MGPI 10-K & 10-Q changes, risk factors and insider trading

Our business is subject to certain risks and uncertainties that could cause actual results and events to differ materially from forward lookingforward-looking statements. The following discussion identifies those risks which we consider to be material. The following discussion of risks is not all inclusive. Additional risks not currently known to us or that we currently deem to be immaterial may also materially and adversely affect our business, financial condition, or results of operations.

•public health policies and initiatives (including dietary guidelines and labeling requirements regarding alcohol consumption) and concerns or regulations related to product safety or quality;

•the expansionexpansion, of, legalization of,legalization, and increased acceptance or use of cannabis; and

•changes in travel, leisure, dining, gifting, entertaining, and beverage consumption trends.

Our success depends in part on fulfilling available opportunities to meet consumer needs and anticipating changes in consumer preferences with successful new brands, products, and product innovations. If our customers and consumers shift away from spirits (particularly brown spirits, such as our bourbon, rye, and other American whiskeys) or shift from purchasing our higher-margin products to our lower-margin products, our business, financial condition, or results of operations could be adversely affected. In addition, consumer pantry, retailer, distributor, or supplier inventory destocking, which we have experienced in the past, could adversely impact our business, financial condition, or results of operations. Additionally, customer contract non-performance, which we have experienced in the past, could adversely impact our business, financial condition, or results of operations.

The markets for our products are very competitive. Our principal competitors in these markets have substantial financial, marketing, and other resources, and several are much larger enterprises than us. Many of our current and potential competitors have larger customer bases, greater name recognition, and broader product offerings. Competition is based on such factors as product innovation, product characteristics, product taste and quality, pricing, color, as well as name and brand image. In recent years, the industries in which we compete have continued to experience consolidation. Industry consolidation can have varying degrees of impact, including the creation of new and larger competitors. In addition, retail industry consolidation has led to increased retailer purchasing power, and larger retailers can often seek to improve their profitability and sales by asking for lower prices or increased trade spending. If the purchasing power of these large retailers continues to increase, it could negatively affect our financial results. We are dependent on being able to generate sales and other operating income in excess of the costs of products sold in order to obtain margins, profits, and cash flows to meet or exceed our targeted financial performance measures. Competition is based on such factors as product innovation, product characteristics, product taste and quality, pricing, color, as well as name and brand image.

Pricing of our products is partly dependent upon industry capacity, which is impacted by competitor actions to bring online idled capacity or to build new production capacity, and may lead us to adjust our pricing, which could adversely impact our business, financial condition, or results of operations. We have been, and may continue to be, adversely impacted by elevated industry-wide barrel inventories of whiskey. In addition, if market conditions make our Branded Spirits products too expensive or our Distilling Solutions or Ingredient Solutions products too expensive for use in consumer goods, our revenues could be affected. If our competitors were to decrease their pricing, we may choose to do the same, which could adversely affect our margins and profitability. If we did not do the same, our revenues could be adversely affected due to the potential loss of sales.

Damage to our reputation, or that of any of our key customers or their brands,products, could affect our business performance.

The success of our products depends in part upon the positive image that consumers have of our brands and products, the third-partyconsumer brandsgoods that use our products, and the raw materials and finished goods that we use to produce our products. Product contamination, whether arising accidentally or through deliberate third-party action, or other events that harm the integrity or consumer support for our or our customers’ products could affect the demand for our or our customers’ products.

Unfavorable media, whether accurate or not, related to us or our industry, to us, our products, our brands, ourcustomers, customers’ products, marketing, personnel, operations, business performance, or prospects could negatively affect our reputation, stock price, ability to attract and retain high-quality talent, orand the performance of our business. Negative publicity or commentary on social media outlets, whether accurate or not, could cause consumers to react rapidly by avoiding our products or by choosing products offered by our competitors, which could have a material adverse effect on our business, financial condition, or results of operations. If our environmental, social, and governance (“ESG”), sustainability, or sustainabilityother positions or practices do not meet investor or other stakeholder expectations and standards, which continue to evolve, our reputation, stock price, ability to attract and retain high-quality talent, and the performance of our business may be negatively affected. Similarly, stakeholders and others who disagree with our ESGESG, sustainability, or sustainabilityother actions, positions, or statements may speak negatively or advocate against us, which could have a material adverse effect on our business, financial condition, or results of operations.

We could also be adversely affected if we are not successful in developing new brands or products as a result of new brand or product introductions by our competitors. SomeFor example, consumer goods companies have diversified their product offerings, including traditional beer and soft drink companies entering into the alcoholic ready-to-drink market and beer and spirits companies entering into the cannabis market – expanding the potential for competition to adversely impact us from various sectors of the consumer goods industry. In addition, some of our competitors may have greater financial and other resources than we do, making them better positioned to pursue new investment opportunities.

We are required by law in the U.S. to use state-licensed distributors or, in 17 states known as “control states,” state-owned agencies performing this function, to distribute our branded spirits to retail outlets, including liquor stores, bars, restaurants, and national chains. We have established relationships for our branded spirits with a limited number of wholesale distributors, and one wholesale distributor represented approximately 1316 percent of our consolidated net sales for 2024.2025. Failure to maintain those relationships could significantly and adversely affect our business, sales, and growth.

