Exhibit 99.1
Truett-Hurst, Inc. Reports Results for the First Quarter of Fiscal Year 2018 Ended September 30, 2017
Healdsburg, California (November 20, 2017) – 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 first quarter of fiscal year 2018 which ended on September 30, 2017.
Q1 FY18 vs. Q1 FY17
For Q1 of fiscal year 2018, total net sales from continuing operations totaled $6.2 million, an increase of 5.2% compared to the prior year. The increase was due to higher sales in the broadmarket and sales to one large retailer. Consolidated gross margin from continuing operations was 33.0%, an increase of 1.1 margin points over the prior year due to a change in the ratio of more profitable wholesale business to less profitable or value oriented retailers.
Wholesale Segment
| • | Net Sales of $4.8 million (+6.0% or +$0.3 million compared to the prior year) |
| • | Gross Margin of 23.7% (an increase of 2.1 margin points compared to the prior year) |
| • | Gross Profit of $1.1 million (+16.3% or +$0.2 million compared to the prior year) |
Direct to Consumer (DTC) Segment
| • | Net Sales of $1.4 million (+2.5% or +$0.035 million compared to the prior year) |
| • | Gross Margin of 64.8% (an increase of 2.5 margin points compared to the prior year) |
| • | Gross Profit of $0.9 million (+6.5% or +$0.056 million compared to the prior year) |
Operating Expenses
Operating expenses for the first quarter of fiscal year 2018 ended September 30, 2017 were $2.2 million compared to $2.1 million in the prior year, an increase of 8.2% caused by the hiring of additional sales personnel.
“I’m pleased that we grew both top line revenue and gross margin % in the first quarter of this fiscal year coming into the important second quarter holiday period (OND). The gross margin % gain was due to a sustainable mix shift to more profitable products. We also launched the innovative Cense wine brand, the first premium, low calorie wine in partnership with Weight Watchers.”
Earnings Call
The Company will not be conducting an earnings call related to its results for the first quarter of fiscal year 2018 ended September 30, 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 first quarter of fiscal year 2018 ended September 30, 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)
| | September 30, 2017 | | | June 30, 2017 | |
Assets | | | | | | | | |
Current assets: | | | | | | | | |
Cash and cash equivalents | | $ | 26 | | | $ | 783 | |
Accounts receivable | | | 3,637 | | | | 1,932 | |
Inventories, net | | | 21,202 | | | | 20,609 | |
Bulk wine deposits | | | 94 | | | | — | |
Other current assets | | | 1,177 | | | | 505 | |
Total current assets | | | 26,136 | | | | 23,829 | |
Property and equipment, net | | | 5,787 | | | | 5,426 | |
Intangible assets, net | | | 507 | | | | 506 | |
Other assets, net | | | 245 | | | | 277 | |
Total assets | | $ | 32,675 | | | $ | 30,038 | |
Liabilities and Equity | | | | | | | | |
Current liabilities: | | | | | | | | |
Lines of credit | | $ | 7,615 | | | $ | 7,290 | |
Accounts payable | | | 4,170 | | | | 1,994 | |
Accrued expenses | | | 710 | | | | 546 | |
Depletion allowance and accrual for sales returns | | | 509 | | | | 495 | |
Current maturities of capital lease obligation | | | 11 | | | | 11 | |
Current maturities of long term debt | | | 475 | | | | 491 | |
Total current liabilities | | | 13,490 | | | | 10,827 | |
Long term debt, net of current maturities | | | 3,208 | | | | 3,002 | |
Capital lease obligation, net of current maturities | | | 60 | | | | 63 | |
Total liabilities | | | 16,758 | | | | 13,892 | |
| | | | | | | | |
Equity: | | | | | | | | |
Shareholders’ equity: | | | | | | | | |
Preferred stock, par value of $0.001 per share, 5,000,000 shares authorized, none issued and outstanding at September 30, 2017 and June 30, 2017 | | | — | | | | — | |
Class A common stock, par value of $0.001 per share, 15,000,000 authorized, 4,460,417 issued and outstanding at September 30, 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 September 30, 2017 and June 30, 2017, respectively | | | — | | | | — | |
Additional paid-in capital | | | 16,214 | | | | 16,082 | |
Accumulated deficit | | | (5,825 | ) | | | (5,651 | ) |
Total Truett-Hurst, Inc. shareholders' equity | | | 10,393 | | | | 10,435 | |
Noncontrolling interest | | | 5,524 | | | | 5,711 | |
Total equity | | | 15,917 | | | | 16,146 | |
