Cover
Cover - shares | 3 Months Ended | |
Oct. 31, 2022 | Nov. 30, 2022 | |
Cover [Abstract] | ||
Document Type | 10-Q | |
Document Quarterly Report | true | |
Document Period End Date | Oct. 31, 2022 | |
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 $0.01 per share | |
Trading Symbol | NAPA | |
Security Exchange Name | NYSE | |
Entity Current Reporting Status | Yes | |
Entity Interactive Data Current | Yes | |
Entity Filer Category | Large Accelerated Filer | |
Entity Small Business | false | |
Entity Emerging Growth Company | false | |
Entity Shell Company | false | |
Entity Common Stock, Shares Outstanding | 115,184,193 | |
Amendment Flag | false | |
Entity Central Index Key | 0001835256 | |
Document Fiscal Year Focus | 2023 | |
Document Fiscal Period Focus | Q1 | |
Current Fiscal Year End Date | --07-31 |
Condensed Consolidated Statemen
Condensed Consolidated Statements of Financial Position (unaudited) - USD ($) $ in Thousands | Oct. 31, 2022 | Jul. 31, 2022 |
Current assets | ||
Cash | $ 5,325 | $ 3,167 |
Accounts receivable trade, net | 69,645 | 37,026 |
Inventories | 341,926 | 285,430 |
Prepaid expenses and other current assets | 14,027 | 13,898 |
Total current assets | 430,923 | 339,521 |
Long-term assets | ||
Property and equipment, net | 274,324 | 269,659 |
Operating lease right-of-use assets | 22,478 | 23,375 |
Intangible assets, net | 189,896 | 191,786 |
Goodwill | 425,209 | 425,209 |
Other long-term assets | 1,842 | 1,963 |
Total long-term assets | 913,749 | 911,992 |
Total assets | 1,344,672 | 1,251,513 |
Current liabilities | ||
Accounts payable | 45,889 | 3,382 |
Accrued expenses | 69,538 | 29,475 |
Accrued compensation | 9,160 | 12,893 |
Deferred revenue | 12,069 | 272 |
Current operating lease liabilities | 3,506 | 3,498 |
Current maturities of long-term debt | 9,109 | 9,810 |
Other current liabilities | 474 | 672 |
Total current liabilities | 149,745 | 60,002 |
Long-term liabilities | ||
Revolving line of credit, net | 94,005 | 108,674 |
Long-term debt, net of current maturities and debt issuance costs | 103,036 | 105,074 |
Operating lease liabilities | 18,864 | 19,732 |
Deferred income taxes | 90,484 | 90,483 |
Other long-term liabilities | 388 | 387 |
Total long-term liabilities | 306,777 | 324,350 |
Total liabilities | 456,522 | 384,352 |
Commitments and contingencies (Note 10) | ||
Equity | ||
Common stock, $0.01 par value; 500,000,000 shares authorized, 115,184,161 issued and outstanding at October 31, 2022 and July 31, 2022 | 1,152 | 1,152 |
Additional paid-in capital | 732,777 | 731,597 |
Retained earnings | 153,639 | 133,824 |
Total The Duckhorn Portfolio, Inc. equity | 887,568 | 866,573 |
Non-controlling interest | 582 | 588 |
Total equity | 888,150 | 867,161 |
Total liabilities and equity | $ 1,344,672 | $ 1,251,513 |
Common stock, shares issued (in shares) | 115,184,161 | 115,184,161 |
Common stock, shares outstanding (in shares) | 115,184,161 | 115,184,161 |
Condensed Consolidated Statem_2
Condensed Consolidated Statements of Financial Position (unaudited) (Parenthetical) - $ / shares | Oct. 31, 2022 | 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) | 115,184,161 | 115,184,161 |
Common stock, shares outstanding (in shares) | 115,184,161 | 115,184,161 |
Condensed Consolidated Statem_3
Condensed Consolidated Statements of Operations (unaudited) - USD ($) $ in Thousands | 3 Months Ended | |
Oct. 31, 2022 | Oct. 31, 2021 | |
Income Statement [Abstract] | ||
Net sales (net of excise taxes of $1,584 and $1,476, respectively) | $ 108,171 | $ 104,181 |
Cost of sales | 53,461 | 51,771 |
Gross profit | 54,710 | 52,410 |
Selling, general and administrative expenses | 25,739 | 23,207 |
Income from operations | 28,971 | 29,203 |
Interest expense | 2,162 | 1,606 |
Other income, net | (87) | (1,093) |
Total other expenses | 2,075 | 513 |
Income before income taxes | 26,896 | 28,690 |
Income tax expense | 7,087 | 7,377 |
Net income | 19,809 | 21,313 |
Less: Net (income) loss attributable to non-controlling interest | 6 | (40) |
Net income attributable to The Duckhorn Portfolio, Inc. | $ 19,815 | $ 21,273 |
Net income per share of common stock: | ||
Basic (in dollars per share) | $ 0.17 | $ 0.18 |
Diluted (in dollars per share) | $ 0.17 | $ 0.18 |
Weighted average shares of common stock outstanding: | ||
Basic (in shares) | 115,184,161 | 115,046,793 |
Diluted (in shares) | 115,275,692 | 115,396,026 |
Condensed Consolidated Statem_4
Condensed Consolidated Statements of Operations (unaudited) (Parenthetical) - USD ($) $ in Thousands | 3 Months Ended | |
Oct. 31, 2022 | Oct. 31, 2021 | |
Income Statement [Abstract] | ||
Excise taxes | $ 1,584 | $ 1,476 |
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) | 21,313 | 21,273 | 21,273 | 40 | ||
Equity-based compensation (Note 11) | 1,459 | 1,459 | 1,459 | |||
Ending balance (in shares) at Oct. 31, 2021 | 115,046,793 | |||||
Ending balance at Oct. 31, 2021 | $ 825,010 | 824,419 | $ 1,150 | 728,362 | 94,907 | 591 |
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) | 19,809 | 19,815 | 19,815 | (6) | ||
Equity-based compensation (Note 11) | $ 1,180 | 1,180 | 1,180 | |||
Ending balance (in shares) at Oct. 31, 2022 | 115,184,161 | 115,184,161 | ||||
Ending balance at Oct. 31, 2022 | $ 888,150 | $ 887,568 | $ 1,152 | $ 732,777 | $ 153,639 | $ 582 |
Condensed Consolidated Statem_6
Condensed Consolidated Statements of Cash Flows (unaudited) - USD ($) $ in Thousands | 3 Months Ended | |
Oct. 31, 2022 | Oct. 31, 2021 | |
Cash flows from operating activities | ||
Net income | $ 19,809 | $ 21,313 |
Adjustments to reconcile net income to net cash from operating activities: | ||
Depreciation and amortization | 5,757 | 4,829 |
Gain on disposal of assets | (32) | (46) |
Change in fair value of derivatives | (368) | (442) |
Amortization of debt issuance costs | 402 | 402 |
Equity-based compensation | 1,180 | 1,459 |
Change in operating assets and liabilities: | ||
Accounts receivable trade, net | (32,619) | (26,365) |
Inventories | (55,626) | (50,686) |
Prepaid expenses and other current assets | 442 | 470 |
Other long-term assets | 122 | (59) |
Accounts payable | 42,670 | 48,755 |
Accrued expenses | 37,262 | 29,177 |
Accrued compensation | (3,733) | (6,090) |
Deferred revenue | 11,797 | 830 |
Other current and long-term liabilities | (679) | (800) |
Net cash provided by operating activities | 26,384 | 22,747 |
Cash flows from investing activities | ||
Purchases of property and equipment, net of sales proceeds | (6,418) | (5,896) |
Net cash used in investing activities | (6,418) | (5,896) |
Cash flows from financing activities | ||
Payments under line of credit | (20,000) | (28,000) |
Borrowings under line of credit | 5,000 | 15,000 |
Payments of long-term debt | (2,808) | (2,848) |
Net cash used in financing activities | (17,808) | (15,848) |
Net increase in cash | 2,158 | 1,003 |
Cash - Beginning of year | 3,167 | 4,244 |
Cash - End of year | 5,325 | 5,247 |
Supplemental cash-flow information | ||
Interest paid, net of amount capitalized | 1,777 | 1,218 |
