news release
May 6, 2014
NASDAQ: THST
Truett-Hurst Inc. Reports Third Quarter
Fiscal Year 2014 Financial Results
Healdsburg, California (May 6, 2014)
– Truett-Hurst Inc. (NASDAQ: THST), today reported fiscal year 2014 financial results for its third quarter and nine months
ended March 31, 2014.
“Our net sales continue to grow,
increasing 44% for the quarter and 36% year-to-date compared to the same periods last year. Margins held steady at 34%, representing
a slight improvement year over year. Our revolutionary new brand introductions including the evocative wraps, California Square®
and PaperBoy® are gaining traction in the marketplace and evolving from an introductory retailer exclusive program
to national and international distribution in the broad market. These brands, in conjunction with expanded new retailer exclusive
listings, our broader portfolio and future innovations, will continue to drive Truett-Hurst’s growth,” said Phillip
L. Hurst, Truett-Hurst’s CEO.
Sales: Strong growth was seen in
all sales channels. Wholesale net sales increased 54% and 36% for the third quarter and nine months ended March 31, 2014 compared
to the prior-year periods and was attributable to continued sales throughout the portfolio, including California Square®,
Colby Red® and the Evocative Wraps. Direct to consumer net sales through our Truett-Hurst and VML tasting rooms
increased 17% and 28% for the third quarter and nine months ended March 31, 2014 compared to the prior-year periods and was attributable
to wine club sales and tasting room traffic. Internet net sales increased 46% and 58% for the third quarter and nine months ended
March 31, 2014 compared to the prior-year periods (The Wine Spies LLC was acquired in August, our first quarter of fiscal 2013)
due to increased website traffic and sales mix, including higher priced, limited production wines. International net sales, Canada
and Mexico, were $0.4 million and $1.1 for the third quarter and nine-months of FY14 compared to $0.01 million and $0.2 million
for the prior year periods.
Gross Margins: We achieved gross
profit margins of 34.0% and 34.2% of net sales for the quarter and nine months ended March 31, 2014, respectively. Compared to
the prior-year periods, quarter over quarter margins decreased 330 basis points due to sales mix between the three channels, but
year-to-date margins increased 60 basis points. The wholesale channel margins compared to the prior-year periods, excluding the
effect of a $0.08 million inventory write-down in the quarter, improved 70 basis points for the quarter and 190 basis points year-to-date.
The direct to consumer channel gross margins increased 500 and 380 basis points, respectively, and were attributable to sales mix,
reduced discounting, and selected price increases associated with certain vintage transitions. The internet channel gross
margins decreased 1,490 and 920 basis points, respectively, as we continue to emphasize and achieve gross profit goals over gross
margin by offering higher priced wines.
Truett-Hurst
• PO BOX 1532 • HEALDSBURG • CA • 95448 • F: 707. 431.4423 • email: ir@truetthurstinc.com
Truett-Hurst, Inc. Reports Third Quarter
Fiscal Year 2014 Financial Results
Operating Loss: The fiscal 2014
net loss for the quarter and nine months ended March 31, 2014, before H.D.D. LLC’s non-controlling interest totaled $0.6
million for each period which included the disclosed provision for loss on deposit of $0.4 million from our former paper bottle
supplier’s filing of administration in the UK compared to $0.3 million and $0.5 million for the prior-year periods.
Sales and marketing expense as a percentage
of net sales improved for the quarter from 28.1% to 24.3% and slightly for the year, compared to the prior-year periods. General
and administrative expense as a percentage of net sales improved for the quarter from 16.0% to 14.3% and was flat for the year
compared to the prior-year periods.
James D. Bielenberg, CFO of Truett-Hurst,
Inc., states “As we build out infrastructure in personnel and systems, including those costs associated with being a public
company, we are beginning to realize leverage in operating expenses as a percentage of sales. Further progress should continue
as we grow the top line. ” Mr. Bielenberg concluded, “Based upon our third quarter results and current projections
we believe we are in line with our revised fiscal 2014 annual guidance of March 6, 2014 furnished on Form 8-K, which assumes there’s
no deterioration in the U.S. economy.”
