**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 the quarterly period ended June 30, 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 markwhether the registrant (1) has filed all reports required to be filed bySection 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding12 months, and (2) has been subject to such filing requirements for the past 90days.

 

Yes    ý        No    o

 

Indicate by check markwhether the registrant is an accelerated filer (as defined in Rule 12b-2 of theExchange Act).

 

Yes    o        No    ý

 

The number of sharesoutstanding of registrant’s Common Stock, $.01 par value per share, as ofAugust 12, 2003 was 5,576,234.

 

 

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TODHUNTER INTERNATIONAL, INC.

 

INDEX

 
| PART I  | FINANCIAL INFORMATION |
|---------|-----------------------|
|    |
|    | Item 1                | Financial Statements |
|    |                  |   |
|    |                  | Consolidated Balance  Sheets -  June 30, 2003, unaudited and September 30, 2002 |
|    |                  |   |
|    |                  | Consolidated Statements  of Income -  Nine and Three Months Ended June 30, 2003 and 2002, unaudited |
|    |                  |   |
|    |                  | Consolidated Statements  of Cash Flows -  Nine and Three Months Ended June 30, 2003 and 2002, unaudited |
|    |                  |   |
|    |                  | 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 negative or item is inapplicable.

 

----

 

**PART I - FINANCIAL INFORMATION**

 

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

 

TODHUNTER INTERNATIONAL, INC.CONSOLIDATED BALANCE SHEETS

 
|                                                       |   | **June 30,  2003** |        | **September 30,  2002** |   |
|------------------------------------------------------------|--------|--------------------|-------------|-------------------------|--------|
|                                                       |   | **(Unaudited)**    |        | *****                   |   |
| ASSETS                                                     |   |               |        |                    |   |
|                                                       |   |               |        |                    |   |
| CURRENT  ASSETS                                            |   |               |        |                    |   |
| Cash  and cash equivalents                                 |   | $                  | 14,205,007  |                    | $      | 13,946,736 |   |
| Short-term  investments                                    |   | 3,402,636          |        | 3,397,033               |   |
| Trade  receivables                                         |   | 13,801,588         |        | 13,505,737              |   |
| Other  receivables                                         |   | 2,617,059          |        | 2,696,743               |   |
| Inventories                                                |   | 32,442,963         |        | 27,854,925              |   |
| Notes  receivable, current maturities                      |   | 246,767            |        | 118,165                 |   |
| Deferred  income taxes                                     |   | 2,205,750          |        | 1,992,000               |   |
| Other  current assets                                      |   | 2,488,589          |        | 3,078,437               |   |
| Total  current assets                                      |   | 71,410,359         |        | 66,589,776              |   |
|                                                       |   |               |        |                    |   |
| LONG-TERM  INVESTMENTS AND NOTES RECEIVABLE                |   |               |        |                    |   |
| Investments  in and advances to equity investees           |   | 1,886,416          |        | 1,584,628               |   |
| Notes  receivable from affiliates, less current maturities |   | 4,121,204          |        | 3,774,773               |   |
| Notes  receivable, less current maturities                 |   | 523,608            |        | 584,687                 |   |
|                                                       |   | 6,531,228          |        | 5,944,088               |   |
|                                                       |   |               |        |                    |   |
| PROPERTY  AND EQUIPMENT                                    |   | 91,632,043         |        | 89,775,329              |   |
| Less  accumulated depreciation                             |   | 50,824,798         |        | 47,590,112              |   |
|                                                       |   | 40,807,245         |        | 42,185,217              |   |
|                                                       |   |               |        |                    |   |
| GOODWILL                                                   |   | 20,524,404         |        | 20,524,404              |   |
| AMORTIZED  INTANGIBLE ASSETS                               |   | 1,785,030          |        | 2,040,181               |   |
| OTHER  ASSETS                                              |   | 29,250             |        | 598,838                 |   |
|                                                       |   | $                  | 141,087,516 |                    | $      | 137,882,504 |   |

 

----

*Fromaudited financial statements.

See Notes to ConsolidatedFinancial Statements.

 

1

----

 

TODHUNTER INTERNATIONAL, INC.

CONSOLIDATED BALANCE SHEETS

 
|                                                                                                                                                    |   | **June 30,  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                                                                                                                                       |   | 7,949,135          |        | 4,051,379               |   |
| Accrued  expenses                                                                                                                                       |   | 3,041,682          |        | 3,223,293               |   |
| Total  current liabilities                                                                                                                              |   | 14,990,817         |        | 11,274,672              |   |
|                                                                                                                                                    |   |               |        |                    |   |
| LONG-TERM  DEBT, less current maturities                                                                                                                |   | 49,900,206         |        | 53,017,009              |   |
|                                                                                                                                                    |   |               |        |                    |   |
| DEFERRED  INCOME TAXES                                                                                                                                  |   | 5,033,250          |        | 4,710,000               |   |
|                                                                                                                                                    |   |               |        |                    |   |
| OTHER  LIABILITIES                                                                                                                                      |   | 2,233,337          |        | 1,811,459               |   |
|                                                                                                                                                    |   | 72,157,610         |        | 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 June 30, 2003, and  5,669,434 shares September 30, 2002 |   | 56,734             |        | 56,694                  |   |
| Additional  paid-in capital                                                                                                                             |   | 18,696,909         |        | 18,664,449              |   |
| Retained  earnings                                                                                                                                      |   | 50,914,043         |        | 49,086,001              |   |
|                                                                                                                                                    |   | 69,667,686         |        | 67,807,144              |   |
| Less  cost of 99,200 shares of treasury stock                                                                                                           |   | (737,780           | )           | (737,780                | )      |
|                                                                                                                                                    |   | 68,929,906         |        | 67,069,364              |   |
|                                                                                                                                                    |   | $                  | 141,087,516 |                    | $      | 137,882,504 |   |

 

----

*From audited financialstatements.

See Notes to ConsolidatedFinancial Statements.

 

2

----

 

TODHUNTERINTERNATIONAL, INC.

CONSOLIDATED STATEMENTS OFINCOME

(Unaudited)

 
|                                          |   | **Nine Months Ended June 30,** |       | **Three Months Ended June 30,** |   |
|-----------------------------------------------|--------|--------------------------------|------------|---------------------------------|--------|
|                                          |   | **2003**                       |       | **2002**                        |   | **2003** |   | **2002** |   |
|                                          |   |                           |       |                            |   |   |   |   |   |
| Sales                                         |   | $                              | 88,646,677 |                            | $      | 97,693,371 |   | $ | 30,924,864 |   | $ | 34,377,199 |   |
| Less  excise taxes                            |   | 22,769,722                     |       | 24,948,483                      |   | 7,837,133 |   | 8,443,889 |   |
| Net  sales                                    |   | 65,876,955                     |       | 72,744,888                      |   | 23,087,731 |   | 25,933,310 |   |
|                                          |   |                           |       |                            |   |   |   |   |   |
| Cost  of goods sold                           |   | 44,423,842                     |       | 49,402,731                      |   | 15,022,995 |   | 17,289,143 |   |
| Gross  profit                                 |   | 21,453,113                     |       | 23,342,157                      |   | 8,064,736 |   | 8,644,167 |   |
|                                          |   |                           |       |                            |   |   |   |   |   |
| Selling,  general and administrative expenses |   | 17,392,479                     |       | 15,592,695                      |   | 6,305,257 |   | 5,778,418 |   |
| Operating  income                             |   | 4,060,634                      |       | 7,749,462                       |   | 1,759,479 |   | 2,865,749 |   |
|                                          |   |                           |       |                            |   |   |   |   |   |
| Other  income (expense):                      |   |                           |       |                            |   |   |   |   |   |
| Interest  income                              |   | 570,479                        |       | 480,619                         |   | 227,759 |   | 107,986 |   |
| Interest  expense                             |   | (2,583,583                     | )          | (2,070,276                      | )      | (985,150 | ) | (649,550 | ) |
| Equity  in income (loss) of equity investee   |   | 325,970                        |       | 136,035                         |   | 76,565 |   | (21,378 | ) |
| Other,  net                                   |   | (1,363,999                     | )          | 327,212                         |   | 94,622 |   | 81,406 |   |
|                                          |   | (3,051,133                     | )          | (1,126,410                      | )      | (586,204 | ) | (481,536 | ) |
|                                          |   |                           |       |                            |   |   |   |   |   |
| Income  before income taxes                   |   | 1,009,501                      |       | 6,623,052                       |   | 1,173,275 |   | 2,384,213 |   |
|                                          |   |                           |       |                            |   |   |   |   |   |
| Income  tax expense (benefit):                |   |                           |       |                            |   |   |   |   |   |
| Current                                       |   | (928,041                       | )          | 1,441,017                       |   | (883,657 | ) | 444,267 |   |
| Deferred                                      |   | 109,500                        |       | 211,500                         |   | 164,500 |   | 185,000 |   |
|                                          |   | (818,541                       | )          | 1,652,517                       |   | (719,157 | ) | 629,267 |   |
|                                          |   |                           |       |                            |   |   |   |   |   |
| Net  Income                                   |   | $                              | 1,828,042  |                            | $      | 4,970,535 |   | $ | 1,892,432 |   | $ | 1,754,946 |   |
|                                          |   |                           |       |                            |   |   |   |   |   |
| Earnings  per common share:                   |   |                           |       |                            |   |   |   |   |   |
| Basic                                         |   | $                              | 0.33       |                            | $      | 0.90 |   | $ | 0.34 |   | $ | 0.32 |   |
| Diluted                                       |   | $                              | 0.32       |                            | $      | 0.88 |   | $ | 0.34 |   | $ | 0.31 |   |
|                                          |   |                           |       |                            |   |   |   |   |   |
| Common  shares and equivalents outstanding:   |   |                           |       |                            |   |   |   |   |   |
| Basic                                         |   | 5,572,608                      |       | 5,518,675                       |   | 5,574,322 |   | 5,528,558 |   |
| Diluted                                       |   | 5,639,825                      |       | 5,631,189                       |   | 5,647,923 |   | 5,661,247 |   |

