**SECURITIES AND EXCHANGE COMMISSION**

**Washington, D.C. 20549**

 

**FORM 10-Q**

 

**QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)**

**OF THE SECURITIES EXCHANGE ACT OF 1934**

 

**For thequarterly period ended March 31, 2003**

 

**Commission File No. 1-13453**

 

| **TODHUNTER INTERNATIONAL, INC.**                                                  |
|------------------------------------------------------------------------------------|
| (Exact  name of registrant as specified in its charter)                            |
|                                                                               |
| **DELAWARE**                                                                       |   | **59-1284057** |
| (State  or other jurisdiction of  incorporation or organization)                   |   | IRS  Employer Identification No. |
|                                                                               |   |   |
| **222 Lakeview Avenue, Suite 1500, West Palm Beach, FL**                           |   | **33401** |
| (Address  of principal executive offices)                                          |   | (Zip  Code) |
|                                                                               |
| Registrant’s telephone  number, including area code:  **(561) 655-8977** |

 

Indicate by check mark whether the registrant(1) has filed all reports required to be filed by Section 13 or 15(d) of theSecurities Exchange Act of 1934 during the preceding 12 months, and (2) hasbeen subject to such filing requirements for the past 90 days.

 

Yes   ý                No   o

 

Indicate by check mark whether the registrantis an accelerated filer (as defined in Rule 12b-2 of the Exchange Act).

 

Yes   o                No   ý

 

The number of shares outstanding ofregistrant’s Common Stock, $.01 par value per share, as of May 12, 2003 was5,574,234.

 

 

----

 

TODHUNTER INTERNATIONAL, INC.

 

INDEX

 
| PART I  | FINANCIAL INFORMATION |
|---------|-----------------------|
|    |                  |
|    | Item 1                | Financial Statements |
|    |                  |   |
|    |                  | Consolidated Balance Sheets  -  March 31, 2003 and September 30, 2002 |
|    |                  |   |
|    |                  | Consolidated  Statements of Income -  Six and Three Months Ended March 31, 2003 and 2002 |
|    |                  |   |
|    |                  | Consolidated  Statements of Cash Flows -  Six and Three Months Ended March 31, 2003 and 2002 |
|    |                  |   |
|    |                  | Notes to  Consolidated Financial Statements |
|    |                  |   |
|    | Item  2               | Management’s  Discussion and Analysis of Financial Condition and Results of Operations |
|    |                  |   |
|    | Item  3               | Quantitative  and Qualitative Disclosures About Market Risk |
|    |                  |   |
|    | Item 4                | Controls and Procedures |
|    |                  |   |
| PART II | OTHER INFORMATION     |
|    |                  |
|    | Item 1                | Legal Proceedings |
|    |                  |   |
|    | Item 2                | Changes in Securities and  Use of Proceeds |
|    |                  |   |
|    | Item 3                | Defaults Upon Senior  Securities |
|    |                  |   |
|    | Item  4               | Submission  of Matters to a Vote of Security Holders |
|    |                  |   |
|    | Item 5                | Other Information |
|    |                  |   |
|    | Item 6                | Exhibits and  Reports on Form 8-K |
|    |                  |
|    | Signatures            |

 

----

* Item is omitted because answer is negativeor item is inapplicable.

 

----

 

**PART I -FINANCIAL INFORMATION**

 

**Item 1.****          ****Financial Statements**

 

TODHUNTERINTERNATIONAL, INC.

CONSOLIDATED BALANCE SHEETS

 
|                                                      |   | **March 31,  2003** |        | **September  30,  2002** |   |
|-----------------------------------------------------------|--------|---------------------|-------------|--------------------------|--------|
|                                                      |   | **(Unaudited)**     |        | *****                    |   |
| ASSETS                                                    |   |                |        |                     |   |
|                                                      |   |                |        |                     |   |
| CURRENT ASSETS                                            |   |                |        |                     |   |
| Cash and cash equivalents                                 |   | $                   | 12,905,229  |                     | $      | 13,946,736 |   |
| Short-term investments                                    |   | 3,402,235           |        | 3,397,033                |   |
| Trade receivables                                         |   | 13,593,832          |        | 13,505,737               |   |
| Other receivables                                         |   | 2,989,610           |        | 2,696,743                |   |
| Inventories                                               |   | 30,092,602          |        | 27,854,925               |   |
| Notes receivable, current maturities                      |   | 123,901             |        | 118,165                  |   |
| Deferred income taxes                                     |   | 2,105,000           |        | 1,992,000                |   |
| Other current assets                                      |   | 1,571,117           |        | 3,078,437                |   |
| Total current assets                                      |   | 66,783,526          |        | 66,589,776               |   |
|                                                      |   |                |        |                     |   |
| LONG-TERM INVESTMENTS AND NOTES RECEIVABLE                |   |                |        |                     |   |
| Investments in and advances to equity investees           |   | 2,108,034           |        | 1,584,628                |   |
| Notes receivable from affiliates, less current maturities |   | 3,755,870           |        | 3,774,773                |   |
| Notes receivable, less current maturities                 |   | 544,374             |        | 584,687                  |   |
|                                                      |   | 6,408,278           |        | 5,944,088                |   |
|                                                      |   |                |        |                     |   |
| PROPERTY AND EQUIPMENT                                    |   | 91,101,193          |        | 89,775,329               |   |
| Less accumulated depreciation                             |   | 49,509,352          |        | 47,590,112               |   |
|                                                      |   | 41,591,841          |        | 42,185,217               |   |
|                                                      |   |                |        |                     |   |
| GOODWILL                                                  |   | 20,524,404          |        | 20,524,404               |   |
| AMORTIZED INTANGIBLE ASSETS                               |   | 1,870,081           |        | 2,040,181                |   |
| OTHER ASSETS                                              |   | 720,653             |        | 598,838                  |   |
|                                                      |   | $                   | 137,898,783 |                     | $      | 137,882,504 |   |

 

----

*From audited financial statements.

See Notes to Consolidated FinancialStatements.

 

1

----

 

TODHUNTERINTERNATIONAL, INC.

CONSOLIDATED BALANCE SHEETS

 
|                                                                                                                                                    |   | **March 31,  2003** |        | **September  30,  2002** |   |
|---------------------------------------------------------------------------------------------------------------------------------------------------------|--------|---------------------|-------------|--------------------------|--------|
|                                                                                                                                                    |   | **(Unaudited)**     |        | *****                    |   |
| LIABILITIES AND STOCKHOLDERS’  EQUITY                                                                                                              |   |                |        |                     |   |
|                                                                                                                                                    |   |                |        |                     |   |
| CURRENT LIABILITIES                                                                                                                                     |   |                |        |                     |   |
| Current maturities of long-term debt                                                                                                                    |   | $                   | 4,000,000   |                     | $      | 4,000,000 |   |
| Accounts payable                                                                                                                                        |   | 5,076,553           |        | 4,051,379                |   |
| Accrued expenses                                                                                                                                        |   | 1,935,619           |        | 3,223,293                |   |
| Total current liabilities                                                                                                                               |   | 11,012,172          |        | 11,274,672               |   |
|                                                                                                                                                    |   |                |        |                     |   |
| LONG-TERM DEBT, less current maturities                                                                                                                 |   | 52,905,192          |        | 53,017,009               |   |
|                                                                                                                                                    |   |                |        |                     |   |
| DEFERRED INCOME TAXES                                                                                                                                   |   | 4,768,000           |        | 4,710,000                |   |
|                                                                                                                                                    |   |                |        |                     |   |
| OTHER LIABILITIES                                                                                                                                       |   | 2,191,382           |        | 1,811,459                |   |
|                                                                                                                                                    |   | 70,876,746          |        | 70,813,140               |   |
|                                                                                                                                                    |   |                |        |                     |   |
| 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 5,673,434 shares March 31, 2003, and 5,669,434 shares September 30,  2002 |   | 56,715              |        | 56,694                   |   |
| Additional paid-in capital                                                                                                                              |   | 18,681,491          |        | 18,664,449               |   |
| Retained earnings                                                                                                                                       |   | 49,021,611          |        | 49,086,001               |   |
|                                                                                                                                                    |   | 67,759,817          |        | 68,807,144               |   |
| Less cost of 99,200 shares of treasury stock                                                                                                            |   | (737,780            | )           | (737,780                 | )      |
|                                                                                                                                                    |   | 67,022,037          |        | 67,069,364               |   |
|                                                                                                                                                    |   | $                   | 137,898,783 |                     | $      | 137,882,504 |   |

 

----

*From audited financial statements.

See Notes to Consolidated FinancialStatements.

 

2

----

 

TODHUNTERINTERNATIONAL, INC.

CONSOLIDATED STATEMENTS OFINCOME

(Unaudited)

