HEALDSBURG, Calif., Sept. 24, 2015 /PRNewswire/ -- Truett-Hurst, Inc. (NASDAQ: THST) today reported results for fiscal 2015 ("FY15"), which ended June 30, 2015. Truett-Hurst, Inc. operates an innovative and fast growing super-premium and ultra-premium wine sales, marketing and production company based in the acclaimed Dry Creek and Russian River Valleys of Sonoma County, California.
FY15 vs. FY14
- Net sales up 20.7% to $26.6 million from $22.1 million (+$4.5 million):
- Wholesale up 6.3% to $16.8 million.
- Direct to Consumer ("DTC") up 19.8% to $4.8 million.
- Internet up 125.5% to $5.0 million.
Despite the Company's inability to ship the Paperboy product due to continued unavailability of bottles, wholesale net sales during the year were up compared to the prior year. After eliminating Paperboy sales from both periods and the Paperboy related loss contingency from FY15, net sales for all other wholesale products grew 20.8% from an adjusted total of $14.3 million in FY14 (of the 20.8% growth, 5% was attributed to sales of the CA Winecraft brand). Applying the same adjustments to overall net sales, total net sales grew 31.9% in the year from an adjusted total of $20.6 million in FY14.
During the fourth quarter of 2015 we launched our CA Winecraft brand with The Kroger Company. The number of stores that participated in the "Summer Rack Program" and/or stocked shelves with CA Winecraft product fell short of Kroger's initial guidance and our expectations leading us to have excess inventory as of June 30, 2015. Due to this excess inventory, we established a $0.5 million reserve for potential obsolescence of the CA Winecraft product which increased our cost of goods sold and reduced our overall gross margins.
Gross margins declined to 33% from 34%. Gross profit increased $1.3 million to $8.7 million. Gross margin in FY15 was impacted by Paperboy charges of $0.8 million and charges of $0.6 million related to CA Winecraft. After adjusting for these items, gross margin for FY15 would have been 37% vs. 34% in FY14.
Operating Expenses:
Operating expenses for FY15 were $11.0 million compared to $8.7 million in the prior-year period. Sales and marketing expense increased $1.6 million primarily due to higher variable expenses associated with our internet net sales (i.e., shipping, credit card transaction fees and sales commissions). We also had higher personnel costs and brand related programming, promotions and incentives. General and administrative expense was higher by $0.7 million primarily due to increased compensation expense (including non-cash stock compensation expense) and increased professional fees. FY15 included non-cash impairment charges of $0.5 million ($0.4 million related to The Wine Spies and $0.1 million related to CA Winecraft) while FY14 included a provision for loss on deposit of $0.5 million from our former paper bottle supplier's filing of administration in the UK.
Phillip L. Hurst, Truett-Hurst, Inc.'s President and CEO stated, "Fiscal 2015 has been a challenging year for Truett-Hurst with two of our innovation projects resulting in losses for the company. Our internet business, which started the year off with triple-digit growth, ended the year with single digit growth in the fourth quarter. Lessons learned this year have helped us to refine our strategy and refocus our efforts with retailers dedicated to growing retail exclusive brands. We look forward to putting the challenges of 2015 behind us and executing our strategy in 2016 and beyond."
Earnings Call
Truett-Hurst, Inc.'s management will host a conference call today, September 24, 2015, at 1:30 p.m. PDT (4:30 p.m. EDT) to discuss the Company's financial results. To listen to the conference call, dial in approximately ten minutes before the scheduled call to 1.888.347.6082 or international at 1.412.902.4286 and request Truett-Hurst, Inc.'s Fiscal Year Ended June 30, 2015 Results Call, or visit our webcast link: https://www.webcaster4.com/Webcast/Page/1132/10595.