We assume no obligation to update our fiscal 2014 annual guidance.
The absence of any statement by us in the future should not be presumed to represent an affirmation of this earnings guidance.
Note Regarding Condensed Consolidated Financial Statements
The unaudited condensed consolidated financial
statements for the three and nine-month periods ended March 31, 2014 and the June 30, 2013 balance sheet, include the results of
Truett-Hurst, Inc. and its consolidated subsidiaries: H.D.D. LLC and The Wine Spies, LLC. The unaudited condensed consolidated
financial statements for the three and nine-month periods ended March 31, 2013 reflect the results of the LLC and Wine Spies. Truett-Hurst,
Inc.’s fiscal 2013 period is from June 26, 2013 to June 30, 2013 due to the completion of the Company’s initial public
offering on June 25, 2013.
Conference Call Details
Truett-Hurst
Inc. will conduct a conference call at 10:00 a.m. Pacific Time (1:00 p.m. Eastern Time), on May 7, 2014 to discuss its third quarter
fiscal 2014 results for the period ended March 31, 2014. To listen to the conference call, dial in approximately ten minutes before
the scheduled call to 1.877.870.4263, Canada Toll Free: 1.855.669.9657 or International Toll: 1.412.317.0790 and request Truett-Hurst
Third Quarter of Fiscal 2014 Results Call. The webcast link is: http://www.videonewswire.com/event.asp?id=99150.
Truett-Hurst,
Inc. Reports Third Quarter Fiscal Year 2014 Financial Results
A replay of the call will be available
one hour after the end of the conference call through May 19, 2014 at 9:00 am ET. To listen to the replay, dial US Toll Free: 1.877.344.7529
or International Toll: 1.412.317.0088 and enter conference number: 10045548.
About Truett-Hurst Inc.
Truett-Hurst Inc. (NASDAQ: THST, http:www.truetthurstinc.com)
is a holding company and its sole asset is the controlling equity interest in H.D.D. LLC., an innovative and fast-growing super-premium,
ultra-premium and luxury wine sales, marketing and production company based in the acclaimed Dry Creek and Russian River Valleys
of Sonoma County, California. Our corporate website is www.truetthurstinc.com. Our principal executive offices are located at 4035
Westside Road, Healdsburg, California 95448, and our telephone number is 707.431.4423. We are an “emerging growth company,”
as defined in the Jumpstart Our Business Startups Act, enacted on April 5, 2012 (“JOBS Act”), a small reporting company
as defined by Section 15(d) of the Exchange Act, and a controlled company as defined by the corporate governance rules of NASDAQ.
Forward-Looking Statements
This press release and our earnings conference
call for the third quarter ended March 31, 2014 contain forward-looking statements within the meaning of 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, expenses, and other guidance for fiscal 2014, ended
June 30, 2014 and any future periods. 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 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 could harm our business; credit
facility restrictions on our current and future operations; failure to protect, or infringement of, trademarks and proprietary
rights; 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. We undertake no obligation to publicly update or review any forward-looking statement, whether
as a result of new information, future developments or otherwise.
This press release should be read in conjunction
with our most recent annual report on Form 10-K filed on September 27, 2013, and our other reports currently on file with the Securities
and Exchange Commission, which contain more detailed discussion of risks and uncertainties that may affect future results. We do
not undertake to update any forward-looking statements unless otherwise required by law.