 

See Notes to Consolidated FinancialStatements.

 

3

----

 

TODHUNTERINTERNATIONAL, INC.

CONSOLIDATED STATEMENTS OFCASH FLOWS

(Unaudited)

 
|                                                                                |   | **Nine Months Ended June 30,** |       |
|-------------------------------------------------------------------------------------|--------|--------------------------------|------------|
|                                                                                |   | **2003**                       |       | **2002** |   |
|                                                                                |   |                           |       |   |   |
| CASH  FLOWS FROM OPERATING ACTIVITIES                                               |   |                           |       |   |   |
| Net  income                                                                         |   | $                              | 1,828,042  |   | $ | 4,970,535 |   |
| Adjustments  to reconcile net income to net cash provided  by operating activities: |   |                           |       |   |   |
| Depreciation                                                                        |   | 4,015,637                      |       | 3,902,721 |   |
| Amortization                                                                        |   | 30,150                         |       | 67,650 |   |
| (Gain)  loss on sale of property and equipment                                      |   | 65,583                         |       | (30,373 | ) |
| Equity  in income of equity investees                                               |   | (325,970                       | )          | (136,035 | ) |
| Deferred  income taxes                                                              |   | 109,500                        |       | 211,500 |   |
| Changes  in assets and liabilities:                                                 |   |                           |       |   |   |
| (Increase)  decrease in:                                                            |   |                           |       |   |   |
| Receivables                                                                         |   | (216,167                       | )          | (81,183 | ) |
| Inventories                                                                         |   | (4,588,038                     | )          | (709,611 | ) |
| Other  current assets                                                               |   | 589,848                        |       | (787,925 | ) |
| Increase  (decrease) in:                                                            |   |                           |       |   |   |
| Accounts  payable                                                                   |   | 3,897,756                      |       | (348,117 | ) |
| Accrued  expenses                                                                   |   | (181,611                       | )          | (314,764 | ) |
| Other  liabilities                                                                  |   | 421,878                        |       | 25,413 |   |
| Net  cash provided by operating activities                                          |   | 5,646,608                      |       | 6,769,811 |   |
|                                                                                |   |                           |       |   |   |
| CASH  FLOWS FROM INVESTING ACTIVITIES                                               |   |                           |       |   |   |
| Proceeds  from sale of property and equipment                                       |   | 60,152                         |       | 58,598 |   |
| Principal  payments received on notes receivable                                    |   | 92,046                         |       | 68,045 |   |
| Purchase  of property and equipment                                                 |   | (2,763,400                     | )          | (4,815,666 | ) |
| Disbursements  for notes receivable                                                 |   | (506,000                       | )          | (286,797 | ) |
| Purchase  of short-term investments                                                 |   | (103,603                       | )          | (2,918,664 | ) |
| Redemption  of short-term investments                                               |   | 98,000                         |       | — |   |
| Investments  in subsidiaries                                                        |   | 24,182                         |       | — |   |
| Increase  in other assets                                                           |   | 794,589                        |       | 190,600 |   |
| Net  cash used in investing activities                                              |   | $                              | (2,304,034 | ) | $ | (7,703,884 | ) |

 

4

----

 
|                                                  |   | **Nine Months Ended June 30,** |       |
|-------------------------------------------------------|--------|--------------------------------|------------|
|                                                  |   | **2003**                       |       | **2002** |   |
|                                                  |   |                           |       |   |   |
| CASH  FLOWS FROM FINANCING ACTIVITIES                 |   |                           |       |   |   |
| Net  borrowings on line of credit                     |   | $                              | 50,000     |   | $ | 1,900,000 |   |
| Issuance  of common stock                             |   | 32,500                         |       | 213,000 |   |
| Disbursements  for loan costs                         |   | —                         |       | (889,833 | ) |
| Principal  payments on long-term borrowings           |   | (3,166,803                     | )          | (3,124,247 | ) |
| Net  cash used in financing activities                |   | (3,084,303                     | )          | (1,901,080 | ) |
|                                                  |   |                           |       |   |   |
| Net  increase (decrease) in cash and cash equivalents |   | 258,271                        |       | (2,835,153 | ) |
|                                                  |   |                           |       |   |   |
| Cash  and cash equivalents:                           |   |                           |       |   |   |
| Beginning                                             |   | 13,946,736                     |       | 5,624,029 |   |
| Ending                                                |   | $                              | 14,205,007 |   | $ | 2,788,876 |   |
|                                                  |   |                           |       |   |   |
| SUPPLEMENTAL DISCLOSURES  OF CASH FLOW INFORMATION    |   |                           |       |   |   |
| Cash  payments (receipts) for:                        |   |                           |       |   |   |
| Interest                                              |   | $                              | 2,580,428  |   | $ | 2,059,474 |   |
| Income  taxes                                         |   | $                              | (595,939   | ) | $ | 1,271,488 |   |

 

See Notes toConsolidated Financial Statements.

 

5

----

 

TODHUNTER INTERNATIONAL, INC.

 

NOTES TO CONSOLIDATEDFINANCIAL STATEMENTS

(Unaudited)

 

Note 1.          Basis of Presentation

 

Theconsolidated financial statements included herein have been prepared by theCompany, without audit, pursuant to the rules and regulations of the Securitiesand Exchange Commission.  Certaininformation and footnote disclosures normally included in financial statementsprepared in accordance with accounting principles generally accepted in the UnitedStates of 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 Executive Officers (see Note 7), necessary fora fair presentation of the financial information for the periods indicated havebeen included.  For further informationregarding the Company’s accounting policies, refer to the consolidatedfinancial statements and related notes included in the Company’s Annual Reporton Form 10-K for the year ended September 30, 2002.

 

Aggregateamortization expenses were $30,150 and $10,050 for the nine and three monthsended June 30, 2003, respectively, and $67,650 and $22,550 for the nine andthree months ended June 30, 2002, respectively.

 

TheCompany applies Accounting Principles Board Opinion Number 25, *Accounting for Stock Issued to Employees*(“APB 25”) and related interpretations in accounting for options granted, whichrequires compensation expense for the Company’s options to be recognized onlyif the market price of the underlying stock exceeds the exercise price on thedate of grant.  Accordingly, the Companyhas not recognized compensation expense for its options granted after 1994.  Statement of Financial Accounting Standards(“SFAS”) No. 123, *Accounting for Stock-BasedCompensation*, issued in October 1995, requires pro forma disclosuresfor option grants made after December 31, 1994, when accounting for stock-basedcompensation plans in accordance with APB 25.

