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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF
SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED SEPTEMBER 30, 1996 COMMISSION FILE NUMBER 0-20624
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TODHUNTER INTERNATIONAL, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 59-1284057
(State of Incorporation) (IRS Employer
Identification
Number)
222 LAKEVIEW AVENUE, SUITE 1500, WEST PALM BEACH,
FL 33401
(Address of principal executive office) (Zip Code)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (407) 655-8977
SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT: NONE
SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT: COMMON STOCK, $.01
PAR VALUE
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934, as amended, during the preceding 12 months (or for such shorter period
that the registrant was required to file such reports), and (2) has been subject
to such filing requirements for the past 90 days. Yes _X_ No ___
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K Section 229.405 of Title 17, Code of Federal Regulations
is not contained herein, and will not be contained, to the best of registrant's
knowledge, in definitive proxy or information statements incorporated by
reference in Part III of this Form 10-K or any amendment to this Form 10-K. /X/
The aggregate market value of the voting stock held by non-affiliates of the
registrant as of December 10, 1996 (computed by reference to the last reported
sale price of registrant's common stock on NASDAQ on such date): $22,634,918
The number of shares outstanding of registrant's Common Stock, $.01 par
value per share, as of December 10, 1996, was 4,923,464.
There were no shares of Preferred Stock outstanding as of December 10, 1996.
Documents Incorporated by Reference: None
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PART I
ITEM 1. BUSINESS
GENERAL OVERVIEW
Todhunter International, Inc. (the "Company") produces citrus-based brandy,
distilled spirits, rum and fortified wine used as ingredients in a variety of
alcoholic beverages; bottles coolers and prepared cocktails and other beverages
on a contract basis; and produces a line of popular price spirits for
distribution in the Southeast. The Company also imports and distributes
alcoholic beverages throughout the United States and produces vinegar, cooking
wine and certain other alcohol related products.
EXPANSION OF FACILITIES
During fiscal 1996, the Company invested $1.3 million in polyethylene
terephthalate ("P.E.T.") bottle manufacturing equipment which has the capacity
to produce 15 million P.E.T. bottles per year. Where possible the Company plans
to utilize P.E.T. bottles to replace glass bottles in its popular price spirits
and contract bottling operations to reduce raw material and freight costs. The
Company began manufacturing P.E.T. bottles in June 1996 and is manufacturing at
a rate of 3,600,000 bottles per year.
During fiscal 1995, the Company expanded its rum production capacity at its
facilities in St. Croix, United States Virgin Islands by 40%. These facilities
now have a capacity to distill 25,000 proof gallons of rum per day. The Company
markets its Cruzan Rum trademark on a national basis and has transferred a
substantial part of its domestic rum production offshore to the Virgin Islands
for cost savings and other competitive reasons. Also during fiscal 1995 the
Company completed the construction of a vinegar production facility in
Louisville, Kentucky. This state-of-the-art facility has more than doubled the
Company's previous vinegar production capacity. Shipments from the new Kentucky
facility commenced in August, 1995.
DISCONTINUED OPERATION
In August 1994, the Company acquired Blair Importers, Ltd., now known as
Todhunter Imports, Ltd. ("Blair"), a national importer of wine and spirits. At
that time Management believed the acquisition of Blair would enhance the
Company's national sales capabilities and provide entry into the imported wine
and spirits segment of the alcoholic beverage market. However, the performance
of Blair was below expectations. In order to eliminate losses, the Company
adopted a plan to discontinue the operations of Blair, close its facilities and
terminate its employees. In accordance with this plan, the Company sold
substantially all of the assets of Blair to David Sherman Corporation on
September 21, 1995. See Item 3. Legal Proceedings, Item 7. Management's
Discussion and Analysis and Note 17 to the Company's consolidated financial
statements included elsewhere herein for additional financial information
concerning discontinued operations.
PRODUCTS AND SERVICES
BEVERAGE INGREDIENTS. The Company distills citrus brandy, citrus and cane
spirits and rum, produces fortified citrus wine, and sells these products to
over 30 producers of alcoholic beverages in the United States and Canada. The
largest components of the Company's beverage ingredients sales in 1996 consisted
of citrus brandy and spirits (24%), fortified citrus wine (38%) and rum (26%).
No customer accounts for more than 10% of these sales.
Citrus brandy and spirits are distilled from citrus juice byproducts
purchased from manufacturers of citrus juice concentrate. The Company's citrus
brandy is used primarily as an ingredient in flavored brandies. Citrus spirits
are used primarily as a fortifying ingredient to increase the alcohol content of
the Company's citrus wine and the wine of other manufacturers. The Company's
citrus wine is fermented from citrus juice and fortified to increase its alcohol
content to approximately 20% by volume. Known as fortified citrus wine, this
product is used primarily as an ingredient in cordials and blended whiskies. Rum
and cane spirits are distilled from sugar cane molasses and are sold to other
bottlers and producers. Rum is also used in the Company's line of popular price
spirits.
1
Management believes that its proximity to raw materials and its use of
citrus byproducts in the production of beverage ingredients provide it with cost
advantages over competing products. Because end products are taxed on a blended
rate based upon the ingredients used rather than on the resulting alcohol
content of the end product, beverage alcohol producers can lower excise taxes
payable on their products by substituting fortified citrus wine ingredients for
distilled spirits alternatives. This cost savings arises because fortified
citrus wine is currently subject to federal excise taxes of $1.57 per gallon,
whereas distilled spirits are taxed at $13.50 per proof gallon (one proof gallon
is approximately equivalent in alcohol content to two and one-half gallons of
fortified citrus wine). The ability of beverage alcohol producers to substitute
fortified citrus wine for distilled spirits varies by end product according to
government regulations. For example, fortified citrus wine ingredients may
contribute up to 49% of the alcohol content of cordials and liqueurs, and up to
approximately 10% of the alcohol content of Canadian whiskey. In addition, small
quantities of fortified citrus wine may be used in blended whiskey, rum, brandy
and certain other alcoholic beverages.
In fiscal 1996, the Company sold 9.9 million proof gallons of distilled
products (citrus brandy, citrus and cane spirits, rum and grain alcohol) and 7.1
million gallons of fortified citrus wine. The total annual maximum capacity of
distilled products and fortified citrus wine for the Company's production
facilities is approximately 23 million proof gallons and 20 million gallons,
respectively.
POPULAR PRICE SPIRITS. The Company produces, bottles and sells a broad line
of popular price spirits under its own proprietary labels and under the private
labels of major retailers of liquor located in the Southeast. These products
currently include rum, gin, vodka, tequila, cordials and various whiskies, and
the Company continues to add additional products to this line. The Company's
proprietary labels include "Cruzan" (rum), "Ron Carlos" (rum), "Stalingrad"
(vodka) and "James's Harbor" (gin, rum and vodka).
The Company distills its own rum, but generally produces its other popular
price spirits from grain alcohol purchased from third parties. Depending on the
particular formula for a product, the Company adds flavoring and/or sugar,
reduces the product's proof and then filters and bottles the finished product.
The Company sold approximately 1.2 million cases of popular price spirits
during the fiscal year ended September 30, 1996.
CONTRACT BOTTLING. The Company bottles coolers, prepared cocktails and other
alcoholic beverages on a contract basis for other producers. The Company also
bottles nonalcoholic beverages on a contract basis including carbonated and
noncarbonated fruit juice flavored beverages, flavored sparkling water and
ready-to-drink brewed iced teas. In fiscal 1996, the Company bottled
approximately 5.1 million cases for third parties.
The Company's bottling capacity is approximately 10 million cases per year.
The Company presently bottles approximately 6.3 million cases per year in its
contract bottling and popular price businesses. The Company is actively seeking
to utilize its remaining capacity by bottling additional types of beverages and
through expansion in the territories it serves.
IMPORTING OPERATIONS. In August 1994 the Company commenced the importing of
wine and spirits through its wholly-owned subsidiary Blair. This subsidiary
imported a wide variety of products sold primarily through distributors
throughout the United States. However, as a result of recurring losses in this
subsidiary, the Company sold substantially all of its assets on September 21,
1995. See Item 3. Legal Proceedings. The Company continues to produce, import
and distribute its own Cruzan Rum from the Virgin Islands and to import and
distribute a limited number of branded beverages from the former Blair product
line.
VINEGAR AND COOKING WINE. To complement its distilling, winery and bottling
operations, the Company produces, packages and distributes vinegar and cooking
wine. Customers for these products include major grocery chains in the
Southeast. Vinegar and cooking wine are also sold to other manufacturers and
bottlers throughout the United States.
2
BAHAMIAN OPERATIONS. The Company engages in operations in the Bahamas
through its Bahamian subsidiary Todhunter Bahamas Limited. The Bahamian
operations include retail businesses and certain real estate holdings. See Notes
5, 8, 12 and 16 to the Company's consolidated financial statements included
elsewhere herein for additional financial information on the Bahamian
operations.
OTHER BUSINESS ACTIVITIES. The Company's distilling operations produce
residuum, a byproduct, which is sold as animal feed. The Company also buys
industrial alcohol in bulk for resale to hospitals, universities, fragrance
producers and other manufacturers.
PRODUCTION
The Company's principal domestic production facilities are located in Lake
Alfred and Auburndale, Florida, both near Orlando and central to Florida's
citrus-growing region. The two plants have similar distilling, bottling and
winery operations, allowing the Company to shift production from one plant to
the other, depending on operations and customer orders. The Lake Alfred plant
also has a vinegar production facility. Both plants are near major highways and
are serviced by a railroad, providing good transportation access. The Company
also operates a winery and vinegar production facility in Louisville, Kentucky.
The Company's offshore rum production facilities are located in St. Croix,
United States Virgin Islands.
DISTILLING. The Company begins its distilling process with citrus or cane
molasses, which is fermented for approximately two to seven days. Once
fermented, the product has an average alcohol content of 4% by volume, which is
increased to approximately 190 proof through distillation. The alcohol is then
processed through rectifying columns and further refined. The finished product
is stored in stainless steel tanks, except rum, which is generally stored in
wooden barrels for aging purposes. The Lake Alfred, Auburndale and Virgin
Islands facilities each have the capacity to distill 25,000 proof gallons per
day.
WINERY. Wine is produced by the fermentation of citrus or grape juice.
After fermentation, the wine is fortified by the addition of distilled citrus
spirits to raise its alcohol content to approximately 20% by volume. Fortified
citrus wine is sold to customers in bulk. The wineries are physically segregated
from the distilling operations and have their own set of fermenting and storage
tanks. The Lake Alfred, Auburndale and Louisville facilities can produce, on a
combined basis, up to 20 million gallons of wine per year.
BOTTLING. The Lake Alfred and Auburndale plants both have automated,
high-speed bottling lines capable of filling up to 600 12-ounce containers per
minute. Lake Alfred has two lines that are used primarily to bottle coolers and
prepared cocktails, three lines that are used to bottle the Company's distilled
spirits products and one line to bottle vinegar. Auburndale has two lines that
are dedicated to bottling coolers and prepared cocktails, three lines that
bottle distilled spirits products and one line to bottle cooking wine. The
Company's warehouse storage areas can accommodate up to 800,000 cases. The
Company's plant in the Virgin Islands has one line capable of bottling up to
250,000 cases of distilled spirits per year.
VINEGAR AND COOKING WINE. Vinegar is produced by converting alcohol into
acetic acid. Several varieties of vinegar (including white, red, malt, tarragon
and apple cider) are produced at the Lake Alfred and Louisville facilities which
have a combined capacity of 6.5 million grain gallons per year. Cooking wine is
produced by the controlled fermentation of red or white grape juice into
alcohol. Several varieties of cooking wine (including red, white and sherry) are
produced at the Auburndale and the Louisville facilities which have a combined
capacity of 7 million wine gallons per year.
QUALITY CONTROL. Each of the Company's facilities is equipped with a
quality control laboratory. The Company employs several chemists who continually
test to ensure the quality of its raw materials and end products.
RAW MATERIALS. The principal raw materials used in the Company's distilling
operations are citrus molasses, a by-product of citrus juice production, and
cane molasses, a by-product of sugar production. Citrus molasses, which is used
in the production of citrus brandy and citrus spirits, accounts for
approximately 50% of the raw materials used in the Company's distilling
operations. Cane molasses, which is used primarily in the production of rum,
accounts for the remaining 50%. Citrus juice concentrate is the primary raw
material used in the Company's winery operations. The Company purchases such raw
materials from a variety of suppliers. The Company purchases grain alcohol used
in the production of its popular price spirits
3
and contract bottling services from several suppliers located in the Midwest.
Glass bottles and other materials, such as caps, labels and cases, are used in
bottling and packaging and are available from numerous suppliers. Grape juice
concentrate is the primary raw material used in the Company's vinegar and
cooking wine operations. One supplier of grain alcohol accounts for
approximately 11% of the Company's raw material purchases.
The cost of raw materials fluctuates depending upon a number of factors,
including crop conditions, weather, governmental programs and purchases by
foreign governments.
MARKETING AND DISTRIBUTION
Beverage ingredients are sold primarily in large quantities through the
Company's salespeople. The Company's marketing strategy emphasizes the cost
advantages of these products over other ingredients available to end producers.
Beverage ingredients are sold primarily to other bottlers, distillers and end
producers located throughout the United States and Canada.
The Company sells popular price spirits to wholesalers for distribution
primarily in the Southeast. The Company's marketing strategy for these products
places primary emphasis upon promotional programs emphasizing the Company's cost
advantages, directed at wholesalers and retailers, rather than consumers.
Wholesalers and retailers market these products to retailers and directly to
consumers, respectively. The Company also produces products sold directly to
retailers under the private labels of those retailers. Although competition for
retail shelf space in the alcoholic beverage industry is significant,
wholesalers of such products, and not the Company, generally must address such
competition, although the Company's promotional programs may have a beneficial
effect upon the allocation of retail shelf space for its products. Sales of the
Company's popular price products are generally made FOB (free on board) at the
Company's facilities and, accordingly, the purchasers of such products are
responsible for the risk of loss and transportation costs. In addition to its
salespeople, the Company works through various brokers to develop and service
its sales to wholesalers and retailers.
The Company's marketing strategy with respect to its contract bottling
operations emphasizes the cost advantages and quality of the Company's services.
Arrangements with bottling customers are typically negotiated by the Company's
executive officers.
Vinegar and cooking wine are sold primarily in large quantities to
manufacturers and bottlers through the Company's salespeople. However, these
products are also sold through wholesalers and directly to retailers under the
Company's own labels and under the private labels of those retailers.
COMPETITION
The areas of the alcoholic beverage industry in which the Company does
business are highly competitive with respect to price, service and product
quality, and there are several companies with substantially greater financial
and other resources than the Company. Within the beverage ingredients business,
the Company competes primarily with producers of grape-based products. While the
Company is aware of only two other domestic producers of citrus brandy and
spirits, there exist several producers of grape-based distilled products. The
Company's line of popular price spirits competes on a regional basis against
other distilled spirits products, including premium labels, mid-price and
popular price products. The popular price products produced by the Company
compete with those of companies for whom the Company performs contract bottling
services and to whom the Company sells its beverage ingredients. The Company
believes that its relationships with such customers are good and has not
experienced any adverse effects, such as termination or non-renewal of ongoing
contracts as a result of such competition. Based upon its historical experience
and customer relationships, the Company does not expect to experience any
adverse effects from such competition in the foreseeable future, even as it
attempts to increase its market share for popular price products. Contract
bottling operations compete against other bottlers located throughout the
Southeast. The Company experiences similar competition in connection with its
vinegar and cooking wine operations. While Management believes that it has
achieved a strong competitive position in the markets it serves, there can be no
assurance that the Company will be able to maintain its competitive position in
the future.