Over the past decade there has been increasing consolidation, both intrastate and interstate, among U.S. distributors. As a result, many U.S. states now have only two or three significant distributors. Also, there are several distributors that now control distribution for several states. If we fail to maintain good relations with a distributor, our branded spirits could, in some instances be excluded from one or more markets entirely. The ultimate success of our branded spirits also depends in large part on our distributors’ ability and desire to distribute and actively promote our branded spirits to our desired U.S. target markets, as we rely significantly on them for product placement and retail store penetration. In addition, allAll of our distributors also distribute competitive brands and product lines.lines that compete with our products for shelf space, promotional displays, and consumer purchases. We cannot assureprovide youassurances that our U.S. distributors will continue to purchase our branded spirits, resell them at our desired or targeted prices, commit sufficient time and resources to promote and market our brands and product lines, or that they can or will sell them to our desired or targeted markets. If they do not, our sales will be harmed, resultingwhich incould have a declinematerial inadverse effect on our business, financial condition, or results of operations.

Our strategic plan for our Ingredient Solutions segmentbusiness includes focusing our efforts on the sale ofsells specialty proteins and starches to targeted consumer packaged goods and distributor customers, which may make our Ingredient Solutions segment reliant on these customer relationships. In addition, our business, financial condition, or results of operations could be materially adversely affected if our Ingredient Solutions customers were to reduce their new product development (“NPD”) activities or cease using our products in their NPD efforts.

Although we maintain insurance coverage for various property damage and loss events, including business interruption insurance, an interruption in or loss of operations at any of our production facilities could reduce or postpone production of our products, which could have a material adverse effect on our business, results of operations, or financial condition. In the past, we have experienced short term interruptions of operations at some of our production facilities due to industrial accidents.accidents, equipment failures, and other causes. Any future accidentsaccidents, equipment failures, or other catastrophic events could result in an extended interruption or reduction of production at our facilities, which could lead to delays or disruptions in shipments and wesales may incurand costs or financial losses that are either not insured against or not fully covered through our insurance.

We also store a substantial amount of our own inventory of aged or aging bourbon, rye, and other whiskeys at our warehouses and at other facilities, including facilities owned by certain third-party producers.third-parties. If a catastrophic event were to occur at any of these locations, our business, financial condition, or results of operations could be adversely affected. The loss of a significant amount of our aged or aging inventory at these facilities through fire, natural disaster, or otherwise could result in a reduction in supply of the affected products andproducts, could affect ourthe long-term performance of any affected brands.products, and could have a material impact on our business. To the extent that our products rely on unique or proprietary attributes, processes, or techniques, replacing production lost as a result of a catastrophic event by purchasing from outside suppliers would be difficult.

OurWe strategichave plan involvesmade significant investment in the aging of barreled distillate. Decisions concerning the quantity of maturing stock of our aged distillate could materially affect our future profitability.

Any capital project we undertake involves risks, including cost overruns, delays and performance uncertainties, regulatory risks (including our ability to timely obtain necessary approvals and permits), and the risk of potential changes in laws and regulations (including zoning and environmental requirements). The expected benefits from any of our capital orand other projects have not been and may not be realized. For example, we may not realize the expected benefits from the mini fuel plant beingthat was constructed at our Atchison, Kansas location or from the ultimate disposal of the distillery assets from our distillery in Atchison, Kansas (the “Atchison Distillery”) that we closed in December 2023. In addition, we may not be successful in our efforts to reduce waste starch stream disposal costs and improve the overall reliability of our Ingredients Solutions operations. Our capital projects may also result in other unanticipated events or unintended consequences, such as the diversion of management’s attention from other operational matters or disruptions to our ongoing operations.

We have third-party supply agreements for our grain supply (primarily corn) and wheat flour. We also procure some textured wheat proteins through a third-party toll manufacturer in the U.S. Additionally, we procure barrels, glass bottles, containers (including glass, PETplastic, containers,and caps,aluminum), closures, labels, aluminum cans, cartons, bottle closures, and other products from third-party vendors. If any of our key suppliers encounters an operational or financial issue, is no longer able to meet our timing, quality, or capacity requirements, ceases doing business with us, or significantly raises prices, and we are not able to promptly develop alternative cost-effective sources of supply or production, it could lead to an interruption in supply to us and higher prices than those we have negotiated or than are available in the market at the time, and in turn, have a material adverse effect on our business, financial condition, or results of operations.

Water is the main ingredient in substantially all of our distillery products andproducts, is also necessary for the production of our foodother ingredients.products, Itand is also a limited resource, facing challenges from climate change, increasing pollution, and poor management.resource. As demand for water continues to increase, water becomes more scarce and the quality of available water deteriorates, we may be affected by increasing production costs or capacity constraints, which could have a material adverse effect on our business, financial condition, or results of operations.

We are subject to a broad range of federal, state, local, and foreign laws and regulations intended to protect public healthregulations, and the environment. Our operationswe are also subject to regulation by various U.S. federal agencies, including the TTB, OSHA, the FDA, and the EPA, by various U.S. state and local authorities, and by various foreign authorities. We are also required to conduct business only with holders of licenses to import, warehouse, transport, distribute, and sell beverage alcohol products. We cannot assure you that thesethe laws and other governmental regulations applicable to our industryus will not change or become more stringent. These laws and regulations cover virtually every aspect of our operations, including production and storage/warehouse facilities, distillation, and maturation requirements, importing ingredients, importing and exporting our products, distribution of beverage alcohol products, marketing, pricing, labeling, packaging, advertising, data privacy, taxation, trade practices, water usage, wastewater discharge, disposal of hazardous wastes and emissions, air emissions and quality, and other matters.