Truett-Hurst, Inc. Reports Third Quarter
Fiscal Year 2014 Financial Results
| For more information, contact: |
For more information, contact: |
|
| Truett-Hurst Inc. |
Truett-Hurst Inc.’s Investor Relations |
|
| James D. Bielenberg, |
Wil Lindgren, |
|
| Chief Financial Officer |
Director of Reporting and Finance |
|
| Phone: 707.431.4423 |
Phone: 707.431.4436 |
|
| Fax: 707.395.0289 |
Fax: 707.395.0290 |
|
| Email: james@truetthurstinc.com |
Email: ir@truetthurstinc.com |
|
| |
Truett-Hurst, Inc. Reports Third Quarter
Fiscal Year 2014 Financial Results
TRUETT-HURST INC. AND SUBSIDIARIES
(Prior to June 26, 2013, H.D.D. LLC and
Subsidiary)
CONDENSED CONSOLIDATED STATEMENTS OF
OPERATIONS
(In thousands, except share data)
(unaudited)
| | |
Quarters Ended
March 31, | | |
Nine-Month Periods Ended March 31, | |
| | |
2014 | | |
2013 | | |
2014 | | |
2013 | |
| | |
| | |
| |
| Sales | |
$ | 5,280 | | |
$ | 3,666 | | |
$ | 16,957 | | |
$ | 12,477 | |
| Less excise tax | |
| (120 | ) | |
| (92 | ) | |
| (415 | ) | |
| (342 | ) |
| Net sales | |
| 5,160 | | |
| 3,574 | | |
| 16,542 | | |
| 12,135 | |
| | |
| | | |
| | | |
| | | |
| | |
| Cost of sales | |
| 3,408 | | |
| 2,242 | | |
| 10,880 | | |
| 8,057 | |
| | |
| | | |
| | | |
| | | |
| | |
| Gross profit | |
| 1,752 | | |
| 1,332 | | |
| 5,662 | | |
| 4,078 | |
| | |
| | | |
| | | |
| | | |
| | |
| Operating expenses: | |
| | | |
| | | |
| | | |
| | |
| Sales and marketing | |
| 1,252 | | |
| 1,005 | | |
| 3,582 | | |
| 2,653 | |
| General and administrative | |
| 738 | | |
| 571 | | |
| 2,285 | | |
| 1,677 | |
| Provision for loss of deposit | |
| 400 | | |
| - | | |
| 400 | | |
| - | |
| Bulk wine sales, net (gain) loss | |
| - | | |
| - | | |
| (1 | ) | |
| - | |
| Total operating expenses | |
| 2,390 | | |
| 1,576 | | |
| 6,266 | | |
| 4,330 | |
| Loss from operations | |
| (638 | ) | |
| (244 | ) | |
| (604 | ) | |
| (252 | ) |
| Other income (expense): | |
| | | |
| | | |
| | | |
| | |
| Interest expense | |
| (42 | ) | |
| (73 | ) | |
| (123 | ) | |
| (253 | ) |
| Other | |
| (56 | ) | |
| 58 | | |
| (26 | ) | |
| (17 | ) |
| Total other income (expense) | |
| (98 | ) | |
| (15 | ) | |
| (149 | ) | |
| (270 | ) |
| Loss before income taxes | |
| (736 | ) | |
| (259 | ) | |
| (753 | ) | |
| (522 | ) |
| Income tax (benefit) expense | |
| (111 | ) | |
| - | | |
| (100 | ) | |
| 2 | |
| Net loss before non-controlling interests | |
| (625 | ) | |
| (259 | ) | |
| (653 | ) | |
| (524 | ) |
| Less: Net income (loss) attributable to non-controlling interest: The Wine Spies, LLC | |
| (13 | ) | |
| 4 | | |
| (74 | ) | |
| (44 | ) |
| Net loss attributable to Truett-Hurst, Inc. and H.D.D. LLC | |
| (612 | ) | |
$ | (263 | ) | |
| (579 | ) | |
| (480 | ) |
| Less: Net loss attributable to non-controlling interest: H.D.D. LLC | |
| (428 | ) | |
| | | |
| (402 | ) | |
| | |
| Net loss attributable to Truett-Hurst, Inc. | |
$ | (184 | ) | |
| | | |
$ | (177 | ) | |
| | |
| | |
| | | |
| | | |
| | | |
| | |
| Net earnings per share: | |
| | | |
| | | |
| | | |
| | |
| Basic and diluted | |
