UNITED STATES
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, 2005

Commission File No. 1-13453

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

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

The number of shares outstanding of registrant’s Common Stock, $.01 par value per share, as of August 9, 2005 was 6,747,306.

CRUZAN INTERNATIONAL, INC.

INDEX

* Item is omitted because answer is negative or item is inapplicable.

CRUZAN INTERNATIONAL, INC.

CONSOLIDATED BALANCE SHEETS

*From audited financial statements.

See Notes to Consolidated Financial Statements.

CRUZAN INTERNATIONAL, INC.

CONSOLIDATED BALANCE SHEETS

*From audited financial statements.

See Notes to Consolidated Financial Statements.

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CRUZAN INTERNATIONAL, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

See Notes to Consolidated Financial Statements.

3

CRUZAN INTERNATIONAL, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

4

See Notes to Consolidated Financial Statements.

5

CRUZAN INTERNATIONAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Note 1.   Basis of Presentation

The consolidated financial statements included herein have been prepared by the Company, without audit, pursuant to the rules and regulations of the Securities and Exchange Commission.  Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted pursuant to such rules and regulations.  In the opinion of management, all adjustments, consisting only of normal recurring adjustments necessary for a fair presentation of the financial information for the periods indicated, have been included.  For further information regarding the Company’s accounting policies, refer to the consolidated financial statements and related notes included in the Company’s Annual Report on Form 10-K for the year ended September 30, 2004.

The Company applies Accounting Principles Board Opinion Number 25, Accounting for Stock Issued to Employees (“APB 25”) and related interpretations in accounting for options granted, which requires compensation expense for the Company’s options to be recognized only if the market price of the underlying stock exceeds the exercise price on the date of grant.  Accordingly, the Company has not recognized compensation expense for its options granted after 1994.  Statement of Financial Accounting Standards (“SFAS”) No. 123, Accounting for Stock-Based Compensation, issued in October 1995, requires pro forma disclosures for option grants made after December 31, 1994, when accounting for stock-based compensation plans in accordance with APB 25.  As of January 1, 2003, the Company adopted SFAS 148, Accounting for Stock-Based Compensation-Transition and Disclosure, an amendment of SFAS 123. The standard amends SFAS 123 to provide alternative methods of transition for voluntary changes to the fair value based method of accounting for stock-based employee compensation. Additionally, SFAS 148 amends the disclosure requirements of SFAS 123 to require pro-forma disclosures when the intrinsic value method continues to be used.  The Company has elected to continue accounting for stock-based compensation using the intrinsic method in accordance with APB 25, and has adopted the new disclosure requirements specified under SFAS 148.

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

On February 24, 2005, the Company’s Compensation Committee granted options to purchase 549,000 shares of the Company’s common stock to officers and other key employees of the Company.

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Note 2.   Inventories

The major components of inventories are:

Note 3.   Financing Arrangements

Long-term debt consists of the following as of June 30, 2005:

(i)                                     In October 2001, the Company entered into a $70 million credit agreement, consisting of a $40 million term loan and a $30 million revolving loan facility.  In March 2004, the revolving loan facility was reduced to $15 million.  In June 2004, the credit agreement was modified to extend the maturity date of the revolving loan facility to September 2006.  In December 2004, the Company received a waiver of its financial covenants compliance requirement for the quarters ended September 30, 2004 and December 31, 2004.  The financial covenant requirements were also amended prospectively in accordance with the Company’s business plan for fiscal 2005 and the maturity of the credit agreement was modified to January 31, 2006, at which time the final principal payment plus accrued interest will be due.  Currently, the Company is considering its alternatives with respect to refinancing its existing credit agreement, including refinancing with an asset based facility during the quarter ending December 31, 2005, although there is no assurance that it will be able to do so.

In August 2005, the credit agreement was modified to approve the prospective change in control of the Company from Angostura, Limited to V&S Vin & Sprit AB (“V&S”) and the Company received a waiver of its fixed charge coverage financial covenant for the quarter ended June 30, 2005.

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

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Note 4.   Earnings (Loss) Per Common Share

Basic earnings (loss) per common share are calculated by dividing net income (loss) by the average common shares outstanding.  On a diluted basis, shares outstanding are adjusted to assume the exercise of stock options. 

*The effect of stock options has not been included, as their effect would have been anti-dilutive.

The Company’s Virgin Islands subsidiary, through the Economic Development Commission of the Government of the Virgin Islands of the United States, has received a 90% exemption from income taxes on operating income.  This exemption is effective through September 2020.  The per share effect of this exemption on earnings (on a diluted basis) was to increase earnings per share by $0.15 and $0.04 for the nine and three months ended June 30, 2005, respectively, and $0.19 and $0.06 for the nine and three months ended June 30, 2004, respectively.

Note 5.   Segment and Geographical Information

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

Bulk Alcohol Products (rum, citrus brandy, citrus spirits, 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)

Vinegar and Cooking Wine (bulk vinegar, bulk cooking wine, vinegar stock and proprietary and private label case goods)

The Company’s executive offices are located in West Palm Beach, Florida and certain of the expenses of the Company’s executive offices are classified as Corporate Operations and are not allocated to the operating segments described above.  These expenses include salaries and related expenses, legal and professional fees, rent for office space, utilities and insurance.

