napa-20241031

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q


☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended October 31, 2024


☐			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 001-40240

The Duckhorn Portfolio, Inc.

(Exact name of registrant as specified in its charter)


Delaware						81-3866305
(State or other jurisdiction of incorporation or organization)						(I.R.S. Employer Identification No.)

1201 Dowdell Lane Saint Helena, CA 94574

(Address of principal executive offices)

(707) 302-2658

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of class

Trading Symbol

Name of exchange on which registered

Common Stock, par value $0.01 per share

NAPA

New York Stock Exchange

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 ☒ 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 ☒ 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

Non-accelerated filer

Smaller reporting company

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 Act). Yes ☐ No ☒

The registrant had outstanding 147,200,572 shares of common stock, $0.01 par value per share, as of November 29, 2024.


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			Page

PART I
Item 1. Financial Statements			5
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations			24
Item 3. Quantitative and Qualitative Disclosures about Market Risk			39
Item 4. Controls and Procedures			40

PART II
Item 1. Legal Proceedings			41
Item 1A. Risk Factors			41
Item 5. Other Information			41
Item 6. Exhibits			42

Signatures			43

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Cautionary Note Regarding Forward-Looking Statements

This Quarterly Report on Form 10-Q and other materials filed or to be filed by us with the U.S. Securities and Exchange Commission (“SEC”) contains statements that are or may be considered to be, forward-looking statements. Forward-looking statements are neither historical facts nor assurances of future performance. Instead, they are based on our current beliefs, expectations and assumptions regarding the future of our business, future plans and strategies and other future conditions. Forward-looking statements can be identified by words such as “anticipate,” “believe,” “estimate,” “expect,” “intend,” “may,” “plan,” “predict,” “project,” “target,” “potential,” “will,” “would,” “could,” “should,” “continue,” “contemplate” and other similar expressions, although not all forward-looking statements contain these identifying words. Important factors that could cause actual results and events to differ materially from those indicated in the forward-looking statements include, among others, the following:

• risks related to the satisfaction of the conditions to closing of the Merger (as defined herein) (including the failure to obtain the requisite approval of the stockholders) in the anticipated timeframe or at all;

• the occurrence of any event, change or other circumstances that could give rise to the termination of the Merger Agreement (as defined herein);

• risks related to disruption of management’s attention from Duckhorn’s ongoing business operations due to the Merger;

• disruption from the Merger making it difficult to maintain business and operational relationships, including retaining and hiring key personnel and maintaining relationships with Duckhorn’s customers, distributors, suppliers and others with whom it does business;

• significant transaction costs;

• the risk of litigation and/or regulatory actions related to the Merger;

• the possibility that competing offers or acquisition proposals for Duckhorn will be made;

• restrictions imposed on our business during the pendency of the Merger;

• our ability to manage the growth of our business;

• our reliance on our brand name, reputation and product quality;

• the effectiveness of our marketing and advertising programs, including the consumer reception of the launch and expansion of our product offerings;

• general competitive conditions, including actions our competitors may take to grow their businesses;

• overall decline in the health of the economy, consumer discretionary spending and consumer demand for wine;

• the occurrence of severe weather events (including fires, floods and earthquakes), catastrophic health events, natural or man-made disasters, social and political conditions or civil unrest;

• risks associated with disruptions in our supply chain for grapes and raw and processed materials, including barrels, glass bottles, cork, winemaking additives and agents, water and other supplies;

• disrupted or delayed service by the distributors and government agencies we rely on for the distribution of our wines outside of California;

• our ability to successfully execute our growth strategy;

• risks associated with our acquisition of Sonoma-Cutrer Vineyards, Inc., a California corporation (“Sonoma-Cutrer”);

• decreases in our wine score ratings by wine rating organizations;

• quarterly and seasonal fluctuations in our operating results;

• our success in retaining or recruiting, or changes required in, our officers, key employees or directors;

• our ability to protect our trademarks and other intellectual property rights, including our brand and reputation;

• our ability to comply with laws and regulations affecting our business, including those relating to the manufacture, sale and distribution of wine;

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• the risks associated with the legislative, judicial, accounting, regulatory, political and economic risks and conditions specific to both domestic and to international markets;

• claims, demands and lawsuits to which we are, and may in the future, be subject and the risk that our insurance or indemnities coverage may not be sufficient;

• our ability to operate, update or implement our information technology (“IT”) systems;

• our ability to successfully pursue strategic acquisitions and integrate acquired businesses;

• our potential ability to obtain additional financing when and if needed;

• our substantial indebtedness and our ability to maintain compliance with restrictive covenants in the documents governing such indebtedness;

• our largest stockholders’ significant influence over us;

• the potential liquidity and trading of our securities; and

• the future trading prices of our common stock and the impact of securities analysts’ reports on these prices.

You should not rely on forward-looking statements as predictions of future events. We have based the forward-looking statements contained in this Quarterly Report on Form 10-Q primarily on our current expectations and projections about future events, and trends that we believe may affect our business, results of operations and financial condition. The outcome of the events described in these forward-looking statements is subject to risks, uncertainties and other factors described in the section titled “Risk Factors” in Part 1 Item 1A. in our Fiscal 2024 Annual Report on Form 10-K and elsewhere in this Quarterly Report on Form 10-Q. Moreover, we operate in a highly competitive environment. New risks and uncertainties emerge from time to time, and it is not possible for us to predict all risks and uncertainties that could have an impact on the forward-looking statements contained in this Quarterly Report on Form 10-Q. The results, events and circumstances reflected in the forward-looking statements may not be achieved or occur, and actual results, events or circumstances could differ materially from those described in the forward-looking statements.

In addition, statements that “we believe” and similar statements reflect our beliefs and opinions on the relevant subject. These statements are based on information available to us as of the date of this Quarterly Report on Form 10-Q. And while we believe that information provides a reasonable basis for these statements, that information may be limited or incomplete. Our statements should not be read to indicate that we have conducted an exhaustive inquiry into, or review of, all relevant information. These statements are inherently uncertain, and investors are cautioned not to unduly rely on these statements.

