-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, QrX0j2XHIJSw2ahTJO2axsaXFvJWtkkfIBnJWv+mBAqgKXdOEiyVaZmwWRBpEjod cvvE/ADstrACjB+ee2ngZA== 0000912057-96-016851.txt : 19960812 0000912057-96-016851.hdr.sgml : 19960812 ACCESSION NUMBER: 0000912057-96-016851 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19960630 FILED AS OF DATE: 19960809 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: TODHUNTER INTERNATIONAL INC CENTRAL INDEX KEY: 0000098544 STANDARD INDUSTRIAL CLASSIFICATION: MALT BEVERAGES [2082] IRS NUMBER: 591284057 STATE OF INCORPORATION: DE FISCAL YEAR END: 0930 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-20624 FILM NUMBER: 96606984 BUSINESS ADDRESS: STREET 1: 222 LAKEVIEW AVE STE 1500 CITY: WEST PALM BEACH STATE: FL ZIP: 33401 BUSINESS PHONE: 4076558977 MAIL ADDRESS: STREET 2: 222 LAKEVIEW AVE STE 1500 CITY: WEST PALM BEACH STATE: FL ZIP: 33401 10-Q 1 10-Q SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarter ended June 30, 1996 Commission File No. 0-20624 ------------- ------- TODHUNTER INTERNATIONAL, INC. - -------------------------------------------------------------------------------- (Exact name of registrant as specified in its charter) DELAWARE 59-1284057 - -------------------------------------------------------------------------------- (State or other jurisdiction of IRS employer identification No. incorporation or organization) 222 Lakeview Avenue, Suite 1500, West Palm Beach, FL 33401 - -------------------------------------------------------------------------------- (Address of principal executive offices) (Zip Code) Registrant's telephone number including area code: (407) 655-8977 Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 30 days. Yes X No -------- -------- The number of shares outstanding of registrant's Common Stock, $.01 par value per share, as of August 7, 1996 was 4,923,464. TODHUNTER INTERNATIONAL, INC. INDEX TO FORM 10-Q QUARTER ENDED JUNE 30, 1996 PART I FINANCIAL INFORMATION Item 1 Financial Statements Consolidated Balance Sheets - June 30, 1996 and September 30, 1995 Consolidated Statements of Income - Nine and Three Months Ended June 30, 1996 and 1995 Consolidated Statements of Cash Flows - Nine Months Ended June 30, 1996 and 1995 Notes to Consolidated Financial Statements Item 2 Management's Discussion and Analysis of Financial Condition and Results of Operations PART II OTHER INFORMATION Item 1 Legal Proceedings Item 2 Changes in Securities * Item 3 Defaults Upon Senior Securities * Item 4 Submission of Matters to a Vote of Security Holders * Item 5 Other Information * Item 6 Exhibits and Reports on Form 8-K Signatures * Item is omitted because answer is negative or item is inapplicable. PART I - FINANCIAL INFORMATION Item 1. Financial Statements TODHUNTER INTERNATIONAL, INC. CONSOLIDATED BALANCE SHEETS
June 30, September 30, ASSETS 1996 1995 ------------- ------------- (Unaudited) * CURRENT ASSETS Cash and cash equivalents $ 1,696,179 $ 2,000,581 Certificates of deposit 4,494,375 4,584,434 Trade receivables 13,458,763 10,249,034 Other receivables 1,839,502 1,414,295 Inventories 20,818,019 17,364,574 Notes receivable, current maturities 1,502,926 1,499,885 Deferred income taxes 2,265,000 3,343,000 Other current assets 1,426,030 2,319,990 Assets of discontinued operations 630,723 6,000,904 ------------- ------------- Total current assets 48,131,517 48,776,697 ------------- ------------- INVESTMENTS AND LONG-TERM RECEIVABLES Investment in affiliated companies 2,621 14,650 Notes receivable, less current maturities 8,085,812 9,293,102 Other 75,673 75,673 ------------- ------------- 8,164,106 9,383,425 ------------- ------------- PROPERTY AND EQUIPMENT 66,966,589 63,184,284 Less accumulated depreciation 23,751,481 21,338,658 ------------- ------------- 43,215,108 41,845,626 ------------- ------------- PROPERTY HELD FOR LEASE 2,281,184 2,246,058 Less accumulated depreciation 844,001 766,206 ------------- ------------- 1,437,183 1,479,852 ------------- ------------- GOODWILL, less accumulated amortization 463,099 487,658 ------------- ------------- OTHER ASSETS 1,904,762 1,813,363 ------------- ------------- $ 103,315,775 $ 103,786,621 ------------- ------------- ------------- -------------
* From audited financial statements. See Notes to Consolidated Financial Statements. TODHUNTER INTERNATIONAL, INC. CONSOLIDATED BALANCE SHEETS