4
REGULATION AND TAXATION
The production, importing and sale of wine and spirits is subject to
extensive regulation by certain federal and state agencies, and the Company is
required to obtain various permits, bonds and licenses to comply with
regulations. Pursuant to federal and state environmental requirements, the
Company is required to obtain permits and licenses to operate certain
facilities, and to treat and remove effluents discharged from its distilling,
winery and bottling operations. Management believes it is presently in material
compliance with all applicable federal and state regulations. See Item 3. Legal
Proceedings for a discussion of certain environmental matters previously filed
against the Company.
Alcoholic beverages produced and bottled by the Company are subject to
substantial federal excise taxes. Excise taxes are imposed at flat rates of
$13.50 per proof gallon for distilled spirits and $1.57 per gallon for fortified
citrus wine. Tax rates on spirits were increased from $12.50 to $13.50 per proof
gallon effective January 1, 1991. Effective at the same time, tax rates on
fortified wines were increased by $.90 per gallon. Where necessary and
competitively feasible, the Company has increased its prices to offset tax
increases. Management believes that such tax increases have adversely affected
the total unit volume of alcoholic beverages sold industry-wide.
The Company's fortified wine products, as an ingredient of alcoholic
beverages, have a cost advantage under the component method of taxation, which
taxes wine at a lower rate than distilled spirits. Changes in, or the
elimination of, the component method of taxation, as it relates to wine, would
have a material adverse effect on the Company's beverage ingredients business.
EMPLOYEES
As of September 30, 1996, the Company had approximately 375 full-time
employees. Additional workers are generally employed at the Company's bottling
facilities during the summer months when the bulk of contract bottling takes
place. None of the Company's employees are members of any labor union nor are
there any collective bargaining agreements between the Company and its
employees, with the exception of the Company's Virgin Islands employees. The
Virgin Islands operation, consisting of approximately 70 employees, is fully
unionized. Management believes that its relations with its employees are good.
FORWARD LOOKING STATEMENTS
From time to time, the Company may publish forward looking statements
relating to such matters as anticipated financial performance, business
prospects, new products and similar matters. The Private Securities Litigation
Reform Act of 1995 provides a safe harbor for forward looking statements. In
order to comply with the terms of the safe harbor, the Company notes that a
variety of factors could cause the Company's actual results and experience to
differ materially from the anticipated results or other expectations expressed
in the Company's forward looking statements. The following is a list of factors,
among others, that could cause actual results to differ materially from the
forward looking statements: business conditions and growth in certain market
segments and industries and the general economy; competitive factors including
increased competition and price pressures; availability of third party component
products at reasonable prices; increased excise taxes; foreign currency
exposure; changes in product mix between and among product lines; lower than
expected customer orders and quarterly seasonal fluctuation of those orders; and
product shipment interruptions. See "Risk Factors" in previous filings with the
Securities and Exchange Commission.
ITEM 2. PROPERTIES
The Company owns all of its principal production facilities, including all
related land, buildings, and equipment. The Lake Alfred facility consists of 4
principal buildings with approximately 250,000 square feet on 32 acres. The
Auburndale facility consists of three principal buildings with approximately
250,000 square feet on 16 acres. The Louisville facility consists of three
principal buildings with approximately 60,000 square feet on 27.5 acres. The
Winter Haven facility consists of 3 principal buildings with approximately
140,000 square feet on 30 acres. The Virgin Islands facility consists of 6
principal buildings with approximately 200,000 square feet on 30 acres. The
Company leases approximately 14,600 square feet of office space in West Palm
Beach, Florida for its executive offices. Management believes that all of its
facilities, both owned and leased, are adequate and suitable for operations in
the foreseeable future.
5
ITEM 3. LEGAL PROCEEDINGS
There are no material legal proceedings pending or, to the knowledge of
management, threatened against the Company, except as set forth below.
In June 1994, C. J. Spirits, Incorporated filed an action against the
Company in the Circuit Court of Hillsborough County, Florida, alleging, among
other things, breach of contract, conversion of goods, trademark infringement
and unfair trade practices, and seeks unspecified dollar damages in excess of
$15,000. The Company has denied these allegations and has filed a counterclaim
seeking in excess of $100,000 for expenses and taxes advanced on behalf of C. J.
Spirits. Management believes that there are substantial defenses to C. J.
Spirits' action and, in addition, no damages were sustained by C. J. Spirits.
Discovery is proceeding and this matter is scheduled for trial in March 1997.
The Company was cited by the U.S. Environmental Protection agency, Atlanta
Region, (the "EPA") in an Administrative Complaint served July 16, 1993,
alleging violations of the Resource Conservation and Recovery Act and seeking
civil penalties of up to $781,400. The Company defended the EPA enforcement
action, and in 1994 a settlement was concluded. The settlement provided for a
civil penalty of $100,000, which was paid in 1995, and a requirement that the
Company invest $1,000,000 in capital pollution control expenditures through
1999. This settlement did not have any measurable impact on the Company's
continuation of its manufacturing operations.
On November 13, 1995, the Company filed an Arbitration Demand against the
former stockholders of Blair arising out of the Company's acquisition of Blair
pursuant to an Agreement and Plan of Merger dated April 22, 1994, as amended,
(the "Merger Agreement"). As part of the acquisition of Blair, Blair executed,
and the Company guaranteed, a note (the "Note") in the amount of $4,844,361
payable over a five-year period to the former Blair stockholders and Charmer
Industries, Inc. ("Charmer"). On July 15, 1996, the Company filed an Amended
Arbitration Demand, which also named Charmer as a Respondent. In the arbitration
proceeding, the Company alleges that various misrepresentations were made by the
Respondents in connection with the Merger Agreement and seeks damages and
rescission of the transaction and the Note. On October 2, 1996, Charmer filed an
application in the United States District Court for the Southern District of
Florida, seeking to stay the arbitration as against Charmer on the ground that
Charmer should not be compelled to arbitrate the claims. The Court is expected
to rule on the application in January 1997.
On August 2, 1996, the selling Blair stockholders filed a counterclaim
against the Company in the arbitration proceeding. The counterclaim alleges that
the Company violated the Merger Agreement in various respects and seeks
unspecified damages, including legal fees, accounting fees and other expenses.
On November 21, 1995, the former Blair stockholders and Charmer commenced a
proceeding against the Company and Blair in the Supreme Court of the State of
New York, County of New York, alleging that the sale of certain assets of Blair
to David Sherman Corp. constituted an "Early Payment Event," accelerating all
remaining payments under the Note referred to above. The Plaintiffs seek
judgment in the amount of the balance remaining under the Note with interest. By
agreement among the parties, no further action was taken in the proceeding until
November 8, 1996, when the plaintiffs gave notice to the Company that the
adjournment of the proceedings was being terminated. On November 29, 1996, the
Company served a motion seeking to compel the plaintiffs to arbitrate their
claims pursuant to the arbitration provision of the Merger Agreement. That
motion has not been decided by the Court as of this date. Since the outstanding
balance of the Note is already recorded in the Company's books and records, this
litigation will not have an adverse material effect on the financial condition
of the Company.
The Company's claims in arbitration and the counterclaims of the Respondents
in the arbitration have not yet been heard by the arbitration panel. The parties
are currently conducting discovery and final hearing is scheduled to begin on
August 4, 1997. Because discovery is at an early stage, the Company cannot
evaluate the likely outcome of the arbitration proceeding or the New York State
Supreme Court action. However, the Company intends to vigorously pursue its
claims and believes it has substantial defenses to the claims asserted against
it.
6
The Company has brought suit in the Supreme Court of the State of New York,
County of New York, against the accounting firm of Ernest Loewenwarter alleging
accounting malpractice and fraud. The acts alleged arise out of the acquisition
of Blair. The Company seeks $10,000,000 in damages. Defendant Lowenwarter moved
to dismiss the amended complaint on December 11, 1996, which notice was denied
by the Court. Discovery has not commenced.
In 1995, Plaintiff Isidore Becker obtained an order allowing him to enter
judgment against SCH Industries, Inc., a subsidiary of Virgin Islands Rum
Industries, Ltd., in the amount of $206,830.75. Supplementary proceedings with
respect to execution on this judgment are pending.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matter was submitted to security holders during the fourth quarter of the
fiscal year ended September 30, 1996.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
(1) The Company's Common Stock has been traded in the over-the-counter market
since the Company's initial public offering on October 13, 1992, and since
that date has been listed in the Nasdaq National Market System under the
symbol "TODH." The following table sets forth the high and low closing
quotations for the stock for each quarter during the past two fiscal years
and reported by Nasdaq. The prices reflect inter-dealer quotations without
retail mark-ups, mark downs or commissions, and do not necessarily represent
actual transactions.
PERIOD HIGH LOW
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Fiscal 1995
First quarter.............................................................. $16 1/2 $13 3/4
Second quarter............................................................. 16 12
Third quarter.............................................................. 13 3/4 8 5/8
Fourth quarter............................................................. 10 3/8 7 1/4
Fiscal 1996
First quarter.............................................................. 8 1/2 6
Second quarter............................................................. 8 3/8 7 1/2
Third quarter.............................................................. 9 7/8 7 1/2
Fourth quarter............................................................. 9 1/2 8 1/8
(2) Number of stockholders of record as of December 10, 1996: 90.
(3) No dividend was paid to stockholders during the fiscal years ended September
30, 1995 and 1996. The Company intends to continue to retain earnings for
use in the business of the Company and therefore does not anticipate
declaring or paying cash dividends in the immediate future.
7
ITEM 6. SELECTED FINANCIAL DATA
The following selected financial data are derived from the Company's audited
consolidated financial statements. The following data are qualified by reference
to, and should be read in conjunction with, the consolidated financial
statements and related notes and "Management's Discussion and Analysis of
Financial Condition and Results of Operations" included elsewhere herein.
YEAR ENDED SEPTEMBER 30,
-----------------------------------------------------
1996 1995 1994 1993 1992
--------- --------- --------- --------- ---------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
STATEMENTS OF INCOME DATA:
Net sales........................................................ $ 78,197 $ 70,191 $ 73,316 $ 67,125 $ 61,500
Cost of goods sold............................................... 58,428 54,564 55,972 52,535 47,932
--------- --------- --------- --------- ---------
Gross profit..................................................... 19,769 15,627 17,344 14,590 13,568
Selling, general and administrative expenses..................... 11,483 11,599 9,619 8,176 7,368
--------- --------- --------- --------- ---------
Operating income................................................. 8,286 4,028 7,725 6,414 6,200
Other income (expense):
Interest income................................................ 1,036 740 403 282 482
Interest expense............................................... (4,351) (4,015) (2,543) (1,886) (3,156)
Investment transactions........................................ -- -- -- 289 168
Other, net..................................................... 766 252 2,900 1,858 728
--------- --------- --------- --------- ---------
Income from continuing operations before income taxes............ 5,737 1,005 8,485 6,957 4,422
Income tax expense............................................... 1,192 1,060 1,871 2,237 1,638
--------- --------- --------- --------- ---------
Income (loss) from continuing operations......................... 4,545 (55) 6,614 4,720 2,784
Discontinued operations, net of income tax benefit............... -- (10,740) 11 -- --
--------- --------- --------- --------- ---------
Income (loss) before extraordinary item.......................... 4,545 (10,795) 6,625 4,720 2,784
Extraordinary item, net of income tax benefit.................... -- (468) -- -- --
--------- --------- --------- --------- ---------
Net income (loss)................................................ $ 4,545 $ (11,263) $ 6,625 $ 4,720 $ 2,784
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
Net income per share
Primary
Income (loss) from continuing operations..................... $ 0.92 $ (0.01) $ 1.40 $ 1.05 $ .89
(Loss) from discontinued operations.......................... -- (2.19) -- -- --
Extraordinary item........................................... -- (0.10) -- -- --
--------- --------- --------- --------- ---------
Net income (loss).......................................... $ 0.92 $ (2.30) $ 1.40 $ 1.05 $ .89
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
Fully diluted
Income (loss) from continuing operations..................... $ 0.91 $ (0.01) $ 1.39 $ 1.04 $ .89
(Loss) from discontinued operations.......................... -- (2.19) -- -- --
Extraordinary item........................................... -- (0.10) -- -- --
--------- --------- --------- --------- ---------
Net income (loss).......................................... $ 0.91 $ (2.30) $ 1.39 $ 1.04 $ .89
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
Cash dividends per share......................................... -- -- -- -- $ .10
Weighted average shares outstanding
Primary........................................................ 4,955 4,906 4,746 4,487 3,115
Fully diluted.................................................. 4,969 4,906 4,761 4,522 3,115
BALANCE SHEET DATA (AT PERIOD END):
Working capital.................................................. $ 33,517 $ 35,435 $ 32,526 $ 20,650 $ 11,008
Total assets..................................................... 98,859 103,787 104,134 61,727 61,240
Short-term debt.................................................. 2,152 2,264 2,289 4,620 12,144
Long-term debt................................................... 51,292 57,759 49,740 23,324 25,688
Stockholders' equity............................................. 31,448 26,865 37,919 26,074 15,015
8
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The following tables set forth certain income statement items as a
percentage of net sales, and certain information on net sales in each of the
Company's operating categories.
YEAR ENDED SEPTEMBER 30,
-------------------------------------
1996 1995 1994
----------- ----------- -----------
Net sales..................................................... 100.0% 100.0% 100.0%
Cost of goods sold............................................ 74.7 77.7 76.3
----- ----- -----
Gross margin.................................................. 25.3 22.3 23.7
Selling, general and administrative expenses.................. 14.7 16.6 13.1
----- ----- -----
Operating income.............................................. 10.6 5.7 10.6
Other income (expense), net................................... (3.3) (4.3) 1.0
----- ----- -----
Income from continuing operations before income taxes......... 7.3 1.4 11.6
Income tax expense............................................ 1.5 1.5 2.6
----- ----- -----
Income (loss) from continuing operations...................... 5.8% (0.1)% 9.0%
----- ----- -----
----- ----- -----
YEAR ENDED SEPTEMBER 30,
-------------------------------
1996 1995 1994
--------- --------- ---------
(IN THOUSANDS)
Beverage ingredients......................................... $ 29,404 $ 25,905 $ 22,829
Popular price spirits........................................ 16,385 12,766 11,951
Contract bottling............................................ 19,267 19,840 22,473
Vinegar and cooking wine..................................... 7,625 5,190 4,366
Bahamian operations.......................................... 2,525 1,959 8,139
Other........................................................ 2,991 4,531 3,558
--------- --------- ---------
$ 78,197 $ 70,191 $ 73,316
--------- --------- ---------
--------- --------- ---------
The following table provides certain unit sales volume data for each of the
periods indicated.
YEAR ENDED SEPTEMBER 30,
-------------------------------
1996 1995 1994
--------- --------- ---------
(IN THOUSANDS)
Beverage ingredients:
Distilled products, in proof gallons............................... 9,883 8,540 7,313
Fortified citrus wine, in gallons.................................. 7,128 6,409 5,622
Popular price spirits, in cases...................................... 1,181 1,137 1,083
Contract bottling, in cases.......................................... 5,099 5,048 5,632
The Company's primary businesses are production of citrus and cane-based
alcoholic beverage ingredients for other manufacturers; contract bottling of
coolers, prepared cocktails and other beverages; and production and bottling of
popular price spirits for distribution in the Southeast. The Company also
imports and distributes alcoholic beverages throughout the United States and
produces vinegar, cooking wine and certain other alcohol related products.
