Truett-Hurst, Inc. Reports Third Quarter and Nine Months Ended March 31, 2017 Results

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May 11, 2017, 06:00 ET

HEALDSBURG, Calif., May 11, 2017 /PRNewswire/ -- 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 third quarter of fiscal year 2017 which ended on March 31, 2017.

Nine months FY17 vs. FY16
For the nine months ended March 31, 2017, total net sales from continuing operations decreased 14.2% compared to the same period in the prior year and totaled $17.0 million. Consolidated gross margin from continuing operations was 34.7%, an increase of 1.8 margin points over the prior year.

Wholesale

Net Sales of $12.4 million (-19.9% or $3.1 million)
Gross Margin of 23.8% (a decrease of 0.1 margin points)
Gross Profit of $2.9 million (-$0.8 million)

Direct to Consumer (DTC)

Net Sales of $4.6 million (+5.9% or $0.3 million)
Gross Margin of 64.1% (a decrease of 0.8 margin points)
Gross Profit of $2.9 million (+$0.1 million)

Operating Expenses
Operating expenses for the nine months ended March 31, 2017 were $6.0 million compared to $6.2 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 $0.1 million, 22.7% of net sales vs 19.8% from the prior year period. General and administrative expenses decreased $0.1 million, 12.7% of net sales vs 11.3% from the prior year period.

Third Quarter FY17 vs. FY16
For the three months ended March 31, 2017, total net sales from continuing operations increased 8.9% compared to the same periods in the prior year and totaled $5.3 million. Consolidated gross margin from continuing operations was 37.9%, an increase of 2.8 margin points over the prior year.

Wholesale

Net Sales of $3.9 million (12.4% or $0.4 million)
Gross Margin of 27.8% (an increase of 4.6 margin points)
Gross Profit of $1.1 million (+$0.3 million)

Direct to Consumer (DTC)

Net Sales of $1.4 million (+0% or $0.0 million)
Gross Margin of 65.8% (an increase of 1.5 margin points)
Gross Profit of $0.9 million (+$0.0 million)

Operating Expenses
Operating expenses for the three months ended March 31, 2017 increased by $0.1 million compared to the same period in the prior year.

Earnings Call
Truett-Hurst, Inc.'s management will host a conference call on May 11, 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 Third Quarter Results Call, or visit our webcast link: https://www.webcaster4.com/Webcast/Page/1132/21104.

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 10107310. The call will be available one hour after the end of the conference call through May 18, 2017 at 9:00 am ET.

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 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 and our earnings conference call for the quarter ended March 31, 2017 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 March 31, 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; 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)

		March 31, 2017		June 30, 2016
		(unaudited)
Assets
Current assets:
Cash and cash equivalents	$	542	$	4,043
Accounts receivable		1,985		2,678
Inventories, net		19,336		19,918
Bulk wine deposits		568		271
Other current assets		180		125
Total current assets		22,611		27,035

Property and equipment, net		5,356		5,583
Intangible assets, net		503		496
Other assets, net		300		391
Total assets	$	28,770	$	33,505

Liabilities and Equity
Current liabilities:
Lines of credit	$	4,311	$	10,311
Accounts payable		3,024		1,351
Accrued expenses		392		1,348
Depletion allowance		566		610
Current maturities of long term debt		507		475
Total current liabilities		8,800		14,095

Long term debt, net of current maturities		3,115		3,189
Total liabilities		11,915		17,284

Commitments and Contingencies
Equity:
Stockholders' equity
Preferred stock, par value of $0.001 per share, 5,000,000 shares authorized,
none issued and outstanding at March 31, 2017 and June 30, 2016		-		-
Class A common stock, par value of $0.001 per share, 15,000,000 authorized,
4,426,789 and 4,306,609 issued and outstanding at March 31, 2017 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 March 31, 2017 and June 30, 2016		-		-
Additional paid-in capital		15,890		15,794
Accumulated deficit		(5,296)		(5,600)
Total Truett-Hurst, Inc. equity		10,598		10,198
Noncontrolling interest		6,257		6,023
Total equity		16,855		16,221
Total liabilities and equity	$	28,770	$	33,505

