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