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8-K - 8-K - Truett-Hurst, Inc.thst-8k_20180214.htm

Exhibit 99.1

 

 

 

Truett-Hurst, Inc. Reports Second Quarter and First Half Fiscal 2018 Results

Healdsburg, California (February 14, 2018) – Truett-Hurst, Inc. (NASDAQ: THST), which operates an innovative super-premium and ultra-premium wine sales, marketing and production company based in the acclaimed Dry Creek Valley of Sonoma County, California, reported results for the second quarter of fiscal year 2018 which ended on December 31, 2017.

First Half FY18 vs. FY17

For the six months ended December 31, 2017, total net sales increased 2.3% compared to the same period in the prior year and totaled $11.9 million. Consolidated gross margin was 32.7%, a decrease of 0.6 margin points over the prior year due to an increase in inventory reserves and depletion allowances.

Wholesale Segment

 

Net Sales of $8.7 million (+2.5% or +$0.2 million compared to the prior year)

 

Gross Margin of 21.6% (a decrease of 0.4 margin points compared to the prior year)

 

Gross Profit of $1.9 million (+0.7% or +$0.01 million compared to the prior year)

Direct to Consumer (DTC) Segment

 

Net Sales of $3.2 million (+1.7% or +$0.05 million compared to the prior year)

 

Gross Margin of 62.7% (a decrease of 0.8 margin points compared to the prior year)

 

Gross Profit of $2.0 million (+0.4% or +$0.008 million compared to the prior year)

Operating Expenses

Operating expenses for the six months ended December 31, 2017 was $4.7 million compared to $4.2 million in the prior year. Sales and marketing expenses increased by $0.3 million, 24.7% of net sales compared to 22.4% from the prior year period. The increase was largely due to the hiring of additional sales personnel, advertising and promotions along with selling expenses. General and administrative expenses also increased by $0.2 million, 14.7% of net sales compared to 13.1% from the prior year period. This increase is primarily due to increases in outside services.  

 

 

Second Quarter FY18 vs, FY17

For the three months ended December 31, 2017, total net sales decreased 0.6% compared to the same period in the prior year and totaled $5.7 million. Consolidated gross margin was 32.3%, a decrease of 3.2 margin points over the prior year due to an increase in inventory reserves and depletion allowances.

Wholesale Segment

 

Net Sales of $3.9 million (a decrease of 1.3% or -$0.05 million compared to the prior year)

 

Gross Margin of 18.6% (a decrease of 3.8 margin points compared to the prior year)

 

Gross Profit of $0.7 million (a decrease of 18.4% or -$0.16 million compared to the prior year)


Direct to Consumer (DTC) Segment

 

Net Sales of $1.8 million (+0.9% or +$0.017 million compared to the prior year)

 

Gross Margin of 62.1% (a decrease of 2.3 margin points compared to the prior year)

 

Gross Profit of $1.1 million (a decrease of 2.6% or -$0.003 million compared to the prior year)

Operating Expenses

Operating expenses for the three months ended December 31, 2017 was $2.4 million compared to $2.1 million in the prior year. Sales and marketing expenses increased by $0.1 million, 25.9% of net sales compared to 24.1% from the prior year period. The increase was largely due to the hiring of additional sales personnel, advertising and promotions along with selling expenses. General and administrative expenses also increased by $0.2 million, 16.7% of net sales compared to 12.3% from the prior year period. This increase is primarily due to increases in outside services.  

 

Earnings Call

The Company will not be conducting an earnings call related to its results for the second quarter of fiscal year 2018 ended December 31, 2017.

 

 

 

 

Truett-Hurst, Inc. • 125 Foss Creek Circle • Healdsburg, CA 95448 • tel: 707.431.4423 • fax: 707.395.0289 • email: ir@truetthurstinc.com


About Truett-Hurst, Inc.

Truett-Hurst, Inc. (NASDAQ: THST) is a holding company and its sole asset is the controlling equity interest in H.D.D. LLC., an innovative super-premium, ultra-premium and luxury wine sales, marketing and production company based in the acclaimed Dry Creek Valley of Sonoma County, California. Truett-Hurst, Inc. is headquartered in Healdsburg, California.

