CRIMSON WINE GROUP, LTD.
Statements included in this Report may contain forward-looking statements. See
"Cautionary Statement for Forward-Looking Information" below. The following
should be read in conjunction with the Management's Discussion and Analysis of
Financial Condition and Results of Operations ("MD&A") and the Company's audited
consolidated financial statements for the year ended December 31, 2020 included
in the Company's Annual Report on Form 10-K as filed with the SEC (the "2020
Report").
Quantities or results referred to as "current quarter" and "current three and
six-month period" refer to the three and six months ended
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 ofCrimson Wine Group, Ltd. and all of its subsidiaries further collectively known as "we", "Crimson", "our", "us", or "the Company", have been prepared in accordance with GAAP for interim financial information and with the general instruction for quarterly reports filed on Form 10-Q and Article 8 of Regulation S-X. All statements, other than statements of historical fact, regarding our strategy, future operations, financial position, prospects, plans, opportunities, and objectives constitute "forward-looking statements." The words "may," "will," "expect," "plan," "anticipate," "believe," "estimate," "potential," or "continue" and similar types of expressions identify such statements, although not all forward-looking statements contain these identifying words. Forward-looking statements include those relating to our financial condition, results of operations, plans, objectives, future performance and business. These statements are based upon information that is currently available to us and our management's current expectations speak only as of the date hereof and are subject to risks and uncertainties. We expressly disclaim any obligation, except as required by federal securities laws, or undertaking to update or revise any forward-looking statements contained herein to reflect any change or expectations with regard thereto or to reflect any change in events, conditions, or circumstances on which any such forward-looking statements are based, in whole or in part. Our actual results may differ materially from the results discussed in or implied by such forward-looking statements.
Risks that could cause actual results to differ materially from any results
projected, forecasted, estimated or budgeted or that may materially and
adversely affect our actual results include, but are not limited to, those
discussed in Part I, Item 1A. Risk Factors in the 2020 Report. Readers should
carefully review the risk factors described in the 2020 Report and in other
documents that the Company files from time to time with the
Overview of Business
The Company generates revenues from sales of wine to wholesalers and direct to consumers, sales of bulk wine and grapes, custom winemaking services, special event fees, tasting fees and non-wine 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 Ecommerce channel. Direct sales to consumers are more profitable for the Company as we are able to sell our products at a price closer to retail prices rather than the wholesale price sold to distributors. From time to time, we may sell grapes or bulk wine because the grapes or wine do not meet the quality standards for the Company's products, market conditions have changed resulting in reduced demand for certain products, or because the Company may have produced more of a particular varietal than it can use. When these sales occur, they may result in a loss. Cost of sales includes grape and bulk wine costs, whether purchased or produced from the Company's controlled vineyards, crush costs, winemaking and processing costs, bottling, packaging, warehousing and shipping and handling costs. For the Company-controlled vineyard-produced grapes, grape costs include annual farming labor costs, harvest costs and depreciation of vineyard assets. For wines that age longer than one year, winemaking and processing costs continue to be incurred and capitalized to the cost of wine, which can range from 3 to 36 months. Reductions to the carrying value of inventories are also included in cost of sales.
As of
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Impact of COVID-19 on Operations
In March 2020 , the coronavirus disease ("COVID-19") outbreak was declared a
national public health emergency which continues to affect the world and has
adversely impacted global activity and contributed to significant economic
declines and volatility in financial markets. The outbreak could have a
continued material adverse impact on economic and market conditions and be
followed by a period of global economic slowdown. The rapid development and
fluidity of this situation precludes any prediction as to the ultimate material
adverse impact of the coronavirus outbreak. The outbreak has adversely impacted
the Company's tasting room visitations, On-Premise business, and special events.
The outbreak presents uncertainty and risk with respect to the Company, its
future performance and financial results.
On March 16, 2020 , with the exception of key operations personnel, the Company
shifted its corporate office staff to remote workstations, which has been an
effective transition to date. The Company will continue to operate remotely
until management determines it is safe for employees to return to offices.
