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 quarterly period ended June 30, 2004

Commission File No. 1-13453

TODHUNTER INTERNATIONAL, INC.

(Exact name of registrant as specified in its charter)

DELAWARE	59-1284057
(State or other jurisdiction of incorporation or organization)	IRS Employer Identification No.
222 Lakeview Avenue, Suite 1500, West Palm Beach, FL	33401
(Address of principal executive offices)	(Zip Code)

Registrant’s telephone number, including area code:  (561) 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, and (2) has been subject to such filing requirements for the past 90 days.

Yes ýNo o

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act).

Yes oNo ý

The number of shares outstanding of registrant’s Common Stock, $.01 par value per share, as of August 12, 2004 was 6,338,519.

TODHUNTER INTERNATIONAL, INC.

INDEX

PART I	FINANCIAL INFORMATION
	Item 1	Financial Statements
		Consolidated Balance Sheets - June 30, 2004, unaudited and September 30, 2003
		Consolidated Statements of Income - Nine and Three Months Ended June 30, 2004 and 2003, unaudited
		Consolidated Statements of Cash Flows - Nine Months Ended June 30, 2004 and 2003, unaudited
		Notes to Consolidated Financial Statements
	Item 2	Management’s Discussion and Analysis of Financial Condition and Results of Operations
	Item 3	Quantitative and Qualitative Disclosures About Market Risk
	Item 4	Controls and Procedures
PART II	OTHER INFORMATION
	Item 1	Legal Proceedings	*
	Item 2	Changes in Securities, Use of Proceeds and Issuer Purchase of Equity 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, 2004		September 30, 2003
	(Unaudited)		*
ASSETS
CURRENT ASSETS
Cash and cash equivalents	$	2,148,713	$	14,918,605
Short-term investments	215,415		1,819,016
Trade receivables	16,303,998		15,867,079
Other receivables	1,369,861		2,879,334
Inventories	31,651,439		28,664,895
Notes receivable, current maturities	662,304		647,782
Deferred income taxes	1,444,000		2,224,000
Other current assets	5,406,666		3,895,977
Total current assets	59,202,396		70,916,688
LONG-TERM INVESTMENTS AND NOTES RECEIVABLE
Investments in and advances to equity investees	2,305,616		1,879,623
Notes receivable from affiliates, less current maturities	3,684,015		3,714,346
Notes receivable, less current maturities	435,522		506,422
	6,425,153		6,100,391
PROPERTY AND EQUIPMENT	95,523,528		92,182,294
Less accumulated depreciation	55,712,025		52,125,682
	39,811,503		40,056,612
GOODWILL	20,524,404		20,524,404
AMORTIZED INTANGIBLE ASSETS	804,697		834,850
OTHER ASSETS	1,221,290		866,128
	$	127,989,443	$	139,299,073

*From audited financial statements.

See Notes to Consolidated Financial Statements.

1

	June 30, 2004			September 30, 2003
	(Unaudited)			*
LIABILITIES AND STOCKHOLDERS’ EQUITY
CURRENT LIABILITIES
Current maturities of long-term debt	$	4,000,000		$	4,000,000
Accounts payable	8,145,365			6,288,431
Accrued expenses	1,480,743			3,837,745
Total current liabilities	13,626,108			14,126,176
LONG-TERM DEBT, less current maturities	25,463,312			47,315,617
DEFERRED INCOME TAXES	5,334,500			5,243,000
OTHER LIABILITIES	1,069,697			2,002,761
	45,493,617			68,687,554
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; issued 6,437,719 shares June 30, 2004, and 5,686,434 shares September 30, 2003	64,377			56,864
Additional paid-in capital	28,934,890			18,803,404
Retained earnings	54,234,339			52,489,031
	83,233,606			71,349,299
Less cost of 99,200 shares of treasury stock	(737,780		)	(737,780		)
	82,495,826			70,611,519
	$	127,989,443		$	139,299,073

*From audited financial statements.

See Notes to Consolidated Financial Statements.

2

TODHUNTER INTERNATIONAL, INC.

CONSOLIDATED STATEMENTS OF INCOME

(Unaudited)

	Nine Months Ended June 30,						Three Months Ended June 30,
	2004			2003			2004			2003
Sales	$	88,954,982		$	88,646,677		$	32,537,957		$	30,924,864
Less excise taxes	18,988,128			22,769,722			7,052,598			7,837,133
Net sales	69,966,854			65,876,955			25,485,359			23,087,731
Cost of goods sold	47,611,349			44,423,842			18,109,695			15,022,995
Gross profit	22,355,505			21,453,113			7,375,664			8,064,736
Selling, general and administrative expenses	21,593,343			17,392,479			8,889,050			6,305,257
Operating income (loss)	762,162			4,060,634			(1,513,386		)	1,759,479
Other income (expense):
Interest income	433,395			570,479			73,164			227,759
Interest expense	(1,958,351		)	(2,583,583		)	(551,933		)	(985,150		)
Equity in income of equity investees	425,993			325,970			76,370			76,565
Other, net	404,681			(1,363,999		)	111,110			94,622
	(694,282		)	(3,051,133		)	(291,289		)	(586,204		)
Income (loss) before income taxes	67,880			1,009,501			(1,804,675		)	1,173,275
Income tax expense (benefit):
Current	(2,548,928		)	(928,041		)	(1,848,169		)	(883,657		)
Deferred	871,500			109,500			268,000			164,500
	(1,677,428		)	(818,541		)	(1,580,169		)	(719,157		)
Net Income (loss)	$	1,745,308		$	1,828,042		$	(224,506	)	$	1,892,432
Earnings (loss) per common share:
Basic	$	0.31		$	0.33		$	(0.04	)	$	0.34
Diluted	$	0.30		$	0.32		$	(0.04	)	$	0.34
Common shares and equivalents outstanding:
Basic	5,620,427			5,572,608			5,647,782			5,574,322
Diluted	5,737,336			5,639,825			5,647,782			5,647,923

See Notes to Consolidated Financial Statements.

3

TODHUNTER INTERNATIONAL, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

	Nine Months Ended June 30,
	2004			2003
CASH FLOWS FROM OPERATING ACTIVITIES
Net income	$	1,745,308		$	1,828,042
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation	3,966,232			4,015,637
Amortization	30,150			30,150
(Gain) loss on sale of property and equipment	(267,997		)	65,583
Equity in income of equity investees	(425,993		)	(325,970		)
Deferred income taxes	871,500			109,500
Changes in assets and liabilities:
(Increase) decrease in:
Receivables	1,072,554			(216,167		)
Inventories	(2,986,544		)	(4,588,038		)
Other current assets	(1,510,689		)	589,848
Increase (decrease) in:
Accounts payable	1,856,934			3,897,756
Accrued expenses	(2,357,002		)	(181,611		)
Other liabilities	(933,064		)	421,878
Net cash provided by operating activities	1,061,389			5,646,608
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from sale of property and equipment	503,591			60,152
Principal payments received on notes receivable	86,709			92,046
Purchase of property and equipment	(3,956,717		)	(2,763,400		)
Purchase of short-term investments	—			(103,603		)
Disbursements for notes receivable	—			(506,000		)
Redemption of short-term investments	1,603,601			98,000
Investments in subsidiaries	—			24,182
(Increase) decrease in other assets	(287,659		)	794,589
Net cash used in investing activities	$	(2,050,475	)	$	(2,304,034	)

4

	Nine Months Ended June 30,
	2004			2003
CASH FLOWS FROM FINANCING ACTIVITIES
Net borrowings (payments) on line of credit	$	(18,750,000	)	$	50,000
Issuance of common stock, net of transaction costs	10,138,999			32,500
Disbursements for loan costs	(67,500		)	—
Principal payments on long-term borrowings	(3,102,305		)	(3,166,803		)
Net cash used in financing activities	(11,780,806		)	(3,084,303		)
Net increase (decrease) in cash and cash equivalents	(12,769,892		)	258,271
Cash and cash equivalents:
Beginning	14,918,605			13,946,736
Ending	$	2,148,713		$	14,205,007
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash payments (refunds) for:
Interest	$	1,987,668		$	2,580,428
Income taxes	$	(1,339,140	)	$	(595,939	)

See Notes to Consolidated Financial Statements.

5

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 accounting principles generally accepted in the United States of America have been condensed or omitted pursuant to such rules and regulations.  In the opinion of management, all adjustments, consisting only of normal recurring adjustments, except for the retirement of the Executive Officer (see Note 7), 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, 2003.

Aggregate amortization expenses were $30,150 for the nine months ended June 30, 2004 and 2003, and $10,050 for the three months ended June 30, 2004 and 2003.

The Company applies Accounting Principles Board Opinion Number 25, Accounting for Stock Issued to Employees (“APB 25”) and related interpretations in accounting for options granted, which requires compensation expense for the Company’s options to be recognized only if the market price of the underlying stock exceeds the exercise price on the date of grant.  Accordingly, the Company has not recognized compensation expense for its options granted after 1994.  Statement of Financial Accounting Standards (“SFAS”) No. 123, Accounting for Stock-Based Compensation, issued in October 1995, requires pro forma disclosures for option grants made after December 31, 1994, when accounting for stock-based compensation plans in accordance with APB 25.