A supporting Fiscal Year End 2015 Earnings Presentation, in advance of the conference call, will be available at:
http://www.truetthurstinc.com/index.php?s=151&cat=3
To listen to a replay of the call, dial US Toll Free: 1.877.344.7529 or International Toll: 1.412.317.0088 and enter the replay access code 10072536. The call will be available one hour after the end of the conference call through October 1, 2015 at 9:00 am ET.
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TRUETT-HURST, INC. AND SUBSIDIARIES |
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CONSOLIDATED STATEMENTS OF OPERATIONS |
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(In thousands, except share data) |
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For the years ended |
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June 30, |
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2015 |
2014 |
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Sales |
$ 27,380 |
$ 22,564 |
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|
Less excise tax |
(754) |
(507) |
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Net sales |
26,626 |
22,057 |
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Cost of sales |
17,885 |
14,628 |
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Gross profit |
8,741 |
7,429 |
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Operating expenses: |
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Sales and marketing |
7,035 |
5,482 |
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General and administrative |
3,432 |
2,699 |
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Provision for loss of deposit |
- |
490 |
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Impairment of goodwill and intangible assets |
361 |
- |
||
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Impairment of other assets |
112 |
- |
||
|
Loss (gain) on disposal of assets |
12 |
(3) |
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Total operating expenses |
10,952 |
8,668 |
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Loss from operations |
(2,211) |
(1,239) |
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Other expense: |
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Interest expense, net |
(286) |
(170) |
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Other |
(111) |
(56) |
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Total other expense |
(397) |
(226) |
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Loss before income taxes |
(2,608) |
(1,465) |
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Income tax expense (benefit) |
2 |
(181) |
||
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Net loss |
(2,610) |
(1,284) |
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Net loss attributable to non controlling interests: The Wine Spies, LLC |
(162) |
(118) |
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Net loss income attributable to Truett-Hurst, Inc. and H.D.D. LLC |
(2,448) |
(1,166) |
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Less: Net loss attributable to non-controlling interest: H.D.D. LLC |
(1,087) |
(638) |
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Net loss attributable to Truett-Hurst, Inc. |
$ (1,361) |
$ (528) |
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Net loss per share: |
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Basic and diluted |
$ (0.35) |
$ (0.15) |
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Weighted average shares used in computing net loss per share: |
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Basic and diluted shares |
3,862,214 |
3,621,455 |
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TRUETT-HURST, INC. AND SUBSIDIARIES |
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CONSOLIDATED BALANCE SHEETS |
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(In thousands, except share data) |
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June 30, 2015 |
June 30, 2014 |
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ASSETS |
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Current assets: |
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Cash and cash equivalents |
$ 1,679 |
$ 5,567 |
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Accounts receivable |
2,797 |
3,300 |
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Inventories, net |
22,127 |
17,179 |
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Bulk wine deposit |
345 |
1,424 |
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Other current assets |
316 |
161 |
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Total current assets |
27,264 |
27,631 |
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Property and equipment, net |
5,751 |
5,553 |
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Intangible assets, net |
481 |
629 |
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Other assets, net |
407 |
381 |
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Goodwill |
- |
134 |
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Total assets |
$ 33,903 |
$ 34,328 |
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LIABILITIES and EQUITY |
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Current liabilities: |
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Credit facilities |
$ 9,034 |
$ 8,685 |
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Accounts payable and accrued expenses |
4,176 |
3,194 |
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Accrual for sales returns |
524 |
- |
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Due to related parties |
134 |
56 |
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Related party note |
- |
67 |
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Current maturities of long-term debt |
368 |
333 |
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Total current liabilities |
14,236 |
12,335 |
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Deferred rent liability |
26 |
48 |
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Long-term debt, net of current maturities |
3,272 |
3,527 |
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Total liabilities |
17,534 |
15,910 |
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Equity: |
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Stockholders' equity |
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Preferred stock, par value of $0.001 per share, 5,000,000 shares authorized, |
- |
- |
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none issued and outstanding at June 30, 2015 and June 30, 2014 |
