ITEM 1A. RISK FACTORS
Our business is subject to certain risks and uncertainties that could cause actual results and events to differ materially from forward-looking statements. The following discussion identifies those risks which we consider to be material. The following discussion of risks is not all inclusive. 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.
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COMMERCIAL, COMPETITION, AND INDUSTRY RISKS
Changes in consumer preferences and purchases, and our ability to anticipate or react to them, could negatively affect our business results.
We operate in highly competitive markets, and our success depends on our continued ability to offer our customers and consumers appealing, high-quality products. Customer and consumer preferences and purchases may shift due to a host of factors, many of which are difficult to predict, including:
• demographic and social trends;
• economic conditions;
• product innovations;
• public health policies and initiatives (including dietary guidelines and labeling requirements regarding alcohol consumption) and concerns or regulations related to product safety or quality;
• health and wellness trends (including the use of GLP-1 drugs);
• changes in government regulation and taxation of beverage alcohol products;
• the expansion, 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.
The markets for our products are very competitive, and our business could be negatively affected if we do not compete effectively. We may also be negatively impacted by industry dynamics and market conditions.
The markets for our products are very competitive. 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.
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. 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.
Unfavorable economic conditions could negatively affect our business and financial results.
A deterioration in economic conditions, including economic slowdowns or recessions, increased unemployment levels, inflationary pressures, or disruptions to credit and capital markets could lead to de creased consumer confidence and consumer spending, thus reducing consumer demand for our products, making our Distilling Solutions or Ingredient Solutions products too expensive for use in consumer goods, and reducing proceeds from used barrels sales, which could adversely impact our business, financial condition, or results of operations. Unfavorable economic conditions could also cause governments to increase taxes on beverage alcohol to attempt to raise revenue, reducing consumers’ willingness to make discretionary purchases of beverage alcohol products or purchase our higher-margin premium products.
Unfavorable economic conditions could also adversely affect our customers, distributors, retailers, and suppliers, who could experience cash flow challenges, more costly or unavailable financing, credit defaults, and other financial hardships, which have occurred in the past. These financial hardships have led to, and could in the future lead to, consumer, distributor, retailer,
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or supplier inventory destocking, increases in our bad debt expense, increases in the level of unsecured credit that we provide to customers, customer contract non-performance, or raw material supply disruptions. Other negative consequences to our business from unfavorable economic conditions could include higher interest rates, an increase in inflation rates, deflation, exchange rate fluctuations, or credit or capital market instability.
Damage to our reputation, or that of any of our key customers or their 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 consumer goods 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 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, products, brands, customers, customers’ products, marketing, personnel, operations, business performance, or prospects could negatively affect our reputation, stock price, ability to attract and retain high-quality talent, and 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 other 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 ESG, sustainability, or other actions, positions, or statements may speak negatively or advocate against us, which could have a material effect on our business, financial condition, or results of operations.
A failure to introduce successful new brands and products or have effective marketing or advertising could adversely affect our results of operations.
Our success depends, in part, on our ability to innovate and develop new brands and products, and customer demands may require us to make internal investments to achieve or sustain competitive advantages and meet customer expectations. The launch and ongoing success of new brands and products are inherently uncertain, especially with regard to their appeal to consumers, and can give rise to a variety of costs. An unsuccessful launch or short-lived popularity of our product innovations, among other things, may affect consumer perception of existing brands or products and our reputation, and may result in inventory write-offs and other costs.
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. For 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.
A failure to sufficiently innovate or maintain adequate and effective marketing or advertising could inhibit our ability to maintain our brand relevance and drive product sales. If our competitors increase their spending on advertising and promotions, if our advertising, media, or marketing expenses increase, if our advertising and promotions become less effective than those of our competitors, or if we do not adequately leverage technology and data analytic capabilities needed to generate concise competitive insight, our business, financial condition, or results of operations could be adversely affected.
A change in public opinion about alcohol or our products could reduce demand for our brands and products.