If the Company elected to recognize compensation cost based on the fair value of the options granted at grant date as prescribed by SFAS No. 123, net income (loss) and earnings (loss) per common share would have been reduced to the pro forma amounts show below:

	Nine Months Ended June 30,				Three Months Ended June 30,
	2004		2003		2004			2003
Net income (loss), as reported	$	1,745,308	$	1,828,042	$	(224,506	)	$	1,892,432
Compensation costs, net of income taxes	42,034		126,103		—			42,034
Net income (loss), pro forma	1,703,274		1,701,939		(224,506		)	1,850,398
Earnings (loss) per common share, as reported
Basic	0.31		0.33		(0.04		)	0.34
Diluted	0.30		0.32		(0.04		)	0.34
Earnings (loss) per common share, pro forma
Basic	0.31		0.30		(0.04		)	0.33
Diluted	0.30		0.30		(0.04		)	0.33

6

Note 2.Inventories

The major components of inventories are:

	June 30, 2004		September 30, 2003
	(Unaudited)
Finished goods	$	19,147,731	$	15,588,106
Work in process	2,395,467		3,380,434
Raw materials and supplies	10,108,241		9,696,355
	$	31,651,439	$	28,664,895

Note 3.Financing Arrangements

Long-term debt consists of the following as of June 30, 2004:

Term loans under a credit agreement (i) (ii), interest payable monthly based on either the Eurodollar or prime rate at the Company’s option, plus an applicable margin as defined in the agreement.  The interest rate at June 30, 2004 was 4.34%.  Future minimum quarterly principal installments of $1,000,000 through September 30, 2006 with any remaining balance due September 30, 2006.	$	29,000,000
Revolving loans under a credit agreement (i), interest payable quarterly based on either the Eurodollar or prime rate at the Company’s option, plus an applicable margin as defined in the agreement.  The blended interest rate at June 30, 2004 was 3.60%.  The revolving line of credit terminates in September 2006.	250,000
Other	213,312
	29,463,312
Less current maturities	4,000,000
	$	25,463,312

(i)In October 2001, the Company entered into a $70 million credit agreement, consisting of a $40 million term loan and a $30 million revolving loan facility.  During March 2004, the credit agreement was amended to reduce the revolving loan facility to $15 million.  In June 2004, the credit agreement was modified to extend the maturity date of the revolving loans to be the same as the term loans, September 2006.  The credit agreement is collateralized principally by all assets located in the United States of America.  Under the credit agreement, the Company has certain limitations in its ability to pay dividends to stockholders.  Also, the Company is required to maintain certain financial covenants under the credit agreement.

(ii)In addition to quarterly principal payments, the Company may be required to make additional principal payments based on results of the Company’s domestic operating profits, as defined in the agreement.

7

Note 4.Earnings (Loss) Per Common Share

Basic earnings (loss) per common share are calculated by dividing net income (loss) by the average common shares outstanding.  On a diluted basis, shares outstanding are adjusted to assume the exercise of stock options.

	Nine Months Ended June 30,				Three Months Ended June 30,
	2004		2003		2004			2003
Net income (loss)	$	1,745,308	$	1,828,042	$	(224,506	)	$	1,892,432
Determination of shares:
Weighted average number of common shares outstanding	5,620,427		5,572,608		5,647,782			5,574,322
Shares issuable on exercise of stock options, net of shares assumed to be purchased out of proceeds	116,909		67,217		—		*	73,601
Average common shares outstanding for diluted earnings per share computation	5,737,336		5,639,825		5,647,782			5,647,923
Earnings (loss) per common share:
Basic	$	0.31	$	0.33	$	(0.04	)	$	0.34
Diluted	$	0.30	$	0.32	$	(0.04	)	$	0.34

*The effect of stock options have not been included for the three months ended June 30, 2004, as their effect would have been anti-dilutive.

The Company’s Virgin Islands subsidiary, through the Economic Development Commission of the Government of the Virgin Islands of the United States, has received a 90% exemption from income taxes on operating income.  This exemption is effective through September 2020.  The per share effect of this exemption on earnings (on a diluted basis) was to increase earnings per share by $0.19 and $0.06 for the nine and three months ended June 30, 2004, respectively, and $0.15 and $0.06 for the nine and three months ended June 30, 2003, respectively.

8

Note 5.Segment and Geographical Information

The Company operates primarily in the beverage alcohol industry in the United States.  The Company reports its operating results in four segments:

•Bulk Alcohol Products (rum, citrus brandy, citrus spirits, cane spirits, fortified citrus wine, purchased distilled products and byproducts)

•Premium Branded Spirits (primarily Cruzan Estate Rums and Cruzan Flavored Rums)

•Bottling Operations (contract bottling services and proprietary and private label products)

•Vinegar and Cooking Wine (bulk vinegar, bulk cooking wine, vinegar stock and proprietary and private label case goods)

Corporate Operations includes expenses related to the Company’s executive offices that are not allocated to its reportable segments.  These expenses include payroll and related expenses, professional fees, consulting fees, rent for the Company’s executive offices, insurance expense, directors’ fees and utilities.

The accounting policies of the reportable segments are the same as those referred to in Note 1 to the consolidated financial statements located in Item 8 of the Company’s Annual Report on Form 10-K for the year ended September 30, 2003.  The Company evaluates the performance of its operating segments based on income before income taxes, equity in income or loss of equity investees, interest income and interest expense. Material intersegment sales and transfers have been eliminated.

9

Net sales, operating income (loss), depreciation and amortization, and capital expenditures for the Company’s reportable segments for the nine and three months ended June 30, 2004 and 2003, and identifiable assets as of June 30, 2004 and 2003, were as follows:

	Nine Months Ended June 30,						Three Months Ended June 30,
	2004			2003			2004			2003
	(in thousands)						(in thousands)
Net Sales
Bulk Alcohol Products	$	27,024		$	26,276		$	9,898		$	8,749
Premium Branded Spirits	18,708			13,521			7,184			4,796
Bottling Operations	8,799			10,953			3,252			4,542
Vinegar and Cooking Wine	15,436			15,127			5,151			5,001
	$	69,967		$	65,877		$	25,485		$	23,088
Operating Income (Loss)
Bulk Alcohol Products	$	8,386		$	8,673		$	2,195		$	2,900
Premium Branded Spirits	(4,669		)	(1,290		)	(2,781		)	(544		)
Bottling Operations	(2,445		)	(1,450		)	(723		)	287
Vinegar and Cooking Wine	2,539			2,947			915			895
Corporate Operations and Other	(3,049		)	(4,819		)	(1,119		)	(1,779		)
	$	762		$	4,061		$	(1,513	)	$	1,759
Depreciation and Amortization
Bulk Alcohol Products	$	2,281		$	2,424		$	707		$	815
Premium Branded Spirits	88			72			33			22
Bottling Operations	1,196			1,099			390			401
Vinegar and Cooking Wine	356			362			119			120
Corporate Operations and Other	75			89			25			30
	$	3,996		$	4,046		$	1,274		$	1,388
Capital Expenditures
Bulk Alcohol Products	$	2,079		$	1,370		$	599		$	298
Premium Branded Spirits	221			71			41			55
Bottling Operations	1,611			1,178			708			171
Vinegar and Cooking Wine	41			68			22			34
Corporate Operations and Other	5			76			—			65
	$	3,957		$	2,763		$	1,370		$	623
Identifiable Assets
Bulk Alcohol Products	$	64,395		$	76,132
Premium Branded Spirits	8,033			7,673
Bottling Operations	25,760			25,150
Vinegar and Cooking Wine	19,730			19,753
Corporate Operations and Other	10,071			12,380
	$	127,989		$	141,088

10

Net sales and operating income (loss) for the nine and three months ended June 30, 2004 and 2003 and identifiable assets as of June 30, 2004 and 2003, classified by geographic area, were as follows:

	United States			U. S. Virgin Islands and the Bahamas		Consolidated
				(in thousands)
Nine Months Ended
June 30, 2004:
Net sales	$	60,718		$	9,249	$	69,967
Operating income (loss)	(2,203		)	2,965		762
Identifiable assets	97,450			30,539		127,989
June 30, 2003:
Net sales	$	57,561		$	8,316	$	65,877
Operating income	1,603			2,458		4,061
Identifiable assets	96,023			45,065		141,088
Three Months Ended
June 30, 2004:
Net sales	$	21,970		$	3,515	$	25,485
Operating income (loss)	(2,578		)	1,245		(1,513		)
June 30, 2003:
Net sales	$	20,078		$	3,010	$	23,088
Operating income	614			1,145		1,759

Included in net sales for the United States are export sales, primarily to Europe, Canada and the Caribbean, totaling approximately $6,776,000 and $2,750,000 for the nine and three months ended June 30, 2004, respectively, and $6,203,000 and $2,506,000 for the nine and three months ended June 30, 2003, respectively.

Note 6.  Supplemental Employee Retirement Plan

During the second quarter of fiscal 2004, the Company’s Compensation and Stock Option Committee approved a supplemental employee retirement plan for certain key executives of the Company.  The plan is an unfunded plan within the meaning of Financial Accounting Standard 132.  The net periodic benefit cost for the nine and three months ended June 30, 2004 and 2003, was as follows:

	Nine Months Ended June 30,				Three Months Ended June 30,
	2004		2003		2004		2003
Amortization of prior service cost	$	88,055	$	—	$	66,041	$	—
Interest cost	5,283		—		3,962		—
Total net periodic benefit cost	$	93,338	$	—	$	70,003	$	—

11

Note 7.  Retirement of Executive Officers

On November 26, 2002, the Company announced the retirement and resignation of A. Kenneth Pincourt, Jr., its founder, Chairman and Chief Executive Officer.  The Company entered into a retirement agreement with Mr. Pincourt, setting forth the terms of his retirement and resignation.  The retirement agreement replaced Mr. Pincourt’s previous employment agreement. Under the retirement agreement, the Company elected to accelerate retirement benefits under its deferred compensation program and to continue to pay compensation and provide related benefits through July 15, 2004, the remaining term of Mr. Pincourt’s previous employment contract.

Accelerated benefits under the deferred program amounted to $1,040,987, of which $549,220 had been accrued as of September 30, 2002. Mr. Pincourt’s deferred compensation was paid to him on December 13, 2002.  Also under the retirement agreement, Mr. Pincourt will continue to receive monthly payments of $41,004 through July 15, 2004, one bonus payment of $150,491, which was paid in October 2003, and a second bonus payment of $119,138 payable on or before August 31, 2004.  Among other benefits, Mr. Pincourt is also able to participate in any health insurance plan, employee benefit plan or other arrangement made available by the Company or its subsidiaries to its executives and key management employees, through July 15, 2004.  The Company recorded a charge for the retirement of Mr. Pincourt during the first quarter of fiscal 2003.  The effect of this charge was included in other expense in the Company’s consolidated statement of income and amounted to $1,503,925 before income taxes.

