QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) |
Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||||||||||||
Large accelerated filer | ☐ | Accelerated filer | ☐ | ||||||||
☒ | Smaller reporting company | ||||||||||
Emerging growth company |
Table of Contents |
Page | |||||
PART I | |||||
PART II | |||||
Index to Condensed Consolidated Financial Statements | |||||
Page | |||||
The Duckhorn Portfolio, Inc. Condensed Consolidated Statements of Financial Position |
(in thousands, except share and per share amounts) | January 31, 2022 | July 31, 2021 | |||||||||
ASSETS | (unaudited) | ||||||||||
Current assets | |||||||||||
Cash | $ | $ | |||||||||
Accounts receivable trade (net of allowance of $ | |||||||||||
Inventories | |||||||||||
Prepaid expenses and other current assets | |||||||||||
Total current assets | |||||||||||
Long-term assets | |||||||||||
Property and equipment, net | |||||||||||
Intangible assets, net | |||||||||||
Goodwill | |||||||||||
Other long-term assets | |||||||||||
Total long-term assets | |||||||||||
Total assets | $ | $ | |||||||||
LIABILITIES AND EQUITY | |||||||||||
Current liabilities | |||||||||||
Accounts payable | $ | $ | |||||||||
Accrued expenses | |||||||||||
Accrued compensation | |||||||||||
Deferred revenue | |||||||||||
Current maturities of long-term debt | |||||||||||
Other current liabilities | |||||||||||
Total current liabilities | |||||||||||
Long-term liabilities | |||||||||||
Revolving line of credit, net | |||||||||||
Long-term debt, net of current maturities and debt issuance costs | |||||||||||
Deferred income taxes | |||||||||||
Other long-term liabilities | |||||||||||
Total long-term liabilities | |||||||||||
Total liabilities | |||||||||||
Commitments and Contingencies (Note 11) | |||||||||||
Equity | |||||||||||
Common stock, $ | |||||||||||
Additional paid-in capital | |||||||||||
Retained earnings | |||||||||||
Total The Duckhorn Portfolio, Inc. equity | |||||||||||
Non-controlling interest | |||||||||||
Total equity | |||||||||||
Total liabilities and equity | $ | $ |
The Duckhorn Portfolio, Inc. Condensed Consolidated Statements of Operations (unaudited) |
Three months ended January 31, | Six months ended January 31, | ||||||||||||||||||||||
(in thousands, except share and per share amounts) | 2022 | 2021 | 2022 | 2021 | |||||||||||||||||||
Net sales (net of excise taxes of $ | $ | $ | $ | $ | |||||||||||||||||||
Cost of sales | |||||||||||||||||||||||
Gross profit | |||||||||||||||||||||||
Selling, general and administrative expenses | |||||||||||||||||||||||
Casualty loss (gain), net (Note 13) | ( | ( | |||||||||||||||||||||
Income from operations | |||||||||||||||||||||||
Interest expense | |||||||||||||||||||||||
Other income, net | ( | ( | ( | ( | |||||||||||||||||||
Total other expenses | |||||||||||||||||||||||
Income before income taxes | |||||||||||||||||||||||
Income tax expense | |||||||||||||||||||||||
Net income | |||||||||||||||||||||||
Less: Net loss (income) attributable to non-controlling interest | ( | ||||||||||||||||||||||
Net income attributable to The Duckhorn Portfolio, Inc. | $ | $ | $ | $ | |||||||||||||||||||
Net income per share of common stock: | |||||||||||||||||||||||
Basic | $ | $ | $ | $ | |||||||||||||||||||
Diluted | $ | $ | $ | $ | |||||||||||||||||||
Weighted average shares of common stock outstanding: | |||||||||||||||||||||||
Basic | |||||||||||||||||||||||
Diluted | |||||||||||||||||||||||
The Duckhorn Portfolio, Inc. Condensed Consolidated Statements of Changes in Equity (unaudited) |
(in thousands, except share amounts) | Common stock | Additional paid-in capital | Retained earnings | Total The Duckhorn Portfolio, Inc. equity | Non-controlling interest | Total equity | |||||||||||||||||||||||||||||||||||
Shares | Amount | ||||||||||||||||||||||||||||||||||||||||
Balances at July 31, 2020 | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||||||||
Net income (loss) | — | — | — | ( | |||||||||||||||||||||||||||||||||||||
Equity-based compensation | — | — | — | — | |||||||||||||||||||||||||||||||||||||
Balances at October 31, 2020 | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||||||||
Net income (loss) | — | — | — | ( | |||||||||||||||||||||||||||||||||||||
Equity-based compensation (Note 12) | — | — | — | — | |||||||||||||||||||||||||||||||||||||
Balances at January 31, 2021 | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||||||||
Balances at July 31, 2021 | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||||||||
Net income | — | — | — | ||||||||||||||||||||||||||||||||||||||
Equity-based compensation | — | — | — | — | |||||||||||||||||||||||||||||||||||||
Balances at October 31, 2021 | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||||||||
Net income (loss) | — | — | — | ( | |||||||||||||||||||||||||||||||||||||
Initial public offering, net of issuance costs | — | — | ( | — | ( | — | ( | ||||||||||||||||||||||||||||||||||
Issuance of common stock under equity incentive plans | — | — | — | ||||||||||||||||||||||||||||||||||||||
Equity-based compensation (Note 12) | — | — | — | — | |||||||||||||||||||||||||||||||||||||
Balances at January 31, 2022 | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||||||||
The Duckhorn Portfolio, Inc. Condensed Consolidated Statements of Cash Flows (unaudited) |
Six months ended January 31, | |||||||||||
(in thousands) | 2022 | 2021 | |||||||||
Cash flows from operating activities | |||||||||||
Net income | $ | $ | |||||||||
Adjustments to reconcile net income to net cash from operating activities: | |||||||||||
Depreciation and amortization | |||||||||||
(Gain) loss on disposal of assets | ( | ||||||||||
Change in fair value of derivatives | ( | ( | |||||||||
Amortization of debt issuance costs | |||||||||||
Loss on debt extinguishment | |||||||||||
Equity-based compensation | |||||||||||
Change in operating assets and liabilities: | |||||||||||
Accounts receivable trade, net | ( | ( | |||||||||
Inventories | ( | ( | |||||||||
Prepaid expenses and other current assets | ( | ( | |||||||||
Other long-term assets | ( | ( | |||||||||
Accounts payable | |||||||||||
Accrued expenses | |||||||||||
Accrued compensation | ( | ( | |||||||||
Deferred revenue | ( | ||||||||||
Other current and long-term liabilities | ( | ( | |||||||||
Net cash provided by operating activities | |||||||||||
Cash flows from investing activities | |||||||||||
Purchases of property and equipment | ( | ( | |||||||||
Proceeds from sales of property and equipment | |||||||||||
Net cash used in investing activities | ( | ( | |||||||||
Cash flows from financing activities | |||||||||||
Payments of deferred offering costs | ( | ||||||||||
Payments under line of credit | ( | ( | |||||||||
Borrowings under line of credit | |||||||||||
Extinguishment of long-term debt | ( | ||||||||||
Issuance of long-term debt | |||||||||||
Payments of long-term debt | ( | ( | |||||||||
Repayment of capital leases | ( | ||||||||||
Debt issuance costs | ( | ||||||||||
Net cash provided by (used in) financing activities | ( | ||||||||||
Net increase in cash | |||||||||||
Cash - Beginning of year | |||||||||||
Cash - End of year | $ | $ | |||||||||
Non-cash investing and financing activities | |||||||||||
Property and equipment additions in accounts payable and accrued expenses | $ | $ | |||||||||
Three months ended January 31, | Six months ended January 31, | ||||||||||||||||||||||
2022 | 2021 | 2022 | 2021 | ||||||||||||||||||||
Wholesale - distributors | % | % | % | % | |||||||||||||||||||
Wholesale - California direct to retail(a) | |||||||||||||||||||||||
DTC(b) | |||||||||||||||||||||||
Net sales | % | % | % | % |
(in thousands) | January 31, 2022 | July 31 2021 | |||||||||
Finished goods | |||||||||||
Bottled wine | $ | $ | |||||||||
Merchandise | |||||||||||
Work in progress | |||||||||||
Bulk wine | |||||||||||
Packaging | |||||||||||
Overhead | |||||||||||
Raw materials | |||||||||||
Deferred crop costs | |||||||||||
Total | $ | $ |
(in thousands) | January 31, 2022 | July 31, 2021 | |||||||||
Land | $ | $ | |||||||||
Buildings and improvements | |||||||||||
Vineyards and improvements | |||||||||||
Machinery and equipment | |||||||||||
Barrels | |||||||||||
Total depreciable property and equipment | |||||||||||
Less: accumulated depreciation and amortization | ( | ( | |||||||||
Total depreciable property and equipment, net | |||||||||||
Construction in progress | |||||||||||
Property and equipment, net | $ | $ |
January 31, 2022 | |||||||||||||||||
(in thousands) | Gross carrying amount | Accumulated amortization | Net | ||||||||||||||
Definite-lived intangible assets | |||||||||||||||||
Customer relationships | $ | $ | $ | ||||||||||||||
Leasehold interests | |||||||||||||||||
Total definite-lived intangible assets | |||||||||||||||||
Indefinite-lived intangible assets | |||||||||||||||||
Trade names | — | ||||||||||||||||
Lane rights | — | ||||||||||||||||
Total indefinite-lived intangible assets | — | ||||||||||||||||
Total other intangible assets | $ | $ | $ |
July 31, 2021 | |||||||||||||||||
(in thousands) | Gross carrying amount | Accumulated amortization | Net | ||||||||||||||
Definite-lived intangible assets | |||||||||||||||||
Customer relationships | $ | $ | $ | ||||||||||||||
Leasehold interests | |||||||||||||||||
Total definite-lived intangible assets | |||||||||||||||||
Indefinite-lived intangible assets | |||||||||||||||||
Trade names | — | ||||||||||||||||
Lane rights | — | ||||||||||||||||
Total indefinite-lived intangible assets | — | ||||||||||||||||
Total other intangible assets | $ | $ | $ |
(in thousands) | January 31, 2022 | July 31, 2021 | |||||||||
Trade spend(a) | $ | $ | |||||||||
Bulk wine and other received not invoiced | |||||||||||
Barrel purchases | |||||||||||
Deferred compensation liability(b) | |||||||||||
Income tax payable | |||||||||||
Accrued invoices and other accrued expenses | |||||||||||
Total | $ | $ |
Notional amount (in thousands) | Interest rate | Effective date | Expiration date | |||||||||||||||||
$ | March 21, 2020 | March 23, 2023 |
(in thousands) | January 31, 2022 | July 31, 2021 | |||||||||