Non-cash investing activities | ||
Property and equipment additions in accounts payable and accrued expenses | $ 3,776 | $ 1,793 |
Description of business
Description of business | 3 Months Ended |
Oct. 31, 2022 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Description of business | Description of business The Duckhorn Portfolio, Inc. and its subsidiaries (the “Company” or “Management”) headquartered in St. Helena, CA, produces luxury and ultra-luxury wine across a portfolio of winery brands, including Duckhorn Vineyards, 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 |
Basis of presentation and recen
Basis of presentation and recent accounting pronouncements | 3 Months Ended |
Oct. 31, 2022 | |
Accounting Policies [Abstract] | |
Basis of presentation and recent accounting pronouncements | Basis of presentation and recent accounting pronouncements Basis of presentation The Company’s Condensed Consolidated Financial Statements are prepared in accordance with U.S. GAAP and Article 10 of the Securities and Exchange Commission’s Regulation S-X. 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 July 31, 2022 Condensed Consolidated Statement of Financial Position data contained in this Form 10-Q was derived from audited financial statements but does not include all disclosures required by accounting principles generally accepted in the United States of U.S. GAAP. The Condensed Consolidated Financial Statements are unaudited and should be read in conjunction with the audited consolidated financial statements and related notes thereto for the year ended July 31, 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 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 October 31, 2022 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 was $2.3 million and $2.4 million at October 31, 2022 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. In order to ease the potential burden in accounting for reference rate reform, ASU 2020-04 provides optional expedients and exceptions for applying U.S. GAAP to contracts, hedging relationships and other transactions that reference the LIBOR or another reference rate expected to be discontinued because of reference rate reform, if certain criteria are met. ASU 2020-04 applies only to contracts, hedging relationships and other transactions that reference LIBOR or another reference rate expected to be discontinued. The standard is effective immediately and may be applied prospectively through December 31, 2022. The Company adopted the standard effective August 1, 2022, the first day of fiscal year 2023. Effective August 30, 2022, the Company executed Amendment No. 8 to the Original First Lien Loan Agreement. The amendment transitioned the outstanding debt from a LIBOR-based interest rate to a Term SOFR based interest rate. The Amendment contemporaneously extended the maturity date of all facilities to November 1, 2023. The Company determined that the extension of the maturity date is a change to terms unrelated to replacement of a reference rate as contemplated by the guidance in ASU 2020-04. Accordingly, the Company is not eligible to elect the optional expedients under ASU 2020-04 for the contract modifications related to Amendment No. 8. Effective September 1, 2022, the Company amended its interest rate swap agreement. The amendment transitioned the LIBOR-based floating rate to a Term SOFR based floating rate. The modification of the agreement qualified for certain of the optional expedients under ASU 2020-04. The election of certain expedients did not have a material impact on the Condensed Consolidated Financial Statements during the three months ended October 31, 2022. 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 ASC 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 October 31, 2022 have had, or are expected to have, a material impact on the Condensed Consolidated Financial Statements. |
Revenue
Revenue | 3 Months Ended |
Oct. 31, 2022 | |
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 October 31, 2022 2021 Wholesale - Distributors 76.4 % 68.5 % Wholesale - California direct to trade (a) 15.8 16.4 DTC (b) 7.8 15.1 Net sales 100.0 % 100.0 % ________________________________________________ (a) Includes $0.6 million and $2.3 million of sales related to bulk, grape and merchandise sales for the three months ended October 31, 2022 and 2021, respectively. (b) Includes shipping and handling revenue of $0.1 million and $0.6 million for the three months ended October 31, 2022 and 2021, respectively. Charges related to credit loss on accounts receivable were immaterial for the three months ended October 31, 2022. Recoveries and reductions in the allowance for credit loss were $0.4 million in the three months ended October 31, 2021. As of October 31, 2022 and July 31, 2022, the allowance for credit losses was $0.4 million. 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 was $12.1 million and $0.3 million at October 31, 2022 and July 31, 2022, respectively, included in deferred revenue in the Condensed Consolidated Statement of Financial Position. In the three months ended October 31, 2022, the Company recognized revenue of $0.2 million which was included in the opening contract liability balance for the corresponding period. |
Inventories
Inventories | 3 Months Ended |
Oct. 31, 2022 | |
Inventory Disclosure [Abstract] | |
Inventories | Inventories Inventories were comprised of the following: (in thousands) October 31, July 31, Finished goods $ 104,764 $ 108,989 Work in progress 217,795 162,337 Raw materials 19,367 14,104 Total $ 341,926 $ 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 $4.6 million and $5.1 million at October 31, 2022 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 October 31, 2022 and 2021, the amount capitalized was $3.5 million and $2.6 million, respectively. The Company also capitalizes total lease costs related to leases used in the production of inventory. For the three months ended October 31, 2022 and 2021, the amount capitalized was $1.1 million and $1.1 million, respectively. |
Property and equipment, net
Property and equipment, net | 3 Months Ended |
Oct. 31, 2022 | |
Property, Plant and Equipment [Abstract] | |
Property and equipment, net | Property and equipment, net Property and equipment, net was comprised of the following: (in thousands) October 31, July 31, Land $ 136,328 $ 136,328 Buildings and improvements 70,847 70,813 Machinery and equipment 53,096 52,619 Vineyards and improvements 44,759 44,759 Barrels 29,817 30,067 Total depreciable property and equipment 334,847 334,586 Less: accumulated depreciation and amortization (74,204) (70,591) Total depreciable property and equipment, net 260,643 263,995 Construction in progress 13,681 5,664 Property and equipment, net $ 274,324 $ 269,659 Depreciation expense recognized in selling, general and administrative expenses was $0.4 million and $0.3 million for the three months ended October 31, 2022 and 2021, respectively. See Note 4 (Inventories) for depreciation expense capitalized into inventory. |
