Cover
Cover - shares | 6 Months Ended | |
Jan. 31, 2023 | Mar. 01, 2023 | |
Cover [Abstract] | ||
Document Type | 10-Q | |
Document Quarterly Report | true | |
Document Period End Date | Jan. 31, 2023 | |
Document Transition Report | false | |
Entity File Number | 001-40240 | |
Entity Registrant Name | The Duckhorn Portfolio, Inc. | |
Entity Incorporation, State or Country Code | DE | |
Entity Tax Identification Number | 81-3866305 | |
Entity Address, Address Line One | 1201 Dowdell Lane | |
Entity Address, City or Town | Saint Helena | |
Entity Address, State or Province | CA | |
Entity Address, Postal Zip Code | 94574 | |
City Area Code | 707 | |
Local Phone Number | 302-2658 | |
Title of 12(b) Security | Common Stock, par value $0.01 per share | |
Trading Symbol | NAPA | |
Security Exchange Name | NYSE | |
Entity Current Reporting Status | Yes | |
Entity Interactive Data Current | Yes | |
Entity Filer Category | Large Accelerated Filer | |
Entity Small Business | false | |
Entity Emerging Growth Company | false | |
Entity Shell Company | false | |
Entity Common Stock, Shares Outstanding | 115,219,396 | |
Entity Central Index Key | 0001835256 | |
Document Fiscal Year Focus | 2023 | |
Document Fiscal Period Focus | Q2 | |
Amendment Flag | false | |
Current Fiscal Year End Date | --07-31 |
Condensed Consolidated Statemen
Condensed Consolidated Statements of Financial Position (unaudited) - USD ($) $ in Thousands | Jan. 31, 2023 | Jul. 31, 2022 |
Current assets | ||
Cash | $ 7,292 | $ 3,167 |
Accounts receivable trade, net | 48,324 | 37,026 |
Inventories | 327,024 | 285,430 |
Prepaid expenses and other current assets | 13,125 | 13,898 |
Total current assets | 395,765 | 339,521 |
Long-term assets | ||
Property and equipment, net | 271,217 | 269,659 |
Operating lease right-of-use assets | 21,777 | 23,375 |
Intangible assets, net | 188,006 | 191,786 |
Goodwill | 425,209 | 425,209 |
Other long-term assets | 5,487 | 1,963 |
Total long-term assets | 911,696 | 911,992 |
Total assets | 1,307,461 | 1,251,513 |
Current liabilities | ||
Accounts payable | 18,410 | 3,382 |
Accrued expenses | 29,071 | 29,475 |
Accrued compensation | 9,224 | 12,893 |
Deferred revenue | 3,285 | 272 |
Current operating lease liabilities | 3,603 | 3,498 |
Current maturities of long-term debt | 9,721 | 9,810 |
Other current liabilities | 3,056 | 672 |
Total current liabilities | 76,370 | 60,002 |
Long-term liabilities | ||
Revolving line of credit, net | 0 | 108,674 |
Long-term debt, net of current maturities and debt issuance costs | 215,633 | 105,074 |
Operating lease liabilities | 18,000 | 19,732 |
Derivative instrument | 1,537 | 0 |
Deferred income taxes | 90,483 | 90,483 |
Other long-term liabilities | 387 | 387 |
Total long-term liabilities | 326,040 | 324,350 |
Total liabilities | 402,410 | 384,352 |
Commitments and contingencies (Note 10) | ||
Equity | ||
Common stock, $0.01 par value; 500,000,000 shares authorized; 115,219,396 issued and outstanding at January 31, 2023 and 115,184,161 issued and outstanding at July 31, 2022 | 1,152 | 1,152 |
Additional paid-in capital | 734,763 | 731,597 |
Retained earnings | 168,556 | 133,824 |
Total The Duckhorn Portfolio, Inc. equity | 904,471 | 866,573 |
Non-controlling interest | 580 | 588 |
Total equity | 905,051 | 867,161 |
Total liabilities and equity | $ 1,307,461 | $ 1,251,513 |
Condensed Consolidated Statem_2
Condensed Consolidated Statements of Financial Position (unaudited) (Parenthetical) - $ / shares | Jan. 31, 2023 | Jul. 31, 2022 |
Statement of Financial Position [Abstract] | ||
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) | 115,219,396 | 115,184,161 |
Common stock, shares outstanding (in shares) | 115,219,396 | 115,184,161 |
Condensed Consolidated Statem_3
Condensed Consolidated Statements of Operations (unaudited) - USD ($) $ in Thousands | 3 Months Ended | 6 Months Ended | ||
Jan. 31, 2023 | Jan. 31, 2022 | Jan. 31, 2023 | Jan. 31, 2022 | |
Income Statement [Abstract] | ||||
Net sales (net of excise taxes of $1,469, $1,507, $3,052 and $2,983, respectively) | $ 103,488 | $ 98,736 | $ 211,659 | $ 202,917 |
Cost of sales | 48,302 | 49,259 | 101,763 | 101,030 |
Gross profit | 55,186 | 49,477 | 109,896 | 101,887 |
Selling, general and administrative expenses | 29,579 | 23,845 | 55,318 | 47,052 |
Income from operations | 25,607 | 25,632 | 54,578 | 54,835 |
Interest expense | 2,684 | 1,636 | 4,846 | 3,242 |
Other expense (income), net | 2,743 | (338) | 2,656 | (1,431) |
Total other expenses, net | 5,427 | 1,298 | 7,502 | 1,811 |
Income before income taxes | 20,180 | 24,334 | 47,076 | 53,024 |
Income tax expense | 5,265 | 6,407 | 12,352 | 13,784 |
Net income | 14,915 | 17,927 | 34,724 | 39,240 |
Less: Net loss (income) attributable to non-controlling interest | 2 | 5 | 8 | (35) |
Net income attributable to The Duckhorn Portfolio, Inc. | $ 14,917 | $ 17,932 | $ 34,732 | $ 39,205 |
Net income per share of common stock: | ||||
Basic (in dollars per share) | $ 0.13 | $ 0.16 | $ 0.30 | $ 0.34 |
Diluted (in dollars per share) | $ 0.13 | $ 0.16 | $ 0.30 | $ 0.34 |
Weighted average shares of common stock outstanding: | ||||
Basic (in shares) | 115,191,575 | 115,049,395 | 115,187,868 | 115,048,094 |
Diluted (in shares) | 115,327,660 | 115,389,502 | 115,424,809 | 115,391,011 |
Condensed Consolidated Statem_4
Condensed Consolidated Statements of Operations (unaudited) (Parenthetical) - USD ($) $ in Thousands | 3 Months Ended | 6 Months Ended | ||
Jan. 31, 2023 | Jan. 31, 2022 | Jan. 31, 2023 | Jan. 31, 2022 | |
Income Statement [Abstract] | ||||
Excise taxes | $ 1,469 | $ 1,507 | $ 3,052 | $ 2,983 |
Condensed Consolidated Statem_5
Condensed Consolidated Statements of Changes in Equity (unaudited) - USD ($) $ in Thousands | Total | Total The Duckhorn Portfolio, Inc. equity | Common stock | Additional paid-in capital | Retained earnings | Non-controlling interest |
Beginning balance (in shares) at Jul. 31, 2021 | 115,046,793 | |||||
Beginning balance at Jul. 31, 2021 | $ 802,238 | $ 801,687 | $ 1,150 | $ 726,903 | $ 73,634 | $ 551 |
Increase (Decrease) in Stockholders' Equity [Roll Forward] | ||||||
Net income (loss) | 39,240 | 39,205 | 39,205 | 35 | ||
Issuance of common stock under equity incentive plans (in shares) | 18,417 | |||||
Issuance of common stock under equity incentive plans | 1 | 1 | $ 1 | |||
Equity-based compensation (Note 11) | 2,875 | 2,875 | 2,875 | |||
Initial public offering, net of issuance costs | (270) | (270) | (270) | |||
Ending balance (in shares) at Jan. 31, 2022 | 115,065,210 | |||||
Ending balance at Jan. 31, 2022 | 844,084 | 843,498 | $ 1,151 | 729,508 | 112,839 | 586 |
Beginning balance (in shares) at Oct. 31, 2021 | 115,046,793 | |||||
Beginning balance at Oct. 31, 2021 | 825,010 | 824,419 | $ 1,150 | 728,362 | 94,907 | 591 |
Increase (Decrease) in Stockholders' Equity [Roll Forward] | ||||||
Net income (loss) | 17,927 | 17,932 | 17,932 | (5) | ||
Issuance of common stock under equity incentive plans (in shares) | 18,417 | |||||
Issuance of common stock under equity incentive plans | 1 | 1 | $ 1 | |||
Equity-based compensation (Note 11) | 1,416 | 1,416 | 1,416 | |||
Initial public offering, net of issuance costs | (270) | (270) | (270) | |||
Ending balance (in shares) at Jan. 31, 2022 | 115,065,210 | |||||
Ending balance at Jan. 31, 2022 | $ 844,084 | 843,498 | $ 1,151 | 729,508 | 112,839 | 586 |
Beginning balance (in shares) at Jul. 31, 2022 | 115,184,161 | 115,184,161 | ||||
Beginning balance at Jul. 31, 2022 | $ 867,161 | 866,573 | $ 1,152 | 731,597 | 133,824 | 588 |
Increase (Decrease) in Stockholders' Equity [Roll Forward] | ||||||
Net income (loss) | 34,724 | 34,732 | 34,732 | (8) | ||
Issuance of common stock under equity incentive plans (in shares) | 22,365 | |||||
Issuance of employee stock purchase plan (in shares) | 12,870 | |||||
Issuance of employee stock purchase plan | 181 | 181 | 181 | |||
Equity-based compensation (Note 11) | $ 2,985 | 2,985 | 2,985 | |||
Ending balance (in shares) at Jan. 31, 2023 | 115,219,396 | 115,219,396 | ||||
Ending balance at Jan. 31, 2023 | $ 905,051 | 904,471 | $ 1,152 | 734,763 | 168,556 | 580 |
Beginning balance (in shares) at Oct. 31, 2022 | 115,184,161 | |||||
Beginning balance at Oct. 31, 2022 | 888,150 | 887,568 | $ 1,152 | 732,777 | 153,639 | 582 |
Increase (Decrease) in Stockholders' Equity [Roll Forward] | ||||||
Net income (loss) | 14,915 | 14,917 | 14,917 | (2) | ||
Issuance of common stock under equity incentive plans (in shares) | 22,365 | |||||
Issuance of employee stock purchase plan (in shares) | 12,870 | |||||
Issuance of employee stock purchase plan | 181 | 181 | 181 | |||
Equity-based compensation (Note 11) | $ 1,805 | 1,805 | 1,805 | |||
Ending balance (in shares) at Jan. 31, 2023 | 115,219,396 | 115,219,396 | ||||
Ending balance at Jan. 31, 2023 | $ 905,051 | $ 904,471 | $ 1,152 | $ 734,763 | $ 168,556 | $ 580 |
Condensed Consolidated Statem_6
Condensed Consolidated Statements of Cash Flows (unaudited) - USD ($) $ in Thousands | 6 Months Ended | |
Jan. 31, 2023 | Jan. 31, 2022 | |
Cash flows from operating activities | ||
Net income | $ 34,724 | $ 39,240 |
Adjustments to reconcile net income to net cash from operating activities: | ||
Depreciation and amortization | 13,290 | 11,047 |
Loss (gain) on disposal of assets | 93 | (13) |
Change in fair value of derivatives | 2,061 | (957) |
Amortization of debt issuance costs | 593 | 804 |
Equity-based compensation | 2,985 | 2,875 |
Change in operating assets and liabilities: | ||
Accounts receivable trade, net | (11,298) | (9,755) |
Inventories | (39,881) | (28,187) |
Prepaid expenses and other current assets | 26 | (361) |
Other long-term assets | (555) | (217) |
Accounts payable | 15,020 | 6,377 |
Accrued expenses | 830 | 6,621 |
Accrued compensation | (3,669) | (4,129) |
Deferred revenue | 3,013 | (2,960) |
Other current and long-term liabilities | 865 | (1,557) |
