Truett-Hurst, Inc. Reports Second Quarter and First Half Fiscal 2017 Results

HEALDSBURG, Calif., Feb. 8, 2017 /PRNewswire/ -- Truett-Hurst, Inc. THST, which operates an innovative 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, reported results for the second quarter of fiscal 2017 which ended on December 31, 2016.

First Half FY17 vs. FY16
For the six months ended December 31, 2016, total net sales from continuing operations decreased 21.9% compared to the same period in the prior year and totaled $11.6 million.  Consolidated gross margin from continuing operations was 33.3%, an increase of 1.1 margin points over the prior year.

Wholesale

  • Net Sales of $8.5 million (-29.3% or $3.5 million)
  • Gross Margin of 22.0% (a decrease of 2.1 margin points)
  • Gross Profit of $1.9 million (-$1.0 million)

Direct to Consumer (DTC)

  • Net Sales of $3.2 million (+8.4% or $0.2 million)
  • Gross Margin of 63.5% (a decrease of 1.7 margin points)
  • Gross Profit of $2.0 million (+$0.1 million)

Operating Expenses
Operating expenses for the six months ended December 31, 2016 were $4.2 million compared to $4.4 million in the same period in the prior year, though the expenses expressed as a percentage of net sales increased due to the net sales shortfall. Sales and marketing expenses decreased $0.2 million, 22.4% of net sales vs 19.0% from the prior year period. General and administrative expenses decreased $0.1 million, 13.1% of net sales vs 10.8% from the prior year period.

Second Quarter FY17 vs. FY16
For the three months ended December 31, 2016, total net sales from continuing operations decreased 33% compared to the same periods in the prior year and totaled $5.7 million.  Consolidated gross margin from continuing operations was 35.5%, an increase of 4.5 margin points over the prior year. 

Wholesale

  • Net Sales of $4.0 million (-42.3% or $2.9 million)
  • Gross Margin of 22.4% (a decrease of 0.7 margin points)
  • Gross Profit of $.9 million (-$0.7 million)

Direct to Consumer (DTC)

  • Net Sales of $1.8 million (+8% or $0.1 million)
  • Gross Margin of 64.4% (an increase of 0.3 margin points)
  • Gross Profit of $1.2 million (+$0.1 million)

Operating Expenses
Operating expenses for the three months ended December 31, 2016 were flat compared to the same period in the prior year. 

"Consistent with our earlier guidance," commented Phillip L. Hurst, Truett-Hurst, Inc.'s President and CEO, "Our sales were lower in the first half of FY17 compared to FY16 due to our product mix and a non-recurring launch by a large US retailer."

Earnings Call
Truett-Hurst, Inc.'s management will host a conference on February 8, 2017, at 1:30 p.m. PT (4:30 p.m. ET) 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 2017 Second Quarter Results Call, or visit our webcast link: https://www.webcaster4.com/Webcast/Page/1132/19356.

A supporting presentation, in advance of the conference call, will be available at:

http://www.truetthurstinc.com

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 10100030.  The call will be available one hour after the end of the conference call through February 15, 2017 at 9:00 am ET.  

About Truett-Hurst, Inc.
Truett-Hurst, Inc. 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 quarter ended December 31, 2016 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 period ended December 31, 2016.  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 filed on September 28, 2016, 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
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except share data/per share data)




December 31,
2016


June 30,
2016



(unaudited)



Assets





Current assets:





   Cash and cash equivalents

$

26

$

4,043

Accounts receivable


2,011


2,678

Inventories, net


19,755


19,918

Bulk wine deposits


-


271

Other current assets


111


125

Total current assets


21,903


27,035






Property and equipment, net


5,437


5,583

Intangible assets, net


501


496

Other assets, net


334


391

Total assets

$

28,175

$

33,505






Liabilities and Equity





Current liabilities:





Lines of credit

$

4,881

$

10,311

Accounts payable


1,492


1,351

Accrued expenses


667


1,348

Depletion allowance


500


610

Due to related parties


32


-

Current maturities of long term debt


516


475

Total current liabilities


8,088


14,095






Long term debt, net of current maturities


3,233


3,189

Total liabilities


11,321


17,284






Equity:





Stockholders' equity





Preferred stock, par value of $0.001 per share, 5,000,000 shares authorized, none issued and outstanding at December 31, 2016 and June 30, 2016






-


-

Class A common stock, par value of $0.001 per share, 15,000,000 authorized, 4,351,789 and 4,306,609 issued and outstanding at December 31, 2016 and June 30, 2016






4


4

Class B common stock, par value of $0.001 per share, 1,000 authorized, 7 issued and outstanding at December 31, 2016 and June 30, 2016






