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SEGMENT REPORTING
 12 Months Ended
Dec. 31, 2011
Notes to Financial Statements  
SEGMENT REPORTING

 

NOTE 13 – SEGMENT REPORTING

 

The Company has identified two operating segments, Produced Wine and Bacchus Distribution. Bacchus Distribution (dba Bacchus Fine Wines), is the company’s in-state distribution department. Bacchus distributes produced wine, purchased wine and glassware at wholesale prices to in-state customers. Produced wine represents all Willamette Valley Vineyard branded wine which is produced at the winery. Purchased wines and glassware are brands purchased from other wine distributors and wineries for sale to in-state customers. For segment reporting, the produced wines distributed by Bacchus are consolidated with Retail and Out-of-State sales and shown as Produced Wines.

  

The two segments reflect how the Company’s operations are evaluated by senior management and the structure of its internal financial reporting. The Company evaluates performance based on the gross profit of the respective business segment. Sales, general and administrative expenses are not allocated between operating segments, therefore net income information for the respective segments is not available. Discrete financial information related to segment assets, other than inventory, is not available and that information continues to be aggregated.

 

The following tables outline the sales, cost of sales and gross profit, for the twelve month periods ended December 31, 2011 and 2010 by operating segment:

 

    Twelve Months Ended December 31, 2011  
    Bacchus     Produced        
    Distribution     Wine     Total  
                   
Net sales   $ 3,337,540     $ 12,324,365     $ 15,661,905  
Cost of sales     2,677,175       5,267,460       7,944,635  
Gross profit     660,365       7,056,905       7,717,270  
Percentage of sales     19.8 %     57.3 %     49.3 %
                         
    Twelve Months Ended December 31, 2010  
    Bacchus     Produced          
    Distribution     Wine     Total  
                         
Net sales   $ 4,253,135     $ 13,117,668     $ 17,370,803  
Cost of sales     3,079,568       6,599,846       9,679,414  
Gross profit     1,173,567       6,517,822       7,691,389  
Percentage of sales     27.6 %     49.7 %     44.3 %

 

Total inventory for Bacchus Distribution at the period ended December 31, 2011 was $612,989 of purchased wines and $162,344 of non-wine merchandise. This compares to produced bottled wine inventory of $4,854,170, produced bulk wine inventory of $3,363,892, and $625,750 of work-in-process and non-wine merchandise for the same period. For the period ended December 31, 2010, total inventory for Bacchus Distribution was $1,492,497 of purchased wines and $310,753 of non-wine merchandise. This compared to produced bottled wine inventory of $5,337,903 produced bulk wine inventory of $3,042,106 and $528,758 of work-in-process and non-wine merchandise for the same period.

 

The Company’s Oregon distribution arm of Bacchus Distribution is in the process of winding down with the eventual elimination of Bacchus Distribution as a means of distribution of wine in the Oregon market. The decision was made by Management and the Board of Directors to utilize Young’s to distribute the produced wine in the market due to the increasingly higher regulatory and overhead costs of maintaining Bacchus as an operating unit. This decision will increase the Company’s gross margin as we will no longer sell the low margin purchased wine products as well as reduce our operating expenditure by reducing staffing and logistic costs associated with the operation of Bacchus Distribution.