Beverage ingredients produced by the Company include fortified citrus wine,
citrus brandy, citrus and cane spirits and rum. Also included in this category
is grain alcohol which the Company buys in bulk and resells as bulk or packaged
grain alcohol. Overall unit sales of beverage ingredients increased
approximately 14% in 1996. Unit sales of rum have increased since 1994 due to
the acquisition of the Company's Virgin Islands operations in February 1994. The
Company expanded the production capacity of the Virgin Islands facility by 40%
during 1995 and has shifted a substantial part of its domestic rum production
offshore in
9
order to capitalize on the lower raw material costs available in the Virgin
Islands. Unit sales of fortified citrus wine have increased substantially in
1995 and 1996 primarily due to increased sales to one of the Company's largest
wine customers due to management's decision to expand geographically by
acquiring the Louisville, Kentucky facility in December 1993. Unit sales of
citrus brandy decreased 6% in 1996. Sales of citrus brandy have declined as a
result of a decline in demand for brandy products which management believes is
due to changing demographics. Management expects this trend to continue in the
future.
Popular price spirits produced by the Company are distributed under the
Company's proprietary labels and those of major retailers of liquor in the
Southeast and include rum, vodka, gin, cordials, brandies and whiskies. Since
the acquisition of the Virgin Islands operations in February 1994, the Company
also produces and sells popular price spirits in the U. S. Virgin Islands. The
Company is importing, marketing and distributing a limited number of alcoholic
beverages from the former Blair product line in the United States. During 1995
and the first three quarters of 1996 the Company's popular price products
experienced a decrease in profit margins due to increased costs of raw materials
which the Company elected to absorb in order to maintain market share. During
the fourth quarter of 1996 the cost of raw materials decreased and the Company
was able to increase prices.
The Company's contract bottling operations consist primarily of bottling
coolers, prepared cocktails and other non-alcoholic beverages. The Company's
contract bottling volume decreased in 1995 due to the loss of certain bottling
customers and some bottling customers discontinuing products. In addition, one
of the Company's largest bottling customers decreased its orders for bottling
services in accordance with its plan to transfer production to its own facility.
The Company continues to provide a significant amount of contract bottling
services to this customer. The underutilization of the Company's bottling
facilities has significantly impacted the Company's profitability due to its
high overhead costs. During 1995, management reduced labor and overhead costs in
an effort to return this division to profitability. The Company's contract
bottling volume increased slightly in 1996. While contract bottling volume to
the Company's significant bottling customers was down slightly, this was offset
by the addition of new customers and new business with an existing customer.
Management is actively seeking to utilize its remaining capacity by bottling
additional types of beverages and through expansion in the territories it
serves.
During the quarter ended September 30, 1995, the Company discontinued the
operations of Blair, sold substantially all of its assets, terminated its
employees, closed its facilities and began liquidating its remaining assets. The
Company acquired Blair in August 1994. At that time management believed that
Blair would enhance the Company's national sales capabilities and provide an
entry to the imported wine and spirits segment of the alcohol beverage market.
However, beginning in January 1995, Blair incurred substantial operating losses.
In 1995, the losses from Blair amounted to $10,740,124 (net of tax benefit of
$935,883), including operating losses during the phase out period of $1,871,173.
These losses resulted from, among other things, the failure to meet exaggerated
sales and gross profit projections furnished to the Company, certain unrecorded
liabilities, surplus inventories, and inadequate reserves for uncollectible
receivables, all of which were uncovered subsequent to the acquisition. The
Company is reserving all rights that it has to indemnification from the selling
shareholders of Blair under the Merger Agreement relating to the acquisition.
See Item 3. Legal Proceedings.
The Company's net sales and gross margins (gross profit as a percentage of
net sales) vary depending on the mix of business among the Company's product
lines. Historically, gross margins have been highest in beverage ingredients and
lower in popular price, contract bottling and vinegar and cooking wine
operations. Within its contract bottling operations, sales and gross margins
have varied substantially based upon the mix of business from the Company's
largest bottling customers. Although gross profit per case for the Company's
bottling customers are approximately equal, some customers pay the Company to
purchase all raw materials. As a result, net sales and cost of goods sold with
respect to products bottled for these customers are higher, and gross margins
are lower, than for other bottling customers which supply their own raw
materials.
10
Net sales represent the Company's gross sales less excise taxes. Excise
taxes are generally payable on products bottled by the Company. In addition,
excise taxes are payable on sales of industrial alcohol to certain customers.
Accordingly, excise taxes vary from period to period depending upon the
Company's product and customer mix.
FORWARD LOOKING STATEMENTS
Management's Discussion and Analysis of Financial Condition and Results of
Operations contains, among other things, information regarding revenue growth,
expenditure levels and plans for development. These statements could be
considered forward looking statements that involve a nunber of risks and
uncertainties. The following is a list of factors, among others, that could
cause actual results to differ materially from the forward looking statements;
business conditions and growth in certain market segments and industries and the
general economy; competitive factors including increased competition and price
pressures; availability of third party component products at reasonable prices;
excise taxes; foreign currency exposure; changes in product mix between and
among product lines; lower than expected customer orders and quarterly seasonal
fluctuation of those orders; and product shipment interruptions.
The following discussion relates to the results of continuing operations.
FISCAL 1996 COMPARED TO FISCAL 1995
NET SALES. Net Sales for the year ended September 30, 1996, were $78.2
million, an 11% increase when compared to net sales of $70.2 million for the
year ended September 30, 1995.
Beverage Ingredients net sales increased 14% during fiscal 1996 due to
volume increases in both distilled products and fortified citrus wine. Distilled
products volume increased 16% and fortified citrus wine volume increased 11%.
The increase in distilled products volume was due to a 108% increase in export
sales of grain alcohol, a 5% increase in sales of rum, and a 37% increase in
sales of citrus spirits. These increases were offset by a 6% decrease in sales
of citrus brandy. The increase in citrus wine volume is due to increased sales
to new and existing customers. The average unit price for distilled products
decreased 2% due to the increase in export sales of grain alcohol which have a
lower unit price than other distilled products. The average unit price for
fortified citrus wine increased 3%.
Net sales of popular price spirits increased 28%. The increase in net sales
is due to the Company's new business of importing, marketing and distributing
branded alcoholic beverages, including its own Cruzan Rum. Net sales of popular
price spirits without the branded beverages decreased 9%. The decrease was due
to soft demand in the Southeast and a decrease in tourism in the Virgin Islands.
In the Company's contract bottling operations, net sales decreased 3%. The
net decrease in sales was due to the loss of a bottling customer for which the
company purchased all raw materials which was partially offset by increases in
sales to new and existing customers.
Net sales of vinegar and cooking wine increased 47%. The increase in net
sales was due to the construction of a new facility in Kentucky which began
shipping vinegar at the end of fiscal 1995.
GROSS PROFIT. Gross profit for fiscal 1996 was $19.8 million compared to
$15.6 million for fiscal 1995. Gross margin increased to 25.3% for fiscal 1996
from 22.3% for fiscal 1995. The increase in gross margin is due to improved
margins for most of the Company's products as well as a change in product and
customer mix.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses for fiscal 1996 were $11.5 million compared to $11.6
million for fiscal 1995, and as a percentage of net sales, were 14.7% in fiscal
1996 compared to 16.6% in fiscal 1995. Selling, general and administrative
expenses for fiscal 1996 increased $1.5 million due to marketing expenses
related to the new business of importing, marketing and distributing branded
alcoholic beverages. Selling, general and administrative expenses for fiscal
1995 included $1.6 million of non recurring professional fees, litigation costs
and write-offs of intangibles and bad debts.
11
INTEREST EXPENSE. The net increase in interest expense was approximately
$336,000 for fiscal 1996 compared to fiscal 1995. Interest expense decreased for
fiscal 1996 by approximately $767,000 due to a combination of the Company paying
down debt during the year and entering into an interest rate swap on the
Company's bank note in the Virgin Islands which reduced the Company's interest
rate to a fixed rate of 8.46% from prime plus one. During fiscal 1995 the
Company allocated approximately $1,102,000 of interest expense from continuing
operations to discontinued operations.
INCOME TAX EXPENSE. The Company's effective income tax rate was 21% for
fiscal 1996 and 105% for fiscal 1995. The low tax rate in 1996 is due to income
from the Virgin Islands operations which has a 90% exemption from income taxes.
In 1995, the Company incurred additional income tax expense from the
repatriation of previously undistributed earnings of its Bahamian subsidiary.
FISCAL 1995 COMPARED TO FISCAL 1994
NET SALES. Net sales for the year ended September 30, 1995 were $70.2
million, a 4% decrease when compared to net sales of $73.3 million for the year
ended September 30, 1994. Beverage ingredients net sales increased 13% during
fiscal 1995. Distilled products volume increased 17% and fortified citrus wine
volume increased 14%. The distilled products volume increase was due to a 55%
increase in rum volume from the Virgin Islands operations acquired on February
4, 1994, which was partially offset by a 10% decrease in citrus brandy volume.
Net sales of popular price spirits increased 7% due to a 5% increase in cases
sold and a 2% increase in the average price per case. In the Company's contract
bottling operations, net sales decreased 12% due primarily to a 10% decrease in
the number of cases bottled. The primary reason for the lower amount of net
sales in fiscal 1995 was the sale of the Bahamian liquor operations in August
1994. Net sales from those operations were approximately $6.1 million in fiscal
1994.
GROSS PROFIT. Gross profit for fiscal 1995 was $15.6 million compared to
$17.3 million for fiscal 1994. Gross margin decreased to 22.3% for fiscal 1995
from 23.7% for fiscal 1994. The decrease was due to a reduction in the Company's
gross margin on popular price spirits of approximately 10% and a reduction in
gross margin on contract bottling of approximately 4%.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses in fiscal 1995 were $11.6 million, compared to $9.6
million in the prior year and, as a percentage of net sales, were 16.6% in
fiscal 1995 compared to 13.1% in fiscal 1994. The dollar increase was due to
several factors, the more significant of which are as follows: an additional
four months of expenses from the Virgin Islands operations ($.6 million),
corporate office salaries and professional fees ($.5 million), litigation costs
($.5 million), and write-offs of intangibles and bad debts ($.6 million). These
increases were offset in part by a decrease in the selling, general and
administrative expenses of the Bahamian operations ($.7 million) due to the sale
of the Bahamian liquor operation.
INTEREST EXPENSE. Interest expense increased approximately $1,472,000
during fiscal 1995 compared to the prior year due primarily to the additional
indebtedness incurred on the Company's acquisitions during fiscal 1994 and to
finance property and equipment additions. Also, the Company refinanced a major
portion of its debt during November 1994.
INCOME TAX EXPENSE. The Company's income tax expense for the year ended
September 30, 1995 was affected by several factors. The Company's U.S.
operations incurred a net operating loss of approximately $6.0 million but
incurred additional income tax expense from the repatriation of previously
undistributed earnings of the Bahamian subsidiary and for the earnings of the
Virgin Islands operations. The Company has a 90% exemption from income taxes on
the income of the Virgin Islands operations.
12
FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES
The Company's net cash provided by operating activities was $10.6 million
for fiscal 1996 compared to net cash used in operating activities of $2.0
million in fiscal 1995. The largest components of net cash provided by (used in)
operating activities are summarized as follows for the fiscal years ended
September 30, 1996 and 1995:
1996 1995
------------- --------------
Net income (loss)........................................................ $ 4,544,798 $ (11,263,482)
Adjustments to net income (loss):
Depreciation and amortization.......................................... 4,048,125 4,712,291
Loss on impairment of assets........................................... -- 4,466,478
Deferred income taxes.................................................. 1,056,000 (328,000)
Change in operating assets and liabilities............................... (1,713,207) 2,905,350
Discontinued operation................................................... 2,728,277 (2,853,063)
Other.................................................................... (31,465) 314,400
------------- --------------
Net cash provided by (used in) operating activities...................... $ 10,632,528 $ (2,046,026)
------------- --------------
------------- --------------
The Company had net income of $4.5 million in fiscal 1996 compared to a net
loss of $11.3 million in fiscal 1995. The net loss in fiscal 1995 included a
loss from discontinued operations of $10.7 million, an extraordinary item of $.5
million relating to the early extinguishment of debt and approximately $.9
million in additional income tax expense due to the repatriation of $2.5 million
of previously undistributed earnings of the Bahamian subsidiary.
The Company incurred higher amortization expense in fiscal 1995 due to a
significant increase in intangibles relating to the acquisition of Blair in
1994. In the fourth quarter of fiscal 1995, when the operations of Blair were
discontinued, the Company recorded a loss on impairment of assets relating to
these intangibles.
In fiscal 1996 the Company's deferred income tax assets decreased due to its
use of a portion of its net operating loss carryforward and the recognition, for
tax purposes, of certain expenses of the discontinued operations. This resulted
in $1,056,000 of deferred income tax expense. In fiscal 1995, when the Company
incurred the net operating loss, the Company recorded a net deferred income tax
benefit of $328,000.
In fiscal 1996, the Company's operating assets and liabilities increased
$1,713,207. This increase relates to the Company's overall increase in sales and
unit volume. In fiscal 1995, the Company's operating assets and liabilities
decreased $2,905,350 due to classifying the assets and liabilities of Blair as
assets and liabilities of discontinued operations.
The net assets of the discontinued operations at the end of fiscal 1995 were
$2,853,063. During fiscal 1996, the Company liquidated most of these assets and
liabilities and as of September 30, 1996 the net assets of discontinued
operations were $124,786.
Net cash used in investing activities was $3.5 million for fiscal 1996
compared to net cash used in investing activities of $10.6 million during fiscal
1995.
During fiscal 1996, the Company received $1.6 million from payments on notes
receivable and purchased $4.9 million of property and equipment. During fiscal
1995, the Company received $.9 million from payments on notes receivable,
purchased $7.2 million of property and equipment and purchased $4.6 million of
certificates of deposit.
During fiscal 1996 the Company's net cash used in financing activities was
$6.5 million compared to net cash provided by financing activities of $7.7
million in fiscal 1995. During fiscal 1996 the Company reduced its line of
credit by $4.1 million and paid down long-term debt by $2.5 million. During
fiscal 1995 the Company increased borrowings on its line of credit by $10.1
million, received proceeds from the issuance of Common Stock of $.2 million,
paid down its long-term debt by $2.1 million and paid $.5 million of loan
closing costs.
13
The Company's long-term debt was $53.4 million as of September 30, 1996, and
its ratio of long-term debt to equity was 1.7 to 1.
The Company has operated in the Bahamas since 1964. Under Bahamian law, the
Company pays no taxes on the profits from these operations, and such profits
have generally been retained in the Bahamas, including a portion which has been
invested in real estate. In addition, the Company has generally not paid United
States federal income taxes on such profits. Repatriation of these profits could
result in a significant United States federal income tax liability to the
Company (see Note 8 to the consolidated financial statements).
Management believes that cash provided by operating activities and the
availability of cash from the revolving credit note will be sufficient to fund
the Company's operations and anticipated investment activities for at least the
next twelve months.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The consolidated financial statements and financial statement schedule of
the Company and its subsidiaries, and the report of independent auditors are
listed at Item 14.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTS AND FINANCIAL
DISCLOSURE
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The following table sets forth information with respect to the directors and
executive officers of the Company as of December 16, 1996.