For many years, there has been a high level of social and political attention directed at the beverage alcohol industry. The attention has focused largely on public health concerns related to alcohol abuse, including drunk driving, underage drinking, and the negative health impacts of beverage alcohol. Anti-alcohol groups have, in the past, advocated successfully for more stringent labeling requirements, higher taxes, and other regulations and educational campaigns designed to discourage alcohol consumption. More restrictive regulations, higher taxes, negative publicity regarding alcohol consumption, or changes in consumer perceptions of the relative healthfulness or safety of beverage alcohol could decrease sales and consumption of alcohol, and thus, the demand for our brands and products. This could, in turn, decrease our revenues and our revenue growth, which could have a material adverse effect on our business, financial condition, or results of operations.
In addition, consumer preferences might change and could lead to a decreased demand for our Ingredient Solutions products. For example, in recent years, we have noticed shifting consumer preferences and media attention directed to gluten, gluten
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intolerance, and “clean label” products. This could decrease our revenues and revenue growth, which could have a material adverse effect on our business, financial condition, or results of operations.
Failure of our distributors to distribute our branded spirits adequately within their territories could adversely affect our business.
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 distributors, and one distributor represented approximately 16 percent of our consolidated net sales for 2025. Failure to maintain those relationships could significantly and adversely affect our business, sales, and growth.
The ultimate success of our branded spirits 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. All of our distributors also distribute brands and product lines that compete with our products for shelf space, promotional displays, and consumer purchases. We cannot provide assurances 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, which could have a material adverse effect on our business, financial condition, or results of operations.
We have changed distribution partners in the past and may do so again in the future. Changes to our distribution partners have resulted, and could result in the future, in temporary or longer-term sales disruptions, business disruptions, and higher costs. In addition, disruption of our distribution network or fluctuations in our product inventory levels at distributors, wholesalers, or retailers could negatively affect our business, financial condition, or results of operations.
Our focus on higher margin specialty ingredients may make us more reliant on fewer, more profitable customer relationships.
Our Ingredient Solutions business sells 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.
OPERATIONAL RISKS
An interruption of operations or a catastrophic event at our facilities could negatively affect our business.
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, equipment failures, and other causes. Any future accidents, equipment failures, or catastrophic events could result in an extended interruption or reduction of production at our facilities, which could lead to delays or in shipments and sales and costs or financial that are either not insured or not fully covered through our insurance.
Our customers store a substantial amount of barreled inventory of aged or aging bourbon, rye, and other whiskeys at our warehouses. If a catastrophic event were to occur at our facilities or our warehouses (including any leased warehouses), our customers’ business could be adversely affected. The loss of a significant amount of aged or aging inventory at these facilities through fire, natural disaster, or otherwise could result in customer claims against us, liability for customer losses, and a reduction of warehouse services revenue.
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 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, could affect the long-term performance of any affected 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.
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We have made 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.
There is an inherent risk in determining the quantity of maturing stock of aged distillate to lay down in a given year for future sales as a result of changes in consumer demand, pricing, new brand launches, changes in product cycles, increase in competitive supply, and other factors. Demand for products could change significantly between the time of production and the date of sale. It has in the past and may continue to be more difficult to accurately predict demand for our products and brands. Inaccurate decisions or estimations could lead to an inability to supply future demand or lead to a future surplus of inventory and consequent write down in the value of aged or aging distillate. As a result, our business, financial condition, or results of operations could be materially adversely affected.
The inability to successfully complete our capital projects or fund necessary capital expenditures could adversely impact us. Warehouse expansion issues could negatively impact our operations and our business.
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 and other projects have not been and may not be realized. For example, we may not realize the expected benefits from the mini fuel plant that 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 matters or disruptions to our ongoing operations.
Although we currently finance most of our capital expenditures through cash provided by operations, we also may depend on increased borrowing or other financing arrangements to fund future capital expenditures. If we are unable to obtain suitable financing on favorable terms, we may not be able to complete future capital projects and our ability to maintain or expand our operations may be limited. The occurrence of these events could have a material adverse effect on our business, financial condition, and results of operations.