Changes in laws, regulatory measures, governmental policies, guidelines, initiatives, or the manner in which current ones are interpreted or applied, could cause us to incur material additional costs or liabilities and jeopardize the growth of our business in the affected market.business. Specifically, we could be required to incur significant additional costs or capital expenditures, increase our operating expenses, or change the manner in which we conduct our business in response to new environmental, food, health, or safety related laws and regulations. In addition, governments have in the past and may in the future prohibit, impose, or increase limitations on advertising and promotional activities or times or locations where beverage alcohol may be sold or consumed, or adopt other measures that could limit our opportunities to reach consumers or sell our products. Certain countries historically have banned all television, newspaper, magazine, and digital commerce/advertising for beverage alcohol products. Increases in regulation of this nature could substantially reduce consumer awareness of our products in the affected markets and make the introduction of new products more challenging. Governmental agencies may issue dietary guidelines that recommend reduced alcohol consumption, which could impact consumer behavior. These matters may have a material adverse effect on our business, financial condition, or results of operations.

Changes or proposed changes in U.S. and foreign governments’ trade policies have resulted in, and may continue to result in, new trade agreements, economic sanctions, or new, expanded or retaliatory tariffstariffs, or other retaliatory actions against certain countries or covering certain products or ingredients (including recent U.S. tariffs imposed or threatened to be imposed on Mexico,imports Canada, China, andfrom other countries and any retaliatory actions taken by suchthese countries). For example, duringin theMarch period2025, several Canadian provinces removed all U.S.-produced beverage alcohol from 2018store through mid-year 2022, the United Kingdom and the European Union imposed tariffs on the import of American whiskeyshelves in response to tariffs imposed by the U.S. announcing a tariff on importsgoods imported from several countries, including those in the European Union. These tariffs are currently slated to be reinstated and doubled if an agreement is not reached by March 31, 2025.Canada. Any new trade agreements, economic sanctions, or new, expanded or retaliatory tariffs or other retaliatory actions, particularly any retaliatory tariffs or other retaliatory actions related to products imported to the U.S. from Mexico or Northern Ireland, could result in an increase in the price of our and our customer’s products, could increase the costs of finished goods and raw materials (including finished goods produced through our joint venture operations in Mexico and our Northern Ireland operations as well as raw materials we procure from outside the U.S.), could prompt consumers to seek alternative products, could result in a supply imbalance in the U.SU.S. if we and our competitors have reduced sales in other countries, and could potentially impact our business, financial condition, or results of operations.

Various jurisdictions have adopted or may seek to adopt significant additional product labeling or warning requirements or limitations on the availability of our products relating to the content or perceived adverse health consequences of some of our products. Several of these labeling regulations or laws require warnings on any product with substances that the jurisdiction lists as potentially associated with cancer or birth defects and heightened requirements could be imposed. If additional or more severe requirements of this type are imposed on one or more of our major products under current or future health, environmental, or other laws or regulations, they could inhibit sales of such products. Further, we cannot predict whether our products will become subject to increased rules and regulations, which, if enacted, could increase our costs or adversely impact sales. For example, in early January 2025, the U.S. Surgeon General suggested requiring that alcohol products have labels with increased and more prominent warnings regarding the health risks of alcohol consumption and in the past, advocacy groups in Australia, Canada, and the United Kingdom have called for the consideration of requiring the sale of alcohol in plain packaging with more comprehensive health warnings orand have launched additional health-related campaigns in an effort to change drinking habits in those countries. This could result in additional governmental regulations concerning the production, marketing, labeling, or availability of our products, any of which could damage our reputation, make our brands unrecognizable, or reduce demand of our products, which could adversely affect our profitability.

The defense of these actions is time consuming and expensive and may subject us to damages, penalties, or fines as well as reputational damage to our business. We evaluate these litigation claims and legal proceedings to assess the likelihood of unfavorable outcomes and to estimate, if possible, the amount of potential losses. Based on these assessments and estimates, we may establish reserves and disclose the relevant litigation claims or legal proceedings, as and when required or appropriate. These assessments and estimates are based on information available to management at the time of such assessment or estimation and involve a significant amount of judgment. As a result, actual outcomes or losses could differ materially from those envisioned by our current assessments and estimates. Our failure to successfully defend or settle any of these litigations or legal proceedings could result in liability that, to the extent not covered by our insurance, could have a material adverse effect on our business, financial condition, and results of operations. See also Part I, “Item 3―Legal Proceedings” and Part II, Item 8, Note 11, Commitments and Contingencies, to our Consolidated Financial Statements.

Under our Articles of Incorporation, (i) holders of our preferred stock, par value $10.00 per share (“Preferred Stock”), are entitled to elect five of our nine directors and (ii) only holders of our Preferred Stock are entitled to vote with respect to a merger, dissolution, lease, exchangeexchange, or sale of substantially all of our assets, or on an amendment to the Articles of Incorporation, unless such action would increase or decrease the authorized shares or par value of the Common Stock or Preferred Stock, or change the powers, preferences or special rights of the Common or Preferred Stock so as to affect the holders of Common Stock adversely. Generally, our Common Stock and Preferred Stock vote as separate classes on all other matters requiring stockholder approval.