Derivative instruments not designated as hedging instruments | |||||||||||
Interest rate swap contracts | $ | $ | |||||||||
Foreign currency forward contracts | |||||||||||
Total derivative instruments not designated as hedging instruments | $ | $ |
(in thousands) | January 31, 2022 | July 31, 2021 | ||||||||||||
Derivative instruments not designated as hedging instruments | ||||||||||||||
Classification | ||||||||||||||
Interest rate swap contracts | ||||||||||||||
Swap contract | Other long-term assets | $ | $ | |||||||||||
Derivative instrument | Other long-term liabilities | ( | ||||||||||||
Foreign currency forward contracts | ||||||||||||||
Derivative instrument | Other current assets | $ | $ | |||||||||||
Three months ended January 31, | Six months ended January 31, | |||||||||||||||||||||||||
(in thousands) | Classification | 2022 | 2021 | 2022 | 2021 | |||||||||||||||||||||
Interest rate swap contracts | Other income, net | $ | ( | $ | ( | $ | ( | $ | ( | |||||||||||||||||
Foreign currency forward contracts | Other income, net | |||||||||||||||||||||||||
Total gains | $ | ( | $ | ( | $ | ( | $ | ( |
(in thousands) | Fair value measurements using: | ||||||||||||||||||||||
Quoted prices in active markets (Level 1) | Significant other observable inputs (Level 2) | Significant unobservable inputs (Level 3) | Total | ||||||||||||||||||||
Assets | |||||||||||||||||||||||
Interest rate swap contracts | $ | $ | $ | $ | |||||||||||||||||||
Deferred compensation plan asset | $ | ||||||||||||||||||||||
Liabilities | |||||||||||||||||||||||
Deferred compensation liability | $ | $ | $ |
(in thousands) | Fair value measurements using: | ||||||||||||||||||||||
Quoted prices in active markets (Level 1) | Significant other observable inputs (Level 2) | Significant unobservable inputs (Level 3) | Total | ||||||||||||||||||||
Assets | |||||||||||||||||||||||
Foreign currency forward contracts | $ | $ | $ | $ | |||||||||||||||||||
Deferred compensation plan asset | |||||||||||||||||||||||
Liabilities | |||||||||||||||||||||||
Interest rate swap contracts | $ | $ | $ | $ | |||||||||||||||||||
Deferred compensation liability |
(in thousands) | |||||
Remaining portion of 2022 | $ | ||||
2023 | |||||
2024 | |||||
2025 | |||||
2026 | |||||
Thereafter (collectively) | |||||
Total | $ |
Performance-based shares | Weighted-average grant-date fair value | ||||||||||
Unvested as of July 31, 2021 | $ | ||||||||||
Granted | |||||||||||
Vested | ( | ||||||||||
Forfeited | |||||||||||
Unvested as of January 31, 2022 | $ |
Number of options | Weighted-average exercise price | Weighted-average remaining contractual life (in years) | Aggregate intrinsic value (in thousands) | ||||||||||||||||||||
Outstanding at July 31, 2021 | $ | ||||||||||||||||||||||
Granted | |||||||||||||||||||||||
Vested | |||||||||||||||||||||||
Forfeited | ( | ||||||||||||||||||||||
Outstanding at January 31, 2022 | $ | $ |
Number of units | Weighted-average grant-date fair value per share | ||||||||||
Unvested as of July 31, 2021 | $ | ||||||||||
Granted | |||||||||||
Vested | ( | ||||||||||
Forfeited | ( | ||||||||||
Unvested as of January 31, 2022 | $ |
Expected term (in years)(a) | |||||
Expected dividend yield(b) | |||||
Risk-free interest rate(c) | % | ||||
Expected volatility(d) | % | ||||
Stock price | $ |
Three months ended January 31, | Six months ended January 31, | ||||||||||||||||||||||
(in thousands, except share and per share amounts) | 2022 | 2021 | 2022 | 2021 | |||||||||||||||||||
Numerator - Net income attributable to The Duckhorn Portfolio, Inc. | $ | $ | $ | $ | |||||||||||||||||||
Denominator: | |||||||||||||||||||||||
Weighted average number of shares of common stock outstanding - basic | |||||||||||||||||||||||
Dilutive stock options and restricted stock(a) | |||||||||||||||||||||||
Weighted average number of shares of common stock outstanding - assuming dilution | |||||||||||||||||||||||
Earnings per share attributable to The Duckhorn Portfolio, Inc. | |||||||||||||||||||||||
Basic | $ | $ | $ | $ | |||||||||||||||||||
Diluted | $ | $ | $ | $ |
Three months ended January 31, | Six months ended January 31, | ||||||||||||||||||||||
(in thousands) | 2022 | 2021 | 2022 | 2021 | |||||||||||||||||||
Net sales | $ | 98,736 | $ | 83,657 | $ | 202,917 | $ | 175,295 | |||||||||||||||
Gross profit | $ | 49,477 | $ | 41,757 | $ | 101,887 | $ | 86,032 | |||||||||||||||
Net income attributable to The Duckhorn Portfolio, Inc. | $ | 17,932 | $ | 22,003 | $ | 39,205 | $ | 39,526 | |||||||||||||||
Adjusted EBITDA | $ | 34,310 | $ | 32,178 | $ | 72,400 | $ | 65,900 |
Three months ended January 31, | Six months ended January 31, | ||||||||||||||||||||||
(in thousands) | 2022 | 2021 | 2022 | 2021 | |||||||||||||||||||
Net income attributable to The Duckhorn Portfolio, Inc. | $ | 17,932 | $ | 22,003 | $ | 39,205 | $ | 39,526 | |||||||||||||||
Interest expense | 1,636 | 3,612 | 3,242 | 7,192 | |||||||||||||||||||
Income tax expense | 6,407 | 7,935 | 13,784 | 14,071 | |||||||||||||||||||
Depreciation and amortization expense | 6,280 | 5,765 | 11,109 | 10,881 | |||||||||||||||||||
EBITDA | 32,255 | 39,315 | 67,340 | 71,670 | |||||||||||||||||||
Purchase accounting adjustments(a) | 99 | 762 | 292 | 1,323 | |||||||||||||||||||
Transaction expenses(b) | 1,024 | — | 2,770 | — | |||||||||||||||||||
Change in fair value of derivatives(c) | (515) | (1,279) | (957) | (2,827) | |||||||||||||||||||
Equity-based compensation(d) | 1,416 | 288 | 2,875 | 576 | |||||||||||||||||||
Casualty gain, net(e) | — | (7,832) | — | (7,832) | |||||||||||||||||||
Loss on debt extinguishment(f) | — | — | — | 272 | |||||||||||||||||||
IPO preparation costs(g) | — | 210 | — | 405 | |||||||||||||||||||
Wildfire costs(h) | 31 | 62 | 80 | 1,617 | |||||||||||||||||||
COVID-19 costs(i) | — | 652 | — | 696 | |||||||||||||||||||
Adjusted EBITDA | $ | 34,310 | $ | 32,178 | $ | 72,400 | $ | 65,900 |
Three months ended January 31, | Six months ended January 31, | ||||||||||||||||||||||
2022 | 2021 | 2022 | 2021 | ||||||||||||||||||||
Wholesale - distributors | 67.2 | % | 60.2 | % | 67.9 | % | 66.9 | % | |||||||||||||||
Wholesale - California direct to retail | 19.8 | % | 19.6 | % | 18.1 | % | 16.9 | % | |||||||||||||||
DTC | 13.0 | % | 20.2 | % | 14.0 | % | 16.2 | % |
Three months ended January 31, | Six months ended January 31, | ||||||||||||||||||||||
2022 | 2021 | 2022 | 2021 | ||||||||||||||||||||
Net sales growth | 18.0 | % | 8.7 | % | 15.8 | % | 17.1 | % | |||||||||||||||
Volume contribution | 24.8 | % | 11.4 | % | 15.3 | % | 25.4 | % | |||||||||||||||
Price / mix contribution | (6.8) | % | (2.8) | % | 0.5 | % | (8.3) | % |
Three months ended January 31, | Six months ended January 31, | ||||||||||||||||||||||
(in thousands) | 2022 | 2021 | 2022 | 2021 | |||||||||||||||||||
Purchase accounting adjustments to cost of sales | $ | 99 | $ | 762 | $ | 292 | $ | 1,323 | |||||||||||||||
Impact of purchase accounting on gross profit | (99) | (762) | (292) | (1,323) | |||||||||||||||||||
Amortization of customer relationships and other intangible assets | 1,921 | 1,921 | 3,842 | 3,842 | |||||||||||||||||||
Impact of purchase accounting on selling, general and administrative expenses | 1,921 | 1,921 | 3,842 | 3,842 | |||||||||||||||||||
Impacts of purchase accounting on income before income taxes | $ | (2,020) | $ | (2,683) | $ | (4,134) | $ | (5,165) |
Three months ended January 31, | Six months ended January 31, | ||||||||||||||||||||||||||||||||||||||||||||||
(in thousands, except percentages) | 2022 | 2021 | 2022 | 2021 | |||||||||||||||||||||||||||||||||||||||||||
Net sales | $ | 98,736 | 100.0 | % | $ | 83,657 | 100.0 | % | $ | 202,917 | 100.0 | % | $ | 175,295 | 100.0 | % | |||||||||||||||||||||||||||||||
Cost of sales | 49,259 | 49.9 | 41,900 | 50.1 | 101,030 | 49.8 | 89,263 | 50.9 | |||||||||||||||||||||||||||||||||||||||
Gross profit | 49,477 | 50.1 | 41,757 | 49.9 | 101,887 | 50.2 | 86,032 | 49.1 | |||||||||||||||||||||||||||||||||||||||
Selling, general, and administrative expenses | 23,814 | 24.1 | 17,471 | 20.9 | 46,972 | 23.1 | 34,276 | 19.6 | |||||||||||||||||||||||||||||||||||||||
Casualty loss (gain), net | 31 | — | (7,770) | (9.3) | 80 | — | (6,215) | (3.5) | |||||||||||||||||||||||||||||||||||||||
Income from operations | 25,632 | 26.0 | 32,056 | 38.3 | 54,835 | 27.0 | 57,971 | 33.1 | |||||||||||||||||||||||||||||||||||||||
Interest expense | 1,636 | 1.7 | 3,612 | 4.3 | 3,242 | 1.6 | 7,192 | 4.1 | |||||||||||||||||||||||||||||||||||||||
Other income, net | (338) | (0.3) | (1,491) | (1.8) | (1,431) | (0.7) | (2,814) | (1.6) | |||||||||||||||||||||||||||||||||||||||
Total other expenses | 1,298 | 1.3 | 2,121 | 2.5 | 1,811 | 0.9 | 4,378 | 2.5 | |||||||||||||||||||||||||||||||||||||||
Income before income taxes | 24,334 | 24.6 | 29,935 | 35.8 | 53,024 | 26.1 | 53,593 | 30.6 | |||||||||||||||||||||||||||||||||||||||
Income tax expense | 6,407 | 6.5 | 7,935 | 9.5 | 13,784 | 6.8 | 14,071 | 8.0 | |||||||||||||||||||||||||||||||||||||||
Net income | 17,927 | 18.2 | 22,000 | 26.3 | 39,240 | 19.3 | 39,522 | 22.5 | |||||||||||||||||||||||||||||||||||||||
Less: Net loss (income) attributable to non-controlling interest | 5 | — | 3 | — | (35) | — | 4 | — | |||||||||||||||||||||||||||||||||||||||
Net income attributable to The Duckhorn Portfolio, Inc. | $ | 17,932 | 18.2 | % | $ | 22,003 | 26.3 | % | $ | 39,205 | 19.3 | % | $ | 39,526 | 22.5 | % | |||||||||||||||||||||||||||||||
Net sales | |||||||||||||||||||||||||||||||||||||||||||||||
Three months ended January 31, | Change | Six months ended January 31, | Change | ||||||||||||||||||||||||||||||||||||||||||||
(in thousands, except percentages) | 2022 | 2021 | $ | % | 2022 | 2021 | $ | % | |||||||||||||||||||||||||||||||||||||||
Net sales | $ | 98,736 | $ | 83,657 | $ | 15,079 | 18.0 | % | $ | 202,917 | $ | 175,295 | $ | 27,622 | 15.8 | % |
Cost of sales | |||||||||||||||||||||||||||||||||||||||||||||||
Three months ended January 31, | Change | Six months ended January 31, | Change | ||||||||||||||||||||||||||||||||||||||||||||
(in thousands, except percentages) | 2022 | 2021 | $ | % | 2022 | 2021 | $ | % | |||||||||||||||||||||||||||||||||||||||