The forward-looking statements in this Quarterly Report on Form 10-Q represent our views as of the date on which the statements are made. We undertake no obligation to update any forward-looking statements whether as a result of new information, future developments or otherwise. We may not actually achieve the plans, intentions or expectations disclosed in our forward-looking statements, and you should not rely on our forward-looking statements in making your investment decision. Actual results or events could differ materially from the plans, intentions and expectations disclosed in the forward-looking statements we make. Our forward-looking statements do not reflect the potential impact of any future acquisitions, mergers, dispositions, joint ventures or investments.

Investors and others should note that we may announce material information to our investors using our investor relations website (https://ir.duckhorn.com), SEC filings, press releases, public conference calls and webcasts. We use these channels, as well as social media, to communicate with our investors and the public about our Company, our business and other issues. It is possible that the information we post on social media could be deemed to be material information. We therefore encourage investors to visit these websites from time to time. The information contained on such websites and social media posts is not incorporated into this filing. Further, our references to website URLs in this filing are intended to be inactive textual references only.

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PART I

Item 1. Financial Statements


Index to Condensed Consolidated Financial Statements
			Page
Condensed Consolidated Financial Statements (unaudited)			6
Condensed Consolidated Statements of Financial Position (unaudited)			6
Condensed Consolidated Statements of Operations (unaudited)			7
Condensed Consolidated Statements of Stockholders’ Equity (unaudited)			8
Condensed Consolidated Statements of Cash Flows (unaudited)			9
Notes to Condensed Consolidated Financial Statements (unaudited)			10
Note 1 Description of Business			10
Note 2 Basis of Presentation and Recent Accounting Pronouncements			11
Note 3 Revenue			13
Note 4 Acquisition			14
Note 5 Inventories			15


Note 6 Accrued Expenses			15
Note 7 Debt			16
Note 8 Derivative Instruments			17
Note 9 Fair Value Measurements			18
Note 1 0 Commitments and Contingencies			19
Note 1 1 Related Party Transactions			21
Note 1 2 Equity-Based Compensation			21

Note 1 3 Earnings Per Share			22
Note 1 4 Income Taxes			23

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The Duckhorn Portfolio, Inc. Condensed Consolidated Statements of Financial Position (Unaudited, in thousands except share and per share data)


	October 31, 2024		July 31, 2024
ASSETS
Current assets:
Cash	$	5,407	$	10,872
Accounts receivable trade, net	88,016		52,262
Due from related party	222		10,845
Inventories	530,293		448,967

Prepaid expenses and other current assets	11,040		14,594
Total current assets	634,978		537,540
Property and equipment, net	568,391		568,457
Operating lease right-of-use assets	26,369		27,130
Intangible assets, net	190,577		192,467
Goodwill	484,379		483,879
Other assets	7,470		7,555
Total assets	$	1,912,164	$	1,817,028

LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	66,357	$	5,774
Accrued expenses	69,346		34,164
Accrued compensation	7,994		11,386
Deferred revenue	12,264		80



Current maturities of long-term debt	9,721		9,721
Due to related party	342		1,714
Other current liabilities	4,250		3,905
Total current liabilities	170,274		66,744
Revolving line of credit	83,000		101,000
Long-term debt, net of current maturities and debt issuance costs	198,263		200,734

Operating lease liabilities	23,579		24,286

Deferred income taxes	151,104		151,104
Other liabilities	694		705
Total liabilities	626,914		544,573
Commitments and Contingencies (Note 10)
Stockholders’ equity:
Common stock, $0.01 par value; 500,000,000 shares authorized; 147,200,572 and 147,073,614 issued and outstanding at October 31, 2024 and July 31, 2024, respectively	1,472		1,471
Additional paid-in capital	1,012,874		1,011,265
Retained earnings	270,299		259,135
Total The Duckhorn Portfolio, Inc. stockholders’ equity	1,284,645		1,271,871
Non-controlling interest	605		584
Total stockholders’ equity	1,285,250		1,272,455
Total liabilities and stockholders’ equity	$	1,912,164	$	1,817,028

The accompanying notes are an integral part of these Condensed Consolidated Financial Statements (unaudited).

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The Duckhorn Portfolio, Inc. Condensed Consolidated Statements of Operations (Unaudited, in thousands except share and per share data)


	Three months ended October 31,
		2024		2023
Sales		$	124,669	$	103,903
Excise tax		1,727		1,394
Net sales		122,942		102,509

Cost of sales		61,442		48,656
Gross profit		61,500		53,853

Selling, general and administrative expenses		40,798		30,483
Income from operations		20,702		23,370

Interest expense		5,115		4,004
Other expense (income), net		117		(1,813)
Total other expenses, net		5,232		2,191
Income before income taxes		15,470		21,179
Income tax expense		4,285		5,629
Net income		11,185		15,550
Net income attributable to non-controlling interest		(21)		(13)
Net income attributable to The Duckhorn Portfolio, Inc.		$	11,164	$	15,537

Earnings per share of common stock:
Basic		$	0.08	$	0.13
Diluted		$	0.08	$	0.13

Weighted average shares of common stock outstanding:
Basic		147,128,486		115,339,774
Diluted		147,186,767		115,451,719

The accompanying notes are an integral part of these Condensed Consolidated Financial Statements (unaudited).

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The Duckhorn Portfolio, Inc. Condensed Consolidated Statements of Stockholders’ Equity (Unaudited, in thousands except share data)


	Three months ended October 31,
	Common stock			Additional paid-in capital		Retained earnings		Total The Duckhorn Portfolio, Inc. stockholders’ equity		Non-controlling interest		Total stockholders’ equity
	Shares	Amount
Balances at July 31, 2024	147,073,614	$	1,471	$	1,011,265	$	259,135	$	1,271,871	$	584	$	1,272,455
Net income	—	—		—		11,164		11,164		21		11,185
Issuance of common stock under equity incentive plans	202,501	2		(1)		—		1		—		1
Exercise of common stock options	—	—		—		—		—		—		—
Equity-based compensation (Note 12)	—	—		2,254		—		2,254		—		2,254
Shares withheld related to net share settlement	(75,543)	(1)		(644)		—		(645)		—		(645)

Balances at October 31, 2024	147,200,572	$	1,472	$	1,012,874	$	270,299	$	1,284,645	$	605	$	1,285,250

Balances at July 31, 2023	115,316,308	$	1,153	$	737,557	$	203,122	$	941,832	$	576	$	942,408
Net income	—	—		—		15,537		15,537		13		15,550
Issuance of common stock under equity incentive plans	79,639	1		—		—		1		—		1
Equity-based compensation (Note 12)	—	—		1,150		—		1,150		—		1,150
Shares withheld related to net share settlement	(28,237)	—		(342)		—		(342)		—		(342)
Balances at October 31, 2023	115,367,710	$	1,154	$	738,365	$	218,659	$	958,178	$	589	$	958,767

The accompanying notes are an integral part of these Condensed Consolidated Financial Statements (unaudited).

