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8-K - LIVE FILING - Castle Brands Inc | htm_46488.htm |
Castle Brands Announces Fiscal 2013 Second Quarter Results
Net Sales Increase 9.8% on Strong Case Sales Growth
NEW YORK November 19, 2012 Castle Brands Inc. (NYSE MKT: ROX), a developer and international marketer of premium and super-premium branded spirits and wine, today reported financial results for the three and six month periods ended September 30, 2012.
Operating highlights for quarter ended September 30, 2012:
| Net sales increased 9.8% to $10.3 million for the quarter ended September 30, 2012, as compared to $9.4 million for the comparable prior-year period |
| Total case sales of beverage alcohol products increased 7.6% to 92,704 cases compared to 86,148 cases in the prior-year period |
| Goslings rum case sales increased 16.3% from the prior-year period |
| Goslings Stormy Ginger Beer case sales increased 45.5% to 74,959 cases compared to 51,520 cases in the prior-year period |
| EBITDA, as adjusted, improved by 74.9% to a loss of ($0.1) million, compared to a loss of ($0.5) million for the three months ended September 30, 2011 |
We continue to increase net sales year-over-year, bringing us closer to profitability. The positive momentum in our business reflects the strength of our portfolio of premium brands, such as Goslings rum and Jeffersons Bourbons, stated Richard J. Lampen, President and Chief Executive Officer of Castle Brands. We are pleased with the growth our brands are experiencing due to our experienced sales team, growing points of distribution and effective marketing programs. We are selectively pursuing new brands, joint ventures and acquisitions in an effort to further enhance our portfolio.
The strong organic growth of our spirits business, coupled with effective cost control efforts, led to improved results in the quarter. Jeffersons in particular has seen growth accelerate with the launch of Jeffersons Rye, the continued expansion of our barrel program and the addition of listings in important Control States, stated John Glover, Chief Operating Officer of Castle Brands.
In the fiscal 2013 second quarter, the Company had net sales of $10.3 million, a 9.8% increase from $9.4 million in the prior-year period. Loss from operations was ($0.5) million for the three months ended September 30, 2012, an improvement of 30.7% from a loss of ($0.8) million for the comparable fiscal 2012 period. The Company had a net loss attributable to common shareholders of ($1.1) million, or $(0.01) per basic and diluted share, in the fiscal 2013 second quarter, compared to a net loss attributable to common shareholders of ($1.0) million or $(0.01) per basic and diluted share, in the comparable fiscal 2012 period.
EBITDA, as adjusted, for the second quarter of fiscal 2013 improved to a loss of ($0.1) million, compared to a loss of ($0.5) million for the prior-year period.
For the six months ended September 30, 2012, the Company had net sales of $20.0 million, a 19.3% increase from $16.8 million in the prior-year period. Loss from operations was ($1.3) million for the six months ended September 30, 2012, an improvement of 39.6% from a loss of ($2.1) million for the comparable fiscal 2012 period. The Company had a net loss attributable to common shareholders of ($2.1) million, or $(0.02) per basic and diluted share, in the first six months of fiscal 2013, compared to a net loss attributable to common shareholders of ($3.1) million or $(0.03) per basic and diluted share, in the comparable fiscal 2012 period.
EBITDA, as adjusted, for the first six months of fiscal 2013 improved to a loss of ($0.6) million, compared to a loss of ($1.6) million for the prior-year period.
Non-GAAP Financial Measures
Within the information above, Castle Brands provides information regarding EBITDA, as adjusted,
which is not a recognized term under GAAP (Generally Accepted Accounting Principles) and does not
purport to be an alternative to operating income (loss) or net income (loss) as a measure of
operating performance. Earnings before interest, taxes, depreciation and amortization, or EBITDA,
adjusted for allowance for doubtful accounts, non-cash compensation expense, gain (loss) from
equity investment in non-consolidated affiliate, foreign exchange, net change in fair value of
warrant liability, net income attributable to noncontrolling interests and dividend to preferred
shareholders is a key metric the Company uses in evaluating its financial performance on a
consistent basis across various periods. EBITDA is considered a non-GAAP financial measure as
defined by Regulation G promulgated by the SEC under the Securities Act of 1933, as amended. Due to
the significance of non-cash and non-recurring items, EBITDA, as adjusted, enables the Companys
Board of Directors and management to monitor and evaluate the business on a consistent basis. The
Company uses EBITDA, as adjusted, as a primary measure, among others, to analyze and evaluate
financial and strategic planning decisions regarding future allocation of capital resources. The
Company believes that EBITDA, as adjusted, eliminates items that are not indicative of its core
operating performance or are based on managements estimates, such as allowance accounts, are due
to changes in valuation, such as the effects of changes in foreign exchange or fair value of
warrant liability, or do not involve a cash outlay, such as stock-based compensation expense.