 

If theCompany elected to recognize compensation cost based on the fair value of theoptions granted at grant date as prescribed by SFAS No. 123, net income andearnings per common share would have been reduced to the pro forma amounts showbelow:

 
|                                                                                                                                               |   | **Nine Months Ended  June 30,** |      | **Three Months Ended  June 30,** |   |
|----------------------------------------------------------------------------------------------------------------------------------------------------|--------|---------------------------------|-----------|----------------------------------|--------|
|                                                                                                                                               |   | **2003**                        |      | **2002**                         |   | **2003** |   | **2002** |   |
|                                                                                                                                               |   |                            |      |                             |   |   |   |   |   |
| Net income, as reported                                                                                                                            |   | $                               | 1,828,042 |                             | $      | 4,970,535 |   | $ | 1,892,432 |   | $ | 1,754,946 |   |
| Deduct:  Total stock-based employee compensation expense determined  under fair value based method for all awards, net of related tax effects |   | 126,103                         |      | 126,103                          |   | 42,034 |   | 42,034 |   |
| Net income, pro forma                                                                                                                              |   | $                               | 1,701,939 |                             | $      | 4,844,432 |   | $ | 1,850,398 |   | $ | 1,712,912 |   |
| Earnings per common share, as  reported                                                                                                            |   |                            |      |                             |   |   |   |   |   |
| Basic                                                                                                                                              |   | 0.33                            |      | 0.90                             |   | 0.34 |   | 0.32 |   |
| Diluted                                                                                                                                            |   | 0.32                            |      | 0.88                             |   | 0.34 |   | 0.31 |   |
| Earnings per common share, pro  forma                                                                                                              |   |                            |      |                             |   |   |   |   |   |
| Basic                                                                                                                                              |   | 0.30                            |      | 0.87                             |   | 0.33 |   | 0.30 |   |
| Diluted                                                                                                                                            |   | 0.30                            |      | 0.86                             |   | 0.32 |   | 0.30 |   |

 

6

----

 

Note 2.          Inventories

 

The major components of inventoriesare:

 

|                        |   | **June 30, 2003** |       | **September 30, 2002** |   |
|-----------------------------|--------|-------------------|------------|------------------------|--------|
|                        |   | **(Unaudited)**   |       |                   |   |
|                        |   |              |       |                   |   |
| Finished  goods             |   | $                 | 17,241,342 |                   | $      | 16,470,057 |   |
| Work  in process            |   | 3,138,158         |       | 1,513,786              |   |
| Raw  materials and supplies |   | 12,063,463        |       | 9,871,082              |   |
|                        |   |              |       |                   |   |
|                        |   | $                 | 32,442,963 |                   | $      | 27,854,925 |   |

 

Note 3.          Financing Arrangements

 

Long-term debt consists ofthe following as of June 30, 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 June 30, 2003 was  5.32%.  Future minimum quarterly  principal installments of $1,000,000 through September 30, 2006 with any  remaining balance due September 30, 2006. |   | $          | 33,000,000 |   |
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|------------|------------|--------|
|                                                                                                                                                                                                                                                                                                                                                                                                                |   |       |       |
| 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 June 30, 2003 was 5.1%.  The revolving  lines of credit terminate in October 2004.                                                                      |   | 20,550,000 |       |
|                                                                                                                                                                                                                                                                                                                                                                                                                |   |       |       |
| Other                                                                                                                                                                                                                                                                                                                                                                                                               |   | 350,206    |       |
|                                                                                                                                                                                                                                                                                                                                                                                                                |   | 53,900,206 |       |
| Less current maturities                                                                                                                                                                                                                                                                                                                                                                                             |   | 4,000,000  |       |
|                                                                                                                                                                                                                                                                                                                                                                                                                |   | $          | 49,900,206 |   |

 

----

(i)             In October 2001, the Company entered into a $70million credit agreement, which consists of a $40 million term loan and a $30million revolving loan facility.  Thecredit agreement is collateralized principally by all assets located in theUnited States of America.  The Companyis restricted from paying dividends to stockholders.  Also, the Company is required to maintain unencumbered cash ormarketable securities of $4 million at the end of each fiscal quarter and tomaintain certain financial covenants.

 

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

 

7

----

 

As of December 31, 2002 andMarch 31, 2003, the Company was not in compliance with the Funded Debt toEBITDA (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 the credit agreement prospectively toreset the levels of certain financial covenants 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.

 

Note 4.          Earnings Per Common Share

 

Basic earnings per commonshare are calculated by dividing net income by the average common sharesoutstanding.  On a diluted basis, sharesoutstanding are adjusted to assume the exercise of stock options.

 
|                                                                                                  |   | **Nine Months Ended  June 30,** |      | **Three Months Ended  June 30,** |   |
|-------------------------------------------------------------------------------------------------------|--------|---------------------------------|-----------|----------------------------------|--------|
|                                                                                                  |   | **2003**                        |      | **2002**                         |   | **2003** |   | **2002** |   |
|                                                                                                  |   |                            |      |                             |   |   |   |   |   |
| Net income                                                                                            |   | $                               | 1,828,042 |                             | $      | 4,970,535 |   | $ | 1,892,432 |   | $ | 1,754,946 |   |
| Determination  of shares:                                                                             |   |                            |      |                             |   |   |   |   |   |
| Weighted average number of common shares outstanding                                                  |   | 5,572,608                       |      | 5,518,675                        |   | 5,574,322 |   | 5,528,558 |   |
| Shares  issuable on exercise of stock options, net of shares assumed to be purchased  out of proceeds |   | 67,217                          |      | 112,514                          |   | 73,601 |   | 132,689 |   |
| Average  common shares outstanding for diluted earnings per share computation                         |   | 5,639,825                       |      | 5,631,189                        |   | 5,647,923 |   | 5,661,247 |   |
|                                                                                                  |   |                            |      |                             |   |   |   |   |   |
| Earnings per common share:                                                                            |   |                            |      |                             |   |   |   |   |   |
| Basic                                                                                                 |   | $                               | 0.33      |                             | $      | 0.90 |   | $ | 0.34 |   | $ | 0.32 |   |
| Diluted                                                                                               |   | $                               | 0.32      |                             | $      | 0.88 |   | $ | 0.34 |   | $ | 0.31 |   |

 

The Company’s Virgin Islands subsidiary, through the EconomicDevelopment Commission of the Government of the Virgin Islands of the UnitedStates, has received a 90% exemption from income taxes on operatingincome.  This exemption is effectivethrough September 2020.  The per shareeffect of this exemption on earnings (on a diluted basis) was to increaseearnings per share by $0.15 and $0.06 for the nine and three months ended June30, 2003, respectively, and $0.12 and $0.04 for the nine and three months endedJune 30, 2002, respectively.

 

8

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Note 5.          Segment and Geographical Information

 

TheCompany operates primarily in the beverage alcohol industry in the UnitedStates.  The Company reports itsoperating results in four segments:

 

Bulk Alcohol Products (citrus brandy, citrus spirits, rum,cane spirits, fortified citrus wine, purchased distilled products andbyproducts)

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

BottlingOperations (contract bottling services and proprietary and private labelproducts)

Vinegarand Cooking Wine (bulk vinegar, bulk cooking wine, vinegar stock andproprietary and private label case goods)

 

Theaccounting policies of the reportable segments are the same as those referredto in Note 1 to the consolidated financial statements.  The Company evaluates the performance of itsoperating segments based on income before income taxes, equity in income orloss of equity investees, interest income and interest expense. Materialintersegment sales and transfers have been eliminated.

 

9

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Summarizedfinancial information concerning the Company’s reportable segments is shown inthe following table.

 

Netsales, operating income (loss), depreciation and amortization and capitalexpenditures for the Company’s reportable segments for the nine and threemonths ended June 30, 2003 and 2002, and identifiable assets as ofJune 30, 2003 and 2002, were as follows:

 
|                               |   | **Nine Months Ended  June 30,** |    | **Three Months Ended  June 30,** |   |
|------------------------------------|--------|---------------------------------|---------|----------------------------------|--------|
|                               |   | **2003**                        |    | **2002**                         |   | **2003** |   | **2002** |   |
|                               |   | **(in thousands)**              |    | **(in thousands)**               |   |
| **Net Sales**                      |   |                            |    |                             |   |   |   |   |   |
| Bulk Alcohol Products              |   | $                               | 26,276  |                             | $      | 26,911 |   | $ | 8,749 |   | $ | 9,219 |   |
| Premium Branded Spirits            |   | 13,521                          |    | 15,134                           |   | 4,796 |   | 6,702 |   |
| Bottling Operations                |   | 10,953                          |    | 14,923                           |   | 4,542 |   | 4,718 |   |
| Vinegar and Cooking Wine           |   | 15,127                          |    | 15,777                           |   | 5,001 |   | 5,294 |   |
|                               |   | $                               | 65,877  |                             | $      | 72,745 |   | $ | 23,088 |   | $ | 25,933 |   |
|                               |   |                            |    |                             |   |   |   |   |   |
| **Operating Income  (Loss)**       |   |                            |    |                             |   |   |   |   |   |
| Bulk Alcohol Products              |   | $                               | 8,673   |                             | $      | 8,235 |   | $ | 2,900 |   | $ | 2,835 |   |
| Premium Branded Spirits            |   | (1,290                          | )       | (230                             | )      | (544 | ) | 312 |   |
| Bottling Operations                |   | (1,450                          | )       | 973                              |   | 287 |   | (35 | ) |
| Vinegar and Cooking Wine           |   | 2,947                           |    | 3,306                            |   | 895 |   | 1,203 |   |
| Corporate Operations and Other     |   | (4,819                          | )       | (4,535                           | )      | (1,778 | ) | (1,450 | ) |
|                               |   | $                               | 4,061   |                             | $      | 7,749 |   | $ | 1,760 |   | $ | 2,865 |   |
|                               |   |                            |    |                             |   |   |   |   |   |
| **Depreciation and  Amortization** |   |                            |    |                             |   |   |   |   |   |
| Bulk Alcohol Products              |   | $                               | 2,424   |                             | $      | 2,226 |   | $ | 815 |   | $ | 765 |   |
| Premium Branded Spirits            |   | 72                              |    | 104                              |   | 22 |   | 33 |   |
| Bottling Operations                |   | 1,099                           |    | 1,193                            |   | 401 |   | 381 |   |
| Vinegar and Cooking Wine           |   | 362                             |    | 352                              |   | 120 |   | 118 |   |
| Corporate Operations and Other     |   | 89                              |    | 95                               |   | 30 |   | 31 |   |
|                               |   | $                               | 4,046   |                             | $      | 3,970 |   | $ | 1,388 |   | $ | 1,328 |   |
|                               |   |                            |    |                             |   |   |   |   |   |
| **Capital  Expenditures**          |   |                            |    |                             |   |   |   |   |   |
| Bulk Alcohol Products              |   | $                               | 1,370   |                             | $      | 3,757 |   | $ | 298 |   | $ | 1,066 |   |
| Premium Branded Spirits            |   | 71                              |    | 63                               |   | 55 |   | 4 |   |
| Bottling Operations                |   | 1,178                           |    | 687                              |   | 171 |   | 344 |   |
| Vinegar and Cooking Wine           |   | 68                              |    | 193                              |   | 34 |   | 115 |   |
| Corporate Operations and Other     |   | 76                              |    | 116                              |   | 65 |   | — |   |
|                               |   | $                               | 2,763   |                             | $      | 4,816 |   | $ | 623 |   | $ | 1,529 |   |
|                               |   |                            |    |                             |   |   |   |   |   |
| **Identifiable  Assets**           |   |                            |    |                             |   |   |   |   |   |
| Bulk Alcohol Products              |   | $                               | 76,132  |                             | $      | 71,355 |   |   |   |   |   |
| Premium Branded Spirits            |   | 7,673                           |    | 8,153                            |   |   |   |   |   |
| Bottling Operations                |   | 25,150                          |    | 25,447                           |   |   |   |   |   |
| Vinegar and Cooking Wine           |   | 19,753                          |    | 20,167                           |   |   |   |   |   |
| Corporate Operations and Other     |   | 12,380                          |    | 12,047                           |   |   |   |   |   |
|                               |   | $                               | 141,088 |                             | $      | 137,169 |   |   |   |   |   |

 

10

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Salesand operating income for the nine and three months ended June 30, 2003 and 2002and identifiable assets as of June 30, 2003 and 2002, classified by geographicarea, were as follows:

 
|                   |   | **United States**  |   | **U. S. Virgin****Islands  andthe Bahamas** |   | **Consolidated** |   |
|------------------------|--------|--------------------|--------|---------------------------------------------|--------|------------------|--------|
|                   |   | **(in thousands)** |   |
| **Nine Months Ended**  |   |               |   |                                        |   |             |   |
|                   |   |               |   |                                        |   |             |   |
| June 30, 2003:         |   |               |   |                                        |   |             |   |
| Net sales              |   | $                  | 57,561 |                                        | $      | 8,316            |   | $ | 65,877 |   |
| Operating income       |   | 1,603              |   | 2,458                                       |   | 4,061            |   |
| Identifiable assets    |   | 96,023             |   | 45,065                                      |   | 141,088          |   |
|                   |   |               |   |                                        |   |             |   |
| June 30, 2002:         |   |               |   |                                        |   |             |   |
| Net sales              |   | 64,991             |   | 7,754                                       |   | 72,745           |   |
| Operating income       |   | 5,752              |   | 1,997                                       |   | 7,749            |   |
| Identifiable assets    |   | 95,563             |   | 41,606                                      |   | 137,169          |   |
|                   |   |               |   |                                        |   |             |   |
| **Three Months Ended** |   |               |   |                                        |   |             |   |
|                   |   |               |   |                                        |   |             |   |
| June 30, 2003:         |   |               |   |                                        |   |             |   |
| Net sales              |   | 20,078             |   | 3,010                                       |   | 23,088           |   |
| Operating income       |   | 615                |   | 1,145                                       |   | 1,760            |   |
|                   |   |               |   |                                        |   |             |   |
| June 30, 2002:         |   |               |   |                                        |   |             |   |
| Net sales              |   | 22,947             |   | 2,986                                       |   | 25,933           |   |
| Operating income       |   | 2,042              |   | 823                                         |   | 2,865            |   |
|                        |        |                    |        |                                             |        |                  |        |  |  |  |

 

Includedin net sales for the United States are export sales, primarily to Europe,Canada and the Caribbean, totaling approximately $6,203,000 and $2,506,000 forthe nine and three months ended June 30, 2003, respectively, and $7,948,000 and$2,837,000 for the nine and three months ended June 30, 2002, respectively.

 

Note 6.          Comprehensive income

 

Comprehensiveincome is the total of net income and other changes in equity. Totalcomprehensive income for the nine and three months ended June 30, 2003 and 2002was as follows:

 
|                                                      |   | **Nine Months Ended  June 30,** |   | **Three Months Ended  June 30,** |   |
|-----------------------------------------------------------|--------|---------------------------------|--------|----------------------------------|--------|
|                                                      |   | **2003**                        |   | **2002**                         |   | **2003** |   | **2002** |   |
|                                                      |   | **(in thousands)**              |   | **(in thousands)**               |   |
|                                                      |   |                            |   |                             |   |   |   |   |   |
| Net income                                                |   | $                               | 1,828  |                             | $      | 4,970 |   | $ | 1,892 |   | $ | 1,755 |   |
| Other comprehensive income,  interest rate cap adjustment |   | —                          |   | 63                               |   | — |   | — |   |
|                                                      |   | $                               | 1,828  |                             | $      | 5,033 |   | $ | 1,892 |   | $ | 1,755 |   |

 

11

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Note 7.          Retirement of Executive Officers

 

OnNovember 26, 2002, the Company announced the retirement and resignation of A.Kenneth Pincourt, Jr., its Founder, Chairman and Chief Executive Officer.  The Company has entered into a retirementagreement with Mr. Pincourt, setting forth the terms of his retirement andresignation.  The retirement agreementreplaces Mr. Pincourt’s previous employment agreement. Under the retirementagreement, the Company elected to accelerate retirement benefits under itsdeferred compensation program and to continue to pay compensation and providerelated benefits through July 15, 2004, the remaining term of Mr. Pincourt’sprevious employment 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.

 

Thefollowing table summarizes the 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 |   |

 

On May22, 2003, the Company announced the retirement of Troy Edwards, its ChiefFinancial Officer, Secretary, Treasurer and Controller.  The Company recorded a charge for theretirement of Mr. Edwards of $207,683 during the third quarter of fiscal 2003.  The effect of this charge was included inother expense in the Company’s consolidated statement of income.

 

Note8.  Income Taxes

 

As ofJune 30, 2003, the Company had a tax loss from U.S. operations of $2.5 million,and the Company currently estimates that its tax loss from U.S. operations throughSeptember 30, 2003 will be $3.0 million. The net operating loss will be carried back to prior tax years resultingin a refund of approximately $0.9 million. As of June 30, 2003, the estimated refund has been recorded as an incometax benefit in the Company’s consolidated statement of income and as areceivable included in other current assets on the Company’s consolidatedbalance sheet.