NAME AGE POSITION OR OFFICE HELD
- ---------------------------- --- ---------------------------------------------
A. Kenneth Pincourt, Jr. 65 Chairman of the Board and Chief Executive
Officer
Jay S. Maltby 46 President, Chief Operating Officer and
Director
Thomas A. Valdes 53 Executive Vice President and Director
D. Chris Mitchell 47 Senior Vice President -- Sales and Director
Troy Edwards 57 Treasurer and Chief Financial Officer
Joseph A. Loveland, Jr. 64 Vice President, Secretary, General Counsel
and Director
Ousik Yu 43 Senior Vice President -- Manufacturing
W. Gregory Robertson 53 Director
Leonard G. Rogers 67 Director
A. KENNETH PINCOURT, JR. -- Mr. Pincourt founded the Company in 1964 and has
been its Chief Executive Officer and a director since its inception and Chairman
of the Board since 1985. Prior to founding the Company, Mr. Pincourt practiced
law in the State of Florida. Mr. Pincourt is a member of the Board of Directors
of the Distilled Spirits Council of the United States.
JAY S. MALTBY -- Mr. Maltby joined the Company in January 1995 as President,
Chief Operating Officer and a director. Prior to joining the Company, Mr. Maltby
was employed by Bacardi Imports, Ltd. since 1978. He has held numerous executive
positions with that company, the latest of which was Vice President of Finance
and Operations and also as a member of its Executive Committee.
THOMAS A. VALDES -- Mr. Valdes joined the Company in July 1995 as Executive
Vice President. Mr. Valdes was appointed a director on December 16, 1996 to
replace Mr. Arnold R. Beinstein who resigned as of December 11, 1996 for reasons
of health. Mr. Valdes will serve as a director until the next annual meeting of
shareholders. Prior to joining the Company, Mr. Valdes held various executive
positions with Bacardi Imports, Ltd. since 1979, the latest of which was Vice
President of Marketing and Operations.
14
D. CHRIS MITCHELL -- Mr. Mitchell joined the Company in 1984 as manager of
the Lake Alfred bottling operation and was promoted to Vice President -- Sales
in 1989 and appointed as Senior Vice President in January 1994. Mr. Mitchell has
been a director of the Company since 1991. Prior to joining the Company, Mr.
Mitchell was general manager of bottling operations for United States Distilled
Products from 1980 to 1984.
TROY EDWARDS -- Mr. Edwards joined the Company in 1980 and has served as
Treasurer, Controller and Assistant Secretary since that time. In 1993 he was
appointed Chief Financial Officer. Prior to joining the Company, Mr. Edwards
served as Vice President of Administrative and Financial Services for New South
Manufacturing Company, a private label industrial chemical products concern.
JOSEPH A. LOVELAND, JR. -- Mr. Loveland joined the Company as Secretary,
General Counsel and director in 1992 and was appointed Vice President in 1993.
Since 1989, Mr. Loveland has practiced law in California. From 1987 to 1989, Mr.
Loveland was Vice President -- Legal Affairs for Dollar-Rent-A-Car Systems, Inc.
and prior to that time was Vice President, General Counsel and Secretary for
Ramada Inns, Inc.
OUSIK YU -- Mr. Yu joined the Company in 1990 and has served as Vice
President -- Bottling Operations since that time until his appointment as Senior
Vice President -- Beverage Division in January 1994. In 1996, Mr. Yu was
appointed Senior Vice President -- Manufacturing. From 1986 through 1989, Mr. Yu
was employed by Brown-Forman, most recently as manager of packaging/process
engineering. Prior thereto from 1981 to 1986, he was employed in plant
engineering by The Stroh's Brewery Company.
W. GREGORY ROBERTSON -- Mr. Robertson joined the Company as a director on
September 27, 1995. In 1989, Mr. Robertson founded TM Capital Corp., a private
New York City-based investment banking firm. Prior to founding TM Capital Corp.,
Mr. Robertson was an Executive Vice President and Director of Thomson McKinnon
Securities Inc., where he headed the firm's investment banking and public
finance activities. Mr. Robertson is also a director of Vicon Industries, Inc.
of Melville, New York (CCTV systems and components).
LEONARD G. ROGERS -- Mr. Rogers joined the Company as a director in 1992. He
was Chairman of the Board of the Company from 1974 to 1985 and since 1985 has
been a private investor. From 1969 to 1974, Mr. Rogers was Senior Vice President
- -- Consumer Products Division for Gulf & Western Industries.
BOARD OF DIRECTORS
The Company's Amended and Restated Certificate of Incorporation provides for
a Board of Directors of three classes as nearly equal in number as practicable
with directors elected for three-year terms. The Board presently consists of
seven directors. Messrs. Valdes and Robertson currently serve as Class I
directors. Mr. Robertson's term expires at the annual meeting of stockholders to
be held in 1999 and Mr. Valdes' term expires at the annual meeting of
stockholders to be held in 1997. Messrs. Loveland and Rogers currently serve as
Class II directors for a term expiring at the annual meeting of stockholders to
be held in 1997, and Messrs. Pincourt, Maltby and Mitchell serve as Class III
directors for a term expiring at the annual meeting of stockholders to be held
in 1998. Generally, executive officers are elected by and serve at the
discretion of the Board of Directors.
15
ITEM 11. EXECUTIVE COMPENSATION
The following table sets forth information concerning the annual and
long-term compensation for services in all capacities to the Company for the
fiscal years ended September 30, 1996, 1995 and 1994, of those persons who were,
for the fiscal year ended September 30, 1996 (i) the chief-executive officer and
(ii) the other four most highly compensated executive officers of the Company.
SUMMARY COMPENSATION TABLE
LONG TERM
COMPENSATION
-------------
ANNUAL COMPENSATION (1) OPTIONS (3)
--------------------------------- (NUMBER OF ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS (2) OPTIONS) COMPENSATION (4)
- ------------------------------------------------ --------- ---------- ---------- ------------- ----------------
A. Kenneth Pincourt, Jr. ....................... 1996 $ 314,734 $ 110,000 -- $ 46,256(5)
Chairman of the Board, President and Chief 1995 309,397 65,000 -- 13,656
Executive Officer 1994 248,925 130,000 60,000 22,927
Arnold R. Beinstein (7) ........................ 1996 160,605 33,000 -- 13,884
Vice Chairman of the Board 1995 255,771 55,000 -- 13,656
1994 200,765 110,000 25,000 22,927
Jay S. Maltby .................................. 1996 240,000 85,000 50,000 15,854(6)
President 1995 180,000 50,000 -- 1,970(6)
1994 -- -- -- --
Thomas A. Valdes ............................... 1996 175,000 65,000 37,500 --
Executive Vice President 1995 37,019 -- -- --
1994 -- -- -- --
Joseph A. Loveland, Jr. ........................ 1996 168,342 23,000 -- 13,884
Vice President, General Counsel and Secretary 1995 165,987 23,000 -- 13,656
1994 109,231 15,000 20,000 10,874
- ------------------------
(1) No other annual compensation, such as perquisites, is shown because no named
executive officers received perquisites with a total value which exceeded
the lesser of $50,000 or 10% of his salary and bonus.
(2) Amounts awarded under the Company's discretionary bonus arrangement.
(3) See table regarding Stock Options for information regarding the value of
such options.
(4) Represents amounts awarded under the Company's defined contribution pension
plan.
(5) Also includes $32,372 which represents an amount equal to the dollar value
of life insurance premiums on Mr. Pincourts life insurance policy paid by
the Company.
(6) Also includes $1,970 in 1996 and 1995 which represents an amount equal to
the dollar value of life insurance premiums on Mr. Maltby's life insurance
policy paid by the Company.
(7) Resigned as of December 11, 1996 for reasons of health.
EMPLOYMENT AND SEVERANCE AGREEMENTS
In August 1992, the Company entered into an employment agreement with Mr.
Pincourt having an initial term ending in August 1997 which is renewable
thereafter for successive one-year periods, unless earlier terminated. Under
this agreement, Mr. Pincourt is entitled to a base salary of approximately
$230,000, subject to increases at the discretion of the Board of Directors, and
is entitled to participate in all Company compensation arrangements or plans,
including the Company's discretionary bonus arrangement, employee stock option
plan and pension plan.
In January 1995, the Company entered into an employment agreement with Mr.
Maltby for a period of three years. Under this agreement, as amended, Mr. Maltby
receives a base salary of $240,000, subject to
16
increases at the discretion of the Board of Directors, and is entitled to
participate in all Company compensation arrangements and plans, including the
Company's discretionary bonus arrangement, employee stock option plan and
pension plan. Mr. Maltby is also entitled to receive 10,000 stock options per
year. In the event of termination of employment by the Company for other than
death, disability or cause, Mr. Maltby is entitled to a sum equal to the Mr.
Maltby base salary for the balance of the employment period or $480,000,
whichever is greater.
OPTION GRANTS IN LAST FISCAL YEAR
The following table provides information regarding stock options granted to
certain of the five named executive officers during fiscal 1996. In addition, in
accordance with SEC rules, the table shows the hypothetical gains or "options
spreads" that would exist for the respective options. These gains are based on
assumed rates of annual compound stock price appreciation of 5% and 10% from the
date the options were granted over the full option term.
POTENTIAL REALIZABLE
VALUE AT ASSUMED
ANNUAL RATES OF
STOCK PRICE
SECURITIES APPRECIATION FOR
UNDER PERCENT OF TOTAL OPTION TERM (2)
OPTIONS OPTIONS GRANTED EXERCISE ($)
GRANTED (1) TO EMPLOYEES IN PRICE EXPIRATION --------------------
NAME # FISCAL YEAR ($) DATE 5% 10%
- ---------------------------------------- ----------- ----------------- ----------- ------------- --------- ---------
Jay S. Maltby........................... 50,000 57% 8.125 2006 255,250 647,245
Thomas A. Valdes........................ 37,500 43% 8.125 2006 191,438 485,438
- ------------------------
(1) These options were granted on February 15, 1996 and become exercisable as to
20% per annum of the optioned shares commencing January 3, 1996, with
respect to those granted to Mr. Maltby, and July 10, 1996, with respect to
Mr. Valdes.
(2) These amounts represent certain assumed rates of appreciation only. Actual
gains, if any, on stock option exercises will depend on the actual stock
price on date of exercise.
AGGREGATE OPTION EXERCISES IN LAST FISCAL YEAR AND
FY-END OPTION VALUES
No options were exercised by any of the five named executive officers. The
following table sets forth information with respect to the five named executive
officers concerning the unexercised options held on September 30, 1996.
NO. OF SHARES COVERED BY VALUE OF IN-THE-MONEY
OUTSTANDING STOCK OUTSTANDING STOCK
OPTIONS (1) OPTIONS (2)
(#) ($)
------------------------ ------------------------
NOT NOT
NAME EXERCISABLE EXERCISABLE EXERCISABLE EXERCISABLE
- --------------------------------------------------------------- ----------- ----------- ----------- -----------
A. Kenneth Pincourt, Jr........................................ 60,000 -- -- --
Arnold R. Beinstein............................................ 42,500 8,750 59,063 29,531
Jay S. Maltby.................................................. 10,000 40,000 12,500 50,000
Thomas A. Valdes............................................... -- 37,500 -- 46,875
Joseph A. Loveland, Jr......................................... 26,500 6,500 21,938 21,938
- ------------------------
(1) These options have exercise prices ranging from $6 to $12.25 and are
exercisable during the period from 1996 to 2006.
(2) Amounts reflecting gains on outstanding options based on September 30, 1996
stock prices less the exercise price of the options.
17
BOARD OF DIRECTORS COMPENSATION; MEETINGS; COMMITTEES
COMPENSATION
Each non-employee director of the Company receives $20,000 per year and is
reimbursed for out-of-pocket expenses incurred in attending meetings.
MEETINGS
The Board of Directors of the Company held a total of four meetings during
fiscal year 1996 with five directors attending all of the meetings and two
directors attending four meetings.
COMMITTEES
The Board of Directors has an Audit Committee and a Compensation and Stock
Option Committee. The Board does not have a standing Nominating Committee.
AUDIT COMMITTEE
The Audit Committee independently communicates with the Company's auditors
regarding its financial condition. The present members of the Audit Committee
are Messrs. Robertson, who joined the Committee in September 1995, and Rogers.
The Audit Committee held two meetings during fiscal 1996.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Compensation and Stock Option Committee of the Board of Directors was
established to determine the cash and other incentive compensation, if any, to
be paid to the Company's executive officers. The Compensation and Stock Option
Committee is also responsible for the administration of and awards under the
Company's 1992 Employee Stock Option Plan. This Committee currently consists of
Messrs. Robertson, who joined the Committee in September 1995, and Rogers. The
Compensation and Stock Option Committee was established in August, 1992, in
anticipation of the Company's October 1992 initial public offering. No executive
officer of the Company serves as an officer, director or member of a
compensation committee of any other entity, an executive officer or director of
which is a member of the Compensation and Stock Option Committee of the Company.
The Compensation and Stock Option Committee met twice during fiscal 1996.
The policies of the Compensation and Stock Option Committee in making
executive compensation decisions for fiscal 1994, 1995 and 1996 are consistent
with those of the Board of Directors applicable for fiscal 1992, when the
Company was privately held, recognizing that the Company is now publicly-owned.
Each member abstains from any vote regarding any compensation to be paid by the
Company to such member.
As disclosed above, Mr. Pincourt is the chairman, chief executive officer
and principal stockholder of the Company. Mr. Pincourt has borrowed from the
Company on a revolving loan basis during the fiscal year ended September 30,
1996. The largest amount of principal outstanding at any time during such period
was $294,750. The interest rate on these loans has been the prime rate as
announced from time to time by the Company's then-principal lender. All of said
indebtedness was repaid in full and, as of the close of such fiscal year, no
indebtedness was outstanding. Under the terms of the Company's refinancing of
its indebtedness, principal amounts of such borrowings may not exceed $300,000
in the aggregate.
In addition, during fiscal 1996, the Company paid, on Mr. Maltby's behalf,
$15,285 for whole-life insurance premiums, which amount was subsequently repaid
by Mr. Maltby.
Management believes that all of the transactions set forth above have been
on terms no less favorable to the Company than could have been obtained from
unaffiliated third parties in arm's-length transactions under similar
circumstances. All transactions during fiscal 1996 and any future transactions
between the Company and any of its officers, directors or other affiliates are
subject to review and approval by the Company's Audit Committee.
COMPLIANCE WITH SECTION 16(a) OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
directors and executive officers, and any persons who own more than ten percent
of the Company's Common Stock, to file with the Securities and Exchange
Commission initial reports of ownership and reports of changes in ownership of
Common Stock. Such persons are required by SEC regulations to furnish the
Company with copies of all Section 16(a) forms they file.
18
Based on a review of copies of filings received by the Company and
representations of its officers and directors, Management believes that each
filing required to be made pursuant to Section 16(a) of the Exchange Act has
been filed in a timely manner.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
BENEFICIAL OWNERSHIP
On December 10, 1996, there were 4,923,464 shares of Common Stock
outstanding.
The following table sets forth the number of shares and percentage owned of
the Company's Common Stock beneficially owned as of December 10, 1996 by (i)
owners of more than five percent of the Common Stock, (ii) each director and
officer of the Company, and (iii) all officers and directors of the Company as a
group.