The accounting policies of the reportable segments are the same as those referred to in Note 1 to the consolidated financial statements located in Item 8 of the Company’s Annual Report on Form 10-K for the year ended September 30, 2004.  The Company evaluates the performance of its operating segments based on income before income taxes, equity in income or loss of equity investees, interest income and interest expense. Material intersegment sales and transfers have been eliminated.

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Net sales and operating income (loss) for the Company’s reportable segments for the nine and three months ended June 30, 2005 and 2004, were as follows:

Note 6.  Supplemental Executive Retirement Plan

During the second quarter of fiscal 2004, the Company’s Compensation and Stock Option Committee approved a supplemental executive retirement plan for certain key executives of the Company.  The plan is an unfunded plan within the meaning of SFAS No. 132 Employers Disclosures about Pensions and Other Post Retirement Benefits.  The net periodic benefit cost for the nine and three months ended June 30, 2005 and 2004, was as follows:

Note 7.  Income Taxes

The Company incurred losses for income tax purposes from its U.S. operations of $5.6 million and $7.0 million through each of its third quarter of 2005 and 2004, respectively.  The Company has recorded an income tax benefit in the Company’s consolidated statement of income and an asset on the Company’s consolidated balance sheet.

Note 8.  Reclassification of Cost of Goods Sold

In the first quarter of fiscal 2005, the Company changed the classification of certain expenses from cost of goods sold to selling, general and administrative as a result of a review and improvement in its financial reporting practices.  The Company has reclassified its prior year statement of income to reflect the new classification.  This resulted in the reclassification of $1,516,366 and $590,214 from cost of goods sold to selling, general and administrative expenses for the nine and three months ended June 30, 2004, respectively.

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Note 9.  Name Change

On May 2, 2005, the Company announced that it had changed its name from Todhunter International, Inc. to Cruzan International, Inc.  The new name, approved by the Company’s shareholders on March 15, 2005, reflects the Company’s evolving strategic focus on its Cruzan Rum brand, which has continued to experience tremendous growth since its repositioning in the marketplace in the late 1990s.  In conjunction with its new corporate identity, on May 3, 2005, the Company’s common stock began trading on the American Stock Exchange under the new symbol, “RUM.”

Note 10.  Issuance of Common Stock

In June 2005, the Company received $5.5 million, net of expenses, from a fully subscribed rights offering and as a result issued 408,787 shares of common stock.

Note 11.  Change of Control and Merger Agreement

On June 3, 2005, the Company announced that Angostura, Ltd. (“Angostura”), the Company’s controlling stockholder, had entered into a Stock Purchase Agreement with V&S Vin & Sprit AB, the Swedish-based international wine and spirits company (“V&S”), pursuant to which V&S agreed to purchase Angostura’s controlling interest in the Company.  Upon the terms and subject to the conditions set forth in the Stock Purchase Agreement, V&S agreed to purchase all 4,294,583 shares of the Company’s common stock beneficially owned by Angostura, representing approximately 63.6% of the Company’s outstanding common stock, for an aggregate consideration of $121,837,320, or $28.37 per share.  The Stock Purchase Agreement is subject to normal closing conditions, including the approval of the board of directors of the Company.  In connection with such approval and any other related issues, the Company’s board of directors has appointed a Special Committee of independent directors (the “Special Committee”).  The purchase and sale is expected to close on or before September 30, 2005.

On July 8, 2005, the Company announced that The Absolut Spirits Company, Inc., a Delaware corporation (“ASCI”), a wholly-owned subsidiary of V&S, had submitted a proposed Agreement and Plan of Merger pursuant to which a wholly-owned subsidiary of ASCI would merge with and into the Company, and each issued share of Company common stock not owned by Angostura would be converted into the right to receive $28.37 in cash (the “ASCI Proposal”).  The ASCI Proposal is conditioned upon, among other things, receipt of appropriate stockholder and regulatory approvals.

The Company’s board of directors and its Special Committee consisting solely of independent directors intend to evaluate the ASCI Proposal in a manner consistent with their fiduciary duties.  The Company cannot assure that the ASCI Proposal will result in a definitive agreement with ASCI, or that any merger under such a definitive agreement will be consummated.  If the Company’s board of directors determines that the terms of the ASCI Proposal are fair to Company stockholders, and enters into a definitive agreement with ASCI, the Company will call a Special Meeting of its stockholders and file a proxy statement and other relevant documents concerning the ASCI Proposal with the Securities and Exchange Commission.

On July 21, 2005, the Company announced that pursuant to the Hart-Scott-Rodino Antitrust Improvements Act, the U.S. Federal Trade Commission and the U.S. Department of Justice have granted clearance for the proposed acquisition by ASCI of controlling interest in the Company from Angostura at a price of $28.37 per share, pursuant to the Stock Purchase Agreement between Angostura and V&S.  The Stock Purchase is conditioned upon, among other things, receipt of certain regulatory approvals, including approval by certain state alcoholic beverage commissions.

