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Crimson Wine Group, Ltd - Quarter Report: 2015 September (Form 10-Q)

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 September 30, 2015

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)

______________________

 

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 and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted 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 and post such files).

       

 

 

 

 

 

 

 

YES

X

 

 

NO

 

 

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.  See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

 

 

 

Large accelerated filer  

 

Accelerated filer  

Non-accelerated filer    

(Do not check if a smaller reporting company)

Smaller reporting company  

 

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 November 5, 2015, there were 24,378,820 outstanding shares of the Registrant’s Common Stock, par value $.01 per share.


 

 

CRIMSON WINE GROUP, LTD.

TABLE OF CONTENTS

 

 

 

 

 

 

 

 

 

 

 

Page Number

PART I. FINANCIAL INFORMATION

 

 

 

 

 

Item 1.

Financial Statements (Unaudited)

 

 

Condensed Consolidated Balance Sheets at September 30, 2015 and December 31, 2014

1

 

Condensed Consolidated Income Statements for the Three and Nine Months Ended September 30, 2015 and 2014

2

 

Condensed Consolidated Statements of Comprehensive Income for the Three and Nine Months Ended September 30, 2015 and 2014

3

 

Condensed Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2015 and 2014

4

 

Notes to Unaudited Interim Condensed Consolidated Financial Statements

5

Item 2.

Management's Discussion and Analysis of Financial Condition and Results of Interim Operations

11

Item 3.

Quantitative and Qualitative Disclosure About Market Risk

16

Item 4.

Controls and Procedures

16

 

 

 

 

 

PART II. OTHER INFORMATION

 

 

 

 

 

Item 1.

Legal Proceedings

17

Item 1A.

Risk Factors

17

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

17

Item 3.

Defaults Under Senior Securities

17

Item 4.

Mine Safety Disclosures

17

Item 5.

Other Information

17

Item 6.

Exhibits

18

 

Signatures

19

 

Exhibit Index

20

 

 

 

 

 


 

 

 

 

 

 

 

 

PART I – FINANCIAL INFORMATION

Item 1. Financial Statements.

 

 

 

 

 

 

 

 

 

 

 

CRIMSON WINE GROUP, LTD.

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except share amounts and par value)

(Unaudited)

 

 

 

 

 

 

 

September 30, 2015

 

December 31, 2014

ASSETS

 

 

 

 

 

Current assets:

 

 

 

 

 

Cash and cash equivalents

$

11,629 

 

$

13,274 

Investments available for sale

 

16,007 

 

 

15,711 

Accounts receivable, net

 

5,999 

 

 

5,784 

Inventory

 

58,518 

 

 

49,593 

Other current assets

 

1,545 

 

 

894 

Deferred tax asset, current

 

2,011 

 

 

3,184 

Total current assets

 

95,709 

 

 

88,440 

 

 

 

 

 

 

Property and equipment, net

 

112,372 

 

 

108,707 

Goodwill

 

1,053 

 

 

1,053 

Intangible assets and other non-current assets

 

16,147 

 

 

17,300 

Total non-current assets

 

129,572 

 

 

127,060 

 

 

 

 

 

 

Total assets

$

225,281 

 

$

215,500 

 

 

 

 

 

 

LIABILITIES

 

 

 

 

 

Current liabilities:

 

 

 

 

 

Accounts payable

$

8,931 

 

$

4,342 

Accrued compensation related expenses

 

2,230 

 

 

1,979 

Other accrued expenses

 

1,918 

 

 

1,266 

Customer deposits

 

1,420 

 

 

403 

Total current liabilities

 

14,499 

 

 

7,990 

 

 

 

 

 

 

Deferred rent, non-current

 

125 

 

 

123 

Deferred tax liability, non-current

 

4,775 

 

 

4,267 

Total non-current liabilities

 

4,900 

 

 

4,390 

 

 

 

 

 

 

Total liabilities

 

19,399 

 

 

12,380 

 

 

 

 

 

 

EQUITY

 

 

 

 

 

Common shares, par value $0.01 per share, authorized 150,000,000 shares; 24,418,135

 

 

 

 

 

and 24,458,368 shares issued and outstanding at September 30, 2015 and December 31, 2014, respectively

 

244 

 

 

245 

Additional paid-in capital

 

277,520 

 

 

277,520 

Accumulated other comprehensive income (loss)

 

 

 

(39)

Accumulated deficit

 

(71,886)

 

 

(74,606)

Total equity

 

205,882 

 

 

203,120 

 

 

 

 

 

 

Total liabilities and equity

$

225,281 

 

$

215,500 

 

See accompanying notes to unaudited interim condensed consolidated financial statements.

Page | 1

 

 


 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

CRIMSON WINE GROUP, LTD.

CONDENSED CONSOLIDATED INCOME STATEMENTS

(In thousands, except per share amounts)

(Unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended

 

Nine Months Ended

 

September 30,

 

September 30,

 

2015

 

2014

 

2015

 

2014

 

 

 

 

 

 

 

 

 

 

 

 

Net sales

$

14,023 

 

$

12,844 

 

$

42,531 

 

$

40,412 

Cost of sales

 

7,063 

 

 

5,904 

 

 

19,801 

 

 

18,273 

Gross profit

 

6,960 

 

 

6,940 

 

 

22,730 

 

 

22,139 

 

 

 

 

 

 

 

 

 

 

 

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

Sales and marketing

 

3,570 

 

 

3,188 

 

 

10,143 

 

 

9,780 

General and administrative

 

2,553 

 

 

2,336 

 

 

7,744 

 

 

7,253 

Administrative service fees paid to Leucadia National Corporation

 

