SCHEID FAMILY WINES REPORTS YEAR END FISCAL 2024 RESULTS

Rhea-AI Summary

Scheid Family Wines reported its fiscal year-end results for 2024, reflecting significant challenges in the wine industry. Revenues slightly declined to $68.0 million from $68.5 million in the previous year. The company faced a $15.0 million non-cash write-down of bulk wine inventories, leading to a drastic 86% drop in gross profit to $2.5 million. Net loss escalated to $20.6 million compared to a $2.2 million net loss last year. Sales and marketing expenses decreased by 12% and general administrative expenses fell by 15%. Interest expenses surged by 45% due to higher borrowings and rising interest rates. The company is negotiating forbearance agreements and exploring alternative financing as it restructures to mitigate financial covenants and default scenarios.

Positive

• Sales and marketing expenses decreased by 12% to $10.8 million.
• General and administrative expenses decreased by 15% to $6.9 million.

Negative

• Total revenues slightly declined to $68.0 million from $68.5 million.
• $15.0 million non-cash write-down of bulk wine inventories.
• Gross profit drastically decreased by 86% to $2.5 million.
• Net loss increased to $20.6 million from $2.2 million.
• Interest expenses rose by 45% to $6.9 million.
• The company is in default under its debt agreements.
• EBITDA turned negative to a loss of $10.0 million from earnings of $5.9 million.

SALINAS, Calif., July 3, 2024 /PRNewswire/ -- Scheid Vineyards Inc. (dba Scheid Family Wines) (OTC Markets: SVIN) announced today its financial results for the fiscal year ended February 29, 2024.

Scott Scheid, President and CEO, commented, "As has been widely reported in the media, the wine industry has faced considerable challenges this past year. Declining wine consumption, inventory destocking, rising interest rates and significant increases in the costs of doing business are just a few of these challenges. One of the side effects of these conditions is the accumulation of bulk wine on the market as businesses seek to hold less inventory, coupled with a larger than average 2023 harvest. As a large wine grape grower using only 60% of our estate vineyard production for our own brands, we sell the balance to other wineries each year. This year we've been faced with selling bulk wine at below cost and, consequently, are taking a $15.0 million non-cash write-down of our bulk wine inventories. Writing down our bulk wine inventory to market is the prudent course of action and better sets us up for future success."

Mr. Scheid continued, "Due to these difficult circumstances, we did not meet certain financial covenants with our lenders and did not make a principal payment that became due on March 1, 2024. We are in default under our debt agreements and are currently negotiating forbearance agreements with our lenders, as well as seeking alternative financing arrangements. In addition, we are looking to monetize certain real estate assets to reduce our debt and cure defaults. This monetization effort is consistent with the evolution of our business from a grower to a branded wine enterprise.  We have work to do but our team is laser-focused on growing sales, making necessary changes, and getting through this difficult part of the cycle."

Financial Results

Total revenues remained relatively flat from the previous year, decreasing to $68.0 million for the fiscal year ended February 29, 2024, from $68.5 million in fiscal 2023. After a slow start to fiscal 2024 shipments, cased goods sales increased 3%, to $46.3 million in fiscal 2024, from $44.9 million in fiscal 2023. In addition, the Company's winery processing and storage revenues increased 12%, to $9.6 million from $8.5 million, which was offset by a decrease in bulk wine and grape sales of 25%, to $8.8 million from $11.8 million.

Due to the downturn in the California wine market and a large 2023 vintage harvest, grape and bulk wine prices have seen significant declines. As a result, the Company recorded a $15.0 million non-cash write-down of its available for sale bulk wine inventories to properly reflect their recorded value to market at February 29, 2024. Before the write-down, gross profit decreased 1%, to $17.5 million in fiscal 2024, from $17.8 million in fiscal 2023. Gross margins remained at 26% for each period. After the write-down, gross profit decreased 86% to $2.5 million for fiscal 2024, from $17.8 million in 2023.

Sales and marketing expenses decreased 12%, to $10.8 million, from $12.2 million, as the Company reorganized its sales and marketing departments in late 2022. These expenses were 16% of total revenues for fiscal 2024, compared to 18% for fiscal 2023. General and administrative expenses decreased 15%, to $6.9 million, from $8.1 million.

Before the write-down, loss from operations decreased 93%, to $0.2 million in fiscal 2024, from $2.6 million in fiscal 2023. After the write-down, loss from operations increased for fiscal 2024 to $15.2 million, an increase of $12.6 million, due to the non-cash write-down of bulk wine inventories of $15.0 million. Earnings before interest, taxes, depreciation, and amortization (EBITDA) decreased to a loss of $10.0 million, from earnings of $5.9 million.

