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Crimson Wine Group, Ltd (CWGL) SEC Filing 10-Q Quarterly report for the period ending Tuesday, March 31, 2020

Crimson Wine Group, Ltd

CIK: 1562151 Ticker: CWGL
Cover Page - shares
3 Months Ended
Mar. 31, 2020
May 01, 2020
Document And Entity Information [Abstract]  
Document Type10-Q 
Amendment Flagfalse 
Entity Emerging Growth Companyfalse 
Entity Small Businesstrue 
Document Period End DateMar. 31, 2020 
Document Fiscal Period FocusQ1 
Document Fiscal Year Focus2020 
Entity Registrant NameCrimson Wine Group, Ltd 
Entity Central Index Key0001562151 
Current Fiscal Year End Date--12-31 
Entity Filer CategoryAccelerated Filer 
Entity Shell Companyfalse 
Entity Current Reporting StatusYes 
Entity Interactive Data CurrentYes 
Entity Common Stock, Shares Outstanding 23,243,476
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C.  20549
 
FORM 10-Q

[X]    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2020
OR
[  ]   TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from
 
to
 
Commission File Number 000-54866

CRIMSON WINE GROUP, LTD.
(Exact name of registrant as specified in its Charter)
Delaware
(State or Other Jurisdiction of
13-3607383
(I.R.S. Employer
Incorporation or Organization)
Identification Number)
2700 Napa Valley Corporate Drive, Suite B, Napa, California
(Address of Principal Executive Offices)
94558
(Zip Code)
(800)  486-0503
(Registrant’s Telephone Number, Including Area Code)

N/A
(Former Name, Former Address and Former Fiscal Year, If Changed Since Last Report)
______________________
Securities registered pursuant to Section 12(b) of the Act: None

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. 
YES
X
 
 
NO
 
 

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this Chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).       
YES
X
 
 
NO
 
 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company.  See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer  ¨
 
Accelerated filer   x
Non-accelerated filer    ¨
 
Smaller reporting company  x
 
 
Emerging growth company  ¨
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
YES
 
 
 
NO
X
 

On May 1, 2020 there were 23,243,476 outstanding shares of the Registrant’s Common Stock, par value $0.01 per share.



CRIMSON WINE GROUP, LTD.
TABLE OF CONTENTS

 
 
Page Number
PART I. FINANCIAL INFORMATION
Item 1.
 
 
 
 
 
 
Item 2.
Item 3.
Item 4.
 
 
 
PART II. OTHER INFORMATION
 
 
 
Item 1.
Item 1A.
Item 2.
Item 3.
Item 4.
Item 5.
Item 6.
 




PART I – FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)

CRIMSON WINE GROUP, LTD.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except share amounts and par value)
(Unaudited)

 
March 31, 2020
 
December 31, 2019
Assets
 
 
 
Current assets:
 
 
 
Cash and cash equivalents
$
15,576

 
$
12,986

Investments available for sale
10,275

 
10,006

Accounts receivable, net
7,714

 
10,131

Inventory
71,095

 
73,498

Other current assets
2,678

 
1,904

Assets held for sale
588

 
2,383

Total current assets
107,926

 
110,908

Property and equipment, net
117,692

 
119,112

Goodwill
1,262

 
1,262

Intangible and other non-current assets, net
10,582

 
10,950

Total non-current assets
129,536

 
131,324

Total assets
$
237,462

 
$
242,232

Liabilities
 

 
 

Current liabilities:
 

 
 

Accounts payable and accrued liabilities
$
6,617

 
$
10,368

Customer deposits
743

 
405

Current portion of long-term debt, net of unamortized loan fees
1,126

 
1,127

Total current liabilities
8,486

 
11,900

Long-term debt, net of current portion and unamortized loan fees
20,772

 
21,054

Deferred tax liability, net
4,183

 
4,178

Other non-current liabilities
221

 
255

Total non-current liabilities
25,176

 
25,487

Total liabilities
33,662

 
37,387

Commitments and contingencies (Note 13)


 


Equity
 

 
 

Common shares, par value $0.01 per share, authorized 150,000,000 shares; 23,243,476 shares issued and outstanding at March 31, 2020 and December 31, 2019
232

 
232

Additional paid-in capital
277,529

 
277,522

Accumulated other comprehensive income
26

 
12

Accumulated deficit
(73,987
)
 
(72,921
)
Total equity
203,800

 
204,845

Total liabilities and equity
$
237,462

 
$
242,232


See accompanying notes to unaudited interim condensed consolidated financial statements.

1


CRIMSON WINE GROUP, LTD.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share amounts)
(Unaudited)
 
Three Months Ended
March 31,
 
2020
 
2019
Net sales
$
14,470

 
$
15,165

Cost of sales
8,505

 
8,708

Gross profit
5,965

 
6,457

Operating expenses:
 

 
 

Sales and marketing
3,951

 
4,324

General and administrative
3,082

 
2,787

Total operating expenses
7,033

 
7,111

Net gain on disposal of property and equipment
(14
)
 
(77
)
Restructuring costs
507

 
76

Loss from operations
(1,561
)
 
(653
)
Other (expense) income:
 

 
 

Interest expense, net
(323
)
 
(321
)
Other income (expense), net
167

 
(23
)
Total other expense, net
(156
)
 
(344
)
Loss before income taxes
(1,717
)
 
(997
)
Income tax benefit
(651
)
 
(292
)
Net loss
$
(1,066
)
 
$
(705
)
Basic and fully diluted weighted-average shares outstanding
23,243

 
23,633

Basic and fully diluted loss per share
$
(0.05
)
 
$
(0.03
)

See accompanying notes to unaudited interim condensed consolidated financial statements.


2


໿CRIMSON WINE GROUP, LTD.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSSES
(In thousands)
(Unaudited)
 
Three Months Ended March 31,
 
2020
 
2019
Net loss
$
(1,066
)
 
$
(705
)
Other comprehensive income:
 
 
 
Net unrealized holding gains on investments arising during the period, net of tax
14

 
19

Comprehensive loss
$
(1,052
)
 
$
(686
)


See accompanying notes to unaudited interim condensed consolidated financial statements.


3


CRIMSON WINE GROUP, LTD.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)

 
Three Months Ended March 31,
 
2020
 
2019
Net cash flows from operating activities:
 
 
 
Net loss
$
(1,066
)
 
$
(705
)
Adjustments to reconcile net loss to net cash provided by (used in) operations:
 
 
 
Depreciation and amortization of property and equipment
1,822

 
1,981

Amortization of intangible assets
321

 
323

Loss on write-down of inventory
219

 
106

Provision for doubtful accounts
68

 

Net gain on disposal of property and equipment
(14
)
 
(77
)
Restructuring charges
507

 
76

Impairment charges

 
50

   Stock-based compensation
7

 

Net change in operating assets and liabilities:
 
 
 
Accounts receivable
2,349

 
1,891

Inventory
2,184

 
2,651

Other current assets
(774
)
 
(653
)
Other non-current assets
47

 
(303
)
Accounts payable and accrued liabilities
(4,240
)
 
(7,138
)
Other payables and accruals
338

 
232

Other non-current liabilities
(34
)
 
39

Net cash provided by (used in) operating activities
1,734

 
(1,527
)
Net cash flows from investing activities:
 

 
 

Purchase of investments available for sale
(5,250
)
 
(5,000
)
Redemptions of investments available for sale
5,000

 
7,500

Acquisition of property and equipment
(453
)
 
(1,197
)
Proceeds from disposals of property and equipment
1,844

 
78

Net cash provided by investing activities
1,141

 
1,381

Net cash flows from financing activities:
 

 
 

Principal payments on long-term debt
(285
)
 
(285
)
Repurchase of common stock

 
(1,059
)
Payment of contingent consideration

 
(112
)
Net cash used in financing activities
(285
)
 
(1,456
)
Net increase (decrease) in cash and cash equivalents
2,590

 
(1,602
)
Cash and cash equivalents - beginning of period
12,986

 
9,376

Cash and cash equivalents - end of period
$
15,576

 
$
7,774

Supplemental disclosure of cash flow information:
 

 
 

Cash paid during the period for:
 

 
 

Interest, net of capitalized interest
$
327

 
$
344

Income tax payments, net
$

 
$

Non-cash investing activity:
 

 
 
Unrealized holding gains on investments, net of tax
$
14

 
$
19

Acquisition of property and equipment accrued but not yet paid
$
122

 
$
50


See accompanying notes to unaudited interim condensed consolidated financial statements.

4


CRIMSON WINE GROUP, LTD.
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
(In thousands, except share amounts)

 
 
 
 
 
 
 
Accumulated
 
 
 
 
 
 
 
Additional
 
Other
 
 
 
 
 
Common Stock
 
Paid-In
 
Comprehensive
 
Accumulated
 
 
 
Shares
 
Amount
 
Capital
 
(Loss) Income
 
Deficit
 
Total
Balance, December 31, 2018
23,714,208

 
$
237

 
$
277,520

 
$
(19
)
 
$
(64,559
)
 
$
213,179

Net loss

 

 

 

 
(705
)
 
(705
)
Other comprehensive income

 

 

 
19

 

 
19

Repurchase of common stock
(130,686
)
 
(1
)
 

 

 
(1,058
)
 
(1,059
)
Balance, March 31, 2019
23,583,522

 
$
236

 
$
277,520

 
$

 
$
(66,322
)
 
$
211,434

 
 
 
 
 
 
 
 
 
 
 
 
Balance, December 31, 2019
23,243,476

 
$
232

 
$
277,522

 
$
12

 
$
(72,921
)
 
$
204,845

Net loss

 

 

 

 
(1,066
)
 
(1,066
)
Other comprehensive income

 

 

 
14

 

 
14

     Stock-based compensation

 

 
7

 

 

 
7

Balance, March 31, 2020
23,243,476

 
$
232

 
$
277,529

 
$
26

 
$
(73,987
)
 
$
203,800


See accompanying notes to unaudited interim condensed consolidated financial statements.