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The Duckhorn Portfolio, Inc. Condensed Consolidated Statements of Cash Flows (Unaudited, in thousands)


	Three months ended October 31,
	2024		2023
Cash flows from operating activities
Net income	$	11,185	$	15,550
Adjustments to reconcile net income to net cash from operating activities:

Depreciation and amortization	10,631		7,329
Gain on disposal of assets	(61)		(42)
Change in fair value of derivatives	137		(1,889)
Amortization of debt issuance costs	194		194


Equity-based compensation	2,254		1,150

Change in operating assets and liabilities; net of acquisition:
Accounts receivable trade, net	(35,754)		(22,547)
Due from related party	10,623		—
Inventories	(80,443)		(66,115)
Prepaid expenses and other current assets	3,550		1,781
Other assets	(212)		283
Accounts payable	61,149		28,045
Accrued expenses	37,058		51,985
Accrued compensation	(3,392)		(7,808)
Deferred revenue	12,184		11,132
Due to related party	(1,372)		—
Other current and non-current liabilities	(496)		(982)
Net cash provided by operating activities	27,235		18,066
Cash flows from investing activities
Purchases of property and equipment, net of sales proceeds	(11,556)		(10,395)


Net cash used in investing activities	(11,556)		(10,395)
Cash flows from financing activities

Payments under line of credit	(18,000)		(13,000)
Borrowings under line of credit	—		23,000

Payments of long-term debt	(2,500)		(2,500)

Taxes paid related to net share settlement of equity awards	(644)		(342)



Net cash (used in) provided by financing activities	(21,144)		7,158
Net (decrease) increase in cash	(5,465)		14,829
Cash - Beginning of period	10,872		6,353
Cash - End of period	$	5,407	$	21,182

Supplemental cash flow information
Interest paid, net of amount capitalized	$	4,585	$	4,009
Income taxes paid	$	—	$	11,607
Non-cash investing activities
Property and equipment additions in accounts payable and accrued expenses	$	2,568	$	3,300

The accompanying notes are an integral part of these Condensed Consolidated Financial Statements (unaudited).

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The Duckhorn Portfolio, Inc.

Notes to Condensed Consolidated Financial Statements (unaudited)

1. Description of Business

The Duckhorn Portfolio, Inc. and its subsidiaries (collectively, “the Company,” “Management,” “we,” “us,” “our” and “Duckhorn”), headquartered in St. Helena, California, produce luxury and ultra-luxury wine across a portfolio of winery brands, including Duckhorn Vineyards, Decoy, Sonoma-Cutrer, Goldeneye, Paraduxx, Migration, Canvasback, Calera, Kosta Browne, Greenwing and Postmark.

The Company’s revenue is comprised of wholesale and direct to consumer (“DTC”) sales. Wholesale revenue is generated through sales directly to California retailers and restaurants, sales to distributors and agents throughout the United States (“U.S.”) and sales to export distributors that sell internationally. DTC revenue results from individual consumers purchasing wine directly from the Company through club membership, the Company’s website or tasting rooms located in Napa Valley, California; Anderson Valley, California; Sebastopol, California; Hollister, California; Windsor, California; and Walla Walla, Washington.

The Company owns or controls, through long-term leases, certain high-quality vineyards throughout Northern and Central California and Washington. Vinification takes place at wineries owned, leased or under contract with third parties predominately located in Napa Valley, California; Anderson Valley, California; Hopland, California; Hollister, California; San Luis Obispo, California; Sebastopol, California; Windsor, California; and Walla Walla, Washington.

Proposed transaction with Butterfly

On October 6, 2024, the Company entered into an Agreement and Plan of Merger (the “Merger Agreement”) with Marlee Buyer, Inc., a Delaware corporation (“Parent”), and Marlee Merger Sub, Inc., a Delaware corporation and wholly owned subsidiary of Parent (“Merger Subsidiary”), pursuant to which Merger Subsidiary will merge with and into the Company whereupon the separate corporate existence of Merger Subsidiary will cease and the Company will be the surviving corporation in the Merger (the “Surviving Corporation”) and will continue as a wholly owned subsidiary of Parent (the “Merger”). Parent is a Delaware corporation and was formed on September 24, 2024 by Butterfly Equity LP (“Butterfly”), solely for the purpose of engaging in the transactions contemplated by the Merger Agreement and other documents or agreements executed and delivered in connection with the Merger Agreement. The Merger, which was unanimously approved by the Company’s Board of Directors, is expected to close this winter, subject to customary closing conditions, including approval by the Company’s stockholders. Upon completion of the transaction, the Company’s common stock will cease to trade and no longer be listed on the New York Stock Exchange.

As a result of the Merger, at the effective time of the Merger (the “Effective Time”) (subject to certain exceptions, including for shares common stock of the Company (collectively, the “Company Stock”) owned by stockholders of the Company who have not voted in favor of the adoption of the Merger Agreement and have properly exercised appraisal rights in accordance with Section 262 of the General Corporation Law of the State of Delaware), each share of Company Stock outstanding immediately prior to the Effective Time will be automatically canceled and converted into the right to receive $11.10 in cash, without interest (the per share consideration, the “Per Share Consideration” and the aggregate consideration, the “Merger Consideration”).