Accrued expenses
Accrued expenses | 3 Months Ended |
Oct. 31, 2022 | |
Payables and Accruals [Abstract] | |
Accrued expenses | Accrued expenses Accrued expenses were comprised of the following: (in thousands) October 31, July 31, Bulk wine and other received not invoiced $ 26,603 $ 143 Trade spend (a) 18,452 15,319 Income taxes payable 7,103 387 Barrel purchase 3,283 988 Deferred compensation liability (b) 2,561 2,142 Accrued professional fees 1,072 3,191 Accrued invoices and other accrued expenses 10,464 7,305 Total $ 69,538 $ 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 in settling its deferred compensation plan liability. The cash surrender value of the life insurance policies was $1.6 million and $1.8 million at October 31, 2022 and July 31, 2022, respectively. |
Debt
Debt | 3 Months Ended |
Oct. 31, 2022 | |
Debt Disclosure [Abstract] | |
Debt | Debt As of October 31, 2022, outstanding principal balances under the Original Debt Facility were $95.0 million for the revolving line of credit, $4.1 million for the capital expenditure loan, $95.1 million for the term loan (tranche one) and $13.1 million for term loan (tranche two). At October 31, 2022, the Company had unused capacity of $330.0 million under the original revolving line of credit, excluding the incremental seasonal borrowing amount of an additional $30.0 million of capacity. The weighted-average interest rate was 1.8% on the amount outstanding at October 31, 2022. There were no amounts outstanding on the letter of credit sub-facility or the swingline sub-facility at October 31, 2022. Included in interest expense in the Condensed Consolidated Statements of Operations, and in depreciation and amortization on the Condensed Consolidated Statements of Cash Flows, is amortization related to debt issuance costs of $0.4 million for both the three months ended October 31, 2022 and 2021, 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 net worth maximum and a fixed charge coverage ratio as defined in the Original Credit Facility. As of October 31, 2022, the Company was not in violation of any financial covenant. Amendments to the Original First Lien Loan 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 First Lien Loan 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. See Note 14 (Subsequent events) to our Condensed Consolidated Financial Statements for additional information. The Company does not anticipate the rate change to be material to its Condensed Consolidated Financial Statements. |
Derivative instruments
Derivative instruments | 3 Months Ended |
Oct. 31, 2022 | |
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 October 31, 2022 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 October 31, 2022, the Company held the following interest rate swap agreements, which fixed the interest rate on the applicable notional amount of outstanding variable rate debt: Notional amount Interest rate Effective date Expiration date $100,000 0.315% September 30, 2022 March 23, 2023 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 aligning settlement dates with expected barrel delivery and the anticipated payments to various coopers. The total notional amounts of the Company’s derivative instruments outstanding are as follows: (in thousands) October 31, July 31, Derivative instruments not designated as hedging instruments Interest rate swap contracts $ 100,000 $ 100,000 Foreign currency forward contracts 1,021 2,793 Total derivative instruments not designated as hedging instruments $ 101,021 $ 102,793 Results of period derivative activity The estimated fair value and classification of derivative instruments on the accompanying Condensed Consolidated Statements of Financial Position are as follows: (in thousands) October 31, July 31, Derivative instruments not designated as hedging instruments Classification Interest rate swap contracts Derivative instrument Other current assets $ 1,588 $ 1,443 Total interest rate swap contract assets $ 1,588 $ 1,443 Foreign currency forward contracts Derivative instrument Other current liabilities — 223 Total foreign currency contract liabilities $ — $ 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 October 31, (in thousands) Classification 2022 2021 Interest rate swap contracts Other income, net $ (145) $ (446) Foreign currency forward contracts Other income, net (223) 4 Total (gains) losses $ (368) $ (442) |
Fair value measurements
Fair value measurements | 3 Months Ended |
Oct. 31, 2022 | |
Fair Value Disclosures [Abstract] | |
Fair value measurements | Fair value measurements The Company applies a fair value hierarchy pursuant to ASC 820, Fair Value Measurement , which consists of three levels of inputs 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 agreement is estimated with the assistance of a third party, using inputs that can be corroborated by observable market data (Level 2 of the fair value hierarchy). Foreign currency forward contracts: The fair value of the Company’s outstanding foreign currency forward contracts is estimated with the assistance of a third party, using inputs that can be corroborated by observable market data (Level 2 of the fair value hierarchy). Deferred compensation plan: Contributions to the Company’s deferred compensation plan are managed by a third-party administrative agent. The fair value of the total contributed plan assets and liabilities are based on inputs that can be corroborated by observable market data (Level 2 of the fair value hierarchy). The Company’s other financial instruments consist mainly of cash, accounts receivable, accounts payable, accrued expenses and debt. The carrying value of all other financial instruments, except debt, approximates fair value due to the short-term nature of these assets and liabilities. The carrying value of the Company's debt approximates fair value as the interest rates are variable and reflective of market rates (Level 2 of the fair value hierarchy). The Company’s assets and liabilities measured and recorded at fair value on a recurring basis at October 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 $ — $ 1,588 $ — $ 1,588 Deferred compensation plan asset — 1,631 — 1,631 Liabilities Deferred compensation liability $ — $ 2,561 — $ 2,561 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 | 3 Months Ended |
Oct. 31, 2022 | |
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 has ongoing commitments to purchase barrels for approximately $8.4 million, of which approximately $6.7 million will be paid in Euros. In order to reduce the foreign exchange risk associated with the Euro to U.S. Dollar conversion rate, the Company entered into foreign currency forward contracts aligning settlement dates with expected barrel delivery and the anticipated 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 October 31, 2022, there were no material contingent obligations requiring accrual or disclosure. In the ordinary course of business, the Company enters into agreements containing standard indemnification provisions. The aggregate maximum potential future liability of the Company under such indemnification provisions is uncertain, as these involve potential future claims against the Company that have not occurred. The Company expects the risk of any future obligations under these indemnification provisions to be remote. As of October 31, 2022 and July 31, 2022, no amounts have been accrued related to such indemnification provisions. |