 

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**Item 2.****          ****Management’s Discussion and Analysisof Financial Condition and Results of Operations**

 

**Forward-Looking Statements**

 

Management’s Discussion and Analysis contains“Forward-Looking Statements,” as defined in section 27a of the Securities Actof 1933, as amended, and Section 21e of the Securities Exchange Act of 1934, asamended.  Forward-Looking Statements arestatements other than historical information or statements of current conditionand relate to future events or the future financial performance of the Company.  Some Forward-Looking Statements may be identifiedby use of such terms 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 following discussion and analysis summarizes thesignificant factors affecting (i) consolidated results of operations of theCompany for the nine months ended June 30, 2003 compared to the nine monthsended June 30, 2002, (ii) consolidated results of operations of the Company forthe three months ended June 30, 2003 compared to the three months ended June30, 2002, and (iii) financial liquidity and capital resources.  This discussion and analysis should be readin conjunction with the Company’s consolidated financial statements and notesthereto included herein.  Certainamounts presented in this Item 2 have been rounded to the nearest thousand orhundred thousand, as applicable, but the percentages calculated are based onactual amounts without rounding.

 

The Company operates primarily in the beverage alcoholindustry in the United States.  TheCompany is a leading producer and supplier of brandy, rum, wine and spirits toother beverage alcohol manufacturers; produces, imports and markets premiumbranded spirits; bottles beverage alcohol and other beverages on a contractbasis and under its own labels; and produces vinegar and cooking wine.  The Company reports its operating results infour segments:  Bulk Alcohol Products(citrus brandy, citrus spirits, rum, cane spirits, fortified citrus wine,purchased distilled products and byproducts); Premium Branded Spirits(primarily Cruzan Estate Rums and Cruzan Flavored Rums); Bottling Operations(contract bottling services and proprietary and private label products); andVinegar and Cooking Wine (bulk vinegar, bulk cooking wine, vinegar stock and proprietaryand private label case goods).

 

Information regarding the net sales, operating income andtotal assets of each of the Company’s business segments and informationregarding geographic areas is set forth in Note 5 to the consolidated financialstatements.

 

The Company’s net sales and gross margins (gross profit as apercentage of net sales) vary depending on the mix of business among theCompany’s products.  Historically, grossmargins have been highest in bulk alcohol products and premium branded spiritsand lower in bottling operations and vinegar and cooking wine operations.

 

The Company has a limited number of customers, and thesecustomers often purchase bulk alcohol products in significant quantities orplace significant orders for contract bottling services, distilled spirits,vinegar and cooking wine.  Accordingly,the size and timing of purchase orders and product shipments can causeoperating results to fluctuate significantly from quarter to quarter.  Additionally, some Company products generatehigher profit margins than others, and changes in the Company’s product mix cancause gross margins to fluctuate. Certain aspects of the Company’s business are seasonal, with increaseddemand for the Company’s contract bottling services from April to October andincreased production of the Company’s bulk alcohol products from November toJune, corresponding to

 

13

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theFlorida citrus harvest.  As a result ofthese factors, the Company’s operating results may vary significantly fromquarter to quarter.

 

Net sales represent the Company’s gross sales less excisetaxes. Excise taxes are generally payable on products bottled by theCompany.  In addition, excise taxes arepayable on sales of industrial alcohol to certain customers.  Accordingly, excise taxes vary from periodto period depending upon the Company’s product and customer mix.

 

**Results ofOperations**

 

The following table sets forth statement of income items as apercentage of net sales.

 
|                                          |   | **Nine Months Ended****June 30****,** |   | **Three Months Ended****June 30****,** |   |
|-----------------------------------------------|--------|---------------------------------------|--------|----------------------------------------|--------|
|                                          |   | **2003**                              |   | **2002**                               |   | **2003** |   | **2002** |   |
| Net sales                                     |   | 100.0                                 | %      | 100.0                                  | %      | 100.0 | % | 100.0 | % |
| Cost  of goods sold                           |   | 67.4                                  |   | 67.9                                   |   | 65.1 |   | 66.7 |   |
| Gross  margin                                 |   | 32.6                                  |   | 32.1                                   |   | 34.9 |   | 33.3 |   |
| Selling,  general and administrative expenses |   | 26.4                                  |   | 21.4                                   |   | 27.3 |   | 22.3 |   |
| Operating  income                             |   | 6.2                                   |   | 10.7                                   |   | 7.6 |   | 11.0 |   |
| Interest  expense                             |   | (3.9                                  | )      | (2.8                                   | )      | (4.3 | ) | (2.5 | ) |
| Other  income (expense), net                  |   | (0.7                                  | )      | 1.2                                    |   | 1.8 |   | 0.7 |   |
| Income  before income taxes                   |   | 1.6                                   |   | 9.1                                    |   | 5.1 |   | 9.2 |   |
| Income  tax (expense) benefit                 |   | 1.2                                   |   | (2.3                                   | )      | 3.1 |   | (2.4 | ) |
| Net  income                                   |   | 2.8                                   | %      | 6.8                                    | %      | 8.2 | % | 6.8 | % |

 

The following table provides information on net sales ofcertain Company products.

 
|                      |   | **Nine Months Ended  June 30,** |   | **Three Months Ended  June 30,** |   |
|---------------------------|--------|---------------------------------|--------|----------------------------------|--------|
|                      |   | **2003**                        |   | **2002**                         |   | **% Change** |   | **2003** |   | **2002** |   | **% Change** |   |
|                      |   | **(in thousands)**              |   |                             |   | **(in thousands)** |   |   |   |
|                      |   |                            |   |                             |   |   |   |   |   |   |   |   |   |
| Bulk Alcohol Products     |   | $                               | 26,276 |                             | $      | 26,911 |   | (2.4 | ) | $ | 8,749 |   | $ | 9,219 |   | (5.1 | ) |
| Premium  Branded Spirits  |   | 13,521                          |   | 15,134                           |   | (10.7 | ) | 4,796 |   | 6,702 |   | (28.5 | ) |
| Bottling  Operations      |   | 10,953                          |   | 14,923                           |   | (26.6 | ) | 4,542 |   | 4,718 |   | (3.7 | ) |
| Vinegar  and Cooking Wine |   | 15,127                          |   | 15,777                           |   | (4.1 | ) | 5,001 |   | 5,294 |   | (5.5 | ) |
|                      |   | $                               | 65,877 |                             | $      | 72,745 |   | (9.4 | ) | $ | 23,088 |   | $ | 25,933 |   | (11.0 | ) |

 

14

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The following table provides unit sales volume data forcertain Company products.

 
|                                 |   | **Nine Months Ended  June 30,** |   |     |   | **Three Months Ended  June 30,** |   |     |   |
|--------------------------------------|--------|---------------------------------|--------|----------|--------|----------------------------------|--------|----------|--------|
|                                 |   | **2003**                        |   | **2002** |   | **% Change**                     |   | **2003** |   | **2002** |   | **% Change** |   |
|                                 |   | **(in thousands)**              |   |     |   | **(in thousands)**               |   |     |   |
|                                 |   |                            |   |     |   |                             |   |     |   |   |   |   |   |
| Bulk alcohol products:               |   |                            |   |     |   |                             |   |     |   |   |   |   |   |
| Distilled products, in proof gallons |   |                            |   |     |   |                             |   |     |   |   |   |   |   |
| Citrus Brandy                        |   | 1,131                           |   | 928      |   | 21.8                             |   | 260      |   | 268 |   | (3.0 | ) |
| Citrus Spirits                       |   | 238                             |   | 430      |   | (44.6                            | )      | 55       |   | 156 |   | (64.5 | ) |
| Rum                                  |   | 3,323                           |   | 3,238    |   | 2.6                              |   | 1,176    |   | 1,265 |   | (7.0 | ) |
| Cane Spirits                         |   | 389                             |   | 485      |   | (19.8                            | )      | 144      |   | 146 |   | (0.9 | ) |
| Fortified citrus wine, in gallons    |   | 7,559                           |   | 7,613    |   | (0.7                             | )      | 2,531    |   | 2,506 |   | 1.0 |   |
| Premium branded spirits, in cases    |   | 360                             |   | 414      |   | (12.9                            | )      | 133      |   | 233 |   | (42.6 | ) |
| Bottling operations, in cases        |   | 2,876                           |   | 4,540    |   | (36.7                            | )      | 1,435    |   | 1,360 |   | 5.5 |   |
| Vinegar                              |   |                            |   |     |   |                             |   |     |   |   |   |   |   |
| Bulk, in 100 grain gallons           |   | 4,290                           |   | 4,112    |   | 4.3                              |   | 1,588    |   | 1,294 |   | 22.7 |   |
| Cases                                |   | 396                             |   | 518      |   | (23.7                            | )      | 125      |   | 160 |   | (22.0 | ) |
| Drums, in 100 grain gallons          |   | 1,162                           |   | 1,302    |   | (10.8                            | )      | 389      |   | 527 |   | (26.3 | ) |
| Cooking Wine                         |   |                            |   |     |   |                             |   |     |   |   |   |   |   |
| Bulk, in gallons                     |   | 3,226                           |   | 3,350    |   | (3.7                             | )      | 1,048    |   | 1,273 |   | (17.7 | ) |
| Cases                                |   | 476                             |   | 519      |   | (8.3                             | )      | 126      |   | 141 |   | (11.3 | ) |

 

**Nine months ended June 30, 2003 compared tonine months ended June 30, 2002**.  Unlessotherwise noted, references to 2003 represent the nine-month period ended June30, 2003 and references to 2002 represent the nine-month period ended June 30,2002.  In 2002, net sales and cost ofgoods sold of premium branded spirits included excise taxes of approximately $2.0million, representing excise taxes included in cases sold from warehouseslocated outside of the Company’s Florida bonded warehouse facilities. BeginningOctober 1, 2002, the Company no longer includes excise taxes in net sales andcost of goods sold of premium branded spirits case sales from locations outsideof the Company’s Florida bonded warehouse facilities.  Net sales and cost of sales in 2002 have been reclassified toconform to the 2003 presentation.