-  

 

 

-  

 

 

-  

 

 

Total operating expenses

 

6,123 

 

 

5,524 

 

 

17,887 

 

 

17,042 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss (gain) on disposal of property and equipment

 

 

 

(44)

 

 

(93)

 

 

(1,864)

 

 

 

 

 

 

 

 

 

 

 

 

Income from operations

 

830 

 

 

1,460 

 

 

4,936 

 

 

6,961 

 

 

 

 

 

 

 

 

 

 

 

 

Other income (expense):

 

 

 

 

 

 

 

 

 

 

 

Interest expense

 

(38)

 

 

(38)

 

 

(114)

 

 

(114)

Other income  (expense), net

 

43 

 

 

(114)

 

 

237 

 

 

(143)

Total other income (expense), net

 

 

 

(152)

 

 

123 

 

 

(257)

 

 

 

 

 

 

 

 

 

 

 

 

Income before income taxes

 

835 

 

 

1,308 

 

 

5,059 

 

 

6,704 

 

 

 

 

 

 

 

 

 

 

 

 

Income tax provision

 

359 

 

 

609 

 

 

1,967 

 

 

2,771 

 

 

 

 

 

 

 

 

 

 

 

 

Net income

$

476 

 

$

699 

 

$

3,092 

 

$

3,933 

 

 

 

 

 

 

 

 

 

 

 

 

Basic and fully diluted weighted-average shares outstanding

 

24,452 

 

 

24,458 

 

 

24,456 

 

 

24,458 

 

 

 

 

 

 

 

 

 

 

 

 

Basic and fully diluted earnings per share

$

0.02 

 

$

0.03 

 

$

0.13 

 

$

0.16 

 

See accompanying notes to unaudited interim condensed consolidated financial statements.

Page | 2

 

 


 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

CRIMSON WINE GROUP, LTD.

 

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

 

(In thousands)

 

(Unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended

 

Nine Months Ended

 

 

September 30,

 

September 30,

 

 

2015

 

2014

 

2015

 

2014

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income

$

476 

 

$

699 

 

$

3,092 

 

$

3,933 

 

Other comprehensive income:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net unrealized holding (losses) gains on

 

 

 

 

 

 

 

 

 

 

 

 

investments arising during the period, net of tax

 

(10)

 

 

(23)

 

 

43 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Comprehensive income

$

466 

 

$

676 

 

$

3,135 

 

$

3,942 

 

 

 

See accompanying notes to unaudited interim condensed consolidated financial statements.

Page | 3

 

 


 

 

 

 

 

 

 

 

 

CRIMSON WINE GROUP, LTD.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)

 

 

 

 

 

 

 

Nine Months Ended September 30,

 

2015

 

2014

Net cash flows from operating activities:

 

 

 

 

 

Net income

$

3,092 

 

$

3,933 

Adjustments to reconcile net income to net cash provided by operations:

 

 

 

 

 

Depreciation and amortization of property and equipment

 

4,379 

 

 

4,072 

Amortization of intangible assets

 

1,136 

 

 

1,136 

Loss on write-down of inventory

 

192 

 

 

169 

Provision for doubtful accounts

 

17 

 

 

-  

Net gain on disposal of property and equipment

 

(93)

 

 

(1,864)

Deferred rent

 

 

 

80 

Provision for deferred income taxes

 

1,678 

 

 

2,500 

Net change in:

 

 

 

 

 

Accounts receivable

 

(232)

 

 

179 

Inventory

 

(9,117)

 

 

(7,947)

Other current assets

 

(651)

 

 

(19)

Other non-current assets

 

17 

 

 

 -

Accounts payable and expense accruals

 

5,388 

 

 

4,543 

Customer deposits

 

1,017 

 

 

1,235 

Net cash provided by operating activities

 

6,825 

 

 

8,017 

 

 

 

 

 

 

Net cash flows from investing activities:

 

 

 

 

 

Purchase of investments available for sale

 

(3,750)

 

 

(7,000)

Redemptions of investments available for sale

 

3,500 

 

 

3,000 

Acquisition of property and equipment

 

(7,975)

 

 

(3,744)

Proceeds from disposals of property and equipment

 

128 

 

 

3,988 

Net cash used in investing activities

 

(8,097)

 

 

(3,756)

 

 

 

 

 

 

Net cash flows from financing activities:

 

 

 

 

 

Repurchase of common stock

 

(373)

 

 

-  

Net cash used in financing activities

 

(373)

 

 

-  

 

 

 

 

 

 

Net (decrease) increase in cash and cash equivalents

 

(1,645)

 

 

4,261 

Cash and cash equivalents - beginning of period

 

13,274 

 

 

13,269 

Cash and cash equivalents - end of period

$

11,629 

 

$

17,530 

 

 

 

 

 

 

Supplemental disclosure of cash flow information:

 

 

 

 

 

Cash paid during the period for:

 

 

 

 

 

Interest

$

114 

 

$

114 

Income taxes

$

569 

 

$

328 

 

 

 

 

 

 

Non-cash investing activity:

 

 

 

 

 

Unrealized holding gains on investments

$

43 

 

$

Capital investments accrued but not yet paid

$

104 

 

$

-  

 

 

See accompanying notes to unaudited interim condensed consolidated financial statements

Page | 4

 

 


 

.

 

CRIMSON WINE GROUP, LTD.