In addition, expansion of our business operations requires additional warehouse capacity. In the event additional warehouse capacity is required, there is the risk of cost overruns, delays, regulatory risks, and the risk of potential changes in laws and regulations, which could have a material adverse effect on our business, financial condition, or results of operations.
We have a high concentration of certain raw material and finished goods purchases from a limited number of suppliers, which exposes us to risk .
We have third-party supply agreements for our grain supply (primarily corn) and wheat fl our. Additionally, we procure barrels, glass bottles, containers (including glass, plastic, and aluminum), closures, labels, cartons, 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 ab le 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.
Work disruptions or stoppages by our unionized workforce could cause interruptions in our operations.
As of December 31, 2025, approximately 197 of our 617 employees were members of a union. Although our relations with our three unions are stable, our failure to renew our collective bargaining agreements on reasonable terms could result in labor disruptions and increased labor costs, which could adversely affect our financial performance. In addition, there is no assurance that we will not experience work disruptions or stoppages in the future, which could interrupt our operations, adversely affect our relationships with our customers, and could have a material adverse effect on our business, financial condition, or results of operations.
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Climate change, or legal, regulatory, or market measures to address climate change, may negatively affect our business or operations, and water scarcity or quality could negatively impact our production costs and capacity.
Increasing concentrations of carbon dioxide and other greenhouse gases in the atmosphere may have an adverse effect on global temperatures, weather patterns, and the frequency and severity of extreme weather events and natural disasters. In the event that the effects of climate change, or legal, regulatory, or market measures enacted to address climate change, has a negative effect on agricultural productivity in the regions from which we procure agricultural products such as corn and wheat, we could be subject to decreased availability or increased prices for these agricultural products, which could have a material adverse effect on our business, financial condition, or results of operations. Increasing regulation of emissions could increase the cost of energy, including fuel, required to operate our facilities or transport and distribute our products, thereby substantially increasing the production, distribution, and supply chain costs associated with our products. Climate change could also lead to disruptions in the production or distribution of our products.
Water is the main ingredient in substantially all of our distillery products, is necessary for the production of our other products, and is a limited 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.
LEGAL, REGULATORY, AND COMPLIANCE RISKS
We are subject to extensive regulation and taxation, as well as compliance with existing or future laws and regulations, which may require us to incur substantial expenditures.
We are subject to a broad range of federal, state, local, and foreign laws and regulations, and we are 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 the laws and regulations applicable to us 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, 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.
Violations of any of these laws and regulations may result, and have in the past resulted, in administrative, civil, or criminal fines or penalties being levied against us, including temporary or prolonged cessation of production, revocation or modification of permits, performance of environmental investigatory or remedial activities, voluntary or involuntary product recalls, or a cease and desist order against operations that are not in compliance with applicable laws.
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. 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 m ake the introduction of new products more challenging. Governmental agencies may issue dietary guidelines that recommend reduced alcohol consumption, which could impact consumer behavior. These matters may have a material adverse effect on our business, financial condition, or results of operations.
Tariffs imposed by the U.S. and other countries, as well as rapidly changing trade relations, could negatively impact our customers and have a material adverse effect on our business and results of operations.
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, new, expanded or retaliatory tariffs, or other retaliatory actions against certain countries or covering certain products or ingredient s (including recent U.S. tariffs imposed or threatened to be imposed on imports from other countries and any retaliatory actions taken by these countries). For example, in March 2025, several Canadian provinces removed all U.S.-produced beverage alcohol from store shelves in response to the U.S. announcing a tariff
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on goods imported from 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 pr oducts, could increase the costs of finished goods and raw materials (including finished goods produced through our joint venture operations in Mexico and our Northern Ireland operations as well as raw materials we procure from outside the U.S.), could prompt consumers to seek alternative products, could result in a supply imbalance in the U.S. if we and our competitors have reduced sales in other countries, and could potentially impact our business, financial condition, or results of operations.
Changes in excise taxes, incentives, and customs duties related to products containing alcohol could adversely affect our business.