 

*Net Sales.*Net sales were $65.9 million in2003, a decrease of 9.4% from net sales of $72.7 million in 2002.

 

Netsales of bulk alcohol products were $26.3 million in 2003, a decrease of 2.4%from net sales of $26.9 million in 2002. The decrease resulted primarily from decreased shipments of citrusspirits, cane spirits and fortified citrus wine.  Due to a decrease in orders from certain customers, managementbelieves that its fortified wine volume in fiscal 2003 may decline byapproximately 5% from fiscal 2002.  In2002, the Company had sales of citrus and cane spirits to new customers thathad difficulty sourcing bulk alcohol from their regular suppliers.  These sales are not expected to reoccur in2003.

 

Net sales of premium branded spirits were $13.5 million in2003, a decrease of 10.7% from net sales of $15.1 million in 2002.  In 2002, net sales of premium brandedspirits included $1.9 million of bulk tequila sales, and $1.2 million of newCruzan ready-to-drink products. Bulk tequila sales represent the liquidation ofinventory that was held to produce Porfidio tequila. During the third quarterof 2002, the Company introduced a new line of Cruzan products in the newready-to-drink category and sold approximately 101,000 cases of this newproduct through June 30, 2002.  Due toincreased competition and management’s expectation of limited growth potentialwithin the ready-to-drink product category, the Company made a strategicdecision to exit this category and concentrate on the growing segment of itspremium branded spirits business, Cruzan Rums and Cruzan Flavored Rums.  Excluding bulk tequila and new Cruzanready-to-drink product sales, net sales of premium branded spirits were $13.5million in 2003, an increase of 12.4% from net sales of $12.0 million in2002.  Sales of the Company’s CruzanEstate Rums

 

15

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andCruzan Flavored Rums, collectively, increased 9.6% and Cruzan Flavored Rumsalone increased 11.2% in 2003 compared to 2002.

 

Net sales of the Company’s bottling operations were $11.0million in 2003, a decrease of 26.6% from net sales of $14.9 million in2002.  The unit volume of the Company’sbottling operations decreased 36.7% in 2003 as a result of the decision of alarge bottling customer to shift production from the Company to its own bottlingfacilities.  During fiscal 2002, thiscustomer represented 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 volume may decline byapproximately 33% in fiscal 2003. During the third quarter of fiscal 2003, management implemented a planto consolidate the Company’s bottling operations to increase efficiencies andreduce overhead in the future. Management expects to realize cost savings from this plan beginning inthe first quarter of fiscal 2004, with these cost savings increasing in thesecond, third and fourth quarters of fiscal 2004.

 

Net sales of vinegar and cooking wine were $15.1 million in2003, a decrease of 4.1% from net sales of $15.8 million in 2002.  Management believes that the decrease in netsales is due to increased competition and the timing of customer orders.

 

*Gross Profit.* Gross profit was $21.5 million in2003, a decrease of 8.1% from gross profit of $23.3 million in 2002.  Gross margin increased to 32.6% in 2003 from32.1% in 2002.

 

*Selling, General and AdministrativeExpenses. *Selling, general and administrativeexpenses were $17.4 million in 2003, an increase of 11.5% from $15.6 million in2002.  The increase was primarilyattributable to increased administrative, marketing and advertising expensesrelated to the Company’s premium branded spirits business.  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 operating income (loss) by reportablesegment of the Company for 2003 and 2002.

 
|                           |   | **Nine Months Ended  June 30,** |   |     |   |
|--------------------------------|--------|---------------------------------|--------|----------|--------|
|                           |   | **2003**                        |   | **2002** |   | **%  Change** |   |
|                           |   | **(In thousands)**              |   |     |   |
| Bulk Alcohol Products          |   | $                               | 8,673  |     | $      | 8,235 |   | 5.3 |   |
| Premium Branded Spirits        |   | (1,290                          | )      | (230     | )      | — |   |
| Bottling Operations            |   | (1,450                          | )      | 973      |   | — |   |
| Vinegar and Cooking Wine       |   | 2,947                           |   | 3,306    |   | (10.8 | ) |
| Corporate Operations and Other |   | (4,819                          | )      | (4,535   | )      | — |   |
|                           |   | $                               | 4,061  |     | $      | 7,749 |   | (47.6 | ) |

 

As a result of the above factors, operating income was $4.1million in 2003, a decrease of 47.6% from operating income of $7.7 million in2002.

 

The Company’s premium branded spirits segment experiencedoperating losses of $1.3 million in 2003 and $0.2 million in 2002.  The operating losses reflected the Company’scontinuing efforts to increase market share by reinvesting segment gross profitsin selling and marketing expenses. Included in the operating loss of premium branded spirits in 2002 wasprofit of $0.5 million related to bulk tequila sales.  Excluding bulk tequila sales, operating loss of premium brandedspirits would have been $0.7 million in 2002.

 

The Company’s bottling operations segment reported anoperating loss of $1.5 million in 2003 compared to operating income of $1.0million in 2002. The operating loss reflected the decision of a large bottlingcustomer to shift production from the Company to its own bottlingfacilities.  This customer representedapproximately 48% of the Company’s annual bottling operations unit volume forfiscal year 2002.  Management believesthat this loss in volume will be partially offset by increased business withnew and existing customers and that total bottling operations volume maydecline by approximately 33% in fiscal 2003. During the third quarter of fiscal 2003, management implemented a planto consolidate the Company’s bottling operations to increase efficiencies andreduce overhead in the future. Management expects to realize cost savings from this plan beginning inthe first quarter of fiscal 2004, with these cost savings increasing in thesecond, third and fourth quarters of fiscal 2004.

 

16

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*Interest Expense.*Interest expense was $2.6 million in2003 and $2.1 million in 2002.  Theincrease in interest expense was due to higher interest rates during 2003 ascompared to 2002 and the payment of $296,250 in waiver fees during 2003 asdescribed in Note 3 to the consolidated financial statements.  The Company’s interest rate under theterm-loan and revolving credit agreement was increased 50 basis pointseffective January 1, 2003 and an additional 50 basis points effective May 14,2003.

 

*Other Expense*. On November 26, 2002, the Company announced the retirement andresignation of A. Kenneth Pincourt, Jr., its Founder, Chairman and ChiefExecutive Officer.  The Company has enteredinto a retirement agreement with Mr. Pincourt, setting forth the terms of hisretirement and resignation.  Theretirement agreement replaces Mr. Pincourt’s previous employment agreement.Under the retirement agreement, the Company elected to accelerate retirementbenefits under its deferred compensation program and to continue to paycompensation and provide related benefits through July 15, 2004, the remainingterm of Mr. Pincourt’s previous employment contract.

 

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

 

The following table summarizes the charge made during thefirst 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 |   |

 

On May 22, 2003, the Company announced the retirement of TroyEdwards, its Chief Financial Officer, Secretary, Treasurer and Controller.  The Company recorded a charge for theretirement of Mr. Edwards of $207,683 during the third quarter of fiscal 2003.  The effect of this charge was included inother expense in the Company’s consolidated statement of income.

 

*Income Tax Expense.*The Company’s effective income taxrate was 24.9% in 2002.  The low taxrate was attributable to a 90% exemption of the Company’s Virgin Islandssubsidiary from U.S. Virgin Islands income taxes.  The exemption is effective through September 2020.  In addition, the Company benefited from theextraterritorial income exclusion in 2003 and 2002.  During 2003, the Company incurred operating losses from its U.S.operations and recorded an income tax benefit of $0.9 million.