Cost of sales | $ | 49,259 | $ | 41,900 | $ | 7,359 | 17.6 | % | $ | 101,030 | $ | 89,263 | $ | 11,767 | 13.2 | % |
Gross profit | |||||||||||||||||||||||||||||||||||||||||||||||
Three months ended January 31, | Change | Six months ended January 31, | Change | ||||||||||||||||||||||||||||||||||||||||||||
(in thousands, except percentages) | 2022 | 2021 | $ | % | 2022 | 2021 | $ | % | |||||||||||||||||||||||||||||||||||||||
Gross profit | $ | 49,477 | $ | 41,757 | $ | 7,720 | 18.5 | % | $ | 101,887 | $ | 86,032 | $ | 15,855 | 18.4 | % |
Operating expenses | |||||||||||||||||||||||||||||||||||||||||||||||
Selling, general and administrative expenses | |||||||||||||||||||||||||||||||||||||||||||||||
Three months ended January 31, | Change | Six months ended January 31, | Change | ||||||||||||||||||||||||||||||||||||||||||||
(in thousands, except percentages) | 2022 | 2021 | $ | % | 2022 | 2021 | $ | % | |||||||||||||||||||||||||||||||||||||||
Selling expenses | $ | 10,971 | $ | 8,403 | $ | 2,568 | 30.6 | % | $ | 21,369 | $ | 16,727 | $ | 4,642 | 27.8 | % | |||||||||||||||||||||||||||||||
Marketing expenses | 2,887 | 2,178 | 709 | 32.6 | 5,059 | 3,925 | 1,134 | 28.9 | |||||||||||||||||||||||||||||||||||||||
General and administrative expenses | 9,956 | 6,890 | 3,066 | 44.5 | 20,544 | 13,624 | 6,920 | 50.8 | |||||||||||||||||||||||||||||||||||||||
Total selling, general and administrative expenses | $ | 23,814 | $ | 17,471 | $ | 6,343 | 36.3 | % | $ | 46,972 | $ | 34,276 | $ | 12,696 | 37.0 | % |
Casualty loss (gain), net | |||||||||||||||||||||||||||||||||||||||||||||||
Three months ended January 31, | Change | Six months ended January 31, | Change | ||||||||||||||||||||||||||||||||||||||||||||
(in thousands, except percentages) | 2022 | 2021 | $ | % | 2022 | 2021 | $ | % | |||||||||||||||||||||||||||||||||||||||
Casualty loss (gain), net | $ | 31 | $ | (7,770) | $ | 7,801 | (100.4) | % | $ | 80 | $ | (6,215) | $ | 6,295 | (101.3) | % |
Other expenses | |||||||||||||||||||||||||||||||||||||||||||||||
Three months ended January 31, | Change | Six months ended January 31, | Change | ||||||||||||||||||||||||||||||||||||||||||||
(in thousands, except percentages) | 2022 | 2021 | $ | % | 2022 | 2021 | $ | % | |||||||||||||||||||||||||||||||||||||||
Interest expense | 1,636 | 3,612 | $ | (1,976) | (54.7) | % | $ | 3,242 | $ | 7,192 | $ | (3,950) | (54.9) | % | |||||||||||||||||||||||||||||||||
Other income, net | (338) | (1,491) | 1,153 | (77.3) | % | (1,431) | (2,814) | 1,383 | (49.1) | % | |||||||||||||||||||||||||||||||||||||
Total other expenses | $ | 1,298 | $ | 2,121 | $ | (823) | (38.8) | % | $ | 1,811 | $ | 4,378 | $ | (2,567) | (58.6) | % |
Income tax expense | |||||||||||||||||||||||||||||||||||||||||||||||
Three months ended January 31, | Change | Six months ended January 31, | Change | ||||||||||||||||||||||||||||||||||||||||||||
(in thousands, except percentages) | 2022 | 2021 | $ | % | 2022 | 2021 | $ | % | |||||||||||||||||||||||||||||||||||||||
Income tax expense | $ | 6,407 | $ | 7,935 | $ | (1,528) | (19.3) | % | $ | 13,784 | $ | 14,071 | $ | (287) | (2.0) | % |
Six months ended January 31, | |||||||||||
(in thousands) | 2022 | 2021 | |||||||||
Cash flows provided by (used in): | |||||||||||
Operating activities | $ | 18,828 | $ | 26,141 | |||||||
Investing activities | (23,336) | (9,748) | |||||||||
Financing activities | 5,034 | (13,371) | |||||||||
Net increase in cash | $ | 526 | $ | 3,022 |
Exhibit no. | Exhibit description | Filed herewith | ||||||||||||
31.1 | * | |||||||||||||
31.2 | * | |||||||||||||
32.1 | * | |||||||||||||
101.INS | XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document. | * | ||||||||||||
101.SCH | XBRL Taxonomy Extension Schema Document. | * | ||||||||||||
101.CAL | XBRL Taxonomy Extension Calculation Linkbase Document. | * | ||||||||||||
101.DEF | XBRL Taxonomy Extension Definition Linkbase Document. | * | ||||||||||||
101.LAB | XBRL Taxonomy Extension Label Linkbase Document. | * | ||||||||||||
101.PRE | XBRL Taxonomy Extension Presentation Linkbase Document. | * | ||||||||||||
104 | Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101) | * |
The Duckhorn Portfolio, Inc. | ||||||||
Date: March 10, 2022 | By: | /s/ Alex Ryan | ||||||
Alex Ryan | ||||||||
President, Chief Executive Officer and Chairman | ||||||||
(Principal Executive Officer) | ||||||||
Date: March 10, 2022 | By: | /s/ Lori Beaudoin | ||||||
Lori Beaudoin | ||||||||
Executive Vice President, Chief Financial Officer | ||||||||
(Principal Financial Officer and Principal Accounting Officer) |
Date: March 10, 2022 | By: | /s/ Alex Ryan | ||||||
Alex Ryan | ||||||||
President, Chief Executive Officer and Chairman | ||||||||
(Principal Executive Officer) |
Date: March 10, 2022 | By: | /s/ Lori Beaudoin | ||||||
Lori Beaudoin | ||||||||
Executive Vice President, Chief Financial Officer | ||||||||
(Principal Financial Officer and Principal Accounting Officer) |
Date: March 10, 2022 | By: | /s/ Alex Ryan | ||||||
Alex Ryan | ||||||||
President, Chief Executive Officer and Chairman | ||||||||
(Principal Executive Officer) |
Date: March 10, 2022 | By: | /s/ Lori Beaudoin | ||||||
Lori Beaudoin | ||||||||
Executive Vice President, Chief Financial Officer | ||||||||
(Principal Financial Officer and Principal Accounting Officer) |
Condensed Consolidated Statements of Financial Position (unaudited) (Parenthetical) - USD ($) $ in Thousands |
Jan. 31, 2022 |
Jul. 31, 2021 |
---|---|---|
Statement of Financial Position [Abstract] | ||
Allowance for credit losses on current accounts receivable | $ 400 | $ 800 |
Common stock, par value (in dollars per share) | $ 0.01 | $ 0.01 |
Common stock, shares authorized (in shares) | 500,000,000 | 500,000,000 |
Common stock, shares issued (in shares) | 115,065,210 | 115,046,793 |
Common stock, shares outstanding (in shares) | 115,065,210 | 115,046,793 |
Condensed Consolidated Statements of Operations (unaudited) - USD ($) $ in Thousands |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jan. 31, 2022 |
Jan. 31, 2021 |
Jan. 31, 2022 |
Jan. 31, 2021 |
|
Income Statement [Abstract] | ||||
Net sales (net of excise taxes of $1,507, $1,150, $2,983 and $2,415, respectively) | $ 98,736 | $ 83,657 | $ 202,917 | $ 175,295 |
Cost of sales | 49,259 | 41,900 | 101,030 | 89,263 |
Gross profit | 49,477 | 41,757 | 101,887 | 86,032 |
Selling, general and administrative expenses | 23,814 | 17,471 | 46,972 | 34,276 |
Casualty loss (gain), net (Note 13) | 31 | (7,770) | 80 | (6,215) |
Income from operations | 25,632 | 32,056 | 54,835 | 57,971 |
Interest expense | 1,636 | 3,612 | 3,242 | 7,192 |
Other income, net | (338) | (1,491) | (1,431) | (2,814) |
Total other expenses | 1,298 | 2,121 | 1,811 | 4,378 |
Income before income taxes | 24,334 | 29,935 | 53,024 | 53,593 |
Income tax expense | 6,407 | 7,935 | 13,784 | 14,071 |
Net income | 17,927 | 22,000 | 39,240 | 39,522 |
Less: Net loss (income) attributable to non-controlling interest | 5 | 3 | (35) | 4 |
Net income attributable to The Duckhorn Portfolio, Inc. | $ 17,932 | $ 22,003 | $ 39,205 | $ 39,526 |
Net income per share of common stock: | ||||
Basic (in dollars per share) | $ 0.16 | $ 0.22 | $ 0.34 | $ 0.39 |
Diluted (in dollars per share) | $ 0.16 | $ 0.22 | $ 0.34 | $ 0.39 |
Weighted average shares of common stock outstanding: | ||||
Basic (in shares) | 115,049,395 | 101,713,460 | 115,048,094 | 101,713,460 |
Diluted (in shares) | 115,389,502 | 101,713,460 | 115,391,011 | 101,713,460 |
Condensed Consolidated Statements of Operations (unaudited) (Parenthetical) - USD ($) $ in Thousands |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jan. 31, 2022 |
Jan. 31, 2021 |
Jan. 31, 2022 |
Jan. 31, 2021 |
|
Income Statement [Abstract] | ||||
Excise taxes | $ 1,507 | $ 1,150 | $ 2,983 | $ 2,415 |
Description of business |
6 Months Ended |
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Jan. 31, 2022 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Description of business | Description of business The Duckhorn Portfolio, Inc. and its subsidiaries (the "Company" or "Management") headquartered in St. Helena, CA, produces luxury and ultra-luxury wine across a portfolio of winery brands, including Duckhorn Vineyards, Paraduxx, Goldeneye, Migration, Decoy, Canvasback, Calera, Kosta Browne, Greenwing and Postmark. The Company's revenue is comprised of wholesale and DTC sales. Wholesale revenue is generated through sales directly to California retailers and restaurants, sales to distributors and agents located in other states throughout the U.S. and sales to export distributors that sell internationally. DTC revenue results from individual consumers purchasing wine directly from the Company through club membership, the Company's website or tasting rooms located in Napa Valley, California; Anderson Valley, California; Sebastopol, California; Hollister, California; and Walla Walla, Washington. The Company owns or controls through long-term leases certain high-quality vineyards throughout Northern and Central California and Washington. Vinification takes place at wineries owned, leased or under contract with third parties predominately located in Napa Valley, California; Anderson Valley, California; Hopland, California; Hollister, California; Sebastopol, California; and Walla Walla, Washington. Fiscal year The Company's fiscal year ends on July 31. Secondary offering In the first quarter of Fiscal 2022, the Company completed a secondary offering where certain existing shareholders sold 12,000,000 shares of common stock at a price of $20.50 per share. In November 2021, an additional 626,467 shares of common stock were sold pursuant to the partial exercise of the underwriters' option to purchase additional shares. The Company did not receive any of the proceeds from the sale of the shares by the existing stockholders. In connection with the offering, the Company incurred costs of $1.0 million of which $0.4 million was incurred in the fourth quarter of Fiscal 2021. These costs are reflected in selling, general and administrative expenses on the Condensed Consolidated Statement of Operations.