Notes to Unaudited Interim Condensed Consolidated Financial Statements

 

1.Background and Basis of Presentation

 

Background

Crimson Wine Group, Ltd. (“Crimson”) is a Delaware corporation that has been operating since 1991.  As used herein, the term “Company” refers to Crimson and its wholly-owned subsidiaries, except as the context may otherwise require.  Prior to February 25, 2013, Crimson was a wholly-owned subsidiary of Leucadia National Corporation (“Leucadia”).  On February 1, 2013, Leucadia declared a pro rata dividend to Leucadia’s common shareholders of all of the outstanding shares of Crimson’s common stock in a manner that was structured to qualify as a tax-free spin-off for U.S. federal income tax purposes (the “Distribution”).  Leucadia’s common shareholders received one share of Crimson common stock for every ten common shares of Leucadia (24,458,368 Crimson common shares in the aggregate), with cash in lieu of fractional shares, on February 25, 2013.

The Company qualifies as an “emerging growth company” as defined in the JOBS Act. Crimson has elected to opt out of the extended transition period for complying with new or revised accounting standards pursuant to Section 107(b) of the JOBS Act.  This election is irrevocable.

 

Financial Statement Preparation

The accompanying unaudited 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) included in the Company’s audited consolidated financial statements for the year ended December 31, 2014, as filed with the SEC on Form 10-K (the “2014 Report”).  Results of operations for interim periods are not necessarily indicative of annual results of operations.  The condensed consolidated balance sheet at December 31, 2014 was extracted from the audited annual financial statements and does not include all disclosures required by GAAP for annual financial statements.

 

Reclassifications

Certain reclassifications have been made to the prior period unaudited condensed consolidated financial statements to conform to the current period presentation. The reclassifications have no impact on previously reported net income, cash flow, or equity.

 

Significant Accounting Policies

Except as described below, there have been no material changes to the Company’s significant accounting policies previously disclosed in the 2014 Report.

 

(a) Share repurchases: Share repurchases are accounted for under the cost method. Any repurchased shares are constructively retired and are deducted from common stock at par value and from accumulated deficit for the excess of cash paid over par value. Direct costs incurred to acquire the shares are included in the total cost of the repurchased shares.  

 

Recent Accounting Pronouncements

In April 2014, the FASB issued guidance that changes the criteria for reporting discontinued operations. To qualify as a discontinued operation under the amended guidance, a component or group of components of an entity that has been disposed of or is classified as held for sale must represent a strategic shift that has or will

Page | 5

 

 


 

have a major effect on the entity's operations and financial results. These changes became effective for the Company on January 1, 2015. The adoption of this guidance did not have a material impact on the Company’s consolidated financial statements.

In May 2014, the FASB issued guidance outlining a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers that supersedes most current revenue recognition guidance. This guidance requires an entity to recognize revenue when it transfers promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. Additionally, this guidance expands related disclosure requirements.

This guidance becomes effective for the Company on January 1, 2018, and early adoption is permitted for the Company beginning on January 1, 2017. Management is currently evaluating the potential impact of this guidance on the Company’s consolidated financial statements.

In August 2014, the Financial Accounting Standards Board ("FASB") issued guidance which requires management of a company to evaluate whether there is substantial doubt about the Company’s ability to continue as a going concern. This guidance becomes effective for the Company on January 1, 2017, and early adoption is permitted.  Management is currently evaluating the potential impact of this guidance on the Company’s consolidated financial statements. 

In April 2015, the FASB issued guidance on the financial statement presentation of debt issuance costs. This guidance requires debt issuance costs to be presented in the balance sheet as a reduction of the related debt liability rather than an asset. This guidance becomes effective for the Company on January 1, 2016, and early adoption is permitted.  Management is currently evaluating the potential impact of this guidance on the Company’s consolidated financial statements.

In July 2015, the FASB issued guidance on the simplification for the measurement of inventory. This guidance requires that an entity should measure in scope inventory at the lower of cost and net realizable value. This guidance becomes effective for the Company on January 1, 2017, and early adoption is permitted.  Management is currently evaluating the potential impact of this guidance on the Company’s consolidated financial statements.

 

2.Inventory:

A summary of inventory at September 30, 2015 and December 31, 2014 is as follows (in thousands):

 

 

 

 

 

 

 

 

 

 

September 30, 2015

 

December 31, 2014

 

 

 

 

Case wine

$

31,915 

 

$

25,613 

In-process wine

 

26,598 

 

 

23,630 

Packaging and bottling supplies

 

 

 

350 

Total inventory

$

58,518 

 

$

49,593 

 

 

 

Page | 6

 

 


 

3.Property and Equipment:

A summary of property and equipment at September 30, 2015 and December 31, 2014 is as follows (in thousands):

 

 

 

 

 

 

 

 

 

 

Depreciable Lives

 

 

 

 

 

 

 

(in years)

 

September 30, 2015

 

December 31, 2014

Land and improvements

N/A

 

$

41,573 

 

$

41,573 

Buildings and improvements

20-40

 

 

48,075 

 

 

45,259 

Vineyards and improvements

7-25

 

 

36,505 

 

 

35,898 

Winery and vineyard equipment

3-25

 

 

28,261 

 

 

25,437 

Caves

20-40

 

 

5,638 

 

 

5,638 

Vineyards under development

N/A

 

 

1,887 

 

 

1,894 

Construction in progress

N/A

 

 

1,694 

 

 

633 

Total

 

 

 

163,633 

 

 

156,332 

Accumulated depreciation and amortization

 

 

 

(51,261)

 

 

(47,625)

Property and equipment, net

 

 

$

112,372 

 

$

108,707 

 

 

 

 

 

 

 

 

 

 

 

Nine Months Ended  September 30,

 

 

 

2015

 

2014

Depreciation expense (in thousands):

 

 

 

 

 

Capitalized into inventory

 

 

 

3,538 

 

 