 
|                                         |   | **Six Months  Ended March 31,** |       | **Three  Months Ended March 31,** |   |
|----------------------------------------------|--------|---------------------------------|------------|-----------------------------------|--------|
|                                         |   | **2003**                        |       | **2002**                          |   | **2003** |   | **2002** |   |
|                                         |   |                            |       |                              |   |   |   |   |   |
| Sales                                        |   | $                               | 57,721,813 |                              | $      | 63,316,172 |   | $ | 29,384,629 |   | $ | 31,354,237 |   |
| Less excise taxes                            |   | 14,932,589                      |       | 16,504,594                        |   | 7,559,884 |   | 8,396,438 |   |
| Net sales                                    |   | 42,789,224                      |       | 46,811,578                        |   | 21,824,745 |   | 22,957,799 |   |
|                                         |   |                            |       |                              |   |   |   |   |   |
| Cost of goods sold                           |   | 29,400,847                      |       | 32,113,588                        |   | 14,020,606 |   | 15,815,898 |   |
| Gross profit                                 |   | 13,388,377                      |       | 14,697,990                        |   | 7,804,139 |   | 7,141,901 |   |
|                                         |   |                            |       |                              |   |   |   |   |   |
| Selling, general and administrative expenses |   | 11,087,222                      |       | 9,814,277                         |   | 5,578,249 |   | 4,744,124 |   |
| Operating income                             |   | 2,301,155                       |       | 4,883,713                         |   | 2,225,890 |   | 2,397,777 |   |
|                                         |   |                            |       |                              |   |   |   |   |   |
| Other income (expense):                      |   |                            |       |                              |   |   |   |   |   |
| Interest income                              |   | 342,720                         |       | 372,633                           |   | 210,059 |   | 148,470 |   |
| Interest expense                             |   | (1,598,433                      | )          | (1,420,726                        | )      | (873,530 | ) | (627,999 | ) |
| Equity in income of equity investees         |   | 249,405                         |       | 157,413                           |   | 156,117 |   | 83,182 |   |
| Other, net                                   |   | (1,458,621                      | )          | 245,806                           |   | (61,591 | ) | 207,357 |   |
|                                         |   | (2,464,929                      | )          | (644,874                          | )      | (568,945 | ) | (188,990 | ) |
|                                         |   |                            |       |                              |   |   |   |   |   |
| Income (loss) before income taxes            |   | (163,774                        | )          | 4,238,839                         |   | 1,656,945 |   | 2,208,787 |   |
|                                         |   |                            |       |                              |   |   |   |   |   |
| Income tax expense (benefit):                |   |                            |       |                              |   |   |   |   |   |
| Current                                      |   | (44,384                         | )          | 996,750                           |   | 222,879 |   | 459,319 |   |
| Deferred                                     |   | (55,000                         | )          | 26,500                            |   | 6,000 |   | 24,000 |   |
|                                         |   | (99,384                         | )          | 1,023,250                         |   | 228,879 |   | 483,319 |   |
|                                         |   |                            |       |                              |   |   |   |   |   |
| Net Income (loss)                            |   | $                               | (64,390    | )                                 | $      | 3,215,589 |   | $ | 1,428,066 |   | $ | 1,725,468 |   |
|                                         |   |                            |       |                              |   |   |   |   |   |
| Earnings (loss) per common share:            |   |                            |       |                              |   |   |   |   |   |
| Basic                                        |   | $                               | (0.01      | )                                 | $      | 0.58 |   | $ | 0.26 |   | $ | 0.31 |   |
| Diluted                                      |   | $                               | (0.01      | )                                 | $      | 0.58 |   | $ | 0.25 |   | $ | 0.31 |   |
|                                         |   |                            |       |                              |   |   |   |   |   |
| Common shares and equivalents outstanding:   |   |                            |       |                              |   |   |   |   |   |
| Basic                                        |   | 5,571,750                       |       | 5,513,734                         |   | 5,572,367 |   | 5,513,734 |   |
| Diluted                                      |   | 5,635,928                       |       | 5,565,483                         |   | 5,607,374 |   | 5,574,959 |   |

 

See Notes to Consolidated FinancialStatements.

 

3

----

 

TODHUNTER INTERNATIONAL, INC.

CONSOLIDATED STATEMENTS OFCASH FLOWS

(Unaudited)

 
|                                                                                           |   | **Six Months  Ended March 31,** |       |
|------------------------------------------------------------------------------------------------|--------|---------------------------------|------------|
|                                                                                           |   | **2003**                        |       | **2002** |   |
|                                                                                           |   |                            |       |   |   |
| CASH FLOWS FROM OPERATING ACTIVITIES                                                           |   |                            |       |   |   |
| Net income (loss)                                                                              |   | $                               | (64,390    | ) | $ | 3,215,589 |   |
| Adjustments to reconcile net income (loss)  to net cash provided by operating activities: |   |                            |       |   |   |
| Depreciation                                                                                   |   | 2,637,420                       |       | 2,596,508 |   |
| Amortization                                                                                   |   | 170,100                         |       | 195,100 |   |
| (Gain) loss on sale of property and equipment                                                  |   | 54,234                          |       | (30,924 | ) |
| Equity in income of equity investees                                                           |   | (249,405                        | )          | (157,413 | ) |
| Deferred income taxes                                                                          |   | (55,000                         | )          | 26,500 |   |
|                                                                                           |   |                            |       |   |   |
| Changes in assets and liabilities:                                                             |   |                            |       |   |   |
| (Increase) decrease in:                                                                        |   |                            |       |   |   |
| Receivables                                                                                    |   | (380,962                        | )          | 2,988,482 |   |
| Inventories                                                                                    |   | (2,237,677                      | )          | 1,144,643 |   |
| Other current assets                                                                           |   | 1,507,320                       |       | 821,193 |   |
| Increase (decrease) in:                                                                        |   |                            |       |   |   |
| Accounts payable                                                                               |   | 1,025,174                       |       | 824,500 |   |
| Accrued expenses                                                                               |   | (1,287,674                      | )          | (801,094 | ) |
| Other liabilities                                                                              |   | 379,923                         |       | 97,516 |   |
| Net cash provided by operating activities                                                      |   | 1,499,063                       |       | 10,920,600 |   |
|                                                                                           |   |                            |       |   |   |
| CASH FLOWS FROM INVESTING ACTIVITIES                                                           |   |                            |       |   |   |
| Proceeds from sale of property and equipment                                                   |   | 42,026                          |       | 46,599 |   |
| Principal payments received on notes receivable                                                |   | 53,480                          |       | 49,622 |   |
| Purchase of property and equipment                                                             |   | (2,140,304                      | )          | (3,287,015 | ) |
| Disbursements for notes receivable                                                             |   | —                          |       | (286,797 | ) |
| Purchase of short-term investments                                                             |   | (103,202                        | )          | (3,231,379 | ) |
| Redemption of short-term investments                                                           |   | 98,000                          |       | — |   |
| Investments in and advances to equity investees                                                |   | (274,001                        | )          | — |   |
| Increase in other assets                                                                       |   | (121,815                        | )          | (106,502 | ) |
| Net cash used in investing activities                                                          |   | $                               | (2,445,816 | ) | $ | (6,815,472 | ) |

 

4

----

 

TODHUNTER INTERNATIONAL, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)

(Unaudited)

 
|                                              |   | **Six Months  Ended March 31,** |       |
|---------------------------------------------------|--------|---------------------------------|------------|
|                                              |   | **2003**                        |       | **2002** |   |
|                                              |   |                            |       |   |   |
| CASH FLOWS FROM FINANCING ACTIVITIES              |   |                            |       |   |   |
| Net payments on line of credit                    |   | $                               | 2,000,000  |   | $ | (2,200,000 | ) |
| Issuance of common stock                          |   | 17,063                          |       | — |   |
| Disbursements for loan costs                      |   | —                          |       | (889,833 | ) |
| Principal payments on long-term borrowings        |   | (2,111,817                      | )          | (2,101,391 | ) |
| Net cash used in financing activities             |   | (94,754                         | )          | (5,191,224 | ) |
|                                              |   |                            |       |   |   |
| Net decrease in cash and cash equivalents         |   | (1,041,507                      | )          | (1,086,096 | ) |
|                                              |   |                            |       |   |   |
| Cash and cash equivalents:                        |   |                            |       |   |   |
| Beginning                                         |   | 13,946,736                      |       | 5,624,029 |   |
| Ending                                            |   | $                               | 12,905,229 |   | $ | 4,537,933 |   |
|                                              |   |                            |       |   |   |
| SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION |   |                            |       |   |   |
| Cash payments for:                                |   |                            |       |   |   |
| Interest                                          |   | $                               | 1,445,278  |   | $ | 1,392,540 |   |
| Income taxes                                      |   | $                               | 142,604    |   | $ | 826,615 |   |

 

See Notes to ConsolidatedFinancial Statements.

 

5

----

 

TODHUNTER INTERNATIONAL, INC.

 

NOTESTO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

 

Note 1.          Basisof Presentation

 

The consolidated financialstatements included herein have been prepared by the Company, without audit,pursuant to the rules and regulations of the Securities and ExchangeCommission.  Certain information andfootnote disclosures normally included in financial statements prepared inaccordance with accounting principles generally accepted in the United Statesof America have been condensed or omitted pursuant to such rules andregulations.  In the opinion ofmanagement, all adjustments, consisting only of normal recurring adjustments,except for the retirement of the Chief Executive Officer (see Note 7),necessary for a fair presentation of the financial information for the periodsindicated have been included.  Forfurther information regarding the Company’s accounting policies, refer to theconsolidated financial statements and related notes included in the Company’sAnnual Report on Form 10-K for the year ended September 30, 2002.

 

Aggregate amortization expenseswere $170,100 and $85,050 for the six and three months ended March 31, 2003,respectively, and $195,100 and $97,550 for the six and three months ended March31, 2002, respectively.

 

The Company applies AccountingPrinciples Board Opinion Number 25, *Accountingfor Stock Issued to Employees* (“APB 25”) and related interpretationsin accounting for options granted, which requires compensation expense for theCompany’s options to be recognized only if the market price of the underlyingstock exceeds the exercise price on the date of grant.  Accordingly, the Company has not recognizedcompensation expense for its options granted after 1994.  SFAS 123, *Accountingfor Stock-Based Compensation*, issued in October 1995, requires proforma disclosures for option grants made after December 31, 1994, whenaccounting for stock-based compensation plans in accordance with APB 25.