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Basis of presentation and recent accounting pronouncements |
6 Months Ended |
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Jan. 31, 2022 | |
Accounting Policies [Abstract] | |
Basis of presentation and recent accounting pronouncements | Basis of presentation and recent accounting pronouncements Basis of presentation The Company’s Condensed Consolidated Financial Statements are prepared in accordance with U.S. GAAP and Article 10 of the Securities and Exchange Commission’s Regulation S-X. As permitted under those rules, certain footnotes or other financial information that are normally required by U.S. GAAP may be condensed or omitted. These Condensed Consolidated Financial Statements have been prepared on the same basis as the Company's audited annual financial statements and, in the opinion of Management, reflect all adjustments, consisting only of normal recurring adjustments, which are necessary for the fair statement of the Company's financial information for the interim periods presented. These interim results are not necessarily indicative of the results to be expected for the year ending July 31, 2022, for any other interim period or for any future year. The Condensed Consolidated Financial Statements are unaudited and should be read in conjunction with the audited consolidated financial statements and related notes thereto for the year ended July 31, 2021. Principles of consolidation The Condensed Consolidated Financial Statements include the accounts of The Duckhorn Portfolio, Inc. and its subsidiaries, including a consolidated VIE of which the Company has determined it is the primary beneficiary. All intercompany balances and transactions are eliminated in consolidation. Accounting estimates The preparation of Condensed Consolidated Financial Statements requires Management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the Condensed Consolidated Financial Statements and the reported amounts of revenues and expenses during the reporting period. Such estimates include, but are not limited to, the following: useful lives and recoverability of long-lived assets, inventory obsolescence and reserves, capitalized indirect inventory costs, allowance for doubtful accounts receivable, calculation of accrued liabilities, customer incentive reserves, uncertain tax positions, contingent liabilities, fair value of assets and liabilities acquired in connection with business combinations, equity-based compensation and deferred revenues. Actual results could differ from those estimates. Preferred stock The Company has 100,000,000 shares of $0.01 par value preferred stock authorized, none of which are issued and outstanding. Variable interest entities The Company evaluates its ownership, contractual relationships and other interests in entities to determine the nature and extent of the interests, whether such interests are variable interests and whether the entities are VIEs in accordance with ASC 810, Consolidations. These evaluations can be complex and involve Management judgment as well as the use of estimates and assumptions based on available historical information, among other factors. Based on these evaluations, if the Company determines that it is the primary beneficiary of a VIE, the entity is consolidated into the financial statements. At January 31, 2022 and July 31, 2021, the Company's ownership percentage of the sole identified VIE was 76.2%. The VIE's net assets were $2.4 million and $2.2 million at January 31, 2022 and July 31, 2021, respectively. The assets and liabilities, which may only be used to settle its own obligations, are primarily related to property, equipment and working capital accounts, which generally represent the amounts owed by or to the Company for goods under current contracts. Recent accounting pronouncements As an “emerging growth company” as established by the JOBS Act, the Company is permitted to delay adoption of new or revised accounting pronouncements applicable to public companies until such pronouncements are made applicable to private companies. The Company has elected to use the adoption dates available to private companies. As a result, the Company’s financial statements may not be comparable to the financial statements of issuers who are required to comply with the effective date for new or revised accounting standards that are applicable to public companies. Based on the Company's aggregate worldwide market value of voting and non-voting common equity held by non-affiliates as of January 31, 2022, the Company will become a “large accelerated filer” and lose emerging growth company status beginning with its Annual Report on Form 10-K for the year ending July 31, 2022. Recently issued accounting pronouncements not yet adopted: In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842), and several amendments, codified as ASC 842, which supersedes prior guidance on accounting for leases under FASB ASC 840, Leases. ASU No. 2016-02, among other provisions, (i) requires lessees to classify leases as either finance or operating leases, (ii) generally requires all leases to be recorded on the Condensed Consolidated Statements of Financial Position through the recognition of right-of-use assets and corresponding lease liabilities and (iii) expands mandatory qualitative and quantitative disclosures regarding leasing activities. The FASB issued ASU No. 2020-05, “Revenue from Contracts with Customers (Topic 606) and Leases (Topic 842) Effective dates for certain entities”, which extends the effective date for all other entities, for annual reporting periods beginning after December 15, 2021, and for interim periods within fiscal years beginning after December 15, 2022. The amended standard is effective for the Company beginning with the year ended July 31, 2022. Early adoption is permitted. The Company’s assessment of the new lease accounting standard’s impact on the Condensed Consolidated Financial Statements is ongoing. The Company is evaluating the optional practical expedients and assessing the Company's existing lease portfolio in order to determine the impact to the financial statements, accounting systems, processes, and internal control over financial reporting. While the Company has not yet quantified the impact, adjustments resulting from the adoption of this standard will materially increase total assets and total liabilities with the recognition of right of use assets and lease liabilities related to the Company's operating leases. In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments–Credit Losses (Topic 326), Measurement of Credit Losses on Financial Instruments, and also issued subsequent amendments to the initial guidance, collectively, ASC 326, to replace the incurred loss impairment methodology in current U.S. GAAP with a methodology that requires the reflection of expected credit losses and will also require consideration of a broader range of reasonable and supportable information to determine credit loss estimates. For many entities with financial instruments, the standard will require the use of a forward-looking expected loss model rather than the incurred loss model for recognizing credit losses, which may result in the earlier recognition of credit losses on financial instruments. This guidance will be effective for the Company beginning with the year ended July 31, 2022, with early adoption permitted. The Company is currently evaluating the impact this standard could have on the Condensed Consolidated Financial Statements. In March 2020, the FASB issued ASU No. 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting (“ASU 2020-04”), and further issued subsequent amendments to the initial guidance. In order to ease the potential burden in accounting for reference rate reform, ASU 2020-04 provides optional expedients and exceptions for applying GAAP to contracts, hedging relationships and other transactions that reference the LIBOR or another reference rate expected to be discontinued because of reference rate reform, if certain criteria are met. ASU 2020-04 applies only to contracts, hedging relationships and other transactions that reference LIBOR or another reference rate expected to be discontinued. The standard is effective immediately and may be applied prospectively through December 31, 2022. The Company is currently evaluating the impact of reference rate reform and the optional expedients provided by this standard on its contracts. In May 2021, the FASB issued ASU No. 2021-04, Earnings per Share (Topic 260), Debt - Modifications and Extinguishments (Subtopic 470-50), Compensation-Stock Compensation (Topic 718), and Derivatives and Hedging - Contracts in Entity's Own Entity (Subtopic 815-40), to clarify the accounting for modifications or exchanges of equity-classified warrants. This amendment applies to freestanding stock options, which the Company granted in Fiscal 2021. In accordance with the ASU, if there is a modification and the option is still determined to be classified as equity, the modification should be accounted for as an exchange of the original option for a new option. This guidance will be effective for the Company beginning with the year ended July 31, 2023, with early adoption permitted. The Company is currently evaluating the impact of this update and will monitor for modifications or exchanges of the issued freestanding stock options, but at this time does not anticipate the adoption of ASU 2021-04 to have a material impact on the Condensed Consolidated Financial Statements.
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Revenue |
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Revenue from Contract with Customer [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Revenue | Revenue Disaggregated revenue information The following table presents the percentages of consolidated net sales disaggregated by sales channels:
________________________________________________ (a) Includes $0.5 million and $2.2 million of sales related to bulk, grape and merchandise sales for the three months and six months ended January 31, 2022, respectively. Sales of a similar nature were immaterial for the three months and six months ended January 31, 2021. (b) Includes shipping and handling revenue of $0.4 million and $0.6 million for the three months ended January 31, 2022 and 2021, respectively and $0.9 million and $1.1 million for the six months ended January 31, 2022 and 2021, respectively. Contract liabilities When the Company receives payment from a customer prior to transferring the product under the terms of a contract, the Company records deferred revenue, which represents a contract liability. The Company’s deferred revenue is primarily comprised of cash collected from DTC members for purchases ahead of the wine shipment date. The Company does not recognize revenue until control of the wine is transferred and the performance obligation is met. As shown on the Condensed Consolidated Statements of Financial Position, the balance of deferred revenue was $3.1 million at July 31, 2021, the beginning of the period, and was $0.1 million at January 31, 2022, the end of the period. Revenue recognized during the six months ended January 31, 2022, which was included in the opening contract liability balance for the corresponding period totaled $3.0 million
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Inventories |
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Inventory Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Inventories | Inventories Inventories were comprised of the following:
The Company capitalizes into inventory depreciation related to property and equipment used in the production of inventory. For the six months ended January 31, 2022 and the year ended July 31, 2021, the amount of depreciation capitalized was $6.6 million and $12.5 million, respectively.