Forward-Looking Statements

This press release for the second quarter of fiscal year 2018 ended December 31, 2017 contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Exchange Act of 1934, as amended, that are made as of the date of this press release based upon our current expectations. All statements, other than statements of historical fact, regarding our strategy, future operations, financial position, estimated revenue, projected costs, prospects, plans, opportunities, and objectives constitute “forward-looking statements.” The words “may,” “will,” “expect,” “intend,” “plan,” “anticipate,” “believe,” “estimate,” “potential” or “continue” and similar types of expressions identify such statements, although not all forward-looking statements contain these identifying words. Such forward-looking statements include expectations regarding revenue, income, and expenses for the periods after September 30, 2017. These forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause the actual results to differ materially from any future results, performance or achievements expressed or implied by such forward-looking statements. Important factors that could cause such differences include, but are not limited to, a reduction in the supply of grapes and bulk wine available to us; significant competition; any change in our relationships with retailers which could harm our business; we may not achieve or maintain profitability in the future; the loss of key employees; a reduction in our access to, or an increase in the cost of, the third-party services we use to produce our wine; credit facility restrictions on our current and future operations; failure to protect, or infringement of, trademarks and proprietary rights; risks relating to our inventory; risks relating to our structure; these factors should not be construed as exhaustive and should be read in conjunction with the other cautionary statements that are included in this report. For additional information, see our Annual Report on Form 10-K filed on October 13, 2017, or our other reports currently on file with the Securities and Exchange Commission, which contain a more detailed discussion of risks and uncertainties that may affect future results. We undertake no obligation to publicly update or review any forward-looking statement, whether as a result of new information, future developments or otherwise.


TRUETT-HURST, INC. AND SUBSIDIARY

CONSOLIDATED BALANCE SHEETS

(In thousands, except share data)

 

 

December 31, 2017

(Unaudited)

 

 

June 30, 2017

 

Assets

 

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

261

 

 

$

783

 

Accounts receivable

 

 

2,550

 

 

 

1,932

 

Inventories, net

 

 

22,275

 

 

 

20,609

 

Bulk wine deposits

 

 

94

 

 

 

 

Other current assets

 

 

627

 

 

 

505

 

Total current assets

 

 

25,807

 

 

 

23,829

 

Property and equipment, net

 

 

6,575

 

 

 

5,426

 

Intangible assets, net

 

 

505

 

 

 

506

 

Other assets, net

 

 

210

 

 

 

277

 

Total assets

 

$

33,097

 

 

$

30,038

 

Liabilities and Equity

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

 

Lines of credit

 

$

8,275

 

 

$

7,290

 

Accounts payable

 

 

4,669

 

 

 

1,994

 

Accrued expenses

 

 

747

 

 

 

546

 

Depletion allowance and accrual for sales returns

 

 

535

 

 

 

495

 

Current maturities of long term debt and capital lease obligation

 

 

575

 

 

 

502

 

Total current liabilities

 

 

14,801

 

 

 

10,827

 

Long term debt, net of current maturities

 

 

3,020

 

 

 

3,065

 

Total liabilities

 

 

17,821

 

 

 

13,892

 

Commitments and contingencies

 

 

 

 

 

 

 

 

Equity:

 

 

 

 

 

 

 

 

Shareholders’ equity:

 

 

 

 

 

 

 

 

Preferred stock, par value of $0.001 per share, 5,000,000 shares authorized,

   none issued and outstanding at December 31, 2017 and June 30, 2017

 

 

 

 

 

 

Class A common stock, par value of $0.001 per share, 15,000,000

   authorized, 4,496,383 issued and outstanding at December 31,

   2017 and 4,426,789 issued and outstanding at June 30, 2017

 

 

4

 

 

 

4

 

Class B common stock, par value of $0.001 per share, 1,000 authorized,

   6 and 7 issued and outstanding at December 31, 2017 and June 30, 2017,

   respectively

 

 

 

 

 

 

Additional paid-in capital

 

 

16,254

 

 

 

16,082

 

Accumulated deficit

 

 

(6,234

)

 

 

(5,651

)

Total Truett-Hurst, Inc. shareholders' equity

 

 

10,024

 

 

 

10,435

 

Noncontrolling interest

 

 

5,252

 

 

 

5,711

 

Total equity

 

 

15,276

 

 

 

16,146

 

Total liabilities and equity

 

$

33,097

 

 

$

30,038

 


TRUETT-HURST, INC. AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except share data)

 

 

Three Months Ended December 31,

 

 

Six Months Ended December 31,

 

 

2017

 

 

2016

 

 

2017

 

 

2016

 

Sales

$

5,867

 

 

$

5,958

 

 

$

12,284

 

 

$

12,060

 

Less excise tax

 

(166

)

 

 

(221

)

 

 

(393

)

 

 

(438

)

Net sales

 

5,701

 

 

 

5,737

 

 

 

11,891

 

 

 

11,622

 

Cost of sales

 

3,858

 

 

 

3,700

 

 

 

8,003

 

 

 

7,756

 

Gross profit

 

1,843

 

 

 

2,037

 

 

 

3,888

 

 

 

3,866

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Sales and marketing

 

1,479

 

 

 

1,380

 

 

 

2,933

 

 

 

2,604

 

General and administrative

 

953

 

 

 

706

 

 

 

1,743

 

 

 

1,518

 

Loss (gain) on disposal of assets

 

4

 

 

 

26

 

 

 

(19

)

 

 

43

 

Total operating expenses

 

2,436

 

 

 

2,112

 

 

 

4,657

 

 