 

**Three months ended June 30, 2003 compared to three monthsended June 30, 2002**.  Unless otherwise noted, references to 2003represent the three-month period ended June 30, 2003 and references to 2002represent the three-month period ended June 30, 2002.  In 2002, net sales and cost of goods sold of premium brandedspirits included excise taxes of approximately $0.9 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 conform tothe 2003 presentation.

 

17

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*Net Sales.*Net sales were $23.1 million in2003, a decrease of 11.0% from net sales of $25.9 million in 2002.

 

Netsales of bulk alcohol products were $8.7 million in 2003, a decrease of 5.1%from net sales of $9.2 million in 2002. Management believes that the decrease in bulk alcohol shipments isprimarily due to the timing of customer orders.  However, in 2002, the Company had sales of citrus and canespirits to new customers that had difficulty sourcing bulk alcohol from theirregular suppliers.  These sales are notexpected to reoccur in 2003.

 

Net sales of premium branded spirits were $4.8 million in2003, a decrease of 28.5% from net sales of $6.7 million in 2002.  In 2002, net sales of premium brandedspirits included $0.7 million in sales of Antiqueno Aguardiente compared to$0.2 million in sales of Antiqueno Aguardiente in 2003, and $1.2 million of newCruzan ready-to-drink products.  Duringthe third quarter of 2002, the Company entered into a settlement agreement withthe producer of Antiqueno Aguardiente and was reappointed exclusive U.S.importer of Antiqueno Aguardiente for a four-year period.  The Company resumed sales of AntiquenoAguardiente in June 2002 after not having received a product shipment sinceJune 2001, and therefore, the replenishment of inventories by customersresulted in a one time increase in these sales.  During the third quarter of 2002, the Company introduced a newline of Cruzan products in the new ready-to-drink category and soldapproximately 101,000 cases of this new product through June 30, 2002.  Due to increased competition andmanagement’s expectation of limited growth potential within the ready-to-drinkproduct category, the Company made a strategic decision to exit this categoryand concentrate on the growing segment of its premium branded spirits business,Cruzan Rums and Cruzan Flavored Rums. Excluding pipeline sales of Antiqueno Aguardiente and new Cruzanready-to-drink product sales, net sales of premium branded spirits were $4.8million in 2003, a decrease of 4.4% from net sales of $5.0 million in2002.  Sales of the Company’s CruzanEstate Rums and Cruzan Flavored Rums, collectively, decreased 10.9% and CruzanFlavored Rums alone decreased 12.2% in 2003 compared to 2002.  During the quarter ended June 30, 2003,Bacardi, Ltd., the world’s largest rum supplier, entered the flavored rumcategory with the introduction of four flavored rum products.  There were also product introductions in theflavored rum category by at least three other rum producers.  This increase in competition in the flavoredrum category, along with price decreases by the Company’s major competitors inthe rum segment, affected the Company’s retail shelf space allocation andproduct sales.  However, distributor'ssales of Cruzan Rum products to retailers continue to be strong.  Therefore, management believes that theeffect of these new product introductions and price promotions will beshort-term and that over the long-term the Company’s Cruzan Rum brands willreturn to strong growth in this growing product segment.

 

Net sales of the Company’s bottling operations were $4.5million in 2003, a decrease of 3.7% from net sales of $4.7 million in2002.  The unit volume of the Company’sbottling operations increased 5.5% in 2003 as a result of increased businesswith new and existing customers. However, the average price per case of product sold decreased.  During the third quarter of fiscal 2003,management implemented a plan to consolidate the Company’s bottling operationsto increase efficiencies and reduce overhead in the future.  Management expects to realize cost savingsfrom this plan beginning in the first quarter of fiscal 2004, with these costsavings increasing in the second, third and fourth quarters of fiscal 2004.

 

Net sales of vinegar and cooking wine were $5.0 million in2003, a decrease of 5.5% from net sales of $5.3 million in 2002.  Management believes that the decrease in netsales is due to increased competition and the timing of customer orders.

 

*Gross Profit.* Gross profit was $8.1 million in2003, a decrease of 6.7% from gross profit of $8.6 million in 2002.  Gross margin increased to 34.9% in 2003 from33.3% in 2002.  The increase in grossmargin was primarily attributable to a favorable change in product mix.

 

*Selling, General and AdministrativeExpenses. *Selling, general and administrativeexpenses were $6.3 million in 2003, an increase of 9.1% from $5.8 million in2002.  The increase was primarilyattributable to increased administrative, marketing and advertising expensesrelated to the Company’s premium branded spirits business.  The Company has increased its administrative,marketing and advertising expenses in its premium branded spirits business asit continues to place emphasis on this growing business segment.

 

*Operating Income.* The following table sets forth the operating income (loss) by reportablesegment of the Company for 2003 and 2002.

 

18

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|                           |   | **Three Months Ended  June 30,** |   |     |   |
|--------------------------------|--------|----------------------------------|--------|----------|--------|
|                           |   | **2003**                         |   | **2002** |   | **%  Change** |   |
|                           |   | **(In thousands)**               |   |     |   |
| Bulk Alcohol Products          |   | $                                | 2,900  |     | $      | 2,835 |   | 2.3 |   |
| Premium Branded Spirits        |   | (544                             | )      | 312      |   | — |   |
| Bottling Operations            |   | 287                              |   | (35      | )      | — |   |
| Vinegar and Cooking Wine       |   | 895                              |   | 1,203    |   | (25.6 | ) |
| Corporate Operations and Other |   | (1,778                           | )      | (1,450   | )      | — |   |
|                           |   | $                                | 1,760  |     | $      | 2,865 |   | (38.6 | ) |

 

As a result of the above factors, operating income was $1.8million in 2003, a decrease of 38.6% from operating income of $2.9 million in2002.

 

The Company’s bottling operations segment reported operatingincome of $0.3 million in 2003 compared to breaking even in 2002. The operatingloss reflected the decision of a large bottling customer to shift productionfrom the Company to its own bottling facilities.  This customer represented approximately 48% of the Company’sannual bottling operations unit volume for fiscal year 2002.  Management believes that this loss in volumewill be partially offset by increased business with new and existing customersand that total bottling operations volume may decline by approximately 33% infiscal 2003.  During the third quarterof fiscal 2003, management implemented a plan to consolidate the Company’s bottlingoperations to increase efficiencies and reduce overhead in the future.  Management expects to realize cost savingsfrom this plan beginning in the first quarter of fiscal 2004, with these costsavings increasing in the second, third and fourth quarters of fiscal 2004.

 

*Interest Expense.*Interest expense was $1.0 million in2003 and $0.6 million in 2002.  Theincrease in interest expense was due to higher interest rates during 2003 ascompared to 2002 and the payment of a $160,000 waiver fee during 2003 asdescribed in Note 3 to the consolidated financial statements.  The Company’s interest rate under theterm-loan and revolving credit agreement was increased 50 basis pointseffective January 1, 2003 and an additional 50 basis points effective May 14, 2003.

* *

*Income Tax Expense.*The Company’s effective income taxrate was 26.3% in 2002.  The low taxrate was attributable to a 90% exemption of the Company’s Virgin Islandssubsidiary from U.S. Virgin Islands income taxes.  The exemption is effective through September 2020.  In addition, the Company benefited from theextraterritorial income exclusion in 2003 and 2002.  During 2003, the Company incurred operating losses from its U.S.operations and recorded an income tax benefit of $0.9 million.

 

**Financial Liquidity and Capital Resources**

 

**General**

 

TheCompany’s principal use of cash in its operating activities is for purchasingraw materials to be used in its manufacturing operations, purchasing importedproducts for its 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

 

19

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financingactivities will provide adequate resources to satisfy its working capital,liquidity and anticipated capital expenditure requirements for both itsshort-term and long-term capital needs.

 

**Operating Activities**

 

Netcash provided by operating activities in 2003 was $5.6 million, which resultedfrom $5.7 million in net income adjusted for noncash items, and $0.1 millionrepresenting the net increase in operating assets and liabilities.

 

TheCompany currently has approximately $2.1 million of ready-to-drink finishedgoods inventory and related raw materials and supplies, the sales of which havenot yet met expectations.  The Companycontinues to sell this inventory in the ordinary course and during July enteredinto a barter agreement with a large media trading company for the trade of a portionof this inventory in exchange for media advertising and other tradecredits.  The Company believes that thevalue of the media advertising and other trade credits received is at leastequal to the book value of the inventory exchanged.

 

**Investing and Financing Activities**

 

Netcash used in investing activities in 2003 was $2.3 million, which resultedprimarily from $2.7 million of capital expenditures.