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Class A common stock, par value $0.001 per share, 15,000,000 authorized, |
4 |
4 |
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4,010,120 issued and outstanding at June 30, 2015 and 3,750,472 issued |
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and outstanding at June 30, 2014 |
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Class B common stock, par value of $0.001 per share, 1,000 authorized, 8 |
- |
- |
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issued and outstanding at June 30, 2015 and 9 issued and outstanding at |
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June 30, 2014 |
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Additional paid-in capital |
14,618 |
14,057 |
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Accumulated deficit |
(5,356) |
(3,995) |
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Total Truett Hurst, Inc. equity |
9,266 |
10,066 |
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Non-controlling interests |
7,103 |
8,352 |
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Total equity |
16,369 |
18,418 |
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Total liabilities and equity |
$ 33,903 |
$ 34,328 |
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TRUETT-HURST, INC. AND SUBSIDIARIES |
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CONSOLIDATED STATEMENTS OF CASH FLOWS |
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(In thousands) |
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For the years ended |
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June 30, |
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2015 |
2014 |
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Cash flows from operating activities: |
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Net loss |
$ (2,610) |
$ (1,284) |
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Adjustments to reconcile net loss to net cash used in operating activities: |
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Depreciation and amortization |
685 |
540 |
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Reserve for obsolescence of inventories |
623 |
- |
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Impairment of goodwill and intangible assets |
361 |
- |
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Impairment of other assets |
112 |
- |
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Stock-based compensation |
561 |
436 |
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Loss on fair value of interest rate swap |
46 |
44 |
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Loss (gain) on disposal of assets |
12 |
(3) |
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Deferred rent |
(22) |
(5) |
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Deferred taxes |
- |
(180) |
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Changes in operating assets and liabilities, net |
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Accounts receivable |
503 |
(484) |
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Inventories |
(5,571) |
(3,957) |
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Bulk wine deposit |
1,079 |
(1,424) |
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Other current assets |
(201) |
40 |
||
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Accounts payable and accrued expenses |
982 |
(639) |
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Accrual for sales returns |
524 |
- |
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Net cash used in operating activities |
(2,916) |
(6,916) |
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Cash flows from investing activities: |
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Acquisition of property and equipment |
(681) |
(547) |
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Acquisition of intangible and other assets |
(321) |
(209) |
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Proceeds from sale of assets |
3 |
2 |
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Net cash used in investing activities |
(999) |
(754) |
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Cash flows from financing activities: |
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Net proceeds from line of credit |
349 |
1,798 |
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Net proceeds from (payments to) related parties |
11 |
(85) |
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Proceeds (payments to) on long-term debt |
(333) |
156 |
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Payments on amount due factor |
- |
1 |
||
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Net cash provided by financing activities |
27 |
1,870 |
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Net decrease in cash and cash equivalents |
(3,888) |
(5,800) |
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Cash and cash equivalents at beginning of year |
5,567 |
11,367 |
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Cash and cash equilvalents at end of year |
$ 1,679 |
$ 5,567 |
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Supplemental disclosure of cash flow information: |
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Cash paid for interest |
$ 258 |
$ 151 |
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Cash paid for income taxes |
$ 2 |
$ 21 |
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Supplemental disclosure of non-cash transactions: |
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Seller-financed acquisition of trademark |
$ 170 |
$ - |
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About Truett-Hurst, Inc.
Truett-Hurst, Inc. (NASDAQ: THST) (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. Truett-Hurst, Inc. is headquartered in Healdsburg, California.
Forward-Looking Statements
This press release and our earnings conference call for the fiscal year ended June 30, 2015 contain 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, expenses, for the fiscal year ending June 30, 2016 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 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; 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 to be filed on, or about September 28, 2015, 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.
For more information, contact:
Truett-Hurst, Inc.
Paul Forgue,
Chief Financial Officer & Chief Operations Officer
Phone: 707.431.4423
Fax: 707.395.0289
Email: paul@truetthurstinc.com
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SOURCE Truett-Hurst, Inc.