The following table summarizes the charge made during the first quarter of fiscal 2003 for Mr. Pincourt’s retirement:

Deferred compensation	$	1,040,987
Compensation and related benefits	1,012,158
Total	2,053,145
Less deferred compensation accrued as of September 30, 2003	(549,220		)
Charged to expense	$	1,503,925

On May 22, 2003, the Company announced the retirement of Troy Edwards, its Chief Financial Officer, Secretary, Treasurer and Controller.  The Company recorded a charge for the retirement of Mr. Edwards of $207,683 during the third quarter of fiscal 2003.  The effect of this charge was included in other expense in the Company’s consolidated statement of income.

Note 8.  Issuance of Common Stock

During June 2004, the Company and Angostura Limited completed a transaction whereby Angostura Limited agreed to invest $10 million in the Company in exchange for 714,285 shares of common stock, which equates to an equity issue price of $14.00 per share.  The transaction was approved by the Board of Directors after having been determined to be fair to the public stockholders of the Company by the Special Committee of Independent Directors of the Company.  In addition, Angostura Limited reimbursed one-half of the Company’s expenses in connection with this transaction.  As a result of this transaction, Angostura Limited’s ownership of the Company’s stock increased from 64% to 68%.

Note 9.  Income Taxes

The Company incurred losses for income tax purposes from its U.S. operations of $7.0 million and $4.0 million for the nine and three months ended June 30, 2004, respectively.  The Company has recorded an income tax benefit in the Company’s consolidated statement of income and as a receivable included in other current assets on the Company’s consolidated balance sheet.

12

Item 2.Management’s Discussion and Analysis of Financial Condition and Results of Operations

Forward-Looking Statements

This Quarterly Report on Form 10-Q, including “Management’s Discussion and Analysis of Financial Condition and Results of Operations” contains “Forward-Looking Statements,” as defined in section 27a of the Securities Act of 1933, as amended, and Section 21e of the Securities Exchange Act of 1934, as amended.  Forward-Looking Statements are statements other than historical information or statements of current condition and relate to future events or the future financial performance of the Company.  Some Forward-Looking Statements may be identified by use of such terms as “believes,” “anticipates,” “intends” or “expects.”  Such Forward-Looking Statements involve known and unknown risks, uncertainties and other factors that may cause the actual results, performance or achievements of the Company to be materially different from any future results, performance or achievements expressed or implied by such Forward-Looking Statements.  The following is a list of factors, among others, that could cause actual results to differ materially from those contemplated by the Forward-Looking Statements:  business conditions in certain market segments and industries and the general economy; competitive factors, including increased competition and price pressures; availability of third-party component products at reasonable prices; increased excise taxes; foreign currency exposure; changes in product mix between and among product lines; lower than expected customer orders and quarterly seasonal fluctuations of those orders; and product shipment interruptions.  The Company undertakes no obligation to update or revise any Forward-Looking Statements, whether as a result of new information, future events or otherwise.

Introduction

The following discussion and analysis summarizes the significant factors affecting (i) consolidated results of operations of the Company for the nine months ended June 30, 2004 compared to the nine months ended June 30, 2003, (ii) consolidated results of operations of the Company for the three months ended June 30, 2004 compared to the three months ended June 30, 2003, and (iii) financial liquidity and capital resources.  This discussion and analysis should be read in conjunction with the Company’s consolidated financial statements and notes thereto included herein.  Certain amounts presented in this Item 2 have been rounded to the nearest thousand or hundred thousand, as applicable, but the percentages calculated are based on actual amounts without rounding.

The Company operates primarily in the beverage alcohol industry in the United States.  The Company is a leading producer and supplier of rum, brandy, wine and spirits to other beverage alcohol manufacturers; produces, imports and markets premium branded spirits; bottles beverage alcohol and other beverages on a contract basis and under its own labels; and produces vinegar and cooking wine.  The Company reports its operating results in four segments:  Bulk Alcohol Products (rum, citrus brandy, citrus spirits, cane spirits, fortified citrus wine, purchased distilled products and byproducts); Premium Branded Spirits (primarily Cruzan Estate Rums and Cruzan Flavored Rums); Bottling Operations (contract bottling services and proprietary and private label products); and Vinegar and Cooking Wine (bulk vinegar, bulk cooking wine, vinegar stock and proprietary and private label case goods).

Information regarding the net sales, operating income and total assets of each of the Company’s business segments and information regarding geographic areas is set forth in Note 5 to the consolidated financial statements.

The Company’s net sales and gross margins (gross profit as a percentage of net sales) vary depending on the mix of business among the Company’s products.  Historically, gross margins have been highest in bulk alcohol products and premium branded spirits and lower in bottling operations and vinegar and cooking wine operations.

The Company’s customers often purchase bulk alcohol products in significant quantities or place significant orders for contract bottling services, distilled spirits, vinegar and cooking wine.  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 can cause gross margins to fluctuate.  Certain aspects of the Company’s business are seasonal, with increased demand for the Company’s contract bottling services from April to October and increased production of the Company’s bulk alcohol products from November to June, corresponding to the Florida citrus harvest.  As a result of these factors, the Company’s operating results may vary significantly from quarter to quarter.

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Net sales represent the Company’s gross sales less excise taxes. Excise taxes are generally payable on sales of certain of the Company’s bulk alcohol products and on all alcohol products bottled by the Company.  However, there are no excise taxes paid on sales made to customers that have tax permits.  Accordingly, excise taxes may vary significantly from period to period depending upon the Company’s product and customer mix.

Results of Operations

The following table sets forth statement of income items as a percentage of net sales.

	Nine Months Ended June 30,				Three Months Ended June 30,
	2004		2003		2004		2003
Net sales	100.0	%	100.0	%	100.0	%	100.0	%
Cost of goods sold	68.0		67.4		71.1		65.1
Gross margin	32.0		32.6		28.9		34.9
Selling, general and administrative expenses	30.9		26.4		34.8		27.3
Operating income (loss)	1.1		6.2		(5.9	)	7.6
Interest expense	(2.8	)	(3.9	)	(2.2	)	(4.3	)
Other income (expense), net	1.8		(0.8	)	1.0		1.8
Income (loss) before income taxes	0.1		1.5		(7.1	)	5.1
Income tax benefit	2.4		1.3		6.2		3.1
Net income (loss)	2.5	%	2.8	%	(0.9	)%	8.2	%

The following table provides information on net sales of certain Company products.

	Nine Months Ended June 30,						Three Months Ended June 30,
	2004		2003		% Change		2004		2003		% Change
	(in thousands)						(in thousands)
Bulk Alcohol Products	$	27,024	$	26,276	2.8		$	9,898	$	8,749	13.1
Premium Branded Spirits	18,708		13,521		38.4		7,184		4,796		49.8
Bottling Operations	8,799		10,953		(19.7	)	3,252		4,542		(28.4	)
Vinegar and Cooking Wine	15,436		15,127		2.0		5,151		5,001		3.0
	$	69,967	$	65,877	6.2		$	25,485	$	23,088	10.4

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The following table provides unit sales volume data for certain Company products.

	Nine Months Ended June 30,				Three Months Ended June 30,
	2004	2003	% Change		2004	2003	% Change
	(in thousands)				(in thousands)
Bulk alcohol products:
Distilled products, in proof gallons
Citrus Brandy	992	1,131	(12.2	)	354	260	36.4
Citrus Spirits	110	238	(54.0	)	55	55	(0.1	)
Rum	3,575	3,323	7.6		1,351	1,176	14.9
Cane Spirits	359	389	(7.9	)	142	144	(2.0	)
Fortified wine, in gallons	8,404	7,559	11.2		3,081	2,531	21.7
Premium branded spirits, in cases	517	360	43.4		175	133	30.8
Bottling operations, in cases	2,289	2,876	(20.4	)	878	1,435	(38.8	)
Vinegar
Bulk, in 100 grain gallons	3,912	4,290	(8.8	)	1,293	1,588	(18.6	)
Cases	364	396	(8.1	)	147	125	18.0
Drums, in 100 grain gallons	1,193	1,162	2.7		543	389	39.8
Cooking Wine
Bulk, in gallons	2,017	3,226	(37.5	)	590	1,048	(43.7	)
Cases	500	476	5.2		135	126	7.3

Nine months ended June 30, 2004 compared to nine months ended June 30, 2003.  Unless otherwise noted, references to 2004 represent the nine-month period ended June 30, 2004 and references to 2003 represent the nine-month period ended June 30, 2003.

Net Sales. Net sales were $70.0 million in 2004, an increase of 6.2% from net sales of $65.9 million in 2003.

Net sales of bulk alcohol products were $27.0 million in 2004, an increase of 2.8% from net sales of $26.3 million in 2003.  The increase resulted primarily from increased shipments of rum and fortified wine offset by decreased shipments of citrus brandy, citrus spirits and cane spirits.  The decrease in citrus brandy, citrus spirits and cane spirits was due in part to the timing of customer orders.  In addition, in 2003, the Company had sales of citrus and cane spirits to new customers that had difficulty sourcing bulk alcohol from their regular suppliers.  These sales did not reoccur in 2004.

Net sales of premium branded spirits were $18.7 million in 2004, an increase of 38.4% from net sales of $13.5 million in 2003.  During fiscal 2002, the Company had introduced a new line of Cruzan products in the ready-to-drink category.  During fiscal 2003, due to increased competition and management’s expectation of limited growth potential within the ready-to-drink product category, the Company made a strategic decision to exit this category and concentrate on the growing segment of its premium branded spirits business, Cruzan Estate Rums and Cruzan Flavored Rums.  In connection with management’s decision to exit the ready-to-drink product category, during the fourth quarter of fiscal 2003, the Company entered into an agreement with a corporate trading company to receive trade credits upon installment deliveries of the Company’s remaining inventory of ready-to-drink products.  In 2004, net sales of premium branded spirits included $0.7 million of Cruzan ready-to-drink products sold to this trading company.  These sales represented the final sales of inventories of such products.  Excluding Cruzan ready-to-drink product sales, net sales of premium branded spirits were $18.0 million in 2004, an increase of 33.2% from net sales of $13.5 million in 2003, as the premium branded spirits segment continued its double-digit growth.