As of December 31, 2024,2025, the majority of the outstanding shares of our Preferred Stock is beneficially owned by one individual, who is effectively in control of the election of five of our nine directors under our Articles of Incorporation. Furthermore, a group of stockholders beneficially owning approximately 2320 percent of our Common Stock as of December 31, 20242025 (excluding shares controlled by certain other stockholders) have a right to nominate up to two of the four directors to be elected by holders of our Common StockStockholders pursuant to the terms of a shareholders’ agreement, provided they continue to hold a certain amount of our Common Stock, and two other individuals who beneficially own approximately 139 percent of our Common Stock as of December 31, 20242025 have agreed to vote in favor of those nominees with respect to any shares of Common Stock over which they have sole voting control.

The concentrated control of our stock and rights of holders of Preferred StockStockholders under our Articles of Incorporation could delay, defer, or prevent a change of control, merger, consolidation, or sale of all or substantially all of our assets that our other stockholders support, or conversely these factors could result in the consummation of such a transaction that our other stockholders do not support. The concentrated control of our stock and rights of holders of Preferred StockStockholders could also discourage a potential investor from acquiring our Common Stock due to the limited voting power of such stock relative to the Preferred Stock and could have an adverse effect on the market price of our Common Stock. In addition, the sale or prospect of a sale of a substantial number of shares by our principal stockholders could have an adverse effect on the market price of our Common Stock.

We have various mechanisms in place to discourage takeover attempts, which may reduce or eliminate our stockholders’ ability to sell their shares for a premium in a change of control transaction. In addition, we could issue additional shares of Common Stock, which could adversely impact the market price of our Common Stock.

•the rights of holders of our Preferred Stock under our Articles of Incorporation (see “Common Stockholders have limited rights under our Articles of Incorporation”);

Our Board of Directors is authorized to issue additional shares of Common Stock and Preferred Stock and may issue the available authorized shares without notice to, or further action by, our stockholders, unless stockholder approval is required by law or the rules of the Nasdaq Global Select Market.Market We believe that it is necessary to maintain a sufficient number of available authorized shares of our Common Stock in order to provide us with the flexibility to issue Common Stock for business purposes that may arise as deemed advisable by our Board.rules. The issuance of additional shares of Common Stock or Preferredpreferred Stockstock may significantly dilute the equity ownership of our current stockholders and could have an adverse effect on the market price of our Common Stock.

Our ability to make and sell our products depends upon the availability of raw materials and energy resources. Prices and supply of all products are subject to market forces, such as inflation, weather, changes in domestic and global demand and supply, and global political orand economic issues.

Higher costs or insufficient availability of suitable grain, agave, water, wood, glass, plastics, closures, and other input materials, or higher associated labor costs or insufficient availability of labor, could have a material adverse effect on our business, financial condition, or results of operations. Similarly, when energy costs rise, our transportation, freight, and other operating costs, such as distilling and bottling expenses, also may increase. Our freight cost and the timely delivery of our products could be adversely affected by a number of factors that could reduce the profitability of our operations, including driver or equipment shortages, higher fuel costs, weather conditions, traffic congestion, shipment container availability, rail shut down,shutdown, increased government regulation, and other matters.

We rely on IT systems, networks, and services, including internet sites, data hosting and processing facilities and tools, hardware (including laptops and mobile devices), software, and technical applications and platforms, some of which are managed and hosted by third-party vendors, to assist us in the management of our business. The various uses of these IT systems, networks, and services include hosting our internal network and communication systems; enterprise resource planning; processing transactions; summarizing and reporting results of operations; business planning and financial information; complying with regulatory, legal, and tax requirements; providing and managing data security; and handling other processes necessary to manage our business. TheWe Company hashave previously experienced, and is expected to continue to be exposed to, failures of our IT systems and those of our third-party vendors due to various causes, including those caused by natural disasters, power outages, computer and telecommunications failures, viruses, phishing attempts, cyber-attacks, malware and ransomware attacks, security breaches, failures in maintenance or development of new IT systems, and errors by employees or vendors.

We have technology and processes in place designed to detect and respond to such failures and disruptions; however, because of the techniques used to obtain unauthorized access, disable, or degrade service, or sabotage systems, and because of the unpredictable nature of other potential threats such as natural disasters, our detection and response measures may be ineffective or inadequate. In addition, increased IT security threats and more sophisticated cyber-crime (including through the use of existing and emerging technologies, such as artificial intelligence (“AI”)) pose a potential risk to the security of our IT systems, networks, and services, as well as the confidentiality, availability, and integrity of our data. This could lead to outside parties having access to our confidential data, strategic information, or information regarding our employees, suppliers, or customers. Ransomware attacks or other cybersecurity breaches have occurred, either internally or at our third-party technology service providers, and have caused and may in the future cause us to be prevented from accessing our data, resulting in interruptions or delays in our business, and causing us to incur remediation costs or requiring us to pay ransom to a hacker which takes over our systems, or damage our reputation. Although we maintain insurance coverage for various cybersecurity risks, we may incur costs or financial losses that are either not insured against or not fully covered through our insurance.