Products containing alcohol are subject to excise taxation in U.S. markets at the federal, state, and local level. Any increase in federal, state or local excise taxes could have an adverse effect on our business by increasing prices and reducing demand, particularly if excise tax levels increase substantially relative to those for beer and wine. In addition, products containing alcohol are the subject of customs duties in many countries around the world. An unanticipated increase in customs duties in the markets where we may sell our products could also adversely affect our results of operations and cash flows.
We may not be able to adequately protect our intellectual property rights or may be accused of infringing intellectual property rights of third parties.
We regard our trademarks, service marks, copyrights, patents, trade dress, trade secrets, proprietary technology, and similar intellectual property as critical to our success, and we rely on trademark, copyright, and patent law, trade secret protection, and confidentiality and license agreements with our employees, customers, and others to protect our proprietary rights. We may not be able to discover or determine the extent of any unauthorized use of our proprietary rights. Third parties that license our proprietary rights also may take actions that diminish the value of our proprietary rights or reputation. The protection of our intellectual property may require the expenditure of significant financial and managerial resources. Moreover, the steps we take to protect our intellectual property may not adequately protect our rights or prevent third parties from infringing or misappropriating our proprietary rights. Our intellectual property rights may not be upheld if challenged. Such results could materially and adversely affect our business. If we are to maintain the proprietary nature of our technologies, we may any competitive provided by our intellectual property. We and our customers and other users of our products may be subject to that we or they or certain uses of our products the intellectual property rights of third parties. is to and the outcome of any is inherently uncertain. Any intellectual property , with or without merit, could be time-consuming and expensive to , could management attention from executing our business plan, and could require us or our customers or other users of our products to change business practices, pay monetary , or enter into licensing or similar arrangements. Any determination related to intellectual property or could be material to our business, financial condition, or results of operations.
Failure of our branded spirits to secure and maintain listings in control states could adversely affect our business.
In control states, the state liquor commissions act in place of distributors and decide which products are to be purchased and offered for sale in their respective states. Products selected for listing in control states must generally reach certain volumes or profit levels to maintain their listings. Products in control states are selected for purchase and sale through listing procedures, which are generally made available to new products only at periodically scheduled listing interviews. Products not selected for listings can only be purchased by consumers in the applicable control state through special orders, if at all. If, in the future, we are unable to maintain our current listings in the control states, or secure and maintain listings in those states for any additional branded spirits we may develop or acquire, sales of our branded spirits could decrease significantly, which would have a material adverse financial effect on our results of operations and financial condition.
Significant additional labeling or warning requirements or limitations on the availability of our products could inhibit sales of affected products.
Various jurisdictions have adopted or may seek to adopt significant additional product labeling or warning requirements or limitations on the availability of our products relating to the content or perceived adverse health consequences of some of our products. 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, advocacy groups in Australia, Canada, and the United Kingdom have called for the consideration of
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requiring the sale of alcohol in plain packaging with more comprehensive health warnings and 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.
Product recalls or other product liability claims could materially and negatively affect our business.
Selling products for human consumption involves inherent legal and other risks, including product contamination, spoilage, product tampering, allergens, or other adulteration. We could decide to, or be required to, recall products due to suspected or confirmed product contamination, adulteration, misbranding, tampering, or other errors or deficiencies. Although we maintain product recall insurance, product recalls or market withdrawals could result in significant losses due to their costs, the destruction of product inventory, lost sales due to the unavailability of the product for a period of time, and we may incur costs or financial losses that are either not insured against or not fully covered through our insurance. We could be affected if our customers confidence in the safety and quality of certain of our products, or if consumers confidence in the food and beverage safety system generally. attention about these types of , whether or not valid, may our reputation, food processors, branded spirits bottlers, or consumers from buying our products, or cause production and delivery .