The Company has not experienced nor does it anticipate significant impact or disruptions to its supply chain network.
OnMarch 16, 2020 , the Company temporarily closed all of its tasting rooms, which are located inCalifornia ,Oregon , andWashington , in compliance with shelter-in-place orders issued by local government offices. Following months of closures, each of the aforementioned states issued reopening guidelines and metrics that counties must achieve prior to businesses reopening. After remaining closed for nearly all of the second quarter and complying with reopening guidelines, the Company's tasting rooms reopened duringJune 2020 in limited capacity and operating hours, and with additional safety measures in place. In the first several weeks ofJuly 2020 , businesses located in severalNorthern California counties were required to shut down indoor dining and winery tasting rooms. In lateJuly 2020 , theState of Washington required the shutdown of wineries, regardless of whether food is served. During this period, while theState of Oregon allowed indoor wine tastings with noted restrictions, the Company'sOregon -based tasting room, Archery Summit, operated almost entirely outdoors. Although outdoor operations were allowed to resume in August, COVID-19 containment measures and the 2020 wildfires limited the amount of traffic at the Company's tasting rooms. Inmid-November 2020 , further government restrictions and shutdown orders were issued for theState of Oregon withCalifornia andWashington following suit inDecember 2020 , resulting in either shutdowns or outdoor-only tastings for all of the Company's tasting rooms. All of the Company's tasting rooms were allowed to reopen in lateJanuary 2021 with varying impacts created by the guidelines, restrictions, and tiered structures of each respective state we operate in. The intermittent updates for each state and county caused operating capacity at each tasting room to fluctuate throughout the first six months of 2021. Although capacity restrictions within the Company's tasting rooms were lifted in the second half of June, the Company continues to maintain a set of operating guidelines to protect the safety of all employees and guests, which may affect capacity and will vary based on estate experience and parameters. All of the Company's tasting rooms have been impacted by government orders and restrictions to significant and varying degrees at times. Management and staff at all estate locations have taken the appropriate steps to continue accommodations for outdoor tastings to ensure the safety of all guests and staff. In addition to limiting the number of guests and requiring reservations, the Company has implemented various measures to prevent the spread of the virus including using available forms of PPE, screening workers before they enter facilities, practicing social distancing, implementing COVID-19 protocols and travel guidelines, and advising employees to adhere to prevention measures recommended by theCDC .
The Company has experienced both reductions and increases in consumer demand in
various channels due to the ongoing COVID-19 pandemic in the three and
six months ended
Our Direct to Consumer segment includes retail sales in the tasting rooms,
remote sites and on-site events, wine club net sales, direct phone sales, and
other sales made directly to the consumer without the use of an intermediary.
Tasting room sales have been negatively impacted during periods of closures and
operating limitations. As restrictions were gradually lifted throughout the
first six months of 2021, the Company has seen a rebound in visitor counts to
its tasting rooms. The Company also sells wine directly to consumers through
Ecommerce sales. The Company's Ecommerce operations have been favorably impacted
through changes in consumer behavior and our opportunistic email campaigns and
web offers to our customers.
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Our Wholesale segment includes all sales through a third party where prices are
given at a wholesale rate. The Company sells wine (through distributors and
directly) to restaurants, bars, and other hospitality locations ("On-Premise").
Demand for wines at On-Premise locations has been reduced due to COVID-19
containment measures restricting consumers from visiting, as well as in many
cases both the temporary and permanent closures of On-Premise venues. However,
as restrictions continued to be lifted throughout the first six months of 2021,
demand for wines at On-Premise locations has started to rebound. The Company
also sells wine (through distributors and directly) to supermarkets, grocery
stores, liquor stores, and other chains, third-party Ecommerce and independent
stores ("Off-Premise"). Demand for wines at Off-Premise locations has increased
due to their classification as essential businesses that remain open during
government-imposed closings and/or restrictions due to COVID-19. As On-Premise
demand recovers, other than sales made through third-party Ecommerce, we have
not observed a reversing trend in Off-Premise demand.