5


CRIMSON WINE GROUP, LTD.
Notes to Unaudited Interim Condensed Consolidated Financial Statements

1.
Background and Basis of Presentation

Background

Crimson Wine Group, Ltd. and its subsidiaries (collectively, “Crimson” or the “Company”) is a Delaware corporation that has been conducting business since 1991. Crimson is in the business of producing and selling ultra-premium plus wines (i.e., wines that retail for over $16 per 750ml bottle). Crimson is headquartered in Napa, California and through its subsidiaries owns seven primary wine estates and brands: Pine Ridge Vineyards, Archery Summit, Chamisal Vineyards, Seghesio Family Vineyards, Double Canyon, Seven Hills Winery and Malene Wines.

Financial Statement Preparation

The accompanying unaudited interim condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the U.S. (“GAAP”) and pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”) for interim financial information. The unaudited interim condensed consolidated financial statements, which reflect all adjustments (consisting of normal recurring items or items discussed herein) that management believes necessary to fairly state results of interim operations, should be read in conjunction with the Notes to Consolidated Financial Statements (including the Significant Accounting Policies and Recent Accounting Pronouncements) included in the Company’s audited consolidated financial statements for the year ended December 31, 2019, as filed with the SEC on Form 10-K (the “2019 Report”). Results of operations for interim periods are not necessarily indicative of annual results of operations.  The unaudited condensed consolidated balance sheet at December 31, 2019 was extracted from the audited annual consolidated financial statements and does not include all disclosures required by GAAP for annual financial statements.

Significant Accounting Policies

Except as described below under Recent Accounting Pronouncements and in Note 13 “Commitments and Contingencies,” there were no changes to the Company’s significant accounting policies during the three months ended March 31, 2020. See Note 2 of the 2019 Report for a description of the Company’s significant accounting policies.

Reclassifications

Certain reclassifications have been made to prior period unaudited interim condensed consolidated balance sheets and statements of cash flows to conform to current period presentation. The reclassifications had no impact on previously reported net (loss) income, equity or cash flows.


6


Recent Accounting Pronouncements

Subsequent to the filing of the 2019 Report there were no accounting pronouncements issued by the Financial Accounting Standards Board (“FASB”) that would have a material effect on Crimson’s unaudited interim condensed consolidated financial statements. The following table provides an update of accounting pronouncements applicable to Crimson that are not yet adopted as of March 31, 2020 and a description of accounting pronouncements that were adopted during the three months ended March 31, 2020:
໿
Standard
 
Description
 
Date of adoption
 
Effect on the financial statements or other significant matters
Standards that are not yet adopted
Accounting Standard Update (“ASU”) 2019-12, Income Taxes (Topic 740)
 
Simplifies the accounting for income taxes by removing certain Codification exceptions and others to be discussed.
 
January 1, 2021, early adoption is permitted for the Company.
 
Management is currently evaluating the potential impact of this guidance on the Company’s unaudited interim condensed consolidated financial statements and does not predict there to be a material impact.
Standards that were adopted
ASU 2017-04, Goodwill and Other (Topic 350)
 
Eliminates Step 2 from the goodwill impairment test. Entities should perform their goodwill impairment tests by comparing the fair value of a reporting unit with its carrying amount and recognize an impairment charge for the amount by which the carrying amount exceeds the reporting unit’s fair value.

 
January 1, 2020
 
The adoption of this standard did not have a material impact on the Company’s unaudited interim condensed consolidated financial statements.
ASU 2018-13, Fair Value Measurement (Topic 820)
 
Improves the disclosures related to fair value by removing, modifying or adding disclosure requirements related to recurring and non-recurring fair value measurements.
 
January 1, 2020
 
The adoption of this standard did not have a material impact on the Company’s unaudited interim condensed consolidated financial statements.
ASU 2018-15, Intangibles - Goodwill and Other - Internal-Use Software (Subtopic 350-40)
 
Aligns the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirement of capitalizing implementation costs incurred to develop or obtain internal-use software (and hosting arrangements that include internal-use software license).
 
January 1, 2020
 
The adoption of this standard did not have a material impact on the Company’s unaudited interim condensed consolidated financial statements.

2.
Revenue

Revenue Recognition

Revenue is recognized once performance obligations under the terms of the Company’s contracts with its customers have been satisfied; this occurs at a point in time when control of the promised product or service is transferred to customers. Generally, the majority of the Company’s contracts with its customers have a single performance obligation and are short term in nature. Revenue is measured in an amount that reflects the consideration the Company expects to receive in exchange for those products or services. Revenue is recognized net of any taxes collected from customers, which are subsequently remitted to governmental authorities. The Company accounts for shipping and handling activities as costs to fulfill its promise to transfer the associated products. Accordingly, the Company records amounts billed for shipping and handling costs as a component of net sales, and classifies such costs as a component of costs of sales. The Company’s products are generally not sold with a right of return unless the product is spoiled or damaged. Historically, returns have not been material to the Company.


7


Wholesale Segment

The Company sells its wine to wholesale distributors under purchase orders. The Company transfers control and recognizes revenue for these orders upon shipment of the wine out of the Company’s third-party warehouse facilities. Payment terms to wholesale distributors typically range from 30 to 120 days. The Company pays depletion allowances to its wholesale distributors based on their sales to their customers. The Company estimates these depletion allowances and records such estimates in the same period the related revenue is recognized, resulting in a reduction of wholesale product revenue and the establishment of a current liability. Subsequently, wholesale distributors will bill the Company for actual depletions, which may be different from the Company’s estimate. Any such differences are recognized in sales when the bill is received. The Company has historically been able to estimate depletion allowances without material differences between actual and estimated expense.

Direct to Consumer Segment

The Company sells its wine and other merchandise directly to consumers through wine club memberships, at the wineries’ tasting rooms and through the internet.

Wine club membership sales are made under contracts with customers, which specify the quantity and timing of future wine shipments. Customer credit cards are charged in advance of quarterly wine shipments in accordance with each contract. The Company transfers control and recognizes revenue for these contracts upon shipment of the wine to the customer.

Tasting room and internet wine sales are paid for at the time of sale. The Company transfers control and recognizes revenue for this wine when the product is either received by the customer (on-site tasting room sales) or upon shipment to the customer (internet sales).

Other

From time to time, the Company sells grapes or bulk wine because the grapes or wine do not meet the quality standards for the Company’s products, market conditions have changed resulting in reduced demand for certain products, or because the Company may have produced more of a particular varietal than it can use. Grape and bulk sales are made under contracts with customers which include product specification requirements, pricing and payment terms. Payment terms under grape contracts are generally structured around the timing of the harvest of the grapes and are generally due 30 days from the time the grapes are delivered. Payment terms under bulk wine contracts are generally 30 days from the date of shipment and may include an upfront payment upon signing of the sales agreement. The Company transfers control and recognizes revenue for grape sales when product specification has been met and title to the grapes has transferred, which is generally on the date the grapes are harvested, weighed and shipped. The Company transfers control and recognizes revenue for bulk contracts upon shipment.

The Company provides custom winemaking services at Double Canyon’s state-of-the-art winemaking facility (“Washington Winemaking Facility”). Custom winemaking services are made under contracts with customers which include specific protocols, pricing, and payment terms and generally have a duration of less than one year. The customer retains title and control of the wine during the winemaking process. The Company recognizes revenue when contract specific performance obligations are met.

Estates hold various public and private events for customers and their wine club members. Upfront consideration received from the sale of tickets or under private event contracts for future events is recorded as deferred revenue. The balance of payments are due on the date of the event. The Company recognizes event revenue on the date the event is held.

Other revenue also includes tasting fees and retail merchandise sales, which are paid for and received or consumed at the time of sale. The Company transfers control and recognizes revenue at the time of sale.

Refer to Note 12, “Business Segment Information,” for revenue by sales channel amounts for the three months ended March 31, 2020 and 2019.

Contract Balances

When the Company receives payments from customers prior to transferring goods or services under the terms of a contract, the Company records deferred revenue, which it classifies as customer deposits on its condensed consolidated balance sheets, and represents a contract liability.


8


The following table reflects changes in the contract liability balance during the three months ended March 31, 2020 and 2019 (in thousands):

 
March 31, 2020
 
March 31, 2019
Outstanding at beginning of period (December 31)
$
405

 
$
375

Increase (decrease) attributed to:
 
 
 
Upfront payments
7,347

 
11,884

Revenue recognized
(7,009
)
 
(11,661
)
Outstanding at end of period
$
743

 
$
598


Revenue recognized during the three months ended March 31, 2020 and 2019, which was included in the opening contract liability balances for those periods, consisted primarily of wine club revenue, grape and bulk sales and event fees.

Accounts Receivable

Accounts receivable are reported at net realizable value. Credit is extended based on an evaluation of the customer’s financial condition. Accounts are charged against the allowance for bad debt as they are deemed uncollectable based on a periodic review of the accounts. In evaluating the collectability of individual receivable balances, the Company considers several factors, including the age of the balance, the customer’s historical payment history, its current credit worthiness and current economic trends. The Company’s accounts receivable balance is net of an allowance for doubtful accounts of $0.2 million and $0.1 million at March 31, 2020 and December 31, 2019, respectively.