Pursuant to the agreement, the Company may be required to pay a termination fee of up to approximately $53.5 million, if the agreement is terminated under certain circumstances, and may be entitled to receipt of a termination fee of approximately $95.0 million, if the agreement is terminated under other certain circumstances.

Fiscal year

The Company’s fiscal year ends on July 31. Unless otherwise stated, references to particular years or quarters refer to the Company’s fiscal years and the associated periods in those fiscal years. Except as otherwise specified, information in this report is provided as of October 31, 2024.

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Issuance of common stock

On April 30, 2024, the Company issued 31,531,532 common shares at a par value of $0.01 to Brown-Forman Corporation (“Brown-Forman”) as equity consideration for the acquisition of Sonoma-Cutrer which represented an ownership percentage of approximately 21.4% of the Company. See Note 4 (Acquisition) for additional information.

2. Basis of Presentation and Recent Accounting Pronouncements

Basis of presentation

The Company’s Condensed Consolidated Financial Statements are prepared in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”) and Article 10 of the Securities and Exchange Commission’s Regulation S-X. These Condensed Consolidated Financial Statements have been prepared on the same basis as the Company’s audited annual financial statements and, in the opinion of Management, reflect all adjustments, consisting only of normal, recurring adjustments, which are necessary for the fair statement of the Company’s financial information for the interim periods presented. These interim results are not necessarily indicative of the results to be expected for the fiscal year ending July 31, 2025, for any other interim period or for any future year.

The Condensed Consolidated Statements of Financial Position as of July 31, 2024 was derived from the Company’s audited financial statements for the fiscal year ended July 31, 2024, previously filed with the SEC. The Condensed Consolidated Financial Statements do not include all of the information and note disclosures required by U.S. GAAP and should be read in conjunction with the audited Consolidated Financial Statements and related notes included in our Annual Report on Form 10-K for the fiscal year ended July 31, 2024.

Principles of consolidation

The Condensed Consolidated Financial Statements include the accounts of The Duckhorn Portfolio, Inc. and its subsidiaries, including a consolidated variable interest entity (“VIE”) of which the Company has determined it is the primary beneficiary. All intercompany balances and transactions are eliminated in consolidation.

Accounting estimates

The preparation of Condensed Consolidated Financial Statements in conformity with U.S. GAAP requires Management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the Condensed Consolidated Financial Statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Operating segment

The Company has one operating segment and one reportable segment. The Company’s Chief Operating Decision Maker (“CODM”) reviews operating performance and makes decisions to allocate resources at the consolidated company level.

Preferred stock

The Company has 100,000,000 shares of $0.01 par value preferred stock authorized, none of which are issued and outstanding.

Variable interest entities

The Company evaluates its ownership, contractual relationships and other interests in entities to determine the nature and extent of the interests, whether such interests are variable interests and whether the entities are VIEs in accordance with Accounting Standards Codification (“ASC”) Topic 810, Consolidations. These evaluations can be complex and involve Management judgment as well as the use of estimates and assumptions based on available historical information, among other factors. Based on these evaluations, if the Company determines that it is the primary beneficiary of a VIE, the entity is consolidated into the financial statements. At October 31, 2024 and July 31, 2024, the Company’s ownership percentage of the sole identified VIE was 76.2%. The total net

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assets of the VIE included on the Condensed Consolidated Statements of Financial Position were $2.3 million at both October 31, 2024 and July 31, 2024. The assets and liabilities, which may only be used to settle its own obligations, are primarily related to property, equipment and working capital accounts, which generally represent the amounts owed by or to the Company for grape sales under current contracts and farming costs.

Business Combination

On April 30, 2024, the Company completed the acquisition of Sonoma-Cutrer. See Note 4 (Acquisition) for additional information. The acquisition was accounted for using the acquisition method of accounting prescribed by ASC Topic 805, Business Combinations, whereby the results of operations, including the revenues and earnings of Sonoma-Cutrer, are included in the financial statements from the date of acquisition. Assets acquired and liabilities assumed as of the date of acquisition are recognized at their fair values based on widely accepted valuation techniques in accordance with ASC Topic 820, Fair Value Measurements. Goodwill is recognized for the excess of the consideration transferred over the net fair values of assets acquired and liabilities assumed. Management’s assessment of qualitative factors affecting goodwill for each acquisition includes estimates of market share at the date of purchase, ability to grow in the market, synergy with existing Company operations and the payor profile in the markets. The fair value assigned to the intangible asset was determined using the income approach, specifically the relief from royalty method. The process for estimating fair values requires the use of significant estimates, assumptions and judgments, including determining the timing and estimates of future cash flows and developing appropriate discount and royalty rates. The estimates of fair value are based upon assumptions believed to be reasonable using the best information available. These assumptions are inherently uncertain and unpredictable and, as a result, actual results may differ materially from estimates.

ASC Topic 805, Business Combinations, establishes a measurement period to provide the Company with a reasonable amount of time to obtain the information necessary to identify and measure various items in a business combination and cannot extend beyond one year from the acquisition date. Measurement period adjustments are recognized in the reporting period in which the adjustments are determined and calculated as if the accounting had been completed as of acquisition date. The Company expects to complete the final fair value determination of the assets acquired and liabilities assumed as soon as practicable within the measurement period, but not to exceed one year from the acquisition date.

Long-lived asset

Long-lived assets held for sale are recorded at the lower of cost or fair value less costs to sell and are recorded within prepaid expenses and other current assets in the Condensed Consolidated Statements of Financial Position. The Company classifies an asset as held for sale if it commits to a plan to sell the asset within one year and actively markets the asset in its current condition for a price that is reasonable in comparison to its estimated fair value. As of October 31, 2024 and July 31, 2024, the Company reported $1.3 million in assets held for sale within prepaid expenses and other current assets in the Condensed Consolidated Statements of Financial Position. No impairments were identified related to long-lived assets for three months ended October 31, 2024 or 2023.