Additionally, we received loan proceeds of approximately $3.8 million under the
Paycheck Protection Program ("PPP") established by the Coronavirus Aid, Relief,
and Economic Security ("CARES") Act and amended by the Paycheck Protection
Program Flexibility Act of 2020. We requested loan forgiveness in April 2021 and
on June 14, 2021 , the forgiveness application to the U.S. Small Business
Administration ("SBA") was approved for the full principal amount including
interest. For additional information about the loan, see "-Liquidity and Capital
Resources-Term Loans".
More recently, many news agencies have reported the spread of new variants of
COVID-19, such as the Delta variant, that are significantly more contagious than
previous strains. The spread of these new variants are beginning to cause some
government authorities to reimplement restrictions and measures to try to reduce
the spread that had become less prevalent. Accordingly, the emergence of these
new variants, particularly the Delta variant, and the prevalence of breakthrough
cases of infection among fully vaccinated people adds additional uncertainty to
the Company's business and operations and could result in further impacts, such
as those discussed above and in the section entitled "Risk Factors" in the 2020
Report.
The extent of COVID-19's impact on our financials and results of operations is
currently unknown and will depend on future developments, including, but not
limited to, the length of time that the pandemic continues, the emergence and
severity of its variants, the effect of governmental regulations imposed in
response to the pandemic, the availability of vaccines and potential hesitancy
to utilize them, the effect on the demand for our products and our supply chain,
and how quickly and to what extent normal economic and operation conditions can
resume. We cannot at this time predict the full impact of COVID-19 on our
financial and operational results. Accordingly, our current results and
financial condition discussed herein may not be indicative of future operating
results and trends. Refer to the section entitled "Risk Factors" in the 2020
Report for additional risks we face due to the COVID-19 pandemic.
Seasonality
As discussed in the 2020 Report, the wine industry in general historically experiences seasonal fluctuations in revenues and net income. The Company typically has lower sales and net income during the first quarter and higher sales and net income during the fourth quarter due to seasonal holiday buying as well as wine club shipment timing. We anticipate similar trends in the future. Restructuring During 2020, the Company committed to various restructuring activities (the "2020 Restructuring Program") including the closure of theDouble Canyon Vineyards tasting room, restructuring of management, changes in sales, marketing, and Direct to Consumer organizational structure, and transitioning of information technology services and export fulfillment to outsourced support models. Restructuring charges of$1.3 million were incurred in the six months endedJune 30, 2020 . As ofSeptember 30, 2020 , the 2020 Restructuring Program was completed with restructuring charges totaling$1.4 million , consisting of$1.1 million employee related costs,$0.2 million of asset impairment charges associated with the tasting room assets upon closure, and$0.1 million of other restructuring costs associated with departmental reorganization activities. 21 -------------------------------------------------------------------------------- Table of Contents Results of Operations Three Months EndedJune 30, 2021 Compared to Three Months EndedJune 30, 2020 Net Sales Three Months Ended June 30, Increase (in thousands, except percentages) 2021 2020 (Decrease) % change Wholesale$ 9,727 $ 7,638 $ 2,089 27% Direct to Consumer 6,635 5,712 923 16% Other 1,029 235 794 338% Total net sales$ 17,391 $ 13,585 $ 3,806 28% Wholesale net sales increased$2.1 million , or 27%, in the current quarter as compared to the same quarter in 2020. The increase was primarily driven by increased domestic wine sales and increased export wine sales compared to the same quarter in 2020. The increase in domestic wine sales was driven by increased rate of sales of our core wines, new distribution in Off-Premise locations, and continued recovery in our On-Premise sales as a result of the reopening of restaurants, bars, and other hospitality locations in the current quarter. Direct to Consumer net sales increased$0.9 million , or 16%, in the current quarter as compared to the same quarter in 2020. The increase was