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Sales of the Company’s Cruzan Estate Rums and Cruzan Flavored Rums increased 25.7% in 2004 compared to 2003.  Sales of Cruzan Estate Rums and Cruzan Flavored Rums increased from $2.2 million in fiscal 1996 to $17.0 million in fiscal 2003.  During this time, the Cruzan brand has been recognized as one of the fastest growing brands in the spirits industry by certain beverage industry publications and the Cruzan Rums have won numerous tasting awards from several prestigious beverage industry organizations.  Recently, several of the Company’s competitors have introduced their own lines of flavored rum products into the marketplace, which, in certain fiscal quarters, has negatively impacted the level of sales growth of Cruzan Flavored Rums.  Some of the Company’s competitors in the rum and flavored rum categories have significantly greater financial and other resources than the Company, which could adversely affect the Company’s sales growth of Cruzan Estate Rums and Cruzan Flavored Rums. As a response to such increased competition, and in order to provide further impetus to the growth of Cruzan Flavored Rums, management has significantly increased its marketing budget for fiscal 2004, causing a current increase in the operating loss for this business segment.  Management believes that by increasing its marketing budget and maintaining its focus on the Cruzan brand, sales of Cruzan Estate Rums and Cruzan Flavored Rums will continue their double-digit growth for fiscal 2004.

Net sales of the Company’s bottling operations were $8.8 million in 2004, a decrease of 19.7% from net sales of $11.0 million in 2003.  During the first quarter of fiscal 2004, the Company lost a large private label bottling customer.  Net sales to this private label bottling customer were approximately $2.5 million and 193,719 cases for the year ended September 30, 2003, or approximately 17.6% of bottling operations net sales and 5.2% of bottling operations volume.  Net sales to this customer during 2003 were approximately $2.1 million and 176,114 cases.  Also during 2004, excise taxes decreased $3.8 million compared to 2003, primarily due to the decrease in sales to this private label bottling customer.  Management believes that the loss of this low margin business will not have a material effect on the Company’s consolidated results of operations or financial position.  Sales in the Company’s bottling operations also continued to decline as a result of a contraction in the ready-to-drink product category, for which the Company is a major contract bottler.  Responding to this decline, in July 2004 the Company completed the consolidation of its bottling operations to reduce overhead.  However, bottling operations volume has not met even the Company’s reduced expectations for this year, which has caused a continuing loss in this segment.  The Company is placing a renewed emphasis on the sales effort in this segment, seeking other contract bottling opportunities.  Additional sales, coupled with savings to be realized from the consolidation, are expected to reverse this loss trend in future quarters.

Net sales of vinegar and cooking wine were $15.4 million in 2004, an increase of 2.0% from net sales of $15.1 million in 2003.

Gross Profit. Gross profit was $22.4 million in 2004, an increase of 4.2% from gross profit of $21.5 million in 2003.  During 2004, bulk alcohol gross profit increased as a result of increased shipments of rum and fortified wine; premium branded spirits gross profit increased with sales; bottling operations gross profit decreased with sales; and vinegar and cooking wine gross profit decreased due to higher material cost.  Gross margin was 32.0% in 2004 and 32.6% in 2003.

Selling, General and Administrative Expenses.  Selling, general and administrative expenses were $21.6 million in 2004, an increase of 24.2% from $17.4 million in 2003.  The increase was primarily attributable to increased administrative, marketing and advertising expenses in the Company’s premium branded spirits business as the Company continues to place emphasis on this growing business segment.  Also during 2004, the Company’s Compensation and Stock Option Committee approved a new Supplemental Employee Retirement Plan for certain key executives of the Company.  This new plan replaces a deferred compensation plan, which resulted in the cancellation of a $0.7 million liability which was credited to expense.

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Results of Operations (Continued)

Operating Income.  The following table sets forth the operating income (loss) by reportable segment of the Company for 2004 and 2003.

	Nine Months Ended June 30,
	2004			2003			% Change
	(In thousands)
Bulk Alcohol Products	$	8,386		$	8,673		(3.3	)
Premium Branded Spirits	(4,669		)	(1,290		)	—
Bottling Operations	(2,445		)	(1,450		)	—
Vinegar and Cooking Wine	2,539			2,947			(13.9	)
Corporate Operations	(3,049		)	(4,819		)	—
	$	762		$	4,061		(81.2	)

As a result of the above factors, operating income was $0.8 million in 2004, a decrease of 81.2% from operating income of $4.1 million in 2003.

The Company’s premium branded spirits segment experienced operating losses of $4.7 million in 2004 and $1.3 million in 2003.  The operating losses reflected the Company’s continuing efforts to increase market share by reinvesting segment gross profits in selling and marketing expenses.

As a result of the factors described under “Net Sales” above, the Company’s bottling operations segment reported an operating loss of $2.4 million in 2004 and $1.5 million in 2003.

Interest Expense. Interest expense was $2.0 million in 2004 and $2.6 million in 2003.  The Company’s borrowing rates and average borrowings were lower in 2004 compared to 2003.

Other Expense.  On November 26, 2002, the Company announced the retirement and resignation of A. Kenneth Pincourt, Jr., its Founder, Chairman and Chief Executive Officer.  The Company has entered into a retirement agreement with Mr. Pincourt, setting forth the terms of his retirement and resignation.  The retirement agreement replaces Mr. Pincourt’s previous employment agreement. Under the retirement agreement, the Company elected to accelerate retirement benefits under its deferred compensation program and to continue to pay compensation and provide related benefits through July 15, 2004, the remaining term of Mr. Pincourt’s previous employment contract.

Accelerated benefits under the deferred program amounted to $1,040,987, of which $549,220 had been accrued as of September 30, 2002. Mr. Pincourt’s deferred compensation was paid to him on December 13, 2002.  Also under the retirement agreement, Mr. Pincourt continued to receive monthly payments of $41,004 through July 15, 2004, one bonus payment of $150,491, which was paid in October 2003, and a second bonus payment of $119,138 payable on or before August 31, 2004.  Among other benefits, Mr. Pincourt was also able to participate in any health insurance plan, employee benefit plan or other arrangement made available by the Company or its subsidiaries to its executives and key management employees, through July 15, 2004.  The Company recorded a charge for the retirement of Mr. Pincourt during 2003.  The effect of this charge was included in other expense in the Company’s consolidated statement of income and amounted to $1,503,925 before income taxes.

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The following table summarizes the charge made during 2003 for Mr. Pincourt’s retirement:

Deferred compensation	$	1,040,987
Compensation and related benefits	1,012,158
Total	2,053,145
Less deferred compensation accrued as of September 30, 2002	(549,220		)
Charged to expense	$	1,503,925

On May 22, 2003, the Company announced the retirement of Troy Edwards, its Chief Financial Officer, Secretary, Treasurer and Controller.  The Company recorded a charge for the retirement of Mr. Edwards of $207,683 during the third quarter of fiscal 2003.  The effect of this charge was included in other expense in the Company’s consolidated statement of income.

Income Tax Expense.  During 2004 and 2003, the Company incurred operating losses from its U.S. operations and recorded an income tax benefit of $1.7 million and $0.8 million, respectively.  The Company’s Virgin Islands subsidiary has a 90% exemption from U.S. Virgin Islands income taxes.  The exemption is effective through September 2020.  In addition, the Company benefited from the extraterritorial income exclusion in 2004 and 2003.

Three months ended June 30, 2004 compared to three months ended June 30, 2003.  Unless otherwise noted, references to 2004 represent the three-month period ended June 30, 2004 and references to 2003 represent the three-month period ended June 30, 2003.

Net Sales. Net sales were $25.5 million in 2004, an increase of 10.4% from net sales of $23.1 million in 2003.

Net sales of bulk alcohol products were $9.9 million in 2004, an increase of 13.1% from net sales of $8.7 million in 2003.  The increase resulted primarily from increased shipments of citrus brandy, rum and fortified wine offset by decreased shipments of citrus and cane spirits due to timing of customer orders.

Net sales of premium branded spirits were $7.2 million in 2004, an increase of 49.8% from net sales of $4.8 million in 2003.  Sales of the Company’s Cruzan Estate Rums and Cruzan Flavored Rums increased 48.9% in 2004 compared to 2003.  Sales of Cruzan Estate Rums and Cruzan Flavored Rums increased from $2.2 million in fiscal 1996 to $17.0 million in fiscal 2003.  During this time, the Cruzan brand has been recognized as one of the fastest growing brands in the spirits industry by certain beverage industry publications and the Cruzan Rums have won numerous tasting awards from several prestigious beverage industry organizations.  Recently, several of the Company’s competitors have introduced their own lines of flavored rum products into the marketplace, which, in certain fiscal quarters, has negatively impacted the level of sales growth of Cruzan Flavored Rums.  Some of the Company’s competitors in the rum and flavored rum categories have significantly greater financial and other resources than the Company, which could adversely affect the Company’s sales growth of Cruzan Rums and Cruzan Flavored Rums. As a response to such increased competition, and in order to provide further impetus to the growth of Cruzan Flavored Rums, management has significantly increased its marketing budget for fiscal 2004, causing a current increase in the operating loss for this business segment.  Management believes that by increasing its marketing budget and maintaining its focus on the Cruzan brand, sales of Cruzan Estate Rums and Cruzan Flavored Rums will continue their double-digit growth for fiscal 2004.

Net sales of the Company’s bottling operations were $3.3 million in 2004, a decrease of 28.4% from net sales of $4.5 million in 2003.  During fiscal 2004, the Company lost a large private label bottling customer.  Net sales to this private label bottling customer were approximately $2.5 million and 193,719 cases for the year ended September 30, 2003, or approximately 17.6% of bottling operations net sales and 5.2% of bottling operations volume.  Net sales to this customer during 2003 were approximately $0.6 million and 55,499 cases.  Also during 2004, excise taxes decreased $0.8 million compared to 2003, primarily due to the decrease in sales to this private label bottling customer.  Management believes that the loss of this low margin business will not have a material effect on the Company’s consolidated results of operations or financial position.  Sales in the Company’s bottling operations also

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continued to decline as a result of a contraction in the ready-to-drink product category, for which the Company is a major contract bottler.  Responding to this decline, in July 2004 the Company completed the consolidation of its bottling operations to reduce overhead.  However, bottling operations volume has not met even the Company’s reduced expectations for this year, which has caused a continuing loss in this segment.  The Company is placing a renewed emphasis on the sales effort in this segment, seeking other contract bottling opportunities.  Additional sales, coupled with savings to be realized from the consolidation, are expected to reverse this loss trend in future quarters.