Net cash provided by operating activities | 18,097 | 18,828 |
Cash flows from investing activities | ||
Purchases of property and equipment, net of sales proceeds | (12,388) | (23,336) |
Net cash used in investing activities | (12,388) | (23,336) |
Cash flows from financing activities | ||
Payments under line of credit | (119,000) | (52,000) |
Borrowings under line of credit | 9,000 | 63,000 |
Issuance of long-term debt | 225,833 | 0 |
Payments of long-term debt | (115,166) | (5,696) |
Proceeds from employee stock purchase plan | 181 | 0 |
Payments for debt issuance costs | (2,432) | 0 |
Payments of deferred offering costs | 0 | (270) |
Net cash (used in) provided by financing activities | (1,584) | 5,034 |
Net increase in cash | 4,125 | 526 |
Cash - Beginning of period | 3,167 | 4,244 |
Cash - End of period | 7,292 | 4,770 |
Supplemental cash-flow information | ||
Interest paid, net of amount capitalized | 1,649 | 2,479 |
Income taxes paid | 10,621 | 8,014 |
Non-cash investing activities | ||
Property and equipment additions in accounts payable and accrued expenses | $ 467 | $ 193 |
Description of business
Description of business | 6 Months Ended |
Jan. 31, 2023 | |
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, Decoy, Goldeneye, Paraduxx, Migration, 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; San Luis Obispo, 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 stockholders 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 $0.6 million during the six months ended January 31, 2022, which are reflected in selling, general and administrative expenses on the Condensed Consolidated Statement of Operations. |
Basis of presentation and recen
Basis of presentation and recent accounting pronouncements | 6 Months Ended |
Jan. 31, 2023 | |
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. 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, 2023, for any other interim period or for any future year. The Condensed Consolidated Statement of Financial Position as of July 31, 2022 was derived from the Company's audited financial statements for the fiscal year ended July 31, 2022, previously filed with the SEC. The Condensed Consolidated Financial Statements do not include all of the information and note disclosures required by U.S. GAAP and should be read in conjunction with the audited consolidated financial statements and related notes included in our Annual Report on Form 10-K for the fiscal year ended July 31, 2022. 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 credit losses, calculation of accrued liabilities, customer incentive reserves, uncertain tax positions, contingent liabilities, 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 Topic 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, 2023 and July 31, 2022, the Company's ownership percentage of the sole identified VIE was 76.2%. The total net assets of the VIE included on the Condensed Consolidated Statement of Financial Position were $2.3 million and $2.4 million at January 31, 2023 and July 31, 2022, 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. Recently adopted accounting pronouncements In March 2020, the Financial Accounting Standards Board 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. The Company adopted the standard effective August 1, 2022, the first day of Fiscal 2023. The adoption of the standard did not have a material impact on the Condensed Consolidated Financial Statements or the related disclosures. As previously disclosed in the Annual Report on Form 10-K for the year ended July 31, 2022, the Company adopted ASU No. 2016-02, Leases (Topic 842) using the modified retrospective transition method as of the first day of Fiscal 2022. The impact of the adoption of ASC 842 on previously reported interim financial statements during the year ended July 31, 2022, included the recognition of right-of-use ("ROU") assets and lease liabilities for operating leases. The adoption of ASC 842 also resulted in reclassifying certain lines within operating activities in the Condensed Consolidated Statement of Cash Flows due to changes in operating assets and liabilities for the related accounts. These changes to previously disclosed amounts conform to the current period presentation. No other new accounting pronouncements issued or effective as of January 31, 2023 have had, or are expected to have, a material impact on the Condensed Consolidated Financial Statements or the related disclosures. |
Revenue
Revenue | 6 Months Ended |
Jan. 31, 2023 | |
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: Three months ended January 31, Six months ended January 31, 2023 2022 2023 2022 Wholesale - Distributors 61.3 % 67.2 % 69.0 % 67.9 % Wholesale - California direct to trade (a) 19.1 19.8 17.4 18.1 DTC (b) 19.6 13.0 13.6 14.0 Net sales 100.0 % 100.0 % 100.0 % 100.0 % ________________________________________________ (a) Includes $0.6 million of sales related to bulk and grape sales for the six months ended January 31, 2023, and $0.5 million and $2.8 million for the three and six months ended January 31, 2022, respectively. (b) Includes shipping and handling revenue of $0.9 million and $1.0 million for the three and six months ended January 31, 2023, respectively, and $0.4 million and $0.9 million for the three and six months ended January 31, 2022, respectively. Charges related to credit loss on accounts receivable were immaterial for the three and six months ended January 31, 2023. Recoveries and reductions in the allowance for credit loss were immaterial for the three and six months ended January 31, 2023. As of January 31, 2023 and July 31, 2022, the allowance for credit losses was $0.4 million for both periods. Contract balances When the Company receives payment from a customer, prior to meeting the performance obligation 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 wines sold through our DTC channels, 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. Deferred revenue in the Condensed Consolidated Statements of Financial Position was $3.3 million and $0.3 million at January 31, 2023 and July 31, 2022, respectively. In the three and six months ended January 31, 2023, the Company recognized revenue of $12.1 million and $0.3 million, respectively, which was included in the opening contract liability balance for the corresponding period. |
Inventories
Inventories | 6 Months Ended |
Jan. 31, 2023 | |
Inventory Disclosure [Abstract] | |
Inventories | Inventories Inventories were comprised of the following: (in thousands) January 31, July 31, Finished goods $ 91,142 $ 108,989 Work in progress 232,227 162,337 Raw materials 3,655 14,104 Inventories $ 327,024 $ 285,430 Inventories are stated at the lower of cost or net realizable value, and are primarily measured on a first-in-first-out basis. The Company records valuation adjustments to the carrying value of its inventories based on periodic reviews of slow-moving, obsolete and excess inventory to determine the need for reserves by comparing inventory carrying values with their net realizable values upon ultimate sale or disposal. The Company's estimates of net realizable value are based on historical experience as well as Management's judgments with respect to future market conditions. In the period the Company determines a reserve is required, the Company recognizes a charge to cost of sales for the excess of the carrying value over net realizable value. The inventory reserve was $0.4 million and $5.1 million at January 31, 2023 and July 31, 2022, respectively. The Company capitalizes into inventory depreciation related to property and equipment used in the production of inventory. For the three months ended January 31, 2023 and 2022, the amount capitalized was $5.2 million and $4.0 million, respectively, and $8.6 million and $6.6 million for the six months ended January 31, 2023 and 2022, respectively. The Company also capitalizes total lease costs related to leases used in the production of inventory. For the three months ended January 31, 2023 and 2022, the amount capitalized was $1.1 million and $1.1 million, respectively. For the six months ended January 31, 2023 and 2022, the amount capitalized was $2.2 million and $2.1 million, respectively. |
Property and equipment, net
Property and equipment, net | 6 Months Ended |
Jan. 31, 2023 | |
Property, Plant and Equipment [Abstract] | |
Property and equipment, net | Property and equipment, net Property and equipment, net was comprised of the following: (in thousands) January 31, July 31, Land $ 136,328 $ 136,328 Buildings and improvements 70,847 70,813 Machinery and equipment 53,160 52,619 Vineyards and improvements 44,866 44,759 Barrels 37,185 30,067 Total depreciable property and equipment 342,386 334,586 Less: accumulated depreciation and amortization (77,898) (70,591) Total depreciable property and equipment, net 264,488 263,995 Construction in progress 6,729 5,664 Property and equipment, net $ 271,217 $ 269,659 Depreciation expense recognized in selling, general and administrative expenses was $0.5 million and $0.3 million for the three months ended January 31, 2023 and 2022, respectively, and $0.9 million and $0.7 million for the six months ended January 31, 2023 and 2022, 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. |
Accrued expenses
Accrued expenses | 6 Months Ended |
Jan. 31, 2023 | |
Payables and Accruals [Abstract] | |