primarily driven by higher sales in the tasting rooms and timing of wine club shipments as compared to the same quarter in 2020. The increase was partially offset by lower Ecommerce sales in the current quarter. With the lifting of COVID-19 containment measures beginning in late January of this year, all of the Company's tasting rooms were opened for visitations in the current quarter. There was a significant increase in visitors to our tasting rooms in the current quarter compared to the same quarter in 2020, where the tasting rooms were negatively impacted by temporary closures and operating limitations. Ecommerce sales decreased in the current quarter as consumers shifted purchasing behaviors with the reopening of tasting rooms, retail and restaurants. Other net sales, which include bulk wine and grape sales, custom winemaking services, event fees and non-wine retail sales, increased$0.8 million , or 338%, in the current quarter as compared to the same quarter in 2020. The increase was primarily driven by an increase in gallons and price of bulk wine sold, higher event fees and non-wine retail sales due to the comparative impact of COVID-19 on tasting rooms' operations for each of the respective quarters (as discussed above in the Direct to Consumer section), and increased revenue from custom winemaking services as compared to the same quarter in 2020. 22 --------------------------------------------------------------------------------
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Gross Profit
Three Months Ended June 30,
Increase
(in thousands, except percentages) 2021 2020 (Decrease) % change
Wholesale $ 3,883 $ 2,358 $ 1,525 65%
Wholesale gross margin percentage 40 % 31 %
Direct to Consumer 4,195 3,256 939 29%
Direct to Consumer gross margin percentage 63 % 57 %
Other 262 (755) 1,017 135%
Total gross profit $ 8,340 $ 4,859 $ 3,481 72%
Total gross margin percentage 48 % 36 %
Wholesale gross profit increased $1.5 million , or 65%, in the current quarter as
compared to the same quarter in 2020 primarily driven by an overall increase in
wine sales, a shift in sales mix towards wines with a more favorable vintage
cost, and decreased price support. Wholesale gross margin percentage, which is
defined as wholesale gross profit as a percentage of wholesale net sales,
increased 905 basis points primarily driven by a shift in sales mix towards
wines with a more profitable vintage and lower price support compared to the
same quarter in 2020.
Direct to Consumer gross profit increased $0.9 million , or 29%, in the current
quarter as compared to the same quarter in 2020. The increase was a result of
higher tasting room sales and timing of wine club shipments when compared to the
same quarter in 2020 with tasting room sales negatively impacted by COVID-19
containment measures. Direct to Consumer gross margin percentage increased 622
basis points in the current quarter compared to the same quarter in 2020. The
increase was primarily driven by a shift in sales channel mix from increased
tasting rooms sales, a shift in sales mix towards wines with a more favorable
vintage cost, and timing of wine club shipments compared to the same quarter of
2020.
Other includes a gross profit on bulk wine and grape sales, custom winemaking
services, event fees and non-wine retail sales. Other gross profit increased
$1.0 million , or 135% in the current quarter as compared to the same quarter in
2020 and is primarily driven by lower inventory write-downs, receipt of
insurance proceeds for smoke taint affected inventory, and higher non-wine
sales.
Operating Expenses
Three Months Ended June 30,
Increase
(in thousands, except percentages) 2021 2020 (Decrease) % change
Sales and marketing $ 3,750 $ 3,462 $ 288 8%
General and administrative 3,256 2,631 625 24%
Total operating expenses $ 7,006 $ 6,093 $ 913 15%
Sales and marketing expenses increased $0.3 million , or 8%, in the current
quarter as compared to the same quarter in 2020. The increase was primarily
driven by higher advertising and promotional expenses, commissions, and travel
costs in line with higher sales activities and lifting of COVID-19 containment
measures when compared to the same quarter in 2020.
General and administrative expenses increased $0.6 million , or 24%, in the
current quarter as compared to the same quarter in 2020 primarily due to costs
related to the amended 2019 Annual Report on Form 10-K and amended 2020
Quarterly Reports on Form 10-Q, increased accrued bonuses related to current
year performance, and increased professional services compared to the same
quarter in 2020.