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Item 2.    Management’s Discussion and Analysis of 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 Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended.  Forward-Looking Statements are statements other than historical information or statements of current condition and relate to future events or the future financial performance of the Company.  Some Forward-Looking Statements may be identified by use of such terms as “believes,” “anticipates,” “intends” or “expects.”  Such Forward-Looking Statements involve known and unknown risks, uncertainties and other factors that may cause the actual results, performance or achievements of the Company to be materially different from any future results, performance or achievements expressed or implied by such Forward-Looking Statements.  For information concerning these factors and related matters, see “Risks that May Affect Future Results” in Item 7, and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” of the Company’s Annual Report on Form 10-K for the fiscal year ended September 30, 2004.  The Company undertakes no obligation to update or revise any Forward-Looking Statements, whether as a result of new information, future events or otherwise.

Introduction

The following discussion and analysis summarizes the significant factors affecting (i) consolidated results of operations of the Company for the nine months ended June 30, 2005 compared to the nine months ended June 30, 2004, (ii) consolidated results of operations of the Company for the three months ended June 30, 2005 compared to the three months ended June 30, 2004, and (iii) financial liquidity and capital resources.  This discussion and analysis should be read in conjunction with the Company’s consolidated financial statements and notes thereto included herein.  Certain amounts presented in this Item 2 have been rounded to the nearest thousand or hundred thousand, as applicable, but the percentages calculated are based on actual amounts without rounding.

Market share and industry data and rankings disclosed in this report have been obtained from industry and government publications, as indicated; the Company has not independently verified this information, although management believes such data and rankings to be reasonably accurate.

Management believes that the Company is the largest supplier of bulk rum in the United States based on reports of U.S. Imports for Consumption prepared by the Department of Census and that the Company’s market share of bulk rum products in the United States is approximately 80%.  Management believes that the Company is the largest supplier of fortified citrus wine in the United States and is not aware of any other domestic suppliers of fortified citrus wine.  Management is aware of only one other United States manufacturer of citrus brandy and citrus spirits and believes that the Company’s market share for these products is approximately 85%.

The Company’s primary spirits brand is Cruzan Rum, which is the fourth-largest premium rum brand in the United States according to statistics published by Impact Databank and Adams Liquor Handbook, two leading spirits industry publications.

The Company’s higher margin cooking wine products are sold throughout the United States and Canada.  Although published data is not available, management is not aware of any competitors of the Company’s size and believes that the Company is the largest supplier of cooking wine in the United States.

The Company operates primarily in the beverage alcohol industry in the United States.  The Company is a leading producer and supplier of rum, brandy, wine and spirits to other beverage alcohol manufacturers; produces, imports and markets premium branded spirits; bottles beverage alcohol and other beverages on a contract basis and under its own labels; and produces vinegar and cooking wine.  The Company reports its operating results in four segments:  Bulk Alcohol Products (rum, citrus brandy, citrus spirits, 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); and Vinegar and Cooking Wine (bulk vinegar, bulk cooking wine, vinegar stock and proprietary and private label case goods).

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The Company’s executive offices are located in West Palm Beach, Florida and certain of the expenses of the Company’s executive offices are not allocated to the operating segments described above.  The expenses of the Company’s corporate operations include salaries and related expenses, legal and professional fees, rent for office space, utilities and insurance.

Information regarding the net sales and operating income (loss) of each of the Company’s business segments is set forth in Note 5 to the consolidated financial statements and in Table 2 included in this Item 2.

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

The Company’s customers often purchase bulk alcohol products in significant quantities or place significant orders for premium branded spirits, contract bottling services, vinegar and cooking wine.  Accordingly, the size and timing of purchase orders and product shipments can cause operating results to fluctuate significantly from quarter to quarter.  Additionally, some Company products generate higher profit margins than others, and changes in the Company’s product mix can cause gross margins to fluctuate.  Certain aspects of the Company’s business are seasonal, with increased demand for the Company’s contract bottling services from April to October and increased production of the Company’s bulk alcohol products from November to June, corresponding to the Florida citrus harvest.  As a result of these factors, the Company’s operating results may vary significantly from quarter to quarter.

Net sales represent the Company’s gross sales less excise taxes. Excise taxes are generally payable on sales of certain of the Company’s bulk alcohol products and on all alcohol products bottled by the Company.  However, there are no excise taxes paid on sales made to customers that have tax permits.  Accordingly, excise taxes may vary significantly from period to period depending upon the Company’s product and customer mix.

Results of Operations

Tables 1 and 2 below set forth statement of income items as a percentage of net sales and information on net sales, gross profit (loss) and operating income (loss) by operating segment.

Table 1 – Statement of Income as a Percent of Net Sales

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Table 2 – Net Sales, Gross Profit (Loss) and Operating Income (Loss) by Operating Segment

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Table 3 below provides unit sales volume data for certain Company products.

Table 3 – Unit Sales Volume Data