Interest expense rose 45%, to $6.9 million, from $4.8 million, due to increased borrowings and increases in interest rates on the Company's variable rate debt. Average interest rates on Company debt increased to 6.3% for fiscal 2024, from 4.9% for fiscal 2023.

During fiscal 2023, the Company recognized a gain from the forgiveness of a $3.7 million loan made to the Company pursuant to the Paycheck Protection Plan ("PPP"). During the same period, the Company settled a class action lawsuit which alleged violations of California wage and hour employment laws for $1.25 million. 

In total, the Company reported a $20.6 million net loss for the year ended February 29, 2024, compared to a $2.2 million net loss for the year ended February 28, 2023.

 

			Year Ended
			February 29 2024					February 28 2023
REVENUES:
Cased goods sales			$	46,275			$		44,847
Bulk wine sales			7,517				9,664
Grape sales			1,321				2,176
Winery processing and storage revenues			9,557				8,518
Direct sales revenues			2,681				2,635
Other revenues			677				660
Total revenues			68,028				68,500
COST OF SALES			(50,487)				(50,723)
GROSS PROFIT BEFORE WRITE-DOWN OF BULK WINE  INVENTORIES TO MARKET			17,541				17,777
WRITE-DOWN OF BULK WINE INVENTORIES TO MARKET			(15,000)				—
GROSS PROFIT			2,541				17,777
Sales and marketing expenses			(10,813)				(12,248)
General and administrative expenses			(6,919)				(8,100)
LOSS FROM OPERATIONS			(15,191)				(2,571)
Interest expense, net			(6,935)				(4,778)
Loan forgiveness			—				3,731
Other expense			(56)				(1,250)
Gain on sale of equipment			100				15
LOSS BEFORE BENEFIT FROM INCOME TAXES			(22,082)				(4,853)
BENEFIT FROM INCOME TAXES			1,436				2,624
NET LOSS			$	(20,646)			$		(2,229)
LOSS PER SHARE			$	(22.54)			$		(2.44)
WEIGHTED AVERAGE SHARES OUTSTANDING			916				913
(amounts in thousands, except for per share data)

About Scheid Family Wines

Scheid Family Wines, a family-owned and operated wine company for over 50 years, is ranked among the top 25 largest wine producers in the United States. Based in Monterey County, California, Scheid is vertically integrated to bring high quality estate grown wines to the marketplace from its sustainably and organically certified vineyards and grower partners throughout the Central Coast. Scheid's innovative, luxury-level winery is 100% powered by renewable wind energy generated by a 400-foot-tall wind turbine, which also supplies energy to the local community. The Scheid Family Wines globally distributed brand portfolio includes Scheid Vineyards, Sunny with a Chance of Flowers, VDR (Very Dark Red), Grandeur (organically certified), Fog & Light, Metz Road, District 7, Ryder Estate, and HOXIE, a premium wine spritzer. Scheid Family Wines sells internationally to over 30 countries and is one of the largest producers of premium exclusive brands.  

Please visit www.scheidfamilywines.com and www.otcmarkets.com/stock/SVIN/quote for more information.

CONTACT:	Scott Scheid, President and CEO, scott.scheid@scheidfamilywines.com
	Mike Thomsen, Chief Financial Officer, mike.thomsen@scheidfamilywines.com
	(831) 455-9990

 

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SOURCE Scheid Family Wines

FAQ

What were Scheid Family Wines' revenues for fiscal year 2024?

Scheid Family Wines reported total revenues of $68.0 million for the fiscal year 2024.

What was the impact of the bulk wine inventory write-down on Scheid Family Wines?

The $15.0 million non-cash write-down of bulk wine inventories led to an 86% decrease in gross profit to $2.5 million.

What is the net loss reported by Scheid Family Wines for fiscal year 2024?

Scheid Family Wines reported a net loss of $20.6 million for fiscal year 2024, compared to a $2.2 million net loss in the previous year.

How did interest expenses change for Scheid Family Wines in fiscal year 2024?

Interest expenses increased by 45% to $6.9 million due to higher borrowings and rising interest rates.

What steps is Scheid Family Wines taking to address its default under debt agreements?

Scheid Family Wines is negotiating forbearance agreements, seeking alternative financing, and looking to monetize real estate assets to reduce debt and cure defaults.