Net sales of vinegar and cooking wine were $5.2 million in 2004, an increase of 3.0% from net sales of $5.0 million in 2003.

Gross Profit. Gross profit was $7.4 million in 2004, a decrease of 8.5% from gross profit of $8.1 million in 2003.  Gross margin was 28.9% in 2004 compared to 34.9% in 2003.  Gross profit increases in premium branded spirits were offset by increased raw material costs in bulk alcohol products and decreased sales in bottling operations.

Selling, General and Administrative Expenses.  Selling, general and administrative expenses were $8.9 million in 2004, an increase of 41.0% from $6.3 million in 2003.  The increase was primarily attributable to increased administrative, marketing and advertising expenses related to the Company’s premium branded spirits business as the Company continues to place emphasis on this growing business segment.

Operating Income.  The following table sets forth the operating income (loss) by reportable segment of the Company for 2004 and 2003.

	Three Months Ended June 30,
	2004			2003			% Change
	(In thousands)
Bulk Alcohol Products	$	2,195		$	2,900		(24.3	)
Premium Branded Spirits	(2,781		)	(544		)	—
Bottling Operations	(723		)	287			—
Vinegar and Cooking Wine	915			895			2.2
Corporate Operations and Other	(1,119		)	(1,779		)	—
	$	(1,513	)	$	1,759		—

As a result of the above factors, operating loss was $1.5 million in 2004, compared to operating income of $1.8 million in 2003.

The Company’s premium branded spirits segment experienced operating losses of $2.8 million in 2004 and $0.5 million in 2003.  The operating loss reflected the Company’s continuing efforts to increase market share by reinvesting segment gross profits in selling and marketing expenses.

As a result of the factors described under “Net Sales” above, the Company’s bottling operations segment reported an operating loss of $0.7 million in 2004 compared to operating income of $0.3 million in 2003.

Interest Expense. Interest expense was $0.6 million in 2004 and $1.0 million in 2003.  The Company’s borrowing rates and average borrowings were lower in 2004 compared to 2003.

Income Tax Expense. During 2004 and 2003, the Company incurred operating losses from its U.S. operations and recorded an income tax benefit of $1.6 million and $0.7 million, respectively.  The Company’s Virgin Islands subsidiary has a 90% exemption from U.S. Virgin Islands income taxes.  The exemption is effective through September 2020.  In addition, the Company benefited from the extraterritorial income exclusion in 2004 and 2003.

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Financial Liquidity and Capital Resources

General

The Company’s principal use of cash in its operating activities is for purchasing raw materials to be used in its manufacturing operations and purchasing imported products for its premium branded spirits business.  The Company’s source of liquidity has historically been cash flow from operations and from borrowings on its line of credit.  Some of the Company’s manufacturing operations are seasonal and the Company’s borrowings on its line of credit vary during the year.  For example, the Company uses citrus molasses as its primary raw material in the production of citrus brandy and spirits at its two Florida distilleries.  The Company buys citrus molasses, a by-product of citrus juice production, from local manufacturers of citrus juice and concentrate during the citrus harvest, which generally runs from November to June.  The Company begins purchasing citrus molasses in November and, due to the short life of the citrus molasses it purchases, manufactures and builds inventory of citrus brandy and spirits through June.  Another seasonal business of the Company is its contract bottling services.  Demand for contract bottling services is highest during the months from April through October.  Management believes that cash provided by its operating and financing activities will provide adequate resources to satisfy its working capital, liquidity and anticipated capital expenditure requirements for both its short-term and long-term capital needs.

Operating Activities

Net cash provided by operating activities in 2004 was $1.1 million, which resulted from $5.9 million in net income adjusted for noncash items, and $4.8 million representing the net increase in operating assets and liabilities.

Investing and Financing Activities

Net cash used in investing activities in 2004 was $2.1 million, which resulted primarily from $4.0 million of capital expenditures, offset by proceeds from the sale of property and equipment, collections on notes receivable and redemptions of short-term investments.

Net cash used in financing activities in 2004 was $11.8 million, which resulted primarily from payments of $3.1 million of long-term debt and $18.8 million in payments on the Company’s line of credit, offset by $10.1 million from the issuance of common stock.

During June 2004, the Company and Angostura Limited completed a transaction whereby Angostura Limited agreed to invest $10 million in the Company in exchange for 714,285 shares of common stock, which equates to an equity issue price of $14.00 per share.  The transaction was approved by the Board of Directors after having been determined to be fair to the public stockholders of the Company by the Special Committee of Independent Directors of the Company.  In addition, Angostura Limited reimbursed one-half of the Company’s expenses in connection with this transaction.  As a result of this transaction, Angostura Limited’s ownership of the Company’s stock increased from 64% to 68%.  The Subscription Agreement for this transaction also provides that the Company will use its best efforts to complete a rights offering pursuant to a registration statement to be filed with the Securities and Exchange Commission.  The rights offering will allow each stockholder of the Company, other than Angostura Limited and its affiliates, to purchase such holder’s pro rata amount of the number of shares of the common stock of the Company that will permit the public stockholders in the aggregate to maintain the percentage stock ownership the public stockholders owned prior to the stock purchase by Angostura Limited.  It is expected that the number of shares available to be sold pursuant to the rights offering will be approximately 408,000 and the per share purchase price of the rights offering will be the lesser of $14.00 or the closing price on the American Stock Exchange two days prior to the effective date of the registration statement.  The Company expects to file the registration statement in August 2004.

The Company’s revolving credit facility provides for maximum borrowings of $15 million.  Borrowings under this facility were $250,000 at June 30, 2004.  During June 2004, the Company’s credit agreement was modified to extend the maturity date of the revolving loans to be the same as the term loans, September 2006.

The Company’s bank debt was $29.3 million as of June 30, 2004, and its ratio of total debt to equity was 0.55 to 1.

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The Company has not paid dividends to stockholders since becoming a public company in 1992.  The Company intends to continue to retain earnings for use in its business and, therefore, does not anticipate declaring or paying cash dividends in this fiscal year.  Also, the Company is limited by the credit agreement in its ability to pay dividends to stockholders.  In addition to quarterly term loan principal payments required by the credit agreement, the Company may be required to make additional principal payments based on the results of the Company’s domestic operating profits, as defined in the credit agreement.

The Company’s share of the undistributed earnings of the Bahamian and Virgin Islands subsidiaries was approximately $7.3 million and $31.6 million, respectively, as of September 30, 2003.  See Note 10 to the Company’s consolidated financial statements included in the Company’s Annual Report on Form 10-K for the year ended September 30, 2003 for additional information on income taxes related to these subsidiaries.

Based on current plans and business conditions, management expects that its cash, cash equivalents, and short-term investments, together with any amounts generated from operations and available borrowings, will be sufficient to meet the Company’s cash requirements for at least the next 12 months.

Effects of Inflation and Changing Prices

The Company’s results of operations and financial condition have not been significantly affected by inflation and changing prices.  The Company has been able, subject to normal competitive conditions, to pass along rising costs through increased selling prices.

Critical Accounting Policies

The Company’s significant accounting policies are more fully described in Note 1 to the Company’s consolidated financial statements located in Item 8 of its Annual Report on Form 10-K for the year ended September 30, 2003. The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues, and expenses, and the related disclosures of contingent assets and liabilities. Actual results could differ from those estimates under different assumptions or conditions. The Company believes that the following critical accounting policy is subject to estimates and judgments used in the preparation of its consolidated financial statements:

The Company has goodwill and intangible assets associated with business acquisitions. The Company reviews these assets for impairment annually and whenever an event occurs or circumstances change that would more likely than not reduce the fair value of these assets below their carrying value.  If the fair value of these assets is less than their carrying value, then an impairment loss would be recognized equal to the excess of the carrying value over the fair value of the asset.

Off-Balance Sheet Arrangements

The Company has no off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on the Company’s financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that are material to investors.  See Recent Accounting Pronouncements, below.

Recent Accounting Pronouncements

As of March 31, 2003, the Company adopted Financial Accounting Standards Board Interpretation No. 45 (“FIN 45”), Guarantor’s Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others.  FIN 45 requires a guarantor to recognize at the inception of a guarantee, a liability for the fair value or market value, of the obligation undertaken in issuing the guarantee and must disclose the information in its interim and annual financial statements.  The provisions related to recognizing a liability at inception for the fair value of the guarantor’s obligation does not apply to guarantees issued between entities under common control and therefore is not applicable to the Company.  Management believes that this standard does not have a material effect on the Company’s consolidated financial position or results of operations.

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In January 2003, the Financial Accounting Standards Board issued Financial Accounting Standards Board Interpretation No. 46 (“FIN 46”), Consolidation of Variable Interest Entities.  FIN 46 clarifies the application of Accounting Research Bulletin 51, Consolidated Financial Statements, for certain entities that do not have sufficient equity at risk for the entity to finance its activities without additional subordinated financial support from other parties or in which equity investors do not have the characteristics of a controlling financial interest (“variable interest entities”).  Variable interest entities within the scope of FIN 46 will be required to be consolidated by their primary beneficiary.  The primary beneficiary of a variable interest entity is determined to be the party that absorbs a majority of the entity’s expected losses, receives a majority of its expected returns, or both.  FIN 46 applied immediately to variable interest entities created after January 31, 2003, and to variable interest entities in which the Company obtains an interest after that date.  FIN 46 was effective July 1, 2003 to variable interest entities in which the Company holds a variable interest that it acquired before February 1, 2003.  Management believes this standard does not have a material effect on the Company’s consolidated financial position or results of operations.