NUMBER OF PERCENTAGE
NAME OF OFFICER OR DIRECTOR (1) SHARES (2) OWNED
- ---------------------------------------------------------------------------- -------------- -------------
A. Kenneth Pincourt, Jr..................................................... 2,003,985 38.9%
A. Kenneth Pincourt, Jr., as Trustee (3).................................... 179,693 3.5
Arnold R. Beinstein......................................................... 44,250 *
Jay S. Maltby............................................................... 11,000 *
Thomas A. Valdes............................................................ 1,000 *
D. Chris Mitchell........................................................... 28,150 *
Joseph A. Loveland, Jr...................................................... 26,500 *
Troy Edwards................................................................ 29,400 *
Leonard G. Rogers........................................................... 400 *
Ousik Yu.................................................................... 39,500 *
W. Gregory Robertson........................................................ 2,500 *
All officers and directors as a group....................................... 2,366,378 45.9%
NAME AND ADDRESS OF OTHER BENEFICIAL OWNERS
- ----------------------------------------------------------------------------
Heartland Advisors, Inc..................................................... 518,000(4) 10.1%
790 North Milwaukee Street
Milwaukee, WI 53202
- ------------------------
* less than 1%
(1) Except as described in (3) below each person listed above has sole voting
power and sole investment power with respect to the shares owned by such
person.
(2) Includes an aggregate of 228,750 shares that may be acquired by such persons
within 60 days of December 10, 1996 upon exercise of outstanding options
under the Company's 1992 Employee Stock Option Plan, as amended, as follows:
A. Kenneth Pincourt, Jr. -- 60,000; Arnold R. Beinstein -- 42,500; D. Chris
Mitchell -- 23,750; Joseph A. Loveland, Jr. -- 26,500; Troy Edwards --
26,500; Ousik Yu -- 39,500; and Jay S. Maltby -- 10,000.
(3) Mr. Pincourt has sole power and authority to vote and dispose of such shares
on behalf of his sister, Ferne Pincourt, pursuant to a Revocable Trust
Agreement, dated April 7, 1992. Under applicable rules relating to
beneficial ownership under the Act, Mr. Pincourt may also be deemed to
beneficially own such shares.
(4) Based upon Schedule 13G of Heartland Advisors, Inc., with respect to shares
of the Company's Common Stock, received by the Company, which Schedule
discloses such stock ownership as of February 9, 1996. The Schedule further
reports sole voting power as to 490,000 of the shares and dispositive power
as to 518,000 shares.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
See "Compensation Committee Interlocks and Insider Participation," for
information regarding certain transactions.
19
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) Financial Statements and Schedules
See "Index to Financial Statements and Financial Statement Schedules".
(b) Exhibits
See "Index to Exhibits".
(c) Reports on Form 8-K
No reports on Form 8-K were filed during the quarter ended September 30,
1996.
20
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this Report to be signed on
its behalf by the undersigned, thereunto duly authorized, in the City of West
Palm Beach, State of Florida, on the 16th day of December, 1996.
TODHUNTER INTERNATIONAL, INC.
By: /s/ A. KENNETH PINCOURT, JR.
-----------------------------------------
A. Kenneth Pincourt, Jr., Chairman
of the Board and Chief
Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
Report has been signed by the following persons in the capacities and on the
dates indicated.
/s/ A. KENNETH PINCOURT, JR. Chairman of the Board and Chief
- ------------------------------------ Executive Officer (Principal December 16, 1996
A. Kenneth Pincourt, Jr. Executive Officer)
* Treasurer and Chief Financial
- ------------------------------------ Officer (Principal Financial and December 16, 1996
Troy Edwards Accounting Officer)
*
- ------------------------------------ Director December 16, 1996
Thomas A. Valdes
*
- ------------------------------------ Director December 16, 1996
Jay S. Maltby
*
- ------------------------------------ Director December 16, 1996
Joseph A. Loveland, Jr.
*
- ------------------------------------ Director December 16, 1996
D. Chris Mitchell
*
- ------------------------------------ Director December 16, 1996
Leonard G. Rogers
*
- ------------------------------------ Director December 16, 1996
W. Gregory Robertson
*By: /s/ A. KENNETH PINCOURT, JR.
------------------------------
A. Kenneth Pincourt, Jr.
Attorney-in-Fact
21
TODHUNTER INTERNATIONAL, INC.
INDEX TO FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULES
PAGE
---------
(a)
Financial Statements
Independent Auditor's Report.......................................................................... 23
Consolidated balance sheets as of September 30, 1996 and 1995......................................... 24
Consolidated statements of operations for the years ended September 30, 1996, 1995 and 1994........... 25
Consolidated statements of stockholders' equity for the years ended September 30, 1996, 1995 and 26
1994.................................................................................................
Consolidated statements of cash flows for the years ended September 30, 1996, 1995 and 1994........... 27
Notes to consolidated financial statements............................................................ 29
(b)
Financial Statement Schedules
Independent Auditors Report on Financial Statement Schedule........................................... 44
Schedule II Valuation and Qualifying Accounts....................................................... 45
All of the other schedules have been omitted as not required, not
applicable, not deemed material or because the information is included in the
notes to the Registrant's consolidated financial statements.
22
INDEPENDENT AUDITOR'S REPORT
To the Board of Directors and Stockholders
Todhunter International, Inc. and Subsidiaries
West Palm Beach, Florida
We have audited the accompanying consolidated balance sheets of Todhunter
International, Inc. and subsidiaries as of September 30, 1996 and 1995, and the
related consolidated statements of operations, stockholders' equity and cash
flows for each of the three years in the period ended September 30, 1996. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Todhunter
International, Inc. and subsidiaries as of September 30, 1996 and 1995, and the
results of their operations and their cash flows for each of the three years in
the period ended September 30, 1996 in conformity with generally accepted
accounting principles.
/s/ McGladrey & Pullen, LLP
West Palm Beach, Florida
November 27, 1996
23
TODHUNTER INTERNATIONAL, INC.
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
ASSETS
SEPTEMBER 30,
-----------------------------
1996 1995
------------- --------------
Current Assets
Cash and cash equivalents....................................................... $ 2,594,246 $ 2,000,581
Certificates of deposit......................................................... 4,494,375 4,584,434
Trade receivables............................................................... 11,232,609 10,249,034
Other receivables............................................................... 1,573,864 1,414,295
Inventories..................................................................... 18,614,304 17,364,574
Notes receivable, current maturities............................................ 1,510,389 1,499,885
Deferred income taxes........................................................... 2,156,000 3,343,000
Other current assets............................................................ 1,358,434 2,319,990
Assets of discontinued operations............................................... 544,719 6,000,904
------------- --------------
Total current assets.......................................................... 44,078,940 48,776,697
Long-Term Notes Receivable, less current maturities............................... 7,768,504 9,293,102
Property and Equipment, less accumulated depreciation 1996 $24,705,488; 1995
$21,338,661...................................................................... 43,122,543 41,845,626
Property Held for Lease, less accumulated depreciation 1996 $871,330; 1995
$766,208......................................................................... 1,445,845 1,479,852
Goodwill, less accumulated amortization 1996 $637,606; 1995 $604,861.............. 454,913 487,658
Other Assets...................................................................... 1,988,051 1,903,686
------------- --------------
$ 98,858,796 $ 103,786,621
------------- --------------
------------- --------------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Current maturities of long-term debt............................................ $ 2,152,206 $ 2,263,559
Accounts payable................................................................ 5,053,661 4,654,813
Accrued interest expense........................................................ 1,261,542 1,281,736
Other accrued expenses.......................................................... 1,674,539 2,200,589
Liabilities of discontinued operations.......................................... 419,933 2,940,784
------------- --------------
Total current liabilities..................................................... 10,561,881 13,341,481
Note Payable, Bank................................................................ -- 10,000,000
Long-Term Debt, less current maturities........................................... 51,292,490 47,759,020
Deferred Income Taxes............................................................. 4,784,000 4,915,000
Other Liabilities................................................................. 354,330 488,823
------------- --------------
66,992,701 76,504,324
------------- --------------
Minority Interest................................................................. 417,784 417,784
------------- --------------
Commitments and Contingencies
Stockholders' Equity
Preferred stock, par value $.01 per share; authorized 2,500,000 shares, no
shares issued.................................................................. -- --
Common stock, par value $.01 per share; authorized 10,000,000 shares issued and
outstanding 1996 4,923,464 shares; 1995 4,916,964 shares......................... 49,235 49,170
Additional paid-in capital........................................................ 11,788,539 11,749,604
Retained earnings................................................................. 19,610,537 15,065,739
------------- --------------
31,448,311 26,864,513
------------- --------------
$ 98,858,796 $ 103,786,621
------------- --------------
------------- --------------
See Notes to Consolidated Financial Statements.
24
TODHUNTER INTERNATIONAL, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
YEARS ENDED SEPTEMBER 30,
----------------------------------------------
1996 1995 1994
-------------- -------------- --------------
Sales............................................................. $ 121,066,640 $ 118,585,016 $ 117,859,246
Less excise taxes............................................... 42,870,108 48,393,855 44,543,438
-------------- -------------- --------------
Net sales..................................................... 78,196,532 70,191,161 73,315,808
Cost of goods sold................................................ 58,427,344 54,564,214 55,971,865
-------------- -------------- --------------
Gross profit.................................................. 19,769,188 15,626,947 17,343,943
Selling, general and administrative expenses...................... 11,482,737 11,598,922 9,618,472
-------------- -------------- --------------
Operating income.............................................. 8,286,451 4,028,025 7,725,471
-------------- -------------- --------------
Other income (expense):
Interest income................................................. 1,035,811 740,036 403,480
Interest expense................................................ (4,350,791) (4,014,878) (2,543,231)
Gain on insured fire damage..................................... -- -- 1,601,451
Gain (loss) on sale of Bahamian liquor operations............... -- (350,054) 1,080,917
Other, net...................................................... 765,592 602,067 217,312
-------------- -------------- --------------
(2,549,388) (3,022,829) 759,929
-------------- -------------- --------------
Income from continuing operations before income taxes......... 5,737,063 1,005,196 8,485,400
-------------- -------------- --------------
Income tax expense:
Current......................................................... 136,265 452,809 538,900
Deferred........................................................ 1,056,000 607,883 1,332,000
-------------- -------------- --------------
1,192,265 1,060,692 1,870,900
-------------- -------------- --------------
Income (loss) from continuing operations...................... 4,544,798 (55,496) 6,614,500
-------------- -------------- --------------
Discontinued operations:
Income (loss) from operations, net of income tax benefit of
$205,593 in 1995............................................... -- (490,407) 10,508
(Loss) on disposal of discontinued operations including
provision of $1,871,173 for operating losses during phase out
period, net of income tax benefit of $730,290.................. -- (10,249,717) --
-------------- -------------- --------------
-- (10,740,124) 10,508
-------------- -------------- --------------
Income (loss) before extraordinary item....................... 4,544,798 (10,795,620) 6,625,008
Extraordinary item, expenses related to early extinguishment of
debt, net of income tax benefit of $251,927...................... -- (467,862) --
-------------- -------------- --------------
Net income (loss)........................................... $ 4,544,798 $ (11,263,482) $ 6,625,008
-------------- -------------- --------------
-------------- -------------- --------------
Earnings per common share:
Primary:
Income (loss) from continuing operations...................... $ 0.92 $ (0.01) $ 1.40
(Loss) from discontinued operations........................... -- (2.19) --
Extraordinary item............................................ -- (0.10) --
-------------- -------------- --------------
Net income (loss)........................................... $ 0.92 $ (2.30) $ 1.40
-------------- -------------- --------------
-------------- -------------- --------------
Fully diluted:
Income (loss) from continuing operations...................... $ 0.91 $ (0.01) $ 1.39
(Loss) from discontinued operations........................... -- (2.19) --
Extraordinary item............................................ -- (0.10) --
-------------- -------------- --------------
Net income (loss)........................................... $ 0.91 $ (2.30) $ 1.39
-------------- -------------- --------------
-------------- -------------- --------------
Common shares and equivalents outstanding:
Primary......................................................... 4,955,088 4,905,998 4,745,795
-------------- -------------- --------------
-------------- -------------- --------------
Fully diluted................................................... 4,969,436 4,905,998 4,761,432
-------------- -------------- --------------
-------------- -------------- --------------
See Notes to Consolidated Financial Statements.
25
TODHUNTER INTERNATIONAL, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
YEARS ENDED SEPTEMBER 30, 1996, 1995 AND 1994
COMMON STOCK
--------------------- ADDITIONAL TOTAL
SHARES PAID-IN RETAINED STOCKHOLDERS'
ISSUED AMOUNT CAPITAL EARNINGS EQUITY
---------- --------- ------------- -------------- --------------
Balance, September 30, 1993................. 4,427,500 $ 44,275 $ 6,325,718 $ 19,704,213 $ 26,074,206
Issuance of common stock in connection
with stock warrants, net of stock
offering costs........................... 150,000 1,500 957,781 -- 959,281
Issuance of common stock in connection
with employee stock options.............. 43,500 435 260,565 -- 261,000
Issuance of common stock in connection
with business acquisition................ 261,214 2,612 3,997,388 -- 4,000,000
Net income................................ -- -- -- 6,625,008 6,625,008
---------- --------- ------------- -------------- --------------
Balance, September 30, 1994................. 4,882,214 48,822 11,541,452 26,329,221 37,919,495
Issuance of common stock in connection
with employee stock options.............. 34,750 348 208,152 -- 208,500
Net (loss)................................ -- -- -- (11,263,482) (11,263,482)
---------- --------- ------------- -------------- --------------
Balance, September 30, 1995................. 4,916,964 49,170 11,749,604 15,065,739 26,864,513
Issuance of common stock in connection
with employee stock options.............. 6,500 65 38,935 -- 39,000
Net income................................ -- -- -- 4,544,798 4,544,798
---------- --------- ------------- -------------- --------------
Balance, September 30, 1996................. 4,923,464 $ 49,235 $ 11,788,539 $ 19,610,537 $ 31,448,311
---------- --------- ------------- -------------- --------------
---------- --------- ------------- -------------- --------------
See Notes to Consolidated Financial Statements.