3.
Restructuring

During 2018, the Company committed to various restructuring activities (the “2018 Restructuring Program”) including the termination of a vineyard operating lease agreement in Oregon and certain departmental reorganizations. Restructuring charges of $0.1 million were incurred in the three months ended March 31, 2019. As of March 31, 2019, the Company incurred $1.4 million of restructuring charges inception-to-date consisting of $0.9 million employee related costs, $0.4 million of asset impairment charges associated with leasehold improvements under the terminated vineyard operating lease agreement, and $0.1 million of other restructuring costs associated with departmental reorganization activities. The fair value of impaired leasehold improvements was determined using the undiscounted cash flows expected to result from the use and eventual disposition of the assets. The activities under the 2018 Restructuring Program were substantially complete as of March 31, 2019.

During 2020, the Company committed to various restructuring activities (the “2020 Restructuring Program”) including the closure of the Double Canyon Vineyards tasting room and restructuring of management. As of March 31, 2020, the Company incurred $0.5 million of restructuring charges inception-to-date and in the quarter consisting of $0.3 million employee related costs, $0.1 million of asset impairment charges associated with the tasting room assets upon closure, and $0.1 million of other restructuring costs associated with departmental reorganization activities. The Company expects to incur an additional $0.3 million in severance and other restructuring charges in the second quarter of 2020. The Company will continue to assess the need for additional restructuring activities during 2020.

The Company recorded an additional liability of $0.4 million for restructuring charges and paid $0.2 million in previously accrued employee related restructuring activities during the three months ended March 31, 2020. The liability related to restructuring activities was $0.5 million and $0.3 million at March 31, 2020 and December 31, 2019, respectively.

A roll forward of the liability recognized related to restructuring activities as of March 31, 2020 is as follows (in thousands): 
 
Balance at December 31, 2019
 
Additions
 
Payments
 
Balance at March 31, 2020
Employee related restructuring activity
$
308

 
$
367

 
$
(225
)
 
$
450



9


4.
Inventory

A summary of inventory at March 31, 2020 and December 31, 2019 is as follows (in thousands):
 
March 31, 2020
 
December 31, 2019
Finished goods
$
34,110

 
$
37,217

In-process goods
36,273

 
35,613

Packaging and bottling supplies
712

 
668

Total inventory
$
71,095


$
73,498



5.
Property and Equipment

A summary of property and equipment at March 31, 2020 and December 31, 2019, and depreciation and amortization for the three months ended March 31, 2020 and 2019, is as follows (in thousands):
໿
 
Depreciable Lives
 
 
 
 
 
(in years)
 
March 31, 2020
 
December 31, 2019
Land and improvements
N/A
 
$
44,928

 
$
44,928

Buildings and improvements
20-40
 
59,900

 
59,948

Winery and vineyard equipment
3-25
 
40,846

 
42,210

Vineyards, orchards and improvements
7-25
 
33,888

 
32,293

Caves
20-40
 
5,639

 
5,639

Vineyards under development
N/A
 
2,025

 
3,476

Construction in progress
N/A
 
2,540

 
2,537

Total
 
 
189,766

 
191,031

Accumulated depreciation and amortization
 
 
(72,074
)
 
(71,919
)
Total property and equipment, net
 
 
$
117,692

 
$
119,112

 
 
 
 
 
 
 
 
Three Months Ended March 31,
 
 
2020
 
2019
Capitalized into inventory
 
$
1,395

 
$
1,500

Expensed to general and administrative
 
427

 
481

Total depreciation and amortization
 
$
1,822

 
$
1,981


During 2018, the Company began actively marketing 36 acres of fallow apple orchards for sale as it does not intend to replant these orchards with vineyards and subsequently reclassified $0.6 million from property and equipment to assets held for sale. In the three months ended March 31, 2019, the Company recorded an impairment charge of less than $0.1 million to write-down the carrying value of the fallow apple orchards to fair value less cost to sell. This impairment charge was recorded to other income (expense), net in the unaudited interim condensed consolidated statements of operations.

During the second quarter of 2019, the Company placed 124 acres of land, composed of 15 acres of vineyards and 109 acres of fallow land, for sale and reclassified an additional $1.2 million from property and equipment to assets as held for sale. In October 2019, the Company finalized the sale of the land for $0.7 million and recorded an impairment charge of $0.5 million to write-down the carrying value to the price in the sales agreement less cost to sell. In the third quarter of 2019, the impairment charge was recorded to loss from operations, net in the unaudited interim condensed consolidated statements of operations.

In the third quarter of 2019, the Company placed 181 acres of land in Klickitat County, Washington, of which 93 acres were planted with wine grapes, for sale. As part of the process to determine the sale price of the property, the Company obtained an appraisal of the property in the second quarter of 2019. As a result, the Company recorded an impairment charge of $1.2 million to write-down the carrying value of the vineyard to the appraised fair value less cost to sell in the second quarter of 2019. The Company

10


recorded an additional impairment charge of $0.1 million in the third quarter of 2019 due to the write-down of in progress vineyard development. The Company reclassified $2.1 million from property and equipment to assets held for sale related to the vineyard as of September 30, 2019. In November 2019, the Company finalized a sales agreement to sell the land for $1.9 million and recorded a final impairment charge of $0.3 million to write-down the carrying value to the price in the sales agreement less cost to sell. These impairment charges were recorded to loss from operations, net in the unaudited interim condensed consolidated statements of operations. The sale of the land closed in January 2020.
As of March 31, 2020, the Company had $0.6 million of assets held for sale classified as current assets on its unaudited interim condensed consolidated balance sheet. The Company expects to complete the sale of the fallow apple orchards within the next twelve months.


6.
Financial Instruments

The Company’s material financial instruments include cash and cash equivalents, investments classified as available for sale and short-term and long-term debt. Investments classified as available for sale are the only assets or liabilities that are measured at fair value on a recurring basis.

All of the Company’s investments mature within two years or less. The par value, amortized cost, gross unrealized gains and losses and estimated fair value of investments classified as available for sale as of March 31, 2020 and December 31, 2019 are as follows (in thousands):
March 31, 2020
Par Value
 
Amortized Cost
 
Gross
Unrealized
Gains
 
Gross
Unrealized
Losses
 
Level 1
 
Level 2
 
Total Fair Value
Measurements
Certificates of Deposit
$
10,250

 
$
10,250

 
$
25

 
$

 
$

 
$
10,275

 
$
10,275

December 31, 2019
Par Value
 
Amortized Cost
 
Gross
Unrealized
Gains
 
Gross
Unrealized
Losses
 
Level 1
 
Level 2
 
Total Fair Value
Measurements
Certificates of Deposit
$
10,000

 
$
10,000

 
$
8

 
$
(2
)
 
$

 
$
10,006

 
$
10,006


Gross unrealized gains on available for sale securities were less than $0.1 million as of March 31, 2020, and the Company believes the gross unrealized gains are temporary as it does not intend to sell these securities and it is more likely than not that the Company will not be required to sell these securities before the recovery of their amortized cost basis.

As of March 31, 2020 and December 31, 2019, other than the assets which were impaired in the current period, the Company did not have any assets or liabilities measured at fair value on a nonrecurring basis. For cash and cash equivalents, the carrying amounts of such financial instruments approximate their fair values. For short-term debt, the carrying amounts of such financial instruments approximate their fair values. As of March 31, 2020, the Company has estimated the fair value of its outstanding debt to be approximately $23.7 million compared to its carrying value of $22.0 million, based upon discounted cash flows with Level 3 inputs, such as the terms that management believes would currently be available to the Company for similar issues of debt, taking into account the current credit risk of the Company and other factors. Level 3 inputs include market rates obtained from American AgCredit, FLCA (“Lender”) as of March 31, 2020 of 4.73% and 4.60% for the 2015 Term Loan and 2017 Term Loan, respectively, as further discussed in Note 9, “Debt.”

The Company does not invest in any derivatives or engage in any hedging activities.


11


7.
Intangible and Other Non-Current Assets

A summary of intangible and other non-current assets at March 31, 2020 and December 31, 2019, and amortization expense for the three months ended March 31, 2020 and 2019, is as follows (in thousands):
 
 
 
March 31, 2020
 
December 31, 2019
 
Amortizable lives
(in years)
 
Gross carrying amount
 
Accumulated amortization
 
Net book value
 
Gross carrying amount
 
Accumulated amortization
 
Net book value
Brand
15 - 17
 
$
18,000

 
$
9,232

 
$
8,768

 
$
18,000

 
$
8,967

 
$
9,033

Distributor relationships
10 - 14
 
2,700

 
1,682

 
1,018

 
2,700

 
1,634

 
1,066

Customer relationships
7
 
1,900

 
1,900

 

 
1,900

 
1,900

 

Legacy permits
14
 
250

 
158

 
92

 
250

 
153

 
97

Trademark
20
 
200

 
116

 
84

 
200

 
113

 
87

Total
 
 
$
23,050

 
$
13,088

 
$
9,962

 
$
23,050

 
$
12,767

 
$
10,283

Other non-current assets
 
 
 
 
 
 
620

 
 
 


 
667

Total intangible and other non-current assets, net
 
 
 
 
 
 
$
10,582

 
 
 


 
$
10,950

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Three Months Ended March 31,
Amortization expense
 
 
 
 
 
 
 
 
 
 
2020
 
2019
Total amortization expense
 
 
 
 
 
 
 
 
 
 
$
321

 
$
323


The estimated aggregate future amortization of intangible assets as of March 31, 2020 is identified below (in thousands):
 
Amortization
Remainder of 2020
$
964

2021
1,286

2022
1,286

2023
1,286

2024
1,286

Thereafter
3,854

Total
$
9,962



8.
Accounts Payable and Accrued Liabilities

Accounts payable and accrued liabilities consisted of the following as of March 31, 2020 and December 31, 2019 (in thousands):
 