Accrued expenses | Accrued expenses Accrued expenses were comprised of the following: (in thousands) January 31, July 31, Trade spend (a) $ 17,477 $ 15,319 Accrued professional fees 3,903 3,191 Deferred compensation liability (b) 2,879 2,142 Income taxes payable 1,730 387 Bulk wine and other received not invoiced 882 143 Barrel purchases — 988 Accrued invoices and other accrued expenses 2,200 7,305 Accrued expenses $ 29,071 $ 29,475 _______________________________________________ (a) Trade spend refers to estimated amounts the Company owes to distributors for depletion-based incentives for meeting specific depletion targets. (b) The Company intends to use the cash surrender value life insurance policies to partially settle its deferred compensation plan liability. The cash surrender value of the life insurance policies was $2.3 million and $1.8 million at January 31, 2023 and July 31, 2022, respectively, and is included in other long-term assets on the Condensed Consolidated Statements of Financial Position. |
Debt
Debt | 6 Months Ended |
Jan. 31, 2023 | |
Debt Disclosure [Abstract] | |
Debt | Debt At January 31, 2023, the Company had unused capacity of $425.0 million under the new revolving line of credit, excluding the incremental seasonal borrowing amount of an additional $30.0 million of capacity. There were no amounts outstanding on the letter of credit sub-facility or the swingline sub-facility at January 31, 2023. Included in interest expense in the Condensed Consolidated Statements of Operations is amortization related to debt issuance costs of $0.2 million and $0.4 million for the three months ended January 31, 2023 and 2022, respectively, and of $0.6 million and $0.8 million for the six months ended January 31, 2023 and 2022, respectively. 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 capitalization ratio and a fixed charge coverage ratio as defined in the New Credit Facility. As of January 31, 2023, the Company is in compliance with all covenants. Amendment to the Original Credit Agreement Effective August 30, 2022, Mallard Buyer Corp., Selway Wine Company and certain other subsidiaries of The Duckhorn Portfolio, Inc. (collectively, the “Borrowers”) entered into an eighth amendment to the Original Credit Agreement, to extend the maturity date of all facilities to November 1, 2023 and to transition from a LIBOR based interest rate to a Term SOFR based interest rate plus applicable margins defined by the terms of the Original Credit Facility. The transaction did not result in any additional cash proceeds. New Credit Agreement Effective November 4, 2022, the Borrowers entered into the New Credit Agreement which amends and restates, in its entirety, the Original Credit Agreement. The New Credit Agreement provides for $675.8 million in first lien senior secured credit facilities consisting of (i) a $425.0 million revolving credit facility, (ii) a $225.8 million term loan facility and (iii) a $25.0 million delayed draw term loan facility. The maturity date for loans borrowed under the New Credit Agreement is November 4, 2027. The term loan facility in the New Credit Agreement replaces the $135.0 million term loan tranche one facility, $25.0 million term loan tranche two facility and $25.0 million capital expenditure facility under the Original Credit Agreement. The New Credit Agreement allows the Borrowers, at any time, to request additional term loans, revolver commitments and delayed draw term loan commitments in an aggregate amount of up to $400.0 million (the “Incremental Facility”). The lenders are not under any obligation to provide the Incremental Facility, and the Incremental Facility is subject to certain customary conditions precedent and other limitations. Borrowings under the revolver portion of the New Credit Agreement generally bear interest based on the sum of Term SOFR plus a loan margin based on average availability as follows: (a) less than or equal to 33% of average availability, a loan margin of 1.50%, (b) greater than 33% and less than or equal to 66% of average availability, a loan margin of 1.25%, and (c) greater than 66% of average availability, a loan margin of 1.00%. Borrowings under the term loan and delayed draw portions of the New Credit Agreement generally bear interest based on the sum of (i) Term SOFR plus (ii) a credit spread adjustment of 10 basis points for 1-month and 3-month interest periods and 15 basis points for a six-month interest period plus (iii) a loan margin of 1.625%. The New Credit Agreement also includes an unused line fee and contains customary representations and warranties and affirmative and negative covenants for agreements of this type. In addition, the New Credit Agreement requires compliance with the following financial covenants, in each case commencing from fiscal quarter ending January 31, 2023: (i) a debt to capitalization ratio not to exceed 0.55:1.00, measured at the end of each fiscal quarter and (ii) a fixed charge coverage ratio not to be less than 1.15:1.00, measured at the end of each fiscal quarter. The Company incurred approximately $3.3 million in debt issuance costs, including bank financing fees and third party legal and other professional fees in closing the New Credit Agreement, of which approximately $2.4 million were capitalized in accordance with ASC Topic 470, Debt . The fees associated with the revolving and delayed draw term facilities were capitalized to other long-term assets and the fees associated with the term loan facility were capitalized to long-term debt, net of current maturities and debt issuance costs on the Condensed Consolidated Statement of Position. The capitalized debt issuance costs will be amortized as interest expense over the term of the New Credit Agreement. Other related charges incurred of $0.9 million that were not capitalized during the period are reflected in other (income) expense in the Condensed Consolidated Statement of Operations. Long-term debt, net was comprised of the following: (in thousands) January 31, 2023 July 31, 2022 Revolving line of credit $ — $ 110,000 Term loan, first lien 225,832 110,117 Capital expenditure loan (a) — 5,049 Total debt 225,832 225,166 Less: Current maturities of long-term debt (9,721) (9,810) Total long-term debt 216,111 215,356 Debt issuance costs (b) (478) (1,608) Total long-term debt, net of current maturities and debt issuance costs $ 215,633 $ 213,748 _______________________________________________ (a) The capital expenditure loan under the Original Credit Agreement was replaced as part of the refinancing and execution of the New Credit Agreement. Under the New Credit Facility, the intent of the delayed draw term loan is similar to that of the capital expenditure loan under the Original Credit Agreement. The delayed draw term loan is secured by certain capital expenditures. As of January 31, 2023, the Company has not drawn on the delayed draw term loan. (b) At January 31, 2023, debt issuance costs are the costs associated with the term loan facility. Debt issuance costs of $3.0 million associated with the revolving credit and delayed draw term loan facilities are recorded in other long-term assets on the Condensed Consolidated Statements of Financial Position. Under the Original Credit Facility, the revolving credit facility debt issuance costs were treated consistently with those of the term debt facilities as the Company did not intend to repay the revolving credit facility in full prior to its maturity. |
Derivative instruments
Derivative instruments | 6 Months Ended |
Jan. 31, 2023 | |
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, 2023 or July 31, 2022. 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, 2023, the Company held the following interest rate swap agreements, which fixed the interest rate on the applicable notional amount of outstanding variable rate debt: Notional amount Interest rate Effective date Expiration date $100,000 0.315% September 30, 2022 March 23, 2023 $100,000 3.735% January 4, 2023 November 4, 2027 The total notional amounts of the Company’s derivative instruments outstanding are as follows: (in thousands) January 31, July 31, Derivative instruments not designated as hedging instruments Interest rate swap contracts $ 200,000 $ 100,000 Foreign currency forward contracts 1,010 2,793 Total derivative instruments not designated as hedging instruments $ 201,010 $ 102,793 Effective September 30, 2022, the Company amended its interest rate swap initially entered into in March 2020 to transition from a LIBOR-based floating rate to a Term SOFR based floating rate. On January 4, 2023, the Company entered into an interest rate swap that partially mitigates the risk to the Company due to potential future Term SOFR movements by trading floating rate payments for fixed rate payments on an applicable notional amount of outstanding variable rate debt. As discussed in Note 10 (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, generally aligning settlement dates with expected barrel deliveries and the anticipated timing of payments to various coopers. Results of period derivative activity The estimated fair value and classification of derivative instruments on the accompanying Condensed Consolidated Statements of Financial Position for January 31, 2023 were as follows: (in thousands) Derivative Assets Derivative Liabilities Balance Sheet Classification Fair Value Balance Sheet Classification Fair Value Interest rate swap contracts Prepaid expenses and other current assets $ 607 Derivative instrument $ 1,537 Foreign currency forward contracts Prepaid expenses and other current assets 89 Other current liabilities — Total derivatives not designated as hedging instruments $ 696 $ 1,537 The estimated fair value and classification of derivative instruments on the accompanying Condensed Consolidated Statements of Financial Position for July 31, 2022 were as follows: (in thousands) Derivative Assets Derivative Liabilities Balance Sheet Classification Fair Value Balance Sheet Classification Fair Value Interest rate swap contracts Prepaid expenses and other current assets $ 1,443 Derivative instrument $ — Foreign currency forward contracts Prepaid expenses and other current assets — Other current liabilities 223 Total derivatives not designated as hedging instruments $ 1,443 $ 223 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: Three months ended January 31, Six months ended January 31, (in thousands) Classification 2023 2022 2023 2022 Interest rate swap contracts Other expense (income), net $ 2,518 $ (515) $ 2,373 $ (962) Foreign currency forward contracts Other expense (income), net (89) — (312) 5 Total loss (gain) $ 2,429 $ (515) $ 2,061 $ (957) |