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Property and equipment |
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Property, Plant and Equipment [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Property and equipment | Property and equipment Property and equipment was comprised of the following major components as of:
Depreciation expense was $0.3 million and $0.7 million for three months and six months ended January 31, 2022 and $0.3 million and $0.6 million for three months and six months ended January 31, 2021, respectively. See Note 4 (Inventories) for depreciation expense capitalized into inventory. Vineyard acquisitions In the second quarter of Fiscal 2022, the Company completed the purchase of three Napa County, California vineyards and related assets for a total of $14.5 million.
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Other intangible assets |
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Goodwill and Intangible Assets Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Other intangible assets | Other intangible assets Intangible assets were comprised of the following components:
The Company’s amortization expense for both the three months and six months ended January 31, 2022 and 2021 was $1.9 million and $3.8 million, respectively. For the next five years, the Company anticipates the annual amortization of the definite-lived intangible assets that have been recorded as of January 31, 2022 to be $7.7 million per year.
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Accrued expenses |
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Payables and Accruals [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Accrued expenses | Accrued expenses The Company’s accrued expenses balance consisted of the following amounts:
________________________________________________ (a) Trade spend refers to estimated amounts the Company owes to distributors for depletion-based incentives granted for meeting specific depletion targets. (b) The Company intends to use the cash surrender value life insurance policies in settling its deferred compensation plan liability. The cash surrender value of the life insurance policies was $1.9 million and $1.7 million at January 31, 2022 and July 31, 2021, respectively.
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Debt |
6 Months Ended |
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Jan. 31, 2022 | |
Debt Disclosure [Abstract] | |
Debt | Debt The Company is subject to the requirements of various financial covenants pursuant to the term loans and revolving line of credit, including a debt to net worth maximum and a fixed charge coverage ratio as defined in the Credit Facility. As of January 31, 2022, the Company was not in violation of any financial covenant. Included in interest expense in the Condensed Consolidated Statements of Operations, and in depreciation and amortization on the Condensed Consolidated Statements of Cash Flows, is amortization related to debt issuance costs of $0.4 million for both the three months ended January 31, 2022 and 2021 and $0.8 million for both the six months ended January 31, 2022 and 2021. Revolving line of credit At January 31, 2022, $290.0 million was available to draw under the revolving line of credit, excluding the incremental seasonal borrowing amount of an additional $30.0 million of capacity. The weighted-average interest rate was 1.8% on the amount outstanding at January 31, 2022. There were no amounts outstanding on the letter of credit sub-facility or the swingline sub-facility at January 31, 2022.
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Derivative instruments |
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Derivative Instruments and Hedging Activities Disclosure [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Derivative instruments | Derivative instruments The Company manages exposure to interest rates and foreign currency movements by entering into derivative contracts from time to time, as movements in such markets could impact the financial results and Condensed Consolidated Statements of Financial Position. The changes in estimated fair values of derivative instruments result from changes in interest rates and foreign currency exchange rates. Such changes serve to offset exposure in related business assets or liabilities. The Company is exposed to credit loss in the event of nonperformance by a counterparty. Certain of the Company's derivative instruments are subject to master netting agreements. In certain circumstances, this agreement allows the Company to net-settle amounts payable or receivable related to multiple derivative transactions with the same counterparty. The fair values of derivative instruments are presented on a gross basis, even when the derivative instruments are subject to master netting arrangements. Collateral is generally not required of the Company or of the counterparties to the master netting agreements, and no cash collateral was received or pledged under such agreements as of January 31, 2022 or July 31, 2021. The Company does not enter into derivative instruments for trading or speculative purposes. The Company's accounting policies do not apply hedge accounting treatment to derivative instruments. As of January 31, 2022, the Company held the following interest rate swap agreements, which fixed the interest rate on the applicable notional amount of outstanding variable rate debt:
As discussed in Note 11 (Commitments and contingencies), the Company manages annual barrel purchases by engaging domestic and foreign cooperages to provide specified barrel quantities on agreed delivery dates. Some of these invoices are paid in Euros. In order to reduce the foreign exchange risk associated with the Euro to U.S. Dollar conversion rate, the Company enters into foreign currency forward contracts aligning settlement dates with expected barrel delivery and the anticipated payments to various coopers. The total notional amounts of the Company’s derivative instruments outstanding are as follows:
Results of period derivative activity The estimated fair value and classification of derivative instruments on the accompanying Condensed Consolidated Statements of Financial Position are as follows:
The amounts and classification of the gains and losses in the Condensed Consolidated Statements of Operations related to derivative instruments not designated as hedging instruments are as follows:
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Fair value measurements |
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Fair Value Disclosures [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Fair value measurements | Fair value measurements The Company applies a fair value hierarchy pursuant to ASC 820, Fair Value Measurement, which consists of three levels of inputs that may be used to measure fair value: Level 1 Inputs to fair value are quoted prices in active markets for identical assets or liabilities; Level 2 Inputs to fair value are based on observable data other than Level 1 prices, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data such as interest rates or yield curves for substantially the full term of the instrument; Level 3 Inputs to fair value are based on unobservable data for the instrument and are supported by little or no market activity. Following is a description of the valuation methodologies used for instruments measured at fair value in the Condensed Consolidated Financial Statements, as well as the general classification of such instruments under the valuation hierarchy. Interest rate swap contracts: The fair value of the Company’s interest rate swap agreement is estimated with the assistance of a third party, using inputs that can be corroborated by observable market data (Level 2 of the fair value hierarchy). Foreign currency forward contracts: The fair value of the Company’s outstanding foreign currency forward contracts is estimated with the assistance of a third party, using inputs that can be corroborated by observable market data (Level 2 of the fair value hierarchy). Deferred compensation plan: Contributions to the Company’s deferred compensation plan are managed by a third-party administrative agent. The fair value of the total contributed plan assets and liabilities are based on inputs that can be corroborated by observable market data (Level 2 of the fair value hierarchy). The Company’s other financial instruments consist mainly of cash, accounts receivable, accounts payable, accrued expenses, and debt. The carrying value of all other financial instruments, except debt, approximates fair value due to the short-term nature of these assets and liabilities. The carrying value of the Company's debt approximates fair value as the interest rates are variable and reflective of market rates. Debt is categorized as a Level 2 liability within the fair value hierarchy. The Company’s assets and liabilities measured and recorded at fair value on a recurring basis at January 31, 2022, were as follows:
The Company’s assets and liabilities measured and recorded at fair value on a recurring basis at July 31, 2021, were as follows:
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Commitments and contingencies |
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Jan. 31, 2022 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Commitments and Contingencies Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Commitments and contingencies | Commitments and contingencies Operating leases The Company leases approximately 150 acres of vineyard property in California under various third-party operating lease agreements, with terms ranging from to 30 years, expiring in future years through December 2046. The Company also leases office space, office equipment and visitor centers under third-party operating leases. Some lease agreements contain purchase options and many include renewal options at specified dates throughout the lease terms. Rental expense was $1.0 million and $2.0 million for three months and six months ended January 31, 2022, respectively, and $0.9 million and $2.0 million for the three months and six months ended January 31, 2021, respectively, the majority of which is capitalized into inventory. At January 31, 2022, the future minimum payments under the non-cancelable operating lease agreements by fiscal year are as follows:
The Company is also party to non-cancelable sublease agreements. Sublease income was immaterial for the three and six months ended January 31, 2022 and is accounted for as other income in the Consolidated Statements of Operations. The terms of the agreements range between and five years and the total future minimum payments for these subleases is immaterial. Long-term purchase contracts The Company has entered into long-term grape purchase contracts with various growers to supply a significant portion of its future grape requirements. The lengths of the contracts typically vary from to eight years, and prices per ton are either determined at the outset for the contract duration or are negotiated annually. The Company's grape purchase contracts generally include acceptance provisions based on qualitative and quantitative grape quality characteristics. For the 2021 harvest, the Company contracted for approximately 34,000 tons of grapes at a cost of $68.1 million in Fiscal 2022. For the 2020 harvest, the Company purchased approximately 12,000 tons of grapes at a total cost of $26.5 million in Fiscal 2021. The increase was largely attributable to lower quantities available for the 2020 harvest at the Company's contractually defined quality levels due to wildfires compounded with higher demand and production levels in current and future periods. Purchase commitments The Company enters into various contracts with third-parties for custom crush, storage and mobile bottling services. The costs related to these contracts are recorded in the period the service is provided. The contracts for custom crush services typically have minimums that the Company is required to pay if certain grape volume thresholds are not delivered. The Company does not record these minimums related to service contracts as contingent liabilities on the Condensed Consolidated Statements of Financial Position given the harvest yield size, resulting volumes and qualities of grape deliveries are not known or estimable until harvest, when all related contingencies would be resolved. Contingent liabilities The Company evaluates pending or threatened litigation, operational events which could result in regulatory or civil penalties, environmental risks, and other sources of potential contingent liabilities during the year. In accordance with applicable accounting guidance, the Company establishes an accrued liability when those matters present loss contingencies, which are both probable and reasonably estimable. As of January 31, 2022, there were no material contingent obligations requiring accrual or disclosure. In the ordinary course of business, the Company enters into agreements containing standard indemnification provisions. The aggregate maximum potential future liability of the Company under such indemnification provisions is uncertain, as these involve potential future claims against the Company that have not occurred. The Company believes the probability of incurring future obligations under these indemnification provisions is sufficiently remote. As of January 31, 2022 and July 31, 2021, no amounts have been accrued related to such indemnification provisions.