March 31, 2020
 
December 31, 2019
Accounts payable and accrued grape liabilities
$
3,013

 
$
5,469

Accrued compensation related expenses
1,708

 
2,753

Sales and marketing
115

 
302

Acquisition of property and equipment
1

 
34

Accrued interest
291

 
297

Depletion allowance
949

 
813

Production and farming
40

 
75

Operating lease liability, current
154

 
171

Other accrued expenses
346

 
454

Total accounts payable and accrued liabilities
$
6,617

 
$
10,368



12


9.
Debt

Revolving Credit Facility

In March 2013, Crimson and its subsidiaries entered into a $60.0 million revolving credit facility (the “2013 Revolving Credit Facility”) with American AgCredit, FLCA, as agent for the lenders identified in the 2013 Revolving Credit Facility, comprised of a revolving loan facility (the “Revolving Loan”) and a term revolving loan facility (the “Term Revolving Loan”), which together are secured by substantially all of Crimson’s assets. In March 2018, Crimson and its subsidiaries entered into the second amendment to the 2013 Revolving Credit Facility with American AgCredit, FCLA (the “Second Amendment”). The Second Amendment modified certain provisions of the 2013 Revolving Credit Facility, including, among other things, extending the Revolving Loan and Term Revolving Loan termination dates to March 31, 2023, extending the Term Revolving Loan conversion date to March 31, 2023 and extending the Term Revolving Loan maturity date to March 31, 2033.

The Revolving Loan is for up to $10.0 million of availability in the aggregate for a five year term, and the Term Revolving Loan is for up to $50.0 million in the aggregate for a fifteen year term. All obligations of Crimson under the 2013 Revolving Credit Facility are collateralized by certain real property, including vineyards and certain winery facilities of Crimson, accounts receivable, inventory and intangible assets. In addition to unused line fees ranging from 0.15% to 0.25%, rates for the borrowings are priced based on a performance grid tied to certain financial ratios and the London Interbank Offered Rate. The 2013 Revolving Credit Facility can be used to fund acquisitions, capital projects and other general corporate purposes. Covenants include the maintenance of specified debt and equity ratios, limitations on the incurrence of additional indebtedness, limitations on dividends and other distributions to shareholders and restrictions on certain mergers, consolidations and sales of assets. No amounts have been borrowed under the 2013 Revolving Credit Facility to date. 

Details of the Company’s debt as of March 31, 2020 and December 31, 2019 were as follows (dollars in thousands):
 
 
March 31, 2020
 
December 31, 2019
 
 
 
 
 
 
Current
 
Long-term
 
Total
 
Current
 
Long-term
 
Total
 
Interest Rate
 
Maturity Date
2015 Term Loan
 
$
640

 
$
12,640

 
$
13,280

 
$
640

 
$
12,800

 
$
13,440

 
5.24%
 
October 1, 2040
2017 Term Loan
 
500

 
8,250

 
8,750

 
500

 
8,375

 
8,875

 
5.39%
 
July 1, 2037
Total debt
 
1,140

 
20,890

 
22,030

 
1,140

 
21,175

 
22,315

 
 
 
 
Unamortized loan fees
 
(14
)
 
(118
)
 
(132
)
 
(13
)
 
(121
)
 
(134
)
 
 
 
 
Total debt, net of unamortized loan fees
 
$
1,126

 
$
20,772

 
$
21,898

 
$
1,127

 
$
21,054

 
$
22,181

 
 
 
 

Term Loans

Term loans consist of the following:

(i) On November 10, 2015, Pine Ridge Winery, LLC (“PRW Borrower”), a wholly-owned subsidiary of Crimson, entered into a senior secured term loan agreement (the “2015 Term Loan”) with American AgCredit, FLCA (“Lender”) for an aggregate principal amount of $16.0 million. Amounts outstanding under the 2015 Term Loan bear a fixed interest rate of 5.24% per annum.

The 2015 Term Loan will mature on October 1, 2040 (the “2015 Loan Maturity Date”). On the first day of each January, April, July and October, commencing January 1, 2016, PRW Borrower is required to make a principal payment in the amount of $160,000 and an interest payment equal to the amount of all interest accrued through the previous day. A final payment of all unpaid principal, interest and any other charges with respect to the 2015 Term Loan shall be due and payable on the 2015 Loan Maturity Date.

The Company incurred debt issuance costs of less than $0.1 million related to the 2015 Term Loan. These costs are recorded as a reduction from current portion of long-term debt or long-term debt based on the time frame in which the fees will be expensed, and as such, amounts to be expensed within twelve months shall be classified against current portion of long-term debt. The costs are being amortized to interest expense using the effective interest method over the contractual term of the loan.

The full $16.0 million was drawn at closing and the 2015 Term Loan can be used to fund acquisitions, capital projects and other general corporate purposes. As of March 31, 2020, $13.3 million in principal was outstanding on the 2015 Term Loan, and unamortized loan fees were less than $0.1 million.

13



(ii) On June 29, 2017, Double Canyon Vineyards, LLC (the “DCV Borrower” and, individually and collectively with the PRW Borrower, “Borrower”), a wholly-owned subsidiary of Crimson, entered into a senior secured term loan agreement (the “2017 Term Loan”) with the Lender for an aggregate principal amount of $10.0 million. Amounts outstanding under the 2017 Term Loan bear a fixed interest rate of 5.39% per annum.

The 2017 Term Loan will mature on July 1, 2037 (the “2017 Loan Maturity Date”). On the first day of each January, April, July and October, commencing October 1, 2017, DCV Borrower is required to make a principal payment in the amount of $125,000 and an interest payment equal to the amount of all interest accrued through the previous day. A final payment of all unpaid principal, interest and any other charges with respect to the 2017 Term Loan shall be due and payable on the 2017 Loan Maturity Date.

The Company incurred debt issuance costs of approximately $0.1 million related to the 2017 Term Loan. These costs were recorded using the same treatment as described for the 2015 Term Loan debt issuance costs.

The full $10.0 million was drawn at closing and the 2017 Term Loan can be used to fund acquisitions, capital projects and other general corporate purposes. As of March 31, 2020, $8.8 million in principal was outstanding on the 2017 Term Loan, and unamortized loan fees were less than $0.1 million.

Borrower’s obligations under the 2015 Term Loan and 2017 Term Loan are guaranteed by the Company. All obligations of Borrower under the 2015 Term Loan and 2017 Term Loan are collateralized by certain real property of the Company. Borrower’s covenants include the maintenance of a specified debt service coverage ratio and certain customary affirmative and negative covenants, including limitations on the incurrence of additional indebtedness; limitations on distributions to shareholders; and restrictions on certain investments, sale of assets and merging or consolidating with other parties.

The Company was in compliance with all debt covenants as of March 31, 2020.

A summary of debt maturities as of March 31, 2020 is as follows (in thousands):
Principal due the remainder of 2020
$
855

Principal due in 2021
1,140

Principal due in 2022
1,140

Principal due in 2023
1,140

Principal due in 2024
1,140

Principal due thereafter
16,615

Total
$
22,030


10.
Stockholders’ Equity and Equity Incentive Plan
Share Repurchase Program

In December 2018, the Company commenced a share repurchase program (the “2019 Winter Repurchase Program”) that provided for the repurchase of up to $2.0 million of outstanding common stock. Under the 2019 Winter Repurchase Program, any repurchased shares were constructively retired, and on April 30, 2019, the 2019 Winter Repurchase Program was completed. Under the total 2019 Winter Repurchase Program, the Company repurchased 253,324 shares at a repurchase price of $2.0 million.

In September 2019, the Company commenced a share repurchase program (the “2019 Summer Repurchase Program”) that provided for the repurchase of up to $2.0 million of outstanding common stock. Under the 2019 Summer Repurchase Program, any repurchased shares are constructively retired, and on December 12, 2019, the 2019 Summer Repurchase Program was completed. Under the total 2019 Summer Repurchase Program, the Company repurchased 283,208 shares at a purchase price of $2.0 million.

Stock-Based Compensation

In February 2013, the Company adopted the 2013 Omnibus Incentive Plan, which provides for the granting of up to 1,000,000 stock options or other common stock-based awards. The terms of awards that may be granted, including vesting and performance criteria, if any, will be determined by the Company’s board of directors.


14


In December 2019, option grants for 89,000 shares were issued. As of March 31, 2020, all 89,000 shares remained outstanding with no additional grants or stock activities related to vesting, exercises or expirations during the quarter. The options vest annually over 5 years, expire in 7 years and have an exercise price of $6.87, the market value at the date of grant. The share-based compensation expense for these grants was $141,000, the grant date fair value, which will be recorded over the vesting period. Estimates of share-based compensation expense require a number of complex and subjective assumptions, including the selection of an option pricing model. The Company determined the grant date fair value of the awards using the Black-Scholes-Merton option-pricing valuation model, with the following assumptions and values: stock price volatility, 22%; employee exercise patterns and expected life, 5 years; dividend yield, 0%; and risk-free interest rate, 1.6%. For the three months ended March 31, 2020, $7,000 was recorded as share-based compensation expense. Share-based compensation expense was recorded to general and administrative expense in the unaudited interim condensed consolidated statements of operations. The related income tax benefit for these expenses were immaterial.