-


-

Additional paid-in capital


15,945


15,794

Accumulated deficit


(5,330)


(5,600)

Total Truett-Hurst, Inc. equity


10,619


10,198

Noncontrolling interest


6,235


6,023

Total equity


16,854


16,221

Total liabilities and equity

$

28,175

$

33,505

 

TRUETT-HURST, INC. AND SUBSIDIARY

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except share data/per share data)

(unaudited)



Three Months Ended


Six Months Ended


December 31,


December 31,



2016


2015



2016


2015

Sales

$

5,958

$

8,748


$

12,060

$

15,280


Less excise tax


(221)


(242)



(438)


(405)


Net sales


5,737


8,506



11,622


14,875













Cost of sales


3,700


5,866



7,756


10,086













Gross profit


2,037


2,640



3,866


4,789













Operating expenses:











Sales and marketing


1,380


1,384



2,604


2,822


General and administrative


706


719



1,518


1,609


Loss (gain) on disposal of assets


26


-



43


(1)


Total operating expenses


2,112


2,103



4,165


4,430













(Loss)  income  from operations


(75)


537



(299)


359













Other income (expense)











Interest expense, net


(96)


(86)



(176)


(169)


Other


101


25



959


(69)


Total other income (expense), net


5


(61)



783


(238)


Net (loss) income before income taxes


(70)


476



484


121


Income tax expense


(1)


(1)



(2)


(1)


Net (loss) income from continuing operations


(71)


475



482


120


Income from discontinued operations, net of tax


-


30



-


45


Net (loss) income attributable to Truett-Hurst, Inc. and H.D.D. LLC


(71)


505



482


165


Net (loss) income attributable to noncontrolling interest: H.D.D. LLC


(25)


270



212


(144)


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

$

(46)

$

235


$

270

$

21













Net (loss) income per share:











Basic per share

$

(0.01)

$

0.06


$

0.06

$

0.01


Diluted per share

$

(0.01)

$

0.03


$

0.04

$

0.00













Weighted average shares used in computing net (loss) income per share:






















Basic weighted average shares


4,314,553


4,062,341



4,310,559


4,045,634



Diluted weighted average shares


4,314,553


7,239,918



7,510,936


7,200,405




















 

TRUETT-HURST, INC. AND SUBSIDIARY

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

 (unaudited)



Six Months Ended


December 31,



2016


2015

Cash flows from operating activities:





Net income

$

482

$

165

Income from discontinued operations, net of tax


-


(45)

Net income from continuing operations


482


120

Adjustments to reconcile net income to net cash provided by operating activities:





Depreciation and amortization


410


295

Reserve for assets to be abandoned


127


-

Stock-based compensation


151


172

(Gain) loss on fair value of interest rate swap


(130)


37

Loss (gain) on disposal of assets


43


(1)






Changes in operating assets and liabilities, net





Accounts receivable


667


(836)

Inventories


163


1,930

Bulk wine deposits


271


320

Other current assets


22


104

Accounts payable


141


(248)

Accrued expenses


(557)


228

Depletion allowance


(110)


120

Due to related parties


32


104

Cash provided by discontinued operations


-


55

Net cash provided by operating activities


1,712


2,400






Cash flows from investing activities:





Acquisition of property and equipment


(371)


(368)

Acquisition of intangible and other assets


(18)


(53)

Proceeds from sale of assets


5


2

Net cash used in investing activities


(384)


(419)






Cash flows from financing activities:





Net (payments on) proceeds from line of credit


(5,430)


1,229

Proceeds from long term debt


387


443

Payments on long term debt


(302)


(214)

Net cash (used in) provided by financing activities


(5,345)


1,458






Net change in cash and cash equivalents


(4,017)


3,439

Cash and cash equivalents at beginning of period


4,043


1,578

Cash and cash equivalents at end of period

$

26

$

5,017






Supplemental disclosure of cash flow information:





Cash paid for interest

$

174

$

169

Cash paid for income taxes

$

2

$

-

Non-cash financing activity:





Conversion of equipment line of credit to term loan

$

387

$

500







 

For more information, contact:                                    
Truett-Hurst, Inc.
Evan B. Meyer,                                                                        
Chief Financial Officer              
Phone: 707.431.4423                                                                
Fax: 707.395.0289                                                                    
Email: evan@truetthurstinc.com

 

To view the original version on PR Newswire, visit:http://www.prnewswire.com/news-releases/truett-hurst-inc-reports-second-quarter-and-first-half-fiscal-2017-results-300403946.html

SOURCE Truett-Hurst, Inc.

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