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Other (Expense) Income
Three Months Ended June 30,
(in thousands, except percentages) 2021 2020 Change % change
Interest expense, net $ (181) $ (114) $ (67) (59)%
Gain on extinguishment of debt 3,863 - 3,863 100%
Other income, net 208 119 89 75%
Total other income, net $ 3,890 $ 5 $ 3,885 77,700%
Interest expense, net, increased $0.1 million , or 59%, in the current quarter
compared to the same quarter in 2020. The increase was primarily driven by lower
patronage dividend payment received in the current quarter partially offset by
lower interest expense on declining principal balances on the 2015 and 2017 Term
Loans.
Gain on extinguishment of debt was recognized for
Other income, net, increased$0.1 million , or 75%, in the current quarter compared to the same quarter in 2020. The increase was primarily driven by a gain on lease modification recognized upon the Company's successful negotiations with the lessor for an early termination agreement of the leased office space previously used as the Company's corporate headquarters. The increase was partially offset by lower investments interest income received compared to the same quarter in 2020. Income Tax Benefit The Company's effective tax rates for the three months endedJune 30, 2021 and 2020 were (9.4)% and 26.2%, respectively. The difference between the consolidated effective income tax rate and theU.S. federal statutory rate for the three months endedJune 30, 2021 was primarily attributable to income exclusion of PPP loan forgiveness for federal income taxes, state income taxes and other permanent items. 24
-------------------------------------------------------------------------------- Table of Contents Six Months EndedJune 30, 2021 Compared to Six Months EndedJune 30, 2020 Net Sales Six Months Ended June 30, Increase (in thousands, except percentages) 2021 2020 (Decrease) % change Wholesale$ 17,917 $ 15,567 $ 2,350 15% Direct to Consumer 12,602 11,274 1,328 12% Other 1,453 1,214 239 20% Total net sales$ 31,972 $ 28,055 $ 3,917 14% Wholesale net sales increased$2.4 million , or 15%, in the current six month period as compared to the same period in 2020. The increase was primarily driven by an increase in domestic wine sales compared to the same period in 2020. The increase in domestic wine sales was driven by increased rate of sales of our core wines, new distribution in Off-Premise locations, and continued recovery from lower On-Premise sales in the prior year period as a result of the reopening of restaurants, bars, and other hospitality locations in the current period. Direct to Consumer net sales increased$1.3 million , or 12%, in the current six month period as compared to the same period in 2020. The increase was primarily driven by higher sales in the tasting rooms and Ecommerce compared to the same period in 2020. With lifting COVID-19 containment measures beginning in late January of this year, all of the Company's tasting rooms were opened for visitations for the majority of the current six month period. There was a significant increase in visitors to our tasting rooms in the current six month period compared to the same period in 2020, where the tasting rooms were negatively impacted by temporary closures and operating limitations. Other net sales, which include bulk wine and grape sales, custom winemaking services, event fees and non-wine retail sales, increased$0.2 million , or 20%, in the current six month period as compared to the same period in 2020. The increase was primarily driven by a higher price of bulk wine sold, and higher event fees and non-wine retail sales due to the comparative impact of COVID-19 on tasting rooms' operations for each of the respective periods (as discussed above in the Direct to Consumer section) as compared to the same period in 2020. 25 --------------------------------------------------------------------------------
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Gross Profit
Six Months Ended June 30,
Increase
(in thousands, except percentages) 2021 2020 (Decrease) % change
Wholesale $ 6,764 $ 4,634 $ 2,130 46%
Wholesale gross margin percentage 38 % 30 %
Direct to Consumer 7,811 6,803 1,008 15%
Direct to Consumer gross margin percentage 62 % 60 %
Other (594) (1,130) 536 47%
Total gross profit $ 13,981 $ 10,307 $ 3,674 36%
Total gross margin percentage 44 % 37 %
Wholesale gross profit increased $2.1 million , or 46%, in the current six month
period as compared to the same period in 2020 primarily driven by an overall
increase in wine sales, a significant reduction of close out sales in the
current period as inventory realignment initiatives were completed, a shift in
sales mix towards wines with a more favorable vintage cost, and lower price
support. Wholesale gross margin percentage, which is defined as wholesale gross
profit as a percentage of wholesale net sales, increased 798 basis points in the
current period compared to the same period in 2020 primarily driven by a
significant reduction of close out sales in the current period, a shift in sales
mix towards wines with a more profitable vintage, and lower price support.