Fair value measurements
Fair value measurements | 6 Months Ended |
Jan. 31, 2023 | |
Fair Value Disclosures [Abstract] | |
Fair value measurements | Fair value measurements The Company applies a fair value hierarchy pursuant to ASC Topic 820, Fair Value Measurement , which consists of three levels of inputs 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; and 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 agreements are 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 (Level 2 of the fair value hierarchy). The Company’s assets and liabilities measured and recorded at fair value on a recurring basis at January 31, 2023, were as follows: (in thousands) Fair value measurements using: Quoted prices in active markets (Level 1) Significant other observable inputs Significant unobservable inputs Total Assets Interest rate swap contract $ — $ 607 $ — $ 607 Deferred compensation plan asset — 2,308 — 2,308 Liabilities Interest rate swap contract $ — $ 1,537 $ — $ 1,537 Deferred compensation liability — 2,879 — 2,879 The Company’s assets and liabilities measured and recorded at fair value on a recurring basis at July 31, 2022, were as follows: (in thousands) Fair value measurements using: Quoted prices in active markets (Level 1) Significant other observable inputs Significant unobservable inputs Total Assets Interest rate swap contracts $ — $ 1,443 $ — $ 1,443 Deferred compensation plan asset — 1,753 — 1,753 Liabilities Foreign currency forward contracts $ — $ 223 $ — $ 223 Deferred compensation liability — 2,142 — 2,142 |
Commitments and contingencies
Commitments and contingencies | 6 Months Ended |
Jan. 31, 2023 | |
Commitments and Contingencies Disclosure [Abstract] | |
Commitments and contingencies | Commitments and contingencies Long-term purchase contracts The Company has entered certain grape purchase contracts with various growers to supply a significant portion of its future grape requirements for wine production. The lengths of the contracts vary from one Purchase commitments The Company enters into commitments to purchase barrels for each harvest, a significant portion of which are settled in Euros. As of July 31, 2022, the Company had $8.8 million in barrel purchase commitments. During the six months ended January 31, 2023, the Company paid the remaining commitments and liabilities associated with the barrel purchases for the 2022 harvest. As of January 31, 2023, the Company does not yet have any commitments for the 2023 harvest. 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, generally aligning settlement dates with expected barrel deliveries and the anticipated timing of payments to various coopers. The Company does not enter into these contracts for speculative purposes. Gains and losses on these contracts are recorded in the Condensed Consolidated Statements of Operations. See Note 8 (Derivative instruments) for the total notional value and impact on the Condensed Consolidated Financial Statements due to foreign currency forward contracts. 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, 2023, 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 expects the risk of any future obligations under these indemnification provisions to be remote. As of January 31, 2023 and July 31, 2022, no amounts have been accrued related to such indemnification provisions. |
Equity-based compensation
Equity-based compensation | 6 Months Ended |
Jan. 31, 2023 | |
Share-Based Payment Arrangement [Abstract] | |
Equity-based compensation | Equity-based compensation 2016 Equity Plan In 2016, the Company adopted the 2016 Equity Plan, which provided profit interest units to certain employees of the Company. In connection with the adoption of the Company's 2021 Plan, the Company will no longer grant additional awards under the 2016 Plan. However, the terms and conditions of the 2016 Plan will continue to govern the previously granted awards, to the extent applicable. The remaining awards vested on August 1, 2022 and were fully expensed as of July 31, 2022. The total fair value of restricted shares that vested during the six months ended January 31, 2023 was $4.9 million. Restricted shares The following table represents restricted share activity: Performance-based shares Weighted-average grant-date fair value Unvested as of July 31, 2022 266,158 $ 14.23 Granted — — Vested (266,158) 14.23 Forfeited — — Unvested as of January 31, 2023 — $ — 2021 Equity Incentive Plan In March 2021, the Company's Board of Directors approved the 2021 Plan, which provides for granting up to 14,003,560 shares of the Company's common stock to employees, officers, and founders. Restricted stock units and stock options are granted to certain employees of the Company, advisors and directors (collectively “grants”). The grants are considered equity awards for purposes of calculating compensation expense and are equity-classified in the Condensed Consolidated Statements of Financial Position. Stock options The following table represents the stock option activity: Number of options Weighted-average exercise price Weighted-average remaining contractual life Aggregate intrinsic value Outstanding at July 31, 2022 1,555,610 $ 17.15 8.7 $ 3,847 Granted 1,067,979 14.43 Exercised (2,586) 15.00 Forfeited (118,237) 16.94 Expired (39,599) 17.25 Outstanding at January 31, 2023 2,463,167 $ 15.99 8.8 $ 3,079 Exercisable as of January 31, 2023 336,673 $ 17.13 8.2 The Company recognized equity compensation expense related to the 2021 Plan stock options in selling, general and administrative expenses and capitalized a portion into inventories on the Condensed Consolidated Statements of Financial Position, as applicable, due to units vesting over their requisite service periods. Total recognized equity compensation expense related to the 2021 Plan stock options was $0.8 million and $0.5 million for the three months ended January 31, 2023 and 2022, respectively, and $1.3 million and $1.0 million for the six months ended January 31, 2023 and 2022, respectively. The total unrecognized compensation expense related to the 2021 Plan stock options was $9.5 million as of January 31, 2023, which is expected to be recognized over a weighted-average period of 3.1 years. The following assumptions were applied in the Black-Scholes option pricing model to estimate the grant-date fair value of the stock options granted in the six months ended January 31, 2023: Six months ended January 31, 2023 Expected term (in years) (a) 6.23 Expected dividend yield (b) — % Risk-free interest rate (c) 3.96 % Expected volatility (d) 33.9 % Stock price $ 14.43 ________________________________________________ (a) Calculated as the midpoint between the weighted-average time to vest and the time to expiration. (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. Treasury Constant Maturity Rates 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 historical and implied volatility of a group of guideline public companies deemed to be comparable public peers within the Company’s industry. Restricted stock units The following table represents the RSU grant activity under the 2021 Plan: Number of units Weighted-average grant-date fair value per share Unvested as of July 31, 2022 414,609 $ 17.32 Granted 382,985 14.56 Vested (22,333) 20.24 Forfeited (39,414) 16.94 Unvested as of January 31, 2023 735,847 $ 15.81 The Company recognized equity compensation expense related to the 2021 Plan RSUs in selling, general and administrative expenses and capitalized a portion into inventories on the Condensed Consolidated Statements of Financial Position, as applicable, due to units vesting over their requisite service periods, of $0.9 million and $0.8 million, respectively, for the three months ended January 31, 2023 and 2022 and $1.6 million and $1.6 million for the six months ended January 31, 2023 and 2022, respectively. The total unrecognized compensation expense related to the 2021 Plan RSUs was $9.4 million as of January 31, 2023, which is expected to be recognized over a weighted-average period of 2.8 years. Employee Stock Purchase Plan |
Earnings per share
Earnings per share | 6 Months Ended |
Jan. 31, 2023 | |
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: Three months ended January 31, Six months ended January 31, (in thousands, except share and per share amounts) 2023 2022 2023 2022 Numerator: Net income attributable to $ 14,917 $ 17,932 $ 34,732 $ 39,205 Denominator: Weighted average number of shares outstanding for basic per share calculation 115,191,575 115,049,395 115,187,868 115,048,094 Effect of dilutive potential shares (a) : Stock options — 145,990 — 158,261 Restricted stock awards 136,085 194,117 236,941 184,656 Adjusted weighted average shares outstanding for diluted per share calculation 115,327,660 115,389,502 115,424,809 115,391,011 Earnings per share attributable to Basic $ 0.13 $ 0.16 $ 0.30 $ 0.34 Diluted $ 0.13 $ 0.16 $ 0.30 $ 0.34 ______________________________________ (a) Calculated using the treasury stock method. For the three months ended January 31, 2023 and 2022, there were 0.6 million and 0.1 million incremental common shares issuable upon the exercise of certain stock options, respectively, that were not included in the calculation of diluted EPS because the effect of their inclusion would have been antidilutive under the treasury stock method. For the six months ended January 31, 2023 and 2022, there were 0.5 million and 0.1 million incremental common shares issuable upon the exercise of certain stock options, respectively, that were not included in the calculation of diluted EPS because the effect of their inclusion would have been antidilutive under the treasury stock method. Refer to Note 11 (Equity-based compensation) for the terms of the awards. |
