thst-ex991

Healdsburg, California (November 19, 2018) – Truett-Hurst, Inc. (NASDAQ: THST), which operates an innovative super-premium and ultra-premium wine sales, marketing and production company based in the acclaimed Dry Creek Valley of Sonoma County, California, reported results for the first quarter of fiscal year 2019 which ended on September 30, 2018.

For Q1 of fiscal year 2019, net sales increased $0.2 million or 13.3%, and gross profit margin increased from 52.1% to 68.6%. The increase in gross profit was primarily due to continued efforts to grow the channel through wine club and tasting room sales, as well as special offers presented via email to wine club members and others.

Operating expenses for the first quarter of fiscal year 2019 ended September 30, 2018 was $1.8 million compared to $1.4 million in the prior year. Sales and marketing expenses decreased by $0.2 million or 27.3% for the first quarter of fiscal year 2019 compared to the same period in the prior year. The dollar decrease for the first quarter of 2019 is due to lower hosted wine club events and lower freight and shipping costs. General and administrative expenses increased by $0.5 million for the first quarter of fiscal year 2019 compared to the same period in the prior year. The increase was primarily due to increases in personnel related costs and outside services and consulting expenses associated with compliance efforts associated with the sale of the wholesale business.

During the fourth quarter of fiscal year 2018, we determined to discontinue operations of our wholesale wine business (the “Wholesale Business”). The Company decided to sell all assets and liabilities directly related to those assets associated with the Wholesale Business due to the sustained losses incurred. Further, the Company determined that the discontinued operations represented a strategic shift that will have a major effect on the Company’s operations and financial results since it represented a complete exit from the wholesale business and, therefore, classified the disposal group as held for sale as of June 30, 2018. The results of discontinued operations are aggregated and separately presented in the consolidated statements of operations, net of income taxes. The assets and liabilities of the discontinued operations are presented separately under the captions “Assets of discontinued operations” and “Liabilities of discontinued operations,” respectively, within the Consolidated Balance Sheets at September 30, 2018 and June 30, 2018.

On August 13, 2018, the Company successfully executed an Asset Purchase Agreement with Precept Brands LLC, a Washington limited liability company, pursuant to which the Company agreed to sell the aforementioned assets comprising its Wholesale Business to Precept. The Company received aggregate consideration of approximately $18 million in cash and future royalty payments to acquire the wholesale business. After the estimated transaction-related costs and expenses of approximately $0.9 million, the Company used a portion of the remaining proceeds to repay secured and unsecured debt of $12 million. The Company also recorded a gain on sale of discontinued operations of approximately $2.6 million.

The Company will not be conducting an earnings call related to its results for the first quarter of fiscal year 2019 ended September 30, 2018.

Truett-Hurst, Inc. (NASDAQ: THST) is a holding company and its sole asset is the controlling equity interest in H.D.D. LLC, an innovative super-premium, ultra-premium and luxury wine sales, marketing and production company based in the acclaimed Dry Creek Valley of Sonoma County, California. Truett-Hurst, Inc. is headquartered in Healdsburg, California.

This press release for the first quarter of fiscal year 2019 ended September 30, 2018 contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Exchange Act of 1934, as amended, that are made as of the date of this press release based upon our current expectations. All statements, other than statements of historical fact, regarding our strategy, future operations, financial position, estimated revenue, projected costs, prospects, plans, opportunities, and objectives constitute “forward-looking statements.” The words “may,” “will,” “expect,” “intend,” “plan,” “anticipate,” “believe,” “estimate,” “potential” or “continue” and similar types of expressions identify such statements, although not all forward-looking statements contain these identifying words. Such forward-looking statements include expectations regarding revenue, income, and expenses for the periods after September 30, 2018. These forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause the actual results to differ materially from any future results, performance or achievements expressed or implied by such forward-looking statements. Important factors that could cause such differences include, but are not limited to, a reduction in the supply of grapes and bulk wine available to us; significant competition; any change in our relationships with retailers which could harm our business; we may not achieve or maintain profitability in the future; the loss of key employees; a reduction in our access to, or an increase in the cost of, the third-party services we use to produce our wine; credit facility restrictions on our current and future operations; failure to protect, or infringement of, trademarks and proprietary rights; risks relating to our inventory; risks relating to our structure; these factors should not be construed as exhaustive and should be read in conjunction with the other cautionary statements that are included in this report. For additional information, see our Annual Report on Form 10-K filed on October 15, 2018, or our other reports currently on file with the Securities and Exchange Commission, which contain a more detailed discussion of risks and uncertainties that may affect future results. We undertake no obligation to publicly update or review any forward-looking statement, whether as a result of new information, future developments or otherwise.

