in iXBRL (Exhibit 101, 104)[139](index=139&type=chunk)

MGP Ingredients, Inc. (NASDAQ:MGPI) Q4 2022 Earnings Conference Call February 23, 2023 10:00 AM ET Company Participants Mike Houston ??? Investor Relations Dave Colo ??? President and Chief Executive Officer Brandon Gall ??? Vice President-Finance and Chief Financial Officer Conference Call Participants Vivien Azer ??? Cowen Marc Torrente ??? Wells Fargo Ben Klieve ??? Lake Street Capital Markets Bill Chappell ??? Truist Securities Sean McGowan ??? ROTH Gerald Pascarelli ??? Wedbush Securities Mitch Pinheir ...

UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC 20549 FORM 10-K ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 (Mark One) ☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2022 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from _______ to _______ Commission file number 0-17196 MGP Ingredients, Inc. (Exact N ...