Income taxes
Income taxes | 6 Months Ended |
Jan. 31, 2023 | |
Income Tax Disclosure [Abstract] | |
Income taxes | Income taxes Income tax expense was $5.3 million and $12.4 million, with an effective tax rate of 26.1% and 26.2% for the three and six months ended January 31, 2023, respectively, compared to $6.4 million and $13.8 million, with an effective tax rate of 26.3% and 26.0% for the three and six months ended January 31, 2022, respectively. The effective tax rates for both periods presented were higher than the federal statutory rate of 21% primarily due to the impact of state income taxes. |
Subsequent events
Subsequent events | 6 Months Ended |
Jan. 31, 2023 | |
Subsequent Events [Abstract] | |
Subsequent events | Subsequent eventsEffective February 6, 2023, the Company entered into the First Amendment to the Amended and Restated First Lien Loan and Security Agreement. The changes in the amendment are administrative in nature and do not have a material impact on the Company's outstanding debt or related debt covenants. The amendment did not result in any additional cash proceeds or changes in commitment amounts. |
Basis of presentation and rec_2
Basis of presentation and recent accounting pronouncements (Policies) | 6 Months Ended |
Jan. 31, 2023 | |
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. 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, 2023, for any other interim period or for any future year. The Condensed Consolidated Statement of Financial Position as of July 31, 2022 was derived from the Company's audited financial statements for the fiscal year ended July 31, 2022, previously filed with the SEC. The Condensed Consolidated Financial Statements do not include all of the information and note disclosures required by U.S. GAAP and should be read in conjunction with the audited consolidated financial statements and related notes included in our Annual Report on Form 10-K for the fiscal year ended July 31, 2022. |
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. |
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 credit losses, calculation of accrued liabilities, customer incentive reserves, uncertain tax positions, contingent liabilities, equity-based compensation and deferred revenues. Actual results could differ from those estimates. |
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 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 Topic 810, Consolidations |
Recently adopted accounting pronouncements | Recently adopted accounting pronouncements In March 2020, the Financial Accounting Standards Board 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. The Company adopted the standard effective August 1, 2022, the first day of Fiscal 2023. The adoption of the standard did not have a material impact on the Condensed Consolidated Financial Statements or the related disclosures. As previously disclosed in the Annual Report on Form 10-K for the year ended July 31, 2022, the Company adopted ASU No. 2016-02, Leases (Topic 842) using the modified retrospective transition method as of the first day of Fiscal 2022. The impact of the adoption of ASC 842 on previously reported interim financial statements during the year ended July 31, 2022, included the recognition of right-of-use ("ROU") assets and lease liabilities for operating leases. The adoption of ASC 842 also resulted in reclassifying certain lines within operating activities in the Condensed Consolidated Statement of Cash Flows due to changes in operating assets and liabilities for the related accounts. These changes to previously disclosed amounts conform to the current period presentation. No other new accounting pronouncements issued or effective as of January 31, 2023 have had, or are expected to have, a material impact on the Condensed Consolidated Financial Statements or the related disclosures. |
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, 2023 or July 31, 2022. 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. |
Contract balances | Contract balancesWhen the Company receives payment from a customer, prior to meeting the performance obligation 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 wines sold through our DTC channels, 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 | Inventories are stated at the lower of cost or net realizable value, and are primarily measured on a first-in-first-out basis. The Company records valuation adjustments to the carrying value of its inventories based on periodic reviews of slow-moving, obsolete and excess inventory to determine the need for reserves by comparing inventory carrying values with their net realizable values upon ultimate sale or disposal. The Company's estimates of net realizable value are based on historical experience as well as Management's judgments with respect to future market conditions. In the period the Company determines a reserve is required, the Company recognizes a charge to cost of sales for the excess of the carrying value over net realizable value. |
Fair value measurements | The Company applies a fair value hierarchy pursuant to ASC Topic 820, Fair Value Measurement , which consists of three levels of inputs 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; and 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 agreements are 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 (Level 2 of the fair value hierarchy). |
Revenue (Tables)
Revenue (Tables) | 6 Months Ended |
Jan. 31, 2023 | |
Revenue from Contract with Customer [Abstract] | |
Schedule of Disaggregation of Revenue | The following table presents the percentages of consolidated net sales disaggregated by sales channels: Three months ended January 31, Six months ended January 31, 2023 2022 2023 2022 Wholesale - Distributors 61.3 % 67.2 % 69.0 % 67.9 % Wholesale - California direct to trade (a) 19.1 19.8 17.4 18.1 DTC (b) 19.6 13.0 13.6 14.0 Net sales 100.0 % 100.0 % 100.0 % 100.0 % ________________________________________________ (a) Includes $0.6 million of sales related to bulk and grape sales for the six months ended January 31, 2023, and $0.5 million and $2.8 million for the three and six months ended January 31, 2022, respectively. (b) Includes shipping and handling revenue of $0.9 million and $1.0 million for the three and six months ended January 31, 2023, respectively, and $0.4 million and $0.9 million for the three and six months ended January 31, 2022, respectively. |
Inventories (Tables)
Inventories (Tables) | 6 Months Ended |
Jan. 31, 2023 | |
Inventory Disclosure [Abstract] | |
Schedule of Inventories | Inventories were comprised of the following: (in thousands) January 31, July 31, Finished goods $ 91,142 $ 108,989 Work in progress 232,227 162,337 Raw materials 3,655 14,104 Inventories $ 327,024 $ 285,430 |
Property and equipment, net (Ta
Property and equipment, net (Tables) | 6 Months Ended |
Jan. 31, 2023 | |
Property, Plant and Equipment [Abstract] | |
Schedule of Property and Equipment | Property and equipment, net was comprised of the following: (in thousands) January 31, July 31, Land $ 136,328 $ 136,328 Buildings and improvements 70,847 70,813 Machinery and equipment 53,160 52,619 Vineyards and improvements 44,866 44,759 Barrels 37,185 30,067 Total depreciable property and equipment 342,386 334,586 Less: accumulated depreciation and amortization (77,898) (70,591) Total depreciable property and equipment, net 264,488 263,995 Construction in progress 6,729 5,664 Property and equipment, net $ 271,217 $ 269,659 |
Accrued expenses (Tables)
Accrued expenses (Tables) | 6 Months Ended |
Jan. 31, 2023 | |
Payables and Accruals [Abstract] | |
Schedule of Accrued Expenses | Accrued expenses were comprised of the following: (in thousands) January 31, July 31, Trade spend (a) $ 17,477 $ 15,319 Accrued professional fees 3,903 3,191 Deferred compensation liability (b) 2,879 2,142 Income taxes payable 1,730 387 Bulk wine and other received not invoiced 882 143 Barrel purchases — 988 Accrued invoices and other accrued expenses 2,200 7,305 Accrued expenses $ 29,071 $ 29,475 _______________________________________________ (a) Trade spend refers to estimated amounts the Company owes to distributors for depletion-based incentives for meeting specific depletion targets. (b) The Company intends to use the cash surrender value life insurance policies to partially settle its deferred compensation plan liability. The cash surrender value of the life insurance policies was $2.3 million and $1.8 million at January 31, 2023 and July 31, 2022, respectively, and is included in other long-term assets on the Condensed Consolidated Statements of Financial Position. |
Debt (Tables)
Debt (Tables) | 6 Months Ended |
Jan. 31, 2023 | |
Debt Disclosure [Abstract] | |
Schedule of Long-Term Debt Instruments | Long-term debt, net was comprised of the following: (in thousands) January 31, 2023 July 31, 2022 Revolving line of credit $ — $ 110,000 Term loan, first lien 225,832 110,117 Capital expenditure loan (a) — 5,049 Total debt 225,832 225,166 Less: Current maturities of long-term debt (9,721) (9,810) Total long-term debt 216,111 215,356 Debt issuance costs (b) (478) (1,608) Total long-term debt, net of current maturities and debt issuance costs $ 215,633 $ 213,748 _______________________________________________ (a) The capital expenditure loan under the Original Credit Agreement was replaced as part of the refinancing and execution of the New Credit Agreement. Under the New Credit Facility, the intent of the delayed draw term loan is similar to that of the capital expenditure loan under the Original Credit Agreement. The delayed draw term loan is secured by certain capital expenditures. As of January 31, 2023, the Company has not drawn on the delayed draw term loan. (b) At January 31, 2023, debt issuance costs are the costs associated with the term loan facility. Debt issuance costs of $3.0 million associated with the revolving credit and delayed draw term loan facilities are recorded in other long-term assets on the Condensed Consolidated Statements of Financial Position. Under the Original Credit Facility, the revolving credit facility debt issuance costs were treated consistently with those of the term debt facilities as the Company did not intend to repay the revolving credit facility in full prior to its maturity. |