We may also suffer losses if our products or operations cause injury, illness, or death. In addition, we could face claims of false or deceptive advertising or other criticism. A significant product liability or other legal judgment or a related regulatory enforcement action against us, or a significant product recall, may materially and adversely affect our reputation and profitability. Moreover, even if a product liability or other legal or regulatory claim is unsuccessful, has no merit, or is not pursued, the negative publicity surrounding assertions against our products or processes and the associated legal and other expenses could have a material effect on our business, financial condition, or results of operations.
Failure to comply with anti-corruption laws, trade sanctions, and restrictions, or similar laws or regulations may have a material adverse effect on our business and financial results.
We market and sell our products in over 45 countries. Some of the countries where we do business have a higher risk of corruption than others. While we are committed to doing business in accordance with applicable anti-corruption laws, trade sanctions and restrictions, and other similar laws and regulations, along with our Code of Conduct and our other policies, we remain subject to the risk that an employee, or one of our business partners, may take action determined to be in violation of international trade, money laundering, anti-corruption, or other laws, sanctions, or regulations, including the U.S. Foreign Corrupt Practices Act of 1977, the U.K. Bribery Act 2010, or equivalent laws. Any determination that our operations or activities are not in compliance with applicable laws or regulations, particularly those related to anti-corruption and international trade, could result in investigations, interruption of business, loss of business partner relationships, or of licenses and permits (our own or those of our partners), imposition of , legal or equitable sanctions, publicity, and management . Any media coverage associated with under these laws and regulations, even if or baseless, could our reputation and sales. Further, our continued compliance with applicable anti- or other laws or regulations, our Code of Conduct, and our other policies could result in higher operating costs.
We also operate our business and market our products in countries that may be subject to export control regulations, embargoes, economic sanctions and other forms of trade restrictions. New or expanded export control regulations, economic sanctions, embargoes or other forms of trade restrictions imposed on countries in which we or our associates do business may curtail our existing business and may result in serious economic challenges in these geographies, which could have a material adverse effect on our and our associates’ operations, and may result in impairment charges on goodwill or other intangible assets. The conflict and related sanctions have resulted and could continue to result in disruptions to global trade, commodity markets (including grain, corn, wheat, energy, and natural gas markets), and supply chain continuity.
We are, and from time to time may become, subject to litigation, and adverse outcomes in such litigation could have a material adverse effect on our business.
We are, and from time to time may become, subject to litigation and various legal proceedings in the ordinary course of our business, including litigation and proceedings related to commercial disputes, intellectual property matters, privacy and data protection and employment disputes, as well as stockholder derivative suits, class action lawsuits, mass arbitrations and other matters, that may involve claims for substantial amounts of money or for other relief, result in significant costs for legal representation, arbitration fees, or other legal or related services, or necessitate changes to our business or operations.
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In particular, we and other companies operating in our industry may face the possibility of class action or similar litigation alleging that the continued excessive use or abuse of beverage alcohol has caused death or serious health problems. It is also possible that governments could assert that the use of alcohol has significantly increased government funded health care costs. Litigation or assertions of this type have adversely affected companies in the tobacco industry, and it is possible that we, as well as our distributors, customers, or suppliers, could be named in litigation of this type. Also, lawsuits have been brought in a number of U.S. states against beverage alcohol manufacturers and marketers alleging improper alcohol marketing, advertising, or distribution practices, including targeting underage consumers in their advertising. While we have not been named in these lawsuits, we could be named in similar lawsuits in the future.
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 or settle any of these or legal proceedings could result in liability that, to the extent not covered by our insurance, could have a material 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 .
RISKS RELATED TO OUR CAPITAL STRUCTURE
Common Stockholders have limited rights under our Articles of Incorporation.
Under our Articles of Incorporation, (i) holders of our preferred stock, par value $10.00 per share (“Preferred Stock”), are entitled to elect five of our nine directors and (ii) only holders of our Preferred Stock are entitled to vote with respect to a merger, dissolution, lease, exchange, or sale of substantially all of our assets, or on an amendment to the Articles of Incorporation, unless such action would increase or decrease the authorized shares or par value of the Common 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, 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 appro ximately 20 percent of our Common Stock as of December 31, 2025 (excluding shares controlled by certain other stockholders) have a right to nominate up to two of the four directors to be elected by our Common Stockholders pursuant to a shareholders’ agreement, provided they continue to hold a certain amount of our Common Stock, and two other individuals who beneficially own approximately 9 percent of our Common Stock as of December 31, 2025 have agreed to vote in favor of those nominees with respect to any share s of Common Stock over which they have sole voting control.