	September 30, 2018 (unaudited)			June 30, 2018
Assets
Current assets:
Cash and cash equivalents	$	5,554		$	278
Accounts receivable		918			—
Inventories		6,162			5,826
Bulk wine deposits		68			—
Other current assets		170			251
Current assets of discontinued operations		692			18,396
Total current assets		13,564			24,751
Property and equipment		6,233			6,320
Intangible assets, net		29			38
Other assets, net		77			73
Total assets	$	19,903		$	31,182
Liabilities and Equity
Current liabilities:
Lines of credit	$	—		$	8,058
Accounts payable		692			409
Accrued expenses		1,552			237
Current maturities of capital lease obligation		11			11
Current maturities of long term debt		—			3,235
Liabilities of discontinued operations		363			3,740
Total current liabilities		2,618			15,690
Capital lease obligation, net of current maturities		48			52
Total liabilities		2,666			15,742
Commitments and contingencies
Equity:
Shareholders’ equity:
Preferred stock, par value of $0.001 per share, 5,000,000 shares authorized, none issued and outstanding at September 30, 2018 and June 30, 2018		—			—
Class A common stock, par value of $0.001 per share, 15,000,000 authorized, 4,595,750 and 4,535,750 issued and outstanding at September 30, 2018 and June 30, 2018 respectively		4			4
Class B common stock, par value of $0.001 per share, 1,000 authorized, 6 issued and outstanding at September 30, 2018 and June 30, 2018		—			—
Additional paid-in capital		16,695			16,527
Accumulated deficit		(5,323	)		(6,299	)
Total Truett-Hurst, Inc. shareholders' equity		11,376			10,232
Noncontrolling interest		5,861			5,208
Total equity		17,237			15,440
Total liabilities and equity	$	19,903		$	31,182

	Three Months Ended September 30,
	2018				2017
Sales	$	1,598		$	1,411
Less excise tax		(1	)		(2	)
Net sales		1,597			1,409
Cost of sales		501			675
Gross profit		1,096			734
Operating expenses:
Sales and marketing		493			678
General and administrative		1,304			790
Gain on disposal of assets		—			(22	)
Impairment of other assets		46			—
Total operating expenses		1,843			1,446
Loss from operations		(747	)		(712	)
Other income (expense):
Interest expense, net		(68	)		(110	)
(Loss) gain on fair value of interest rate swap		(14	)		2
Gain on insurance settlement, net		469			—
Other expense		(1	)		(8	)
Total other income (expense)		386			(116	)
Loss before income tax expense		(361	)		(828	)
Income tax expense		—			—
Loss from continuing operations		(361	)		(828	)
Income from discontinued operations, net of tax		1,990			535
Net income (loss) attributable to Truett-Hurst, Inc. and H.D.D. LLC		1,629			(293	)
Net income (loss) attributable to noncontrolling interest: H.D.D. LLC		653			(117	)
Net income (loss) attributable to Truett-Hurst, Inc.	$	976		$	(176	)
Net (loss) income per share, basic and diluted:
Continuing operations	$	(0.08	)	$	(0.19	)
Discontinued operations	$	0.44		$	0.12
Attributable to noncontrolling interest	$	0.14		$	(0.03	)
Attributable to Truett-Hurst, Inc.	$	0.22		$	(0.04	)
Weighted average shares used in computing net (loss) income per share:
Basic weighted average shares		4,555,967			4,437,998
Diluted weighted average shares		4,555,967			4,437,998

	Three Months Ended
	September 30,
	2018			2017
Cash flows from operating activities:
Loss from continuing operations	$	(361	)	$	(828	)
Income from discontinued operations, net of tax		1,990			535
Net income (loss)		1,629			(293)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation and amortization		224			213
Stock-based compensation		50			62
Executive termination benefits		118			—
Loss (gain) on fair value of interest rate swap		14			(2	)
Gain on sale of assets		—			(22	)
Gain on insurance settlement		(612	)		—
Impairment of intangibles		46			—
Changes in operating assets and liabilities, net
Accounts receivable		(449	)		(70	)
Inventories		(193	)		(5,242	)
Bulk wine deposits		(68	)		—
Other current assets		67			(355	)
Accounts payable		283			1,650
Accrued expenses		1,314			104
Net cash provided by (used in) operating activities		2,423			(3,955	)
Cash flows from investing activities:
Acquisition of property and equipment		(89	)		(535	)
Acquisition of intangible and other assets		(3	)		(6	)
Proceeds from sale of assets		—			22
Net cash used in investing activities		(92	)		(519	)
Cash flows from financing activities:
Net (payments on) proceeds from lines of credit		(8,058	)		325
Proceeds from long term debt		—			327
Payments on long term debt		(3,235	)		(137	)
Payments on capital lease obligation		(4	)		(3	)
Net cash (used in) provided by financing activities		(11,297	)		512
Discontinued Operations
Net cash provided by operating activities		14,242			3,205
Net cash provided by discontinued operations		14,242			3,205
Net change in cash and cash equivalents		5,276			(757	)
Cash and cash equivalents at beginning of period		278			783
Cash and cash equivalents at end of period	$	5,554		$	26
Supplemental disclosure of cash flow information:
Cash paid for interest	$	103		$	110
Cash paid for income taxes		—		$	—