June 30, September 30, LIABILITIES AND STOCKHOLDERS' EQUITY 1996 1995 ------------- ------------- (Unaudited) * CURRENT LIABILITIES Current maturities of long-term debt $ 2,156,016 $ 2,263,559 Accounts payable 6,608,584 4,654,813 Accrued interest expense 593,154 1,281,736 Other accrued expenses 1,522,348 2,200,589 Liabilities of discontinued operations 506,225 2,940,784 ------------- ------------- Total current liabilities 11,386,327 13,341,481 NOTE PAYABLE, BANK - 10,000,000 LONG-TERM DEBT, less current maturities 55,372,846 47,759,020 DEFERRED INCOME TAXES 4,761,000 4,915,000 OTHER LIABILITIES 431,944 488,823 ------------- ------------- 71,952,117 76,504,324 ------------- ------------- MINORITY INTEREST 417,784 417,784 ------------- ------------- STOCKHOLDERS' EQUITY Preferred stock, par value $.01 per share; authorized 2,500,000 shares, no shares issued - - Common stock, par value $.01 per share; authorized 10,000,000 shares 49,235 49,170 Additional paid-in capital 11,788,539 11,749,604 Retained earnings 19,108,100 15,065,739 ------------- ------------- 30,945,874 26,864,513 ------------- ------------- $ 103,315,775 $ 103,786,621 ------------- ------------- ------------- -------------
* From audited financial statements. See Notes to Consolidated Financial Statements. TODHUNTER INTERNATIONAL, INC. CONSOLIDATED STATEMENTS OF INCOME (Unaudited)
Nine Months Ended Three Months Ended June 30, June 30, ------------------------------ ---------------------------- 1996 1995 1996 1995 ------------- ----------- ----------- ----------- Sales $ 90,365,991 $90,128,366 $29,965,081 $32,366,820 Less excise taxes 32,511,496 37,847,069 10,776,460 11,836,698 ------------- ----------- ----------- ----------- Net sales 57,854,495 52,281,297 19,188,621 20,530,122 Cost of goods sold 42,216,934 38,710,665 14,226,807 15,908,029 ------------- ----------- ----------- ----------- Gross profit 15,637,561 13,570,632 4,961,814 4,622,093 Selling, general and administrative expenses 8,626,296 7,464,342 2,804,297 2,547,958 ------------- ----------- ----------- ----------- Operating income 7,011,265 6,106,290 2,157,517 2,074,135 ------------- ----------- ----------- ----------- Other income (expense): Interest income 776,589 560,289 257,597 179,503 Interest expense (3,339,630) (2,855,506) (1,080,823) (960,342) Other, net 617,481 503,329 183,633 209,254 ------------- ----------- ----------- ----------- (1,945,560) (1,791,888) (639,593) (571,585) ------------- ----------- ----------- ----------- Income from continuing operations before income taxes 5,065,705 4,314,402 1,517,924 1,502,550 ------------- ----------- ----------- ----------- Income tax expense: Current 99,343 848,795 27,743 403,581 Deferred 924,000 244,000 321,000 65,000 ------------- ----------- ----------- ----------- 1,023,343 1,092,795 348,743 468,581 ------------- ----------- ----------- ----------- Income from continuing operations 4,042,362 3,221,607 1,169,181 1,033,969 (Loss) from discontinued operations, net of income taxes - (458,955) - (666,605) ------------- ----------- ----------- ----------- Net income $ 4,042,362 $ 2,762,652 $ 1,169,181 $ 367,364 ------------- ----------- ----------- ----------- ------------- ----------- ----------- ----------- Earnings per common share: Primary: Income from continuing operations $ 0.82 $ 0.65 $ 0.24 $ 0.20 (Loss) from discontinued operations - (0.09) - (0.13) ------------- ----------- ----------- ----------- Net income $ 0.82 $ 0.56 $ 0.24 $ 0.07 ------------- ----------- ----------- ----------- ------------- ----------- ----------- ----------- Fully diluted: Income from continuing operations $ 0.82 $ 0.65 $ 0.24 $ 0.20 (Loss) from discontinued operations - (0.09) - (0.13) ------------- ----------- ----------- ----------- Net income $ 0.82 $ 0.56 $ 0.24 $ 0.07 ------------- ----------- ----------- ----------- ------------- ----------- ----------- ----------- Common shares and equivalents outstanding: Primary 4,949,904 4,970,123 4,959,298 4,969,774 ------------- ----------- ----------- ----------- ------------- ----------- ----------- ----------- Fully diluted 4,955,651 4,970,123 4,959,298 4,969,774 ------------- ----------- ----------- ----------- ------------- ----------- ----------- -----------
See Notes to Consolidated Financial Statements. TODHUNTER INTERNATIONAL, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
Nine Months Ended June 30, -------------------------------- 1996 1995 ------------ ------------ CASH FLOWS FROM OPERATING ACTIVITIES Net income $ 4,042,362 $ 2,762,652 Adjustments to reconcile net income to net cash provided by (used in) operating activities: Depreciation 2,827,765 2,608,570 Amortization 153,414 719,984 (Gain) on investment transactions (17,406) - (Gain) on sale of property and equipment (53,056) (77,751) Equity in earnings of affiliates 12,029 8,707 Deferred income taxes 924,000 244,000 Minority interest in net income - - Changes in assets and liabilities: (Increase) decrease in: Receivables (3,634,936) (7,341,763) Inventories (3,453,445) (5,200,776) Other current assets 893,960 1,196,484 Increase (decrease) in: Accounts payable 1,953,771 1,631,510 