March 18, 2005

On February 11th 2005, Todhunter International announced financial results for its first quarter in fiscal year 2005. Net sales were $24.2 million compared with $22.4 million reported for fiscal 2004’s first quarter. Gross profit was $8.0 million, compared to $7.6 million in the same period last year, and first quarter net income was $149,090, or $0.02 per diluted share, compared with net income of $851,284 or $0.15 per diluted share, one year ago. Earnings were lower in 2004 due to a 24% increase in selling general and administrative expenses. The company attributes this increase to higher spending on marketing and advertising for its premium brand segment.

Todhunter’s advertising strategy appears to be working. Cruzan Estate Rums and Cruzan Flavoured Rums posted a 25% increase in sales for the quarter. In addition, two leading beverage industry publications have recognized Cruzan as one of the fastest growing brands in the spirits industry. Yet despite this impressive growth, it appears the investment community has failed to take notice of Todhunter’s stock. The share price is virtually unchanged from a year ago and with no official analyst coverage and very little trading volume, it is safe to say that Todhunter is probably “off the radar screen” of many investors.

Todhunter’s overlooked status has not gone unnoticed by management and the Board of Directors. At the company’s Annual General Meeting, which took place on March 15th 2005, a decision was made to change the company’s name from Todhunter International to Cruzan International. The change is designed to alter investor’s perception of the company, which many still view as a bottler and ingredients supplier as well as a producer of cooking wines and vinegars. Finally, shares of Cruzan International will now trade under a new ticker symbol to go with its new name. Even we were surprised that it hadn’t been taken, but Cruzan International will soon trade under the ticker symbol “RUM”.

August 26, 2005

We have sold our shares in Cruzan International (formerly Todhunter International). On June 3rd Cruzan’s majority shareholder, Angostura, agreed to sell its 67.8% stake in Cruzan to Stockholm-based Absolut Spirits for $28.37 per share. This was welcomed news as the following day shares of Cruzan traded as high as $26.50, an 89% increase over the previous days closing price of $14.05. Despite this impressive gain, the shares were still selling approximately $2 below the $28.37 price of the Angostura/Absolut deal. This discount was probably due to the uncertainty of whether or not Cruzan’s minority shareholders would eventually get bought out at the same price. Given the future growth potential of Cruzan’s premium rum business, Absolut’s large financial resources and the nuisance of having a publicly traded subsidiary, we were confident that Absolut would eventually offer the remaining shareholders the same deal and take Cruzan private. Therefore, with a possible $2 per share in upside remaining, we decided to hold onto our shares. Approximately one month later, Cruzan announced that Absolut would, in fact, purchase the remaining 32.2% of Cruzan’s shares for $28.37. When the shares recently began trading over $28, we agreed the best course of action was to be prudent and to liquidate our position, now, since the timing of the buyout could be several months or longer.