Our two class structure with our Common Stock and Preferred Stock may prevent the inclusion of our Common Stock in certain stock market indices, may cause stockholder advisory firms or others to publish negative commentary about our corporate governance practices or otherwise seek to cause us to change our capital structure, and may result in large institutional investors not purchasing shares of our Common Stock. Any actions or publications by stockholder advisory firms, institutional investors, or others critical of our corporate governance practices or capital structure could also adversely affect the value of our Common Stock or make it difficult for us to attract and retain qualified directors. Any actions we might pursue to eliminate the Preferred Stock would require the support of the holders of our Preferred Stock and would likely involve payment to the holders of our Preferred Stock for redeeming their shares, the amount of which could be material and would involve risks related to the valuation and terms of any such transaction.
The concentrated control of our stock and rights of Preferred Stockholders 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 Preferred Stockholders 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
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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 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.
Various provisions of our Articles of Incorporation and bylaws and of Kansas corporate law may discourage, delay, or prevent a change in control or takeover attempt of our Company by a third-party which our management and Board of Directors opposes. Stockholders who might desire to participate in such a transaction may not have the opportunity to do so. These antitakeover provisions could substantially impede the ability of stockholders to benefit from a change of control or change in our management and Board of Directors. These provisions include:
• the rights of holders of our Preferred Stock under our Articles of Incorporation (see Common Stockholders have limited rights under our Articles of Incorporation );
• additional shares of preferred stock and Common Stock that could be issued by our Board of Directors to make it more difficult for a third-party to acquire, or to discourage a third-party from acquiring, a majority of our outstanding voting stock;
• non-cumulative voting in the election of directors;
• limitations on the ability of stockholders to call special meetings of stockholders; and
• advance notice requirements for nominations of candidates for election to our Board of Directors or for proposing matters that can be acted upon by our stockholders at stockholder meetings.
Our Board of Directors is authorized to issue additional shares of Common 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 Nasdaq Global Select Market rules. The issuance of additional shares of Common Stock or preferred stock may significantly dilute the equity ownership of our current stockholders and could have an adverse effect on the market price of our Common Stock.
GENERAL RISKS
Higher costs or unavailability of raw materials, product ingredients, energy resources, or labor could adversely affect our financial results.
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 and 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 shutdown, increased government regulation, and other matters.
In addition, the relationship between the price we pay for corn and the sales price of distillers feed, the principal co-product of our alcohol production process, can fluctuate significantly and negatively impact our business. The selling price of distillers feed has historically tracked the price of corn, but is also susceptible to other factors, including weather, other available feedstock, and global trade relations. As a result, the profitability of distillers feed could be adversely affected, which could be material to our business, financial condition, or results of operations.
If we cannot offset higher raw material costs with higher selling prices, increased sales volume, or reductions in other costs, our profitability could be adversely affected. There can be no assurance that we can cover these potential cost increases through future pricing actions. Also, as a result of these pricing actions, consumers could purchase less or move from purchasing our higher-margin products to our lower-margin products.
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A failure of one or more of our key information technology (“IT”) systems, networks, processes, associated sites, or service providers could have a negative impact on our business.
We 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. We have 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 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 or 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 our reputation. Although we maintain insurance coverage for various cybersecurity risks, we may incur costs or financial that are either not insured 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 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 financial and reputational because of or confidential information belonging to us or to our employees, customers, or suppliers. Additionally, we could be to potential liability, , governmental inquiries, , or regulatory enforcement actions and we could be subject to the payment of or other , ransoms, legal by our suppliers, customers, or employees, and significant remediation costs.