Accrued interest expense (688,582) - Accrued expenses (678,241) (317,240) Other liabilities (56,879) (110,554) Discontinued operations 2,728,566 - ------------ ------------ Net cash provided by (used in) operating activities 4,953,322 (3,876,177) ------------ ------------ CASH FLOWS FROM INVESTING ACTIVITIES Proceeds from sale of property and equipment 75,187 109,885 Proceeds from sale of marketable securities 17,406 - Principal payments received on notes receivable 1,204,249 771,906 Purchase of property and equipment (3,969,654) (5,703,241) Disbursements for notes receivable - (41,200) Purchase of certificates of deposit (4,565,382) - Redemption of certificates of deposit 4,655,441 - (Increase) decrease in other assets (198,887) (761,066) ------------ ------------ Net cash (used in) investing activities $ (2,781,640) $ (5,623,716) ------------ ------------
(Continued) TODHUNTER INTERNATIONAL, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued) (Unaudited)
Nine Months Ended June 30, ------------------------------ 1996 1995 ---------- ------------ CASH FLOWS FROM FINANCING ACTIVITIES Net borrowings (payments) under line of credit arrangements $ (509,520) $ 11,179,595 Proceeds from issuance of common stock 39,000 208,500 Principal payments on long-term borrowings (1,984,197) (1,781,403) Disbursements for loan closing costs (21,367) (458,382) ---------- ------------ Net cash provided by (used in) financing activities (2,476,084) 9,148,310 ---------- ------------ Net (decrease) in cash and cash equivalents (304,402) (351,583) Cash and cash equivalents: Beginning 2,000,581 6,945,962 ---------- ------------ Ending $ 1,696,179 $ 6,594,379 ---------- ------------ ---------- ------------ SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION - Cash payments for: Interest $ 4,028,212 $ 3,162,098 ---------- ------------ ---------- ------------ Income taxes $ 84,000 $ 973,000 ---------- ------------ ---------- ------------ SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND FINANCING ACTIVITIES Transfer of equipment from discontinued operations $ 207,056 $ - ---------- ------------ ---------- ------------ Refinancing of long-term debt: Repayment of outstanding debt $ - $ 35,845,238 Payment of interest on borrowings - 170,586 Payment of loan closing costs - 23,528 ---------- ------------ $ - $ 36,039,352 ---------- ------------ ---------- ------------
See Notes to Consolidated Financial Statements. TODHUNTER INTERNATIONAL, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) NOTE 1. BASIS OF PRESENTATION The consolidated financial statements included herein have been prepared by the Company, without audit, pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to such rules and regulations. In the opinion of management, all adjustments, consisting only of normal recurring adjustments necessary for a fair presentation of the financial information for the periods indicated have been included. For further information regarding the Company's accounting policies, refer to the consolidated financial statements and related notes included in the Company's Annual Report on Form 10-K for the year ended September 30, 1995. NOTE 2. INVENTORIES The major components of inventories are: JUNE 30, 1996 SEPTEMBER 30, 1995 ------------- ------------------ (Unaudited) Finished goods $ 13,389,382 $ 9,579,693 Work in process 873,440 915,807 Raw materials and supplies 6,555,197 6,869,074 ------------- ------------- $ 20,818,019 $ 17,364,574 ------------- ------------- ------------- ------------- TODHUNTER INTERNATIONAL, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued (Unaudited) NOTE 3. LONG-TERM DEBT Long-term debt consists of the following as of June 30, 1996: Senior notes, interest payable semiannually at 8.905%, principal payments of $6,800,000 on October 30, 1999, $7,933,333 on October 30, 2000 and 2001, $4,533,334 on October 30, 2002 and $3,400,000 on October 30, 2003 and 2004, unsecured. (1) $34,000,000 Revolving credit note of $20,000,000, interest payable monthly at the prime rate for domestic loans and at 150 basis points above the LIBOR rate for Eurodollar loans, principal is due in full November 1, 1997. The maximum amount which can be drawn on the revolving note is based on the borrowing base as specified in the agreement, unsecured. 13,240,289 Bank note payable, interest payable monthly at the prime rate for domestic loans and at 250 basis points above the LIBOR rate for Eurodollar loans, quarterly principal payments of $250,000, collateralized by real property, equipment, machinery and trade receivables in the Virgin Islands. (2) 7,000,000 Note payable, interest at 6%, monthly principal payments of $80,739, unsecured. 3,068,095 Note payable, interest at the prime rate, monthly principal payments of $16,667. 220,478 ------------ 57,528,862 Less current maturities 2,156,016 ------------ $55,372,846 ------------ ------------