Recently adopted accounting pronouncements

In November 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures (“ASU 2023-07”) to improve reportable segment disclosures, primarily through enhanced disclosures related to significant segment expenses regularly provided to the CODM and by requiring current annual disclosures to be provided in interim periods. Additionally, it requires public entities with a single reportable segment to provide all the disclosures provided by the standard. ASU 2023-07 will be effective for the Company beginning with the fiscal year ended July 31, 2025, and for interim periods beginning in the fiscal year ended July 31, 2026, on a retrospective basis. Early adoption is permitted. The Company is currently evaluating the impact of this ASU on its Condensed Consolidated Financial Statements and related disclosures.

In December 2023, the FASB issued ASU No. 2023-09, Income Taxes (Topic 740): Improvement to Income Tax Disclosures (“ASU 2023-09”) to enhance the transparency and decision usefulness of income tax disclosures, primarily requiring disaggregated information about a reporting entity’s effective tax rate reconciliation and

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income taxes paid. ASU 2023-09 will be effective for the Company beginning with the fiscal year ended July 31, 2026, with early adoption permitted. The Company is currently evaluating the impact of this ASU on its Condensed Consolidated Financial Statements and related disclosures.

In November 2024, the FASB issued ASU No. 2024-03, Income Statement-Reporting Comprehensive Income-Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses which aims to improve the disclosures about a public business entity’s expenses by requiring more detailed information about the types of expenses in commonly presented expense captions. ASU 2024-03 is effective for fiscal years beginning after December 15, 2026 and interim periods within fiscal years beginning after December 15, 2027. Early adoption is permitted. The disclosures required under the guidance can be applied either prospectively to financial statements issued for reporting periods after the effective date or retrospectively to any or all periods presented in the financial statements. The Company is currently evaluating the impact that this ASU on our Consolidated Financial Statements and related disclosures.

3. Revenue

Disaggregated revenue information

The following table presents the percentages of consolidated net sales disaggregated by sales channels:


	Three months ended October 31,
		2024		2023
Wholesale — Distributors		79.3	%	77.0	%
Wholesale — California direct to trade(a)		13.9		15.6
DTC(b)		6.8		7.4
Net sales(c)		100.0	%	100.0	%

_______________________________________________

(a) Includes $0.6 million and $0.7 million of sales related to bulk and grape sales for the three months ended October 31, 2024 and 2023, respectively.

(b) Includes shipping and handling revenue of $0.1 million for both the three months ended October 31, 2024 and 2023.

(c) For the three months ended October 31, 2023, excludes lease income of $0.9 million, from Geyserville winery acquired in June 2023.

Charges, recoveries and reductions related to credit loss on accounts receivable and the related allowance were immaterial for the three months ended October 31, 2024 and 2023. The allowance for credit losses was $0.5 million as of October 31, 2024 and July 31, 2024.

Contract balances

When the Company receives payment from a customer prior to transferring the product under the terms of a contract, the Company records deferred revenue, which represents a contract liability. The Company’s deferred revenue is primarily comprised of cash collected from DTC members for purchases ahead of the wine shipment date. The Company does not recognize revenue until control of the wine is transferred and the performance obligation is met. Deferred revenue in the Condensed Consolidated Statements of Financial Position was $12.3 million and $0.1 million at October 31, 2024 and July 31, 2024, respectively.

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4. Acquisition

Sonoma-Cutrer

On April 30, 2024, (the “Closing Date”) the Company acquired 100% of the equity of Sonoma-Cutrer Vineyards, Inc., a wholly owned subsidiary of Brown-Forman Corporation which includes six estate vineyards spanning approximately 1,100 acres. The Company acquired Sonoma-Cutrer for consideration comprised of approximately $50.0 million, funded from the revolver portion of the Company’s Credit Facility, and 31,531,532 shares of common stock issued for $267.1 million, determined based on the closing stock price of the Company’s stock of $8.47 per share on April 30, 2024, plus net working capital payable adjustments of $1.0 million.

The addition of Sonoma-Cutrer to the Company’s portfolio of luxury winery brands expands the Company’s portfolio of luxury Chardonnay and adds a well-renowned brand to the Company’s portfolio. Sonoma-Cutrer produces and markets its luxury Chardonnay wine brand, sourced from vineyards in the Russian River Valley and Sonoma Coast appellations.

During the three months ended October 31, 2024, the Company incurred $0.2 million of third-party integration costs recorded in selling, general and administrative expenses in the Condensed Consolidated Statements of Operations. During the three months ended October 31, 2023, the Company incurred $2.7 million of third-party acquisition transaction costs recorded in selling, general and administrative expenses in the Condensed Consolidated Statements of Operations.

There have been no material changes since the initial allocation as reported in our April 30, 2024 Form 10-Q. The current allocation of the purchase consideration to the assets acquired and liabilities assumed as of October 31, 2024 is as follows:


(in thousands)	Amount
Total purchase consideration	$	318,028

Assets acquired:

Inventories	61,897
Prepaid expenses and other current assets	373
Property and equipment, net	243,955
Intangible asset (Trade name)	17,000
Other assets	246
Total assets	323,471

Liabilities assumed:
Current liabilities	(3,554)
Deferred income taxes	(60,857)
Other liabilities	(202)
Total liabilities	(64,613)

Goodwill	$	59,170

The estimated fair values of assets acquired were determined with the assistance of a valuation specialist using primarily Level 3 inputs as defined under ASC Topic 820, Fair Value Measurement, as of the acquisition date. All estimates, key assumptions, and forecasts were either provided by or reviewed by the Company. The intangible asset is recorded at fair value, as determined by Management based on available information. The fair value assigned to the trade name was determined using the income approach, specifically the relief from royalty method. The Company applied significant judgment in determining the fair value of the intangible asset, which involved the use of Level 3 inputs, including estimates and assumptions of future revenues, royalty rate and discount rate. The trade name is determined to have an indefinite useful life.

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Goodwill related to the Sonoma-Cutrer acquisition is attributed to the benefit of a skilled workforce, brand strength in the luxury Chardonnay wine market, planned growth in new markets and synergies from combined sales, operational and administrative functions. The goodwill is not deductible for tax purposes.

The Sonoma-Cutrer acquisition accounted for $28.8 million of net sales for the three months ended October 31, 2024. Due to the continued integration of the combined businesses, as well as our corporate structure and the allocation of selling, general and administrative costs, it is impracticable to determine Sonoma-Cutrer’s contribution to our earnings.