We may not be able to successfully implement our strategies.
Our success depends, to a significant extent, on successful implementation of our strategies. We cannot provide assurances that we will be able to successfully implement our strategies or, if successfully implemented, we will be able to realize the expected benefits of our strategies.
Part of our strategic business plan is to grow our business through acquisitions, and we continue to evaluate opportunities to acquire or invest in businesses or brands to expand our portfolio. However, we may not be able to identify acceptable acquisition or investment opportunities at acceptable prices and terms, and we may not have available capital to complete an acquisition or investment opportunity. Acquisitions and investments involve risks and uncertainties, including paying more than a brand or business is ultimately determined to be worth, exposure to unknown liabilities, business disruption, and management distraction. We have encountered, and may in the future encounter, challenges in successfully integrating any acquired businesses or brands, which could result in an inability to achieve anticipated synergies; the loss of key employees, customers, or vendors of acquired businesses; and challenges in extending our controls, policies, and procedures (including internal controls over financial reporting, disclosure controls, and cybersecurity, food safety, food quality, and occupational safety policies and procedures) to acquired businesses or brands. If the financial performance of our business, as supplemented by any acquired businesses or brands, does not meet our expectations, it may make it more for us to service our debt obligations and our financial results may not meet market expectations or otherwise be affected.
From time to time, we also consider disposing of assets or businesses that may no longer meet our financial or strategic objectives. In selling assets or businesses, we may not get prices or terms as favorable as we anticipated. We could also
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encounter difficulty in finding buyers on acceptable terms in a timely manner, which could delay accomplishment of our strategic objectives. We also may not achieve expected cost savings from any dispositions, and any disposition may temporarily disrupt our other business operations and divert management attention. Any of these outcomes could negatively affect our financial results.
Acquisitions, investments, and dispositions could also have a significant effect on our financial position and could cause substantial fluctuations in our operating results.
As part our strategic business plan, we are also seeking to improve productivity and achieve cost savings through a wide range of initiatives and restructuring actions. Some of the actions we may take in pursuing these opportunities may become a distraction for our employees, disrupt business operations, and may cause deterioration in employee morale, which may make it more difficult for us to retain or attract qualified employees. We also may not achieve the anticipated savings or efficiencies from our cost savings and productivity initiatives. The failure to implement our cost savings and productivity initiatives in accordance with our expectations could have a negative effect on our business, financial condition, or results of operations .
An increase in interest rates would increase the cost of servicing our debt and could reduce our profitability.
Our revolving credit facility bears interest at variable rates. 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 $500 million maximum principal commitment, for each 1% increase in Secured Overnight Financing Rate (“SOFR”) would result in a $5.0 million increase in annual interest expense under the revolving credit facility.
If we were to lose any of our key personnel, we may not be able to fully implement our strategic plan, and our system of internal controls could be impacted.
We rely on the continued services of key personnel involved in management, finance, product development, sales, manufacturing, marketing, human resources, operations, and distribution, and upon the efforts and abilities of our executive management team. The loss of service of any of our key personnel could be disruptive to our operations and create uncertainty
about our business and future direction, which could have a material adverse effect on our business, financial condition, results of operations, or on our system of internal controls.
If we cannot attract and retain key personnel, or if our search for qualified personnel is prolonged, our system of internal controls may be affected, which could lead to an adverse effect on our business, financial condition, or results of operations. In addition, it could be difficult, time consuming, and expensive to replace any key management member or other critical personnel, and no guarantee exists that we will be able to recruit suitable replacements or assimilate new key personnel into our organization.
We may be required to recognize impairment charges that could negatively affect our financial results.
We have a significant amount of intangible assets, such as goodwill and trade names, and may acquire more intangible assets in the future. We assess our noncurrent assets, including trade names, goodwill and other intangible assets, equity method investments and other long-lived assets, as and when required by U.S. Generally Accepted Accounting Principles (“GAAP”) to determine whether they are impaired and, if they are, we record appropriate impairment charges. We have recorded in the past, and we may be required to record in the future, significant impairment charges related to our intangible assets, which could have a material adverse effect on our business, financial condition, or results of operations. For example, in the fourth quarter 2024 and 2025, we recorded impairment charges related to our Branded Spirits reporting unit.