$ | (0.06 | ) | |
| | | |
$ | (0.07 | ) | |
| | |
| | |
| | | |
| | | |
| | | |
| | |
| Weighted average shares used in computing net loss per share: | |
| | | |
| | | |
| | | |
| | |
| Basic and diluted | |
| 2,936,894 | | |
| | | |
| 2,704,752 | | |
| | |
Truett-Hurst, Inc. Reports Third Quarter
Fiscal Year 2014 Financial Results
TRUETT-HURST INC. AND SUBSIDIARIES
(Prior to June 26, 2013, H.D.D. LLC and
Subsidiary)
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except share data)
| | |
March 31, 2014 | | |
June 30, 2013 | |
| ASSETS | |
(unaudited) | | |
| |
| Current assets: | |
| | | |
| | |
| Cash | |
$ | 5,117 | | |
$ | 11,367 | |
| Accounts receivable | |
| 2,523 | | |
| 2,816 | |
| Inventories | |
| 17,184 | | |
| 13,222 | |
| Bulk wine deposit | |
| 1,125 | | |
| - | |
| Other current assets | |
| 205 | | |
| 245 | |
| Total current assets | |
| 26,154 | | |
| 27,650 | |
| Property and equipment, net | |
| 5,575 | | |
| 5,383 | |
| Goodwill | |
| 134 | | |
| 134 | |
| Intangible assets, net | |
| 659 | | |
| 706 | |
| Deferred tax asset, net | |
| 2,669 | | |
| - | |
| Other assets, net | |
| 369 | | |
| 259 | |
| Total assets | |
$ | 35,560 | | |
$ | 34,132 | |
| | |
| | | |
| | |
| LIABILITIES and STOCKHOLDERS' EQUITY | |
| | | |
| | |
| | |
| | | |
| | |
| Current liabilities: | |
| | | |
| | |
| Line of credit | |
$ | 6,582 | | |
$ | 6,887 | |
| Accounts payable | |
| 2,020 | | |
| 2,123 | |
| Accrued expenses | |
| 933 | | |
| 1,710 | |
| Due to related parties | |
| 331 | | |
| 71 | |
| Current portion of deferred taxes | |
| - | | |
| 96 | |
| Current maturities of related party notes | |
| 73 | | |
| 70 | |
| Current maturities of long-term debt | |
| 332 | | |
| 250 | |
| Total current liabilities | |
| 10,271 | | |
| 11,207 | |
| | |
| | | |
| | |
| Long-term debt, net of current maturities | |
| 3,611 | | |
| 3,454 | |
| Due to related parties pursuant to tax receivable agreement | |
| 2,512 | | |
| - | |
| Deferred taxes, net of current portion | |
| - | | |
| 127 | |
| Deferred rent liability | |
| 51 | | |
| 53 | |
| Related party notes, net of current maturities | |
| 12 | | |
| 67 | |
| Total liabilities | |
| 16,457 | | |
| 14,908 | |
| | |
| | | |
| | |
| Commitments and contingencies | |
| | | |
| | |
| | |
| | | |
| | |
| Stockholders' equity | |
| | | |
| | |
| Preferred stock, par value of $0.001 per share, 5,000,000 shares authorized and zero issued and outstanding | |
| - | | |
| - | |
| Class A common stock, par value of $0.001 per share, 7,000,000 authorized and 3,599,778 issued and outstanding at March 31, 2014 and 2,700,000 at June 30, 2013 | |
| 4 | | |
| 3 | |
| Class B common stock, par value of $0.001 per share,1,000 authorized and 10 issued and outstanding | |
| - | | |
| - | |
| Additional paid-in capital | |
| 13,786 | | |
| 10,977 | |
| Accumulated deficit | |
| (3,645 | ) | |
| (3,467 | ) |
| Total Truett-Hurst, Inc. equity | |
| 10,145 | | |
| 7,513 | |
| Non-controlling interests | |
| 8,958 | | |
| 11,711 | |
| Total equity | |
| 19,103 | | |
| 19,224 | |