TRUETT-HURST, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except share data)
(unaudited)

		Three Months Ended				Nine Months Ended
		March 31,				March 31,
		2017		2016		2017		2016
Sales	$	5,427	$	5,090	$	17,487	$	20,367
Less excise tax		(87)		(184)		(525)		(587)
Net sales		5,340		4,906		16,962		19,780

Cost of sales		3,318		3,186		11,074		13,272

Gross profit		2,022		1,720		5,888		6,508

Operating expenses:
Sales and marketing		1,236		1,103		3,843		3,925
General and administrative		641		635		2,156		2,244
Loss on disposal of assets		4		11		47		10
Total operating expenses		1,881		1,749		6,046		6,179

Income (loss) from operations		141		(29)		(158)		329

Other income (expense), net:
Interest expense, net		(71)		(73)		(248)		(242)
Other		(14)		(80)		945		(148)
Total other income (expense)		(85)		(153)		697		(390)
Net income (loss) before income taxes		56		(182)		539		(61)
Income tax expense		(1)		(1)		(2)		(1)
Net income (loss) from continuing operations		55		(183)		537		(62)
Income from discontinued operations, net of tax		-		-		-		45
Net income (loss)		55		(183)		537		(17)
Net (income) loss attributable to noncontrolling interest: H.D.D. LLC		(22)		90		(234)		(55)
Net income (loss) attributable to Truett-Hurst, Inc.	$	33	$	(93)	$	303	$	(72)

Net income (loss) per share:
Basic per share	$	0.01	$	(0.02)	$	0.07	$	(0.02)
Diluted per share	$	0.00	$	(0.02)	$	0.04	$	(0.02)

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

Basic weighted average shares		4,365,122		4,253,026		4,323,487		4,114,545
Diluted weighted average shares		7,459,702		4,253,026		7,572,351		4,114,545

TRUETT-HURST, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(unaudited)

		Nine Months Ended
		March 31,
		2017		2016
Cash flows from operating activities:
Net income (loss)	$	537	$	(17)
Income from discontinued operations, net of tax		-		(45)
Net income (loss) from continuing operations		537		(62)
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		623		496
Stock-based compensation		96		274
Deferred rent		-		(5)
(Gain) loss on fair value of interest rate swap		(140)		112
Loss on disposal of assets		188		10

Changes in operating assets and liabilities, net
Accounts receivable		693		1,061
Inventories		582		2,289
Bulk wine deposits		(297)		(595)
Other current assets		(37)		29
Accounts payable		1,673		(875)
Accrued expenses		(834)		(332)
Depletion allowance		(44)		216
Due to related parties		-		(38)
Cash provided by discontinued operations		-		78
Net cash provided by operating activities		3,040		2,659

Cash flows from investing activities:
Acquisition of property and equipment		(473)		(395)
Acquisition of intangible and other assets		(31)		(125)
Proceeds from sale of assets		5		4
Net cash used in investing activities		(499)		(516)

Cash flows from financing activities:
Net (payments on) proceeds from line of credit		(6,000)		1,022
Proceeds from long term debt		388		500
Payments on long term debt		(430)		(373)
Net cash (used in) provided by financing activities		(6,042)		1,149

Net change in cash and cash equivalents		(3,501)		3,292
Cash and cash equivalents at beginning of period		4,043		1,578
Cash and cash equivalents at end of period	$	542	$	4,870

Supplemental disclosure of cash flow information:
Cash paid for interest	$	245	$	242
Cash paid for income taxes	$	2	$	-

For more information, contact:
Truett-Hurst, Inc.
Evan B. Meyer,
Chief Financial Officer
Phone: 707.431.4423
Fax: 707.395.0289
Email: [email protected]

SOURCE Truett-Hurst, Inc.