Item 3.Quantitative and Qualitative Disclosures About Market Risk

The information required under this Item 3 is incorporated herein by reference to the Company’s Annual Report on Form 10-K for the year ended September 30, 2003.  As of June 30, 2004, there have been no material changes for the information provided therein.

Item 4.Controls and Procedures

Evaluation of Disclosure Controls and Procedures

The Company maintains disclosure controls and procedures (as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”) that are designed to ensure that information required to be disclosed in the Company’s reports under the Exchange Act are recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that the information is accumulated and communicated to the Company’s management, including the Company’s Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.  In designing and evaluating the disclosure controls and procedures, management recognized that any disclosure controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired objectives, and management was required to apply its judgment in evaluating the cost-benefit relationship of possible disclosure controls and procedures.  The Company’s management, with the participation of the Company’s Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of the design and operation of the Company’s disclosure controls and procedures as of the end of the period covered by this report.  Based upon that evaluation and subject to the foregoing, the Company’s Chief Executive Officer and Chief Financial Officer concluded that the design and operation of the Company’s disclosure controls and procedures provided reasonable assurance that the disclosure controls and procedures are effective to accomplish their objectives.

Changes in Internal Control Over Financial Reporting

In addition, management, including the Company’s Chief Executive Officer and Chief Financial Officer, reviewed the Company’s internal control over financial reporting (as defined in Rule 13a-15(f) under the Exchange Act), and there have been no significant changes in the Company’s internal control or in other factors that could significantly affect the Company’s internal control over financial reporting during the period covered by this report.

22

PART II.  OTHER INFORMATION

Item 2.  Changes in Securities, Use of Proceeds and Issuer Purchases of Equity Securities

During June 2004, the Company and Angostura Limited completed a transaction whereby Angostura Limited agreed to invest $10 million in the Company in exchange for 714,285 shares of common stock, which equates to an equity issue price of $14.00 per share.  The transaction was approved by the Board of Directors after having been determined to be fair to the public stockholders of the Company by the Special Committee of Independent Directors of the Company.  In addition, Angostura Limited reimbursed one-half of the Company’s expenses in connection with this transaction.  As a result of this transaction, Angostura Limited’s ownership of the Company’s stock increased from 64% to 68%.

Item 6.  Exhibits and Reports on Form 8-K

10.22(d)	Modification of Credit Agreement, dated June 29, 2004, by and among Todhunter International, Inc., SouthTrust Bank, acting as lender and Agent, and Wachovia Bank, N.A. (2)
11.1	Statement of Computation of Per Share Earnings (1)
20.1	Earnings press release for the three— and nine-month periods ended June 30, 2004 (2)
31.1	Certification of Jay S. Maltby, Chairman, Chief Executive Officer and President, pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934 (2)
31.2	Certification of Ezra Shashoua, Executive Vice President and Chief Financial Officer, pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934 (2)
32.1	Certification of Jay S. Maltby, Chairman, Chief Executive Officer and President, pursuant to 18 U.S.C. Section 1350 (2)
32.2	Certification of Ezra Shashoua, Executive Vice President and Chief Financial Officer, pursuant to 18 U.S.C. Section 1350 (2)

(1)Filed herewith and incorporated herein by reference to Note 4 of notes to consolidated financial statements, included in Item 1 of the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2004.

(2)Filed herewith.

(b)Reports on Form 8-K

During the third quarter of fiscal 2004, the Company filed the following current report on Form 8-K:

(1)Form 8-K dated June 9, 2004.  This Form 8-K reported information under Item 5 (Other Events and required FD Disclosure).

23

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 13, 2004	/s/ Jay S. Maltby
	Jay S. Maltby
	Chairman, Chief Executive Officer and President
Date: August 13, 2004	/s/ Ezra Shashoua
	Ezra Shashoua
	Executive Vice President and Chief Financial Officer

24

EX-10.22(D)

Exhibit 10.22(d)

MODIFICATION OF CREDIT AGREEMENT

THIS MODIFICATION OF CREDIT AGREEMENT (“Modification”) is made as of the 29th day of June, 2004 (the “Effective Date”), by and between SOUTHTRUST BANK, an Alabama corporation, formerly known as SouthTrust Bank, National Association acting as a Lender and as Administrative Agent and Funding Agent (collectively “Agent”) pursuant to the Credit Agreement (defined below), WACHOVIA BANK, NATIONAL ASSOCIATION, a national banking association, formerly known as First Union National Bank, a national banking association, acting as a lender, (together, the “Lenders”), and TODHUNTER INTERNATIONAL, INC., a Delaware corporation (the “Borrower”)

W I T N E S S E T H:

WHEREAS, On October 19, 2001, Agent, Lenders and Borrower entered into an Amended and Restated Credit Agreement (as subsequently amended, “Credit Agreement”) in connection with Revolving Loans, Term Loans and Letters of Credit made available by Lenders, and other lenders, to Borrower in an aggregate commitment that is currently of $45,000,000.00; and

WHEREAS, Borrower has requested Agent and Lenders to make certain modifications to the Credit Agreement including modifications of the financial covenants and extension of the Revolving Termination Date; and

WHEREAS, Lenders and Agent are willing to amend the Credit Agreement on the terms and conditions set forth in this Modification.

NOW, THEREFORE, in consideration of mutual promises and covenants of this Modification and for other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, Lenders, Agent and Borrower agree as follows:

1.             Recitals.  The foregoing recitals are true and correct and by this reference are made a material part of this Modification.  All capitalized terms used herein shall have the meaning ascribed to them in the Credit Agreement unless the context shall require otherwise.

2.             Lenders.  SouthTrust Bank and Wachovia Bank, National Association are the sole Lenders, having received by assignment and mutual agreement the Loan interests of the other lenders heretofore a party to the Credit Agreement as Lenders.  As of the Effective Date hereof, the Credit Percentage of SouthTrust Bank is 55.5556% and the Credit Percentage of Wachovia Bank, National Association is 44.4444%.

3.             Definitions.  The definitions of the following terms defined in Article 1 are revised as follows:

“EBITDA” means, for any period, (i) net income (or loss) of the Borrower and its Subsidiaries on a consolidated basis for such period, plus (ii) to the extent deducted in computing net income (or loss), (A) interest expense for such period, (B) charges against income for foreign, federal, state and local taxes for such period, (C) depreciation and amortization of intangible assets during the period, (D) non-cash charges related specifically to FASB 133, FASB 87 and FASB 123 and other non-recurring, non-cash charges during such period, (E) any extraordinary expense items and/or unusual, non-recurring cash charges not to exceed $500,000.00 realized during such period, less, (iii) non-cash credits related specifically to FASB 133, FASB 87 and FASB 123 and any other non-recurring, non-cash credits for such period, and any gains or losses on the sale or disposition of assets outside the ordinary course of the Borrower’s business for such period.  All of the foregoing shall be determined in accordance with GAAP.  EBITDA will be determined based on the most recent four (4) fiscal quarters of Borrower.

“Fixed Charge Coverage Ratio” means the ratio of (i) EBITDA, less capital expenditures, to (ii) Fixed Charges.

“Fixed Charges” means cash interest, cash taxes, scheduled principal payments on Funded Debt and cash dividends paid in the period in question, but not including any additional principal payments made by Borrower pursuant to Section 2.09.

“Funded Debt” means without duplication, the principal balance of all indebtedness, for money borrowed, purchase money mortgages, capitalized leases, conditional sales contracts and similar title retention debt instruments under which Borrower or any of its Subsidiaries is an obligor, including any current maturities of such indebtedness, plus all debt of other entities or Persons, other than Subsidiaries, which has been guaranteed by the Borrower or any Subsidiary (other than the current balance of the indebtedness of Premier Wines & Spirits, Ltd. as of October 19, 2001 guaranteed by Borrower), or which is supported by a letter of credit issued for the account of the Borrower or any Subsidiary which by its terms matures more than one year from the date of any calculation thereof and/or which is renewable or extendible at the option of the obligor to a date beyond one year from such date; provided that, for the purposes of this Agreement, the calculation of “Funded Debt” as of the end of Borrower’s first three (3) fiscal quarters shall exclude the bi-weekly excise tax payments made by Borrower (to the extent such payments are funded from the Revolving Credit Facility) up to $2,500,000.00 and the calculation of “Funded Debt” as of the end of Borrower’s fiscal year shall exclude the bi-weekly excise tax payments made by Borrower (to the extent such payments are funded from the Revolving Credit Facility) up to $5,000,000.00.  “Funded Debt” shall also exclude the Tank Loan.

“Revolving Termination Date” shall mean September 29, 2006.

2

4.             Fixed Charge Coverage.  Section 11.03 of the Credit Agreement is hereby replaced in its entirety with the following:

SECTION 11.03.  Fixed Charge Coverage.    Maintain at all times a Fixed Charge Coverage Ratio of not less than 1.00 to 1.00, which shall be tested at each fiscal quarter end of Borrower for the four consecutive quarters then ended.

5.             Liquidity.  Section 11.06 is hereby deleted in its entirety as of March 30, 2004.

6.             Amendment.  Notwithstanding anything in Section 14.07 to the contrary, amendments to financial covenants will be subject to approval of Required Lenders unless there are fewer than three (3) Lenders, in which case all amendments shall be subject to approval of all of the Lenders.

7.             Further Agreement.  Lenders and Borrower further agree as follows:

a.Notwithstanding anything to the contrary in Sections 10.05 or 10.16 of the Credit Agreement, Borrower may pay cash dividends in an amount not to exceed 33.33% of net earnings as long as no event of Default has occurred.

b.Borrower’s Foreign Subsidiaries may increase their investments in Todhunter Finance Company and Todhunter Barbados (SRL) provided such investments will be used to increase loans extended by Todhunter Finance Company to Borrower.  All such loans shall be subordinate to the Loans.

c.Borrower may transfer the Cruzan trademark to a foreign entity of which Borrower or any of its Subsidiaries owns at least fifty percent.