Derivative instruments (Tables)
Derivative instruments (Tables) | 6 Months Ended |
Jan. 31, 2023 | |
Derivative Instruments and Hedging Activities Disclosure [Abstract] | |
Schedule of Interest Rate Derivatives | As of January 31, 2023, the Company held the following interest rate swap agreements, which fixed the interest rate on the applicable notional amount of outstanding variable rate debt: Notional amount Interest rate Effective date Expiration date $100,000 0.315% September 30, 2022 March 23, 2023 $100,000 3.735% January 4, 2023 November 4, 2027 |
Schedule of Derivative Instruments | The total notional amounts of the Company’s derivative instruments outstanding are as follows: (in thousands) January 31, July 31, Derivative instruments not designated as hedging instruments Interest rate swap contracts $ 200,000 $ 100,000 Foreign currency forward contracts 1,010 2,793 Total derivative instruments not designated as hedging instruments $ 201,010 $ 102,793 |
Schedule of Derivative Instruments in Statement of Financial Position, Fair Value | The estimated fair value and classification of derivative instruments on the accompanying Condensed Consolidated Statements of Financial Position for January 31, 2023 were as follows: (in thousands) Derivative Assets Derivative Liabilities Balance Sheet Classification Fair Value Balance Sheet Classification Fair Value Interest rate swap contracts Prepaid expenses and other current assets $ 607 Derivative instrument $ 1,537 Foreign currency forward contracts Prepaid expenses and other current assets 89 Other current liabilities — Total derivatives not designated as hedging instruments $ 696 $ 1,537 The estimated fair value and classification of derivative instruments on the accompanying Condensed Consolidated Statements of Financial Position for July 31, 2022 were as follows: (in thousands) Derivative Assets Derivative Liabilities Balance Sheet Classification Fair Value Balance Sheet Classification Fair Value Interest rate swap contracts Prepaid expenses and other current assets $ 1,443 Derivative instrument $ — Foreign currency forward contracts Prepaid expenses and other current assets — Other current liabilities 223 Total derivatives not designated as hedging instruments $ 1,443 $ 223 |
Schedule of Derivative Instruments, Gain (Loss) | 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: Three months ended January 31, Six months ended January 31, (in thousands) Classification 2023 2022 2023 2022 Interest rate swap contracts Other expense (income), net $ 2,518 $ (515) $ 2,373 $ (962) Foreign currency forward contracts Other expense (income), net (89) — (312) 5 Total loss (gain) $ 2,429 $ (515) $ 2,061 $ (957) |
Fair value measurements (Tables
Fair value measurements (Tables) | 6 Months Ended |
Jan. 31, 2023 | |
Fair Value Disclosures [Abstract] | |
Schedule of Fair Value, Assets and Liabilities Measured on Recurring Basis | The Company’s assets and liabilities measured and recorded at fair value on a recurring basis at January 31, 2023, were as follows: (in thousands) Fair value measurements using: Quoted prices in active markets (Level 1) Significant other observable inputs Significant unobservable inputs Total Assets Interest rate swap contract $ — $ 607 $ — $ 607 Deferred compensation plan asset — 2,308 — 2,308 Liabilities Interest rate swap contract $ — $ 1,537 $ — $ 1,537 Deferred compensation liability — 2,879 — 2,879 The Company’s assets and liabilities measured and recorded at fair value on a recurring basis at July 31, 2022, were as follows: (in thousands) Fair value measurements using: Quoted prices in active markets (Level 1) Significant other observable inputs Significant unobservable inputs Total Assets Interest rate swap contracts $ — $ 1,443 $ — $ 1,443 Deferred compensation plan asset — 1,753 — 1,753 Liabilities Foreign currency forward contracts $ — $ 223 $ — $ 223 Deferred compensation liability — 2,142 — 2,142 |
Equity-based compensation (Tabl
Equity-based compensation (Tables) | 6 Months Ended |
Jan. 31, 2023 | |
Share-Based Payment Arrangement [Abstract] | |
Schedule of Restricted Shares Activity | The following table represents restricted share activity: Performance-based shares Weighted-average grant-date fair value Unvested as of July 31, 2022 266,158 $ 14.23 Granted — — Vested (266,158) 14.23 Forfeited — — Unvested as of January 31, 2023 — $ — |
Schedule of Share-based Payment Arrangement, Option, Activity | The following table represents the stock option activity: Number of options Weighted-average exercise price Weighted-average remaining contractual life Aggregate intrinsic value Outstanding at July 31, 2022 1,555,610 $ 17.15 8.7 $ 3,847 Granted 1,067,979 14.43 Exercised (2,586) 15.00 Forfeited (118,237) 16.94 Expired (39,599) 17.25 Outstanding at January 31, 2023 2,463,167 $ 15.99 8.8 $ 3,079 Exercisable as of January 31, 2023 336,673 $ 17.13 8.2 |
Schedule of Share-based Payment Award, Stock Options, Valuation Assumptions | The following assumptions were applied in the Black-Scholes option pricing model to estimate the grant-date fair value of the stock options granted in the six months ended January 31, 2023: Six months ended January 31, 2023 Expected term (in years) (a) 6.23 Expected dividend yield (b) — % Risk-free interest rate (c) 3.96 % Expected volatility (d) 33.9 % Stock price $ 14.43 ________________________________________________ (a) Calculated as the midpoint between the weighted-average time to vest and the time to expiration. (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. Treasury Constant Maturity Rates 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 historical and implied volatility of a group of guideline public companies deemed to be comparable public peers within the Company’s industry. |
Schedule of Share-based Payment Arrangement, Restricted Stock Unit, Activity | The following table represents the RSU grant activity under the 2021 Plan: Number of units Weighted-average grant-date fair value per share Unvested as of July 31, 2022 414,609 $ 17.32 Granted 382,985 14.56 Vested (22,333) 20.24 Forfeited (39,414) 16.94 Unvested as of January 31, 2023 735,847 $ 15.81 |
Earnings per share (Tables)
Earnings per share (Tables) | 6 Months Ended |
Jan. 31, 2023 | |
Earnings Per Share [Abstract] | |
Schedule of Basic and Diluted Common Shares | The following is a reconciliation of the Company's basic and diluted income per share calculation: Three months ended January 31, Six months ended January 31, (in thousands, except share and per share amounts) 2023 2022 2023 2022 Numerator: Net income attributable to $ 14,917 $ 17,932 $ 34,732 $ 39,205 Denominator: Weighted average number of shares outstanding for basic per share calculation 115,191,575 115,049,395 115,187,868 115,048,094 Effect of dilutive potential shares (a) : Stock options — 145,990 — 158,261 Restricted stock awards 136,085 194,117 236,941 184,656 Adjusted weighted average shares outstanding for diluted per share calculation 115,327,660 115,389,502 115,424,809 115,391,011 Earnings per share attributable to Basic $ 0.13 $ 0.16 $ 0.30 $ 0.34 Diluted $ 0.13 $ 0.16 $ 0.30 $ 0.34 ______________________________________ (a) Calculated using the treasury stock method. |
Description of business (Detail
Description of business (Details) - Secondary Offering - USD ($) $ / shares in Units, $ in Millions | 1 Months Ended | 3 Months Ended | 6 Months Ended |
Nov. 30, 2021 | Oct. 31, 2021 | Jan. 31, 2022 | |
Subsidiary, Sale of Stock [Line Items] | |||
Sale of stock, number of shares issued in transaction | 626,467 | 12,000,000 | |
Sale of stock, price per share (in dollars per share) | $ 20.50 | ||
Sale of stock, transaction costs | $ 0.6 |
Basis of presentation and rec_3
Basis of presentation and recent accounting pronouncements (Details) - USD ($) $ / shares in Units, $ in Millions | 6 Months Ended | 12 Months Ended |
Jan. 31, 2023 | Jul. 31, 2022 | |
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 issued (in shares) | 0 | |
Preferred stock, shares outstanding (in shares) | 0 | |
Variable Interest Entity, Primary Beneficiary | ||
Accounting Policies [Line Items] | ||
Variable interest entity, ownership percentage | 76.20% | 76.20% |
Variable interest entity, net assets | $ 2.3 | $ 2.4 |
Revenue - Disaggregation of Rev
Revenue - Disaggregation of Revenue (Details) - USD ($) $ in Thousands | 3 Months Ended | 6 Months Ended | ||
Jan. 31, 2023 | Jan. 31, 2022 | Jan. 31, 2023 | Jan. 31, 2022 | |
Disaggregation of Revenue [Line Items] | ||||
Revenue from contract with customer, percent | 100% | 100% | 100% | 100% |
Revenue | $ 103,488 | $ 98,736 | $ 211,659 | $ 202,917 |
Bulk and Grape Sales | ||||
Disaggregation of Revenue [Line Items] | ||||
Revenue | 500 | 600 | 2,800 | |
Shipping and Handling | ||||
Disaggregation of Revenue [Line Items] | ||||
Revenue | $ 900 | $ 400 | $ 1,000 | $ 900 |
Wholesale - Distributors | ||||
Disaggregation of Revenue [Line Items] | ||||
Revenue from contract with customer, percent | 61.30% | 67.20% | 69% | 67.90% |
Wholesale - California direct to trade | ||||
Disaggregation of Revenue [Line Items] | ||||