Equity-based compensation
Equity-based compensation | 3 Months Ended |
Oct. 31, 2022 | |
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 Equity 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 three months ended October 31, 2022 was $4.9 million. Restricted shares The following table represents restricted shares 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 October 31, 2022 — $ — 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 Stock option activity and activity regarding shares available for grant under the 2021 Plan is shown below: 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 — — Forfeited (112,912) 17.00 Expired (4,549) 18.08 Outstanding at October 31, 2022 2,506,128 $ 16.00 9.0 $ 203 Exercisable as of October 31, 2022 374,309 $ 17.12 7.6 The Company recognized equity compensation expense related to the 2021 Plan stock options in selling, general and administrative expense and capitalized a portion into inventory, as applicable, due to units vesting over their requisite service periods. Total recognized equity compensation expense related to the 2021 Plan stock options was $0.5 million and $0.5 million for the three months ended October 31, 2022 and 2021, respectively. The total unrecognized compensation expense related to the 2021 Plan stock options was $10.3 million as of October 31, 2022, which is expected to be recognized over a weighted-average period of 3.2 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 three months ended October 31, 2022: Three months ended October 31, 2022 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 355,993 14.43 Vested — — Forfeited (37,638) 17.00 Unvested as of October 31, 2022 732,964 $ 15.93 The Company recognized equity compensation expense related to the 2021 Plan RSUs in selling, general and administrative expense and capitalized a portion into inventory, as applicable, due to units vesting over their requisite service periods, of $0.7 million and $0.8 million, respectively, for the three months ended October 31, 2022 and 2021. The total unrecognized compensation expense related to the 2021 Plan RSUs was $10.0 million as of October 31, 2022, which is expected to be recognized over a weighted-average period of 3.1 years. Employee Stock Purchase Plan The Company adopted the 2021 Employee Stock Purchase Plan, which allows for the issuance of up to a total of 1,250,509 shares of the Company's common stock. An offering period under the Plan began on September 1, 2022 and will end on December 30, 2022. No purchases have been made under the ESPP for the three months ended October 31, 2022 or 2021. The fair value of ESPP shares is estimated at the date of grant using the Black-Scholes option pricing model. The following assumptions were applied in the model to estimate the grant-date fair value of the ESPP for the offering period that began on September 1, 2022. Three months ended October 31, 2022 Expected term (in years) (a) 0.33 Expected dividend yield (b) — Risk-free interest rate (c) 3.07 % Expected volatility (d) 41 % Stock price $ 18.38 ________________________________________________ (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 Company's historical and implied volatility, and considering a group of guideline public companies deemed to be comparable public peers within the Company’s industry. |
Earnings per share
Earnings per share | 3 Months Ended |
Oct. 31, 2022 | |
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 October 31, (in thousands, except share and per share amounts) 2022 2021 Numerator - Net income attributable to The Duckhorn Portfolio, Inc. $ 19,815 $ 21,273 Denominator: Weighted average number of shares outstanding for basic per share calculation 115,184,161 115,046,793 Effect of dilutive potential shares (a) : Stock options 11,976 167,269 Restricted stock awards 79,555 181,964 Adjusted weighted average shares outstanding for diluted per share calculation 115,275,692 115,396,026 Earnings per share attributable to The Duckhorn Portfolio, Inc. Basic $ 0.17 $ 0.18 Diluted $ 0.17 $ 0.18 Anti-dilutive shares: Stock options 60,022 2,925 Restricted stock awards 17,543 — _______________________________________ (a) Calculated using the treasury stock method. |
Income taxes
Income taxes | 3 Months Ended |
Oct. 31, 2022 | |
Income Tax Disclosure [Abstract] | |
Income taxes | Income taxes Income tax expense was $7.1 million, with an effective tax rate of 26.3%, for the three months ended October 31, 2022, compared to $7.4 million, with an effective tax rate of 25.7% for the three months ended October 31, 2021. 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 | 3 Months Ended |
Oct. 31, 2022 | |
Subsequent Events [Abstract] | |
Subsequent events | Subsequent events 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, 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's accounting assessment of the treatment of the amended and restated New Credit Agreement and related fees is ongoing, and is not expected to result in a material impact to the Company's financial statements for the three or six months ended January 31, 2023. |
Basis of presentation and rec_2
Basis of presentation and recent accounting pronouncements (Policies) | 3 Months Ended |
Oct. 31, 2022 | |
Accounting Policies [Abstract] | |
Basis of presentation | Basis of presentation The Company’s Condensed Consolidated Financial Statements are prepared in accordance with U.S. GAAP and Article 10 of the Securities and Exchange Commission’s Regulation S-X. 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 July 31, 2022 Condensed Consolidated Statement of Financial Position data contained in this Form 10-Q was derived from audited financial statements but does not include all disclosures required by accounting principles generally accepted in the United States of U.S. GAAP. The Condensed Consolidated Financial Statements are unaudited and should be read in conjunction with the audited consolidated financial statements and related notes thereto for the year ended July 31, 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 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. In order to ease the potential burden in accounting for reference rate reform, ASU 2020-04 provides optional expedients and exceptions for applying U.S. GAAP to contracts, hedging relationships and other transactions that reference the LIBOR or another reference rate expected to be discontinued because of reference rate reform, if certain criteria are met. ASU 2020-04 applies only to contracts, hedging relationships and other transactions that reference