5. Inventories

Inventories were comprised of the following:


(in thousands)	October 31, 2024		July 31, 2024
Finished goods	$	184,766	$	185,196
Work in progress	310,931		239,493
Raw materials	34,596		24,278
Inventories	$	530,293	$	448,967

Inventories are stated at the lower of cost or net realizable value and are primarily measured on a first-in-first-out basis. The Company records valuation adjustments to the carrying value of its inventories based on periodic reviews of slow-moving, obsolete and excess inventory to determine the need for reserves by comparing inventory carrying values with their net realizable values upon ultimate sale or disposal. The Company’s estimates of net realizable value are based on historical experience as well as Management’s judgments with respect to future market conditions. In the period the Company determines a reserve is required, the Company recognizes a charge to cost of sales for the excess of the carrying value over net realizable value. The inventory reserve was $0.9 million at October 31, 2024 and July 31, 2024.

The Company capitalizes into inventories depreciation related to property and equipment used in the production of inventory. For the three months ended October 31, 2024 and 2023, the amount capitalized was $8.3 million and $3.8 million, respectively. The Company also capitalizes total lease costs related to leases used in the production of inventory. For the three months ended October 31, 2024 and 2023, the amount capitalized was $1.1 million and $1.2 million, respectively.

6. Accrued Expenses

Accrued expenses were comprised of the following:


(in thousands)	October 31, 2024		July 31, 2024
Bulk wine and other received not invoiced	$	23,796	$	2,901
Trade spend(a)	17,012		10,593
Accrued professional fees(b)	8,085		264
Deferred compensation liability(c)	3,919		3,932
Income taxes payable	1,900		—
Barrel purchase	1,794		3,143
Accrued construction in progress	749		4,385
Accrued invoices and other accrued expenses	12,091		8,946
Accrued expenses	$	69,346	$	34,164

_______________________________________________

(a) Trade spend refers to estimated amounts the Company owes to distributors for depletion-based incentives.

(b) Includes transaction costs related to the Merger Agreement.

(c) The Company intends to use the cash surrender value of life insurance policies to settle its deferred compensation plan liability. The cash surrender value of the life insurance policies was $3.7 million at October 31, 2024 and July 31, 2024, and is included in other assets on the Condensed Consolidated Statements of Financial Position.

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7. Debt

Long-term debt, net of current maturities and debt issuance costs, was comprised of the following:


(in thousands)	October 31, 2024		July 31, 2024
Revolving line of credit	$	83,000	$	101,000
Term loan, first lien	208,332		210,832
Total debt	291,332		311,832
Less: Current maturities of long-term debt	(9,721)		(9,721)
Total long-term debt	281,611		302,111
Debt issuance costs(a)	(348)		(377)
Total long-term debt, net of current maturities and debt issuance costs	$	281,263	$	301,734

_______________________________________________

(a) Debt issuance costs are the costs associated with the term loan facility. Debt issuance costs of $2.0 million and $2.2 million at October 31, 2024 and July 31, 2024, respectively, associated with the revolving credit and delayed draw term loan facilities are recorded in other assets on the Condensed Consolidated Statements of Financial Position.

On November 4, 2022, Mallard Buyer Corp., Selway Wine Company and certain other subsidiaries of The Duckhorn Portfolio, Inc. (collectively, the “Borrowers”) entered into the Amended and Restated First Lien Loan and Security Agreement (“Credit Facility” and “Credit Agreement”) with the lenders named therein and BMO Harris (as successor in interest to Bank of the West), as administrative agent and collateral agent.

The Credit Agreement provides for $675.8 million in first lien senior secured credit facilities consisting of (i) a $425.0 million revolving credit facility, (ii) a $225.8 million term loan facility and (iii) a $25.0 million delayed draw term loan facility. The maturity date for loans borrowed under the Credit Agreement is November 4, 2027. The principal of the term loan facility is repayable in quarterly installments equal to $2.4 million, with a final installment equal to the entire remaining outstanding principal amount due on the maturity date.

The Credit Agreement allows the Borrowers, at any time, to request additional term loans, revolver commitments and delayed draw term loan commitments in an aggregate amount of up to $400.0 million (the “Incremental Facility”). The lenders are not under any obligation to provide the Incremental Facility, and the Incremental Facility is subject to certain customary conditions precedent and other limitations.

Borrowings under the revolver portion of the Credit Agreement generally bear interest based on the sum of the forward-looking term rate based on the Secured Overnight Financing Rate (“Term SOFR”) plus a loan margin based on average availability as follows: (a) less than or equal to 33% of average availability, a loan margin of 1.50%, (b) greater than 33% and less than or equal to 66% of average availability, a loan margin of 1.25%, and (c) greater than 66% of average availability, a loan margin of 1.00%. Borrowings under the term loan and delayed draw portions of the Credit Agreement generally bear interest based on the sum of (i) Term SOFR plus (ii) a credit spread adjustment of 10 basis points for 1-month and 3-month interest periods and 15 basis points for a six-month interest period plus (iii) a loan margin of 1.625%.

The Credit Agreement also includes an unused line fee and contains customary representations and warranties and affirmative and negative covenants for agreements of this type. In addition, the Credit Agreement requires compliance with the following financial covenants, in each case commencing from fiscal quarter ending January 31, 2023: (i) a debt to capitalization ratio not to exceed 0.55:1.00, measured at the end of each fiscal quarter and (ii) a fixed charge coverage ratio not to be less than 1.15:1.00, measured at the end of each fiscal quarter. As of October 31, 2024, the Company was in compliance with all covenants.

At October 31, 2024 and July 31, 2024, the Company had unused capacity of $342.0 million and $324.0 million, respectively, under the revolving credit facility, excluding the incremental seasonal borrowing amount of an additional $30.0 million of capacity. There were no amounts outstanding on the delayed draw term loan, letter of credit sub-facility or the swingline sub-facility at October 31, 2024 or July 31, 2024.

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8. Derivative Instruments

The Company manages exposure to interest rates and foreign currency movements by entering into derivative contracts from time to time, as movements in such markets could impact the Company’s financial results.