Direct to Consumer gross profit increased $1.0 million , or 15%, in the current
six month period as compared to the same period in 2020. The increase was as a
result of higher Direct to Consumer sales compared to the same period in 2020 as
discussed above under Net Sales . Direct to Consumer gross margin percentage
increased 164 basis points in the current period compared to the same period in
2020 primarily driven by a shift in sales channel mix from increased tasting
rooms sales and a shift in sales mix towards wines with a more favorable vintage
cost.
Other includes a gross loss on bulk wine and grape sales, custom winemaking
services, event fees and non-wine retail sales. Other gross loss decreased $0.5
million , or 47% in the current six month period as compared to the same period
in 2020 and the decrease in gross loss is primarily driven by improved margins
on bulk wine sales, insurance proceeds for smoke taint affected inventory, and
higher non-wine retail sales.
Operating Expenses
Six Months Ended June 30,
Increase
(in thousands, except percentages) 2021 2020 (Decrease) % change
Sales and marketing $ 6,795 $ 7,413 $ (618) (8)%
General and administrative 6,714 5,713 1,001 18%
Total operating expenses $ 13,509 $ 13,126 $ 383 3%
Sales and marketing expenses decreased $0.6 million , or 8%, in the current six
month period as compared to the same period in 2020. The decrease was primarily
driven by reduced compensation as a result of the 2020 Restructuring Program and
decreased travel costs related to COVID-19, partially offset by increased
advertising and promotional expenses compared to the same period in 2020.
General and administrative expenses increased $1.0 million , or 18%, in the
current six month period as compared to the same period in 2020 primarily due to
costs related to the amended 2019 Annual Report on Form 10-K and amended 2020
Quarterly Reports on Form 10-Q, increased accrued bonuses related to current
year performance, and increased professional services partially offset by
temporarily and voluntarily reduced Board of Directors fees compared to the same
period in 2020.
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Other (Expense) Income
Six Months Ended June 30,
(in thousands, except percentages) 2021 2020 Change % change
Interest expense, net $ (431) $ (437) $ 6 1%
Gain on extinguishment of debt 3,863 - 3,863 100%
Other income, net 258 286 (28) (10)%
Total other income (expense), net $ 3,690 $ (151) $ 3,841 2,544%
Interest expense, net, was flat in the current six month period as compared to the same period in 2020.
Gain on extinguishment of debt was recognized for$3.9 million in the current six month period. The gain on extinguishment of debt was related to the PPP loan forgiveness approved by the SBA onJune 14, 2021 . Other income, net, was flat in the current six month period as compared to the same period in 2020. Income Tax Benefit The Company's effective tax rates for the six months endedJune 30, 2021 and 2020 were (17.0)% and 30.8%, respectively. The difference between the consolidated effective income tax rate and theU.S. federal statutory rate for the six months endedJune 30, 2021 was primarily attributable to income exclusion of PPP loan forgiveness for federal income taxes, state income taxes and other permanent items. 27
-------------------------------------------------------------------------------- Table of Contents Liquidity and Capital Resources
General
The Company's principal sources of liquidity are its available cash and cash equivalents, investments in available for sale securities, funds generated from operations and bank borrowings. The Company's primary cash needs are to fund working capital requirements and capital expenditures. Despite the negative effects of COVID-19 on our business, the Company has maintained adequate liquidity to meet working capital requirements, fund capital expenditures, meet payroll, and repay scheduled principal and interest payments on debt. In response to the current macro-economic environment, we protected our financial position and liquidity as evidenced by the following items: we managed our operating expenses closely and limited discretionary spending; reduced and/or deferred capital projects where prudent; actively managed our working capital, including supporting our business partners most impacted by the pandemic through extended terms and closely monitoring our customers' solvency and our ability to collect from them; and delayed plans for a share repurchase program to preserve liquidity. As a result, we believe that cash flows generated from operations and our cash, cash equivalents, and marketable securities balances, as well as our borrowing arrangements, will be sufficient to meet our presently anticipated cash requirements for capital expenditures, working capital, debt obligations and other commitments during the next twelve months.