26
TODHUNTER INTERNATIONAL, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED SEPTEMBER 30,
--------------------------------------------
1996 1995 1994
------------- -------------- -------------
Cash Flows From Operating Activities
Net income (loss)................................................ $ 4,544,798 $ (11,263,482) $ 6,625,008
Adjustments to reconcile net income (loss) to net cash provided
by (used in) operating activities:
Depreciation................................................... 3,837,646 3,459,317 3,033,469
Amortization................................................... 210,479 1,252,974 444,484
Loss on impairment of assets................................... -- 4,466,478
(Gain) on sale of intangible assets............................ -- (119,844) --
(Gain) on investment transactions.............................. -- -- (5,423)
(Gain) loss on sale of property and equipment.................. (48,556) 71,008 (25,023)
(Gain) on insured fire damage.................................. -- -- (1,601,451)
(Gain) loss on sale of Bahamian liquor operations.............. -- 350,054 (1,080,917)
Equity in earnings of affiliated companies, net of
distributions................................................. 17,091 13,182 10,419
Deferred income taxes.......................................... 1,056,000 (328,000) 1,332,000
Minority interest in net income................................ -- -- 3,206
Changes in assets and liabilities:
(Increase) decrease in:
Receivables................................................ (1,143,144) 3,477,892 (1,629,373)
Inventories................................................ (1,249,730) 1,121,564 (2,232,193)
Other assets............................................... 961,556 1,240,734 (2,027,382)
Increase (decrease) in:
Accounts payable........................................... 398,848 (4,776,401) 403,549
Accrued interest expense................................... (20,194) 1,281,736 --
Other accrued expenses..................................... (526,050) 360,142 (1,221,039)
Other liabilities.......................................... (134,493) 199,683 146,035
Discontinued operations, net of $207,057 of property and
equipment in 1995........................................... 2,728,277 (2,853,063) --
------------- -------------- -------------
Net cash provided by (used in) operating activities...... 10,632,528 (2,046,026) 2,175,369
------------- -------------- -------------
Cash Flows From Investing Activities
Proceeds from sale of property and equipment..................... 76,762 44,774 65,972
Principal payments received on notes receivable.................. 1,576,164 939,287 1,151,631
Proceeds from sale of Bahamian liquor operations................. -- -- 1,492,651
Proceeds from insurance settlement............................... -- -- 4,234,356
Purchase of property and equipment............................... (4,901,705) (7,155,626) (7,260,151)
Disbursements for notes receivable............................... (62,070) (42,670) (371,000)
Net cash acquired in acquisitions................................ -- -- 1,128,625
Purchase of certificates of deposit.............................. (4,565,381) (4,584,434) --
Redemption of certificates of deposit............................ 4,655,440 -- --
(Increase) decrease in goodwill and other assets................. (279,190) 155,523 (282,375)
Other............................................................ -- -- 17,909
------------- -------------- -------------
Net cash provided by (used in) investing activities...... (3,499,980) (10,643,146) 177,618
------------- -------------- -------------
27
TODHUNTER INTERNATIONAL, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
YEARS ENDED SEPTEMBER 30,
--------------------------------------------
1996 1995 1994
------------- -------------- -------------
Cash Flows From Financing Activities
Net borrowings (payments) under line of credit arrangements...... $ (4,064,324) $ 10,124,244 $ 3,187,646
Proceeds from issuance of common stock........................... 39,000 208,500 1,251,000
Proceeds from long-term borrowings............................... -- -- 500,000
Principal payments on long-term borrowings....................... (2,513,559) (2,130,571) (4,825,330)
Disbursements for loan closing costs............................. -- (458,382) (454,532)
Stock offering costs paid........................................ -- -- (30,719)
------------- -------------- -------------
Net cash provided by (used in) financing activities...... (6,538,883) 7,743,791 (371,935)
------------- -------------- -------------
Net increase (decrease) in cash and cash equivalents..... 593,665 (4,945,381) 1,981,052
Cash and cash equivalents:
Beginning........................................................ 2,000,581 6,945,962 4,964,910
------------- -------------- -------------
Ending........................................................... $ 2,594,246 $ 2,000,581 $ 6,945,962
------------- -------------- -------------
------------- -------------- -------------
See Notes to Consolidated Financial Statements.
28
TODHUNTER INTERNATIONAL, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1. NATURE OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES
NATURE OF BUSINESS:
Todhunter International, Inc. and subsidiaries (the "Company") produces
citrus-based brandy, distilled spirits, rum and fortified wine used as
ingredients in a variety of alcoholic beverages; bottles coolers and prepared
cocktails and other beverages on a contract basis; and produces a line of
popular price spirits for distribution in the Southeast. The Company also
imports and distributes alcoholic beverages throughout the United States and
produces vinegar, cooking wine and other certain alcohol related products.
A summary of the Company's significant accounting policies follows:
PRINCIPLES OF CONSOLIDATION:
The consolidated financial statements include the accounts of Todhunter
International, Inc. and all of its majority-owned subsidiaries. All significant
intercompany balances and transactions have been eliminated in consolidation.
ACCOUNTING ESTIMATES:
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
CASH EQUIVALENTS:
The Company considers certificates of deposit with an original maturity of
three months or less to be cash equivalents. The Company maintains depository
accounts in excess of FDIC insured limits. It has not experienced any credit
losses in such accounts and does not anticipate any losses.
INVENTORIES:
Inventories are stated at the lower of cost or market. Cost is determined
using the first-in, first-out method.
PROPERTY AND EQUIPMENT AND PROPERTY HELD FOR LEASE:
Property and equipment and property held for lease are stated at cost.
Depreciation is calculated on the straight-line method over the estimated useful
lives of the various classes of depreciable assets. Estimated lives are as
follows:
YEARS
---------
Land improvements............................................................................. 3 to 20
Buildings and improvements.................................................................... 3 to 40
Furniture, fixtures and equipment............................................................. 3 to 33
AMORTIZATION:
Amortization is computed on the straight-line basis over the estimated lives
of the capitalized assets. Estimated lives are as follows:
YEARS
---------
Goodwill...................................................................................... 20 - 40
Trade names and copyrights.................................................................... 20 - 40
Other......................................................................................... 3 - 12
29
TODHUNTER INTERNATIONAL, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 1. NATURE OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
INCOME TAXES:
Deferred income tax assets and liabilities are computed for differences
between the financial statement and tax bases of assets and liabilities that
will result in taxable or deductible amounts in the future based on enacted tax
laws and rates applicable to the periods in which the differences are expected
to affect taxable income. Valuation allowances are established when necessary to
reduce deferred tax assets to the amount expected to be realized.
NET INCOME (LOSS) PER COMMON SHARE:
The net income (loss) per common share amounts are computed using the
weighted average number of common shares outstanding and dilutive common stock
equivalents during the period.
PREFERRED STOCK:
The Company has authorized 2,500,000 shares of $.01 par value preferred
stock. No terms are stated as to dividend, liquidation or other rights
applicable to these shares.
NOTE 2. INVENTORIES
The major components of inventories as of September 30, 1996 and 1995 are:
1996 1995
------------- -------------
Finished goods........................................................... $ 12,032,447 $ 9,579,693
Work in process.......................................................... 549,673 915,807
Raw materials and supplies............................................... 6,032,184 6,869,074
------------- -------------
$ 18,614,304 $ 17,364,574
------------- -------------
------------- -------------
NOTE 3. NOTES RECEIVABLE
Notes receivable consist of the following as of September 30, 1996 and 1995:
1996 1995
------------ -------------
6% note, collateralized by general intangibles, mortgage and security
agreement, monthly principal and interest payments through September
2001...................................................................... $ 4,916,667 $ 6,000,000
7% note, collateralized by property and equipment, monthly principal and
interest payments through September 1999, unpaid principal balance of
$3,000,000 due in October 1999............................................ 3,961,936 4,240,353
7% - 10% notes, unsecured, maturities through October 1998................. 318,141 457,100
Other...................................................................... 82,149 95,534
------------ -------------
9,278,893 10,792,987
Less current maturities.................................................... 1,510,389 1,499,885
------------ -------------
$ 7,768,504 $ 9,293,102
------------ -------------
------------ -------------
30
TODHUNTER INTERNATIONAL, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 4. PROPERTY AND EQUIPMENT
The major classifications of property and equipment as of September 30, 1996
and 1995 are:
1996 1995
------------- -------------
Land..................................................................... $ 4,757,587 $ 4,757,587
Land improvements........................................................ 1,039,720 975,524
Buildings and improvements............................................... 14,184,693 13,147,528
Furniture, fixtures and equipment........................................ 47,846,031 44,303,648
------------- -------------
67,828,031 63,184,287
Less accumulated depreciation............................................ 24,705,488 21,338,661
------------- -------------
$ 43,122,543 $ 41,845,626
------------- -------------
------------- -------------
NOTE 5. PROPERTY HELD FOR LEASE
The major classifications of property held for lease as of September 30,
1996 and 1995 are:
1996 1995
------------ ------------
Land........................................................................ $ 191,318 $ 191,318
Buildings................................................................... 2,032,721 1,961,606
Furniture and equipment..................................................... 93,136 93,136
------------ ------------
2,317,175 2,246,060
Less accumulated depreciation............................................... 871,330 766,208
------------ ------------
$ 1,445,845 $ 1,479,852
------------ ------------
------------ ------------
Property held for lease consists of two commercial shopping centers and five
residential townhomes in the Bahamas. The properties are leased on a
month-to-month basis. Total rental income was $234,882, $276,375 and $273,269
for the years ended September 30, 1996, 1995 and 1994, respectively.
NOTE 6. OTHER ASSETS
Other assets, net of accumulated amortization, consist of the following as
of September 30, 1996 and 1995:
1996 1995
------------ ------------
Trade names and copyrights.................................................. $ 1,306,248 $ 1,156,448
Other....................................................................... 681,803 747,238
------------ ------------
$ 1,988,051 $ 1,903,686
------------ ------------
------------ ------------
31
TODHUNTER INTERNATIONAL, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 7. FINANCING ARRANGEMENTS
Note payable, bank bore interest at the prime rate and was refinanced on a
long-term basis in 1996, under the same terms as the revolving credit note
described below.
Long-term debt consists of the following as of September 30, 1996 and 1995:
1996 1995
------------- -------------
Senior notes, interest payable semiannually at 8.905%, principal payments
of $6,800,000 on October 30, 1999, $7,933,333 on October 30, 2000 and
2001, $4,533,334 on October 30, 2002 and $3,400,000 on October 30, 2003
and 2004, unsecured (1)................................................. $ 34,000,000 $ 34,000,000
Revolving credit note of $20,000,000, interest payable monthly at the
prime rate for domestic loans and at 150 basis points above the LIBOR
rate for Eurodollar loans, principal is due in full November 1, 1997.
The maximum amount which can be drawn on the revolving note is based on
the borrowing base as specified in the agreement, unsecured............. 9,685,485 3,749,809
Bank note payable, interest at the prime rate plus 1%, quarterly
principal payments of $250,000 collateralized by real property,
equipment, machinery and trade receivables in the Virgin Islands (2).... 6,750,000 8,000,000
Note payable, interest at 6%, monthly principal payments of $80,739,
unsecured............................................................... 2,825,877 3,794,749
Note payable, interest at the prime rate, monthly principal payments of
$16,667................................................................. 183,334 383,335
Other.................................................................... -- 94,686
------------- -------------
53,444,696 50,022,579
Less current maturities.................................................. 2,152,206 2,263,559
------------- -------------
$ 51,292,490 $ 47,759,020
------------- -------------
------------- -------------
32
TODHUNTER INTERNATIONAL, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 7. FINANCING ARRANGEMENTS (CONTINUED)
Maturities of long-term debt as of September 30, 1996 are as follows:
YEAR ENDING
SEPTEMBER 30, AMOUNT
--------------- -------------
1997..................................................................................... $ 2,152,206
1998..................................................................................... 11,654,357
1999..................................................................................... 8,688,133
2000..................................................................................... 8,933,333
2001..................................................................................... 10,683,333
Thereafter............................................................................... 11,333,334
-------------
$ 53,444,696
-------------
-------------
- ------------------------
(1) The Company has entered into an interest rate swap agreement accounted for
as a hedge with a bank. The agreement calls for the Company to exchange, as
of May 1 and November 1 through 2004, interest payment streams calculated on
a principal balance starting at $4,000,000 and reducing starting in November
1999. The Company's interest is calculated based upon a floating rate of
1.06% above the six-month London Interbank Offered Rate (LIBOR). The bank's
rate is 8.905%. During 1996 and 1995, the Company received payments of
$100,444 and $36,321, respectively, related to this agreement, and reduced
interest expense accordingly.
(2) The Company has entered into an interest rate swap agreement accounted for
as a hedge with a bank. The agreement calls for the Company to exchange, as
of January 1, April 1, July 1, and October 1, through 2003, interest payment
streams calculated on a principal balance starting at $7,500,000 and
reducing starting April 1, 1996. The Company's rate is fixed at 8.46%.
During 1996, the Company made payments of $27,332 related to this agreement,
and increased interest expense accordingly.
The long-term debt contains various restrictive covenants related to
fixed-charge coverage, interest expense coverage, net worth and debt limitation.
All covenants have been met.
In October 1996, the Company transferred $2,500,000 in previously taxed
income from its Bahamian subsidiary to reduce the revolving credit note.
During 1995, the Company recognized an extraordinary loss of $467,862, net
of income tax benefit of $251,927 on its early extinguishment of debt. This loss
relates to the write-off of unamortized deferred financing costs due to the
refinancing of long-term debt.
NOTE 8. INCOME TAXES
Income tax expense on income from continuing operations consists of the
following for the years ended September 30, 1996, 1995 and 1994:
1996 1995 1994
------------ ------------ ------------
Current income tax expense (benefit):
Federal..................................................... $ 116,265 $ 485,636 $ 112,891
State....................................................... 20,000 (32,827) 426,009
------------ ------------ ------------
136,265 452,809 538,900
------------ ------------ ------------
Deferred income tax expense:
Federal..................................................... 978,000 586,883 1,177,000
State....................................................... 78,000 21,000 155,000
------------ ------------ ------------
1,056,000 607,883 1,332,000
------------ ------------ ------------
Total income tax expense on income from continuing
operations............................................... $ 1,192,265 $ 1,060,692 $ 1,870,900
------------ ------------ ------------
------------ ------------ ------------
33
TODHUNTER INTERNATIONAL, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 8. INCOME TAXES (CONTINUED)
Temporary differences between the financial statement carrying amounts and
tax bases of assets and liabilities that give rise to significant portions of
the deferred tax assets and liabilities relate to the following as of September
30, 1996 and 1995:
1996 1995
------------ ------------
Deferred tax liabilities:
Property and equipment, principally due to differences in depreciation.... $ 3,290,000 $ 3,093,000
Installment sale.......................................................... 1,459,000 1,787,000
Other..................................................................... 35,000 35,000
------------ ------------
4,784,000 4,915,000
------------ ------------
Deferred tax assets:
Inventories, principally due to additional costs inventoried for tax
purposes pursuant to the Tax Reform Act of 1986.......................... 531,000 750,000
Difference related to anticipated future expenses and allowances of
discontinued operations.................................................. 389,000 1,270,000
Net operating loss carryfowards........................................... 1,117,000 1,323,000
Other..................................................................... 119,000 --
------------ ------------
2,156,000 3,343,000
------------ ------------
Net deferred income tax liability........................................... $ 2,628,000 $ 1,572,000
------------ ------------
------------ ------------
No valuation allowance has been recorded as of September 30, 1996.
Total income tax expense differed from the amounts computed by applying the
statutory United States federal income tax rate to income from continuing
operations before income taxes as a result of the following for the years ended
September 30, 1996, 1995 and 1994:
1996 1995 1994
------------ ------------ ------------
Computed "expected" tax expense............................... $ 1,950,602 $ 351,818 $ 2,969,890
(Nontaxable) taxable income and dividends from Bahamian
subsidiary................................................... (5,918) 777,455 (121,337)
Effect of income tax subsidy on earnings of Virgin Islands
operations................................................... (767,571) (317,520) (399,010)
Nontaxable insurance proceeds................................. -- -- (560,507)
Effect of state taxes......................................... (6,800) 20,000 12,772
Other......................................................... 21,952 228,939 (30,908)
------------ ------------ ------------
Total income tax expense on income from continuing
operations............................................... $ 1,192,265 $ 1,060,692 $ 1,870,900
------------ ------------ ------------
------------ ------------ ------------
Generally, the Bahamian subsidiary is not subject to United States taxes on
income and there are no taxes on income in the Commonwealth of the Bahamas.
Certain passive income of the Bahamian subsidiary is subject to United States
taxes. In addition, the Internal Revenue Code provides for the taxation of
previously untaxed accumulated earnings and profits of foreign corporations with
excess passive assets earned during years ended September 30, 1994 through 1996.