3,418 

Expensed to general and administrative

 

 

 

841 

 

 

654 

Total depreciation

 

 

$

4,379 

 

$

4,072 

 

 

 

 

 

4.Financial Instruments:

The Company’s material financial instruments include cash and cash equivalents and investments classified as available for sale; investments classified as available for sale include certificates of deposit that are the only assets or liabilities that are measured at fair value on a recurring basis. All of the Company’s investments mature within three 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 September  30, 2015 and December 31, 2014 are as follows (in thousands):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Par Value

 

Amortized Cost

 

Gross Unrealized Gains

 

Gross Unrealized Losses

 

Significant Other Observable Inputs
(Level 2)

 

Total Fair Value Measurements

September 30, 2015

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Certificates of Deposit

$

16,000 

 

$

16,000 

 

$

20 

 

$

(13)

 

$

16,007 

 

$

16,007 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

December 31, 2014

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Certificates of Deposit

$

15,750 

 

$

15,750 

 

$

 

$

(46)

 

$

15,711 

 

$

15,711 

As of September  30, 2015 and December 31, 2014, the Company did not have any assets or liabilities measured at fair value on a nonrecurring basis.

Page | 7

 

 


 

For cash and cash equivalents, the carrying amounts of such financial instruments approximate their fair values.

 

5.Intangible and Other Non-Current Assets:

A summary of intangible and other non-current assets at September 30, 2015 and December 31, 2014 is as follows (in thousands):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Amortizable Lives
(in years)

 

September 30, 2015

 

December 31, 2014

 

 

 

 

 

 

Brand, net of accumulated amortization of $4,461 and $3,688

17

 

$

13,039 

 

$

13,812 

Distributor relations, net of accumulated amortization of $805 and $666

14

 

 

1,795 

 

 

1,934 

Customer relations, net of accumulated amortization of $1,175 and $971

7

 

 

725 

 

 

929 

Legacy permits, net of accumulated amortization of $77 and $64

14

 

 

173 

 

 

186 

Trademark, net of accumulated amortization of $71 and $64

20

 

 

129 

 

 

136 

Total intangible assets, net

 

 

$

15,861 

 

$

16,997 

 

 

 

 

 

 

 

 

Other non-current assets

 

 

 

286 

 

 

303 

Total intangible and other non-current assets

 

 

$

16,147 

 

$

17,300 

 

 

 

 

 

 

 

 

 

 

 

Nine Months Ended September 30,

Amortization expense (in thousands):

 

 

2015

 

2014

Total amortization expense

 

 

$

1,136 

 

$

1,136 

 

The estimated aggregate future amortization is identified below (in thousands):

 

 

 

 

 

 

Years Remaining:

 

Amortization

2015

 

$

378 

2016

 

 

1,514 

2017

 

 

1,514 

2018

 

 

1,359 

2019

 

 

1,243 

Thereafter

 

 

9,853 

Total

 

$

15,861 

 

 

 

 

 

 

6.Due to Leucadia and its Affiliates:

Effective March 1, 2013, the Company entered into an administrative service agreement with Leucadia.  Pursuant to this agreement, Leucadia provided certain administrative, SEC, tax filing and accounting services, including providing the services of the Company’s Corporate Secretary. 

 

Effective August 1, 2013, Leucadia and the Company agreed to amend the administrative service agreement to reduce the administrative services provided to the Company by Leucadia and to terminate the agreement effective February 2014. Administrative services expense was $9,000 for the first quarter of 2014 and there have been no charges since then. 

 

Page | 8

 

 


 

7.Credit Facilities:

There have been no material changes with respect to the Company’s credit facilities as disclosed in the 2014 Report. 

 

The Company has a revolving credit facility for up to $10.0 million of availability maturing in March 2018 and a term revolving credit facility for up to $50.0 million maturing in March 2028. As of September 30, 2015, the amounts were fully available and no amounts have been borrowed on the facilities to date.

 

All obligations of the Company under the revolving credit facilities are collateralized by certain real property, including vineyards and certain winery facilities, accounts receivable, inventory and intangible assets of the Company.  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. 

 

8.Stockholders’ Equity:

In March 2014, the Board of Directors of the Company authorized a share repurchase program that provides for the repurchase of up to $2.0 million of outstanding common stock. Under the share repurchase program, any repurchased shares are constructively retired. As of September  30, 2015, the Company had repurchased 40,233 shares which were constructively retired at an original repurchase cost of $0.4 million. Through November 6, 2015, the Company had repurchased 81,148 shares which were constructively retired at an original repurchase cost of $0.7 million. 

 

9.Income Taxes:

The Company’s effective tax rates for the three and nine months ended September 30, 2015 were 43.0% and 38.9%, respectively.  The Company’s effective tax rates for the three and nine months ended September 30, 2014 were 46.6% and 41.3%, respectively. The effective tax rates primarily reflect the impact of federal and state income taxes.

 

The Company does not have any amounts in its consolidated balance sheet for unrecognized tax benefits related to uncertain tax positions at September  30, 2015 and December 31, 2014. As discussed in the 2014 Report, the Company will not be required to reimburse Leucadia for any payments made by Leucadia for adjustments to taxable periods prior to the Distribution, nor will the Company be entitled to any refunds for adjustments to taxable periods prior to the Distribution.  The Company is responsible for any adjustments or liabilities related to its California state income tax return for all periods and its Federal income tax return for all periods subsequent to the Distribution.  The statute of limitations with respect to California state income tax returns has expired for all years through 2009.