Our global business is subject to commercial, political, and financial risks.
Our products are sold in more than 45 countries; accordingly, we are subject to risks associated with doing business globally, including commercial, political, and financial risks. In addition, we are subject to potential business disruption caused by military conflicts; the results of elections; potentially unstable governments or legal systems; civil or political upheaval or unrest; local labor policies and conditions; possible expropriation, nationalization, or confiscation of assets; problems with repatriation of foreign earnings; economic or trade sanctions; closure of markets to imports; anti-American sentiment; terrorism or other types of violence in or outside the U.S.; and health pandemics. If shipments of our products to international markets were to experience significant disruption, it could have a material adverse effect on our financial results. We are also subject to financial risks and our business has been, and could in the future also be, impacted by economic conditions, including inflation, deflation, exchange rate fluctuations, and credit or capital market . See also —Tariffs
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imposed by the U.S. and other countries, as well as rapidly changing trade relations, could negatively impact our customers and have a material adverse effect on our business and results of operations .
Covenants and other provisions in our credit arrangements could hinder our ability to operate. Our failure to comply with covenants in our credit arrangements could result in the acceleration of the debt extended under such agreements, limit our liquidity, and trigger other rights of our lenders.
Our credit arrangements contain a number of financial and other covenants that include provisions which require us, in certain circumstances, to meet certain financial tests. These covenants could hinder our ability to operate and could reduce our profitability. The lender may also terminate or accelerate our obligations under our credit arrangements upon the occurrence of various events in addition to payment defaults and other breaches. Any acceleration of our debt or termination of our credit arrangements would negatively impact our overall liquidity and might require us to take other actions to preserve any remaining liquidity. Although we anticipate that we will be able to meet the covenants in our credit arrangements, there can be no assurance that we will do so, as there are a number of external factors that affect our operations over which we have little or no control, that could have a material adverse effect on our business, financial condition, or results of operations. See also Part II, Item 8, Note 7, Corporate Borrowings, to our Consolidated Financial Statement s.
Pandemics or other health crises could disrupt or otherwise negatively impact our operations, including the demand for our products and our ability to produce and deliver our products.
A pandemic, such as COVID-19, or another widespread health crisis, could have a negative impact on our operations, including voluntary or mandatory temporary closures of our facilities or offices; interruptions to our supply chain, which could impact the cost or availability of raw materials; disruptions or restrictions on our ability to travel or to market and distribute our products; reductions in consumer demand for our products or those of our customers due to bar and restaurant closures or reduced consumer traffic in bars, restaurants, and other locations; and labor shortages.
Furthermore, our facilities and those of our customers and suppliers could be required to comply with new regulations imposed by state and local governments in response to such an outbreak, which could cause an increase in the cost, or delay or reduce the volume, of products produced at our facilities or those of our suppliers. A pandemic or other widespread health crisis could disrupt or negatively impact credit markets, which could adversely affect the availability and cost of capital, which could limit our ability to fund our operations and satisfy our obligations.
Cash dividends and share repurchases are subject to uncertainties which could affect the price of our Common Stock.
The payment of dividends, the amount of any dividends, and any share repurchase program require approval of our Board of Directors. Future dividend payments and share repurchases are also subject to our financial results, the availability of statutory surplus funds to pay dividends, restrictions in our debt agreements, and our capital allocation strategy. These or other factors could result in a change to our current policy of paying dividends on our Common Stock, us paying smaller dividends on our Common Stock in the future, or a change in the amount, timing and frequency of any share repurchases. A change in dividend payments or share repurchases could adversely affect the price of our Common Stock. Additionally, any share repurchases may not enhance shareholder value because the market price of our Common Stock may decline below the levels at which we repurchased shares of Common Stock, and short-term stock price fluctuations could reduce the program’s effectiveness.