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Equity-based compensation |
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Share-based Payment Arrangement [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Equity-based compensation | Equity-based compensation 2016 Equity Plan The Company recognized equity compensation expense related to the 2016 Plan in selling, general and administrative expenses due to units vesting over their requisite service periods in the aggregate amounts of $0.1 million and $0.2 million for the three months and six months ended January 31, 2022, respectively, and $0.3 million and $0.6 million for the three months and six months ended January 31, 2021, respectively. The total unrecognized compensation expense related to the 2016 Plan was $0.2 million as of January 31, 2022, which is expected to be recognized over a weighted-average period of 0.5 years. Restricted shares
The total fair value of restricted shares that vested during the six months ended January 31, 2022 was $1.9 million. 2021 Equity incentive plan The Company recognized in selling, general and administrative expenses equity compensation expense related to the 2021 Plan totaling $1.1 million and $2.2 million for the three months and six months ended January 31, 2022, respectively, due to units vesting over their requisite service period. In addition, the Company capitalized into inventory $0.2 million and $0.4 million for the three months and six months ended January 31, 2022, respectively. Stock options Stock option activity and activity regarding shares available for grant under the 2021 Plan is shown below:
The total unrecognized compensation expense related to the 2021 Plan stock options was $5.6 million as of January 31, 2022, which is expected to be recognized over a weighted-average period of 3.1 years. No options were vested and exercisable as of January 31, 2022. Restricted stock units RSU grant activity under the 2021 Plan is shown below:
The total fair value of restricted stock that vested during the six months ended January 31, 2022 was $0.3 million. The total unrecognized compensation expense related to the 2021 Plan RSUs was $7.4 million as of January 31, 2022, which is expected to be recognized over a weighted-average period of 2.9 years. Employee Stock Purchase Plan In connection with the IPO, the Company adopted the 2021 Employee Stock Purchase Plan, which allows for the issuance of up to a total of 1,250,509 shares of the Company's common stock. The ESPP, pursuant to Internal Revenue Code Section 423, allows eligible participants to purchase shares using payroll deductions of up to 15% of their total compensation, subject to a $25,000 calendar year limitation on contributions. The purchase price of each share will be 85% of the lesser of the fair market value of the stock as determined on the applicable grant date or the applicable purchase date for each offering period. Each offering period is six months in duration. The first offering period for the Employee Stock Purchase Plan began on January 3, 2022. Thereafter, offering periods will begin on the first business day of January and July. No purchases have been made under the ESPP as of January 31, 2022. The fair value of ESPP shares is estimated at the date of grant using the Black-Scholes option-pricing valuation model. The following assumptions were applied in the model to estimate the grant-date fair value of the ESPP for the initial offering period that began on January 3, 2022.
________________________________________________ (a) Based on the contractual terms of the 2021 ESPP Agreement and equal to each option period. (b) The Company has not historically paid and does not expect to pay dividends in the foreseeable future. (c) The risk-free rate was estimated from the U.S. Constant Maturity Treasury Yield Curve for a period consistent with the expected term in effect at the grant date. (d) The expected volatility was estimated based on analysis of the Company's historical and implied volatility, and considering a group of guideline public companies deemed to be comparable public peers within the Company’s industry. The equity-based compensation expense related to the ESPP is generally recognized evenly over the service period unless otherwise stipulated by the award agreement. The service period is the period over which the employee performs the related services, which is normally the same as the six month ESPP offering period. As of January 31, 2022, total estimated unrecognized compensation expense related to the ESPP was $0.1 million. That cost is expected to be recognized over the remaining term of the offering period of 0.4 years.
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Casualty loss |
6 Months Ended |
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Jan. 31, 2022 | |
Unusual or Infrequent Items, or Both [Abstract] | |
Casualty loss | Casualty loss Wildfires Several wildfires occurred in northern California in the first quarter of Fiscal 2021. Other than smoke exposure to unharvested grapes, the Company's owned and leased vineyards did not sustain damage during the fires. Fire and smoke exposure related expenses are reported on the casualty loss line in the Condensed Consolidated Statement of Operations and were immaterial in the current fiscal year. Smoke and fire damage to vineyards in the primary markets where the Company sources fruit rendered some of the available grapes unacceptable for the Company’s production needs. Based on an internal analysis of the impacts of these wildfires, Management believes the potential impact to the Company's operational results to be immaterial and intend to continue to monitor the ongoing effects to the business for any material changes to that conclusion. Flood In Fiscal 2021, as discussed in the 2021 Form 10-K, the Company received proceeds from an insurance claim related to losses incurred in February 2019 due to a flood at a winery. Any incremental charges in the fiscal year ended July 31, 2021, offset by insurance proceeds received, which were reported on the casualty gain, net line item in the Consolidated Statements of Operations and did not recur in Fiscal 2022.
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Earnings per share |
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Earnings Per Share [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Earnings per share | Earnings per share Basic earnings per share is calculated by dividing the net income by the weighted average number of shares of common stock outstanding during the period. Diluted earnings per share reflects the dilution that would occur if any potentially dilutive instruments were exercised or converted into shares of common stock. The following is a reconciliation of the Company's basic and diluted income per share calculation:
________________________________________________ (a) Calculated using the treasury stock method. There were no outstanding common stock awards deemed anti-dilutive for the three months and six months ended January 31, 2022 and 2021
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Subsequent events |
6 Months Ended |
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Jan. 31, 2022 | |
Subsequent Events [Abstract] | |
Subsequent events | Subsequent events In February 2022, the Company entered into a preliminary purchase and sale agreement to buy a San Luis Obispo County, California vineyard and related assets for a total of $18.2 million. This acquisition is expected to close during the third quarter of Fiscal 2022, subject to customary closing conditions. Accordingly, until closing of the purchase, there can be no assurance that the Company will acquire the vineyard property. The Company has not yet completed its evaluation and determination of final consideration to be paid, certain assets and liabilities acquired or treatment of these transactions as either a business combination or asset acquisition in accordance with Topic 805. |
Basis of presentation and recent accounting pronouncements (Policies) |
6 Months Ended |
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Jan. 31, 2022 | |
Accounting Policies [Abstract] | |
Basis of presentation | Basis of presentation The Company’s Condensed Consolidated Financial Statements are prepared in accordance with U.S. GAAP and Article 10 of the Securities and Exchange Commission’s Regulation S-X. As permitted under those rules, certain footnotes or other financial information that are normally required by U.S. GAAP may be condensed or omitted. These Condensed Consolidated Financial Statements have been prepared on the same basis as the Company's audited annual financial statements and, in the opinion of Management, reflect all adjustments, consisting only of normal recurring adjustments, which are necessary for the fair statement of the Company's financial information for the interim periods presented. These interim results are not necessarily indicative of the results to be expected for the year ending July 31, 2022, for any other interim period or for any future year. The Condensed Consolidated Financial Statements are unaudited and should be read in conjunction with the audited consolidated financial statements and related notes thereto for the year ended July 31, 2021.
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Principles of consolidation | Principles of consolidation The Condensed Consolidated Financial Statements include the accounts of The Duckhorn Portfolio, Inc. and its subsidiaries, including a consolidated VIE of which the Company has determined it is the primary beneficiary. All intercompany balances and transactions are eliminated in consolidation.
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Accounting estimates | Accounting estimates The preparation of Condensed Consolidated Financial Statements requires Management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the Condensed Consolidated Financial Statements and the reported amounts of revenues and expenses during the reporting period. Such estimates include, but are not limited to, the following: useful lives and recoverability of long-lived assets, inventory obsolescence and reserves, capitalized indirect inventory costs, allowance for doubtful accounts receivable, calculation of accrued liabilities, customer incentive reserves, uncertain tax positions, contingent liabilities, fair value of assets and liabilities acquired in connection with business combinations, equity-based compensation and deferred revenues. Actual results could differ from those estimates.
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Preferred stock | Preferred stockThe Company has 100,000,000 shares of $0.01 par value preferred stock authorized, none of which are issued and outstanding. |
Variable interest entities | Variable interest entitiesThe Company evaluates its ownership, contractual relationships and other interests in entities to determine the nature and extent of the interests, whether such interests are variable interests and whether the entities are VIEs in accordance with ASC 810, Consolidations. These evaluations can be complex and involve Management judgment as well as the use of estimates and assumptions based on available historical information, among other factors. Based on these evaluations, if the Company determines that it is the primary beneficiary of a VIE, the entity is consolidated into the financial statements. |
Recent accounting pronouncements | Recent accounting pronouncements As an “emerging growth company” as established by the JOBS Act, the Company is permitted to delay adoption of new or revised accounting pronouncements applicable to public companies until such pronouncements are made applicable to private companies. The Company has elected to use the adoption dates available to private companies. As a result, the Company’s financial statements may not be comparable to the financial statements of issuers who are required to comply with the effective date for new or revised accounting standards that are applicable to public companies. Based on the Company's aggregate worldwide market value of voting and non-voting common equity held by non-affiliates as of January 31, 2022, the Company will become a “large accelerated filer” and lose emerging growth company status beginning with its Annual Report on Form 10-K for the year ending July 31, 2022. Recently issued accounting pronouncements not yet adopted: In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842), and several amendments, codified as ASC 842, which supersedes prior guidance on accounting for leases under FASB ASC 840, Leases. ASU No. 2016-02, among other provisions, (i) requires lessees to classify leases as either finance or operating leases, (ii) generally requires all leases to be recorded on the Condensed Consolidated Statements of Financial Position through the recognition of right-of-use assets and corresponding lease liabilities and (iii) expands mandatory qualitative and quantitative disclosures regarding leasing activities. The FASB issued ASU No. 2020-05, “Revenue from Contracts with Customers (Topic 606) and Leases (Topic 842) Effective dates for certain entities”, which extends the effective date for all other entities, for annual reporting periods beginning after December 15, 2021, and for interim periods within fiscal years beginning after December 15, 2022. The amended standard is effective for the Company beginning with the year ended July 31, 2022. Early adoption is permitted. The Company’s assessment of the new lease accounting standard’s impact on the Condensed Consolidated Financial Statements is ongoing. The Company is evaluating the optional practical expedients and assessing the Company's existing lease portfolio in order to determine the impact to the financial statements, accounting systems, processes, and internal control over financial reporting. While the Company has not yet quantified the impact, adjustments resulting from the adoption of this standard will materially increase total assets and total liabilities with the recognition of right of use assets and lease liabilities related to the Company's operating leases. In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments–Credit Losses (Topic 326), Measurement of Credit Losses on Financial Instruments, and also issued subsequent amendments to the initial guidance, collectively, ASC 326, to replace the incurred loss impairment methodology in current U.S. GAAP with a methodology that requires the reflection of expected credit losses and will also require consideration of a broader range of reasonable and supportable information to determine credit loss estimates. For many entities with financial instruments, the standard will require the use of a forward-looking expected loss model rather than the incurred loss model for recognizing credit losses, which may result in the earlier recognition of credit losses on financial instruments. This guidance will be effective for the Company beginning with the year ended July 31, 2022, with early adoption permitted. The Company is currently evaluating the impact this standard could have on the Condensed Consolidated Financial Statements. In March 2020, the FASB issued ASU No. 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting (“ASU 2020-04”), and further issued subsequent amendments to the initial guidance. In order to ease the potential burden in accounting for reference rate reform, ASU 2020-04 provides optional expedients and exceptions for applying GAAP to contracts, hedging relationships and other transactions that reference the LIBOR or another reference rate expected to be discontinued because of reference rate reform, if certain criteria are met. ASU 2020-04 applies only to contracts, hedging relationships and other transactions that reference LIBOR or another reference rate expected to be discontinued. The standard is effective immediately and may be applied prospectively through December 31, 2022. The Company is currently evaluating the impact of reference rate reform and the optional expedients provided by this standard on its contracts. In May 2021, the FASB issued ASU No. 2021-04, Earnings per Share (Topic 260), Debt - Modifications and Extinguishments (Subtopic 470-50), Compensation-Stock Compensation (Topic 718), and Derivatives and Hedging - Contracts in Entity's Own Entity (Subtopic 815-40), to clarify the accounting for modifications or exchanges of equity-classified warrants. This amendment applies to freestanding stock options, which the Company granted in Fiscal 2021. In accordance with the ASU, if there is a modification and the option is still determined to be classified as equity, the modification should be accounted for as an exchange of the original option for a new option. This guidance will be effective for the Company beginning with the year ended July 31, 2023, with early adoption permitted. The Company is currently evaluating the impact of this update and will monitor for modifications or exchanges of the issued freestanding stock options, but at this time does not anticipate the adoption of ASU 2021-04 to have a material impact on the Condensed Consolidated Financial Statements.