11.
Income Taxes
On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security Act (“CARES”) Act was enacted in response to the COVID-19 pandemic. The CARES Act, among other things, permits net operating loss (“NOL”) carryovers and carrybacks to offset 100% of taxable income for taxable years beginning before 2021. In addition, the CARES Act allows NOLs incurred in 2018, 2019, and 2020 to be carried back to each of the five preceding taxable years to generate a refund of previously paid income taxes. In accordance with the CARES Act, the Company plans to carry back its 2019 NOL such that it would provide the Company $0.9 million in cash tax refunds and a permanent rate benefit of $0.3 million. Farming loss NOLs were permitted to be carried back based on prior law and were reflected as such in an earlier period. The incremental permanent rate benefit of $0.2 million from carrying back the remaining NOL in excess of the farming loss NOL is recognized in the first quarter of 2020.

Consolidated income tax expenses for the three months ended March 31, 2020 and 2019 were determined based upon the Company’s estimated consolidated effective income tax rates calculated without discrete items for the years ending December 31, 2020 and 2019, respectively.

The Company’s effective tax rates for the three months ended March 31, 2020 and 2019 were 26.6% and 29.3%, respectively. As a result of the Tax Cuts and Jobs Act (Public Law 115-97), the Company revised its estimated annual effective tax rate to reflect the change in the U.S. federal statutory tax rate from 34% to 21%. The difference between the consolidated effective income tax rate and the U.S. federal statutory rate for the three months ended March 31, 2020 was primarily attributable to state income taxes and permanent items, which primarily consisted of meals and entertainment.

The Company does not have any amounts in its condensed consolidated balance sheets for unrecognized tax benefits related to uncertain tax positions as of March 31, 2020.


15


12.
Business Segment Information

The Company has identified two operating segments, Wholesale net sales and Direct to Consumer net sales, which are reportable segments for financial statement reporting purposes, based upon their different distribution channels, margins and selling strategies. Wholesale net sales include all sales through a third party where prices are given at a wholesale rate, whereas Direct to Consumer net sales include retail sales in the tasting room, remote sites and on-site events, wine club net sales, direct phone sales, and other sales made directly to the consumer without the use of an intermediary.

The two segments reflect how the Company’s operations are evaluated by senior management and the structure of its internal financial reporting. The Company evaluates performance based on the gross profit of the respective business segments. Selling expenses that can be directly attributable to the segment are allocated accordingly. However, centralized selling expenses and general and administrative expenses are not allocated between operating segments. Therefore, net income information for the respective segments is not available. Based on the nature of the Company’s business, revenue generating assets are utilized across segments. Therefore, discrete financial information related to segment assets and other balance sheet data is not available and that information continues to be aggregated.

The following table outlines the net sales, cost of sales, gross profit (loss), directly attributable selling expenses and operating income (loss) for the Company’s reportable segments for the three months ended March 31, 2020 and 2019, and also includes a reconciliation of consolidated income (loss) from operations. Other/Non-allocable net sales and gross profit include bulk wine and grape sales, event fees and retail sales. Other/Non-allocable expenses include centralized corporate expenses not specific to an identified reporting segment.  Sales figures are net of related excise taxes.

 
Three Months Ended March 31,
 
Wholesale
 
Direct to Consumer
 
Other/Non-Allocable
 
Total
(in thousands)
2020
 
2019
 
2020
 
2019
 
2020
 
2019
 
2020
 
2019
Net sales
$
7,929

 
$
8,494

 
$
5,562

 
$
5,300

 
$
979

 
$
1,371

 
$
14,470

 
$
15,165

Cost of sales
5,534

 
5,325

 
1,942

 
1,705

 
1,029

 
1,678

 
8,505

 
8,708

Gross profit (loss)
2,395

 
3,169

 
3,620

 
3,595

 
(50
)
 
(307
)
 
5,965

 
6,457

Operating expenses:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Sales and marketing
1,503

 
1,549

 
1,608

 
1,707

 
840

 
1,068

 
3,951

 
4,324

General and administrative

 

 

 

 
3,082

 
2,787

 
3,082

 
2,787

Total operating expenses
1,503

 
1,549

 
1,608

 
1,707

 
3,922

 
3,855

 
7,033

 
7,111

Net gain on disposal of property and equipment

 

 

 

 
(14
)
 
(77
)
 
(14
)
 
(77
)
Restructuring costs

 

 

 

 
507

 
76

 
507

 
76

Income (loss) from operations
$
892

 
$
1,620

 
$
2,012

 
$
1,888

 
$
(4,465
)
 
$
(4,161
)
 
$
(1,561
)
 
$
(653
)


13.
Commitments and Contingencies

Leases

The Company has leased retail and office space and has entered into various other agreements in conducting its business. At inception, the Company determines whether an agreement represents a lease, and at commencement the Company evaluates each lease agreement to determine whether the lease is an operating or financing lease. Some of the Company’s lease agreements have contained renewal options, tenant improvement allowances and rent escalation clauses.

Pursuant to ASU 2016-02, all of the Company’s leases outstanding on January 1, 2019 continued to be classified as operating leases. With the adoption of ASU 2016-02, the Company recorded an operating lease right-of-use asset and an operating lease liability on its condensed consolidated balance sheet beginning January 1, 2019. Right-of-use lease assets represent the Company’s right to use the underlying asset for the lease term and the lease obligation represents the Company’s commitment to make the lease payments arising from the lease. Right-of-use lease assets and obligations are recognized at the commencement date based on the present value of remaining lease payments over the lease term. As the Company’s leases do not provide an implicit rate, the Company has used an estimated incremental borrowing rate based on the information available at the commencement date in determining the present value of lease payments. The right-of-use lease asset includes any lease payments made prior to

16


commencement and excludes any lease incentives. The lease term may include options to extend or terminate the lease when it is reasonably certain that the Company will exercise that option. Operating lease expense is recognized on a straight-line basis over the lease term, subject to any changes in the lease or expectation regarding the terms. Variable lease costs such as common area costs and property taxes are expensed as incurred. For all lease agreements, the Company combines lease and non-lease components, and leases with an initial term of 12 months or less are not recorded on the balance sheet.

Supplemental balance sheet information related to leases were as follows (in thousands):
 
 
March 31, 2020
Assets:
 
 
Other non-current assets
 
$
365

 
 
 
Liabilities:
 
 
Accounts payable and accrued liabilities
 
$
154

Other non-current liabilities
 
221

Total operating lease liabilities
 
$
375

 
 
 
Weighted Average Remaining Lease Term
 
 
Operating leases
 
2.25 years

Weighted Average Discount Rate
 
 
Operating leases
 
6.34
%

Maturities of lease liabilities are as follows (in thousands):
 
Amortization
Remainder of 2020
$
120

2021
161

2022
94

Total
$
375


Base rent expense was less than $0.1 million for the three months ended March 31, 2020 and 2019. Of this amount, less than $0.1 million relates to the lease liability referred to in this footnote for the three months ended March 31, 2020. Cash paid for amounts included in the measurement of operating lease liabilities as part of operating cash flows was less than $0.1 million for the three months ended March 31, 2020.

Litigation

The Company and its subsidiaries may become parties to legal proceedings that are considered to be either ordinary, routine litigation incidental to their business or not significant to the Company’s consolidated financial position or liquidity. The Company does not believe that there is any pending litigation that could have a significant adverse impact on its consolidated financial position, liquidity or results of operations.


17


Other

In October 2017, significant wildfires broke out in Napa, Sonoma, and surrounding counties in Northern California. Operations at two of the Company’s properties, Pine Ridge Vineyards and Seghesio Family Vineyards, were temporarily impacted due to these wildfires and then resumed shortly thereafter. At the time of the wildfires, both properties had already harvested substantially all of their 2017 estate grapes. Certain inventory on hand was impacted by power losses and smoke damage which was covered under existing insurance policies. During 2018, the Company recognized $1.1 million in insurance proceeds of which $0.6 million was offset against inventory losses and $0.5 million was included in other income, net.

In October 2019, the Company received an additional $0.2 million from insurance proceeds related to the October 2017 wildfires.

During the first quarter of 2020, government offices throughout the United States and around the world issued shelter in place orders due to the global outbreak of the COVID-19 virus. On March 27, 2020, the President of the United States signed into law the Families First Coronavirus Response Act and two phases of the Coronavirus Aid, Relief, and Economic Security (“CARES”) Act which are intended to provide emergency assistance to individuals and business affected by COVID-19. The CARES Act includes a small business stimulus program, Paycheck Protection Program (“PPP”), which is intended to provide loans to qualified businesses to guarantee eight weeks of payroll and other identified costs which may be eligible for partial or full forgiveness.

In April 2020, the Company successfully secured a $3.8 million Small Business Association (“SBA”) loan under the Payroll Protection Program to secure payroll expenses for otherwise furloughed employees impacted by government imposed shelter in place orders. Per the terms of the loan, the full amount will be forgiven as long as loan proceeds are used to cover payroll costs and other specified non-payroll costs (provided any non-payroll costs do not exceed 25% of the forgiven amount) over an 8-week period after the loan is made; and employee and compensation levels are maintained. The Company fully intends to comply with the above terms in order to qualify for loan forgiveness. In the event the Company is required to repay the loan, all payments are deferred for 6 months with accrued interest over this period. Amounts outstanding under the loan will bear a fixed interest rate of 1.00% per annum with a maturity date of 2 years from commencement date.

18



Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Interim Operations. 

Statements included in this Report may contain forward-looking statements. See “Cautionary Statement for Forward-Looking Information” below. The following should be read in conjunction with the Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) and the Company’s audited consolidated financial statements for the year ended December 31, 2019 included in the Company’s Annual Report on Form 10-K as filed with the SEC (the “2019 Report”).

Quantities or results referred to as “current quarter” and “current three-month period” refer to the three months ended March 31, 2020.