 

4,165

 

Net (loss) from operations

 

(593

)

 

 

(75

)

 

 

(769

)

 

 

(299

)

Other income (expense):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest expense, net

 

(111

)

 

 

(96

)

 

 

(221

)

 

 

(176

)

Gain on fair value of interest rate swap

 

25

 

 

 

108

 

 

 

27

 

 

 

131

 

Other (expense) income

 

(3

)

 

 

(7

)

 

 

(10

)

 

 

828

 

Total other (expense) income

 

(89

)

 

 

5

 

 

 

(204

)

 

 

783

 

Net (loss) income before income taxes

 

(682

)

 

 

(70

)

 

 

(973

)

 

 

484

 

Income tax expense

 

(1

)

 

 

(1

)

 

 

(1

)

 

 

(2

)

Net (loss) income attributable to Truett-Hurst, Inc.

   and H.D.D. LLC

 

(683

)

 

 

(71

)

 

 

(974

)

 

 

482

 

Net (loss) income attributable to noncontrolling

   interest: H.D.D. LLC

 

(274

)

 

 

(25

)

 

 

(391

)

 

 

212

 

Net (loss) income attributable to Truett-Hurst, Inc.

$

(409

)

 

$

(46

)

 

$

(583

)

 

$

270

 

Net (loss) income per share:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic per share

$

(0.09

)

 

$

(0.01

)

 

$

(0.13

)

 

$

0.06

 

Diluted per share

$

(0.09

)

 

$

(0.01

)

 

$

(0.13

)

 

$

0.04

 

Weighted average shares used in computing net (loss)

   income per share:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic weighted average shares

 

4,460,417

 

 

 

4,314,553

 

 

 

4,449,208

 

 

 

4,310,559

 

Diluted weighted average shares

 

4,460,417

 

 

 

4,314,553

 

 

 

4,449,208

 

 

 

7,510,936

 

 


TRUETT-HURST, INC. AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

 

 

Six Months Ended

 

 

 

December 31,

 

 

 

2017

 

 

2016

 

Cash flows from operating activities:

 

 

 

 

 

 

 

 

Net (loss) income

 

$

(974

)

 

$

482

 

Adjustments to reconcile net (loss) income to net cash provided by

   operating activities:

 

 

 

 

 

 

 

 

Depreciation and amortization

 

 

486

 

 

 

410

 

Reserve for assets to be abandoned

 

 

 

 

 

127

 

Stock-based compensation

 

 

102

 

 

 

151

 

Gain on fair value of interest rate swap

 

 

(27

)

 

 

(130

)

(Gain) loss on disposal of assets

 

 

(19

)

 

 

43

 

Changes in operating assets and liabilities, net

 

 

 

 

 

 

 

 

Accounts receivable

 

 

(618

)

 

 

667

 

Inventories

 

 

(1,666

)

 

 

163

 

Bulk wine deposits

 

 

(94

)

 

 

271

 

Other current assets

 

 

(95

)

 

 

22

 

Accounts payable

 

 

2,675

 

 

 

173

 

Accrued expenses

 

 

201

 

 

 

(557

)

Depletion allowance and accrual for sales returns

 

 

40

 

 

 

(110

)

Net cash provided by operating activities

 

 

11

 

 

 

1,712

 

Cash flows from investing activities:

 

 

 

 

 

 

 

 

Acquisition of property and equipment

 

 

(1,557

)

 

 

(371

)

Acquisition of intangible and other assets

 

 

(12

)

 

 

(18

)

Proceeds from sale of assets

 

 

23

 

 

 

5

 

Net cash used in investing activities

 

 

(1,546

)

 

 

(384

)

Cash flows from financing activities:

 

 

 

 

 

 

 

 

Net proceeds from (payments on) lines of credit

 

 

985

 

 

 

(5,430

)

Proceeds from long term debt

 

 

327

 

 

 

387

 

Payments on long term debt and capital lease obligation

 

 

(299

)

 

 

(302

)

Net cash provided by (used in) financing activities

 

 

1,013

 

 

 

(5,345

)

Net change in cash and cash equivalents

 

 

(522

)

 

 

(4,017

)

Cash and cash equivalents at beginning of period

 

 

783

 

 

 

4,043

 

Cash and cash equivalents at end of period

 

$

261

 

 

$

26

 

Supplemental disclosure of cash flow information:

 

 

 

 

 

 

 

 

Cash paid for interest

 

$

219

 

 

$

174

 

Cash paid for income taxes

 

$

 

 

$

2

 

Non-cash investing and financing activities:

 

 

 

 

 

 

 

 

Equipment financed with capital lease obligation

 

 

 

 

 

387

 

 

 

For more information, contact:

Truett-Hurst, Inc.

Evan B. Meyer,

Chief Financial Officer

Phone: 707.431.4423

Fax: 707.395.0289

Email:  evan@truetthurst.com