All of these potential failures or disruptions of our data security systems or our IT systems could have a material adverse impact on our business, financial conditions,condition, or results of operations. If the IT systems, networks, or service providers we rely upon fail to function properly, we may suffer disruptions to operations, including order processing, invoicing, and production and distribution of our products, as well as reputational, competitive, or business harm, all of which may have a material adverse effect on our business, financial condition, or results of operations. If our critical IT systems or back-up systems or those of our third-party vendors were damaged or ceased to function properly, we might have to make a significant investment to repair or replace them. In addition, these events could result in unauthorized disclosure of confidential information, and we may suffer financial and reputational damage because of lost or misappropriated confidential information belonging to us or to our employees, customers, or suppliers. Additionally, we could be exposed to potential liability, litigation, governmental inquiries, investigations, or regulatory enforcement actions and we could be subject to the payment of fines or other penalties, ransoms, legal claims by our suppliers, customers, or employees, and significant remediation costs.

AcquiringAcquisitions, additionalinvestments, distilledand spirits brands or other businessesdispositions could also have a significant effect on our financial position and could cause substantial fluctuations in our operating results.

Our revolving credit facility bears interest at variable rates. The U.S. Federal Reserve began raising the Federal Funds interest rate in early 2022 and continued to do so throughout the first half of 2023. Although the Federal Reserve cut interest rates during 2024, they may again raise interest rates in the future. Any increase in interest rates would increase the cost of servicing our variable rate debt and could materially reduce our profitability and cash flows. In addition, higher interest rates could increase the future cost to refinance our convertible notes or the cost of financing any future acquisitions. Assuming our revolving credit facility was fully drawn up to the current $400$500 million maximum principal commitment, for each 1% increase in Secured Overnight Financing Rate (“SOFR”) would result in a $4.0$5.0 million increase in annual interest expense under the revolving credit facility.

This Report may contain forward lookingforward-looking statements as well as historical information. All statements, other than statements of historical facts, regarding the prospects of our industries and our prospects, plans, financial position, mission, and strategy may constitute forward lookingforward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, including without limitation statements about our sources of cash being adequate; our capital expenditures; our ability to support our liquidity and operating needs through cash generated from operations and borrowings; and our abilitycapital toexpenditures. obtain credit funding. Forward lookingForward-looking statements are usually identified by or are associated with such words as “intend,” “plan,” “believe,” “estimate,” “expect,” “anticipate,” “project,” “forecast,” “hopeful,” “should,” “may,” “will,” “could,” “encouraged,” “opportunities,” “potential,” and similar terminology. These forward-looking statements reflect management’s current beliefs and estimates of future economic circumstances, industry conditions, our performance, our financial results, and our financial condition and are not guarantees of future performance.

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 ConditionsCondition and Results of Operations” of 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.

MGP is a leading producer of branded and distilled spirits as well as food ingredient solutions. We have an extensive award-winning global portfolio of branded spirits, which we produce through our distilleries and bottling facilities and sell to distributors. Our branded spirits products account for a range of price points from value products through premium plus brands. Distilled spirits include premium bourbon, rye, and other whiskeys (“brown goods”) and grain neutral spirits (“GNS”), including vodka and gin. Our distilled spirits are either sold directly or indirectly to manufacturers of other branded spirits. 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 ingredientsingredient products are sold directly, or through distributors, to manufacturers and processors of finished packaged goods or to bakeries.

Our Distilling Solutions segment mission is to cultivate lasting partnerships with customers across all product categories by leveraging our technical distilling expertise, strong sales and operating platform, aging whiskey inventory, and unique project development skills. Our Distilling Solutions segment is subject to unfavorable macro industry trends, which include increased competition as industry participants seek to capitalize on consumer trends, inflation and interest rate impacts on customers, overall American whiskey supply and consumer consumption patterns, as well as increased commodity prices. Additionally, the industry has been impacted by unfavorable industry trends resulting in a number of distilleries reducing production or shutting down operations. Our strategy for the Distilling Solutions segment is to further develop our existing customer relationships, expandcapitalize ouron corenew strengthscustomer throughopportunities, innovation, services and stability, cultivate additional domestic customers for brown goods sales, and increase our global presencegrow in the Americanprivate whiskeylabel market.category, maximize the value of our aged inventory by partnering with customers whose business models uniquely benefit from its attributes, optimize our digital interface to enhance the customer experience, and enhance awareness of MGP as a global partner to branded spirits suppliers.

We continue to focus on attractingutilizing customersour capabilities and developingproduct offerings to attract and develop customer relationships for our brown goods as well as shifting our focus away from industrial alcohol, fuel grade alcohol, and white beverage alcohol.goods. During 2024,2025, the industry experiencedcontinued to experience a softening of American whiskey category trends as well as elevated industry-wide barrel whiskey inventories, which ledresulted in the inability of some customers to instanceshonor their contracts with us and a number of customer contract non-performance that put pressure on our brownlarge goodscustomers business.to pause their whiskey purchases after completing their existing contracts. We expect these trends to continue. Distilling Solutions segment sales for 20242025 decreased 2645 percent over the prior year.

Our Ingredient Solutions segment mission is to remain a strategic business partner ofin choicespecialty earningingredients meaningfulproviding relationshipspremium throughdietary collaboration, innovation,fiber and dedicationplant toprotein best-in-classsupporting customerhealth service.and wellness brands. The favorable macro industry trends we anticipate will benefit our business include moreincreasing consumer focus on high fiber and lower net carbs, high protein, plant-based protein, and non-GMO products. We continue to provide customer solutions, taking advantage of our position within growing consumer trends. Our strategy for the Ingredient Solutions segment is to focus on enhancing our operational reliability, expand and optimize our dietary fiber, plant proteins, and clean label starches; expand our extruded products platform; and continue to innovate and expand opportunities through research and development. Ingredient Solutions segment sales for 20242025 decreased 17 percent over the prior year.

