Item 7.01 Regulation FD Disclosure.
The Management is filing this 8-K on the day before its Annual Meeting to report
the impact of COVID-19, government shutdowns and changes in consumer behavior
prior to the release of the 10-Q stating second quarter results. The financial
information provided here is not reviewed or audited by its auditors nor does it
provide or suggest earnings performance.
The Company will hold its first virtual Annual Stockholder Meeting on Friday,
July 17th at 1 pm Pacific Time. The public may view and hear this meeting online
by visiting www.virtualshareholdermeeting.com/WVVI2020. Guests may login at the
time of the meeting, during the meeting or as early as 15 minutes prior to the
start time by entering their name and email address under "Guest Login."
The previous 30 Annual Meetings were held at the winery drawing hundreds of
Company stockholders each July with a weekend filled with updates on
developments and events featuring food and wine pairings. COVID-19 has prevented
the festive annual stockholder gathering this year, but the winery has arranged
for special wine tasting presentations to follow the virtual meeting via Zoom.
The long-term impacts of the COVID-19 pandemic to the wine industry and the
Company are unknown. The Company took a cautious approach to spending cash as
the various economic and market impacts of the pandemic and government actions
were not able to be estimated. All construction and capital purchases were put
on hold at the beginning of the shutdown as the Company's planned Preferred
Stock Offering was delayed due to the then condition of the capital market.
The Company has since reinitiated winemaking and vineyard equipment purchases to
improve efficiencies as well as the widening of Highway 99W for access to the
new winery construction near Dundee, scheduled to be completed by December 2020.
The Company expects Bernau Estate, the new sparkling wine facility, tasting room
and biodynamically-farmed gardens, to be open to the public early summer of
The Company qualified and obtained a PPP loan for $1.655 million, but quickly
returned the funds after obtaining a $5 million commercial loan commitment from
a private lender as a back-up for liquidity if the Company was to experience
operating losses from sales disruptions due to COVID-19. The Management and the
Board of Directors returned the federal PPP loan because private financing was
secured, jobs were preserved and the Company felt the money should be reserved
for businesses facing greater market and financial challenges than the Company.
While the Company was required to close its five tasting rooms for more than 66
days and furlough some retail employees not able to transition to other roles,
total employment has grown from pre-pandemic levels at March 16, 2020 of 229
employees to 261 as of June 30, 2020. The Company had 206 employees as of
December 31, 2019.
As on-premise restaurants were no longer ordering wine from distributors, the
Company focused on the sales channels still available. Case sales
to distributors in the second quarter were up slightly at 31,685 compared
to 31,413 during the same time period in 2019. Case sales to distributors for
the first six months of the year was 71,145 as compared with 59,122 for the
These cases included sales of the charitable project Oregon Solidarity,
which amounted to 448 cases for the second quarter of 2020 as compared with the
same period last year with 1,191 cases. For the first six months of 2020, the
Oregon Solidarity portion was 448 cases as compared with those of the prior year
Removing the charitable sales of Oregon Solidarity from both years results in
Company branded wine sales to distributors of 31,237 cases in the second quarter
of 2020 as compared with the same period of 30,222 cases last year and for the
first six months of 2020 of 70,697 cases as compared to 56,004 cases from last
year. During the pandemic second quarter of 2020, Company branded wine sales
were up 1,015 cases and up 14,693 cases for the first six months.
Case depletions from distributors to their accounts during the second quarter of
2020 is estimated to be 32,492 cases, up 1,965 cases or 6.4% from the same time
period in the prior year. The six month 2020 depletions are estimated to be
61,165 cases, up 5,316 cases or 9.5% over the first six months of 2019.
Direct sales volumes also increased during the second quarter of this year to
6,687 cases compared to the same quarter last year of 6,528 cases as the closing
of the Company's five tasting rooms, hospitality and kitchen were made up by
increases in sales from their Winery Ambassador program and internet orders. As
Wine Club membership is derived from guest visitations, membership declined in
April and May, but increased in June when limited visitations were allowed under
the physical distancing requirements.
The Preferred Stock Offering, scheduled for mid-March, was delayed until
mid-June, and first announced to current stockholders and waiting list contacts
where $1,635,304in subscription agreements have been received as of July 16,
2020. The official announcement of the Preferred Stock Offering was made on
July 8, 2020. The Management believes the Preferred Stock Offering strategy has
demonstrated success in increasing Direct Sales with Preferred stockholders now
accounting for approximately 25% of all Direct Sales purchases, approximately $2
million in sales in 2019. The current stock offering proceeds are intended for
completing the Bernau Estate winery construction in the Dundee Hills and other
uses. Previous stock offerings have financed vineyard land acquisition and
planting in key American Viticultural Areas to support anticipated winegrape and
brand needs. The 12 vineyard land parcels the Company now owns total
approximately 706 acres.
To meet the government restrictions, the Company's tasting room operations were
limited to pick-up and delivery options only. The Management transitioned much
of the guest-facing staff to other roles within the winery and focused on
remaining sales channels and new marketing initiatives, including pick-up food
and wine orders, curbside pick-up; local direct delivery; virtual wine tastings;
outbound phone sales; e-commerce sales; email and social media communications
The Willamette Wineworks located in Historic Folsom opened to the public in
mid-February before the first shut down in mid-March. The California Governor
has ordered all indoor tasting room spaces be closed as of July 2, 2020 for a
minimum of three weeks. The location offers an outdoor deck seating for 28
guests where service is continuing 3-days a week by appointment.
Prior to reopening of the tasting rooms, safety measures were implemented for
the well-being of the Company's employees, Owners, Wine Club Members and guests
including transitioning winery experiences to tableside service, adding a
reservation management system, using recyclable single-use materials, offering
contactless payment options, requiring all staff to wear face masks, continue
meticulous hand hygiene and regularly cleaning all high-traffic locations and
surfaces. Far exceeding the required Oregon Healthy Authority protocols, a new
state-of-the-art UV light filtration has been installed in the Company's HVAC
system to reduce harmful viruses in the air at its tasting room locations and
staff offices. The innovative ActivePure Technology used by NASA is distributed
by Aerus Enterprise Solutions.
Where possible, the Company's administrative, sales and marketing positions
transitioned to working from home and when working from the winery are
staggering the use of office spaces.
As non-profit organizations were no longer able to raise funds through hosting
in-person events, the winery staff created a new Golden Coin program offering
wine enthusiasts a charitable wine adventure. The Company hid 200 numbered
Golden Coins inside the capsule of Willamette Valley Vineyards wines and placed
them in retailers throughout Oregon and Washington. The Golden Coins were
inspired by the Golden Tickets in the 1971 fantasy film Willy Wonka & The
Chocolate Factory. When the lucky winners find a Golden Coin, the winery will
donate $50 to their local food bank and $50 to the charity of their choice to
support the community during this time of need and recovery. With this program,
the winery is committing to donate $20,000 through December 31, 2020.
The Company also committed $1 for every bottle sold directly through the winery
in June to Self Enhancement, Inc. Self Enhancement, Inc. is a local non-profit
resource for underserved youth and families, primarily African Americans and
others living in poverty or seeking culturally responsive services. It is also
one of the region's leading multi-service organizations, providing thousands of
youth, families and adults with a wide array of education and social services.
The winery has accumulated a donation of $23,852.
The winery kitchen staff prepared meals for first responders during the shutdown
and winery staff delivered gifts of wine to local hospital staff.
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