Cautionary Statement for Forward-Looking Information

This MD&A and other parts of this Quarterly Report on Form 10-Q contain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). The unaudited interim condensed consolidated financial statements, that include results of Crimson Wine Group, Ltd. and all of its subsidiaries further collectively known as “we”, “Crimson”, “our”, “us”, or “the Company”, have been prepared in accordance with GAAP for interim financial information and with the general instruction for quarterly reports filed on Form 10-Q and Article 8 of Regulation S-X. All statements, other than statements of historical fact, regarding our strategy, future operations, financial position, prospects, plans, opportunities, and objectives constitute “forward-looking statements.” The words “may,” “will,” “expect,” “plan,” “anticipate,” “believe,” “estimate,” “potential,” or “continue” and similar types of expressions identify such statements, although not all forward-looking statements contain these identifying words. These statements are based upon information that is currently available to us and our management’s current expectations speak only as of the date hereof and are subject to risks and uncertainties. We expressly disclaim any obligation, except as required by federal securities laws, or undertaking to update or revise any forward-looking statements contained herein to reflect any change or expectations with regard thereto or to reflect any change in events, conditions, or circumstances on which any such forward-looking statements are based, in whole or in part. Our actual results may differ materially from the results discussed in or implied by such forward-looking statements.

Risks that could cause actual results to differ materially from any results projected, forecasted, estimated or budgeted or that may materially and adversely affect our actual results include, but are not limited to, those discussed in Part I, Item 1A. Risk Factors in the 2019 Report and the additional risk factor regarding COVID-19 discussed in Part II, Item 1A of this Report. Readers should carefully review the risk factors described in the 2019 Report, this Report and in other documents that the Company files from time to time with the SEC.

Overview of Business

The Company generates revenues from sales of wine to wholesalers and direct to consumers, sales of bulk wine and grapes, custom winemaking services, special event fees, tasting fees and retail sales. 
Our wines are primarily sold to wholesale distributors, who then sell to retailers and restaurants. As permitted under federal and local regulations, we have also been placing increased emphasis on generating revenue from direct sales to consumers which occur through wine clubs, at the wineries’ tasting rooms and through the internet and direct outreach to customers. Direct sales to consumers are more profitable for the Company as we are able to sell our products at a price closer to retail prices rather than the wholesale price sold to distributors. From time to time, we may sell grapes or bulk wine because the grapes or wine do not meet the quality standards for the Company’s products, market conditions have changed resulting in reduced demand for certain products, or because the Company may have produced more of a particular varietal than it can use. When these sales occur, they may result in a loss.
Cost of sales includes grape and bulk wine costs, whether purchased or produced from the Company’s controlled vineyards, crush costs, winemaking and processing costs, bottling, packaging, warehousing and shipping and handling costs. For the Company controlled vineyard produced grapes, grape costs include annual farming labor costs, harvest costs and depreciation of vineyard assets. For wines that age longer than one year, winemaking and processing costs continue to be incurred and capitalized to the cost of wine, which can range from 3 to 36 months. Reductions to the carrying value of inventories are also included in cost of sales.
In a strategic effort to maximize asset utilization in 2019, the Company increased focus on supply chain management. During 2019, the Company performed regular costing updates to apply actual cost for the 2017 and 2018 vintage bulk wine compared to the standard cost estimates used. The analysis showed higher cellar overhead costs incurred for these vintages than previously estimated in the standard rate applied to bulk wine gallons produced. The increase in the revised standard rate over the production

19


period was a result of a strategic reduction of wine bottled driven by less than forecasted demand for certain products. Additionally, cost capitalized to inventory increased due to growth in general and administrative overhead costs as well as onboarding cellar costs related to the Double Canyon winemaking facility and acquired Seven Hills Winery.
As of March 31, 2020, wine inventory includes approximately 0.7 million cases of bottled and bulk wine in various stages of the aging process. Cased wine is expected to be sold over the next 12 to 36 months and generally before the release date of the next vintage.

Impact of COVID-19 on Operations

In March 2020, the COVID-19 outbreak was declared a National Public Health Emergency which continues to spread throughout the world and has adversely impacted global activity and contributed to significant declines and volatility in financial markets. The outbreak could have a continued material adverse impact on economic and market conditions and trigger a period of global economic slowdown. The rapid development and fluidity of this situation precludes any prediction as to the ultimate material adverse impact of the coronavirus outbreak. Although financial impacts to the current quarter have been limited due to the timing of onset, the outbreak presents uncertainty and risk with respect to the Company and its performance and financial results.
As of March 16, 2020, with the exception of key operations personnel, we have shifted our office staff to remote workstations, which has been an effective transition to date. We will continue to operate remotely until local government offices have lifted shelter-in-place orders and management determines it is safe for employees to return to offices.
We have not experienced nor do we anticipate significant impact or disruptions to our supply chain network.
The Company has experienced both reductions and increases in consumer demand in various channels due to the coronavirus disease 2019 (“COVID-19”) in the three months ended March 31, 2020. On March 16, 2020 (“the closure date”), the Company temporarily closed all of its tasting rooms, which are located in California, Oregon, and Washington, in compliance with shelter-in-place orders issued by local government offices. From the closure date through March 31, 2020, net sales from the Company’s tasting rooms decreased 80% compared to the same period in 2019 due to the offerings of limited direct shipments to customers during this temporary closure period. As of March 31, 2020, the Company’s tasting rooms remained closed.
In addition to selling wine directly to consumers in its tasting rooms, the Company sells wine directly to consumers through our website (http://www.crimsonwinegroup.com), third-party websites, through direct phone calls, and other online sales (“Ecommerce”). The Company’s Ecommerce operations have been favorably impacted and continued to sell and distribute wine directly to consumers. From the closure date through March 31, 2020, net sales from Ecommerce operations increased 85% compared to the same period in 2019.
The Company sells wine (through distributors and directly) to restaurants, bars, and other hospitality locations (“On-Premise”). Demand for wines at On-Premise locations has been reduced due to the shelter-in-place orders restricting consumers from visiting, as well as in some cases their temporary closure. During March 2020, shipments from the distributors to retail accounts (depletion) to On-Premise locations as a percentage of the Company’s total depletions decreased by 1% compared to the same period in 2019.
The Company also sells wine (through distributors and directly) to supermarkets, grocery stores, liquor stores, and other chains and independent stores (“Off-Premise”). Demand for wines at Off-Premise locations has increased due to their classification as essential businesses that remain open during shelter-in-place orders. During March 2020, depletions to Off-Premise locations as a percentage of the Company’s total depletions increased by 1% compared to the same period in 2019.

Seasonality

As discussed in the 2019 Report, the wine industry in general historically experiences seasonal fluctuations in revenues and net income. The Company typically has lower sales and net income during the first quarter and higher sales and net income during the fourth quarter due to seasonal holiday buying as well as wine club shipment timing. We anticipate similar trends in the future.

Restructuring

During 2018, the Company committed to various restructuring activities (the “2018 Restructuring Program”) including the termination of a vineyard operating lease agreement in Oregon and certain departmental reorganizations. Restructuring charges of $0.1 million were incurred in the three months ended March 31, 2019. As of March 31, 2019, the Company incurred $1.4 million of restructuring charges inception-to-date consisting of $0.9 million employee related costs, $0.4 million of asset impairment charges associated with leasehold improvements under the terminated vineyard operating lease agreement, and $0.1 million of other restructuring costs associated with departmental reorganization activities. The fair value of impaired leasehold improvements was determined using the undiscounted cash flows expected to result from the use and eventual disposition of the assets. The activities under the 2018 Restructuring Program were substantially complete as of March 31, 2019.


20


During 2020, the Company committed to various restructuring activities (the “2020 Restructuring Program”) including the closure of the Double Canyon Vineyards tasting room and restructure of management. As of March 31, 2020, the Company incurred $0.5 million of restructuring charges inception-to-date and in the quarter consisting of $0.3 million employee related costs, $0.1 million of asset impairment charges associated with the tasting room assets upon closure, and $0.1 million of other restructuring costs associated with departmental reorganization activities. The Company expects to incur an additional $0.3 million in severance and other restructuring charges in the second quarter of 2020. The Company will continue to assess the need for additional restructuring activities during 2020.

Results of Operations

Three Months Ended March 31, 2020 Compared to Three Months Ended March 31, 2019

Net Sales
໿
 
Three Months Ended March 31,
(in thousands, except percentages)
2020
 
2019
 
Increase (Decrease)
 
% change
Wholesale
$
7,929

 
$
8,494

 
$
(565
)
 
(7)%
Direct to Consumer
5,562

 
5,300

 
262

 
5%
Other
979

 
1,371

 
(392
)
 
(29)%
Total net sales
$
14,470

 
$
15,165

 
$
(695
)
 
(5)%

Wholesale net sales decreased $0.6 million, or 7%, in the current quarter as compared to the same quarter in 2019. The decrease was primarily driven by a decrease in wine sales to the cruise and transportation segments, as well as increased price support compared to the same quarter in 2019.

Direct to Consumer net sales increased $0.3 million, or 5%, in the current quarter as compared to the same quarter in 2019. The increase was primarily driven by successful strategic Ecommerce offers and timing of wine club shipments compared to the same quarter in 2019. The increase was partially offset by the temporary closure of tasting rooms in compliance with shelter-in-place orders issued by local government officers in March.

Other net sales include bulk wine, grape sales, custom winemaking services, event fees and retail sales, and decreased $0.4 million, or 29% primarily due to a decrease in gallons of bulk wine sold, and reduced event fees and retail sales due to the temporary closure of tasting rooms and event cancellations related to shelter-in-place orders. The decrease was partially offset by an increase in revenue from custom winemaking services as compared to the same quarter in 2019.