(c)Weighted average shares outstanding change primarily related to the vesting of employee restricted stock units (“RSUs”), our withholding and purchase of vested RSUs from employees to pay withholding taxes, and the granting of Common Stock to directors. Additionally, during 2024, the weighted average shares outstanding were impacted by shares repurchased,repurchased pursuant to the Company’s share repurchase program.

20242025 to 20232024 - Basic and diluted EPS was $1.56$(4.99) in 2024,2025, compared to $4.82 and $4.80, respectively$1.56 in 2023.2024. The change in basic and diluted EPS was primarily due to a decrease in operating income and increasechange in the effective tax rate, both driven primarily by the nondeductible goodwill impairment.impairment, as well as decreased gross profit in each of the segments. Additionally, the decrease was related to anthe increasereduction in interestthe expense.weighted Theseaverage decreasesshares wereoutstanding partially offset byduring the change other income (expense), net related to equity method investment income.period.

DISTILLINGBRANDED SOLUTIONSSPIRITS SEGMENT

Gross profit increaseddecreased year versus year by $18,682,$2,876, or 152 percent. Gross margin for 20232025 increased to 32.249.5 percent fromcompared 29.5to 49.1 percent for 2022.2024. The decrease in gross profit was primarily driven by a decrease in sales volume and net price/mix within the value price tier, partially offset by increased premium plus sales volume. The increase in gross profitmargin was due primarily todriven by increased net/price mix and increased volume of higher margin brown goods. This increase was partially offset by larger gross profit lossessales in the Atchisonpremium Distillery.plus price tier.

Gross profit increaseddecreased year versus year by $17,260,$73,325, or 1852 percent. Gross margin for 20232025 increaseddecreased to 44.437.8 percent comparedfrom to 40.142.7 percent for 2022.2024. The increasedecrease in gross profit was primarilydue drivento bylower contributionsbrown fromgoods thesales acquisitionvolume and growth of Penelope as well as by higher net price/mix in the premium plus, value, mid, and other price tiers. These increases weremix, partially offset by increased inputgross costsprofit acrossin allwarehouse categories.services.

OperatingOur primary sources of liquidity have been cash flow from operating activities and borrowings through our Credit Agreement, Convertible Senior Notes and Note Purchase Agreement (see Note 7, Corporate Borrowings) provide the primary sources of cash to fund operating needs and capital expenditures.. These same sources of cash are used to fund our operating needs, capital expenditures, stockholder dividends and other discretionary uses. We continue to monitor market conditions which may create credit and economic challenges that could adversely impact our cash flow from operating activities and cash provided by borrowings. Our overall liquidity reflects our strong business results and an effective cash management strategy that takes into account liquidity management, economic factors, and tax considerations. We expect our sources of cash to be adequate to provide for budgeted capital expenditures, potential mergers or acquisitions, and anticipated operating requirements for the next 12 months and beyond.

Operating Activities. Cash provided by operating activities was $102,278$121,528 during the year ended December 31, 2024.2025. The cash provided by operating activities during 20242025 resulted primarily from a net incomeloss of $34,465$107,832, andoffset by adjustments for non-cash or non-operating charges of $114,994,$203,136, including goodwill impairment, depreciation and amortization,indefinite-lived intangible asset impairment, the change in the fair value of the contingent consideration, and share-baseddepreciation compensation,and partiallyamortization; offsetcash provided by uses of cash due tothe changes in operating assets and liabilities of $47,181.$26,224. The primary drivers of the changes in operating assets and liabilities were $18,155$32,189 of cash provided by decreased accounts receivables, net, due to timing of customer payments and a reduction in consolidated sales during the year and $8,424 related to increased accrued expenses and other, which related to an increase in our incentive compensation accrual. These increases in operating assets and liabilities were partially offset by $18,145 use of cash related to an increase in inventories, primarily barreled distillate, and $15,111 use of cash related to accrued expenses and other related to reduced incentive compensation expenses.distillate.

Cash provided by operating activities was $83,783$102,278 during the year ended December 31, 2023.2024. The cash provided by operating activities during 20232024 resulted primarily from net income of $107,130,$34,465 and adjustments for non-cash or non-operating charges of $56,263,$114,994, including goodwill impairment, depreciation and amortization, impairmentthe change in fair value of long-livedcontingent assetsconsideration, and other, share-based compensation, partially offset by uses of cash due to changes in operating assets and liabilities of $79,610.$47,181. The primary drivers of the changes in operating assets and liabilities were $46,921$18,155 use of cash related to an increase in inventories, primarily barreled distillate, and $32,397$15,111 use of cash related to anaccrued increaseexpenses inand receivables.other related to reduced incentive compensation expenses.

Cash used in investing activities for the year ended December 31, 20232024 was $159,242,$71,558, which primarily resulted from $103,712 related to the acquisition of Penelope and additions to property, plant and equipment of $55,267$71,181 (see “Capital Spending”).