(1) The Company has entered into an interest rate swap agreement accounted for as a hedge with a bank. The agreement calls for the Company to exchange, as of May 1 and November 1 through 2004, interest payment streams calculated on a principal balance starting at $4,000,000 and reducing starting in November 1999. The Company's interest is calculated based upon a floating rate of 1.06% above the six-month London Interbank Offered Rate (LIBOR). The bank's rate is 8.905%. TODHUNTER INTERNATIONAL, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued (Unaudited) NOTE 3. LONG-TERM DEBT - CONTINUED (2) The Company has entered into an interest rate swap agreement accounted for as a hedge with a bank. The agreement calls for the Company to exchange, as of January 1, April 1, July 1, and October 1, through 2003, interest payment streams calculated on a principal balance starting at $7,500,000 and reducing starting April 1, 1996. The Company's rate is fixed at 8.46%. The long-term debt contains various restrictive covenants related to fixed-charge coverage, interest expense coverage, net worth and debt limitation. NOTE 4. EARNINGS PER COMMON SHARE Primary earnings per common share are calculated by dividing net income by the average common stock outstanding and common stock equivalents assuming the exercise of stock options at an average market price. On a fully diluted basis, shares outstanding are adjusted to assume the exercise of stock options at the ending market price.
Nine Months Ended June 30, Three Months Ended June 30, 1996 1995 1996 1995 ---------- ---------- ---------- ---------- Net income $4,042,362 $2,762,652 $1,169,181 $ 367,364 ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- Determination of shares: Weighted average number of common shares outstanding 4,949,904 4,970,123 4,959,298 4,969,774 Shares issuable on exercise of stock options, net of shares assumed to be purchased out of proceeds at ending market price 5,747 * * * ---------------------------------------------------------- Average common shares out- standing for fully diluted computation 4,955,651 4,970,123 4,959,298 4,969,774 ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- Earnings per common share Primary $ 0.82 $ 0.56 $ 0.24 $ 0.07 Fully diluted $ 0.82 $ 0.56 $ 0.24 $ 0.07
* Shares not included in computation since effect is anti-dilutive. TODHUNTER INTERNATIONAL, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-Continued (Unaudited) NOTE 5. DISCONTINUED OPERATIONS During July 1995, the Company decided to discontinue the operations of Blair Importers, Ltd. and sold assets consisting of certain trademarks and inventory in September 1995. Revenues and interest expense allocated to the discontinued operations were as follows:
Nine Months Ended June 30, Three Months Ended June 30, 1996 1995 1996 1995 ---- ---- ---- ---- Revenues $ -- $17,225,011 $ -- $ 5,077,814 Interest Expense $ -- $ 852,769 $ -- $ 342,243
Interest expense was allocated based on financed inventory and receivable balances. As of June 30, 1996, the assets and liabilities of the discontinued operations consisted of the following: Assets Cash and cash equivalents $ 53,223 Receivables 344,526 Inventories 952,667 Other current assets 4,107 Less adjustment for write-down of accounts receivable and inventories to estimated net realized value $( 723,800) ----------- $ 630,723 ----------- ----------- Liabilities Accounts payable $ 36,069 Anticipated future expenses to disposal date 470,156 ----------- $ 506,225 ----------- ----------- The foregoing assets and liabilities have been classified as current as of June 30, 1996 since the discontinuance is expected to be completed within twelve months. TODHUNTER INTERNATIONAL, INC. Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations The Company's primary businesses are production of citrus and cane-based alcoholic beverage ingredients for other manufacturers; contract bottling of coolers, prepared cocktails and other beverages; and production and bottling of popular price spirits for distribution in the Southeast. The Company also produces vinegar, cooking wine and certain other alcohol related products. Beverage ingredients produced by the Company include fortified citrus wine, citrus brandy, citrus and cane spirits and rum. The Company also buys grain alcohol in bulk which it resells as bulk or packaged grain alcohol. Popular price spirits produced by the Company are distributed under the Company's proprietary labels and those of major retailers of liquor in the Southeast, and include rum, vodka, gin, cordials, brandies and whiskies. The