EBITDA, as adjusted, should be considered in addition to, rather than as a substitute for, income
from operations, net income and cash flows from operating activities. Reconciliation of net loss to
EBITDA, as adjusted, is presented below.
About Castle Brands Inc.
Castle Brands is a developer and international marketer of premium beverage alcohol brands
including: Goslings Rum®, Jeffersons®, Jeffersons Presidential
SelectTM and Jeffersons Reserve® bourbon, Boru® vodka,
Pallini® Limoncello, Raspicello and Peachcello, Knappogue Castle Whiskey®,
Clontarf® Irish whiskey, Betts & SchollTM wines, cc: winesTM,
Celtic Honey® liqueur, Bradys® Irish Cream, A. De Fussigny®
cognacs, Travis Hasses Original® liqueurs, Gozio® amaretto and
TierrasTM tequila. Additional information concerning the Company is available on the
Companys website, www.castlebrandsinc.com.
Forward Looking Statements
This press release includes statements of our expectations, intentions, plans and beliefs that
constitute forward looking statements within the meaning of Section 27A of the Securities Act of
1933 and Section 21E of the Securities Exchange Act of 1934 and are intended to come within the
safe harbor protection provided by those sections. These statements, which involve risks and
uncertainties, related to the discussion of our business strategies and our expectations concerning
future operations, margins, sales, new products and brands, potential joint ventures, potential
acquisitions, expenses, profitability, liquidity and capital resources and to analyses and other
information that are based on forecasts of future results and estimates of amounts not yet
determinable. You can identify these and other forward-looking statements by the use of such words
as may, will, should, expects, intends, plans, anticipates, believes, thinks,
estimates, seeks, expects, predicts, could, projects, potential and other similar
terms and phrases, including references to assumptions. These forward looking statements are made
based on expectations and beliefs concerning future events affecting us and are subject to
uncertainties, risks and factors relating to our operations and business environments, all of which
are difficult to predict and many of which are beyond our control, that could cause our actual
results to differ materially from those matters expressed or implied by these forward looking
statements. These risks include our history of losses and expectation of further losses, our
ability to expand our operations in both new and existing markets, our ability to develop or
acquire new brands, our relationships with distributors, the success of our marketing activities
and our cost reduction efforts, the effect of competition in our industry and economic and
political conditions generally, including the current recessionary economic environment and
concurrent market instability. More information about these and other factors are described under
the caption Risk Factors in Castle Brands Annual Report on Form 10-K for the year ended March
31, 2012 and Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2012 filed
with the Securities and Exchange Commission. When considering these forward looking statements, you
should keep in mind the cautionary statements in this press release and the reports we file with
the Securities and Exchange Commission. New risks and uncertainties arise from time to time, and we
cannot predict those events or how they may affect us. We assume no obligation to update any
forward looking statements after the date of this press release as a result of new information,
future events or developments, except as required by the federal securities laws.
INVESTOR CONTACTS:
Castle Brands Inc.