8.             Pricing.  The pricing grid incorporated into the definition of Applicable Margin in Section 1.01 of the Credit Agreement is hereby replaced in its entirety with the following:

		Applicable Margin Revolving Loans						Applicable Margin Term Loans
Level	Funded Debt/EBITDA	Eurodollar Rate		Base Rate		Unused Fee		Eurodollar Rate		Base Rate
I	≤ 3.25 and › 2.50	2.50	%	.50	%	0.25	%	3.00	%	0.75	%
II	≤2.50 and › 2.00	2.25	%	0.50	%	0..25	%	2.75	%	0.75	%
III	≤ 2.00 and › 1.50	2.00	%	0.25	%	0.25	%	2.50	%	00.50	%
IV	≤ 1.50	1.75	%	0.25	%	0.25	%	2.25		0.50	%

3

9.             Warranty.  Borrower hereby warrants and represents to Lenders that, since May 14, 2003, Borrower has been and is in compliance with all provisions of the Credit Agreement and all other Loan Documents and that no default or Event of Default has occurred thereunder nor has any event occurred or failed to occur which with the passage of time or the giving of notice or both would comprise such a Default or Event of Default.

10.           Ratifications.  Borrower hereby ratifies and confirms each of its obligations and indebtedness under the Credit Agreement and each of the other Loan Documents, as amended hereby, and hereby represents and warrants to Lenders and Agent that Borrower neither has nor claims any defenses, counterclaims or offsets to any such obligations or indebtedness.

11.           Fees.  The effectiveness of this Modification and the amendments contemplated herein are expressly conditioned upon the payment by Borrower to Agent for the prorata benefit of Lenders an amendment fee of $45,000.00 (based on ten (10) basis points of the current committed amount ($45,000,000)), $13,333.33 of which shall be payable by Agent to Lender Wachovia Bank, and reimbursement by Borrower of Agent for all reasonable attorneys’ fees and expenses incurred in connection with this Modification.

12.           Miscellaneous.

(a)  This agreement shall be governed by and construed in accordance with the laws of the State of Florida.  Paragraph headings used herein are for convenience only and shall not be used to interpret any term hereof.  The Credit Agreement shall continue in full force and effect as modified by this Modification.  In the event the terms of this Modification conflict with the terms of the Credit Agreement, the terms of this Modification shall control.

(b)  This Modification constitutes the entire agreement among the parties hereto and supersedes all prior agreements, understandings, negotiations and discussions, both written and oral among the parties hereto with respect to the subject matter hereof, all of which prior agreements, understanding, negotiations and discussions, both written and oral, are merged into this Modification.  All provisions of the Credit Agreement and each of the other Loan Documents shall remain in full force and effect as modified by this Modification.  Without limiting the generality of any of the provisions of this Modification, nothing herein or in any instrument or agreement shall be deemed or construed to constitute a novation, satisfaction or refinancing of all or any portion of the Loan or in any manner affect or impair the lien or priority of the Credit Agreement or any of the Loan Documents as amended hereby.

(c)  This Modification may be executed in any number of counterparts with each executed counterpart constituting an original, but altogether constituting but one and the same instrument.

(d)  This Modification shall be binding upon and inure to the benefit of Borrower, Agent and Lenders and their respective heirs, legal representatives, executors, successors and assigns.

13.           RELEASE.  IN CONSIDERATION OF THE ACCOMMODATIONS PROVIDED HEREIN, BORROWER HEREBY UNCONDITIONALLY IRREVOCABLY AND FOREVER RELEASES, ACQUITS AND DISCHARGES LENDERS AND EACH OF

4

LENDERS’ RESPECTIVE OFFICERS, DIRECTORS, EMPLOYEES, AGENTS AND COUNSEL FROM ANY AND ALL CLAIMS, DEMANDS AND CAUSES OF ACTION THAT ANY OF THEM HAD, NOW HAS OR MAY IN THE FUTURE HAVE AGAINST ANY ONE OR MORE OF THE LENDERS OR ANY ONE OR MORE OF LENDERS’ OFFICERS, DIRECTORS, EMPLOYEES, AGENTS OR COUNSEL FOR THE ACTS OR OMISSIONS OF ANY OF THE FOREGOING PARTIES FROM THE BEGINNING OF TIME THROUGH, TO AND INCLUDING THE DATE OF THE EFFECTIVENESS OF THIS MODIFICATION, WHICH RELATED TO ANY CLAIMS ARISING OUT OF OR CONNECTED IN ANY MANNER WITH THE TRANSACTIONS CONTEMPLATED HEREIN OR IN THE CREDIT AGREEMENT AS AMENDED HEREBY OR ANY OTHER LOAN DOCUMENTS AS THE SAME MAY BE AMENDED HEREBY, AS THE CASE MAY BE.

14.           WAIVER OF JURY TRIAL.  BORROWER, AGENT AND LENDERS HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVE THE RIGHT ANY OF THEM MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION BASED HEREON, OR ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS MODIFICATION OR ANY AGREEMENT EXECUTED IN CONJUNCTION HEREWITH, OR ANY COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS, (WHETHER VERBAL OR WRITTEN) OR ACTIONS BY ANY PARTY.  THIS PROVISION IS A MATERIAL INDUCEMENT TO LENDERS’ ENTERING INTO THIS MODIFICATION AND MAKING ANY LOAN, ADVANCE OR OTHER EXTENSION OF CREDIT TO BORROWER.  FURTHER, BORROWER HEREBY CERTIFIES THAT NO REPRESENTATIVE OR AGENT OF LENDERS, NOR THE AGENT OR ANY OF AGENT’S COUNSEL OR LENDERS’ COUNSEL, HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT AGENT OR ANY OF AGENT’S COUNSEL OR LENDERS WOULD NOT, IN THE EVENT OF SUCH LITIGATION, SEEK TO ENFORCE THIS WAIVER OF RIGHT TO JURY TRIAL PROVISION.  NO REPRESENTATIVE OR AGENT OF LENDERS, NOR AGENT OR ANY OF AGENT’S COUNSEL OR LENDERS’ COUNSEL HAS THE AUTHORITY TO WAIVE, CONDITION, OR MODIFY THIS PROVISION.

IN WITNESS WHEREOF, Borrower, Agent and Lenders have caused this agreement to be effective as of the day and year set forth above.

WITNESSES:	BORROWER:
	TODHUNTER INTERNATIONAL, INC., a Delaware corporation
/s/:  Michael V. Mitrione	/s/: Ezra Shashoua, Executive Vice President
/s/:  Thomas E. Streit

5

STATE OF FLORIDA	)
	)
COUNTY OF PALM BEACH	)

The foregoing instrument was acknowledged before me this 29th day of June, 2004 by Ezra Shashoua as Executive Vice President of Todhunter International, Inc., on behalf of the corporation.  He is personally known to me or has produced                                        (type of identification) as identification.

		/s/:  Thomas E. Streit
		Notary Public
		State of Florida
		/s/:  Thomas E. Streit
		Commission No.  CC982756
		My Commission Expires:  Nov. 19, 20o04
		(Print,Type or Stamp Commissioned Name of Notary Public)
WITNESSES:		AGENT:
		SOUTHTRUST BANK, an Alabama banking corporation
/s/:  Michael V. Mitrione		/s/:  Tom Turnberger, Vice President
/s/:  Thomas E. Streit
STATE OF FLORIDA	)
	)
COUNTY OF PALM BEACH	)

The foregoing instrument was acknowledged before me this 29th day of June, 2004 by Tom Turnberger as Vice President of SouthTrust Bank, on behalf of the bank.  He is personally known to me or has produced _____________________ (type of identification) as identification.

/s/:  Thomas E. Streit

Notary Public

State of Florida

My Commission Expires:  Nov. 19, 2004

Commission No.  CC 982756

(Print, Type or Stamp Commissioned Name of Notary Public)

6

WITNESSES:		LENDERS:
		SOUTHTRUST BANK, an Alabama banking corporation
/s/:  Michael V. Mitrione		/s/:  Tom Turnberger, Vice President
/s/:  Thomas E. Streit
STATE OF FLORIDA	)
	)
COUNTY OF PALM BEACH	)

The foregoing instrument was acknowledged before me this 29th day of June, 2004 by Tom Turnberger as Vice President of SouthTrust Bank, on behalf of the bank.  He is personally known to me or has produced                                           (type of identification) as identification.

/s/:  Thomas E. Streit

Notary Public

State of Florida

My Commission Expires:  Nov. 19, 2004

Commission No.  CC982756

(Print, Type or Stamp Commissioned Name of Notary Public)

WITNESSES:

7

WITNESSES:		WACHOVIA BANK, NATIONAL ASSOCIATION
/s/:  Michael V. Mitrione		/s/:  Britton S. Core, Vice President
/s/:  Thomas E. Streit
STATE OF FLORIDA	)
	)
COUNTY OF PALM BEACH	)

The foregoing instrument was acknowledged before me this 29th day of June, 2004 by Britton S.Core as Vice President of Wachovia Bank, National Association, on behalf of the bank.  He/She is personally known to me or has produced                                            (type of identification) as identification.

/s/:  Thomas E. Streit

Notary Public

State of Florida

My Commission Expires:  Nov. 19, 2004

Commission No. CC 982756

(Print, Type or Stamp Commissioned Name of Notary Public)

8

EX-20.1

EXHIBIT 20.1

222 LAKEVIEW AVENUE, SUITE 1500, WEST PALM BEACH, FL 33401

NEWS RELEASE

TODHUNTER INTERNATIONAL, INC., ANNOUNCES FINANCIAL RESULTS

FOR FISCAL 2004 THIRD QUARTER AND NINE MONTHS ENDED

JUNE 30, 2004

WEST PALM BEACH, FLORIDA—August 13, 2004—Todhunter International, Inc. (AMEX: THT), producer and distributor of the Cruzan line of rums from the Virgin Islands and a leading distiller of rum, brandy, and importer and marketer of premium branded spirits, today reported financial results for its third quarter and nine months ended June 30, 2004.