LIBOR or another reference rate expected to be discontinued. The standard is effective immediately and may be applied prospectively through December 31, 2022. The Company adopted the standard effective August 1, 2022, the first day of fiscal year 2023. Effective August 30, 2022, the Company executed Amendment No. 8 to the Original First Lien Loan Agreement. The amendment transitioned the outstanding debt from a LIBOR-based interest rate to a Term SOFR based interest rate. The Amendment contemporaneously extended the maturity date of all facilities to November 1, 2023. The Company determined that the extension of the maturity date is a change to terms unrelated to replacement of a reference rate as contemplated by the guidance in ASU 2020-04. Accordingly, the Company is not eligible to elect the optional expedients under ASU 2020-04 for the contract modifications related to Amendment No. 8. Effective September 1, 2022, the Company amended its interest rate swap agreement. The amendment transitioned the LIBOR-based floating rate to a Term SOFR based floating rate. The modification of the agreement qualified for certain of the optional expedients under ASU 2020-04. The election of certain expedients did not have a material impact on the Condensed Consolidated Financial Statements during the three months ended October 31, 2022. 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 ASC 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 October 31, 2022 have had, or are expected to have, a material impact on the Condensed Consolidated Financial Statements. |
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. |
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 October 31, 2022 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. |
Fair value measurements | The Company applies a fair value hierarchy pursuant to ASC 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 agreement is estimated with the assistance of a third party, using inputs that can be corroborated by observable market data (Level 2 of the fair value hierarchy). Foreign currency forward contracts: The fair value of the Company’s outstanding foreign currency forward contracts is estimated with the assistance of a third party, using inputs that can be corroborated by observable market data (Level 2 of the fair value hierarchy). Deferred compensation plan: Contributions to the Company’s deferred compensation plan are managed by a third-party administrative agent. The fair value of the total contributed plan assets and liabilities are based on inputs that can be corroborated by observable market data (Level 2 of the fair value hierarchy). The Company’s other financial instruments consist mainly of cash, accounts receivable, accounts payable, accrued expenses and debt. The carrying value of all other financial instruments, except debt, approximates fair value due to the short-term nature of these assets and liabilities. The carrying value of the Company's debt approximates fair value as the interest rates are variable and reflective of market rates (Level 2 of the fair value hierarchy). |
Revenue (Tables)
Revenue (Tables) | 3 Months Ended |
Oct. 31, 2022 | |
Revenue from Contract with Customer [Abstract] | |
Disaggregation of Revenue | The following table presents the percentages of consolidated net sales disaggregated by sales channels: Three months ended October 31, 2022 2021 Wholesale - Distributors 76.4 % 68.5 % Wholesale - California direct to trade (a) 15.8 16.4 DTC (b) 7.8 15.1 Net sales 100.0 % 100.0 % ________________________________________________ (a) Includes $0.6 million and $2.3 million of sales related to bulk, grape and merchandise sales for the three months ended October 31, 2022 and 2021, respectively. (b) Includes shipping and handling revenue of $0.1 million and $0.6 million for the three months ended October 31, 2022 and 2021, respectively. |
Inventories (Tables)
Inventories (Tables) | 3 Months Ended |
Oct. 31, 2022 | |
Inventory Disclosure [Abstract] | |
Schedule of Inventories | Inventories were comprised of the following: (in thousands) October 31, July 31, Finished goods $ 104,764 $ 108,989 Work in progress 217,795 162,337 Raw materials 19,367 14,104 Total $ 341,926 $ 285,430 |
Property and equipment, net (Ta
Property and equipment, net (Tables) | 3 Months Ended |
Oct. 31, 2022 | |
Property, Plant and Equipment [Abstract] | |
Property and Equipment | Property and equipment, net was comprised of the following: (in thousands) October 31, July 31, Land $ 136,328 $ 136,328 Buildings and improvements 70,847 70,813 Machinery and equipment 53,096 52,619 Vineyards and improvements 44,759 44,759 Barrels 29,817 30,067 Total depreciable property and equipment 334,847 334,586 Less: accumulated depreciation and amortization (74,204) (70,591) Total depreciable property and equipment, net 260,643 263,995 Construction in progress 13,681 5,664 Property and equipment, net $ 274,324 $ 269,659 |
Accrued expenses (Tables)
Accrued expenses (Tables) | 3 Months Ended |
Oct. 31, 2022 | |
Payables and Accruals [Abstract] | |
Schedule of Accrued Liabilities | Accrued expenses were comprised of the following: (in thousands) October 31, July 31, Bulk wine and other received not invoiced $ 26,603 $ 143 Trade spend (a) 18,452 15,319 Income taxes payable 7,103 387 Barrel purchase 3,283 988 Deferred compensation liability (b) 2,561 2,142 Accrued professional fees 1,072 3,191 Accrued invoices and other accrued expenses 10,464 7,305 Total $ 69,538 $ 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 in settling its deferred compensation plan liability. The cash surrender value of the life insurance policies was $1.6 million and $1.8 million at October 31, 2022 and July 31, 2022, respectively. |
Derivative instruments (Tables)
Derivative instruments (Tables) | 3 Months Ended |
Oct. 31, 2022 | |
Derivative Instruments and Hedging Activities Disclosure [Abstract] | |
Schedule of Interest Rate Derivatives | As of October 31, 2022, the Company held the following interest rate swap agreements, which fixed the interest rate on the applicable notional amount of outstanding variable rate debt: Notional amount Interest rate Effective date Expiration date $100,000 0.315% September 30, 2022 March 23, 2023 |
Schedule of Derivative Instruments | The total notional amounts of the Company’s derivative instruments outstanding are as follows: (in thousands) October 31, July 31, Derivative instruments not designated as hedging instruments Interest rate swap contracts $ 100,000 $ 100,000 Foreign currency forward contracts 1,021 2,793 Total derivative instruments not designated as hedging instruments $ 101,021 $ 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 are as follows: (in thousands) October 31, July 31, Derivative instruments not designated as hedging instruments Classification Interest rate swap contracts Derivative instrument Other current assets $ 1,588 $ 1,443 Total interest rate swap contract assets $ 1,588 $ 1,443 Foreign currency forward contracts Derivative instrument Other current liabilities — 223 Total foreign currency contract liabilities $ — $ 223 |