The changes in estimated fair values of derivative instruments result from changes in interest rates and foreign currency exchange rates. Such changes serve to offset exposure in related business assets or liabilities. The Company is exposed to credit loss in the event of nonperformance by a counterparty. Certain of the Company’s derivative instruments are subject to master netting agreements. In certain circumstances, this agreement allows the Company to net-settle amounts payable or receivable related to multiple derivative transactions with the same counterparty. The fair values of derivative instruments are presented on a gross basis, even when the derivative instruments are subject to master netting arrangements. Collateral is generally not required of the Company or of the counterparties to the master netting agreements, and no cash collateral was received or pledged under such agreements as of October 31, 2024 or July 31, 2024. The Company does not enter into derivative instruments for trading or speculative purposes. The Company does not apply hedge accounting treatment to derivative instruments.

As of October 31, 2024, the Company held the following interest rate swap agreement, which fixed the interest rate on the applicable notional amount of outstanding variable rate debt:

Notional amount

(in thousands)

Interest rate

Effective date

Expiration date

$100,000

3.735%

January 4, 2023

November 4, 2027

The total notional amounts of the Company’s derivative instruments outstanding are as follows:


(in thousands)	October 31, 2024		July 31, 2024

Interest rate swap contract	$	100,000	$	100,000
Foreign currency forward contracts	—		3,792
Total derivative instruments not designated as hedging instruments	$	100,000	$	103,792

The Company manages annual barrel purchases by engaging domestic and foreign cooperages to provide specified barrel quantities on agreed delivery dates. A significant portion of these invoices are paid in Euros. In order to reduce the foreign exchange risk associated with the Euro to U.S. Dollar conversion rate, the Company enters into foreign currency forward contracts, generally aligning settlement dates with expected barrel deliveries and the anticipated timing of payments to various coopers. See Note 10 (Commitments and Contingencies) for additional information related to the Company’s barrel purchase commitments.

Results of period derivative activity

The estimated fair value and classification of derivative instruments on the Condensed Consolidated Statements of Financial Position at October 31, 2024 were as follows:

Derivative Assets

(in thousands)

Balance Sheet Classification

Fair Value

Interest rate swap contract

Other assets

333

Total derivatives not designated as hedging instruments

333

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The estimated fair value and classification of derivative instruments on the Condensed Consolidated Statements of Financial Position at July 31, 2024 were as follows:

Derivative Assets

(in thousands)

Balance Sheet Classification

Fair Value

Interest rate swap contract

Other assets

465

Foreign currency forward contracts

Prepaid expenses and other current assets

Total derivatives not designated as hedging instruments

470

The amounts and classification of the gains and losses in the Condensed Consolidated Statements of Operations related to derivative instruments not designated as hedging instruments are as follows:


		Three months ended October 31,
(in thousands)	Classification		2024		2023
Interest rate swap contract	Other expense (income), net		$	132	$	(1,965)
Foreign currency forward contracts	Other expense (income), net		5		76
Total loss (gain)			$	137	$	(1,889)

9. Fair Value Measurements

The Company applies a fair value hierarchy pursuant to ASC Topic 820, Fair Value Measurement, which consists of three levels of inputs used to measure fair value:

Level 1 Inputs to fair value are quoted prices in active markets for identical assets or liabilities;

Level 2 Inputs to fair value are based on observable data other than Level 1 prices, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data such as interest rates or yield curves for substantially the full term of the instrument; and

Level 3 Inputs to fair value are based on unobservable data for the instrument and are supported by little or no market activity.

The following is a description of the valuation methodologies used for instruments measured at fair value in the Condensed Consolidated Financial Statements, as well as the general classification of such instruments under the valuation hierarchy.

Interest rate swap contract: The fair value of the Company’s interest rate swap agreement is estimated with the assistance of a third-party, using inputs that can be corroborated by observable market data (Level 2 of the fair value hierarchy).

Foreign currency forward contracts: The fair value of the Company’s outstanding foreign currency forward contracts is estimated with the assistance of a third-party, using inputs that can be corroborated by observable market data (Level 2 of the fair value hierarchy).

The Company’s other financial instruments consist mainly of cash, accounts receivable, accounts payable, accrued expenses and debt. The carrying value of all other financial instruments, except debt and cash surrender value life insurance policies, approximates fair value due to the short-term nature of these assets and liabilities. The carrying value of the Company’s debt approximates fair value as the interest rates are variable and reflective of market rates (Level 2 of the fair value hierarchy). The carrying value of cash surrender value life insurance policies is recorded at cash surrender value and, accordingly, approximates fair value.

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The Company’s assets and liabilities measured and recorded at fair value on a recurring basis at October 31, 2024, were as follows:


(in thousands)	Fair value measurements using:
	Quoted prices in active markets (Level 1)		Significant other observable inputs (Level 2)		Significant unobservable inputs (Level 3)
Assets:
Interest rate swap contract	$	—	$	333	$	—

The Company’s assets and liabilities measured and recorded at fair value on a recurring basis at July 31, 2024, were as follows:


(in thousands)	Fair value measurements using:
	Quoted prices in active markets (Level 1)		Significant other observable inputs (Level 2)		Significant unobservable inputs (Level 3)
Assets:
Interest rate swap contract	$	—	$	465	$	—
Foreign currency forward contracts	$	—	$	5	$	—

10. Commitments and Contingencies

Long-term purchase contracts

The Company has entered into certain grape purchase contracts with various growers to supply a significant portion of its future grape requirements for wine production. Grapes are delivered during the harvest season, a period which generally spans from August to October. The original lengths of the contracts vary from one to 16 years, and prices per ton are either determined at the outset for the contract duration or are negotiated annually. The Company’s grape purchase contracts generally include acceptance provisions based on qualitative and quantitative grape quality characteristics. For the 2024 harvest, the Company purchased 35,000 tons of grapes at a total cost of $89.0 million which was recognized into inventory during Fiscal 2025. For the 2023 harvest, the Company purchased 32,000 tons of grapes for a total cost of $85.7 million which was recognized into inventory during Fiscal 2024. The Company also increases the scope of its grape contracts when necessitated by supply needs to meet production levels in future periods.