This law has been repealed effective for tax years ending after September 30,
1996. Accordingly, the tax effect of income from the Bahamian subsidiary
reflected above and the undistributed earnings of the Bahamian subsidiary have
been reduced by the taxable
34
TODHUNTER INTERNATIONAL, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 8. INCOME TAXES (CONTINUED)
amount. The Company's share of the undistributed earnings of the Bahamian
subsidiary was approximately $9,100,000 as of September 30, 1996. No provision
has been made for taxes which would result from the remittance of such
undistributed earnings as the Company intends to reinvest these earnings
indefinitely.
The Virgin Islands subsidiary, through the Industrial Development Commission
of the Government of the Virgin Islands of the United States, has received a 90%
exemption from income taxes. This exemption is effective through January 31,
1999.
The Company has available for tax reporting purposes net operating loss
carryforwards of approximately $3,000,000 which expire in 2010.
NOTE 9. LEASES
The Company occupies office space under noncancelable operating leases which
expire in 1999. Initial base rent is $28,544 payable monthly. A portion of the
office space is subject to annual adjustments based on the Consumer Price Index,
not to exceed 5% per year. The leases contain two renewal options of five years
each.
Future minimum lease payments, including Consumer Price Index escalations to
date, under noncancelable operating leases as of September 30, 1996 are as
follows:
YEAR ENDING
SEPTEMBER 30, AMOUNT
--------------- ------------
1997...................................................................................... $ 413,336
1998...................................................................................... 420,887
1999...................................................................................... 285,961
------------
$ 1,120,184
------------
------------
Rent expense for office space (including the Company's share of common area
expenses, real estate and sales taxes) amounted to $470,080, $504,432, and
$406,585 for the years ended September 30, 1996, 1995 and 1994, respectively.
NOTE 10. LEGAL PROCEEDINGS
The Company has the following legal proceedings on going as of September 30,
1996:
1. In June 1994, C.J. Spirits, Incorporated filed an action against the
Company and two of its officers, in the Circuit Court of Hillsborough
Country, Florida, alleging, among other things, breach of contract,
conversion of goods, trademark infringement and unfair trade practices, and
seeks unspecified dollar damages in excess of $15,000. The Company has
denied these allegations and has filed a counterclaim seeking in excess of
$100,000 for expenses and taxes advanced on behalf of C.J. Spirits.
Management believes that there are substantial defenses to C.J. Spirits'
action and, in addition, no damages were sustained by C.J. Spirits.
Discovery is proceeding and this matter is scheduled for trial in March
1997.
2. On November 13, 1995, the Company filed an Arbitration Demand
against the former stockholders of Blair arising out of the Company's
acquisition of Blair pursuant to an Agreement and Plan of Merger dated April
22, 1994, as amended (the "Merger Agreement"). As part of the acquisition of
Blair, Blair executed, and the Company guaranteed, a note in the amount of
$4,844,361 payable over a five-year period to the former Blair stockholders
and Charmer Industries, Inc. ("Charmer"). On July 15, 1996, the Company
filed an Amended Arbitration Demand, which also named Charmer as a
Respondent. In the arbitration proceeding, the Company alleges various
misrepresentations were made by the Respondents in connection with the
Merger Agreement and seeks damages and rescission of the
35
TODHUNTER INTERNATIONAL, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 10. LEGAL PROCEEDINGS (CONTINUED)
transaction and the note. On October 2, 1996, Charmer filed an application
in the United States District Court for the Southern District of Florida,
seeking to stay the arbitration as against Charmer on the grounds that
Charmer should not be compelled to arbitrate the claims. The Court is
expected to rule on the application in January 1997.
On August 2, 1996, the selling Blair stockholders filed a counterclaim
against the Company in the arbitration proceeding. The counterclaim alleges
that the Company violated the Merger Agreement in various respects and seeks
unspecified damages, including legal fees, accounting fees and other
expenses.
On November 21, 1995, the former Blair stockholders and Charmer
commenced a proceeding against the Company and Blair in the Supreme Court of
the State of New York, County of New York, alleging that the sale of certain
assets of Blair to David Sherman Corp. constituted an "Early Payment Event,"
accelerating all remaining payments under the note referred to above. The
Plaintiffs seek judgment in the amount of the balance remaining on the note
with interest. By agreement among the parties, no further action was taken
in the proceeding until November 8, 1996, when the plaintiffs gave notice to
the Company that the adjournment of the proceedings was being terminated. On
November 29, 1996, the Company served a motion seeking to compel the
plaintiffs to arbitrate their claims pursuant to the arbitration provision
of the Merger Agreement. That motion has not been decided by the Court as of
this date. Since the outstanding balance of the note is already recorded in
the Company's books and records, this litigation will not have an adverse
material effect on the financial condition of the Company.
The Company's claims in arbitration and the counterclaims of the
Respondents in the arbitration have not yet been heard by the arbitration
panel. The parties are currently conducting discovery and the final hearing
is scheduled to begin on August 4, 1997. Because discovery is at an early
stage, the Company cannot evaluate the likely outcome of the arbitration
proceeding or the New York State Supreme Court action. However, the Company
intends to vigorously pursue its claims and believes it has substantial
defenses to the Claims asserted against it.
3. The Company has brought suit in the Supreme Court of the State of
New York, County of New York, against the former independent accounting firm
for Blair alleging accounting malpractice and fraud. The acts alleged arise
out of the acquisition of Blair. The Company seeks $10,000,000 in damages.
The defendant moved to dismiss the amended complaint on December 11, 1996,
which notice was denied by the Court. Discovery has not commenced.
NOTE 11. STOCK OPTION PLAN
On August 11, 1992, the Company adopted a stock option plan for the grant of
options to key employees. Option prices may not be less than 85% for the
nonqualified options or 100% for the qualified stock options of the fair market
value at the date of the grant, but in no event less than the initial public
offering price of the common stock for a period of three years after the
offerings. As of September 30, 1996, 1,400,000 shares are authorized for
issuance under the option plan. On November 3, 1992, the Company granted options
to purchase an aggregate of 200,000 shares at the exercise price of $6 per
share. These rights vest 25% per year commencing on November 3, 1993 and expire
on November 3, 2002. On April 11, 1994, the Company granted additional options
to purchase an aggregate of 200,000 shares at the exercise price of $12.25 per
share, the fair market value of the Company's stock at the grant date. Those
rights vest at 33 1/3% per year commencing on January 1, 1995 and expire on
April 11, 2004. On February 15, 1996, the Company granted additional options to
purchase an aggregate of 87,500 shares at the exercise price of $8.125, the fair
market value of the Company's stock at the grant date. Those rights vest at 20%
per year commencing on
36
TODHUNTER INTERNATIONAL, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 11. STOCK OPTION PLAN (CONTINUED)
January 3, 1996 for 50,000 shares and July 10, 1996 for 37,500 shares and expire
on February 15, 2006. During the years ended September 30, 1996, 1995, and 1994
the Company received a total of $39,000, $208,500 and $261,000 upon the exercise
of stock options for 6,500, 34,750 and 43,500 shares, respectively.
A reconciliation of the Company's stock option activity, and related
information, for the years ended September 30 follows:
1994 1995 1996
---------------------- ----------------------- ----------------------
EXERCISE EXERCISE EXERCISE
PRICE PRICE PRICE
NUMBER OF WEIGHTED NUMBER OF WEIGHTED NUMBER OF WEIGHTED
OPTIONS AVERAGE OPTIONS AVERAGE OPTIONS AVERAGE
--------- ----------- ---------- ----------- --------- -----------
Outstanding, beginning of year................. 200,000 $ 6.00 356,500 $ 9.51 321,750 $ 9.89
Granted........................................ 200,000 12.25 -- -- 87,500 8.13
Exercised...................................... (43,500) 6.00 (34,750) 6.00 (6,500) 6.00
Forfeited...................................... -- -- -- -- -- --
--------- ----------- ---------- ----- --------- -----
Outstanding, end of year....................... 356,500 $ 9.51 321,750 $ 9.89 402,750 $ 9.57
--------- ----------- ---------- ----- --------- -----
--------- ----------- ---------- ----- --------- -----
Exercisable at end of year..................... 6,500 88,417 216,084
--------- ---------- ---------
--------- ---------- ---------
The following table summarizes information about the stock options at
September 30, 1996:
NUMBER NUMBER
OUTSTANDING AT EXERCISABLE
SEPTEMBER 30, AT SEPTEMBER
EXERCISE PRICE 1996 30, 1996 EXPIRATION DATE
- --------------------------------------------------------------- -------------- ------------- ------------------
$6.000......................................................... 115,250 65,250 November 2002
12.250......................................................... 200,000 133,334 April 2004
8.125.......................................................... 87,500 17,500 February 2006
------- -------------
402,750 216,084
------- -------------
------- -------------
Statement of Financial Accounting Standards Number 123, ACCOUNTING FOR
STOCK-BASED COMPENSATION, ("FAS 123") was issued in October 1995. This
Statement, which is effective for the Company during the fiscal year ending
September 30, 1997, establishes a fair value-based method of accounting for
stock-based compensation plans and encourages, but does not require, entities to
adopt that method in place of existing generally accepted accounting principles
("APB 25"). The Statement requires pro forma disclosures, as if FAS 123 had been
adopted, for option grants made after December 31, 1994, when companies elect to
continue to account for stock-based compensation plans in accordance with APB
25. The Company has elected not to adopt FAS 123 and will present the required
pro forma disclosure as if the expense recognition elements of the Statement
were adopted. The pro forma effects on net income and earnings per share of
applying FAS 123 during 1996 and 1995 are insignificant.
NOTE 12. MAJOR CUSTOMERS AND GEOGRAPHIC INFORMATION
The Company has made net sales of approximately $12,100,000, $12,264,000 and
$11,060,000 to a major customer for the years ended September 30, 1996, 1995 and
1994, respectively. Included in trade receivables was $634,087 and $662,000 from
this customer as of September 30, 1996 and 1995, respectively.
37
TODHUNTER INTERNATIONAL, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 12. MAJOR CUSTOMERS AND GEOGRAPHIC INFORMATION (CONTINUED)
Sales and operating income from continuing operations for the years ended
September 30, 1996, 1995, and 1994 and identifiable assets from continuing
operations as of the end of each period classified by geographic area, were as
follows:
U. S. VIRGIN
ISLANDS AND
UNITED STATES THE BAHAMAS CONSOLIDATED
------------- ------------- -------------
September 30, 1996:
Net sales......................................................... $ 66,052,948 $ 12,143,584 $ 78,196,532
Operating income.................................................. 5,673,351 2,613,100 8,286,451
Identifiable assets............................................... 64,030,346 34,283,731 98,314,077
September 30, 1995:
Net sales......................................................... 60,713,673 9,477,488 70,191,161
Operating income.................................................. 1,769,150 2,258,875 4,028,025
Identifiable assets............................................... 65,909,593 31,876,124 97,785,717
September 30, 1994:
Net sales......................................................... 60,573,401 12,742,407 73,315,808
Operating income.................................................. 5,638,803 2,086,668 7,725,471
Identifiable assets............................................... 72,727,575 31,406,357 104,133,932
NOTE 13. GAIN ON INSURED FIRE DAMAGE
During September 1993, the Company experienced a fire at one of its
facilities. Damage from the fire (except for a $50,000 deductible) was fully
covered by insurance. The cost of inventory and the net book value of property
and equipment which was destroyed amounted to approximately $1,970,000. During
1994 the Company agreed on terms with its insurance carrier for the replacement
of assets destroyed or damaged. The insurance proceeds received in excess of the
net book value of the damaged assets and related clean-up and repair costs were
included in other income for the years ended September 30, 1994 and 1993.
NOTE 14. PENSION PLAN
The Company has a defined contribution retirement plan which covers
substantially all U. S. Employees. Contributions to the plan were approximately
$456,000 $462,000, and $420,000 for the years ended September 30, 1996, 1995 and
1994, respectively. The Company contributes 5.5% of an employee's compensation,
plus 5.3% of compensation in excess of $48,000 for the year ended September 30,
1994 and 6.0% of an employee's compensation, plus 5.5% of compensation in excess
of $60,600 for the years ended September 30, 1996 and 1995. Generally,
contributions to the plan begin to vest to the benefit of the participant after
three years of service. Participants are entitled, upon retirement, to their
vested portion of the retirement fund assets, which are held by a corporate
trustee.
NOTE 15. BUSINESS ACQUISITIONS
On February 4, 1994, the Company acquired Virgin Islands Rum Industries,
Ltd., a Virgin Islands Corporation ("VIRIL"), from VI Acquisition Partnership, a
New York general partnership, for an aggregate purchase price of $16 million.
VIRIL is a manufacturer of rum which it sells throughout the Virgin Islands and
in the United States under the "Cruzan" label and is a supplier of bulk rum to
other bottlers and distillers in the United States. This acquisition has been
accounted for as a purchase. Operations since the acquisition date are included
in the consolidated financial statements.
On August 4, 1994, the Company acquired Blair Importers, Ltd. for 261,214
shares of the Company's stock having a value of $4,000,000. This acquisition has
been accounted for as a purchase and its operations since the acquisition date
are included in the consolidated financial statements under the caption
discontinued operations.
38
TODHUNTER INTERNATIONAL, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
NOTE 16. SALE OF BAHAMIAN LIQUOR OPERATIONS
On August 31, 1994, the Company sold its Bahamian liquor operations and
recognized a gain of $1,080,917. During 1995, the purchase price was adjusted by
$350,054 under the terms of the sale agreement.
NOTE 17. DISCONTINUED OPERATIONS
During July 1995, the Company decided to discontinue the operations of
Todhunter Imports, Ltd., formerly known as Blair Importers, Ltd. and sold assets
consisting of certain trademarks and inventory in September 1995.
Revenues and interest expense allocated to the discontinued operations were
as follows:
INTEREST
YEAR ENDED SEPTEMBER 30, REVENUES EXPENSE
--------------- ------------- ------------
1996....................................................................... $ 493,994 $ 201,605
1995....................................................................... 22,352,924 1,102,413
1994....................................................................... 3,059,663 79,828
Interest expense was allocated based on financed inventory and receivable
balances.
As of September 30, 1996 and 1995, the assets and liabilities of the
discontinued operations consisted of the following:
1996 1995
----------- -------------
Assets:
Cash and cash equivalents........................................................... $ 11,679 $ 215,994
Receivables......................................................................... 315,981 5,778,768
Inventories......................................................................... 893,696 2,040,622
Other current assets................................................................ 4,107 8,463
Property and equipment.............................................................. -- 207,057
Less adjustment for write-down of accounts receivable and inventories to estimated
net realizable value............................................................... (680,744) (2,250,000)
----------- -------------
$ 544,719 $ 6,000,904
----------- -------------
----------- -------------
Liabilities:
Accounts payable.................................................................... $ 23,728 $ 1,029,202
Anticipated future expenses to disposal date........................................ 396,205 1,911,582
----------- -------------
$ 419,933 $ 2,940,784
----------- -------------
----------- -------------
Discontinued operations include management's best estimate of the amounts
expected to be realized on the sale of the remaining inventory, the collection
of the remaining receivables and the remaining costs and expenses to be incurred
to complete the disposal. The amounts the Company will ultimately realize or
expend could differ materially in the near term from the amounts assumed in
arriving at the loss on disposal of the discontinued operations.