Company's contract bottling operations consist primarily of bottling coolers, prepared cocktails and other nonalcoholic beverages. In February 1994, the Company acquired Virgin Islands Rum Industries, Ltd. ("Viril") located in St. Croix, United States Virgin Islands. Viril is a producer of rum sold throughout the Virgin Islands and in the United States under its proprietary Cruzan label. In addition, Viril is a significant supplier of bulk rum to other bottlers and distillers in the United States. Prior to its acquisition by the Company, Viril was a significant competitor of the Company in the domestic rum market. During fiscal 1995, the Company expanded the production capacity of the Virgin Islands facility by 40% and has shifted a portion of its rum production offshore in order to capitalize on the lower raw material costs available in the Virgin Islands. In December 1993, the Company acquired the Yellowstone Distillery property located in Louisville, Kentucky. During fiscal 1994, the Company expanded the wine production capacity of the Kentucky facility and has shifted a significant portion of its wine production from Florida to Kentucky in order to save on freight costs. Some of the freight costs saved are passed on to the Company's customers. Management's decision to expand geographically by acquiring the Kentucky facility continues to result in increased wine sales. Demand for citrus brandy used in flavored brandies continues to decline. Management expects this trend to continue in the future. Citrus spirits used in the production of wine has increased and management expects this trend to continue in the future. The Company's popular price products experienced a decrease in profit margins due to increased costs of raw materials which the Company elected to absorb in order to maintain market share. The Company's popular price spirits category now contains certain brands retained upon the discontinuance of Blair during the quarter ended September 30, 1995. These brands, which include the Company's own Cruzan Rum trademark, are being marketed by the Company on a national basis. The under utilization of the Company's bottling facilities continues to impact this division's profitability. Management is actively seeking to utilize its remaining capacity by bottling additional types of alcoholic and non-alcoholic beverages. TODHUNTER INTERNATIONAL, INC. During fiscal 1995, the Company completed the construction of a vinegar production facility in Louisville, Kentucky. This state-of-the-art facility has more than doubled the Company's previous vinegar production capacity. Shipments from the new Kentucky facility commenced in August 1995. During the quarter ended September 30, 1995, the Company discontinued the operations of Blair Importers, Ltd. ("Blair"), sold substantially all of its assets, terminated its employees, closed its facilities and is liquidating its remaining assets. The Company acquired Blair in August 1994. At that time, management believed that Blair would enhance the Company's national sales capabilities and provide an entry to the imported wine and spirits segment of the alcohol beverage market. However, since January 1995, Blair had incurred substantial operating losses. In 1995, the losses from Blair amounted to $10,740,124 (net of tax benefit of $935,883), including operating losses during the phase out period of $1,871,173. These losses resulted from, among other things, the failure to meet exaggerated sales and gross profit projections furnished to the Company, certain unrecorded liabilities, surplus inventories, and inadequate reserves for uncollectible receivables, all of which were uncovered subsequent to the acquisition. The Company is reserving all rights that it has to indemnification from the selling shareholders of Blair under the merger agreement relating to the acquisition. Net sales and gross margins (gross profit as a percentage of net sales) vary depending on the mix of business among the Company's product lines. Historically, gross margins have been highest in beverage ingredients and lower in popular price, contract bottling and vinegar and cooking wine operations. Within its contract bottling operations, sales and gross margins have varied substantially based upon the mix of business from the Company's largest bottling customers. Although gross profit per case for the Company's bottling customers are approximately equal, some customers pay the Company to purchase all raw materials. As a result, net sales and cost of goods sold with respect to products bottled for these customers are higher, and gross margins are lower, than for other bottling customers which supply their own raw materials. Net sales represent the Company's gross sales