Investor Relations
(646)-356-0200
info@castlebrandsinc.com
www.castlebrandsinc.com
CASTLE BRANDS INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Operations
(Unaudited)
Three months ended September 30, | Six months ended September 30, | |||||||||||||||
2012 | 2011 | 2012 | 2011 | |||||||||||||
Sales, net* |
$ | 10,317,737 | $ | 9,399,954 | $ | 20,037,164 | $ | 16,792,338 | ||||||||
Cost of sales* |
6,594,889 | 6,107,115 | 12,881,664 | 10,753,210 | ||||||||||||
Provision for obsolete inventory |
100,000 | | 100,000 | | ||||||||||||
Gross profit |
3,622,848 | 3,292,839 | 7,055,500 | 6,039,128 | ||||||||||||
Selling expense |
2,770,866 | 2,656,399 | 5,393,858 | 5,263,180 | ||||||||||||
General and administrative expense |
1,159,606 | 1,185,713 | 2,488,206 | 2,454,113 | ||||||||||||
Depreciation and amortization |
229,857 | 225,811 | 460,939 | 453,956 | ||||||||||||
Loss from operations |
(537,481 | ) | (775,084 | ) | (1,287,503 | ) | (2,132,121 | ) | ||||||||
Other expense |
(16 | ) | | (16 | ) | | ||||||||||
Gain (loss) from equity investment in
non-consolidated affiliate |
(11,075 | ) | 108 | (10,727 | ) | (17,349 | ) | |||||||||
Foreign exchange loss |
(218,113 | ) | (116,387 | ) | (22,172 | ) | (238,462 | ) | ||||||||
Interest expense, net |
(136,816 | ) | (176,731 | ) | (247,837 | ) | (354,272 | ) | ||||||||
Net change in fair value of warrant liability |
162,607 | 209,899 | 71,279 | 185,025 | ||||||||||||
Income tax benefit |
37,038 | 37,038 | 74,076 | 74,076 | ||||||||||||
Net loss |
(703,856 | ) | (821,157 | ) | (1,422,900 | ) | (2,483,103 | ) | ||||||||
Net income attributable to noncontrolling interests |
(197,440 | ) | (99,514 | ) | (307,897 | ) | (204,578 | ) | ||||||||
Net loss attributable to controlling interests |
(901,296 | ) | (920,671 | ) | (1,730,797 | ) | (2,687,681 | ) | ||||||||
Dividend to preferred shareholders |
(184,199 | ) | (49,927 | ) | (364,150 | ) | (379.387 | ) | ||||||||
Net loss attributable to common shareholders |
$ | (1,085,495 | ) | $ | (970,598 | ) | $ | (2,094,947 | ) | $ | (3,067,068 | ) | ||||
Net loss per common share, basic and diluted,
attributable to common shareholders |
(0.01 | ) | (0.01 | ) | (0.02 | ) | (0.03 | ) | ||||||||
Weighted average shares used in computation, basic
and diluted, attributable to common shareholders |
108,491,137 | 107,452,007 | 108,441,966 | 107,327,758 | ||||||||||||
Sales, net and Cost of sales include excise taxes of $1,532,880 and $1,497,879 for the three months ended September 30, 2012 and 2011, respectively, and $2,914,421 and $2,713,498 for the six months ended September 30, 2012 and 2011, respectively.
See accompanying notes to the unaudited condensed consolidated financial statements.
CASTLE BRANDS INC. AND SUBSIDIARIES
Reconciliation of Net Loss to EBITDA, as adjusted
Three months ended | Six months ended | |||||||||||||||
September 30, | September 30, | |||||||||||||||
2012 | 2011 | 2012 | 2011 | |||||||||||||
Net loss attributable to common shareholders |
$ | (1,085,494 | ) | $ | (970,598 | ) | $ | (2,094,946 | ) | $ | (3,067,069 | ) | ||||
Adjustments: |
||||||||||||||||
Interest expense, net |
136,816 | 176,731 | 247,837 | 354,272 | ||||||||||||
Income tax benefit |
(37,038 | ) | (37,038 | ) | (74,076 | ) | (74,076 | ) | ||||||||
Depreciation and amortization |
229,857 | 225,811 | 460,939 | 453,956 | ||||||||||||
EBITDA (loss) |
(755,859 | ) | (605,094 | ) | (1,460,246 | ) | (2,332,917 | ) | ||||||||
Allowance for doubtful accounts |
6,000 | 11,123 | 12,000 | 18,034 | ||||||||||||
Allowance for obsolete inventory |
100,000 | | 100,000 | | ||||||||||||
Stock-based compensation expense |
79,748 | 52,737 | 138,928 | 84,513 | ||||||||||||
Other expense |
16 | | 16 | | ||||||||||||
Gain (loss) from equity investment in non-consolidated affiliate |
11,075 | (108 | ) | 10,727 | 17,349 | |||||||||||
Foreign exchange loss |
218,113 | 116,387 | 22,172 | 238,462 | ||||||||||||
Net change in fair value of warrant liability |
(162,607 | ) | (209,899 | ) | (71,279 | ) | (185,025 | ) | ||||||||
Net income attributable to noncontrolling interests |
197,440 | 99,515 | 307,898 | 204,578 | ||||||||||||
Dividend to preferred shareholders |
184,199 | 49,927 | 364,150 | 379,387 | ||||||||||||
EBITDA, as adjusted |
(121,875 | ) | (485,412 | ) | (575,634 | ) | (1,575,619 | ) | ||||||||
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