Revolving Credit Facility
InMarch 2013 , Crimson and its subsidiaries entered into a$60.0 million revolving credit facility (the "Revolving Credit Facility") withAmerican AgCredit, FLCA , as agent for the lenders. The Revolving Credit Facility is comprised of a revolving loan facility (the "Revolving Loan") and a term revolving loan facility (the "Term Revolving Loan"), which together are secured by substantially all of Crimson's assets. The Revolving Loan is for up to$10.0 million of availability in the aggregate for a five year term, and the Term Revolving Loan is for up to$50.0 million in the aggregate for a fifteen year term. In addition to unused line fees ranging from 0.15% to 0.25%, rates for the borrowings are priced based on a performance grid tied to certain financial ratios and the London Interbank Offered Rate. The Revolving Credit Facility can be used to fund acquisitions, capital projects and other general corporate purposes. Covenants include the maintenance of specified debt and equity ratios, limitations on the incurrence of additional indebtedness, limitations on dividends and other distributions to shareholders and restrictions on certain mergers, consolidations and sales of assets. No amounts have been borrowed under the revolving credit facility to date.
Term Loans
Term loans consist of the following:
(i) OnNovember 10, 2015 ,Pine Ridge Winery, LLC ("PRW Borrower"), a wholly-owned subsidiary of Crimson, entered into a senior secured term loan agreement (the "2015 Term Loan") withAmerican AgCredit, FLCA ("Lender") for an aggregate principal amount of$16.0 million . Amounts outstanding under the 2015 Term Loan bear a fixed interest rate of 5.24% per annum. The 2015 Term Loan will mature onOctober 1, 2040 . The term loan can be used to fund acquisitions, capital projects and other general corporate purposes. As ofJune 30, 2021 ,$12.5 million in principal was outstanding on the 2015 Term Loan, and unamortized loan fees were less than$0.1 million . (ii) OnJune 29, 2017 ,Double Canyon Vineyards, LLC (the "DCV Borrower" and, individually and collectively with the PRW Borrower, "Borrower"), a wholly-owned subsidiary of Crimson, entered into a senior secured term loan agreement (the "2017 Term Loan") with the Lender for an aggregate principal amount of$10.0 million . Amounts outstanding under the 2017 Term Loan bear a fixed interest rate of 5.39% per annum. The 2017 Term Loan will mature onJuly 1, 2037 . The term loan can be used to fund acquisitions, capital projects and other general corporate purposes. As ofJune 30, 2021 ,$8.1 million in principal was outstanding on the 2017 Term Loan, and unamortized loan fees were less than$0.1 million . Borrower's obligations under the 2015 Term Loan and 2017 Term Loan are guaranteed by the Company. All obligations of Borrower under the 2015 Term Loan and 2017 Term Loan are collateralized by certain real property of the Company. Borrower's covenants include the maintenance of a specified debt service coverage ratio and certain customary affirmative and negative covenants, including limitations on the incurrence of additional indebtedness, limitations on distributions to shareholders, and restrictions on certain investments, the sale of assets, and merging or consolidating with other entities. Borrower was in compliance with all debt covenants as ofJune 30, 2021 . 28
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Table of Contents (iii) OnApril 22, 2020 , Crimson entered into an unsecured term loan agreement (the "2020 PPP Term Loan") with Lender for an aggregate principal amount of$3.8 million pursuant to a new loan program through the SBA as the result of the PPP established by the CARES Act and amended by the Paycheck Protection Program Flexibility Act of 2020. The Company requested loan forgiveness inApril 2021 and onJune 14, 2021 , the forgiveness application to the SBA was approved for the full principal amount including interest. The SBA has remitted payment to the lender and the Company has been legally released from the loan agreement. InJune 2021 , the Company recorded a gain on extinguishment of debt for approximately$3.9 million , which includes both the full principal and interest amounts.
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