| Total liabilities and stockholders' equity | |
$ | 35,560 | | |
$ | 34,132 | |
Truett-Hurst,
Inc. Reports Third Quarter Fiscal Year 2014 Financial Results
TRUETT-HURST INC. AND SUBSIDIARIES
(Prior to June 26, 2013, H.D.D. LLC and
Subsidiary)
CONDENSED CONSOLIDATED STATEMENTS OF
CASH FLOWS
(In thousands)
(unaudited)
| | |
Nine-Month Periods Ended
March 31, | |
| | |
2014 | | |
2013 | |
| Cash flows from operating activities: | |
| | | |
| | |
| Net loss | |
$ | (653 | ) | |
$ | (524 | ) |
| Adjustments to reconcile net loss to net cash used in operating activities: | |
| | | |
| | |
| Depreciation and amortization | |
| 394 | | |
| 256 | |
| Stock-based compensation | |
| 253 | | |
| 56 | |
| Deferred taxes | |
| (100 | ) | |
| - | |
| Loss (gain) on fair value of warrant and interest rate swap | |
| (3 | ) | |
| 18 | |
| Deferred rent | |
| (2 | ) | |
| (3 | ) |
| Contributed rent | |
| - | | |
| 35 | |
| | |
| | | |
| | |
| Changes in operating assets and liabilities, net | |
| | | |
| | |
| Accounts receivable | |
| 293 | | |
| (87 | ) |
| Inventories | |
| (3,962 | ) | |
| (4,749 | ) |
| Bulk wine deposit | |
| (1,125 | ) | |
| (486 | ) |
| Other current assets | |
| 44 | | |
| (664 | ) |
| Accounts payable and accrued expenses | |
| (880 | ) | |
| 1,367 | |
| Net cash used in operating activities | |
| (5,741 | ) | |
| (4,781 | ) |
| | |
| | | |
| | |
| Cash flows from investing activities: | |
| | | |
| | |
| Acquisition of property and equipment | |
| (472 | ) | |
| (725 | ) |
| Acquisition of intangible and other assets | |
| (180 | ) | |
| (52 | ) |
| Acquisition of The Wine Spies, LLC | |
| - | | |
| (325 | ) |
| Proceeds from sale of assets | |
| 1 | | |
| - | |
| Net cash used in investing activities | |
| (651 | ) | |
| (1,102 | ) |
| | |
| | | |
| | |
| Cash flows from financing activities: | |
| | | |
| | |
| Net proceeds from (payments on) line of credit | |
| (305 | ) | |
| 5,415 | |
| Advances from related parties | |
| - | | |
| 683 | |
| Net proceeds (payments to) related parties | |
| 260 | | |
| (77 | ) |
| Proceeds from related party notes | |
| - | | |
| 350 | |
| Payments on related party notes | |
| (52 | ) | |
| (450 | ) |
| Proceeds from long-term debt | |
| 425 | | |
| 3,881 | |
| Payments on long-term debt | |
| (186 | ) | |
| (3,544 | ) |
| Payments on amount due factor | |
| - | | |
| (869 | ) |
| Proceeds from exercise of warrant | |
| - | | |
| 498 | |
| Net cash provided by financing activities | |
| 142 | | |
| 5,887 | |
| | |
| | | |
| | |
| Net increase (decrease) in cash | |
| (6,250 | ) | |
| 4 | |
| Cash at beginning of period | |
| 11,367 | | |
| 167 | |
| Cash at end of period | |
$ | 5,117 | | |
$ | 171 | |
| | |
| | | |
| | |
| Supplemental disclosure of non-cash transactions | |
| | | |
| | |
| Contributed rent for membership interest | |
$ | - | | |
$ | 36 | |
| Deferred tax asset arising from LLC unit exchange | |
$ | 2,791 | | |
$ | - | |
| Due to related parties pursuant to tax receivable agreement | |
$ | 2,512 | | |
$ | - | |
| Equity benefit on LLC unit exchange | |
$ | 279 | | |
$ | - | |