 

Netcash used in financing activities in 2003 was $3.1 million, which resultedprimarily from payments of $3.2 million of long-term debt.

 

TheCompany’s revolving credit facility provides for maximum borrowings of $30million.  Borrowings under this facilitywere $20.6 million at June 30, 2003 (see Note 3 to the consolidated financialstatements).

 

TheCompany’s bank debt was $53.6 million as of June 30, 2003, and its ratio oftotal debt to equity was 1.04 to 1.

 

Asof December 31, 2002 and March 31, 2003, the Company was not in compliance withthe Funded Debt to EBITDA (earnings before interest, taxes, depreciation andamortization) financial covenant under its credit agreement.  In addition, as of March 31, 2003 theCompany was not in compliance with its Interest Coverage and Fixed ChargeCoverage financial covenants.  OnFebruary 18, 2003, the Company received a waiver for the December 31, 2002covenant violation.  On May 14, 2003,the Company received a waiver of the March 31, 2003 covenant violations andamended the credit agreement prospectively 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.

 

TheCompany’s share of the undistributed earnings of the Bahamian and VirginIslands subsidiaries was approximately $7.5 million and $27.9 million,respectively, as of September 30, 2002. See Note 10 to the Company’s consolidated financial statements includedin the Company’s Annual Report on Form 10-K for the year ended September 30,2002 for additional information on income taxes related to these subsidiaries.

 

Basedon current plans and business conditions, management expects that its cash,cash equivalents, and short-term investments, together with any amountsgenerated from operations and available borrowings, will be sufficient to meetthe Company’s cash requirements for at least the next 12 months.

 

**Effects of Inflation and Changing Prices**

 

The Company’s results of operations and financial conditionhave not been significantly affected by inflation and changing prices.  The Company has been able, subject to normalcompetitive conditions, to pass along rising costs through increased sellingprices.

 

20

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**Critical Accounting Policies**

 

The Company’s significant accounting policies are more fullydescribed in Note 1 to the Company’s consolidated financial statements locatedin Item 8 of its Annual Report on Form 10-K. The preparation of financialstatements in conformity with accounting principles generally accepted in theUnited States of America requires management to make estimates and assumptionsthat affect the reported amounts of assets, liabilities, revenues, andexpenses, and the related disclosures of contingent assets and liabilities.Actual results could differ from those estimates under different assumptions orconditions. The Company believes that the following critical accounting policyis subject to estimates and judgments used in the preparation of itsconsolidated financial statements:

 

The Company has goodwill and intangible assets associatedwith business acquisitions. The Company reviews these assets for impairmentannually and whenever an event occurs or circumstances change that would morelikely than not reduce the fair value of these assets below their carryingvalue.  If the fair value of theseassets is less than their carrying value, then an impairment loss would berecognized equal to the excess of the carrying value over the fair value of theasset.

** **

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

 

The information required under this Item 3 is incorporatedherein by reference to the Company’s Annual Report on Form 10-K for the yearended September 30, 2002.

 

**Item 4.****          ****Controls and Procedures**

 

**Evaluation of Disclosure Controls and Procedures**

 

As of the end of the period covered by this report,management, including the Company’s Chief Executive Officer and Chief FinancialOfficer, carried out an evaluation of the effectiveness of the design andoperation of the Company’s disclosure controls and procedures (as defined inRules 13a-15(e) or 15d-15(e) under the Securities Exchange Act, asamended).  Based on this evaluation, theCompany’s Chief Executive Officer and Chief Financial Officer concluded thatthe disclosure controls and procedures are effective in timely alerting them tomaterial information required to be included in the Company’s periodic SECreports.  It should be noted that thedesign 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.

 

**Changes in Internal Controls**

 

In addition, management, including the Company’s ChiefExecutive Officer and Chief Financial Officer, reviewed the Company’s internalcontrols, and there have been no significant changes in the internal controlsduring the Company’s most recently completed fiscal quarter that couldsignificantly affect those controls subsequent to the date of their lastevaluation.

 

**PART II.  OTHER INFORMATION**

 

**Item 6.  Exhibits andReports 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) |

 

21

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| 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 (8) |
| 10.22(b) | Modification  of Credit Agreement, dated May 14, 2003, by and among Todhunter  International, Inc., SouthTrust Bank, acting as lender and Agent, Wachovia  Bank, N.A., National City Bank and SunTrust Bank (10)              |
| 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)                                                                           |
| 11.1     | Statement  of Computation of Per Share Earnings (9)                                                                                                                                                                           |
| 20.1     | Earnings  press release for the three-month and nine-month periods ended June 30, 2003  (10)                                                                                                                                  |
| 21.1     | Subsidiaries  of Todhunter International, Inc. (2)                                                                                                                                                                            |
| 31.1     | Certification  of Jay S. Maltby, Chairman, Chief Executive Officer and President, pursuant  to Rule 13a-14(a) of the Securities Exchange Act of 1934 (10)                                                                     |
| 31.2     | Certification  of Ezra Shashoua, Executive Vice President and Chief Financial Officer,  pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934 (10)                                                                |
| 32.1     | Certification  of Jay S. Maltby, Chairman, Chief Executive Officer and President, pursuant  to 18 U.S.C. Section 1350 (10)                                                                                                    |
| 32.2     | Certification  of Ezra Shashoua, Executive Vice President and Chief Financial Officer,  pursuant to 18 U.S.C. Section 1350 (10)                                                                                     |

 

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| (1)    |   | Incorporated  herein by reference to the Company’s Registration Statement on Form S-1  (File No.  33-50848).                                                                                                 |
|--------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |   |                                                                                                                                                                                                                        |
| (2)    |   | Incorporated  herein by reference to the Company’s Annual Report on Form 10-K for the  year ended September 30, 1995.                                                                                        |
|   |   |                                                                                                                                                                                                                        |
| (3)    |   | Incorporated  herein by reference to the Company’s Annual Report on Form 10-K for the year  ended September 30, 1997.                                                                                                  |
|   |   |                                                                                                                                                                                                                        |
| (4)    |   | Incorporated  herein by reference to the Company’s Annual Report on Form 10-K for the year  ended September 30, 1998.                                                                                                  |
|   |   |                                                                                                                                                                                                                        |
| (5)    |   | Incorporated  herein by reference to the Company’s Annual Report on Form 10-K for the year  ended September 30, 1999.                                                                                                  |
|   |   |                                                                                                                                                                                                                        |
| (6)    |   | Incorporated  herein by reference to the Company’s Annual Report on Form 10-K for the year  ended September 30, 2001.                                                                                                  |
|   |   |                                                                                                                                                                                                                        |
| (7)    |   | Incorporated  herein by reference to the Company’s Report on Form 8-K for November 26,  2002.                                                                                                                          |
|   |   |                                                                                                                                                                                                                        |
| (8)    |   | Incorporated  herein by reference to the Company’s Quarterly Report on Form 10-Q for the  quarter ended March 31, 2003.                                                                                                |
|   |   |                                                                                                                                                                                                                        |
| (9)    |   | Filed  herewith and incorporated herein by reference to Note 4 of notes to  consolidated financial statements, included in Item 1 of the Company’s  Quarterly Report on Form 10-Q for the quarter ended June 30, 2003. |
|   |   |                                                                                                                                                                                                                        |
| (10)   |   | Filed  herewith.                                                                                                                                                                                                            |

 

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| **(b)** |   | **Reports on Form 8-K**                                                                                |
|---------|--------|--------------------------------------------------------------------------------------------------------|
|    |   |                                                                                                   |
|    |   | During  the third quarter of fiscal 2003, the Company filed the following current  report on Form 8-K: |

 
| (1)    |   | Form  8-K dated May 15, 2003. This Form 8-K reported information under Item 9  (Regulation FD Disclosure).                |
|--------|--------|---------------------------------------------------------------------------------------------------------------------------|
|   |   |                                                                                                                      |
| (2)    |   | Form  8-K dated May 22, 2003. This Form 8-K reported information under Item 5  (Other Events and required FD Disclosure). |
|   |   |                                                                                                                      |

 

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**Signatures**

 

Pursuantto the 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:  August 14, 2003 | /s/  Jay S. Maltby                               |
|------------------------|-------------------------------------------------------|
|                   | Jay S.  Maltby                                        |
|                   | Chairman,  Chief Executive Officer and President      |
|                   |                                                  |
|                   |                                                  |
| Date:  August 14, 2003 | /s/  Ezra Shashoua                               |
|                   | Ezra  Shashoua                                        |
|                   | Executive  Vice President and Chief Financial Officer |

 

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