Purchase commitments

The Company enters into commitments to purchase barrels for each harvest, a significant portion of which are settled in Euros. As of October 31, 2024, the Company had $4.7 million in barrel purchase commitments. During the three months ended October 31, 2024, the Company paid $7.8 million associated with the barrel purchases for the 2024 harvest. In order to reduce the foreign exchange risk associated with the Euro to U.S. Dollar conversion rate, the Company enters into foreign currency forward contracts, generally aligning settlement dates with expected barrel deliveries and the anticipated timing of payments to various coopers. The Company does not enter into these contracts for speculative purposes. Gains and losses on these contracts are recorded in other expense (income), net on the Condensed Consolidated Statements of Operations. See Note 8 (Derivative Instruments) for the total notional value and impact on the Condensed Consolidated Financial Statements due to foreign currency forward contracts.

The Company enters into various purchase commitments related to production activities. In December 2023, the Company entered into an equipment agreement resulting in a purchase commitment of $15.9 million. Under the agreement, the Company is obligated to pay milestone payments as equipment and services are rendered of $10.3 million and $0.8 million for the fiscal years 2025 and 2026, respectively.

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The Company enters into various contracts with third parties for custom crush, storage, glass and bottling services. The costs related to these contracts are recorded in the period the service is provided. The contracts for custom crush services typically have minimums that the Company is required to pay if certain grape volume thresholds are not delivered. The Company does not record these minimums related to service contracts as contingent liabilities on the Condensed Consolidated Statements of Financial Position given the harvest yield size, resulting volumes and qualities of grape deliveries are not known or estimable until harvest, when all related contingencies would be resolved.

Contingent liabilities

The Company evaluates pending or threatened litigation, operational events which could result in regulatory or civil penalties, environmental risks and other sources of potential contingent liabilities during the year. In accordance with applicable accounting guidance, the Company establishes an accrued liability when those matters present loss contingencies which are both probable and reasonably estimable. As of October 31, 2024 and July 31, 2024, there were no material contingent obligations requiring an accrual.

Advisory Agreement

For financial advisory services rendered in connection with the Merger, the Company has agreed to pay J.P. Morgan an estimated fee of approximately $30.0 million, $5.0 million of which became payable and was paid to J.P. Morgan at the time J.P. Morgan delivered its opinion during the three months ended October 31, 2024, and the remainder of which is contingent and payable upon the consummation of the Merger. Because the consummation of the Merger is not in the control of the Company, the Company will not accrue the contingent portion of the fee due to J.P. Morgan until the consummation of the Merger.

Wage and Hour Claim

On March 22, 2024, a former employee of the Company filed a putative class action in San Benito County Superior Court, seeking to represent all non-exempt workers of the Company in the State of California. The complaint alleges various wage and hour violations under the California Labor Code and related statutes. Plaintiff has also served a Private Attorneys General Act (“PAGA”) notice for the same alleged wage and hour violations. The claims predominantly relate to alleged unpaid wages (overtime) and missed meal and rest breaks. The lawsuit seeks, among other things, compensatory damages, statutory penalties, attorneys’ fees and costs. The Company has retained outside legal counsel to defend this action. The parties have agreed to participate in mediation of one plaintiff's individual PAGA claim and the representative PAGA claims in March 2025. The claim is in an early stage, and the amount of any loss cannot be reasonably estimated at this date.

In the ordinary course of business, the Company enters into agreements containing standard indemnification provisions. The aggregate maximum potential future liability of the Company under such indemnification provisions is uncertain, as these involve potential future claims against the Company that have not occurred. The Company expects the risk of any future obligations under these indemnification provisions to be remote. As of October 31, 2024 and July 31, 2024, no amounts were accrued related to such indemnification provisions.

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11. Related Party Transactions

Effective April 30, 2024, in connection with the Sonoma-Cutrer acquisition, the Company entered into a TSA with Brown-Forman, which is considered a related party transaction. See Note 4 (Acquisition) for additional information regarding the acquisition. The TSA governs services including certain distribution services, information technology services, finance and accounting services and sales and marketing services for a limited time to ensure an orderly transition following the acquisition. The agreed-upon charges for such services are intended to cover any costs and expenses incurred in providing such services to the Company by Brown-Forman (with a mark-up to reflect the management and administrative cost of providing the services). The Company had a receivable balance outstanding with Brown-Forman of $0.2 million and $10.8 million as of October 31, 2024 and July 31, 2024, respectively, related to these services and related net sales, recognized in due from related party on the Condensed Consolidated Statements of Financial Position. During the three months ended October 31, 2024, the Company recorded net sales of $0.6 million, net of applicable service fees, to Brown-Forman recognized within net sales in the Condensed Consolidated Statements of Operations.

As of October 31, 2024 and July 31, 2024, the Company had a related party payable of $0.3 million and $1.7 million, respectively, outstanding with Brown-Forman for preliminary working capital adjustments related to consideration paid for the acquisition and accounts payable, recognized in due to related party on the Condensed Consolidated Statements of Financial Position. See Note 4 (Acquisition) for additional information.

12. Equity-Based Compensation

In March 2021, the Company’s Board of Directors approved the 2021 Equity Incentive Plan (“2021 Equity Plan”), which provides for granting up to 14,003,560 shares of the Company’s common stock. Restricted stock units (“RSUs”), non-qualified stock options (“stock options”) and performance-based restricted stock units (“PSUs”) are granted to certain employees of the Company, advisors and directors (collectively “grants”). The grants are considered equity awards for purposes of calculating compensation expense and are equity-classified in the Condensed Consolidated Statements of Financial Position.

Stock options

Stock option awards are valued using the Black-Scholes option pricing model to estimate the fair value of each stock option award on the date of grant and expense ratably over the vesting period, generally four years. Stock options have a ten-year term.

The following table represents the stock option activity:

Number of options outstanding

Weighted-average exercise price

(per share)

Weighted-average remaining

contractual life

(in years)

Aggregate intrinsic value

SEC Form 10-Q filed by The Duckhorn Portfolio Inc.