21


Gross Profit
 
Three Months Ended March 31,
(in thousands, except percentages)
2020
 
2019
 
Increase (Decrease)
 
% change
Wholesale
$
2,395

 
$
3,169

 
$
(774
)
 
(24)%
Wholesale gross margin percentage
30
%
 
37
%
 
 

 
 
Direct to Consumer
3,620

 
3,595

 
25

 
1%
Direct to Consumer gross margin percentage
65
%
 
68
%
 
 

 
 
Other
(50
)
 
(307
)
 
257

 
84%
Total gross profit
$
5,965

 
$
6,457

 
$
(492
)
 
(8)%
Total gross margin percentage
41
%
 
43
%
 
 
 
 

Wholesale gross profit decreased $0.8 million, or 24%, in the current quarter as compared to the same quarter in 2019 primarily driven by the release of higher cost vintages, increased price support, and close out sales. Increased costs were primarily driven by higher fixed production costs, planned decreased production volumes in an effort to re-align supply with demand, and a lower crop yield on vintages sold. Gross margin percentage, which is defined as gross profit as a percentage of net sales, decreased 710 basis points primarily driven by increased cost of goods sold and increased price support compared to the same quarter in 2019.

Direct to Consumer gross profit was relatively flat in the current quarter as compared to the same quarter in 2019. Gross margin percentage decreased 275 basis points in the current quarter primarily driven by release of higher cost vintages compared to the same quarter in 2019.

Other gross profit includes bulk wine, grape sales, event fees and non-wine retail sales and increased $0.3 million, or 84% in the current quarter as compared to the same quarter in 2019. The increase in gross profit is primarily driven by a higher average price per gallon sold of bulk wine.

Operating Expenses
 
Three Months Ended March 31,
(in thousands, except percentages)
2020
 
2019
 
Increase (Decrease)
 
% change
Sales and marketing
$
3,951

 
$
4,324

 
$
(373
)
 
(9)%
General and administrative
3,082

 
2,787

 
295

 
11%
Total operating expenses
$
7,033

 
$
7,111

 
$
(78
)
 
(1)%

Sales and marketing expenses decreased $0.4 million, or 9%, in the current quarter as compared to the same quarter in 2019. The decrease was primarily driven by timing of promotional programs and a decrease in travel costs compared to the same quarter in 2019.

General and administrative expenses increased $0.3 million, or 11%, in the current quarter as compared to the same quarter in 2019 primarily due to an increase in compensation and employee related expenses compared to the same quarter in 2019.

Other (Expense) Income
 
Three Months Ended March 31,
(in thousands, except percentages)
2020
 
2019
 
Change
 
% change
Interest expense, net
$
(323
)
 
$
(321
)
 
$
(2
)
 
(1)%
Other income (expense), net
167

 
(23
)
 
190

 
826%
Total other expense, net
$
(156
)
 
$
(344
)
 
$
188

 
55%

Interest expense, net was flat in the current quarter compared to the same quarter in 2019

Other income increased by $0.2 million, or 826% in the current quarter as compared to the same quarter in 2019. The increase was primarily driven by the discontinuation of apple consignment sales, which yielded a loss, in the same quarter in 2019.

22


Income Tax Provision

The Company’s effective tax rates for the three months ended March 31, 2020 and 2019 were 26.6% and 29.3%, respectively. As a result of the Tax Cuts and Jobs Act (Public Law 115-97), the Company revised its estimated annual effective tax rate to reflect the change in the U.S. federal statutory tax rate from 34% to 21%. The difference between the consolidated effective income tax rate and the U.S. federal statutory rate for the three months ended March 31, 2020 was primarily attributable to state income taxes and the effect of certain permanent differences, which primarily consisted of meals and entertainment.

Liquidity and Capital Resources

General

The Company’s principal sources of liquidity are its available cash and cash equivalents, investments in available for sale securities, funds generated from operations and bank borrowings. The Company’s primary cash needs are to fund working capital requirements and capital expenditures.

Revolving Credit Facility

In March 2013, Crimson and its subsidiaries entered into a $60.0 million revolving credit facility (the “2013 Revolving Credit Facility”) with American AgCredit, FLCA, as agent for the lenders identified in the 2013 Revolving Credit Facility, comprised of a revolving loan facility (the “Revolving Loan”) and a term revolving loan facility (the “Term Revolving Loan”), which together are secured by substantially all of Crimson’s assets. In March 2018, Crimson and its subsidiaries entered into the second amendment to the 2013 Revolving Credit Facility with American AgCredit, FCLA (the “Second Amendment”). The Second Amendment modified certain provisions of the 2013 Revolving Credit Facility, including, among other things, extending the Revolving Loan and Term Revolving Loan termination dates to March 31, 2023, extending the Term Revolving Loan conversion date to March 31, 2023 and extending the Term Revolving Loan maturity date to March 31, 2033.

The Revolving Loan is for up to $10.0 million of availability in the aggregate for a five year term, and the Term Revolving Loan is for up to $50.0 million in the aggregate for a fifteen year term. All obligations of Crimson under the 2013 Revolving Credit Facility are collateralized by certain real property, including vineyards and certain winery facilities of Crimson, accounts receivable, inventory and intangible assets. In addition to unused line fees ranging from 0.15% to 0.25%, rates for the borrowings are priced based on a performance grid tied to certain financial ratios and the London Interbank Offered Rate. The 2013 Revolving Credit Facility can be used to fund acquisitions, capital projects and other general corporate purposes. Covenants include the maintenance of specified debt and equity ratios, limitations on the incurrence of additional indebtedness, limitations on dividends and other distributions to shareholders and restrictions on certain mergers, consolidations and sales of assets. No amounts have been borrowed under the revolving credit facility to date.

Term Loans

Term loans consist of the following:

(i) On November 10, 2015, Pine Ridge Winery, LLC (“PRW Borrower”), a wholly-owned subsidiary of Crimson, entered into a senior secured term loan agreement (the “2015 Term Loan”) with American AgCredit, FLCA (“Lender”) for an aggregate principal amount of $16.0 million. Amounts outstanding under the 2015 Term Loan bear a fixed interest rate of 5.24% per annum.

The 2015 Term Loan will mature on October 1, 2040 (the “2015 Loan Maturity Date”). On the first day of each January, April, July and October, commencing January 1, 2016, PRW Borrower is required to make a principal payment in the amount of $160,000 and an interest payment equal to the amount of all interest accrued through the previous day. A final payment of all unpaid principal, interest and any other charges with respect to the 2015 Term Loan shall be due and payable on the 2015 Loan Maturity Date.

The full $16.0 million was drawn at closing and the 2015 Term Loan can be used to fund acquisitions, capital projects and other general corporate purposes. As of March 31, 2020, $13.3 million in principal was outstanding on the 2015 Term Loan, and unamortized loan fees were less than $0.1 million.

(ii) On June 29, 2017, Double Canyon Vineyards, LLC (the “DCV Borrower” and, individually and collectively with the PRW Borrower, “Borrower”), a wholly-owned subsidiary of Crimson, entered into a senior secured term loan agreement (the “2017 Term Loan”) with the Lender for an aggregate principal amount of $10.0 million. Amounts outstanding under the 2017 Term Loan bear a fixed interest rate of 5.39% per annum.

23


The 2017 Term Loan will mature on July 1, 2037 (the “2017 Loan Maturity Date”). On the first day of each January, April, July and October, commencing October 1, 2017, DCV Borrower is required to make a principal payment in the amount of $125,000 and an interest payment equal to the amount of all interest accrued through the previous day. A final payment of all unpaid principal, interest and any other charges with respect to the 2017 Term Loan shall be due and payable on the 2017 Loan Maturity Date.

The full $10.0 million was drawn at closing and the 2017 Term Loan can be used to fund acquisitions, capital projects and other general corporate purposes. As of March 31, 2020, $8.8 million in principal was outstanding on the 2017 Term Loan, and unamortized loan fees were less than $0.1 million.

Borrower’s obligations under the 2015 Term Loan and 2017 Term Loan are guaranteed by the Company. All obligations of Borrower under the 2015 Term Loan and 2017 Term Loan are collateralized by certain real property of the Company. Borrower’s covenants include the maintenance of a specified debt service coverage ratio and certain customary affirmative and negative covenants, including limitations on the incurrence of additional indebtedness, limitations on distributions to shareholders, and restrictions on certain investments, sale of assets and merging or consolidating with other entities.

In April 2020, the Company successfully secured a $3.8 million Small Business Association (“SBA”) loan under the Payroll Protection Program (“PPP”) to secure payroll expenses for otherwise furloughed employees impacted by government imposed shelter in place orders. Per the terms of the loan, the full amount will be forgiven as long as loan proceeds are used to cover payroll costs and other specified non-payroll costs (provided any non-payroll costs do not exceed 25% of the forgiven amount) over an 8-week period after the loan is made; and employee and compensation levels are maintained. The Company fully intends to comply with the above terms in order to qualify for loan forgiveness. In the event the Company is required to repay the loan, all payments are deferred for 6 months with accrued interest over this period. Amounts outstanding under the loan will bear a fixed interest rate of 1.00% per annum with a maturity date of 2 years from commencement date.






24


Consolidated Statements of Cash Flows

The following table summarizes our cash flow activities for the three months ended March 31, 2020 and 2019 (in thousands):
Cash provided by (used in):
2020
 
2019
Operating activities
$
1,734

 
$
(1,527
)
Investing activities
1,141

 
1,381

Financing activities
(285
)
 
(1,456
)

Cash provided by operating activities

Net cash provided by operating activities was $1.7 million for the three months ended March 31, 2020, consisting primarily of $1.1 million of net loss adjusted for non-cash items such as $2.3 million primarily consisting of depreciation, amortization, and loss on the write-down of inventory and $0.5 million of restructuring charges. The net cash inflow related to changes in operating assets and liabilities totaled $0.1 million.