 

10.Business Segment Information:

The Company has identified two operating segments which are reportable segments for financial statement reporting purposes, Wholesale Sales and Direct to Consumer Sales, based upon their different distribution channels, margins and selling strategies.  Wholesale Sales includes all sales through a third party where prices are given at a wholesale rate whereas Direct to Consumer Sales includes retail sales in the tasting room, remote sites and at on-site events, Wine Club 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

Page | 9

 

 


 

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, directly attributable selling expenses, and operating income for the Company’s reportable segments for the three and nine months ended September 30, 2015 and 2014, 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 September 30,

 

 

Wholesale

 

Direct to Consumer

 

Other/Non-Allocable

 

Total

(in thousands)

 

2015

 

2014

 

2015

 

2014

 

2015

 

2014

 

2015

 

2014

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net sales

$

8,464 

$

7,450 

$

4,301 

$

4,280 

$

1,258 

$

1,114 

$

14,023 

$

12,844 

Cost of sales

 

4,340 

 

3,725 

 

1,111 

 

1,193 

 

1,612 

 

986 

 

7,063 

 

5,904 

Gross profit (loss)

 

4,124 

 

3,725 

 

3,190 

 

3,087 

 

(354)

 

128 

 

6,960 

 

6,940 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Sales and marketing

 

1,442 

 

1,426 

 

1,583 

 

1,280 

 

545 

 

482 

 

3,570 

 

3,188 

General and administrative

 

 -

 

 -

 

 -

 

 -

 

2,553 

 

2,336 

 

2,553 

 

2,336 

Total operating expenses

 

1,442 

 

1,426 

 

1,583 

 

1,280 

 

3,098 

 

2,818 

 

6,123 

 

5,524 

Net (gain) loss on disposal of property and equipment

 

 -

 

 -

 

 -

 

 -

 

 

(44)

 

 

(44)

Income (loss) from operations

$

2,682 

$

2,299 

$

1,607 

$

1,807 

$

(3,459)

$

(2,646)

$

830 

 

1,460 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Nine Months Ended September 30,

 

 

Wholesale

 

Direct to Consumer

 

Other/Non-Allocable

 

Total

(in thousands)

 

2015

 

2014

 

2015

 

2014

 

2015

 

2014

 

2015

 

2014

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net sales

$

25,411 

$

24,228 

$

14,617 

$

13,728 

$

2,503 

$

2,456 

$

42,531 

$

40,412 

Cost of sales

 

12,946 

 

12,212 

 

3,989 

 

4,143 

 

2,866 

 

1,918 

 

19,801 

 

18,273 

Gross profit (loss)

 

12,465 

 

12,016 

 

10,628 

 

9,585 

 

(363)

 

538 

 

22,730 

 

22,139 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Sales and marketing

 

4,229 

 

4,254 

 

4,425 

 

4,129 

 

1,489 

 

1,397 

 

10,143 

 

9,780 

General and administrative*

 

 -

 

 -

 

 -

 

 -

 

7,744 

 

7,262 

 

7,744 

 

7,262 

Total operating expenses

 

4,229 

 

4,254 

 

4,425 

 

4,129 

 

9,233 

 

8,659 

 

17,887 

 

17,042 

Net (gain) loss on disposal of property and equipment

 

 -

 

 -

 

 -

 

 -

 

(93)

 

(1,864)

 

(93)

 

(1,864)

Income (loss) from operations

$

8,236 

$

7,762 

$

6,203 

$

5,456 

$

(9,503)

$

(6,257)

$

4,936 

$

6,961 

 

Footnote to table:

Sales are net of excise taxes of $0.3 million and $0.2 million for the three months ended September 30, 2015 and 2014, respectively, and $0.9 million and $0.7 million for the nine months ended September 30, 2015 and 2014, respectively.

 

* The nine months ended September 30, 2014 includes $9,000 paid to Leucadia for administrative services.

Page | 10

 

 


 

 

 

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”) included in the Company’s audited consolidated financial statements for the year ended December 31, 2014, as filed with the SEC on Form 10-K (“the 2014 Report”).    

 

Quantities or results referred to as “current quarter” and “current nine-month period” refer to the three and nine months ended September 30, 2015, respectively.

 

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 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 or 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.

Factors 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 the following: worsening economic conditions causing a decline in estimated future cash flows; our dependence on certain key personnel; significant increases in operating costs and reduced profitability due to competition for skilled management and staff employees; various diseases, pests and weather conditions affecting the quality and quantity of grapes; our inability to grow or acquire enough fruit for our wines; significant competition adversely affecting our profitability; competition for shelf space in retail stores and for marketing focus by our independent distributors; the contamination of our wines; a reduction in consumer demand for our wines; a decrease in wine score rating by important rating organizations; climate change, or legal, regulatory or market measures to address climate change, negatively affecting our business, operations or financial performance, and water scarcity or poor quality negatively impacting our production costs and capacity, including the continuation or worsening of the drought in California; environmental issues or hazardous substances on our properties resulting in us incurring significant liabilities; indebtedness we may incur materially affecting our financial health; changes in laws and government regulations or in the implementation and/or enforcement of government rules and regulations increasing our costs or restricting our ability to sell our products into certain markets; our inability to insure certain risks economically; being subject to litigation which may have a significant adverse effect on our consolidated financial condition or results of operations; not paying dividends currently or in the future; impairment of our intangible assets; the limited market for our common stock because our stock is not listed on any securities exchange; volatility in our common stock price; future sales of our common stock depressing the market price of our stock; public company compliance costs; loss of our status as an emerging growth company; restrictions on our ability to enter into certain transactions that could jeopardize our tax free spin-off from

Page | 11

 

 


 

Leucadia; and the significant influence of certain principal stockholders.  For additional information see Part I, Item 1A. Risk Factors in the 2014 Report.