 

If the Company elected torecognize compensation cost based on the fair value of the options granted atgrant date as prescribed by SFAS No. 123, net income and earnings per commonshare would have been reduced to the pro forma amounts show below:

 
|                                           |   | **Six Months  Ended  March 31,** |    | **Three  Months Ended  March 31,** |   |
|------------------------------------------------|--------|----------------------------------|---------|------------------------------------|--------|
|                                           |   | **2003**                         |    | **2002**                           |   | **2003** |   | **2002** |   |
|                                           |   |                             |    |                               |   |   |   |   |   |
| Net income (loss), as reported                 |   | $                                | (64,390 | )                                  | $      | 3,215,589 |   | $ | 1,428,066 |   | $ | 1,725,468 |   |
| Net income (loss), pro forma                   |   | (197,833                         | )       | 3,082,146                          |   | 1,361,344 |   | 1,658,746 |   |
| Earnings (loss) per common share, as  reported |   |                             |    |                               |   |   |   |   |   |
| Basic                                          |   | (0.01                            | )       | 0.58                               |   | 0.26 |   | 0.31 |   |
| Diluted                                        |   | (0.01                            | )       | 0.58                               |   | 0.25 |   | 0.31 |   |
| Earnings (loss) per common share, pro forma    |   |                             |    |                               |   |   |   |   |   |
| Basic                                          |   | (0.03                            | )       | 0.55                               |   | 0.24 |   | 0.30 |   |
| Diluted                                        |   | (0.03                            | )       | 0.55                               |   | 0.24 |   | 0.29 |   |
|                                                |        |                                  |         |                                    |        |  |  |  |  |  |  |  |  |

 

6

----

 

Note 2.          Inventories

 

The major components of inventories are:

 
|                       |   | **March 31,  2003** |       | **September  30, 2002** |   |
|----------------------------|--------|---------------------|------------|-------------------------|--------|
|                       |   | **(Unaudited)**     |       |                    |   |
|                       |   |                |       |                    |   |
| Finished goods             |   | $                   | 16,251,569 |                    | $      | 16,470,057 |   |
| Work in process            |   | 2,399,366           |       | 1,513,786               |   |
| Raw materials and supplies |   | 11,441,667          |       | 9,871,082               |   |
|                       |   |                |       |                    |   |
|                       |   | $                   | 30,092,602 |                    | $      | 27,854,925 |   |

 

Note 3.          FinancingArrangements

 

Long-term debt consists of the following asof March 31, 2003:

 
| Term loans under a credit agreement (i)  (ii), interest payable monthly based on either the Eurodollar or prime rate  at the Company’s option, plus an applicable margin as defined in the  agreement.  The interest rate at March  31, 2003 was 4.78%.  Future minimum  quarterly principal installments of $1,000,000 through September 30, 2006  with any remaining balance due September 30, 2006. |   | $          | 34,000,000 |   |
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|------------|------------|--------|
|                                                                                                                                                                                                                                                                                                                                                                                                                  |   |       |       |
| Revolving loans under a credit agreement  (i), interest payable quarterly based on either the Eurodollar or prime rate  at the Company’s option, plus an applicable margin as defined in the  agreement.  The blended interest rate  at March 31, 2003 was 5.2%.  The  revolving lines of credit terminate in October 2004.                                                                            |   | 22,500,000 |       |
|                                                                                                                                                                                                                                                                                                                                                                                                                  |   |       |       |
| Other                                                                                                                                                                                                                                                                                                                                                                                                                 |   | 405,192    |       |
|                                                                                                                                                                                                                                                                                                                                                                                                                  |   | 56,905,192 |       |
| Less current maturities                                                                                                                                                                                                                                                                                                                                                                                               |   | 4,000,000  |       |
|                                                                                                                                                                                                                                                                                                                                                                                                                  |   | $          | 52,905,192 |   |

 

(i)             InOctober 2001, the Company entered into a $70 million credit agreement, whichconsists of a $40 million term loan and a $30 million revolving loanfacility.  The credit agreement iscollateralized principally by all assets located in the United States ofAmerica.  The Company is restricted frompaying dividends to stockholders.  Also,the Company is required to maintain unencumbered cash or marketable securitiesof $4 million at the end of each fiscal quarter and to maintain a minimum fixedcharge and interest coverage ratio, among other financial covenants.

 

(ii)          In addition to quarterly principal payments, the Company may berequired to make additional principal payments based on results of the Company’s domestic operating profits,as defined in the agreement.

 

7

----

 

As of December 31, 2002 and March 31, 2003,the Company was not in compliance with the Funded Debt to EBITDA (earningsbefore interest, taxes, depreciation and amortization) financial covenant underits credit agreement.  In addition, asof March 31, 2003 the Company was not in compliance with its Interest Coverageand Fixed Charge Coverage financial covenants. On February 18, 2003, the Company received a waiver for the December 31,2002 covenant violation.  On May 14,2003, the Company received a waiver of the March 31, 2003 covenant violationsand amended prospectively the credit agreement to reset the levels of certainfinancial covenants to reflect the Company’s current business plan andforecasts.  The Company paid a fee of$136,250 for the December waiver and $160,000 for the March waiver andamendment.  The Company’s interest rateunder the term-loan and revolving credit agreement was increased 50 basispoints effective January 1, 2003 and an additional 50 basis points effectiveMay 14, 2003.

 

Note 4.          Earnings(Loss) Per Common Share

 

Basic earnings per common share arecalculated by dividing net income by the average common sharesoutstanding.  On a diluted basis, sharesoutstanding are adjusted to assume the exercise of stock options.  The effect of stock options have not beenincluded in six months ended March 31, 2003 loss per common share, as theireffect would have been anti-dilutive.

 
|                                                                                                 |   | **Six Months  Ended  March 31,** |    | **Three  Months Ended  March 31,** |   |
|------------------------------------------------------------------------------------------------------|--------|----------------------------------|---------|------------------------------------|--------|
|                                                                                                 |   | **2003**                         |    | **2002**                           |   | **2003** |   | **2002** |   |
|                                                                                                 |   |                             |    |                               |   |   |   |   |   |
| Net income (loss)                                                                                    |   | $                                | (64,390 | )                                  | $      | 3,215,589 |   | $ | 1,428,066 |   | $ | 1,725,468 |   |
| Determination of shares:                                                                             |   |                             |    |                               |   |   |   |   |   |
| Weighted average number of common shares outstanding                                                 |   | 5,571,750                        |    | 5,513,734                          |   | 5,572,367 |   | 5,513,734 |   |
| Shares issuable on exercise of stock options, net of shares assumed  to be purchased out of proceeds |   | 64,178                           |    | 51,749                             |   | 35,007 |   | 61,225 |   |
| Average common shares outstanding for diluted earnings per share  computation                        |   | 5,635,928                        |    | 5,565,483                          |   | 5,607,374 |   | 5,574,959 |   |
|                                                                                                 |   |                             |    |                               |   |   |   |   |   |
| Earnings (loss) per common share:                                                                    |   |                             |    |                               |   |   |   |   |   |
| Basic                                                                                                |   | $                                | (0.01   | )                                  | $      | 0.58 |   | $ | 0.26 |   | $ | 0.31 |   |
| Diluted                                                                                              |   | $                                | (0.01   | )                                  | $      | 0.58 |   | $ | 0.25 |   | $ | 0.31 |   |

 

The Company’s Virgin Islandssubsidiary, through the Economic Development Commission of the Government ofthe Virgin Islands of the United States, has received a 90% exemption fromincome taxes on operating income.  Thisexemption is effective through September 2020. The per share effect of this exemption on earnings (on both a basic anddiluted basis) was to increase earnings per share by $0.09 and $0.06 for thesix and three months ended March 31, 2003, respectively, and $0.08 and $0.05for the six and three months ended March 31, 2002, respectively.

 

8

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Note 5.          Segment and GeographicalInformation

 

The Company operates primarilyin the beverage alcohol industry in the United States.  The Company reports its operating results infour segments:

 

Bulk AlcoholProducts (citrus brandy, citrus spirits, rum, cane spirits, fortified citruswine, purchased distilled products and byproducts)

PremiumBranded Spirits (primarily Cruzan Estate Rums and Cruzan Flavored Rums)

BottlingOperations (contract bottling services and proprietary and private labelproducts)

Vinegar andCooking Wine (bulk vinegar, bulk cooking wine, vinegar stock and proprietaryand private label case goods)

 

The accounting policies of thereportable segments are the same as those referred to in Note 1 to theconsolidated financial statements.  TheCompany evaluates the performance of its operating segments based on incomebefore income taxes, equity in income or loss of equity investees, interestincome and interest expense. Material intersegment sales and transfers havebeen eliminated.

 

9

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Summarized financialinformation concerning the Company’s reportable segments is shown in thefollowing table.

 

Net sales, operating income(loss), depreciation and amortization and capital expenditures for theCompany’s reportable segments for the six and three months ended March 31, 2003and 2002, and identifiable assets as of March 31, 2003 and 2002, were asfollows:

 
|                              |   | **Six Months  Ended****March 31,** |    | **Three  Months Ended****March 31,** |       |
|-----------------------------------|--------|------------------------------------|---------|--------------------------------------|------------|
|                              |   | **2003**                           |    | **2002**                             |       | **2003** |   | **2002** |   |
|                              |   | **(in  thousands)**                |    | **(in  thousands)**                  | ** ** |
| **Net Sales**                     |   |                               |    |                                 |       |   |   |   |   |
| Bulk Alcohol Products             |   | $                                  | 17,527  |                                 | $          | 17,692 |   | $ | 8,832 |   | $ | 8,856 |   |
| Premium Branded Spirits           |   | 8,725                              |    | 8,432                                |       | 4,521 |   | 3,659 |   |
| Bottling Operations               |   | 6,411                              |    | 10,205                               |       | 3,582 |   | 5,423 |   |
| Vinegar and Cooking Wine          |   | 10,126                             |    | 10,483                               |       | 4,890 |   | 5,020 |   |
|                              |   | $                                  | 42,789  |                                 | $          | 46,812 |   | $ | 21,825 |   | $ | 22,958 |   |
|                              |   |                               |    |                                 |       |   |   |   |   |
| **Operating Income (Loss)**       |   |                               |    |                                 |       |   |   |   |   |
| Bulk Alcohol Products             |   | $                                  | 5,773   |                                 | $          | 5,400 |   | $ | 3,676 |   | $ | 2,511 |   |
| Premium Branded Spirits           |   | (746                               | )       | (542                                 | )          | (333 | ) | (371 | ) |
| Bottling Operations               |   | (1,737                             | )       | 1,008                                |       | (455 | ) | 826 |   |
| Vinegar and Cooking Wine          |   | 2,052                              |    | 2,103                                |       | 880 |   | 956 |   |
| Corporate Operations and Other    |   | (3,041                             | )       | (3,085                               | )          | (1,542 | ) | (1,524 | ) |
|                              |   | $                                  | 2,301   |                                 | $          | 4,884 |   | $ | 2,226 |   | $ | 2,398 |   |
|                              |   |                               |    |                                 |       |   |   |   |   |
| **Depreciation and Amortization** |   |                               |    |                                 |       |   |   |   |   |
| Bulk Alcohol Products             |   | $                                  | 1,609   |                                 | $          | 1,461 |   | $ | 800 |   | $ | 755 |   |
| Premium Branded Spirits           |   | 50                                 |    | 71                                   |       | 25 |   | 35 |   |
| Bottling Operations               |   | 698                                |    | 812                                  |       | 400 |   | 414 |   |
| Vinegar and Cooking Wine          |   | 242                                |    | 234                                  |       | 120 |   | 117 |   |
| Corporate Operations and Other    |   | 209                                |    | 214                                  |       | 105 |   | 107 |   |
|                              |   | $                                  | 2,808   |                                 | $          | 2,792 |   | $ | 1,450 |   | $ | 1,428 |   |
|                              |   |                               |    |                                 |       |   |   |   |   |
| **Capital Expenditures**          |   |                               |    |                                 |       |   |   |   |   |
| Bulk Alcohol Products             |   | $                                  | 1,072   |                                 | $          | 2,691 |   | $ | 314 |   | $ | 759 |   |
| Premium Branded Spirits           |   | 16                                 |    | 59                                   |       | — |   | 50 |   |
| Bottling Operations               |   | 1,007                              |    | 343                                  |       | 376 |   | 203 |   |
| Vinegar and Cooking Wine          |   | 34                                 |    | 78                                   |       | 23 |   | 61 |   |
| Corporate Operations and Other    |   | 11                                 |    | 116                                  |       | — |   | 40 |   |
|                              |   | $                                  | 2,140   |                                 | $          | 3,287 |   | $ | 713 |   | $ | 1,113 |   |
|                              |   |                               |    |                                 |       |   |   |   |   |
| **Identifiable Assets**           |   |                               |    |                                 |       |   |   |   |   |
| Bulk Alcohol Products             |   | $                                  | 73,442  |                                 | $          | 70,523 |   |   |   |   |   |
| Premium Branded Spirits           |   | 6,838                              |    | 5,117                                |       |   |   |   |   |
| Bottling Operations               |   | 25,639                             |    | 24,509                               |       |   |   |   |   |
| Vinegar and Cooking Wine          |   | 19,600                             |    | 20,518                               |       |   |   |   |   |
| Corporate Operations and Other    |   | 12,380                             |    | 12,136                               |       |   |   |   |   |
|                              |   | $                                  | 137,899 |                                 | $          | 132,803 |   |   |   |   |   |