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 October 31, (in thousands) Classification 2022 2021 Interest rate swap contracts Other income, net $ (145) $ (446) Foreign currency forward contracts Other income, net (223) 4 Total (gains) losses $ (368) $ (442) |
Fair value measurements (Tables
Fair value measurements (Tables) | 3 Months Ended |
Oct. 31, 2022 | |
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 October 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 $ — $ 1,588 $ — $ 1,588 Deferred compensation plan asset — 1,631 — 1,631 Liabilities Deferred compensation liability $ — $ 2,561 — $ 2,561 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) | 3 Months Ended |
Oct. 31, 2022 | |
Share-Based Payment Arrangement [Abstract] | |
Schedule of Restricted Shares Activity | The following table represents restricted shares 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 October 31, 2022 — $ — |
Share-based Payment Arrangement, Option, Activity | Stock option activity and activity regarding shares available for grant under the 2021 Plan is shown below: 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 — — Forfeited (112,912) 17.00 Expired (4,549) 18.08 Outstanding at October 31, 2022 2,506,128 $ 16.00 9.0 $ 203 Exercisable as of October 31, 2022 374,309 $ 17.12 7.6 |
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 three months ended October 31, 2022: Three months ended October 31, 2022 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. |
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 355,993 14.43 Vested — — Forfeited (37,638) 17.00 Unvested as of October 31, 2022 732,964 $ 15.93 |
Schedule of Employee Stock Purchase Plan (ESPP) Valuation Assumptions | The following assumptions were applied in the model to estimate the grant-date fair value of the ESPP for the offering period that began on September 1, 2022. Three months ended October 31, 2022 Expected term (in years) (a) 0.33 Expected dividend yield (b) — Risk-free interest rate (c) 3.07 % Expected volatility (d) 41 % Stock price $ 18.38 ________________________________________________ (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 Company's historical and implied volatility, and considering a group of guideline public companies deemed to be comparable public peers within the Company’s industry. |
Earnings per share (Tables)
Earnings per share (Tables) | 3 Months Ended |
Oct. 31, 2022 | |
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 October 31, (in thousands, except share and per share amounts) 2022 2021 Numerator - Net income attributable to The Duckhorn Portfolio, Inc. $ 19,815 $ 21,273 Denominator: Weighted average number of shares outstanding for basic per share calculation 115,184,161 115,046,793 Effect of dilutive potential shares (a) : Stock options 11,976 167,269 Restricted stock awards 79,555 181,964 Adjusted weighted average shares outstanding for diluted per share calculation 115,275,692 115,396,026 Earnings per share attributable to The Duckhorn Portfolio, Inc. Basic $ 0.17 $ 0.18 Diluted $ 0.17 $ 0.18 Anti-dilutive shares: Stock options 60,022 2,925 Restricted stock awards 17,543 — _______________________________________ (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 |
Nov. 30, 2021 | Oct. 31, 2021 | |
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 | $ 0.5 |
Basis of presentation and rec_3
Basis of presentation and recent accounting pronouncements (Details) - USD ($) $ / shares in Units, $ in Millions | 3 Months Ended | 12 Months Ended |
Oct. 31, 2022 | 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, net assets | $ 2.3 | |
Variable Interest Entity, Primary Beneficiary | ||
Accounting Policies [Line Items] | ||
Variable interest entity, ownership percentage | 76.20% | 76.20% |
Variable interest entity, net assets | $ 2.4 |
Revenue - Disaggregation of Rev
Revenue - Disaggregation of Revenue (Details) $ in Thousands | 3 Months Ended | |
Oct. 31, 2022 USD ($) | Oct. 31, 2021 USD ($) | |
Disaggregation of Revenue [Line Items] | ||
Revenue from contract with customer, percent | 1 | 1 |
Revenue | $ 108,171 | $ 104,181 |
Wholesale - Distributors | ||
Disaggregation of Revenue [Line Items] | ||
Revenue from contract with customer, percent | 0.764 | 0.685 |
Wholesale - California direct to trade | ||
Disaggregation of Revenue [Line Items] | ||
Revenue from contract with customer, percent | 0.158 | 0.164 |
DTC | ||
Disaggregation of Revenue [Line Items] | ||
Revenue from contract with customer, percent | 0.078 | 0.151 |
Bulk, Grape and Merchandise Sales | ||
Disaggregation of Revenue [Line Items] | ||
Revenue | $ 600 | $ 2,300 |
Shipping and Handling | ||
Disaggregation of Revenue [Line Items] | ||
Revenue | $ 100 | $ 600 |
Revenue - Narrative (Details)
Revenue - Narrative (Details) - USD ($) $ in Thousands | 3 Months Ended | ||
Oct. 31, 2022 | Oct. 31, 2021 | Jul. 31, 2022 | |
Revenue from Contract with Customer [Abstract] | |||
Recoveries and reductions in the allowance for credit loss | $ 400 | ||
Allowance for credit losses on current accounts receivable | $ 400 | $ 400 | |
Deferred revenue | 12,069 | $ 272 | |
Revenue recognized | $ 200 |
Inventories - Schedule of Inven
Inventories - Schedule of Inventories (Details) - USD ($) $ in Thousands | Oct. 31, 2022 | Jul. 31, 2022 |
Inventory Disclosure [Abstract] | ||
Finished goods | $ 104,764 | $ 108,989 |
Work in progress | 217,795 | 162,337 |
Raw materials | 19,367 | 14,104 |
Total | $ 341,926 | $ 285,430 |
Inventories - Narrative (Detail
Inventories - Narrative (Details) - USD ($) $ in Millions | 3 Months Ended | ||
Oct. 31, 2022 | Oct. 31, 2021 | Jul. 31, 2022 | |
Inventory Disclosure [Abstract] | |||
Excess and obsolete inventory reserve | $ 4.6 | $ 5.1 | |
Inventory, capitalized costs incurred | 3.5 | $ 2.6 | |
Capitalized leases costs used in production of inventory | $ 1.1 | $ 1.1 |
Property and equipment, net - S
Property and equipment, net - Schedule of Property and Equipment (Details) - USD ($) $ in Thousands | Oct. 31, 2022 | Jul. 31, 2022 |
Property, Plant and Equipment [Line Items] | ||
Property and equipment, net | $ 274,324 | $ 269,659 |
Depreciable Property and Equipment | ||
Property, Plant and Equipment [Line Items] | ||
Total depreciable property and equipment | 334,847 | 334,586 |
Less: accumulated depreciation and amortization | (74,204) | (70,591) |
Property and equipment, net | 260,643 | 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 | 53,096 | 52,619 |
Vineyards and improvements | ||
Property, Plant and Equipment [Line Items] | ||
Total depreciable property and equipment | 44,759 | 44,759 |
Barrels | ||
Property, Plant and Equipment [Line Items] | ||
Total depreciable property and equipment | 29,817 | 30,067 |
Construction in progress | ||
Property, Plant and Equipment [Line Items] | ||
Total depreciable property and equipment | $ 13,681 | $ 5,664 |
Property and equipment, net - N