 

Overview of Business

The Company generates revenues from sales of wine to wholesalers and direct to consumers, sales of bulk wine and grapes, 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 it is able to sell its 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 wine does 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 costs and amortization of vineyard development expenditures. 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 to estimated net realizable value are also included in costs of sales.

 

At September 30, 2015, wine inventory includes approximately 0.9 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.

 

Seasonality

As discussed in the 2014 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.  We anticipate similar trends in 2015 due to seasonal holiday buying as well as wine club shipment timing.

 

Results of Operations:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net Sales

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended September 30,

 

Nine Months Ended September 30,

(in thousands, except percentages)

2015

 

2014

 

Increase  (Decrease)

 

% change

 

2015

 

2014

 

Increase  (Decrease)

 

% change

Wholesale

$

8,464 

 

$

7,450 

$

1,014 

 

14%

 

$

25,411 

 

$

24,228 

$

1,183 

 

5%

Direct to consumer

 

4,301 

 

 

4,280 

 

21 

 

0.5%

 

 

14,617 

 

 

13,728 

 

889 

 

6%

Other

 

1,258 

 

 

1,114 

 

144 

 

13%

 

 

2,503 

 

 

2,456 

 

47 

 

2%

Total net sales

$

14,023 

 

$

12,844 

$

1,179 

 

9%

 

$

42,531 

 

$

40,412 

$

2,119 

 

5%

 

Wholesale net sales increased  $1.0 million, or 14%, in the current quarter as compared to the same period in 2014, and increased $1.2 million, or 5%, in the current nine-month period as compared to the same period in 2014. The increase in the current quarter was driven by domestic and export volume growth of 12% and 14%, respectively, and shifts in product mix, partially offset by increased price support. The increase in the current nine-month period was driven by domestic and export volume growth of 4% and 11%, respectively, partially offset by shifts in product mix and increased price support.

Page | 12

 

 


 

 

Direct to consumer net sales stayed relatively flat in the current quarter as compared to the same period in 2014, and increased $0.9 million, or 6%, in the current nine-month period as compared to the same period in 2014, primarily driven by price increases, shifts towards higher priced products and the timing of wine club shipments.  Tasting room net sales increased $0.2 million and special events and e-commerce combined net sales increased $0.l million in the current quarter as compared to the same period in 2014, partially offset by a decrease in wine club net sales of $0.3 million. In the current nine-month period, wine club net sales increased $0.6 million and tasting room net sales increased $0.2 million as compared to the same period in 2014.

 

Other net sales include bulk wine and grape sales, event fees and retail sales which had an overall increase of $0.1 million, or 13%, in the current quarter and increased less than $0.1 million, or 2%, in the current nine-month period as compared to the same periods in 2014. The increase in the current quarter was primarily driven by higher grape sales, due to an earlier harvest in 2015 as compared to the same period in 2014, and higher bulk wine sales. 

 

Gross Profit

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended September 30,

 

Nine Months Ended September 30,

(in thousands, except percentages)

2015

 

2014

 

Increase  (Decrease)

 

% change

 

2015

 

2014

 

Increase  (Decrease)

 

% change

Wholesale

$

4,124 

 

$

3,725 

$

399 

 

11%

 

$

12,465 

 

$

12,016 

$

449 

 

4%

  Wholesale gross margin percentage

 

49% 

 

 

50% 

 

 

 

 

 

 

49% 

 

 

50% 

 

 

 

 

Direct to consumer

 

3,190 

 

 

3,087 

 

103 

 

3%

 

 

10,628 

 

 

9,585 

 

1,043 

 

11%

  Direct to consumer gross margin percentage

 

74% 

 

 

72% 

 

 

 

 

 

 

73% 

 

 

70% 

 

 

 

 

Other

 

(354)

 

 

128 

 

(482)

 

-377%

 

 

(363)

 

 

538 

 

(901)

 

-167%

Total gross profit

$

6,960 

 

$

6,940 

$

20 

 

0.3%

 

$

22,730 

 

$

22,139 

$

591 

 

3%

 

Wholesale gross profit increased $0.4 million, or 11%, in the current quarter as compared to the same period in 2014, and increased $0.4 million, or 4%, in the current nine-month period as compared to the same period in 2014. Gross margin percentage, defined as gross profit as a percentage of net sales, decreased approximately 128 and 54 basis points in the current quarter and current nine-month period as compared to the same periods in 2014, respectively. The decreases were driven by shifts in product mix and increased price support.   

 

Direct to consumer gross profit increased $0.1 million, or 3%, and $1.0 million, or 11%, in the current quarter and current nine-month period as compared to the same periods in 2014, respectively. Gross margin percentage increased approximately 204 and 289 basis points in the current quarter and current nine-month period as compared to the same periods in 2014, respectively. The overall increase in margin has been driven by price increases, a shift towards higher priced products and channels and lower costs related to the transition to new vintage products that carry a lower average cost. 

 

Other gross profit includes bulk wine and grape sales, event fees, non-wine retail sales and inventory write-downs which reflected an overall decrease of $0.5 million, or 377%, and $0.9 million, or 167%, in the current quarter and current nine-month period as compared to the same periods in 2014, respectively. The overall decreases were primarily related to losses on bulk wine sales due to reduced bulk pricing and increased volumes of gallons sold, and lower margin on sales of grapes due to mix and an earlier harvest in 2015 as compared to the same period in 2014.