less excise taxes. Excise taxes are generally payable on products bottled by the Company. In addition, excise taxes are payable on sales of industrial alcohol to certain customers. Accordingly, excise taxes vary from period to period depending upon the Company's product mix. The Company has a limited number of customers, and these customers often purchase beverage ingredients in significant quantities or place significant orders for bottling services. Accordingly, the size and timing of purchase orders and product shipments can cause operating results to fluctuate significantly from quarter to quarter. Additionally, some Company products generate higher profit margins than others, and changes in the Company's product mix will cause gross margins to fluctuate. Certain aspects of the Company's business are also somewhat seasonal, with increased demand for the Company's bottling services during the summer months and increased production of the Company's beverage ingredients during the months from October to June, corresponding to the Florida citrus-growing season. As a result of these factors, the Company's operating results vary significantly from quarter to quarter. TODHUNTER INTERNATIONAL, INC. The following tables set forth certain income statement items as a percentage of net sales, and certain information on net sales in each of the Company's operating categories.
NINE MONTHS ENDED JUNE 30, THREE MONTHS ENDED JUNE 30, 1996 1995 1996 1995 -------- -------- -------- -------- Net sales 100.0% 100.0% 100.0% 100.0% Cost of goods sold 73.0 74.0 74.1 77.5 -------- -------- -------- -------- Gross margin 27.0 26.0 25.9 22.5 Selling, general and administrative expenses 14.9 14.3 14.7 12.4 -------- -------- -------- -------- Operating income 12.1 11.7 11.2 10.1 Interest expense (5.8) (5.5) (5.6) (4.7) Other income (expense), net 2.5 2.1 2.3 1.9 -------- -------- -------- -------- Income from continuing operations before income taxes 8.8 8.3 7.9 7.3 Income tax expense (1.8) (2.1) (1.8) (2.3) -------- -------- -------- -------- Income from continuing operations 7.0% 6.2% 6.1% 5.0% -------- -------- -------- -------- -------- -------- -------- -------- NINE MONTHS ENDED JUNE 30, THREE MONTHS ENDED JUNE 30, 1996 1995 1996 1995 -------- -------- -------- -------- (IN THOUSANDS) (IN THOUSANDS) Beverage ingredients $22,244 $19,260 $6,342 $5,748 Popular price spirits 12,281 9,997 3,603 3,053 Contract bottling 13,509 3,857 5,887 8,279 Vinegar and cooking wine 5,385 13,791 1,887 1,423 Bahamian operations 1,927 1,403 579 432 Other 2,508 3,973 891 1,595 -------- -------- -------- -------- $ 57,854 $52,281 $19,189 $20,530 -------- -------- -------- -------- -------- -------- -------- -------- The following table provides certain unit sales volume data for each of the periods indicated. NINE MONTHS ENDED JUNE 30, THREE MONTHS ENDED JUNE 30, 1996 1995 1996 1995 -------- -------- -------- -------- (IN THOUSANDS) (IN THOUSANDS) Beverage ingredients: Distilled products, in proof gallons 7,497 6,503 1,928 1,786 Fortified citrus wine, in gallons 5,393 4,551 1,802 1,590 Popular price spirits, in cases 915 891 287 266 Contract bottling, in cases 3,791 3,502 1,644 2,035
TODHUNTER INTERNATIONAL, INC. A. Nine Months Ended June 30, 1996 vs. Nine Months Ended June 30, 1995. NET SALES. Net sales for the nine months ended June 30, 1996 increased 11% to $57.9 million from $52.3 million for the comparable prior year period. Beverage ingredients net sales increased 15% from the comparable prior year period due to volume increases in both distilled products and fortified citrus wine. Distilled products volume increased 15% and fortified citrus wine volume increased 19%. The increase in distilled products volume was primarily due to increased export sales of grain alcohol. The increase in citrus wine volume is due to increased sales to new and existing customers. The average unit price for distilled products decreased 3% due to a decrease in brandy and citrus spirits volume of 4% which has a higher unit price and the increase in grain alcohol sales which have a lower unit price than other distilled products. The average unit price for fortified citrus wine increased 2%. Net sales of popular price spirits increased 23% from the comparable prior year period. The increase in net sales was due to certain brands which were retained upon the discontinuance of Blair. Net sales of popular price spirits without the retained brands decreased 11%. The decrease was due to soft demand in the Southeast and a decrease in tourism in the Virgin Islands. In the Company's contract bottling operations, net sales decreased approximately 3% from the comparable prior year period due to the loss of a bottling customer for which the Company