Capital Spending. We manage capital spending to support our business growth plans. We have incurred $31,887, $73,161, $61,108, and $47,859$61,108 of capital expenditures and have paid $45,488, $71,181, $55,267, and $45,323$55,267 for capital expenditures for the years ended December 31, 2024,2025, 20232024 and 2022,2023, 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 $36,000$20,000 in capital expenditures for 2025,2026, which we expect to use for facility improvement and expansion, facility sustenance projects, and environmental health and safety projects.

Financing Activities. Cash used in financing activities for the year ended December 31, 20242025 was $23,803,$83,522, due to repurchasesnet payments on long-term debt of Common Stock of $48,773$69,400 (see “Treasury Purchases”Long-Term and “ShareShort-Term RepurchasesDebt”), and payments of dividends and dividend equivalents of $10,630$10,325 (see Note 9, Equity and EPS for additional information), partiallyand offset by net proceeds on long-term debtpayments of $35,600loan fees of $2,762 (see “Long-Term and Short-Term Debt”).

Cash providedused byin financing activities for the year ended December 31, 20232024 was $45,924, primarily$23,803, due to net proceeds on long-term debtrepurchases of $57,400Common Stock of $48,773 (see Long-Term“Treasury Purchases” and Short-Term“Share DebtRepurchases”), partially offset byand payments of dividends and dividend equivalents of $10,675$10,630 (see Note 9, Equity and EPS for additional information), partially offset by net proceeds on long-term debt of $35,600 (see “Long-Term and Short-Term Debt”).

Treasury Purchases. 81,942105,776 RSUs vested and converted to commonCommon sharesStock for employees during the year ended December 31, 2024,2025, of which we withheld and purchased for treasury 25,52131,631 shares valued at $2,185$1,035 to cover payment of associated withholding taxes.

22,59281,942 RSUs vested and converted to commonCommon sharesStock for employees during the year ended December 31, 2023,2024, of which we withheld and purchased for treasury 8,43725,521 shares valued at $801$2,185 to cover payment of associated withholding taxes.

Share Repurchases. On February 29, 2024, we announced that our Board of Directors approved a $100,000 share repurchase program. Under the share repurchase program, we can repurchase 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 ended December 31, 2025, we did not repurchase any shares of Common Stock under the share repurchase program. During the year ended December 31, 2024, we repurchased 886,936 shares of Common Stock for approximately $46,588, resulting in approximately $53,412 remaining under the share repurchase program.

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, Board-approved dividendsdividends, and share repurchases) and the overall cost of capital. Total debt was $252,318 (net of unamortized loan fees of $7,732) at December 31, 2025 and $323,541 (net of unamortized loan fees of $5,909) at December 31, 20242024. Net payments on all debt for 2025 were $69,400 and $287,249 (net of unamortized loan fees of $6,601) at December 31, 2023. Net borrowingborrowings on all debt for 2024 and 2023 were $35,600, and $57,400, respectively$35,600 (see Note 7, Corporate Borrowings for additional information). Additionally, during the year ended December 31, 2025, we incurred $2,762 of loan fees associated with amending and restating our credit agreement.

MGP is a leading producer of branded and distilled spirits as well as food ingredient solutions. We have an extensive award-winning global portfolio of branded spirits, which we produce through our distilleries and bottling facilities and sell to distributors. Our branded spirits products account for a range of price points from value products through premium plus brands. Distilled spirits include premium bourbon, rye, and other whiskeys (“brown goods”) and grain neutral spirits (“GNS”), including vodka and gin. Our distilled spirits are either sold directly or indirectly to manufacturers of other branded spirits. Our protein and starch food ingredients are predominatelypredominantly wheat based and provide a host of functional, nutritional, and sensory benefits for a wide range of food products to serve the consumer packaged goods industry. Our ingredient products are sold directly, or through distributors, to manufacturers and processors of finished packaged goods or to bakeries.

The table below details the consolidated results for the quarters ended MarchJune 31,30, 2026 and 2025:

Sales - Sales for the quarter ended MarchJune 31,30, 2026 were $106,427,$124,357, a decrease of 1315 percent compared to the year-ago quarter, which was the result of decreased sales in the Distilling Solutions and Branded Spirits segments, partially offset by increased sales in the Ingredient Solutions segment. Within the Distilling Solutions segment, sales were down 4042 percent primarily due to decreased salessale volume of brown goods. Within the Branded Spirits segment, sales were down 81 percent primarily due to decreased sales volume of our private label bottled products within the other category. Within the Ingredient Solutions segment, sales were up 292 percent, primarily due to increased sales of specialty wheat proteinsbiofuel and starchesother (see “Segment Results”).

Gross profit - Gross profit for the quarter ended MarchJune 31,30, 2026 was $33,582,$46,471, a decrease of 2220 percent compared to the year-ago quarter.quarter, The decreasewhich was driventhe byresult of decreased gross profit in the Distilling Solutions and Branded Spirits segments, partially offset by increased gross profit in the Ingredient Solutionseach segment. Within the Distilling Solutions segment, gross profit decreased by $10,055,$7,510, or 5440 percent. Within the Ingredient Solutions segment, gross profit decreased by $4,018, or 53 percent. Within the Branded Spirits segment, gross profit decreased $1,062,$388, or 5 percent. Within the Ingredient Solutions segment, gross profit increased by $1,369, or 561 percent (see “Segment Results”).