 

10

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Sales and operating income forthe six and three months ended March 31, 2003 and 2002 and identifiable assetsas of March 31, 2003 and 2002, classified by geographic area, were as follows:

 
|                   |   | **United  States**  |   | **U. S. Virgin  Islands and  the Bahamas** |   | **Consolidated** |       |
|------------------------|--------|---------------------|--------|--------------------------------------------|--------|------------------|------------|
|                   |   | **(in  thousands)** |   |
|                   |   |                |   |                                       |   |             |       |
| **Six Months Ended**   |   |                |   |                                       |   |             |       |
|                   |   |                |   |                                       |   |             |       |
| March 31, 2003:        |   |                |   |                                       |   |             |       |
| Net sales              |   | $                   | 37,483 |                                       | $      | 5,306            |       | $ | 42,789 |   |
| Operating Income       |   | 988                 |   | 1,313                                      |   | 2,301            |       |
| Identifiable assets    |   | 94,637              |   | 43,262                                     |   | 137,899          |       |
|                   |   |                |   |                                       |   |             |       |
| March 31, 2002:        |   |                |   |                                       |   |             |       |
| Net sales              |   |                | 42,044 | ** **                                 |   | 4,768            | ** ** |   | 46,812 | ** ** |
| Operating income       |   | 3,710               |   | 1,174                                      |   | 4,884            |       |
| Identifiable assets    |   | 90,853              |   | 41,950                                     |   | 132,803          |       |
|                   |   |                |   |                                       |   |             |       |
| **Three Months Ended** |   |                |   |                                       |   |             |       |
|                   |   |                |   |                                       |   |             |       |
| March 31, 2003:        |   |                |   |                                       |   |             |       |
| Net sales              |   | 18,823              |   | 3,002                                      |   | 21,825           |       |
| Operating income       |   | 1,351               |   | 875                                        |   | 2,226            |       |
|                   |   |                |   |                                       |   |             |       |
| March 31, 2002:        |   |                |   |                                       |   |             |       |
| Net sales              |   | 20,120              |   | 2,838                                      |   | 22,958           |       |
| Operating income       |   | 1,574               |   | 824                                        |   | 2,398            |       |

 

Included in net sales for theUnited States are export sales, primarily to Europe, Canada and the Caribbean,totaling approximately $3,697,000 and $1,779,000 for the six and three monthsended March 31, 2003, respectively, and $5,111,000 and $1,995,000 for the sixand three months ended March 31, 2002, respectively.

 

Note 6.          Comprehensive income(loss)

 

Comprehensive income (loss) isthe total of net income (loss) and other changes in equity. Total comprehensiveincome (loss) for the six and three months ended March 31, 2003 and 2002 was asfollows:

 
|                                                      |   | **Six Months  Ended  March 31,** |   | **Three  Months Ended  March 31,** |   |
|-----------------------------------------------------------|--------|----------------------------------|--------|------------------------------------|--------|
|                                                      |   | **2003**                         |   | **2002**                           |   | **2003** |   | **2002** |   |
|                                                      |   | **(in  thousands)**              |   | **(in  thousands)**                |   |
|                                                      |   |                             |   |                               |   |   |   |   |   |
| Net income (loss)                                         |   | $                                | (64    | )                                  | $      | 3,215 |   | $ | 1,428 |   | $ | 1,725 |   |
| Other comprehensive income, interest rate  cap adjustment |   | —                           |   | 63                                 |   | — |   | 12 |   |
|                                                      |   | $                                | (64    | )                                  | $      | 3,278 |   | $ | 1,428 |   | $ | 1,737 |   |

 

11

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Note 7.          Retirement of Chairmanand Chief Executive Officer

 

On November 26, 2002, theCompany announced the retirement and resignation of A. Kenneth Pincourt, Jr.,its Founder, Chairman and Chief Executive Officer.  The Company has entered into a retirement agreement with Mr.Pincourt, setting forth the terms of his retirement and resignation.  The retirement agreement replaces Mr.Pincourt’s previous employment agreement. Under the retirement agreement, theCompany elected to accelerate retirement benefits under its deferredcompensation program and to continue to pay compensation and provide relatedbenefits through July 15, 2004, the remaining term of Mr. Pincourt’s previousemployment contract.

 

Accelerated benefits under thedeferred program amounted to $1,040,987, of which $549,220 had been accrued asof September 30, 2002. Mr. Pincourt’s deferred compensation was paid to him onDecember 13, 2002.  Also under theretirement agreement, Mr. Pincourt will continue to receive monthly payments of$41,004 through July 15, 2004, one bonus payment of $150,491 payable on orbefore October 31, 2003, and a second bonus payment of $119,138 payable on orbefore August 31, 2004.  Among otherbenefits, Mr. Pincourt is also able to participate in any health insuranceplan, employee benefit plan or other arrangement made available by the Companyor its subsidiaries to its executives and key management employees, throughJuly 15, 2004.  The Company recorded acharge for the retirement of Mr. Pincourt during the first quarter of fiscal2003.  The effect of this charge wasincluded in other expense in the Company’s consolidated statement of income andamounted to $1,503,925 before income taxes.

 

The following table summarizesthe charge made during the first quarter for Mr. Pincourt’s retirement:

 
| Deferred compensation                                         |   | $         | 1,040,987 |   |
|---------------------------------------------------------------|--------|-----------|-----------|--------|
| Compensation and related  benefits                            |   | 1,012,158 |      |
| Total                                                         |   | 2,053,145 |      |
|                                                          |   |      |      |
| Less deferred compensation  accrued as of September  30, 2002 |   | (549,220  | )         |
| Charged to expense                                            |   | $         | 1,503,925 |   |

 

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**Item2.****           Management’s Discussionand Analysis of Financial Condition and Results of Operations**

 

**Forward-LookingStatements**

 

Management’sDiscussion and Analysis contains “Forward-Looking Statements,” as defined insection 27a of the Securities Act of 1933, as amended, and Section 21e of theSecurities Exchange Act of 1934, as amended. Forward-Looking Statements are statements other than historicalinformation or statements of current condition and relate to future events orthe future financial performance of the Company.  Some Forward-Looking Statements may be identified by use of suchterms as “believes,” “anticipates,” “intends” or “expects.”  Such Forward-Looking Statements involveknown and unknown risks, uncertainties and other factors that may cause theactual results, performance or achievements of the Company to be materiallydifferent from any future results, performance or achievements expressed orimplied by such Forward-Looking Statements. The following is a list of factors, among others, that could causeactual results to differ materially from those contemplated by theForward-Looking Statements:  businessconditions 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; increasedexcise taxes; foreign currency exposure; changes in product mix between andamong product lines; lower than expected customer orders and quarterly seasonalfluctuations of those orders; and product shipment interruptions.  The Company undertakes no obligation toupdate or revise any Forward-Looking Statements, whether as a result of newinformation, future events or otherwise.

 

**Introduction**

 

The followingdiscussion and analysis summarizes the significant factors affecting (i)consolidated results of operations of the Company for the six months endedMarch 31, 2003 compared to the six months ended March 31, 2002, (ii)consolidated results of operations of the Company for the three months endedMarch 31, 2003 compared to the three months ended March 31, 2002, and (iii)financial liquidity and capital resources. This discussion and analysis should be read in conjunction with theCompany’s consolidated financial statements and notes thereto included herein.  Certain amounts presented in this Item 2have been rounded to the nearest thousand or hundred thousand, as applicable,but the percentages calculated are based on actual amounts without rounding.

 

The Companyoperates primarily in the beverage alcohol industry in the United States.  The Company is a leading producer andsupplier of brandy, rum, wine and spirits to other beverage alcoholmanufacturers; produces, imports and markets premium branded spirits; bottlesbeverage alcohol and other beverages on a contract basis and under its own labels;and produces vinegar and cooking wine. The Company reports its operating results in four segments:  Bulk Alcohol Products (citrus brandy, citrusspirits, rum, cane spirits, fortified citrus wine, purchased distilled productsand byproducts); Premium Branded Spirits (primarily Cruzan Estate Rums andCruzan Flavored Rums); Bottling Operations (contract bottling services andproprietary and private label products); and Vinegar and Cooking Wine (bulkvinegar, bulk cooking wine, vinegar stock and proprietary and private labelcase goods).

 

Informationregarding the net sales, operating income and total assets of each of theCompany’s business segments and information regarding geographic areas is setforth in Note 5 to the consolidated financial statements.

