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SEGMENT REPORTING
 3 Months Ended
Mar. 31, 2012
Notes to Financial Statements  
SEGMENT REPORTING

7) 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 purchased wine and Riedel glassware at wholesale prices to in-state customers. Purchased wines and Riedel glassware are brands purchased from other wine distributors and wineries for sale to in-state customers.

 

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 three month periods ended March 31, 2012 and 2011 by operating segment:

 

   Three Months Ended March 31, 2012
    Bacchus    Produced      
    Distribution    Wine    Total 
                
Net sales  $482,107   $2,722,604   $3,204,711 
Cost of sales   492,541    1,109,242    1,601,783 
Gross (loss) profit   (10,434)   1,613,362    1,602,928 
Gross (loss) profit margin   -2.2%   59.3%   50.0%
                
    Three Months Ended March 31, 2011
    Bacchus    Produced      
    Distribution    Wine    Total 
                
Net sales  $888,539   $2,737,154   $3,625,693 
Cost of sales   621,145    1,265,263    1,886,408 
Gross profit   267,394    1,471,891    1,739,285 
Gross profit margin   30.1%   53.8%   48.0%

 

 

Total inventory for Bacchus Fine Wines of purchased wine was $152,660 and $1,400,009 at March 31, 2012 and 2011, respectively, a reduction of $1,247,349 or 89.1%. Total inventory for Bacchus Fine Wines of non-wine merchandise was $138,797 and $419,694 at March 31, 2012 and 2011, respectively, a reduction of $280,897 or 66.9%. Total inventory of produced wine inventory was $4,544,050 and $  5,566,550 at March 31, 2012 and 2011, respectively, a reduction of $1,022,500 or 18.4%. Total inventory of non-wine merchandise and work-in-process was $4,232,710 and $3,094,200 at March 31, 2012 and 2011, respectively, an increase of $1,138,510 or 36.8%.

 

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 Market Company of Oregon, LLC, an Oregon limited liability company and Young’s Market Company of Washington, LLC an Oregon limited liability company 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 the Company will no longer sell the low margin purchased wine products as well as reduce the Company’s operating expenditure by reducing staffing and logistic costs associated with the operation of Bacchus Distribution.