 

Page | 13

 

 


 

Operating Expenses

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended September 30,

 

Nine Months Ended September 30,

(in thousands, except percentages)

2015

 

2014

 

Increase

 

% change

 

2015

 

2014

 

Increase

 

% change

Sales and marketing

$

3,570 

 

$

3,188 

$

382 

 

12%

 

$

10,143 

 

$

9,780 

$

363 

 

4%

General and administrative*

 

2,553 

 

 

2,336 

 

217 

 

9%

 

 

7,744 

 

 

7,262 

 

482 

 

7%

Total operating expenses

$

6,123 

 

$

5,524 

$

599 

 

11%

 

$

17,887 

 

$

17,042 

$

845 

 

5%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

*The nine months ended September 30, 2014 includes $9,000 paid to Leucadia for administrative services.

 

Sales and marketing expenses increased $0.4 million, or 12%, and $0.4 million, or 4%, in the current quarter and current nine-month period as compared to the same periods in 2014, respectively. The increases were primarily driven by increased headcount, which resulted in higher compensation costs, travel and office expenses to accommodate growth and a shift away from outside broker relationships.  

 

General and administrative expenses increased $0.2 million, or 9%, and $0.5 million, or 7%, in the current quarter and the current nine-month period as compared to the same periods in 2014, respectively.  The increases in the current quarter and current nine-month period were driven by increased salaries and recruiting costs to manage growth, costs associated with a new corporate office and related depreciation of leasehold improvements, and depreciation and other costs associated with infrastructure enhancements related to information technology.

 

Net Loss (Gain) on Disposal of Property and Equipment  

In the second quarter of 2014, the Company sold a non-strategic unplanted parcel of land in Washington for cash consideration of $4.2 million, and a net of $3.9 million after expenses. The Company recorded a pre-tax gain of $1.8 million, net of closing costs, during the second quarter of 2014.  

 

Interest Expense

Interest expense was immaterial in both the three and nine months ended September 30, 2015 and 2014 and is comprised of unused line of credit fees, which range from 0.25% to 0.375%.

Other Income (Expense), Net

The current quarter had other income of less than $0.1 million as compared to other expense of $0.1 million in the same period in 2014.  The current nine-month period had other income of $0.2 million as compared to other expense of $0.1 million in the same period in 2014. The increases in income relate to increased rental income and one-time income of $0.1 million associated with a vineyard lease.

Income Tax Provision 

Our income tax provision decreased $0.3 million, or 41%, and $0.8 million, or 29%, in the current quarter and current nine-month period as compared to the same periods in 2014, respectively. The effective tax rate was 43.0% and 38.9% for the current quarter and current nine-month periods, respectively, and 46.6% and 41.3% for the prior year three- and nine-month periods, respectively. The higher effective tax rates for 2014 were primarily driven by the valuation allowance against our deferred tax assets. This valuation allowance was subsequently reduced in the third quarter of 2014 and eliminated by year end 2014. Our effective tax rates are higher than the federal statutory rate primarily due to state income taxes.

 

Liquidity and Capital Resources

General

The Company’s principal sources of liquidity are its available cash, funds generated from operations and its revolving credit facility. The Company’s primary cash needs are to fund working capital requirements and capital expenditures.

 

Page | 14

 

 


 

Consolidated Statements of Cash Flows

Net cash provided by operating activities was $6.8 million and $8.0 million for the nine months ended September 30, 2015 and 2014, respectively,  an overall decrease of $1.2 million. The decrease was due to a net decrease in working capital of $1.6 million primarily due to an earlier harvest,  increased income tax provision of $0.8 million, partially offset by $0.9 million of improved income excluding gain on sales of property.

 

Net cash used in investing activities was $8.1 million and $3.8 million for the nine months ended September 30, 2015 and 2014, respectively, an overall increase of $4.3 million.  This increase was due to an increase in capital expenditures of $4.2 million and a decrease in purchases of available-for-sale investments of $3.3 million, partially offset by decreased proceeds from sale of assets of $3.9 million.  The increase in capital expenditures reflects investment in infrastructure and leasehold improvement projects, including expansion of the fermentation capacity at Seghesio Family Vineyards and technological enhancements related to growth. Proceeds from the sale of assets were $0.1 million and $4.0 million for the nine months ended September 30, 2015 and 2014, respectively. Proceeds in the first nine months of 2014 included $3.9 million from the sale of a non-strategic parcel of land.

 

Net cash used in financing activities during the nine months ended September 30, 2015 reflected the repurchase of 40,233 shares of our common stock at an original purchase price of $0.4 million.

 

The Company expects to spend approximately $8.4 million in 2015 for capital expenditures. We expect to use our available cash and cash flows generated from operating activities to fund capital expenditures

Credit Facilities

The Company has a revolving credit facility for up to $10.0 million of availability maturing in March 2018 and a term revolving credit facility for up to $50.0 million maturing in March 2028. The facilities can be used to fund acquisitions, capital projects and other general corporate purposes. As of September 30, 2015, the amounts were fully available and no amounts have been borrowed on the facilities to date.

 

All obligations of the Company under the revolving credit facilities are collateralized by certain real property, including vineyards and certain winery facilities, accounts receivable, inventory and intangible assets of the Company.  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 sale of assets.

 

In addition to unused line fees ranging from 0.25% to 0.375%, rates for any borrowings are priced based on a performance grid tied to certain financial ratios and the London Interbank Offered Rate. Effective October 1, 2015 the unused line fees will range from 0.15% to 0.25%. We are in compliance with the terms and covenants of the facilities.

Share Repurchases

In March 2014, the board of directors of the Company authorized a stock repurchase program pursuant to which we may repurchase up to $2.0 million of the Company’s common stock.  The repurchases will be funded by available cash and will depend on market conditions, including the price of the common stock.  At September 30, 2015, we had 40,233 repurchased shares which were constructively retired at an original repurchase cost of $0.4 million  (See Part II, Item 2 in this Report). Through November 6, 2015, we had repurchased 81,148 shares which were constructively retired at an original repurchase cost of $0.7 million.