 

The Company’snet sales and gross margins (gross profit as a percentage of net sales) varydepending on the mix of business among the Company’s products.  Historically, gross margins have beenhighest in bulk alcohol products and premium branded spirits and lower inbottling operations and vinegar and cooking wine operations.

 

The Companyhas a limited number of customers, and these customers often purchase bulkalcohol products in significant quantities or place significant orders forcontract bottling services, distilled spirits, vinegar and cooking wine.  Accordingly, the size and timing of purchaseorders and product shipments can cause operating results to fluctuatesignificantly from quarter to quarter. Additionally, some Company products generate higher profit margins thanothers, and changes in the Company’s product mix can cause gross margins tofluctuate.  Certain aspects of theCompany’s business are seasonal, with increased demand for the Company’s contractbottling services from April to October and increased production of theCompany’s bulk alcohol products from November to June, corresponding to

 

13

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the Florida citrusharvest.  As a result of these factors,the Company’s operating results may vary significantly from quarter to quarter.

 

Net salesrepresent the Company’s gross sales less excise taxes. Excise taxes aregenerally payable on products bottled by the Company.  In addition, excise taxes are payable on sales of industrialalcohol to certain customers. Accordingly, excise taxes vary from period to period depending upon theCompany’s product and customer mix.

 

**Results ofOperations**

 

The followingtable sets forth statement of income items as a percentage of net sales.

 
|                                         |   | **Six Months  Ended****March 31****,** |   | **Three  Months Ended****March 31****,** |   |
|----------------------------------------------|--------|----------------------------------------|--------|------------------------------------------|--------|
|                                         |   | **2003**                               |   | **2002**                                 |   | **2003** |   | **2002** |   |
| Net sales                                    |   | 100.0                                  | %      | 100.0                                    | %      | 100.0 | % | 100.0 | % |
| Cost of goods sold                           |   | 68.7                                   |   | 68.6                                     |   | 64.2 |   | 68.9 |   |
| Gross margin                                 |   | 31.3                                   |   | 31.4                                     |   | 35.8 |   | 31.1 |   |
| Selling, general and administrative expenses |   | 25.9                                   |   | 21.0                                     |   | 25.6 |   | 20.7 |   |
| Operating income                             |   | 5.4                                    |   | 10.4                                     |   | 10.2 |   | 10.4 |   |
| Interest expense                             |   | (3.7                                   | )      | (3.0                                     | )      | (4.0 | ) | (2.7 | ) |
| Other income (expense), net                  |   | (2.1                                   | )      | 1.7                                      |   | 1.4 |   | 1.9 |   |
| Income (loss) before income taxes            |   | (0.4                                   | )      | 9.1                                      |   | 7.6 |   | 9.6 |   |
| Income tax (expense) benefit                 |   | 0.2                                    |   | (2.2                                     | )      | (1.1 | ) | (2.1 | ) |
| Net income (loss)                            |   | (0.2                                   | )%     | 6.9                                      | %      | 6.5 | % | 7.5 | % |

 

The followingtable provides information on net sales of certain Company products.

 
|                     |   | **Six Months  Ended********March 31,** |   | **Three  Months Ended********March 31,** |   |
|--------------------------|--------|----------------------------------------|--------|------------------------------------------|--------|
|                     |   | **2003**                               |   | **2002**                                 |   | **% Change** |   | **2003** |   | **2002** |   | **% Change** |   |
|                     |   | **(in  thousands)**                    |   |                                     |   | **(in  thousands)** |   |   |   |
|                     |   |                                   |   |                                     |   |   |   |   |   |   |   |   |   |
| Bulk Alcohol Products    |   | $                                      | 17,527 |                                     | $      | 17,692 |   | (0.9 | ) | $ | 8,832 |   | $ | 8,856 |   | (0.3 | ) |
| Premium Branded Spirits  |   | 8,725                                  |   | 8,432                                    |   | 3.5 |   | 4,521 |   | 3,659 |   | 23.6 |   |
| Bottling Operations      |   | 6,411                                  |   | 10,205                                   |   | (37.2 | ) | 3,582 |   | 5,423 |   | (33.9 | ) |
| Vinegar and Cooking Wine |   | 10,126                                 |   | 10,483                                   |   | (3.4 | ) | 4,890 |   | 5,020 |   | (2.6 | ) |
|                     |   | $                                      | 42,789 |                                     | $      | 46,812 |   | (8.6 | ) | $ | 21,825 |   | $ | 22,958 |   | (4.9 | ) |

 

14

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The followingtable provides unit sales volume data for certain Company products.

 
|                                 |   | **Six Months  Ended  March 31,** |   | **% Change** |   | **Three  Months Ended  March 31,** |     | **% Change** |     |
|--------------------------------------|--------|----------------------------------|--------|--------------|--------|------------------------------------|----------|--------------|----------|
|                                 |   | **2003**                         |   | **2002**     |   |                               | **2003** |         | **2002** |   |   |
|                                 |   | **(in  thousands)**              |   |         |   | **(in  thousands)**                |     |         |     |
|                                 |   |                             |   |         |   |                               |     |         |     |   |   |   |   |
| Bulk alcohol products:               |   |                             |   |         |   |                               |     |         |     |   |   |   |   |
| Distilled products, in proof gallons |   |                             |   |         |   |                               |     |         |     |   |   |   |   |
| Citrus Brandy                        |   | 871                              |   | 660          |   | 31.9                               |     | 414          |     | 297 |   | 39.5 |   |
| Citrus Spirits                       |   | 183                              |   | 274          |   | (33.3                              | )        | 67           |     | 118 |   | (43.6 | ) |
| Rum                                  |   | 2,147                            |   | 1,973        |   | 8.8                                |     | 1,199        |     | 1,126 |   | 6.5 |   |
| Cane Spirits                         |   | 245                              |   | 339          |   | (27.9                              | )        | 120          |     | 139 |   | (14.3 | ) |
| Fortified citrus wine, in gallons    |   | 5,028                            |   | 5,107        |   | (1.5                               | )        | 2,485        |     | 2,403 |   | 3.4 |   |
| Premium branded spirits, in cases    |   | 227                              |   | 181          |   | 25.1                               |     | 118          |     | 92 |   | 27.7 |   |
| Bottling operations, in cases        |   | 1,441                            |   | 3,180        |   | (54.7                              | )        | 898          |     | 1,748 |   | (48.6 | ) |
| Vinegar                              |   |                             |   |         |   |                               |     |         |     |   |   |   |   |
| Bulk, in 100 grain gallons           |   | 2,702                            |   | 2,818        |   | (4.1                               | )        | 1,463        |     | 1,466 |   | (0.2 | ) |
| Cases                                |   | 271                              |   | 358          |   | (24.4                              | )        | 117          |     | 189 |   | (38.3 | ) |
| Drums, in 100 grain gallons          |   | 773                              |   | 775          |   | (0.2                               | )        | 388          |     | 397 |   | (2.1 | ) |
| Cooking Wine                         |   |                             |   |         |   |                               |     |         |     |   |   |   |   |
| Bulk, in gallons                     |   | 2,178                            |   | 2,077        |   | 4.9                                |     | 1,025        |     | 1,010 |   | 1.5 |   |
| Cases                                |   | 350                              |   | 378          |   | (7.2                               | )        | 166          |     | 170 |   | (1.9 | ) |

 

**Six months ended March 31, 2003 compared tosix months ended March 31, 2002**.  Unless otherwise noted, references to 2003represent the six-month period ended March 31, 2003 and references to 2002represent the six-month period ended March 31, 2002.  In 2002, net sales and cost of goods sold of premium brandedspirits included excise taxes of approximately $1.2 million, representingexcise taxes included in cases sold from warehouses located outside of theCompany’s Florida bonded warehouse facilities. Beginning October 1, 2002, theCompany no longer includes excise taxes in net sales and cost of goods sold ofpremium branded spirits case sales from locations outside of the Company’sFlorida bonded warehouse facilities. Net sales and cost of sales in 2002 have been reclassified to conformwith the 2003 presentation.

 

*Net Sales.*Net saleswere $42.8 million in 2003, a decrease of 8.6% from net sales of $46.8 millionin 2002.

 

Net sales ofbulk alcohol products were $17.5 million in 2003, a decrease of 0.9% from netsales of $17.7 million in 2002.  Thedecrease resulted primarily from decreased shipments of citrus spirits, canespirits and fortified citrus wine. Except for fortified citrus wine, management believes that the decreasein bulk alcohol product sales is due to the timing of customer orders.  Due to the loss of certain customers,management believes that its fortified wine volume in fiscal 2003 may declineby approximately 2% from fiscal 2002.

 

Net sales ofpremium branded spirits were $8.7 million in 2003, an increase of 3.5% from netsales of $8.4 million in 2002.  In 2002,net sales of premium branded spirits included $1.9 million of bulk tequilasales, representing the liquidation of inventory that was held to producePorfidio tequila.  Excluding bulktequila sales, net sales of premium branded spirits increased 34.4% from netsales of $6.5 million in 2002.  Sales ofthe Company’s Cruzan Estate Rums and Cruzan Flavored Rums, collectively,increased 26.0% and Cruzan Flavored Rums alone increased 32.7% in 2003 comparedto 2002.

 

15

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Net sales ofthe Company’s bottling operations were $6.4 million in 2003, a decrease of37.2% from net sales of $10.2 million in 2002. The unit volume of the Company’s bottling operations decreased 54.7% in2003 as a result of the decision of a large bottling customer to shiftproduction from the Company to its own bottling facilities.  During fiscal 2002, this customerrepresented approximately 48% of the Company’s unit volume in bottlingoperations.  Management believes thatthis loss in volume will be partially offset by increased business with new andexisting customers and that total bottling operations may decline byapproximately 7% to 10% in fiscal 2003.

 

Net sales ofvinegar and cooking wine were $10.1 million in 2003, a decrease of 3.4% fromnet sales of $10.5 million in 2002. Management believes that the decrease in net sales is due to increasedcompetition and the timing of customer orders.

 

*Gross Profit.* Grossprofit was $13.4 million in 2003, a decrease of 8.9% from gross profit of $14.7million in 2002.  Gross margin decreasedto 31.3% in 2003 from 31.4% in 2002.