39
TODHUNTER INTERNATIONAL, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 18. STATEMENT OF CASH FLOWS INFORMATION
1996 1995 1994
------------ ------------- --------------
Supplemental Disclosures of Cash Flow Information
Cash payments for:
Interest........................................................ $ 4,370,985 $ 3,699,296 $ 2,623,059
------------ ------------- --------------
------------ ------------- --------------
Income taxes.................................................... $ 140,181 $ 1,090,897 $ 1,860,175
------------ ------------- --------------
------------ ------------- --------------
Supplemental Schedule of Noncash Investing and Financing Activities
Refinancing of long-term debt..................................... $ -- $ 34,000,000 $ --
------------ ------------- --------------
------------ ------------- --------------
Intangible assets exchanged for note receivable................... $ -- $ 6,000,000 $ --
------------ ------------- --------------
------------ ------------- --------------
Subsidiaries acquired for:
Investment in affiliated companies.............................. -- -- 2,575,104
Long-term borrowings............................................ -- -- 5,000,000
Acquisition costs............................................... -- -- 305,274
Common stock issued............................................. -- -- 4,000,000
Less cash received.............................................. -- -- (1,433,899)
Less note receivable............................................ -- -- (602,151)
------------ ------------- --------------
$ -- $ -- $ 9,844,328
------------ ------------- --------------
------------ ------------- --------------
Receivables..................................................... $ -- $ -- $ 5,079,339
Inventories..................................................... -- -- 7,670,986
Notes receivable................................................ -- -- 381,846
Deferred income taxes........................................... -- -- 1,545,000
Other current assets............................................ -- -- 323,074
Property and equipment, net..................................... -- -- 10,077,182
Other assets.................................................... -- -- 11,543,305
Accounts payable................................................ -- -- (5,030,753)
Accrued expenses................................................ -- -- (2,006,663)
Other liabilities............................................... -- -- (116,210)
Long-term debt.................................................. -- -- (19,622,778)
------------ ------------- --------------
$ -- $ -- $ 9,844,328
------------ ------------- --------------
------------ ------------- --------------
40
TODHUNTER INTERNATIONAL, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 18. STATEMENT OF CASH FLOWS INFORMATION (CONTINUED)
1996 1995 1994
------------ ------------- --------------
Disposition of business for:
Cash............................................................ $ -- $ -- $ 1,492,651
Note receivable................................................. -- -- 4,500,000
Receivables..................................................... -- -- (1,073,052)
Inventories..................................................... -- -- (2,261,106)
Other current assets............................................ -- -- (17,076)
Property and equipment, net..................................... -- -- (1,061,584)
Notes receivable................................................ -- -- (59,066)
Other assets.................................................... -- -- (562,751)
Accounts payable................................................ -- -- 600
Accrued expenses................................................ -- -- 1,050
Minority interest............................................... -- -- 121,251
------------ ------------- --------------
Gain on disposition of business................................. $ -- $ -- $ 1,080,917
------------ ------------- --------------
------------ ------------- --------------
Debt issued in exchange for property and equipment.................. $ -- $ -- $ 600,000
------------ ------------- --------------
------------ ------------- --------------
NOTE 19. FAIR VALUE OF FINANCIAL INSTRUMENTS
The following methods and assumptions were used to estimate the fair value
of each class of financial instruments for which it is practicable to estimate
that value:
The carrying amounts approximate fair values as of September 30, 1996
and 1995 for cash and cash equivalents, certificates of deposit, trade
receivables, other receivables and accounts payable because of the
short-term maturities of those instruments.
NOTES RECEIVABLE: The fair value of the Company's notes receivable has
been determined based on available market information and management's
estimate of current market conditions of similar instruments.
LONG-TERM DEBT AND NOTES PAYABLE, BANK: The fair value of the Company's
long-term debt and note payable, bank is estimated based on the current
rates offered to the Company for debt of the same remaining maturities with
similar collateral requirements.
CARRYING AMOUNT FAIR VALUE
---------------------------- ----------------------------
1996 1995 1996 1995
------------- ------------- ------------- -------------
Financial assets:
Notes receivable........................ $ 9,278,893 $ 10,792,987 $ 9,161,449 $ 10,534,901
Financial liabilities:
Note payable, bank...................... -- 10,000,000 -- 10,000,000
Long-term debt, including interest rate
swaps.................................. 53,444,696 50,022,579 55,628,630 51,370,736
41
TODHUNTER INTERNATIONAL, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 20. EARNINGS PER COMMON SHARE
Primary earnings per common share are calculated by dividing net income by
the average common stock outstanding and common stock equivalents assuming the
exercise of stock options at an average market price. On a fully diluted basis,
shares outstanding are adjusted to assume the exercise of stock options at the
ending market price.
1996 1995 1994
------------ -------------- ------------
Net income (loss)..................................................... $ 4,544,798 $ (11,263,482) $ 6,625,008
------------ -------------- ------------
------------ -------------- ------------
Determination of shares:
Weighted average number of common shares outstanding................ $ 4,919,060 $ 4,905,998 $ 4,616,392
Shares issuable on exercise of stock options, net of shares assumed
to be repurchased.................................................. 50,376 * 145,040
------------ -------------- ------------
Average common shares outstanding for fully diluted computation....... $ 4,969,436 $ 4,905,998 $ 4,761,432
------------ -------------- ------------
------------ -------------- ------------
Earnings per common share:
Primary............................................................. $ 0.92 $ (2.30) $ 1.40
Fully diluted....................................................... 0.91 (2.30) 1.39
- ------------------------
*Shares not included in computation since effect is anti-dilutive.
42
TODHUNTER INTERNATIONAL, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 21. QUARTERLY FINANCIAL DATA (UNAUDITED)
QUARTER FIRST SECOND THIRD FOURTH
- ------------------------------------------------------------ ----------- ----------- ----------- ------------
(IN THOUSANDS, EXCEPT PER SHARE AND GROSS MARGIN
DATA)
1996
Net sales................................................... $ 19,027 $ 19,638 $ 19,189 $ 20,343
Gross profit................................................ 5,089 5,587 4,962 4,131
Gross margin................................................ 26.7% 28.4% 25.9% 20.3%
Income from continuing operations........................... 1,491 1,382 1,169 503
Net income.................................................. 1,491 1,382 1,169 503
Per share data, fully diluted:
Income from continuing operations......................... 0.30 0.28 0.24 0.09
Net income................................................ 0.30 0.28 0.24 0.09
1995
Net sales................................................... $ 16,687 $ 15,065 $ 20,530 $ 17,909
Gross profit................................................ 4,484 4,464 4,622 2,057
Gross margin................................................ 26.9% 29.6% 22.5% 11.5%
Income (loss) from continuing operations.................... 1,062 1,125 1,034 (3,276)
Net income (loss)........................................... 1,500 895 368 (14,026)
Per share data, fully diluted:
Income (loss) from continuing operations.................. 0.21 0.23 0.20 (0.65)
Net income (loss)......................................... 0.30 0.18 0.07 (2.85)
1994
Net sales................................................... $ 14,782 $ 17,871 $ 21,807 $ 18,856
Gross profit................................................ 3,589 4,735 5,556 3,464
Gross margin................................................ 24.3% 26.5% 25.5% 18.4%
Income from continuing operations........................... 987 1,855 2,207 1,566
Net income.................................................. 987 1,855 2,207 1,576
Per share data, fully diluted:
Income from continuing operations......................... 0.21 0.40 0.47 0.32
Net income................................................ 0.21 0.40 0.47 0.32
43
INDEPENDENT AUDITOR'S REPORT ON FINANCIAL STATEMENT SCHEDULE
To the Board of Directors
Todhunter International, Inc.
West Palm Beach, Florida
Our audits were made for the purpose of forming an opinion on the basic
consolidated financial statements taken as a whole. The consolidated financial
statement schedule II for the years ended September 30, 1996, 1995, and 1994 is
presented for purposes of complying with the Securities and Exchange
Commission's rules and is not a part of the basic consolidated financial
statements. This schedule has been subjected to the auditing procedures applied
in our audits of the basic consolidated financial statements and, in our
opinion, is fairly stated in all material respects in relation to the basic
consolidated financial statements taken as a whole.
/s/ McGladrey & Pullen, LLP
West Palm Beach, Florida
November 27, 1996
44
SCHEDULE II
TODHUNTER INTERNATIONAL, INC. AND SUBSIDIARIES
VALUATION AND QUALIFYING ACCOUNTS
ALLOWANCE FOR DISCOUNTED OPERATIONS
YEAR ENDED SEPTEMBER 30,
-------------------------------------------
1996 1995 1994
------------- ------------- -------------
Balance, beginning of period......................................... $ 2,250,000 $ -- $ --
Additional charged to expense...................................... -- 2,250,000 --
Deductions resulting from realization of losses and expenses for
discontinued operations which were previously charged to
expense........................................................... (1,569,256) -- --
------------- ------------- -------------
Balance, end of period............................................... $ 680,744 $ 2,250,000 $ --
------------- ------------- -------------
------------- ------------- -------------
45
TODHUNTER INTERNATIONAL, INC.
INDEX TO EXHIBITS
2.1 Subscription Agreement dated as of January 5, 1994 between Todhunter
International, Inc. and Virgin Islands Rum Industries, Ltd. (2)
2.2 Stock Purchase Agreement dated as of January 5, 1994 between Virgin
Islands Rum Industries, Ltd. and VI Acquisition Partnership (2)
2.3 Agreement and Plan of Merger dated as of April 22, 1994 by and among
Todhunter International, Inc., Todhunter Acquisition, Inc., Blair
Importers, Ltd. and the Stockholders of Blair Importers, Ltd. (3)
2.4 Agreement dated August 31, 1994 between Todhunter-Mitchell and Company
Limited and Todhunter-Mitchell Distilleries Limited. (4)
2.5 Agreement of Purchase and Sale of Assets dated September 21, 1995 between
Todhunter International, Inc. and David Sherman Corporation (11)
3.1 Amended and Restated Certificate of Incorporation of Todhunter
International, Inc. (1)
3.2 Amended and Restated By-Laws of Todhunter International, Inc. (1)
10.1 Amended and Restated Loan Agreement, dated as of November 22, 1991 among
Todhunter International, Inc., First Union Commercial Corporation, First
Union National Bank of Florida and Sun Bank/South Florida, National
Association (1)
10.1(a) Second Amended and Restated Loan Agreement between Todhunter
International, Inc. and First Union National Bank of Florida dated as of
October 13, 1993 (5)
10.1(b) First Amendment to Second Amended and Restated Loan Agreement dated as of
January 31, 1994 among Todhunter International, Inc., Kenneth Pincourt,
Jr. and First Union National Bank of Florida (6)
10.1(c) Second Amendment to Second Amended and Restated Loan Agreement dated as of
August 4, 1994 among Todhunter International, Inc., A. Kenneth Pincourt,
Jr. and First Union Bank of Florida (7)
10.1(d) Third Amendment to Second Amended and Restated Loan Agreement dated as of
September 26, 1994 among Todhunter International, Inc., A. Kenneth
Pincourt Jr. and First Union Bank of Florida (8)
10.2 Bulk Malt Purchase Agreement, dated as of September 25, 1991, between
Todhunter International, Inc. and Joseph E. Seagram & Sons, Inc. (1)
10.3 Cooler Production Agreement dated as of October 15, 1987, between
Todhunter International, Inc. and Joseph E. Seagram & Sons, Inc., as
amended May 1, 1990 and August 27, 1991 (1)
10.4 Agreement, dated October 1, 1990, among Todhunter International, Inc.,
Bacardi Imports, Inc. and Castleton Beverage Corporation, as amended by
an Amendment dated December 12, 1991 (1)
10.5 Letter Agreement, dated August 11, 1992, between Todhunter International,
Inc. and A. Kenneth Pincourt, Jr. (1)
10.6 Todhunter International, Inc. 1992 Stock Option Plan, as amended (12)
10.7 Todhunter International, Inc. Defined Contribution Pension Plan (1)
10.8 Lease, dated March 24, 1988, as amended, between Todhunter International,
Inc. and Especially West Palm Beach, Inc. (1)
46
10.9 Sublease dated June 6, 1994 between SunBank/South Florida, National
Association and Todhunter International, Inc. (8)
10.10 Loan Agreement dated as of January 31, 1994 between Virgin Islands Rum
Industries, Ltd. and First Union National Bank of Florida (8)
10.10(a) Modification of Loan Agreement dated as of January 5, 1996, amending Loan
Agreement dated Janaury 31, 1994 (13)
10.11 Loan Agreement dated as of August 4, 1994 among Todhunter International,
Inc., Blair Importers, Ltd. and certain banks (8)
10.12 Guaranteed Subordinated Note Agreement dated as of August 4, 1994 among
Todhunter International, Inc., Blair Importers, Ltd., Charmer Industries,
Inc. and certain shareholders thereof (3)
10.13 Note Purchase Agreement dated as of October 30, 1994 among Todhunter
International, Inc., Blair Importers, Ltd. and certain purchasers (8)
10.13(a) First Amendment Agreement and Waiver dated as of February 1, 1996,
amending Note Purchase Agreement dated as of October 30, 1994 (14)
10.14 Loan Agreement dated as of November 22, 1994 among Todhunter
International, Inc., Blair Importers, Ltd. and First Union National Bank
of Florida (8)
10.14(a) Modification of Loan Agreement dated as of February 26, 1996, amending
Loan Agreement dated as of November 22, 1994 (14)
10.14(b) Modification of Loan Agreement dated as of August 19, 1996, amending Loan
Agreement dated as of November 22, 1994, as amended
10.15 Note dated December 30, 1994 between Todhunter International, Inc. and
First Union National Bank of Florida (9)
10.16 Note dated April 28, 1995 between Todhunter International, Inc. and First
Union National Bank of Florida (10)
10.17 Amended and Restated Employment Agreement dated as of July 31, 1995
between Todhunter International, Inc. and Jay S. Maltby (12)
21.1 Subsidiaries of Todhunter International, Inc. (12)
23.1 Consent of McGladrey & Pullen, LLP
24.1 Powers of Attorney
27.1 Financial Data Schedule
- ------------------------
(1) Incorporated herein by reference to the Company's Registration Statement on
Form S-1 (File No. 33-50848).
(2) Incorporated herein by reference to the Company's Current Report on Form
8-K for February 4, 1994, as amended.
(3) Incorporated herein by reference to the Company's Current Report on Form
8-K for August 5, 1994, as amended.
(4) Incorporated herein by reference to the Company's Current Report on Form
8-K for August 31, 1994, as amended.
(5) Incorporated herein by reference to the Company's Quarterly Report on Form
10-Q for quarter ended December 31, 1993, as amended.
(6) Incorporated herein by reference to the Company's Quarterly Report on Form
10-Q for quarter ended March 31, 1994, as amended.
47
(7) Incorporated herein by reference to the Company's Quarterly Report on Form
10-Q for quarter ended June 30, 1994, as amended.
(8) Incorporated herein by reference to the Company's Annual Report on Form
10-K for the year ended September 30, 1994.
(9) Incorporated herein by reference to the Company Quarterly Report on Form
10-Q for the quarter ended December 31, 1995.
(10) Incorporated herein by reference to the Company's Quarterly Report on Form
10-Q for the quarter ended June 30, 1995.
(11) Incorporated herein by reference to the Company's Current Report on Form
8-K for September 21, 1995.
(12) Incorporated herein by reference to the Company's Annual Report on Form
10-K for the year ended September 30, 1995.
(13) Incorporated herein by reference to the Company's Quarterly Report on Form
10-Q for the quarter ended December 31, 1995.
(14) Incorporated herein by reference to the Company's Quarterly Report on Form
10-Q for the quarter ended March 31, 1996.
48