Net sales for 2004’s nine-month period were $69,966,854, an increase of 6.2% over $65,876,955 in the same period last year. Gross profit was $22,355,505, an increase of 4.2% over $21,453,113 in the same period last year.  Nine-month period net income was $1,745,308, or $0.30 per diluted share, compared to $1,828,042, or $0.32 per diluted share, one year ago.  During the prior fiscal year’s first and third quarter’s, the Company incurred one-time charges of approximately $1,078,000, net of income taxes, relating to the retirement of the Company’s former Chief Executive Officer and Chief Financial Officer.  After adding back these charges, earnings per diluted share were $0.52 in the nine-month period ended June 30, 2003.

Net sales for fiscal 2004’s third quarter were $25,485,359, an increase of 10.4% over $23,087,731 in the same period last year. Gross profit was $7,375,664, a decrease of 8.5% from $8,064,736 in the same period last year.  Third-quarter net loss was $224,506, or $0.04 per diluted share, compared with net income of $1,892,432, or $0.34 per diluted share, one year ago.

Commenting on the results, Jay S. Maltby, Chairman and Chief Executive Officer said, “While our operating and net income was adversely affected by decreased sales in our bottling operations and increased marketing expenses related to the Cruzan brand, our premium brands business continues its strong sales and volume growth, with net sales increasing by 49.8 percent for the quarter and 38.4 percent for the nine-month period.  We are very excited

about the recent strong growth of the Cruzan brand in the face of increasing competition in the flavored rum category.  Our strong results validate our brand promotion strategy and are an indication of the increasing acceptance of the Cruzan brand in the trade and by consumers. The current heavy investment spending in the Cruzan brand lays the foundation for substantial earnings in future years.  Sales in our bottling operations, however, continued to decline as a result of a contraction in the ready-to-drink product category, for which we are a major contract bottler.  Responding to this decline, in July 2004 we completed the consolidation of our bottling operations to reduce overhead.  However, bottling operations volume has not met even our reduced expectations for this year, which has caused a continuing loss in this segment.  We are placing a renewed emphasis on the sales effort in this segment, seeking other contract bottling opportunities.  Additional sales, coupled with savings to be realized from the consolidation, should reverse this loss trend in future quarters.”  The Chairman also noted, “Our core bulk alcohol, vinegar and cooking wine businesses are stable and providing good cash flow to support our investment spending on Cruzan.”

Todhunter International, Inc., is a major supplier of rum, brandy and wine to the beverage alcohol industry. The Company also produces ultra-premium single-barrel aged rums and tropical rums, vinegar and other alcohol-related products.

Statements contained in this press release, other than historical facts, are “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Todhunter intends that such forward-looking statements shall be subject to the safe harbors created thereby. These statements involve various risks and uncertainties, including without limitation those contained in the section entitled “Forward-Looking Statements” in Todhunter’s Annual Report on Form 10-K for the fiscal year ended September 30, 2003. As a result, future results may differ materially from the expected results represented by the forward-looking statements contained in this press release.

Contact:       Ezra Shashoua, Executive Vice President and Chief Financial Officer

William J. Viggiano, Controller

(561) 655-8977

—Financial Results Follow—

TODHUNTER  INTERNATIONAL, INC.

Statements of Income

Periods ended	Three Months						Statement of Income as a % ofNet Sales
June 30,	2004			2003			2004		2003
Net sales	$	25,485,359		$	23,087,731		100.0	%	100.0	%
Cost of sales	18,109,695			15,022,995			71.1	%	65.1	%
Gross profit	7,375,664			8,064,736			28.9	%	34.9	%
Selling, general and administrative	8,889,050			6,305,257			34.9	%	27.3	%
Operating income (loss)	(1,513,386		)	1,759,479			-5.9	%	7.6	%
Interest expense	(551,933		)	(985,150		)	-2.2	%	-4.3	%
Other income, net	260,644			398,946			1.0	%	1.7	%
Income (loss) before income taxes	(1,804,675		)	1,173,275			-7.1	%	5.1	%
Income tax benefit	1,580,169			719,157			6.2	%	3.1	%
Net income (loss)	$	(224,506	)	$	1,892,432		-0.9	%	8.2	%
Earnings (loss) per common share:
Basic	($0.04		)	$	0.34
Diluted	($0.04		)	$	0.34
Common shares and equivalents outstanding
Basic	5,647,782			5,574,322
Diluted	5,647,782			5,647,923
Shares outstanding at end of period	6,338,519			5,576,234

TODHUNTER  INTERNATIONAL, INC.

Statements of Income

Periods ended	Nine Months						Statement of Income as a % ofNet Sales
June 30,	2004			2003			2004		2003
Net sales	$	69,966,854		$	65,876,955		100.0	%	100.0	%
Cost of sales	47,611,349			44,423,842			68.0	%	67.4	%
Gross profit	22,355,505			21,453,113			32.0	%	32.6	%
Selling, general  and administrative	21,593,343			17,392,479			30.9	%	26.4	%
Operating income	762,162			4,060,634			1.1	%	6.2	%
Interest expense	(1,958,351		)	(2,583,583		)	-2.8	%	-3.9	%
Other income (expense), net	1,264,069			(467,550		)	1.8	%	-0.7	%
Income before income taxes	67,880			1,009,501			0.1	%	1.5	%
Income tax benefit	1,677,428			818,541			2.4	%	1.2	%
Net income	$	1,745,308		$	1,828,042		2.5	%	2.8	%
Earnings per common share:
Basic	$	0.31		$	0.33
Diluted	$	0.30		$	0.32
Common shares and equivalents outstanding
Basic	5,620,427			5,572,608
Diluted	5,737,336			5,639,825
Shares outstanding at end of period	6,338,519			5,576,234

TODHUNTER  INTERNATIONAL, INC.

Condensed Consolidated Balance Sheets

					Balance Sheet as a % ofTotal Assets
	June 30, 2004		September 30, 2003		June 30, 2004		September 30, 2003
ASSETS
CURRENT ASSETS
Cash and short-term investments	$	2,364,128	$	16,737,621	1.8	%	12.0	%
Receivables	17,673,859		18,746,413		13.8	%	13.5	%
Inventories	31,651,439		28,664,895		24.7	%	20.6	%
Other current assets	7,512,970		6,767,759		5.9	%	4.9	%
Total current assets	59,202,396		70,916,688		46.3	%	50.9	%
PROPERTY AND EQUIPMENT, net	39,811,503		40,056,612		31.1	%	28.8	%
OTHER ASSETS	28,975,544		28,325,773		22.6	%	20.3	%
Total assets	$	127,989,443	$	139,299,073	100.0	%	100.0	%
LIABILITIES AND STOCKHOLDERS’ EQUITY
CURRENT LIABILITIES
Current maturities of long-term debt	$	4,000,000	$	4,000,000	3.1	%	2.9	%
Accounts payable	8,145,365		6,288,431		6.4	%	4.5	%
Other accrued expenses	1,480,743		3,837,745		1.2	%	2.8	%
Total current liabilities	13,626,108		14,126,176		10.6	%	10.1	%
LONG-TERM DEBT, less current maturities	25,463,312		47,315,617		19.9	%	34.0	%
DEFERRED INCOME TAXES	5,334,500		5,243,000		4.2	%	3.8	%
OTHER LIABILITIES	1,069,697		2,002,761		0.8	%	1.4	%
STOCKHOLDERS’ EQUITY	82,495,826		70,611,519		64.5	%	50.7	%
Total liabilities and stockholders’ equity	$	127,989,443	$	139,299,073	100.0	%	100.0	%

EX-31.1

Exhibit 31.1

Certification of CEO Pursuant to Securities Exchange Act
Rules 13a-14 and 15d-14 as Adopted Pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002

I, Jay S. Maltby, certify that:

1.I have reviewed this quarterly report on Form 10-Q of Todhunter International, Inc.;

2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:

(a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b)Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(c)Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: August 13, 2004
	/s/ Jay S. Maltby
	Jay S. Maltby
	Chairman, Chief Executive Officer and President

EX-31.2

Exhibit 31.2

Certification of CFO Pursuant to Securities Exchange Act
Rules 13a-14 and 15d-14 as Adopted Pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002

I, Ezra Shashoua, certify that:

1.I have reviewed this quarterly report on Form 10-Q of Todhunter International, Inc.;

2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:

(a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b)Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(c)Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: August 13, 2004
	/s/ Ezra Shashoua
	Ezra Shashoua
	Executive Vice President and Chief Financial Officer

EX-32.1

Exhibit 32.1

Certification of CEO Pursuant to 18 U.S.C. Section 1350

Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, the undersigned certifies that (1) this Quarterly Report of Todhunter International, Inc. (the “Company”) on Form 10-Q for the period ended June 30, 2004, as filed with the Securities and Exchange Commission on the date hereof (this “Report”), fully complies with the requirements of Section 13(a) of the Securities Exchange Act of 1934, as amended, and (2) the information contained in this Report fairly presents, in all material respects, the financial condition of the Company and its results of operations as of and for the periods covered therein.

/s/  Jay S. Maltby

Jay S. Maltby

Chairman, Chief Executive Officer and President

Date:  August 13, 2004

A signed original of this written statement required by Section 906, or other document authenticating, acknowledging or otherwise adopting the signature that appears in typed form within the electronic version of this written statement required by Section 906, has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.

EX-32.2

Exhibit 32.2

Certification of CFO Pursuant to 18 U.S.C. Section 1350

Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, the undersigned certifies that (1) this Quarterly Report of Todhunter International, Inc. (the “Company”) on Form 10-Q for the period ended June 30, 2004, as filed with the Securities and Exchange Commission on the date hereof (this “Report”), fully complies with the requirements of Section 13(a) of the Securities Exchange Act of 1934, as amended, and (2) the information contained in this Report fairly presents, in all material respects, the financial condition of the Company and its results of operations as of and for the periods covered therein.

/s/  Ezra Shashoua

Ezra Shashoua

Executive Vice President and Chief Financial Officer

Date:  August 13, 2004

A signed original of this written statement required by Section 906, or other document authenticating, acknowledging or otherwise adopting the signature that appears in typed form within the electronic version of this written statement required by Section 906, has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.