purchased all raw materials. GROSS PROFIT. Gross profit for the nine months ended June 30, 1996 increased to $15.6 million from $13.6 million for the comparable prior year period. Gross margin was 27.0% compared to 26.0% in the prior year period. The increase in gross margin was due to a higher percentage of beverage ingredients sales, which have a higher gross margin, and a lower percentage of contract bottling sales, which have a lower gross margin. SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and administrative expenses for the nine months ended June 30, 1996 were $8.6 million compared to $7.5 million in the prior year period. The dollar increase was primarily due to marketing expenses associated with certain brands which were retained upon the discontinuance of Blair. INTEREST EXPENSE. Interest expense for the nine months ended June 30, 1996 increased approximately $484,000 from the comparable prior year period due to higher interest rates during the nine months ended June 30, 1996. INCOME TAX EXPENSE. The Company's effective income tax rate was 20% for the nine months ended June 30, 1996 and 25% for the comparable prior year period. The low tax rates are primarily due to income from the operations of Viril which is taxed at an effective rate of approximately 4%. TODHUNTER INTERNATIONAL, INC. B. Three Months Ended June 30, 1996 vs. Three Months Ended June 30, 1995. NET SALES. Net sales for the three months ended June 30, 1996 decreased 7% to $19.2 million from $20.5 million for the comparable prior year period. Beverage ingredients net sales increased 10% from the comparable prior year period due to volume increases in distilled products and fortified citrus wine. Distilled products volume increased 8% and fortified citrus wine volume increased 13%. The increase in distilled products volume was due to increases in brandy and citrus spirits volume of 42% and rum volume of 6% offset by a decrease in grain alcohol volume of 29%. The average unit price for distilled products decreased 1%. The average unit price for fortified citrus wine increased 1%. Net sales of popular price spirits increased 18% from the comparable prior year period. The increase in net sales was due to certain brands which were retained upon the discontinuance of Blair. Net sales of popular price spirits without the retained brands decreased 15%. The decrease was due to soft demand in the Southeast and a dcrease in tourism in the Virgin Islands. In the Company's contract bottling operations, net sales decreased 29% from the comparable prior year period due to a volume decrease of 19% resulting from the timing of orders from existing customers and the loss of one bottling customer for which the Company purchased all raw materials. GROSS PROFIT. Gross profit for the three months ended June 30, 1996 increased to $5.0 million from $4.6 million for the comparable prior year period. Gross margin was 25.9% compared to 22.5% in the prior year period. The increase in gross margin was due to a higher percentage of beverage ingredients sales, which have a higher gross margin, and a lower percentage of contract bottling sales, which have a lower gross margin. SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and administrative expenses for the three months ended June 30, 1996 were $2.8 million compared to $2.5 million for the prior year period. The increase was primarily due to marketing expenses associated with certain brands which were retained upon the discontinuance of Blair. INTEREST EXPENSE. Interest expense for the three months ended June 30, 1996 increased approximately $120,000 from the comparable prior year period due to higher interest rates during the three months ended June 30, 1996. INCOME TAX EXPENSE. The Company's effective income tax rate was 23% for the three months ended June 30, 1996 and 31% for the comparable prior year period. The low tax rates are primarily due to income from the operations of Viril which is taxed at an effective rate of approximately 4%. TODHUNTER INTERNATIONAL, INC. C. Financial Condition, Liquidity and Capital Resources The Company's net cash provided by operating activities was $5.0 million for the nine months ended June 30, 1996 compared to net cash used in operating activities of $3.9 million for the comparable prior year period. This change primarily resulted from smaller increases in receivables and inventories during the nine months ended June 30, 1996 and the cash provided by the discontinued operations. As of June 30, 1996, receivables increased $3.6 million and inventories increased $3.5 million from September 30, 1995 compared to increases of $7.3 million and $5.2 million in receivables and inventories, respectively, in the comparable prior year period. As