 

*Selling, General and AdministrativeExpenses. *Selling,general and administrative expenses were $11.1 million in 2003, an increase of13.0% from $9.8 million in 2002.  Theincrease was primarily attributable to increased administrative, marketing andadvertising expenses related to the Company’s premium branded spiritsbusiness.  The Company has increased itsadministrative, marketing and advertising expenses in its premium brandedspirits business as it continues to place emphasis on this growing businesssegment.

 

*Operating Income.*  The following table sets forth the operatingincome (loss) by reportable segment of the Company for 2003 and 2002.

 
|                           |   | **Six months ended****March 31,** |       |     |       |
|--------------------------------|--------|-----------------------------------|------------|----------|------------|
|                           |   | **2003**                          |       | **2002** |       | **% Change** |   |
|                           |   | **(In  thousands)**               | ** ** |     | ** ** |
| Bulk Alcohol Products          |   | $                                 | 5,773      |     | $          | 5,400 |   | 6.9 |   |
| Premium Branded Spirits        |   | (746                              | )          | (542     | )          | — |   |
| Bottling Operations            |   | (1,737                            | )          | 1,008    |       | — |   |
| Vinegar and Cooking Wine       |   | 2,052                             |       | 2,103    |       | (2.4 | ) |
| Corporate Operations and Other |   | (3,041                            | )          | (3,085   | )          | — |   |
|                           |   | $                                 | 2,301      |     | $          | 4,884 |   | (52.9 | ) |

 

As a result ofthe above factors, operating income was $2.3 million in 2003, a decrease of52.9% from operating income of $4.9 million in 2002.

 

The Company’spremium branded spirits segment experienced operating losses of $0.7 million in2003 and $0.5 million in 2002.  Theoperating loss reflected the Company’s continuing efforts to increase marketshare by reinvesting segment gross profits in selling and marketingexpenses.  Included in operating loss ofpremium branded spirits in 2002 was profit of $0.5 million related to bulktequila sales.  Excluding bulk tequilasales, operating loss of premium branded spirits would have been $1.1 millionin 2002.

 

The Company’sbottling operations segment reported an operating loss of $1.7 million in 2003compared to operating income of $1.0 million in 2002. The operating lossreflected the decision of a large bottling customer to shift production fromthe Company to its own bottling facilities. This customer represented approximately 48% of the Company’s annualbottling operations unit volume for fiscal year 2002.  Management believes that this loss in volume will be partiallyoffset by increased business with new and existing customers and that totalbottling operations volume may decline by approximately 7% to 10% in fiscal2003.

 

*Interest Expense.*Interestexpense was $1.6 million in 2003 and $1.4 million in 2002.  The increase in interest expense was due tohigher interest rates during 2003 as compared to 2002 and the payment of a$136,250 waiver fee during 2003 as described in Note 3 to the consolidatedfinancial statements.  The Company’sinterest rate under the term-loan and revolving credit agreement was increased50 basis points effective January 1, 2003.

 

16

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*Other Expense*.  On November 26, 2002, the Company announcedthe retirement and resignation of A. Kenneth Pincourt, Jr., its Founder,Chairman and Chief Executive Officer. The Company has entered into a retirement agreement with Mr. Pincourt,setting forth the terms of his retirement and resignation.  The retirement agreement replaces Mr.Pincourt’s previous employment agreement. Under the retirement agreement, theCompany elected to accelerate retirement benefits under its deferredcompensation program and to continue to pay compensation and provide relatedbenefits through July 15, 2004, the remaining term of Mr. Pincourt’s previousemployment contract.

 

Acceleratedbenefits under the deferred program amounted to $1,040,987, of which $549,220had been accrued as of September 30, 2002. Mr. Pincourt’s deferred compensationwas paid to him on December 13, 2002. Also under the retirement agreement, Mr. Pincourt will continue toreceive monthly payments of $41,004 through July 15, 2004, one bonus payment of$150,491 payable on or before October 31, 2003, and a second bonus payment of$119,138 payable on or before August 31, 2004. Among other benefits, Mr. Pincourt is also able to participate in anyhealth insurance plan, employee benefit plan or other arrangement madeavailable by the Company or its subsidiaries to its executives and keymanagement employees, through July 15, 2004. The Company recorded a charge for the retirement of Mr. Pincourt duringthe first quarter of fiscal 2003.  Theeffect of this charge was included in other expense in the Company’sconsolidated statement of income and amounted to $1,503,925 before incometaxes.

 

The followingtable summarizes the charge made during the first quarter for Mr. Pincourt’sretirement:

 
| Deferred compensation                                         |   | $         | 1,040,987 |   |
|---------------------------------------------------------------|--------|-----------|-----------|--------|
| Compensation and related  benefits                            |   | 1,012,158 |      |
| Total                                                         |   | 2,053,145 |      |
|                                                          |   |      |      |
| Less deferred compensation  accrued as of September  30, 2002 |   | (549,220  | )         |
| Charged to expense                                            |   | $         | 1,503,925 |   |

 

*Income Tax Expense.*TheCompany’s effective income tax rate was 20.0% in 2003 and 24.1% in 2002.  The low tax rate was attributable to a 90%exemption of the Company’s Virgin Islands subsidiary from U.S. Virgin Islandsincome taxes.  The exemption iseffective through September 2020.  Inaddition, the Company benefited from the extraterritorial income exclusion in2003 and 2002.  During 2003, the Companyincurred operating losses from its U.S. operations and recorded an income taxbenefit of $0.1 million.

 

**Threemonths ended March 31, 2003 compared to three months ended March 31, 2002**.  Unless otherwise noted, references to 2003represent the three-month period ended March 31, 2003 and references to 2002represent the three-month period ended March 31, 2002.  In 2002, net sales and cost of goods sold ofpremium branded spirits included excise taxes of approximately $0.6 million,representing excise taxes included in cases sold from warehouses locatedoutside of the Company’s Florida bonded warehouse facilities. Beginning October1, 2002, the Company no longer includes excise taxes in net sales and cost ofgoods sold of premium branded spirits case sales from locations outside of theCompany’s Florida bonded warehouse facilities. Net sales and cost of sales in 2002 have been reclassified to conformwith the 2003 presentation.

 

*Net Sales.*Net saleswere $21.8 million in 2003, a decrease of 4.9% from net sales of $23.0 millionin 2002.

 

Net sales ofbulk alcohol products were $8.8 million in 2003, a decrease of 0.3% from netsales of $8.9 million in 2002.  Managementbelieves that the decrease in bulk alcohol shipments is due to the timing ofcustomer orders.

 

Net sales ofpremium branded spirits were $4.5 million in 2003, an increase of 23.6% fromnet sales of $3.7 million in 2002.  In2002, net sales of premium branded spirits included $0.3 million of bulktequila sales, representing the liquidation of inventory that was held toproduce Porfidio tequila.  Excludingbulk tequila sales, net sales of premium branded spirits were $4.5 million in2003, an increase of 37.1% from net sales of $3.3 million in 2002.  Sales of the Company’s Cruzan Estate Rumsand Cruzan Flavored Rums, collectively, increased 19.1% and Cruzan FlavoredRums alone increased 20.1% in 2003 compared to 2002.

 

17

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Net sales ofthe Company’s bottling operations were $3.6 million in 2003, a decrease of33.9% from net sales of $5.4 million in 2002. The unit volume of the Company’s bottling operations decreased 48.6% in2003 as a result of the decision of a large bottling customer to shiftproduction from the Company to its own bottling facilities.  During fiscal 2002, this customerrepresented approximately 48% of the Company’s fiscal 2002 unit volume inbottling operations.  Managementbelieves that this loss in volume will be partially offset by increasedbusiness with new and existing customers and that total bottling operations maydecline by approximately 7% to 10% in fiscal 2003.

 

Net sales ofvinegar and cooking wine were $4.9 million in 2003, a decrease of 2.6% from netsales of $5.0 million in 2002. Management believes that the decrease in net sales is due to increasedcompetition and the timing of customer orders.

 

*Gross Profit.* Grossprofit was $7.8 million in 2003, an increase of 9.3% from gross profit of $7.1million in 2002.  Gross margin increasedto 35.8% in 2003 from 31.1% in 2002. The increase in gross margin was primarily attributable to the decreasedvolume in bottling operations and an increase in shipments of bulk alcohol.

 

*Selling, General and AdministrativeExpenses. *Selling,general and administrative expenses were $5.6 million in 2003, an increase of17.6% from $4.7 million in 2002.  Theincrease was primarily attributable to increased administrative, marketing andadvertising expenses related to the Company’s premium branded spiritsbusiness.  The Company has increased itsadministrative, marketing and advertising expenses in its premium brandedspirits business as it continues to place emphasis on this growing businesssegment.

 

*Operating Income.*  The following table sets forth the operatingincome (loss) by reportable segment of the Company for 2003 and 2002.

 
|                           |   | **Three months ended****March 31,** |       |     |       |
|--------------------------------|--------|-------------------------------------|------------|----------|------------|
|                           |   | **2003**                            |       | **2002** |       | **% Change** |   |
|                           |   | **(In  thousands)**                 | ** ** |     | ** ** |
| Bulk Alcohol Products          |   | $                                   | 3,676      |     | $          | 2,511 |   | 46.5 |   |
| Premium Branded Spirits        |   | (333                                | )          | (371     | )          | — |   |
| Bottling Operations            |   | (455                                | )          | 826      |       | — |   |
| Vinegar and Cooking Wine       |   | 880                                 |       | 956      |       | (8.0 | ) |
| Corporate Operations and Other |   | (1,542                              | )          | (1,524   | )          | — |   |
|                           |   | $                                   | 2,226      |     | $          | 2,398 |   | (7.2 | ) |

 

As a result ofthe above factors, operating income was $2.2 million in 2003, a decrease of7.2% from operating income of $2.4 million in 2002.

 

The Company’spremium branded spirits segment experienced operating losses of $0.3 million in2003 and $0.4 million in 2002.  Theoperating loss reflected the Company’s continuing efforts to increase marketshare by reinvesting segment gross profits in selling and marketing expenses.

 

The Company’sbottling operations segment reported an operating loss of $0.5 million in 2003compared to operating income of $0.8 million in 2002. The operating lossreflected the decision of a large bottling customer to shift production fromthe Company to its own bottling facilities. This customer represented approximately 48% of the Company’s annualbottling operations unit volume for fiscal year 2002.  Management believes that this loss in volume will be partiallyoffset by increased business with new and existing customers and that totalbottling operations volume may decline by approximately 8% in fiscal 2003.