Revenue from contract with customer, percent | 19.10% | 19.80% | 17.40% | 18.10% |
DTC | ||||
Disaggregation of Revenue [Line Items] | ||||
Revenue from contract with customer, percent | 19.60% | 13% | 13.60% | 14% |
Revenue - Narrative (Details)
Revenue - Narrative (Details) - USD ($) $ in Thousands | 3 Months Ended | 6 Months Ended | |
Jan. 31, 2023 | Jan. 31, 2023 | Jul. 31, 2022 | |
Revenue from Contract with Customer [Abstract] | |||
Allowance for credit losses on current accounts receivable | $ 400 | $ 400 | $ 400 |
Deferred revenue | 3,285 | 3,285 | $ 272 |
Revenue recognized | $ 12,100 | $ 300 |
Inventories - Schedule of Inven
Inventories - Schedule of Inventories (Details) - USD ($) $ in Thousands | Jan. 31, 2023 | Jul. 31, 2022 |
Inventory Disclosure [Abstract] | ||
Finished goods | $ 91,142 | $ 108,989 |
Work in progress | 232,227 | 162,337 |
Raw materials | 3,655 | 14,104 |
Inventories | $ 327,024 | $ 285,430 |
Inventories - Narrative (Detail
Inventories - Narrative (Details) - USD ($) $ in Millions | 3 Months Ended | 6 Months Ended | |||
Jan. 31, 2023 | Jan. 31, 2022 | Jan. 31, 2023 | Jan. 31, 2022 | Jul. 31, 2022 | |
Inventory Disclosure [Abstract] | |||||
Excess and obsolete inventory reserve | $ 0.4 | $ 0.4 | $ 5.1 | ||
Inventory, capitalized costs incurred | 5.2 | $ 4 | 8.6 | $ 6.6 | |
Capitalized leases costs used in production of inventory | $ 1.1 | $ 1.1 | $ 2.2 | $ 2.1 |
Property and equipment, net - S
Property and equipment, net - Schedule of Property and Equipment (Details) - USD ($) $ in Thousands | Jan. 31, 2023 | Jul. 31, 2022 |
Property, Plant and Equipment [Line Items] | ||
Property and equipment, net | $ 271,217 | $ 269,659 |
Depreciable Property and Equipment | ||
Property, Plant and Equipment [Line Items] | ||
Total depreciable property and equipment | 342,386 | 334,586 |
Less: accumulated depreciation and amortization | (77,898) | (70,591) |
Property and equipment, net | 264,488 | 263,995 |
Land | ||
Property, Plant and Equipment [Line Items] | ||
Total depreciable property and equipment | 136,328 | 136,328 |
Buildings and improvements | ||
Property, Plant and Equipment [Line Items] | ||
Total depreciable property and equipment | 70,847 | 70,813 |
Machinery and equipment | ||
Property, Plant and Equipment [Line Items] | ||
Total depreciable property and equipment | 53,160 | 52,619 |
Vineyards and improvements | ||
Property, Plant and Equipment [Line Items] | ||
Total depreciable property and equipment | 44,866 | 44,759 |
Barrels | ||
Property, Plant and Equipment [Line Items] | ||
Total depreciable property and equipment | 37,185 | 30,067 |
Construction in progress | ||
Property, Plant and Equipment [Line Items] | ||
Total depreciable property and equipment | $ 6,729 | $ 5,664 |
Property and equipment, net - N
Property and equipment, net - Narrative (Details) $ in Millions | 3 Months Ended | 6 Months Ended | ||
Jan. 31, 2023 USD ($) | Jan. 31, 2022 USD ($) plan | Jan. 31, 2023 USD ($) | Jan. 31, 2022 USD ($) | |
Property, Plant and Equipment [Abstract] | ||||
Depreciation | $ 0.5 | $ 0.3 | $ 0.9 | $ 0.7 |
Number of vineyards purchased | plan | 3 | |||
Acquisition price | $ 14.5 |
Accrued expenses - Components (
Accrued expenses - Components (Details) - USD ($) $ in Thousands | Jan. 31, 2023 | Jul. 31, 2022 |
Payables and Accruals [Abstract] | ||
Trade spend | $ 17,477 | $ 15,319 |
Accrued professional fees | 3,903 | 3,191 |
Deferred compensation liability | 2,879 | 2,142 |
Income taxes payable | 1,730 | 387 |
Bulk wine and other received not invoiced | 882 | 143 |
Barrel purchases | 0 | 988 |
Accrued invoices and other accrued expenses | 2,200 | 7,305 |
Accrued expenses | $ 29,071 | $ 29,475 |
Accrued expenses - Narrative (D
Accrued expenses - Narrative (Details) - USD ($) $ in Millions | Jan. 31, 2023 | Jul. 31, 2022 |
Payables and Accruals [Abstract] | ||
Cash surrender value of life insurance | $ 2.3 | $ 1.8 |
Debt - Narrative (Details)
Debt - Narrative (Details) - USD ($) | 3 Months Ended | 6 Months Ended | |||
Nov. 04, 2022 | Jan. 31, 2023 | Jan. 31, 2022 | Jan. 31, 2023 | Jan. 31, 2022 | |
Debt Instrument [Line Items] | |||||
Amortization of debt issuance costs | $ 200,000 | $ 400,000 | $ 593,000 | $ 804,000 | |
First Lien Senior Secured Credit Facilities | |||||
Debt Instrument [Line Items] | |||||
Maximum borrowing capacity | $ 675,800,000 | ||||
First Lien Senior Secured Credit Facilities | Maximum | |||||
Debt Instrument [Line Items] | |||||
Debt capitalization ratio | 0.55 | ||||
First Lien Senior Secured Credit Facilities | Minimum | |||||
Debt Instrument [Line Items] | |||||
Debt capitalization ratio | 1.15 | ||||
First Lien Senior Secured Credit Facilities | Less Than or Equal to 33% of Average Availability | SOFR | |||||
Debt Instrument [Line Items] | |||||
Loan margin (percent) | 1.50% | ||||
First Lien Senior Secured Credit Facilities | Greater Than 33% and Less Than or Equal to 66% of Average Availability | SOFR | |||||
Debt Instrument [Line Items] | |||||
Loan margin (percent) | 1.25% | ||||
First Lien Senior Secured Credit Facilities | Greater Than 66% of Average Availability | SOFR | |||||
Debt Instrument [Line Items] | |||||
Loan margin (percent) | 1% | ||||
Secured Debt | Term Loan Tranche One Facility | |||||
Debt Instrument [Line Items] | |||||
Debt, face amount | $ 135,000,000 | ||||
Secured Debt | Term Loan Tranche Two Facility | |||||
Debt Instrument [Line Items] | |||||
Debt, face amount | 25,000,000 | ||||
Secured Debt | Capital Expenditure Loan | |||||
Debt Instrument [Line Items] | |||||
Debt, face amount | 25,000,000 | ||||
Senior Secured Credit Facility | |||||
Debt Instrument [Line Items] | |||||
Incremental facility | 400,000,000 | ||||
Debt issuance costs | 3,300,000 | 3,300,000 | |||
Capitalized debt issuance costs | 2,400,000 | 2,400,000 | |||
Debt issuance costs expensed | 900,000 | ||||
Revolving Line of Credit | |||||
Debt Instrument [Line Items] | |||||
Unused capacity | 425,000,000 | 425,000,000 | |||
Additional borrowing capacity | 30,000,000 | 30,000,000 | |||
Revolving Line of Credit | First Lien Senior Secured Credit Facilities | |||||
Debt Instrument [Line Items] | |||||
Maximum borrowing capacity | 425,000,000 | ||||
Letter of Credit Sub-Facility | |||||
Debt Instrument [Line Items] | |||||
Line of credit | 0 | 0 | |||
Term Loan Facility | First Lien Senior Secured Credit Facilities | |||||
Debt Instrument [Line Items] | |||||
Maximum borrowing capacity | 225,800,000 | ||||
Delayed Draw Term Loan Facility | First Lien Senior Secured Credit Facilities | |||||
Debt Instrument [Line Items] | |||||
Maximum borrowing capacity | $ 25,000,000 | ||||
Swingline Sub-Facility | |||||
Debt Instrument [Line Items] | |||||
Line of credit | $ 0 | $ 0 | |||
Term Loan and Delayed Draw Term Loan Facilities | First Lien Senior Secured Credit Facilities | SOFR | |||||
Debt Instrument [Line Items] | |||||
Loan margin (percent) | 1.625% | ||||
Term Loan and Delayed Draw Term Loan Facilities | First Lien Senior Secured Credit Facilities | SOFR | Variable Rate Component One | |||||
Debt Instrument [Line Items] | |||||
Basis spread on variable rate (percent) | 0.10% | ||||
Term Loan and Delayed Draw Term Loan Facilities | First Lien Senior Secured Credit Facilities | SOFR | Variable Rate Component Two | |||||
Debt Instrument [Line Items] | |||||
Basis spread on variable rate (percent) | 0.15% |
Debt - Schedule of Long Term De
Debt - Schedule of Long Term Debt (Details) - USD ($) $ in Thousands | Jan. 31, 2023 | Jul. 31, 2022 |
Line of Credit Facility [Line Items] | ||
Long-term debt, gross | $ 225,832 | $ 225,166 |
Less: Current maturities of long-term debt | (9,721) | (9,810) |
Total long-term debt | 216,111 | 215,356 |
Total long-term debt, net of current maturities and debt issuance costs | 215,633 | 213,748 |
Revolving Credit and Delayed Draw Term Loan | ||
Line of Credit Facility [Line Items] | ||
Debt issuance costs | (3,000) | |
Line of Credit | Revolving Line of Credit | ||
Line of Credit Facility [Line Items] | ||
Long-term debt, gross | 0 | 110,000 |
Secured Debt | Term Loan Facility | ||
Line of Credit Facility [Line Items] | ||
Long-term debt, gross | 225,832 | 110,117 |
Debt issuance costs | (478) | (1,608) |
Capital Expenditure Loan | ||
Line of Credit Facility [Line Items] | ||
Long-term debt, gross | $ 0 | $ 5,049 |
Derivative instruments - Narrat
Derivative instruments - Narrative (Details) - USD ($) | Jan. 31, 2023 | Jul. 31, 2022 |
Derivative Instruments and Hedging Activities Disclosure [Abstract] | ||
Cash collateral received | $ 0 | $ 0 |
Cash collateral pledged | $ 0 | $ 0 |
Derivative instruments - Intere
Derivative instruments - Interest Rate Swaps (Details) $ in Thousands | Jan. 31, 2023 USD ($) |
Interest Rate Swap Expiring March 2023 | |
Derivative [Line Items] | |
Notional amount | $ 100,000 |
Interest rate (percent) | 0.315% |
Interest Rate Swap Expiring November 2027 | |
Derivative [Line Items] | |
Notional amount | $ 100,000 |
Interest rate (percent) | 3.735% |
Derivative instruments - Total
Derivative instruments - Total Notional Amount (Details) - Not Designated as Hedging Instrument - USD ($) $ in Thousands | Jan. 31, 2023 | Jul. 31, 2022 |
Derivative [Line Items] | ||
Notional amount | $ 201,010 | $ 102,793 |
Interest rate swap contracts | ||
Derivative [Line Items] | ||
Notional amount | 200,000 | 100,000 |
Foreign currency forward contracts | ||
Derivative [Line Items] | ||
Notional amount | $ 1,010 | $ 2,793 |
Derivative instruments - Estima
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, 2023 | Jul. 31, 2022 |
Derivatives, Fair Value [Line Items] | ||
Derivative asset | $ 696 | $ 1,443 |
Derivative liability | 1,537 | 223 |
Interest rate swap contracts | Prepaid expenses and other current assets | ||
Derivatives, Fair Value [Line Items] | ||
Derivative asset | 607 | 1,443 |