of June 30, 1995 receivables and inventories increased significantly from September 30, 1994, primarily due to the acquisition of Blair. Net cash used in investing activities was $2.8 million for the nine months ended June 30, 1996 and $5.6 million for the nine months ended June 30, 1995. During the nine months ended June 30, 1996, the Company received $1.2 million in principal payments on notes receivable and purchased $4.0 million of property and equipment. During this period, the Company also purchased $4.6 million of certificates of deposit and redeemed $4.7 million. In the comparable prior year period the Company received $.8 million in principal payments on notes receivable and purchased $5.7 million of property and equipment. For the nine months ended June 30, 1996, the Company's net cash used in financing activities was $2.5 million compared to net cash provided by financing activities of $9.1 million in the comparable prior year period. During the nine months ended June 30, 1996, the combined payments on the line of credit and long-term borrowings amounted to $2.5 million. During the nine months ended June 30, 1995, the Company's net borrowings on the line of credit amounted to $11.2 million, principal payments on long-term borrowings were $1.8 million and loan closing costs were $.5 million. The increase in the use of the Company's line of credit for the nine months ended June 30, 1995 was primarily due to the acquisition of Blair. The Company's total debt aggregated $57.5 million as of June 30, 1996, and its ratio of total debt to equity was 1.9 to 1. As of June 30, 1996, the Company had $5.2 million in cash and certificates of deposit in the Bahamas. Under Bahamian law, the Company pays no taxes on operating profits from Bahamian operations, and such profits have generally been retained in the Bahamas. The Company has generally not paid United States federal income taxes on such profits. Repatriation of these profits could result in a significant United States federal income tax liability to the Company. Management believes that cash provided by operating activities and the availability of cash from the revolving credit note will be sufficient to fund the Company's operations and anticipated investment activities for at least the next twelve months. TODHUNTER INTERNATIONAL, INC. PART II. OTHER INFORMATION Item 1. Legal Proceedings As set forth in the Company's Annual Report on Form 10-K for the fiscal year ended September 30, 1995, on or about November 10, 1995, the Company filed a Demand for arbitration with the American Arbitration Association against the former shareholders of Blair seeking (i) a declaration that the agreement relating to the acquisition of Blair is void and (ii) damages in excess of $12,000,000 resulting from numerous breaches of representations and warranties set forth in the agreement and other wrongful conduct. A mediation conference was held on May 20, 1996. At that time the parties were unable to settle this dispute by mediation. Accordingly, this matter is expected to be arbitrated in the latter part of 1996 or in 1997. At the mediation conference the attorneys for the former shareholders of Blair advised the Company that they intend to assert certain counterclaims in the arbitration. On August 5, 1996, a counterclaim was filed with the American Arbitration Association alleging a breach of a representation and warranty and certain payment provisions of the agreement, and seeking damages of $4,000,000. The Company believes the allegations contained in the counterclaim are without merit. Item 6. Exhibits and Reports on Form 8-K (a) Exhibit Index Exhibit No. Description ----------- ----------- 27 Financial data schedule. (b) Reports on Form 8-K No reports on Form 8-K have been filed during the quarter ended June 30, 1996. TODHUNTER INTERNATIONAL, INC. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. Date: August 7, 1996 /s/ A. Kenneth Pincourt, Jr. ----------------------------------- A. Kenneth Pincourt, Jr. Chairman and Chief Executive Officer Date: August 7, 1996 /s/ Troy Edwards ----------------------------------- Troy Edwards Chief Financial Officer, Treasurer and Controller EX-27 2 EXHIBIT 27
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM TODHUNTER INTERNATIONAL, INC.'S FINANCIAL STATEMENTS FOR THE THIRD QUARTER ENDED JUNE 30, 1996 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 9-MOS SEP-30-1996 JUN-30-1996 6,190,554 0 15,298,265 0 20,818,019 48,131,517 69,247,773 24,595,482 103,315,775 11,386,327 55,372,846 49,235 0 0 30,896,639 103,315,775 57,854,495 57,854,495 42,216,934 42,216,934 (1,394,070) 0 3,339,630 5,065,703 1,023,343 4,042,362 0 0 0 4,042,362 0.82 0.82
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