 

*Interest Expense.*Interestexpense was $0.9 million in 2003 and $0.6 million in 2002.  The increase in interest expense was due tohigher interest rates during 2003 as compared to 2002 and the payment of a$136,250 waiver fee during 2003 as described in Note 3 to the consolidatedfinancial statements.  The Company’sinterest rate under the term-loan and revolving credit agreement was increased50 basis points effective January 1, 2003.

 

18

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*Income Tax Expense.*TheCompany’s effective income tax rate was 13.8% in 2003 and 21.9% in 2002.  The low tax rate was attributable to a 90%exemption of the Company’s Virgin Islands subsidiary from U.S. Virgin Islandsincome taxes.  The exemption iseffective through September 2020.  Inaddition, the Company benefited from the extraterritorial income exclusion in2003 and 2002.

 

**FinancialLiquidity and Capital Resources**

 

**General**

 

The Company’sprincipal use of cash in its operating activities is for purchasing raw materialsto be used in its manufacturing operations, purchasing imported products forits premium branded spirits business and carrying inventories andreceivables.  The Company’s source ofliquidity has historically been cash flow from operations and its line ofcredit.  Some of the Company’smanufacturing operations are seasonal and the Company’s borrowings on its lineof credit vary during the year.  Forexample, the Company uses citrus molasses as its primary raw material in theproduction of citrus brandy and spirits at its two Florida distilleries.  The Company buys citrus molasses, aby-product of citrus juice production, from local manufacturers of citrus juiceand concentrate during the citrus harvest, which generally runs from Novemberto June.  The Company generally beginspurchasing citrus molasses in November and manufactures and builds inventory ofcitrus brandy and spirits.  The Companymanufactures and builds inventory while raw materials are available due to theshort life of the citrus molasses it purchases.  Another seasonal business of the Company is its contract bottlingservices.  Demand for contract bottlingservices is highest during the months from April through October.  Management believes that cash provided byits operating and financing activities will provide adequate resources tosatisfy its working capital, liquidity and anticipated capital expenditurerequirements for both its short-term and long-term capital needs.

 

**Operating Activities**

 

Net cashprovided by operating activities in 2003 was $1.5 million, which resulted from$2.5 million in net income adjusted for noncash items, and $1.0 millionrepresenting the net increase in operating assets and liabilities.

 

The Companycurrently has approximately $2.1 million of ready-to-drink finished goodsinventory and related raw materials and supplies, the sales of which have notyet met expectations.  The Companycontinues to sell this inventory in the ordinary course and is currentlyexploring alternatives with respect to the disposition of any excessinventory.  The Company believes that itwill be able to recover at least the book value thereof in the current fiscalyear.

 

**Investing and Financing Activities**

 

Net cash usedin investing activities in 2003 was $2.4 million, which resulted primarily from$2.1 million of capital expenditures.

 

Net cash usedin financing activities in 2003 was $0.1 million, which resulted fromborrowings of $2.0 million under the revolving credit facility and payments of$2.1 million of long-term debt.

 

The Company’srevolving credit facility provides for maximum borrowings of $30 million.  Borrowings under this facility were $22.5million at March 31, 2003 (see Note 3 to the consolidated financialstatements).

 

The Company’sbank debt was $56.5 million as of March 31, 2003, and its ratio of total debtto equity was 1.1 to 1.

 

As of December31, 2002 and March 31, 2003, the Company was not in compliance with the FundedDebt to EBITDA (earnings before interest, taxes, depreciation and amortization)financial covenant under its credit agreement. In addition, as of March 31, 2003 the Company was not in compliance withits Interest Coverage and Fixed Charge Coverage financial covenants.  On February 18, 2003, the Company received awaiver for the December 31, 2002 covenant violation.  On May 14, 2003, the Company received a waiver of the March 31,2003 covenant violations and amended prospectively the credit agreement toreset the levels of certain financial covenants

 

19

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to reflect the Company’scurrent business plan and forecasts. The Company paid a fee of $136,250 for the December waiver and $160,000for the March waiver and amendment.  TheCompany’s interest rate under the term-loan and revolving credit agreement wasincreased 50 basis points effective January 1, 2003 and an additional 50 basispoints effective May 14, 2003.

 

The Company’sshare of the undistributed earnings of the Bahamian and Virgin Islandssubsidiaries was approximately $7.5 million and $27.9 million, respectively, asof September 30, 2002.  See Note 10 tothe Company’s consolidated financial statements included in the Company’sAnnual Report on Form 10-K for the year ended September 30, 2002 for additionalinformation on income taxes related to these subsidiaries.

 

Based oncurrent plans and business conditions, management expects that its cash, cashequivalents, and short-term investments, together with any amounts generatedfrom operations and available borrowings, will be sufficient to meet the Company’scash requirements for at least the next 12 months.

 

**Effectsof Inflation and Changing Prices**

 

The Company’sresults of operations and financial condition have not been significantlyaffected by inflation and changing prices. The Company has been able, subject to normal competitive conditions, topass along rising costs through increased selling prices.

 

**CriticalAccounting Policies**

 

The Company’ssignificant accounting policies are more fully described in Note 1 to theCompany’s consolidated financial statements located in Item 8 of its AnnualReport on Form 10-K. The preparation of financial statements in conformity withaccounting principles generally accepted in the United States of Americarequires management to make estimates and assumptions that affect the reportedamounts of assets, liabilities, revenues, and expenses, and the relateddisclosures of contingent assets and liabilities. Actual results could differfrom those estimates under different assumptions or conditions. The Company believesthat the following critical accounting policy is subject to estimates andjudgments used in the preparation of its consolidated financial statements:

 

The Companyhas goodwill and intangible assets associated with business acquisitions. TheCompany reviews these assets for impairment annually and whenever an eventoccurs or circumstances change that would more likely than not reduce the fairvalue of these assets below their carrying value.  If the fair value of these assets is less than their carrying value,then an impairment loss would be recognized equal to the excess of the carryingvalue over the fair value of the asset.

 

**Item 3.****          ****Quantitative and QualitativeDisclosures about Market Risk**

 

Theinformation required under this Item 3 is incorporated herein by reference tothe Company’s Annual Report on Form 10 - K for the year endedSeptember 30, 2002.

 

**Item4.****           Controls and Procedures**

 

**Evaluationof Disclosure Controls and Procedures**

 

Within 90 daysprior to the date of this report, management, including the Company’s ChiefExecutive Officer and Chief Financial Officer, carried out an evaluation of theeffectiveness of the design and operation of the Company’s disclosure controlsand procedures.  Based on this evaluation,the Company’s Chief Executive Officer and Chief Financial Officer concludedthat the disclosure controls and procedures are effective in timely alertingthem to material information required to be included in the Company’s periodicSEC reports.  It should be noted thatthe design of any system of controls is based in part upon certain assumptionsabout the likelihood of future events, and there can be no assurance that anydesign will succeed in achieving its stated goals under all potential futureconditions, regardless of how remote.

 

20

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**Changesin Internal Controls**

 

In addition,management, including the Company’s Chief Executive Officer and Chief FinancialOfficer, reviewed the Company’s internal controls, and there have been nosignificant changes in the internal controls or in other factors that couldsignificantly affect those controls subsequent to the date of their lastevaluation.

 

**PART II. OTHER INFORMATION**

 

**Item4.  Submission of Matters to a Vote ofSecurity Holders**

 

The annualmeeting of stockholders of the Company was held on March 18, 2003, in West PalmBeach, Florida, for the purpose of electing two Class II directors to holdoffice for a term of three years.

 

Proxies forthe meeting were solicited pursuant to Section 14(a) of the Securities ExchangeAct of 1934, as amended, and there was no solicitation in opposition tomanagement’s solicitations.

 

Election ofDirectors

 

All ofmanagement’s nominees for election as directors as listed in the proxystatement were elected.  The results ofthe election were as follows:

 
| **Name**          |   | **For**   |   | **Withheld** |   | **Abstentions and  Broker Non-Votes** |
|-------------------|--------|-----------|--------|--------------|--------|---------------------------------------|
|              |   |      |   |         |   |                                  |
| Joseph R. Cook    |   | 4,632,667 |   | 139,510      |   | 0                                     |
| Leonard G. Rogers |   | 4,632,667 |   | 139,510      |   | 0                                     |

 

Following the annual meeting,Godfrey D. Bain, Donald L. Kasun and Thomas A. Valdes continue to serve asClass I directors with terms expiring at the 2005 annual meeting and Jay S.Maltby, Edward F. McDonnell and D. Chris Mitchell continue to serve as ClassIII directors with terms expiring at the 2004 annual meeting.

 

**Item6.  Exhibits and Reports on Form 8-K**

 
| 3.1      |   | Amended and  Restated Certificate of Incorporation of Todhunter International, Inc.   (1)                                                                                                                                |
|----------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| 3.2      |   | Amended and  Restated By-Laws of Todhunter International, Inc.  (5)                                                                                                                                                      |
| 4.1      |   | Form of  Todhunter International, Inc. Common Stock Certificate (1)                                                                                                                                                           |
| 10.6     |   | Todhunter  International, Inc. 1992 Stock Option Plan, as amended  (3)                                                                                                                                                   |
| 10.8     |   | Lease, dated  March 24, 1988, as amended, between Todhunter International, Inc. and  Esperanté Limited Partnership  (1)                                                                                        |
| 10.8(a)  |   | Amendment to  Lease, dated January 1, 1997, between Todhunter International, Inc. and  Florida Acquisition Fund Esperanté, Ltd. (4)                                                                                      |
| 10.18    |   | Executive  Employment Agreement dated as of July 15, 1999, between Thomas A. Valdes and  Todhunter International, Inc. (5)                                                                                                    |
| 10.19    |   | Executive  Employment Agreement dated as of July 15, 1999, between Jay S. Maltby and  Todhunter International, Inc. (5)                                                                                                       |
| 10.21    |   | Executive  Employment Agreement dated as of July 15, 1999, between D. Chris Mitchell and  Todhunter International, Inc. (5)                                                                                                   |
| 10.22    |   | Amended and  Restated Credit Agreement dated as of October 19, 2001, by and among  Todhunter International, Inc., and each of the Financial Institutions  Initially a Signatory thereto, and SouthTrust Bank (6)              |
| 10.22(a) |   | Waiver of  Defaults Under Credit Agreement, dated February 18, 2003, by and among  Todhunter International, Inc., SouthTrust Bank, acting as lender and Agent,  Wachovia Bank, N.A., National City Bank and Suntrust Bank (9) |
| 10.23    |   | Agreement  and General Release of All Claims between Todhunter International, Inc. and  A. Kenneth Pincourt, Jr., dated as of November 26, 2002 (7)                                                                           |
|     |   |

 

21

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|   |   |                                                                                                                         |
|--------|--------|------------------------------------------------------------------------------------------------------------------------------|
| 11.1   |   | Statement of  Computation of Per Share Earnings (8)                                                                          |
| 21.1   |   | Subsidiaries  of Todhunter International, Inc. (2)                                                                           |
| 99.1   |   | Certification  pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the  Sarbanes-Oxley Act of 2002 (9) |
| 99.2   |   | Certification  pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the  Sarbanes-Oxley Act of 2002 (9) |

 

----

(1)                                  Incorporatedherein by reference to the Company’s Registration Statement on Form S-1(File No.  33-50848).