Interest rate swap contracts | Derivative instrument | ||
Derivatives, Fair Value [Line Items] | ||
Derivative liability | 1,537 | 0 |
Foreign currency forward contracts | Prepaid expenses and other current assets | ||
Derivatives, Fair Value [Line Items] | ||
Derivative asset | 89 | 0 |
Foreign currency forward contracts | Other current liabilities | ||
Derivatives, Fair Value [Line Items] | ||
Derivative liability | $ 0 | $ 223 |
Derivative instruments - Amount
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, 2023 | Jan. 31, 2022 | Jan. 31, 2023 | Jan. 31, 2022 | |
Derivative [Line Items] | ||||
Total (gain) loss | $ 2,061 | $ (957) | ||
Not Designated as Hedging Instrument | ||||
Derivative [Line Items] | ||||
Total (gain) loss | $ 2,429 | $ (515) | 2,061 | (957) |
Interest rate swap contracts | Not Designated as Hedging Instrument | ||||
Derivative [Line Items] | ||||
Total (gain) loss | 2,518 | (515) | 2,373 | (962) |
Foreign currency forward contracts | Not Designated as Hedging Instrument | ||||
Derivative [Line Items] | ||||
Total (gain) loss | $ (89) | $ 0 | $ (312) | $ 5 |
Fair value measurements - Asset
Fair value measurements - Assets and Liabilities Measured on a Recurring Basis (Details) - USD ($) $ in Thousands | Jan. 31, 2023 | Jul. 31, 2022 |
Assets | ||
Deferred compensation plan asset | $ 2,308 | $ 1,753 |
Liabilities | ||
Deferred compensation liability | 2,879 | 2,142 |
Interest rate swap contracts | ||
Assets | ||
Derivative asset | 607 | 1,443 |
Liabilities | ||
Derivative liability | 1,537 | |
Foreign currency forward contracts | ||
Liabilities | ||
Derivative liability | 223 | |
Quoted prices in active markets (Level 1) | ||
Assets | ||
Deferred compensation plan asset | 0 | 0 |
Liabilities | ||
Deferred compensation liability | 0 | 0 |
Quoted prices in active markets (Level 1) | Interest rate swap contracts | ||
Assets | ||
Derivative asset | 0 | 0 |
Liabilities | ||
Derivative liability | 0 | |
Quoted prices in active markets (Level 1) | Foreign currency forward contracts | ||
Liabilities | ||
Derivative liability | 0 | |
Significant other observable inputs (Level 2) | ||
Assets | ||
Deferred compensation plan asset | 2,308 | 1,753 |
Liabilities | ||
Derivative liability | 1,537 | |
Deferred compensation liability | 2,879 | 2,142 |
Significant other observable inputs (Level 2) | Interest rate swap contracts | ||
Assets | ||
Derivative asset | 607 | 1,443 |
Significant other observable inputs (Level 2) | Foreign currency forward contracts | ||
Liabilities | ||
Derivative liability | 223 | |
Significant unobservable inputs (Level 3) | ||
Assets | ||
Deferred compensation plan asset | 0 | 0 |
Liabilities | ||
Derivative liability | 0 | |
Deferred compensation liability | 0 | 0 |
Significant unobservable inputs (Level 3) | Interest rate swap contracts | ||
Assets | ||
Derivative asset | $ 0 | 0 |
Significant unobservable inputs (Level 3) | Foreign currency forward contracts | ||
Liabilities | ||
Derivative liability | $ 0 |
Commitments and contingencies -
Commitments and contingencies - Narrative (Details) - USD ($) $ in Millions | 6 Months Ended | 12 Months Ended |
Jan. 31, 2023 | Jul. 31, 2022 | |
Commitments and Contingencies [Line Items] | ||
Purchase commitment, remaining amount committed | $ 8.8 | |
Indemnification Agreement | ||
Commitments and Contingencies [Line Items] | ||
Accruals relating to indemnification provisions | $ 0 | 0 |
Inventories | ||
Commitments and Contingencies [Line Items] | ||
Long-term purchase commitment, amount purchased, cost | $ 71 | $ 68.1 |
Minimum | ||
Commitments and Contingencies [Line Items] | ||
Long-term purchase contract, period | 1 year | |
Maximum | ||
Commitments and Contingencies [Line Items] | ||
Long-term purchase contract, period | 8 years |
Equity-based compensation - Nar
Equity-based compensation - Narrative (Details) - USD ($) $ in Millions | 3 Months Ended | 6 Months Ended | |||
Jan. 31, 2023 | Jan. 31, 2022 | Jan. 31, 2023 | Jan. 31, 2022 | Mar. 31, 2021 | |
ESPP | |||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||||
Shares available for future grants (in shares) | 1,250,509 | 1,250,509 | |||
Share-based payment arrangement, expense | $ 0 | $ 0.1 | |||
Unrecognized compensation expense | 0 | 0 | |||
2016 Equity Plan | Restricted shares | |||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||||
Fair value of vested restricted shares | 4.9 | ||||
2021 Equity Incentive Plan | |||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||||
Shares available for future grants (in shares) | 14,003,560 | ||||
Unrecognized compensation expense of stock options | 9.5 | 9.5 | |||
2021 Equity Incentive Plan | Stock options | |||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||||
Share-based payment arrangement, expense | 0.8 | $ 0.5 | $ 1.3 | $ 1 | |
Unrecognized compensation expense, period for recognition (years) | 3 years 1 month 6 days | ||||
2021 Equity Incentive Plan | RSU | |||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||||
Share-based payment arrangement, expense | 0.9 | $ 0.8 | $ 1.6 | $ 1.6 | |
Unrecognized compensation expense, period for recognition (years) | 2 years 9 months 18 days | ||||
Unrecognized compensation expense | $ 9.4 | $ 9.4 |
Equity-based compensation - Act
Equity-based compensation - Activity for Awards (Details) | 6 Months Ended |
Jan. 31, 2023 $ / shares shares | |
Restricted shares | 2016 Equity Plan | |
Number of units | |
Unvested, beginning (in shares) | shares | 266,158 |
Granted (in shares) | shares | 0 |
Vested (in shares) | shares | (266,158) |
Forfeited (in shares) | shares | 0 |
Unvested, ending (in shares) | shares | 0 |
Weighted-average grant-date fair value | |
Unvested, beginning (in dollars per share) | $ / shares | $ 14.23 |
Granted (in dollars per share) | $ / shares | 0 |
Vested (in dollars per share) | $ / shares | 14.23 |
Forfeited (in dollars per share) | $ / shares | 0 |
Unvested, ending (in dollars per share) | $ / shares | $ 0 |
RSU | 2021 Equity Incentive Plan | |
Number of units | |
Unvested, beginning (in shares) | shares | 414,609 |
Granted (in shares) | shares | 382,985 |
Vested (in shares) | shares | (22,333) |
Forfeited (in shares) | shares | (39,414) |
Unvested, ending (in shares) | shares | 735,847 |
Weighted-average grant-date fair value | |
Unvested, beginning (in dollars per share) | $ / shares | $ 17.32 |
Granted (in dollars per share) | $ / shares | 14.56 |
Vested (in dollars per share) | $ / shares | 20.24 |
Forfeited (in dollars per share) | $ / shares | 16.94 |
Unvested, ending (in dollars per share) | $ / shares | $ 15.81 |
Equity-based compensation - Sto
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, 2023 | Jul. 31, 2022 | |
Number of options | ||
Outstanding, beginning (in shares) | 1,555,610 | |
Granted (in shares) | 1,067,979 | |
Exercised (in shares) | (2,586) | |
Forfeited (in shares) | (118,237) | |
Expired (in shares) | (39,599) | |
Outstanding, ending (in shares) | 2,463,167 | 1,555,610 |
Exercisable (shares) | 336,673 | |
Weighted-average exercise price | ||
Outstanding, beginning (in dollars per share) | $ 17.15 | |
Granted (in dollars per share) | 14.43 | |
Exercised (in dollars per share) | 15 | |
Forfeited (in dollars per share) | 16.94 | |
Expired (in dollars per share) | 17.25 | |
Outstanding, ending (in dollars per share) | 15.99 | $ 17.15 |
Exercisable (in dollars per share) | $ 17.13 | |
Share-based Compensation Arrangement by Share-based Payment Award, Options, Additional Disclosures [Abstract] | ||
Outstanding, weighted-average remaining contractual life (in years) | 8 years 9 months 18 days | 8 years 8 months 12 days |
Exercisable, weighted-average remaining contractual life (in years) | 8 years 2 months 12 days | |
Aggregate intrinsic value | $ 3,079 | $ 3,847 |
Exercisable, aggregate intrinsic value |
Equity-based compensation - Val
Equity-based compensation - Valuation Assumptions (Details) - 2021 Equity Incentive Plan - Stock options | 6 Months Ended |
Jan. 31, 2023 $ / shares | |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |
Expected term (in years) | 6 years 2 months 23 days |
Expected dividend yield (percent) | 0% |
Risk-free interest rate (percent) | 3.96% |
Expected volatility (percent) | 33.90% |
Stock price (in dollars per share) | $ 14.43 |
Earnings per share - Reconcilia
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, 2023 | Jan. 31, 2022 | Jan. 31, 2023 | Jan. 31, 2022 | |
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | ||||
Numerator: Net income attributable to The Duckhorn Portfolio, Inc. | $ 14,917 | $ 17,932 | $ 34,732 | $ 39,205 |
Denominator: | ||||
Weighted average number of shares outstanding for basic per share calculation (in shares) | 115,191,575 | 115,049,395 | 115,187,868 | 115,048,094 |
Adjusted weighted average shares outstanding for diluted per share calculation (in shares) | 115,327,660 | 115,389,502 | 115,424,809 | 115,391,011 |
Earnings per share attributable to The Duckhorn Portfolio, Inc. | ||||
Basic (in dollars per share) | $ 0.13 | $ 0.16 | $ 0.30 | $ 0.34 |
Diluted (in dollars per share) | $ 0.13 | $ 0.16 | $ 0.30 | $ 0.34 |
Stock options | ||||
Denominator: | ||||
Effect of dilutive potential shares (in shares) | 0 | 145,990 | 0 | 158,261 |
Restricted stock awards | ||||
Denominator: | ||||
Effect of dilutive potential shares (in shares) | 136,085 | 194,117 | 236,941 | 184,656 |
Stock options | ||||
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | ||||
Anti-dilutive shares (in shares) | 600,000 | 100,000 | 500,000 | 100,000 |
Income taxes (Details)
Income taxes (Details) - USD ($) $ in Thousands | 3 Months Ended | 6 Months Ended | ||
Jan. 31, 2023 | Jan. 31, 2022 | Jan. 31, 2023 | Jan. 31, 2022 | |
Income Tax Disclosure [Abstract] | ||||
Income tax expense | $ 5,265 | $ 6,407 | $ 12,352 | $ 13,784 |
Effective income tax rate, percent | 26.10% | 26.20% | 26.30% | 26% |