Property and equipment, net - Narrative (Details) - USD ($) $ in Millions | 3 Months Ended | |
Oct. 31, 2022 | Oct. 31, 2021 | |
Property, Plant and Equipment [Abstract] | ||
Depreciation | $ 0.4 | $ 0.3 |
Accrued expenses (Details)
Accrued expenses (Details) - USD ($) $ in Thousands | Oct. 31, 2022 | Jul. 31, 2022 |
Payables and Accruals [Abstract] | ||
Bulk wine and other received not invoiced | $ 26,603 | $ 143 |
Trade spend | 18,452 | 15,319 |
Income taxes payable | 7,103 | 387 |
Barrel purchase | 3,283 | 988 |
Deferred compensation liability | 2,561 | 2,142 |
Accrued professional fees | 1,072 | 3,191 |
Accrued invoices and other accrued expenses | 10,464 | 7,305 |
Total | 69,538 | 29,475 |
Cash surrender value of life insurance | $ 1,600 | $ 1,800 |
Debt (Details)
Debt (Details) - USD ($) | 3 Months Ended | ||
Oct. 31, 2022 | Oct. 31, 2021 | Nov. 04, 2022 | |
Debt Instrument [Line Items] | |||
Amortization of debt issuance costs | $ 402,000 | $ 402,000 | |
Capital Expenditure Loan | |||
Debt Instrument [Line Items] | |||
Outstanding principal balance | 4,100,000 | ||
First Lien Loan Agreement, Tranche One | Secured Debt | |||
Debt Instrument [Line Items] | |||
Outstanding principal balance | 95,100,000 | ||
First Lien Loan Agreement, Tranche Two | Secured Debt | |||
Debt Instrument [Line Items] | |||
Outstanding principal balance | 13,100,000 | ||
First Lien Senior Secured Credit Facilities | Subsequent Event | |||
Debt Instrument [Line Items] | |||
Additional borrowing capacity | $ 400,000,000 | ||
Maximum borrowing capacity | 675,800,000 | ||
Revolving Line of Credit | |||
Debt Instrument [Line Items] | |||
Line of credit | 95,000,000 | ||
Unused capacity | 330,000,000 | ||
Additional borrowing capacity | $ 30,000,000 | ||
Weighted average interest rate (percent) | 1.80% | ||
Revolving Line of Credit | First Lien Senior Secured Credit Facilities | Subsequent Event | |||
Debt Instrument [Line Items] | |||
Maximum borrowing capacity | 425,000,000 | ||
Letter of Credit Sub-Facility | |||
Debt Instrument [Line Items] | |||
Line of credit | $ 0 | ||
Swingline Sub-Facility | |||
Debt Instrument [Line Items] | |||
Line of credit | $ 0 | ||
Term Loan Facility | First Lien Senior Secured Credit Facilities | Subsequent Event | |||
Debt Instrument [Line Items] | |||
Maximum borrowing capacity | 225,800,000 | ||
Delayed Draw Term Loan Facility | First Lien Senior Secured Credit Facilities | Subsequent Event | |||
Debt Instrument [Line Items] | |||
Maximum borrowing capacity | $ 25,000,000 |
Derivative instruments - Narrat
Derivative instruments - Narrative (Details) - USD ($) | Oct. 31, 2022 | 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) - Interest Rate Swap Expiring March 2023 $ in Thousands | Oct. 31, 2022 USD ($) |
Derivative [Line Items] | |
Notional amount | $ 100,000 |
Interest rate (percent) | 0.315% |
Derivative instruments - Total
Derivative instruments - Total Notional Amount (Details) - Not Designated as Hedging Instrument - USD ($) $ in Thousands | Oct. 31, 2022 | Jul. 31, 2022 |
Derivative [Line Items] | ||
Notional amount | $ 101,021 | $ 102,793 |
Interest rate swap contracts | ||
Derivative [Line Items] | ||
Notional amount | 100,000 | 100,000 |
Foreign currency forward contracts | ||
Derivative [Line Items] | ||
Notional amount | $ 1,021 | $ 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 | Oct. 31, 2022 | Jul. 31, 2022 |
Interest rate swap contracts | ||
Derivatives, Fair Value [Line Items] | ||
Derivative asset | $ 1,588 | $ 1,443 |
Interest rate swap contracts | Other current assets | ||
Derivatives, Fair Value [Line Items] | ||
Derivative asset | 1,588 | 1,443 |
Foreign currency forward contracts | ||
Derivatives, Fair Value [Line Items] | ||
Derivative liability | 0 | 223 |
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 | |
Oct. 31, 2022 | Oct. 31, 2021 | |
Derivative [Line Items] | ||
Total (gains) losses | $ (368) | $ (442) |
Not Designated as Hedging Instrument | ||
Derivative [Line Items] | ||
Total (gains) losses | (368) | (442) |
Interest rate swap contracts | Not Designated as Hedging Instrument | ||
Derivative [Line Items] | ||
Total (gains) losses | (145) | (446) |
Foreign currency forward contracts | Not Designated as Hedging Instrument | ||
Derivative [Line Items] | ||
Total (gains) losses | $ (223) | $ 4 |
Fair value measurements - Asset
Fair value measurements - Assets and Liabilities Measured on a Recurring Basis (Details) - Fair Value, Recurring - USD ($) $ in Thousands | Oct. 31, 2022 | Jul. 31, 2022 |
Assets | ||
Deferred compensation plan asset | $ 1,631 | $ 1,753 |
Liabilities | ||
Deferred compensation liability | 2,561 | 2,142 |
Interest rate swap contracts | ||
Assets | ||
Derivative asset | 1,588 | 1,443 |
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 |
Significant other observable inputs (Level 2) | ||
Assets | ||
Deferred compensation plan asset | 1,631 | 1,753 |
Liabilities | ||
Deferred compensation liability | 2,561 | 2,142 |
Significant other observable inputs (Level 2) | Interest rate swap contracts | ||
Assets | ||
Derivative asset | 1,588 | 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 | ||
Deferred compensation liability | 0 | 0 |
Significant unobservable inputs (Level 3) | Interest rate swap contracts | ||
Assets | ||
Derivative asset | $ 0 | $ 0 |
Commitments and contingencies -
Commitments and contingencies - Narrative (Details) - USD ($) | 3 Months Ended | 12 Months Ended |
Oct. 31, 2022 | Jul. 31, 2022 | |
Commitments and Contingencies [Line Items] | ||
Purchase commitment, remaining amount committed | $ 8,400,000 | |
Indemnification Agreement | ||
Commitments and Contingencies [Line Items] | ||
Accruals relating to indemnification provisions | 0 | $ 0 |
Euro | ||
Commitments and Contingencies [Line Items] | ||
Purchase commitment, remaining amount committed | 6,700,000 | |
Inventories | ||
Commitments and Contingencies [Line Items] | ||
Long-term purchase commitment, amount purchased, cost | $ 71,000,000 | $ 68,100,000 |
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 | ||
Oct. 31, 2022 | Oct. 31, 2021 | Mar. 31, 2021 | |
2016 Equity Plan | Restricted Stock | |||
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 (shares) | 14,003,560 | ||
Unrecognized compensation expense of stock options | 10.3 | ||
2021 Equity Incentive Plan | Stock Option | |||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||
Share-based payment arrangement, expense | $ 0.5 | $ 0.5 | |
Unrecognized compensation expense, period for recognition (years) | 3 years 2 months 12 days | ||
2021 Equity Incentive Plan | RSU | |||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||
Share-based payment arrangement, expense | $ 0.7 | $ 0.8 | |
Unrecognized compensation expense, period for recognition (years) | 3 years 1 month 6 days | ||
Unrecognized compensation expense | $ 10 | ||
2021 Employee Stock Purchase Plan | Employee Stock | |||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||
Shares available for future grants (shares) | 1,250,509 | ||
Purchases under ESPP (in shares) | 0 | 0 |