 

(2)                                  Incorporatedherein by reference to the Company’s Annual Report on Form 10-K for theyear ended September 30, 1995.

 

(3)                                  Incorporatedherein by reference to the Company’s Annual Report on Form 10-K for the yearended September 30, 1997.

 

(4)                                  Incorporatedherein by reference to the Company’s Annual Report on Form 10-K for the yearended September 30, 1998.

 

(5)                                  Incorporatedherein by reference to the Company’s Annual Report on Form 10-K for the yearended September 30, 1999.

 

(6)                                  Incorporatedherein by reference to the Company’s Annual Report on Form 10-K for the yearended September 30, 2001.

 

(7)                                  Incorporatedherein by reference to the Company’s Report on Form 8-K for November 26, 2002.

 

(8)                                  Filedherewith and incorporated herein by reference to Note 4 of notes toconsolidated financial statements, included in Item 1 of the Company’sQuarterly Report on Form 10-Q for the quarter ended March 31, 2003.

 

(9)                                  Filedherewith.

 

 
| **(b)** |   | **Reports on Form 8-K**                                                                                                           |
|---------|--------|-----------------------------------------------------------------------------------------------------------------------------------|
|    |   |                                                                                                                              |
|    |   | During the  second quarter of fiscal 2003, the Company filed the following current report  on Form 8-K:                           |
|    |   |                                                                                                                              |
| (1)     |   | Form 8-K  dated March 19, 2003.  This Form 8-K  reported information under Item 5 (Other Events and required FD Disclosure). |

 

22

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**Signatures**

 

Pursuant tothe requirements of the Securities Exchange Act of 1934, the registrant hasduly caused this report to be signed on its behalf by the undersigned thereuntoduly authorized.

 

 
| Date: May  15, 2003 |   | /s/ Jay S.  Maltby                                 |
|---------------------|--------|----------------------------------------------------|
|                |   | Jay S.  Maltby                                     |
|                |   | Chairman,  Chief Executive Officer and President   |
|                |   |                                               |
|                |   |                                               |
| Date: May  15, 2003 |   | /s/ Troy  Edwards                                  |
|                |   | Troy Edwards                                       |
|                |   | Chief  Financial Officer, Treasurer and Controller |

 

23

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CERTIFICATION REQUIRED BY THE

CHIEF EXECUTIVE OFFICER

PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

 

I, Jay S. Maltby, certify that:

 

1.               Ihave reviewed this quarterly report on Form 10-Q of Todhunter International,Inc.;

 

2.               Basedon my knowledge, this quarterly report does not contain any untrue statement ofa material fact or omit to state a material fact necessary to make thestatements made, in light of the circumstances under which such statements weremade, not misleading with respect to the period covered by this quarterlyreport;

 

3.               Basedon my knowledge, the financial statements, and other financial informationincluded in this quarterly report, fairly present in all material respects thefinancial condition, results of operations and cash flows of the registrant asof, and for, the periods presented in this quarterly report;

 

4.     The registrant’s othercertifying officers and I are responsible for establishing and maintainingdisclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and15d-14) for the registrant and we have:

 

a)              designedsuch disclosure controls and procedures to ensure that material informationrelating to the registrant, including its consolidated subsidiaries, is madeknown to us by others within those entities, particularly during the period inwhich this quarterly report is being prepared;

 

b)             evaluatedthe effectiveness of the registrant’s disclosure controls and procedures as ofa date within 90 days prior to the filing date of this quarterly report (the“Evaluation Date”); and

 

c)              presentedin this quarterly report our conclusions about the effectiveness of thedisclosure controls and procedures based on our evaluation as of the EvaluationDate;

 

5.               Theregistrant’s other certifying officers and I have disclosed, based on our mostrecent evaluation, to the registrant’s auditors and the audit committee ofregistrant’s board of directors (or persons performing the equivalentfunction):

 

a)              allsignificant deficiencies in the design or operation of internal controls whichcould adversely affect the registrant’s ability to record, process, summarizeand report financial data and have identified for the registrant’s auditors anymaterial weaknesses in internal controls; and

 

b)             anyfraud, whether or not material, that involves management or other employees whohave a significant role in the registrant’s internal controls; and

 

6.               Theregistrant’s other certifying officers and I have indicated in this quarterlyreport whether or not there were significant changes in internal controls or inother factors that could significantly affect internal controls subsequent tothe date of our most recent evaluation, including any corrective actions with regardto significant deficiencies and material weaknesses.

 
| Date:  May 15, 2003 |   |                                             |
|--------------------------|--------|--------------------------------------------------|
|                     |   |                                             |
|                     |   |                                             |
|                     |   |     /s/ Jay S. Maltby             |   |
|                     |   | Jay S.  Maltby                                   |
|                     |   | Chairman,  Chief Executive Officer and President |

 

24

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CERTIFICATION REQUIRED BY THE

CHIEF FINANCIAL OFFICER

PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

 

I, Troy Edwards, certify that:

 

1.               Ihave reviewed this quarterly report on Form 10-Q of Todhunter International,Inc.;

 

2.               Basedon my knowledge, this quarterly report does not contain any untrue statement ofa material fact or omit to state a material fact necessary to make thestatements made, in light of the circumstances under which such statements weremade, not misleading with respect to the period covered by this quarterlyreport;

 

3.               Basedon my knowledge, the financial statements, and other financial informationincluded in this quarterly report, fairly present in all material respects thefinancial condition, results of operations and cash flows of the registrant asof, and for, the periods presented in this quarterly report;

 

4.     The registrant’s othercertifying officers and I are responsible for establishing and maintainingdisclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and15d-14) for the registrant and we have:

 

a)              designedsuch disclosure controls and procedures to ensure that material informationrelating to the registrant, including its consolidated subsidiaries, is madeknown to us by others within those entities, particularly during the period inwhich this quarterly report is being prepared;

 

b)             evaluatedthe effectiveness of the registrant’s disclosure controls and procedures as ofa date within 90 days prior to the filing date of this quarterly report (the“Evaluation Date”); and

 

c)              presentedin this quarterly report our conclusions about the effectiveness of thedisclosure controls and procedures based on our evaluation as of the EvaluationDate;

 

5.               Theregistrant’s other certifying officers and I have disclosed, based on our mostrecent evaluation, to the registrant’s auditors and the audit committee ofregistrant’s board of directors (or persons performing the equivalentfunction):

 

a)              allsignificant deficiencies in the design or operation of internal controls whichcould adversely affect the registrant’s ability to record, process, summarizeand report financial data and have identified for the registrant’s auditors anymaterial weaknesses in internal controls; and

 

b)             anyfraud, whether or not material, that involves management or other employees whohave a significant role in the registrant’s internal controls; and

 

6.               Theregistrant’s other certifying officers and I have indicated in this quarterlyreport whether or not there were significant changes in internal controls or inother factors that could significantly affect internal controls subsequent tothe date of our most recent evaluation, including any corrective actions withregard to significant deficiencies and material weaknesses.

 
| Date:  May 15, 2003 |   |                                               |
|--------------------------|--------|----------------------------------------------------|
|                     |   |                                               |
|                     |   |                                               |
|                     |   |   /s/   Troy Edwards                     |   |
|                     |   | Troy Edwards                                       |
|                     |   | Chief  Financial Officer, Treasurer and Controller |

 

25

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**EXHIBIT 99.1**

 

**CERTIFICATION**

 

Pursuant to 18 U.S.C.Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of2002, the undersigned certifies that (1) this Quarterly Report of TodhunterInternational, Inc. (the “Company”) on Form 10-Q for the period ended March 31,2003, as filed with the Securities and Exchange Commission on the date hereof(this “Report”), fully complies with the requirements of Section 13(a) of theSecurities Exchange Act of 1934, as amended, and (2) the information containedin this Report fairly presents, in all material respects, the financial conditionof the Company as of March 31, 2003 and its results of operations for the periodended March 31, 2003.

 

 
|                     | /s/  Jay S. Maltby                          |   |
|--------------------------|--------------------------------------------------|--------|
|                     | Jay S. Maltby                                    |
|                     | Chairman, Chief Executive  Officer and President |
|                     |                                             |
|                     |                                             |
| Date:  May 15, 2003 |                                             |

 

----

 

**EXHIBIT 99.2**

 

**CERTIFICATION**

 

Pursuant to 18 U.S.C.Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of2002, the undersigned certifies that (1) this Quarterly Report of TodhunterInternational, Inc. (the “Company”) on Form 10-Q for the period ended March 31,2003, as filed with the Securities and Exchange Commission on the date hereof(this “Report”), fully complies with the requirements of Section 13(a) of theSecurities Exchange Act of 1934, as amended, and (2) the information containedin this Report fairly presents, in all material respects, the financialcondition of the Company as of March 31, 2003 and its results of operations forthe period ended March 31, 2003.

 
|                     |   /s/   Troy Edwards                     |   |
|--------------------------|----------------------------------------------------|--------|
|                     | Troy Edwards                                       |
|                     | Chief Financial Officer,  Treasurer and Controller |
|                     |                                               |
|                     |                                               |
| Date:  May 15, 2003 |                                               |

 

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