Advertising and promotion expenses - Advertising and promotion expenses for the quarter ended MarchJune 31,30, 2026 were $6,191,$5,683, a decrease of 2418 percent compared to the year-ago quarter, primarily driven by realignmenttiming of our advertising and promotion spend to brands we believe have the most attractive growth opportunities.spend.

SG&A expenses - SG&A expenses for the quarter ended MarchJune 31,30, 2026 were $21,066,$20,237, a decrease of 113 percent compared to the year-ago quarter.quarter, primarily driven by our cost savings initiatives.

Income tax expense (benefit) - Income tax benefitexpense for the quarter ended MarchJune 31,30, 2026 was $39,865,$3,063, for an effective tax rate of 22.820.3 percent. Income tax expense for the quarter ended MarchJune 31,30, 2025 was $671,$4,308, for an effective tax rate of (28.1)23.0 percent. The decrease in income tax expense, quarter versus quarter, was due primarily to lower income before income taxes. The increasedecrease in tax rate, quarter versus quarter, was primarily due to the taxdiscrete impact of a state law change on the goodwillCompany’s anddeferred othertax long-lived assets impairment.balances.

Earnings per common share (“EPS”) - Basic and Diluted EPS was $(6.30)$0.55 for the quarter ended MarchJune 31,30, 2026, compared to $(0.14)$0.67 for the quarter ended MarchJune 31,30, 2025. The change in basic and diluted EPS, quarter versus quarter, was primarily due to an increase in interest expense, net and a decrease in operating income.

The following tables show selected financial information for the Branded Spirits segment for the quarters ended MarchJune 31,30, 2026 and 2025.

Total sales of the Branded Spirits segment for the quarter ended MarchJune 31,30, 2026 decreased by $3,990,$890, or 81 percent, compared to the prior year quarter, primarily due to a decrease in sales volume of our private label bottled products within the other category. SalesThis ofdecrease brands within the value price tier decreased, driven by lower sales volume and net price/mix as we continued to optimize our offerings in these price tiers. These decreases werewas partially offset by increased sales volume in the premium plus price tier reflecting our continued focusgrowth onof theour American whiskey and tequila categories.offerings.

Gross profit decreased versus the prior year quarter by $1,062,$388, or 51 percent, primarily driven by lower sales volume of private label bottled products within the other category. Gross margin for the quarter ended MarchJune 31,30, 2026 increased to 47.853.0 percent from 46.052.8 percent for the prior year quarter, driven primarily by increased sales volume in the premium plus price tier.

The following tables show selected financial information for the DistillingBranded SolutionsSpirits segment for the quartersyear to date ended MarchJune 31,30, 2026 and 2025.

Gross profit decreased versusfor the prior year quarterto date ended June 30, 2026 decreased by $10,055,$1,450, or 543 percent, primarily duedriven toby lower brown goods sales volume and decreased gross profit of whiteprivate goodslabel andbottled products within the other co-products.category. Gross margin for the quarteryear to date ended MarchJune 31,30, 2026 decreasedincreased to 30.850.8 percent from 39.849.8 percent for the prior year quarterperiod, driven primarily dueby toincreased lowersales brownvolume goodsin sales.the premium plus price tier.

IngredientDistilling Solutions

The following tables show selected financial information for the IngredientDistilling Solutions segment for the quarters ended MarchJune 31,30, 2026 and 2025.

Gross profit increaseddecreased versus the prior year quarter by $1,369,$7,510, or 5640 percent.percent, primarily due to lower brown goods sales volume. Gross margin for the quarter ended MarchJune 31,30, 2026 increased to 11.238.7 percent from 9.337.6 percent for the prior year quarter. The increase in gross profit wasquarter primarily drivendue byto an increase in net price/mix and volume of specialtybrown wheat proteinsgoods and starches.reduced Thisdistillation increase was partially offset by higher costs associated with the disposal of waste starch streams.costs.

Our primary sources of liquidity have been cash flow from operating activities and borrowings through our Credit Agreement, Convertible Senior NotesNotes, and Note Purchase Agreement (see Note 4, Corporate Borrowings). These sources of cash are used to fund our operating needs, capital expenditures, stockholder dividendsdividends, and other discretionary uses. We continue to monitor market conditions which have created, and may createcontinue to create, credit and economic challenges that could adversely impact our cash flow from operating activities and cash provided by borrowings. In the past, this has included consumer, distributor, retailer, and supplier inventory destocking, increases in our provision for credit loss, and customer contract non-performance, and we continue to face these risks (see “Operating Activities”). Our overall liquidity reflects our effective cash management strategy that takes into account liquidity management, economic factors, and tax considerations. We expect our sources of cash to be adequate to provide for budgeted capital expenditures, potential mergers or acquisitions, and anticipated operating requirements for the next 12 months and beyond.

At MarchJune 31,30, 2026, our current assets exceeded our current liabilities by $321,058,$458,355, largely due to our inventories, at cost, of $403,107.$408,416. At MarchJune 31,30, 2026, our cash balance was $10,357$17,794 and we have used our various debt agreements for liquidity purposes, with $464,000$338,000 available under our credit agreement for additional borrowings and $234,800$236,400 available under the Note Purchase Agreement (see Note 4, Corporate Borrowings). Under these agreements (including the Credit Agreement amendment and the Note Purchase Agreement amendment we entered into on February 20, 2026), we must meet certain financial covenants and restrictions, and at MarchJune 31,30, 2026, we met those covenants and restrictions.