Net cash used in operating activities was $1.5 million for the three months ended March 31, 2019, consisting primarily of $0.7 million of net loss adjusted for non-cash items totaling $2.3 million of depreciation and amortization partially offset by $3.3 million of net cash outflow related to changes in operating assets and liabilities. The change in operating assets and liabilities was primarily due to a decrease in accounts payable and expense accruals, partially offset by a decrease in inventory and accounts receivable. The decrease in accounts payable and expense accruals was primarily due to grower payments made in the current quarter for the 2018 harvest.

Cash provided by investing activities

Net cash provided by investing activities was $1.1 million for the three months ended March 31, 2020, consisting primarily of proceeds from sale of land in Klickitat County, Washington totaling $1.8 million, partially offset by net purchases of available for sale investments of $0.3 million and capital expenditures of $0.5 million

Net cash provided by investing activities was $1.4 million for the three months ended March 31, 2019, consisting primarily of net redemptions of available for sale investments of $2.5 million, partially offset by capital expenditures of $1.2 million.

Cash used in financing activities

Net cash used in financing activities for the three months ended March 31, 2020 was $0.3 million, which reflects the principal payments on our term loans of $0.3 million.

Net cash used in financing activities for the three months ended March 31, 2019 was $1.5 million, which reflects the repurchase of shares of our common stock at a repurchase price of $1.1 million, principal payments on our term loans of $0.3 million and contingent consideration payments of $0.1 million associated with the Seven Hills Winery acquisition.

Share Repurchases

In December 2018, the Company commenced a share repurchase program (the “2019 Winter Repurchase Program”) that provided for the repurchase of up to $2.0 million of outstanding common stock. Under the 2019 Winter Repurchase Program, any repurchased shares were constructively retired. On April 30, 2019, the 2019 Winter Repurchase Program was completed. Under the total 2019 Winter Repurchase Program, the Company had repurchased 253,324 shares at a repurchase price of $2.0 million.

In September 2019, the Company commenced a share repurchase program (the “2019 Summer Repurchase Program”) that provided for the repurchase of up to $2.0 million of outstanding common stock. Under the 2019 Summer Repurchase Program, any repurchased shares were constructively retired. During the three months ended March 31, 2020, the Company repurchased 283,208 shares at a purchase price of $2.0 million under the 2019 Summer Repurchase Program.


25


Commitments & Contingencies

There have been no significant changes to our contractual obligations table as disclosed in the 2019 Report.

Off-Balance Sheet Financing Arrangements

None.

Critical Accounting Policies and Estimates

Except as disclosed in Note 1 of this Form 10-Q, there have been no material changes to the critical accounting policies and estimates previously disclosed in the 2019 Report.

Item 3. Quantitative and Qualitative Disclosures About Market Risk.
Crimson does not currently have any exposure to financial market risk. Sales to international customers are denominated in U.S. dollars; therefore, Crimson is not exposed to market risk related to changes in foreign currency exchange rates.  As discussed above under Liquidity and Capital Resources, Crimson has a revolving credit facility and two term loans. The revolving credit facility had no outstanding balance as of March 31, 2020, and bears interest at floating rates on borrowings. The term loans had $22.0 million outstanding at March 31, 2020, and are fixed-rate debt and therefore are not subject to fluctuations in market interest rates.

Item 4. Controls and Procedures.
The Company’s management evaluated, with the participation of the Company’s principal executive and principal financial officers, the effectiveness of the Company’s disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)), as of March 31, 2020. Based on their evaluation, the Company’s principal executive and principal financial officers concluded that the Company’s disclosure controls and procedures were effective as of March 31, 2020.

There has been no change in the Company's internal control over financial reporting that occurred during the Company's fiscal quarter ended March 31, 2020 that has materially affected, or is reasonably likely to materially affect, the Company's internal control over financial reporting.

26


PART II – OTHER INFORMATION

Item 1. Legal Proceedings.

From time to time, Crimson may be involved in legal proceedings in the ordinary course of its business. Crimson is not currently involved in any legal or administrative proceedings individually or together that it believes are likely to have a significant adverse effect on its business, results of operations or financial condition.

Item 1A. Risk Factors.

In addition to the factors discussed in Part I, “Item 1A. Risk Factors” in our 2019 Report, which could materially affect our business, results of operations or financial condition, please carefully consider the additional risk factor below.

We face risks related to health pandemics, particularly the recent outbreak of COVID-19, which could adversely affect our business and results of operations.      

Our business could be materially adversely affected by a widespread outbreak of contagious disease, including the recent outbreak of the novel coronavirus, known as COVID-19, which has spread to many countries throughout the world. The effects of this outbreak on our business have included and could continue to include disruptions or restrictions on our employees’ ability to travel in affected regions, as well as temporary closures of our tasting rooms and temporary closures of the facilities of our suppliers, customers, or other vendors in our supply chain, which could impact our business, interactions and relationships with our customers, third-party suppliers and contractors, and results of operations. In addition, a significant outbreak of contagious disease in the human population could result in a widespread health crisis that could adversely affect the economies and financial markets of many countries, resulting in an economic downturn that could reduce the demand for our products and likely impact our results of operations. The extent to which the COVID-19 outbreak will impact business and the economy is highly uncertain and cannot be predicted. Accordingly, we cannot predict the extent to which our financial condition and results of operations will be affected.

Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may eventually prove to materially adversely affect our business, results of operations or financial condition.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

None.

Item 3. Defaults Upon Senior Securities.

None.

Item 4. Mine Safety Disclosures.

None.

Item 5. Other Information.

None.


27


Item 6. Exhibits.

2.1*
3.1*
3.2*
10.1*

10.2*

31.1**
31.2**
32.1**
32.2**
101**
Unaudited financial statements from the Quarterly Report on Form 10-Q of Crimson Wine Group, Ltd. for the quarter ended March 31, 2020, formatted in Extensible Business Reporting Language (XBRL): (i) the Condensed Consolidated Balance Sheets; (ii) the Condensed Consolidated Statements of Loss; (iii) the Condensed Consolidated Statements of Comprehensive Income (iv) the Condensed Consolidated Statements of Cash Flows; and (v) the Notes to Unaudited Interim Condensed Consolidated Financial Statements.
 
 
* Incorporated by reference
** Filed herewith

28


SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

 
 
 
CRIMSON WINE GROUP, LTD.
 
 
 
 
(Registrant)
 
 
 
 
 
Date:
May 7, 2020
By:
/s/ Karen L. Diepholz
 
 
 
Karen L. Diepholz
 
 
 
Chief Financial Officer
 
 
 
 

29

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Inside this 10-Q Quarterly Report

Cover Page
Condensed Consolidated Balance Sheets (Unaudited)
Condensed Consolidated Balance Sheets (Unaudited) (Parenthetical)
Condensed Consolidated Statements Of Cash Flows (Unaudited)
Condensed Consolidated Statements Of Changes In Equity
Condensed Consolidated Statements Of Comprehensive Losses (Unaudited)
Condensed Consolidated Statements Of Operations (Unaudited)
Accounts Payable And Accrued Liabilities
Accounts Payable And Accrued Liabilities (Details)
Accounts Payable And Accrued Liabilities (Tables)
Background And Basis Of Presentation
Background And Basis Of Presentation (Details)
Background And Basis Of Presentation (Policies)
Background And Basis Of Presentation (Tables)
Business Segment Information
Business Segment Information (Narrative) (Details)
Business Segment Information (Schedule Of Segment Reporting) (Details)
Business Segment Information (Tables)
Commitments And Contingencies
Commitments And Contingencies (Narrative) (Details)
Commitments And Contingencies (Supplemental Balance Sheet Information) (Details)
Commitments And Contingencies (Tables)
Commitments And Contingencies Commitments And Contingencies (Maturities Of Lease Liabilities) (Details)
Debt
Debt (Long-Term Debt Maturities) (Details)
Debt (Narrative) (Details)
Debt (Schedule Of Debt) (Details)
Debt (Tables)
Financial Instruments
Financial Instruments (Narrative) (Details)
Financial Instruments (Schedule Of Available For Sale Securities) (Details)
Financial Instruments (Tables)
Income Taxes
Income Taxes (Details)
Intangible And Other Non-Current Assets
Intangible And Other Non-Current Assets (Amortization Expense For Intangible Assets) (Details)
Intangible And Other Non-Current Assets (Summary Of Intangible Assets) (Details)
Intangible And Other Non-Current Assets (Tables)
Inventory
Inventory (Details)
Inventory (Tables)
Property And Equipment
Property And Equipment (Details)
Property And Equipment (Tables)
Restructuring
Restructuring (Narrative) (Details)
Restructuring (Roll Forward Of Restructuring Reserve) (Details)
Restructuring Roll Forward Of Restructuring Reserve (Tables)
Revenue
Revenue (Contract Balances) (Details)
Revenue (Narrative) (Details)
Revenue (Tables)
Stockholders??? Equity And Equity Incentive Plan
Stockholders??? Equity And Equity Incentive Plan (Details)

Material Contracts, Statements, Certifications & more

Crimson Wine Group, Ltd provided additional information to their SEC Filing as exhibits

Ticker: CWGL
CIK: 1562151
Form Type: 10-Q Quarterly Report
Accession Number: 0001562151-20-000040
Submitted to the SEC: Thu May 07 2020 5:36:38 PM EST
Accepted by the SEC: Fri May 08 2020
Period: Tuesday, March 31, 2020
Industry: Beverages

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