Commitments & Contingencies

There have been no significant changes to our contractual obligations table as disclosed in the 2014 Report.

 

Critical Accounting Policies and Estimates

There have been no material changes to the critical accounting policies and estimates previously disclosed in the 2014 Report.

Page | 15

 

 


 

 

Item 3. Quantitative and Qualitative Disclosure 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. Prior to the Distribution, Crimson did not have any significant outstanding debt instruments other than amounts due to Leucadia; therefore, Crimson was not exposed to market risk relating to interest rates. As discussed above under Liquidity and Capital Resources, Crimson has access to a revolving credit facility. Any amount borrowed is expected to bear interest at floating 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 Exchange Act) as of September 30, 2015.  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 September 30, 2015.

 

There has been no change in the Company's internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) that occurred during the Company's fiscal quarter ended September 30, 2015, that has materially affected, or is reasonably likely to materially affect, the Company's internal control over financial reporting.

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PART II – OTHER INFORMATION

 

Item 1. Legal Proceedings.

 

From time to time, the Company may be involved in legal proceedings in the ordinary course of its business. The Company 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 other information set forth in this Report, you should carefully consider the factors discussed in Part I, “Item 1A. Risk Factors” in our 2014 Report, which could materially affect our business, results of operations or financial condition.  The risks described in our 2014 Report are not the only risks facing us.  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.

 

Share repurchase activity under the Company’s share repurchase program, on a trade date basis, for the three months ended September 30, 2015, was as follows:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Fiscal Period

 

Total Number of Shares Purchased

 

Average Price Paid per Share

 

Total Number of Shares Purchased as Part of Publicly Announced Plan

 

Approximate Dollar Value of Shares that May Yet Be Purchased Under Publicly Announced Plan
(millions) (1)

July 1-31, 2015

 

-  

 

$

-  

 

-  

 

$

2.0 

August 1-31, 2015

 

-  

 

 

-  

 

-  

 

 

2.0 

September 1-30, 2015

 

40,233 

 

 

9.27 

 

40,233 

 

 

1.6 

Total

 

40,233 

 

 

 

 

40,233 

 

 

 

 

(1)

In March 2014, the Board of Directors of the Company authorized a share repurchase program that provides for the repurchase of up to $2.0 million of outstanding common stock. The share repurchase program expires on the earlier of September 1, 2017 or the date that the aggregate purchase price of all shares repurchased reaches $2.0 million. Under the share repurchase program, any repurchased shares are constructively retired.

 

Item 3. Defaults Upon Senior Securities.

 

None

 

Item 4. Mine Safety Disclosures.

 

None

 

Item 5. Other Information.

 

None.

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Item 6. Exhibits.

 

 

 

 

 

2.1

Separation Agreement, dated February 1, 2013, between Crimson Wine Group, Ltd. and Leucadia National Corporation (incorporated by reference to Exhibit 2.1 to Form 8-K filed on February 25, 2013).

 

 

3.1

Amended and Restated Certificate of Incorporation (incorporated by reference to Exhibit 3.1 to Form 8-K filed on February 25, 2013).

 

 

3.2

Amended and Restated Bylaws (incorporated by reference to Exhibit 3.2 to Form 8-K filed on February 25, 2013).

 

 

 

 

 

 

31.1

Certification of President and Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

 

 

31.2

Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

 

 

32.1

Certification of Principal Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

 

 

32.2

Certification of Principal Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

 

 

101

Financial statements from the Quarterly Report on Form 10-Q of Crimson Wine Group, Ltd. for the quarter ended September 30, 2015, formatted in Extensible Business Reporting Language (XBRL): (i) the Condensed Consolidated Balance Sheets; (ii) the Condensed Consolidated Income Statements; (iii) the Condensed Consolidated Statements of Comprehensive Income; (iv) the Condensed Consolidated Statements of Cash Flows; and (v) the Notes to Condensed Consolidated Financial Statements.

 

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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: November 9, 2015

By:

/s/ Shannon McLaren

 

 

 

Shannon McLaren

 

 

 

Chief Financial Officer

 

 

 

 

 

 

 

 

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EXHIBIT INDEX

 

 

 

 

 

 

Exhibit Number

Description

 

 

 

 

2.1

Separation Agreement, dated February 1, 2013, between Crimson Wine Group, Ltd. and Leucadia National Corporation (incorporated by reference to Exhibit 2.1 to Form 8-K filed on February 25, 2013).

 

 

3.1

Amended and Restated Certificate of Incorporation (incorporated by reference to Exhibit 3.1 to Form 8-K filed on February 25, 2013).

 

 

3.2

Amended and Restated Bylaws (incorporated by reference to Exhibit 3.2 to Form 8-K filed on February 25, 2013).

 

 

31.1

Certification of President and Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

 

 

31.2

Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

 

 

32.1

Certification of Principal Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

 

 

32.2

Certification of Principal Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

 

 

101

Financial statements from the Quarterly Report on Form 10-Q of Crimson Wine Group, Ltd. for the quarter ended September  30, 2015, formatted in Extensible Business Reporting Language (XBRL): (i) the Condensed Consolidated Balance Sheets; (ii) the Condensed Consolidated Income Statements; (iii) the Condensed Consolidated Statements of Comprehensive Income; (iv) the Condensed Consolidated Statements of Cash Flows; and (v) the Notes to Condensed Consolidated Financial Statements.

 

 

 

 

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