Total liabilities and equity | | $ | 32,675 | | | $ | 30,038 | |
TRUETT-HURST, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except share data)
| | Three Months Ended September 30, | |
| | 2017 | | | 2016 | |
Sales | | $ | 6,417 | | | $ | 6,102 | |
Less excise tax | | | (227 | ) | | | (216 | ) |
Net sales | | | 6,190 | | | | 5,886 | |
Cost of sales | | | 4,145 | | | | 4,056 | |
Gross profit | | | 2,045 | | | | 1,830 | |
Operating expenses: | | | | | | | | |
Sales and marketing | | | 1,454 | | | | 1,224 | |
General and administrative | | | 790 | | | | 812 | |
(Gain) loss on disposal of assets | | | (22 | ) | | | 17 | |
Total operating expenses | | | 2,222 | | | | 2,053 | |
Net loss from operations | | | (177 | ) | | | (223 | ) |
Other income (expense): | | | | | | | | |
Interest expense, net | | | (110 | ) | | | (80 | ) |
Gain on lease termination, net | | | — | | | | 844 | |
Gain on fair value of interest rate swap | | | 2 | | | | 23 | |
Other expense | | | (8 | ) | | | (9 | ) |
Total other (expense) income | | | (116 | ) | | | 778 | |
Net (loss) income before income taxes | | | (293 | ) | | | 555 | |
Income tax expense | | | — | | | | (1 | ) |
Net (loss) income from continuing operations | | | (293 | ) | | | 554 | |
Net (loss) income attributable to Truett-Hurst, Inc. and H.D.D. LLC | | | (293 | ) | | | 554 | |
Net (loss) income attributable to noncontrolling interest: H.D.D. LLC | | | (117 | ) | | | 237 | |
Net (loss) income attributable to Truett-Hurst, Inc. | | $ | (176 | ) | | $ | 317 | |
Net (loss) income per share: | | | | | | | | |
Basic per share | | $ | (0.04 | ) | | $ | 0.07 | |
Diluted per share | | $ | (0.04 | ) | | $ | 0.04 | |
Weighted average shares used in computing net (loss) income per share: | | | | | | | | |
Basic weighted average shares | | | 4,437,998 | | | | 4,306,609 | |
Diluted weighted average shares | | | 4,437,998 | | | | 7,675,917 | |
TRUETT-HURST, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
| | Three Months Ended | |
| | September 30, | |
| | 2017 | | | 2016 | |
Cash flows from operating activities: | | | | | | | | |
Net (loss) income from continuing operations | | $ | (293 | ) | | $ | 554 | |
Adjustments to reconcile net (loss) income to net cash provided by operating activities: | | | | | | | | |
Depreciation and amortization | | | 213 | | | | 200 | |
Reserve for assets to be abandoned | | | — | | | | 127 | |
Stock-based compensation | | | 62 | | | | 95 | |
Gain on fair value of interest rate swap | | | (2 | ) | | | (23 | ) |
Gain on lease termination, net | | | — | | | | (844 | ) |
Proceeds received on lease termination | | | — | | | | 955 | |
Gain on disposal of assets | | | (22 | ) | | | (94 | ) |
Changes in operating assets and liabilities, net | | | | | | | | |
Accounts receivable | | | (1,705 | ) | | | (1,212 | ) |
Inventories | | | (593 | ) | | | (1,748 | ) |
Bulk wine deposits | | | (94 | ) | | | 271 | |
Other current assets | | | (670 | ) | | | (90 | ) |
Accounts payable | | | 2,176 | | | | 2,704 | |
Accrued expenses | | | 164 | | | | 179 | |
Depletion allowance and accrual for sales returns | | | 14 | | | | (492 | ) |
Due to related parties | | | — | | | | 64 | |
Net cash (used in) provided by operating activities | | | (750 | ) | | | 646 | |
Cash flows from investing activities: | | | | | | | | |
Acquisition of property and equipment | | | (535 | ) | | | (288 | ) |
Acquisition of intangible and other assets | | | (6 | ) | | | (15 | ) |
Proceeds from sale of assets | | | 22 | | | | 4 | |
Net cash used in investing activities | | | (519 | ) | | | (299 | ) |
Cash flows from financing activities: | | | | | | | | |
Net proceeds from (payments on) lines of credit | | | 325 | | | | (277 | ) |
Proceeds from long term debt | | | 327 | | | | 387 | |
Payments on long term debt | | | (137 | ) | | | (176 | ) |
Payments on capital lease obligation | | | (3 | ) | | | — | |
Net cash provided by (used in) financing activities | | | 512 | | | | (66 | ) |
Net change in cash and cash equivalents | | | (757 | ) | | | 281 | |
Cash and cash equivalents at beginning of period | | | 783 | | | | 4,043 | |
Cash and cash equivalents at end of period | | $ | 26 | | | $ | 4,324 | |
Supplemental disclosure of cash flow information: | | | | | | | | |
Cash paid for interest | | $ | 110 | | | $ | 80 | |
Cash paid for income taxes | | | — | | | $ | 1 | |
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