Equity-based compensation - Act
Equity-based compensation - Activity for Awards (Details) | 3 Months Ended |
Oct. 31, 2022 $ / shares shares | |
Restricted Stock | 2016 Equity Plan | |
Number of units | |
Unvested, beginning (in shares) | shares | 266,158 |
Granted (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 (shares) | shares | 355,993 |
Vested (in shares) | shares | 0 |
Forfeited (in shares) | shares | (37,638) |
Unvested, ending (in shares) | shares | 732,964 |
Weighted-average grant-date fair value | |
Unvested, beginning (in dollars per share) | $ / shares | $ 17.32 |
Granted (in dollars per share) | $ / shares | 14.43 |
Vested (in dollars per share) | $ / shares | 0 |
Forfeited (in dollars per share) | $ / shares | 17 |
Unvested, ending (in dollars per share) | $ / shares | $ 15.93 |
Equity-based compensation - Sto
Equity-based compensation - Stock Option Activity (Details) - 2021 Equity Incentive Plan - USD ($) $ / shares in Units, $ in Thousands | 3 Months Ended | 12 Months Ended |
Oct. 31, 2022 | Jul. 31, 2022 | |
Number of options | ||
Outstanding, beginning (shares) | 1,555,610 | |
Granted (shares) | 1,067,979 | |
Exercised (shares) | 0 | |
Forfeited (shares) | (112,912) | |
Expired (shares) | (4,549) | |
Outstanding, ending (shares) | 2,506,128 | 1,555,610 |
Exercisable (shares) | 374,309 | |
Weighted-average exercise price | ||
Outstanding, beginning (in dollars per share) | $ 17.15 | |
Granted (in dollars per share) | 14.43 | |
Exercised (in dollars per share) | 0 | |
Forfeited (in dollars per share) | 17 | |
Expired (in dollars per share) | 18.08 | |
Outstanding, ending (in dollars per share) | 16 | $ 17.15 |
Exercisable (in dollars per share) | $ 17.12 | |
Share-based Compensation Arrangement by Share-based Payment Award, Options, Additional Disclosures [Abstract] | ||
Weighted-average remaining contractual life (in years) | 9 years | 8 years 8 months 12 days |
Exercisable, weighted-average remaining contractual life (in years) | 7 years 7 months 6 days | |
Aggregate intrinsic value | $ 203 | $ 3,847 |
Exercisable, aggregate intrinsic value |
Equity-based compensation - Val
Equity-based compensation - Valuation Assumptions (Details) | 3 Months Ended |
Oct. 31, 2022 $ / shares | |
2021 Equity Incentive Plan | Stock Option | |
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 |
2021 Employee Stock Purchase Plan | Employee Stock | |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |
Expected term (in years) | 3 months 29 days |
Expected dividend yield (percent) | 0% |
Risk-free interest rate (percent) | 3.07% |
Expected volatility (percent) | 41% |
Stock price (in dollars per share) | $ 18.38 |
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 | |
Oct. 31, 2022 | Oct. 31, 2021 | |
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | ||
Numerator - Net income attributable to The Duckhorn Portfolio, Inc. | $ 19,815 | $ 21,273 |
Denominator: | ||
Weighted average number of shares of outstanding for basic per share calculation (in shares) | 115,184,161 | 115,046,793 |
Adjusted weighted average shares outstanding for diluted per share calculation (in shares) | 115,275,692 | 115,396,026 |
Earnings per share attributable to The Duckhorn Portfolio, Inc. | ||
Basic (in dollars per share) | $ 0.17 | $ 0.18 |
Diluted (in dollars per share) | $ 0.17 | $ 0.18 |
Stock Option | ||
Denominator: | ||
Effect of dilutive potential shares (in shares) | 11,976 | 167,269 |
Earnings per share attributable to The Duckhorn Portfolio, Inc. | ||
Anti-dilutive shares (in shares) | 60,022 | 2,925 |
Restricted Stock | ||
Denominator: | ||
Effect of dilutive potential shares (in shares) | 79,555 | 181,964 |
Earnings per share attributable to The Duckhorn Portfolio, Inc. | ||
Anti-dilutive shares (in shares) | 17,543 | 0 |
Income taxes (Details)
Income taxes (Details) - USD ($) $ in Thousands | 3 Months Ended | |
Oct. 31, 2022 | Oct. 31, 2021 | |
Income Tax Disclosure [Abstract] | ||
Income tax expense | $ 7,087 | $ 7,377 |
Effective income tax rate, percent | 26.30% | 25.70% |
Subsequent events (Details)
Subsequent events (Details) - USD ($) | Nov. 04, 2022 | Oct. 31, 2022 | Aug. 31, 2018 | Dec. 31, 2016 |
First Lien Loan Agreement, Tranche One | Secured Debt | ||||
Subsequent Event [Line Items] | ||||
Secured debt | $ 135,000,000 | |||
First Lien Loan Agreement, Tranche Two | Secured Debt | ||||
Subsequent Event [Line Items] | ||||
Secured debt | $ 25,000,000 | |||
Capital Expenditure Facility | Secured Debt | ||||
Subsequent Event [Line Items] | ||||
Secured debt | $ 25,000,000 | |||
Revolving Line of Credit | ||||
Subsequent Event [Line Items] | ||||
Additional borrowing capacity | $ 30,000,000 | |||
Subsequent Event | First Lien Senior Secured Credit Facilities | ||||
Subsequent Event [Line Items] | ||||
Maximum borrowing capacity | $ 675,800,000 | |||
Additional borrowing capacity | $ 400,000,000 | |||
Subsequent Event | First Lien Senior Secured Credit Facilities | Maximum | ||||
Subsequent Event [Line Items] | ||||
Debt capitalization ratio | 0.55 | |||
Subsequent Event | First Lien Senior Secured Credit Facilities | Minimum | ||||
Subsequent Event [Line Items] | ||||
Fixed change coverage ratio | 1.15 | |||
Subsequent Event | First Lien Senior Secured Credit Facilities | SOFR | Less Than or Equal to 33% of Average Availability | ||||
Subsequent Event [Line Items] | ||||
Loan margin (percent) | 1.50% | |||
Subsequent Event | First Lien Senior Secured Credit Facilities | SOFR | Greater Than 33% and Less Than or Equal to 66% of Average Availability | ||||
Subsequent Event [Line Items] | ||||
Loan margin (percent) | 1.25% | |||
Subsequent Event | First Lien Senior Secured Credit Facilities | SOFR | Greater Than 66% of Average Availability | ||||
Subsequent Event [Line Items] | ||||
Loan margin (percent) | 1% | |||
Subsequent Event | Revolving Line of Credit | First Lien Senior Secured Credit Facilities | ||||
Subsequent Event [Line Items] | ||||
Maximum borrowing capacity | $ 425,000,000 | |||
Subsequent Event | Term Loan Facility | First Lien Senior Secured Credit Facilities | ||||
Subsequent Event [Line Items] | ||||
Maximum borrowing capacity | 225,800,000 | |||
Subsequent Event | Delayed Draw Term Loan Facility | First Lien Senior Secured Credit Facilities | ||||
Subsequent Event [Line Items] | ||||
Maximum borrowing capacity | $ 25,000,000 | |||
Subsequent Event | Term Loan and Delayed Draw Term Loan Facilities | First Lien Senior Secured Credit Facilities | SOFR | ||||
Subsequent Event [Line Items] | ||||
Loan margin (percent) | 1.625% | |||
Subsequent Event | Term Loan and Delayed Draw Term Loan Facilities | First Lien Senior Secured Credit Facilities | SOFR | Variable Rate Component One | ||||
Subsequent Event [Line Items] | ||||
Basis spread on variable rate (percent) | 0.10% | |||
Subsequent Event | Term Loan and Delayed Draw Term Loan Facilities | First Lien Senior Secured Credit Facilities | SOFR | Variable Rate Component Two | ||||
Subsequent Event [Line Items] | ||||
Basis spread on variable rate (percent) | 0.15% |