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Contract liabilities | Contract liabilitiesWhen the Company receives payment from a customer prior to transferring the product under the terms of a contract, the Company records deferred revenue, which represents a contract liability. The Company’s deferred revenue is primarily comprised of cash collected from DTC members for purchases ahead of the wine shipment date. The Company does not recognize revenue until control of the wine is transferred and the performance obligation is met. |
Inventories | The Company capitalizes into inventory depreciation related to property and equipment used in the production of inventory. |
Derivative instruments | The changes in estimated fair values of derivative instruments result from changes in interest rates and foreign currency exchange rates. Such changes serve to offset exposure in related business assets or liabilities. The Company is exposed to credit loss in the event of nonperformance by a counterparty. Certain of the Company's derivative instruments are subject to master netting agreements. In certain circumstances, this agreement allows the Company to net-settle amounts payable or receivable related to multiple derivative transactions with the same counterparty. The fair values of derivative instruments are presented on a gross basis, even when the derivative instruments are subject to master netting arrangements. Collateral is generally not required of the Company or of the counterparties to the master netting agreements, and no cash collateral was received or pledged under such agreements as of January 31, 2022 or July 31, 2021. The Company does not enter into derivative instruments for trading or speculative purposes. The Company's accounting policies do not apply hedge accounting treatment to derivative instruments. |
Fair value measurements | The Company applies a fair value hierarchy pursuant to ASC 820, Fair Value Measurement, which consists of three levels of inputs that may be used to measure fair value: Level 1 Inputs to fair value are quoted prices in active markets for identical assets or liabilities; Level 2 Inputs to fair value are based on observable data other than Level 1 prices, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data such as interest rates or yield curves for substantially the full term of the instrument; Level 3 Inputs to fair value are based on unobservable data for the instrument and are supported by little or no market activity.
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Revenue (Tables) |
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Revenue from Contract with Customer [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Disaggregation of revenue | The following table presents the percentages of consolidated net sales disaggregated by sales channels:
________________________________________________ (a) Includes $0.5 million and $2.2 million of sales related to bulk, grape and merchandise sales for the three months and six months ended January 31, 2022, respectively. Sales of a similar nature were immaterial for the three months and six months ended January 31, 2021. (b) Includes shipping and handling revenue of $0.4 million and $0.6 million for the three months ended January 31, 2022 and 2021, respectively and $0.9 million and $1.1 million for the six months ended January 31, 2022 and 2021, respectively.
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Inventories (Tables) |
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Inventory Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of inventory | Inventories were comprised of the following:
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Property and equipment (Tables) |
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Property, Plant and Equipment [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Property and equipment | Property and equipment was comprised of the following major components as of:
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Other intangible assets (Tables) |
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Goodwill and Intangible Assets Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of definite-lived intangible assets | Intangible assets were comprised of the following components:
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Schedule of indefinite-lived intangible assets | Intangible assets were comprised of the following components:
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Accrued expenses (Tables) |
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Payables and Accruals [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Summary of accrued expenses | The Company’s accrued expenses balance consisted of the following amounts:
________________________________________________ (a) Trade spend refers to estimated amounts the Company owes to distributors for depletion-based incentives granted for meeting specific depletion targets. (b) The Company intends to use the cash surrender value life insurance policies in settling its deferred compensation plan liability. The cash surrender value of the life insurance policies was $1.9 million and $1.7 million at January 31, 2022 and July 31, 2021, respectively.
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Derivative instruments (Tables) |
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Derivative Instruments and Hedging Activities Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of interest rate swap agreements | As of January 31, 2022, the Company held the following interest rate swap agreements, which fixed the interest rate on the applicable notional amount of outstanding variable rate debt:
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Schedule of notional amounts of derivative instruments outstanding | The total notional amounts of the Company’s derivative instruments outstanding are as follows:
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Schedule of estimated fair value and classification of derivative instruments | The estimated fair value and classification of derivative instruments on the accompanying Condensed Consolidated Statements of Financial Position are as follows:
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Schedule of gains (losses) of derivative instruments not designated as hedging instruments | The amounts and classification of the gains and losses in the Condensed Consolidated Statements of Operations related to derivative instruments not designated as hedging instruments are as follows:
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Fair value measurements (Tables) |
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Jan. 31, 2022 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Fair Value Disclosures [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of assets and liabilities measured and recorded at fair value on a recurring basis | The Company’s assets and liabilities measured and recorded at fair value on a recurring basis at January 31, 2022, were as follows:
The Company’s assets and liabilities measured and recorded at fair value on a recurring basis at July 31, 2021, were as follows:
|
Commitments and contingencies (Tables) |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jan. 31, 2022 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Commitments and Contingencies Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of future minimum payments under non-cancelable operating leases | At January 31, 2022, the future minimum payments under the non-cancelable operating lease agreements by fiscal year are as follows:
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Equity-based compensation (Tables) |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Share-based Payment Arrangement [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of restricted shares activity |
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of stock option activity | Stock option activity and activity regarding shares available for grant under the 2021 Plan is shown below:
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of restricted stock unit (RSU) | RSU grant activity under the 2021 Plan is shown below:
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Schedule of employee stock purchase plan (ESPP) valuation assumptions | The following assumptions were applied in the model to estimate the grant-date fair value of the ESPP for the initial offering period that began on January 3, 2022.
________________________________________________ (a) Based on the contractual terms of the 2021 ESPP Agreement and equal to each option period. (b) The Company has not historically paid and does not expect to pay dividends in the foreseeable future. (c) The risk-free rate was estimated from the U.S. Constant Maturity Treasury Yield Curve for a period consistent with the expected term in effect at the grant date. (d) The expected volatility was estimated based on analysis of the Company's historical and implied volatility, and considering a group of guideline public companies deemed to be comparable public peers within the Company’s industry.
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Earnings per share (Tables) |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jan. 31, 2022 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Earnings Per Share [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Reconciliation of basic and diluted income per share | The following is a reconciliation of the Company's basic and diluted income per share calculation:
________________________________________________ (a) Calculated using the treasury stock method.
|
Description of business (Details) - USD ($) $ / shares in Units, $ in Millions |
1 Months Ended | 3 Months Ended | 9 Months Ended | |
---|---|---|---|---|
Nov. 30, 2021 |
Oct. 31, 2021 |
Jul. 31, 2021 |
Jan. 31, 2022 |
|
Secondary Offering | ||||
Subsidiary, Sale of Stock [Line Items] | ||||
Sale of stock, number of shares issued in transaction | 12,000,000 | |||
Sale of stock, price per share (in dollars per share) | $ 20.50 | |||
Sale of stock, transaction costs | $ 0.4 | $ 1.0 | ||
Secondary Offering - Greenshoe | ||||
Subsidiary, Sale of Stock [Line Items] | ||||
Sale of stock, number of shares issued in transaction | 626,467 |
Basis of presentation and recent accounting pronouncements (Details) - USD ($) $ / shares in Units, $ in Millions |
Jan. 31, 2022 |
Jul. 31, 2021 |
---|---|---|
Accounting Policies [Line Items] | ||
Preferred stock, shares authorized (in shares) | 100,000,000 | |
Preferred stock, par or stated value per share (in dollars per share) | $ 0.01 | |
Preferred stock, shares outstanding (in shares) | 0 | |
Preferred stock, shares issued (in shares) | 0 | |
Variable interest entity, net assets | $ 2.4 | $ 2.2 |
Variable Interest Entity, Primary Beneficiary | ||
Accounting Policies [Line Items] | ||
Variable interest entity, ownership percentage | 76.20% | 76.20% |
Revenue - Disaggregation of Revenue (Details) $ in Thousands |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jan. 31, 2022
USD ($)
|
Jan. 31, 2021
USD ($)
|
Jan. 31, 2022
USD ($)
|
Jan. 31, 2021
USD ($)
|
|
Disaggregation of Revenue [Line Items] | ||||
Revenue from contract with customer, percent | 1.000 | 1.000 | 1.000 | 1.000 |
Revenue | $ 98,736 | $ 83,657 | $ 202,917 | $ 175,295 |
Wholesale - distributors | ||||
Disaggregation of Revenue [Line Items] | ||||
Revenue from contract with customer, percent | 0.672 | 0.602 | 0.679 | 0.669 |
Wholesale - California direct to retail | ||||
Disaggregation of Revenue [Line Items] | ||||
Revenue from contract with customer, percent | 0.198 | 0.196 | 0.181 | 0.169 |
DTC | ||||
Disaggregation of Revenue [Line Items] | ||||
Revenue from contract with customer, percent | 0.130 | 0.202 | 0.140 | 0.162 |
Bulk, Grape and Merchandise Sales | ||||
Disaggregation of Revenue [Line Items] | ||||
Revenue | $ 500 | $ 2,200 | ||
Shipping and Handling | ||||
Disaggregation of Revenue [Line Items] | ||||
Revenue | $ 400 | $ 600 | $ 900 | $ 1,100 |
Revenue - Narrative (Details) - USD ($) $ in Thousands |
6 Months Ended | |
---|---|---|
Jan. 31, 2022 |
Jul. 31, 2021 |
|
Revenue from Contract with Customer [Abstract] | ||
Deferred revenue | $ 143 | $ 3,102 |
Revenue recognized | $ 3,000 |
Inventories - Schedule of Inventories (Details) - USD ($) $ in Thousands |
Jan. 31, 2022 |
Jul. 31, 2021 |
---|---|---|
Inventory [Line Items] | ||
Inventories | $ 297,531 | $ 267,737 |
Bottled wine | ||
Inventory [Line Items] | ||
Finished goods | 94,520 | 120,876 |
Merchandise | ||
Inventory [Line Items] | ||
Finished goods | 458 | 547 |
Bulk wine | ||
Inventory [Line Items] | ||
Work in progress | 194,186 | 130,693 |
Packaging | ||
Inventory [Line Items] | ||
Work in progress | 3,747 | 3,541 |
Overhead | ||
Inventory [Line Items] | ||
Work in progress | 1,671 | 613 |
Deferred crop costs | ||
Inventory [Line Items] | ||
Raw materials | $ 2,949 | $ 11,467 |
Inventories - Narrative (Details) - USD ($) $ in Millions |
6 Months Ended | 12 Months Ended |
---|---|---|
Jan. 31, 2022 |
Jul. 31, 2021 |
|
Inventory Disclosure [Abstract] | ||
Inventory capitalized | $ 6.6 | $ 12.5 |
Property and equipment - Narrative (Details) $ in Millions |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jan. 31, 2022
USD ($)
vineyard
|
Jan. 31, 2021
USD ($)
|
Jan. 31, 2022
USD ($)
|
Jan. 31, 2021
USD ($)
|
|
Property, Plant and Equipment [Abstract] | ||||
Depreciation expense | $ 0.3 | $ 0.3 | $ 0.7 | $ 0.6 |
Number of vineyards purchased | vineyard | 3 | |||
Acquisition price | $ 14.5 |
Other intangible assets - Narrative (Details) - USD ($) $ in Millions |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jan. 31, 2022 |
Jan. 31, 2021 |
Jan. 31, 2022 |
Jan. 31, 2021 |
|
Goodwill and Intangible Assets Disclosure [Abstract] | ||||
Amortization of intangible assets | $ 1.9 | $ 1.9 | $ 3.8 | $ 3.8 |
Finite-lived intangible asset, expected amortization, year one | 7.7 | 7.7 | ||
Finite-lived intangible asset, expected amortization, year two | 7.7 | 7.7 | ||
Finite-lived intangible asset, expected amortization, year three | 7.7 | 7.7 | ||
Finite-lived intangible asset, expected amortization, year four | 7.7 | 7.7 | ||
Finite-lived intangible asset, expected amortization, year five | $ 7.7 | $ 7.7 |
Accrued expenses (Details) - USD ($) $ in Thousands |
Jan. 31, 2022 |
Jul. 31, 2021 |
---|---|---|
Payables and Accruals [Abstract] | ||
Trade spend | $ 16,207 | $ 10,734 |
Bulk wine and other received not invoiced | 607 | 1,526 |
Barrel purchases | 0 | 936 |
Deferred compensation liability | 2,144 | 2,096 |
Income tax payable | 2,313 | 0 |
Accrued invoices and other accrued expenses | 5,805 | 6,265 |
Accrued expenses | 27,076 | 21,557 |
Cash surrender value of life insurance | $ 1,900 | $ 1,700 |
Debt (Details) - USD ($) |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jan. 31, 2022 |
Jan. 31, 2021 |
Jan. 31, 2022 |
Jan. 31, 2021 |
|
Debt Instrument [Line Items] | ||||
Amortization of debt issuance costs | $ 400,000 | $ 400,000 | $ 804,000 | $ 823,000 |
Revolving Line of Credit | ||||
Debt Instrument [Line Items] | ||||
Current borrowing capacity | 290,000,000 | 290,000,000 | ||
Additional borrowing capacity | $ 30,000,000 | $ 30,000,000 | ||
Weighted average interest rate (percent) | 1.80% | 1.80% | ||
Letter of Credit Sub-Facility | ||||
Debt Instrument [Line Items] | ||||
Long term line of credit | $ 0 | $ 0 | ||
Swingline Sub-Facility | ||||
Debt Instrument [Line Items] | ||||
Long term line of credit | $ 0 | $ 0 |
Derivative instruments - Narrative (Details) - USD ($) |
Jan. 31, 2022 |
Jul. 31, 2021 |
---|---|---|
Derivative Instruments and Hedging Activities Disclosure [Abstract] | ||
Cash collateral received | $ 0 | $ 0 |
Cash collateral pledged | $ 0 | $ 0 |
Derivative instruments - Interest Rate Swaps (Details) - Interest Rate Swap Two $ in Thousands |
Jan. 31, 2022
USD ($)
|
---|---|
Derivative [Line Items] | |
Notional amount | $ 100,000 |
Interest rate (percent) | 0.487% |
Derivative instruments - Total Notional Amount (Details) - Not Designated as Hedging Instrument - USD ($) $ in Thousands |
Jan. 31, 2022 |
Jul. 31, 2021 |
---|---|---|
Derivative [Line Items] | ||
Notional amount | $ 100,000 | $ 102,369 |
Interest rate swap contracts | ||
Derivative [Line Items] | ||
Notional amount | 100,000 | 100,000 |
Foreign currency forward contracts | ||
Derivative [Line Items] | ||
Notional amount | $ 0 | $ 2,369 |
Derivative instruments - Estimated Fair Value and Classification of Derivative Instruments on the Condensed Consolidated Statements of Financial Position (Details) - Not Designated as Hedging Instrument - USD ($) $ in Thousands |
Jan. 31, 2022 |
Jul. 31, 2021 |
---|---|---|
Other long-term assets | Interest rate swap contracts | ||
Derivatives, Fair Value [Line Items] | ||
Derivative asset | $ 482 | $ 0 |
Other long-term liabilities | Interest rate swap contracts | ||
Derivatives, Fair Value [Line Items] | ||
Derivative liability | 0 | (480) |
Other current assets | Foreign currency forward contracts | ||
Derivatives, Fair Value [Line Items] | ||
Derivative asset | $ 0 | $ 5 |
Derivative instruments - Amounts and Classification of the Gains and Losses in the Condensed Consolidated Statements of Operations (Details) - USD ($) $ in Thousands |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jan. 31, 2022 |
Jan. 31, 2021 |
Jan. 31, 2022 |
Jan. 31, 2021 |
|
Derivative [Line Items] | ||||
Change in fair value of derivatives | $ (957) | $ (2,827) | ||
Not Designated as Hedging Instrument | ||||
Derivative [Line Items] | ||||
Change in fair value of derivatives | $ (515) | $ (1,279) | (957) | (2,827) |
Interest rate swap contracts | Not Designated as Hedging Instrument | Other income, net | ||||
Derivative [Line Items] | ||||
Change in fair value of derivatives | (515) | (1,279) | (962) | (2,945) |
Foreign currency forward contracts | Not Designated as Hedging Instrument | Other income, net | ||||
Derivative [Line Items] | ||||
Change in fair value of derivatives | $ 0 | $ 0 | $ 5 | $ 118 |
Commitments and contingencies - Future Minimum Payments for Operating Leases (Details) $ in Thousands |
Jan. 31, 2022
USD ($)
|
---|---|
Commitments and Contingencies Disclosure [Abstract] | |
Remaining portion of 2022 | $ 2,068 |
2023 | 4,122 |
2024 | 4,106 |
2025 | 4,070 |
2026 | 2,686 |
Thereafter (collectively) | 10,836 |
Total | $ 27,888 |
Equity-based compensation - Stock Option Activity (Details) - 2021 Equity Incentive Plan - USD ($) $ / shares in Units, $ in Thousands |
6 Months Ended | 12 Months Ended |
---|---|---|
Jan. 31, 2022 |
Jul. 31, 2021 |
|
Number of options | ||
Outstanding, beginning (shares) | 1,552,648 | |
Granted (shares) | 0 | |
Vested (shares) | 0 | |
Forfeited (shares) | (2,799) | |
Outstanding, ending (shares) | 1,549,849 | 1,552,648 |
Weighted-average exercise price | ||
Outstanding, beginning (in dollars per share) | $ 17.11 | |
Granted (in dollars per share) | 0 | |
Vested (in dollars per share) | 0 | |
Forfeited (in dollars per share) | 17.00 | |
Outstanding, ending (in dollars per share) | $ 17.11 | $ 17.11 |
Share-based Compensation Arrangement by Share-based Payment Award, Options, Additional Disclosures [Abstract] | ||
Weighted-average remaining contractual life (in years) | 9 years 1 month 6 days | |
Aggregate intrinsic value | $ 5,888 |
Equity-based compensation - Valuation Assumptions (Details) - Employee Stock - 2021 Employee Stock Purchase Plan |
6 Months Ended |
---|---|
Jan. 31, 2022
$ / shares
| |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |
Expected term (in years) | 6 months |
Expected dividend yield | 0.00% |
Risk-free interest rate (percent) | 0.22% |
Expected volatility (percent) | 47.00% |
Stock price (in dollars per share) | $ 23.33 |
Earnings per share - Reconciliation of Basic and Diluted Income Per Share (Details) - USD ($) $ / shares in Units, $ in Thousands |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jan. 31, 2022 |
Jan. 31, 2021 |
Jan. 31, 2022 |
Jan. 31, 2021 |
|
Earnings Per Share [Abstract] | ||||
Numerator - Net income attributable to The Duckhorn Portfolio, Inc. | $ 17,932 | $ 22,003 | $ 39,205 | $ 39,526 |
Denominator: | ||||
Weighted average number of shares of common stock outstanding - basic (shares) | 115,049,395 | 101,713,460 | 115,048,094 | 101,713,460 |
Dilutive stock options and restricted stock (shares) | 340,107 | 0 | 342,917 | 0 |
Weighted average number of shares of common stock outstanding - assuming dilution (shares) | 115,389,502 | 101,713,460 | 115,391,011 | 101,713,460 |
Earnings per share attributable to The Duckhorn Portfolio, Inc. | ||||
Basic (in dollars per share) | $ 0.16 | $ 0.22 | $ 0.34 | $ 0.39 |
Diluted (in dollars per share) | $ 0.16 | $ 0.22 | $ 0.34 | $ 0.39 |
Earnings per share - Narrative (Details) - shares |
3 Months Ended | 6 Months Ended |
---|---|---|
Jan. 31, 2022 |
Jan. 31, 2022 |
|
Earnings Per Share [Abstract] | ||
Antidilutive securities excluded from computation of earnings per share (shares) | 0 | 0 |
Subsequent Events (Details) $ in Millions |
1 Months Ended |
---|---|
Feb. 28, 2022
USD ($)
| |
Subsequent Event | San Luis Obispo County, California Vineyard And Related Assets | |
Subsequent Event [Line Items] | |
Expected acquisition price | $ 18.2 |
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