Exhibit 99.1
[CASTLE BRANDS LOGO]
FOR IMMEDIATE RELEASE:
CASTLE BRANDS INC. REPORTS 21% INCREASE
IN SECOND QUARTER NET SALES
Brand Development Leads Spirits Supplier to Strong Top-Line Growth
New York City (November 13, 2006) - Castle Brands Inc. (AMEX: ROX), an emerging
developer and international marketer of premium spirits headquartered in New
York City, today reported financial results for the quarter ending September 30,
2006, the second quarter of its 2007 fiscal year. For the second quarter, Castle
Brands posted net sales of $6.3 million, representing a 21% increase from the
second quarter of its prior fiscal year. The increase was the result of the
continued strong organic growth in the largest categories of Castle Brands'
premium portfolio. Case sales were 80,118 (nine-liter) cases, a 12.9% increase
over the comparable period in the prior fiscal year.
For the six months ended September 30, 2006, net sales increased $1.6 million,
or 16.1% to $11.7 million compared to $10.1 million for the six months ended
September 30, 2005. Case sales were 150,613, representing a 14.2% gain against
131,885 for the comparable period last year.
"Our continued top-line growth illustrates the success of our efforts to achieve
organic growth within our current portfolio of brands," said Mark Andrews,
Chairman of the Board and Chief Executive Officer of Castle Brands. "This solid
growth demonstrates not only the growing popularity of our brands, but also the
increasing strength of our route to market."
Despite the increase in top-line growth, Castle Brands' gross margin experienced
a decline to 32.3% in the second quarter from 38.9% for the same period last
year, largely as a result of a shift in the combination of products being sold,
with Castle Brands' largest volume gains in the international business being
made in products with lower margins. Net loss for the second quarter totaled
$4.2 million, which was anticipated as part of Castle Brands' stated strategic
objectives to focus investment on growing its premium portfolio and corporate
support structure to help achieve long-term returns. This loss also reflected
the significant expenses of operating as a publicly traded entity.
Castle Brands focuses its sales efforts in two areas - US and International. US
sales by volume rose 16.5% to 48,107 nine liter cases in the second fiscal
quarter of Castle Brands' 2007 fiscal year, versus the comparable period from
the previous year, driven by a continued focus on brand growth by its sales
force and increased marketing efforts. International case sales in the second
quarter were 32,011, up 8.0% against the comparable period in the prior fiscal
year.
Supported by continued distribution gains and in-market promotional activities,
along with continued trade advertising, Boru Vodka case sales increased 22.4% in
the US and 25.4% on a global basis in the second quarter versus the comparable
prior year period. "As it is one of our flagship brands, we are pleased with the
continued growth of Boru, particularly given that we have not yet launched our
new bottle or initiated the related advertising campaign, which is scheduled for
spring 2007" said Andrews.
Castle Brands' rum offerings continued to see strong growth, jumping 21.8% in
volume for the quarter, to 23,122 nine-liter cases, versus the comparable prior
year period. The domestic growth of our rum products, led by Gosling's Rum,
advanced to 19,180 cases, representing a 24.4% increase in domestic volume over
the comparable period in the prior fiscal year. This growth was fueled by strong
growth in key markets where increased marketing efforts were focused through the
summer season.
The volume gains made by Castle Brands in its two largest categories (vodka and
rum), were offset in part by declines in certain international sales of products
in other categories, principally the result of one-time sales opportunities for
the Company's Irish cream products which occurred in the prior fiscal year.
"During this quarter, we continued to exceed our goals for the top-line growth
of our existing portfolio of premium brands. We believe that the continued
growth of our products, which is the result of our well-developed route to
market and the capability of our sales force, reinforces our view that we are a
partner of choice for family-owned brands looking for stable and rapid growth,
as further evidenced by our recent acquisition of McLain & Kyne, Ltd. We also
provide a solid platform for brands which may be acquired from larger spirits
companies. We look forward to continued aggressive expansion through both
organic growth and acquisitions. While the increased investment in our brands
and our company's top-line growth resulted in an expected net loss for the
quarter, we are on our way to achieving our long-term strategic goals, and
continue to believe that this growth will reward investors by maximizing
shareholder value as we develop our growing portfolio and increase our presence
in the US and international premium spirits markets." said Andrews.
More about Castle Brands Inc.
Castle Brands is an emerging developer and global marketer of premium branded
spirits within four growing categories of the spirits industry: vodka, rum,
Irish whiskey and liqueurs/cordials. Currently, the Castle Brands' portfolio
includes Boru(TM) Vodka, Gosling's Rum(R), Sea Wynde(R) Rum, Knappogue Castle(R)
Irish Single Malt Whiskey, Clontarf(R) Irish Whiskey, Jefferson's(TM) and
Jefferson's Reserve(R) Bourbon, Sam
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Houston(R) Bourbon, Celtic Crossing Liqueur(R), Pallini(R) Limoncello,
Raspicello and Peachcello and Brady's Irish Cream(R).
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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, relate to the discussion of our business strategies and our
expectations concerning future operations, margins, 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. We
have used words such 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, in this press release to identify
forward-looking statements. 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.
When considering these forward-looking statements, you should keep in mind the
cautionary statements in this press release and the documents incorporated by
reference. 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.
Conference Call
Castle Brands will host a conference call to discuss first quarter results on
November 14, 2006 at 8:30 a.m. ET. All interested parties in the U.S. are
invited to join the conference by dialing (800) 289-0496 and asking for the
Castle Brands call. International callers should dial (913)-981-5519 and ask for
the Castle Brands call. No password is required. The Company suggests that
participants dial in approximately ten minutes in advance of the 8:30 a.m. start
of the conference call.
For those unable to participate in the live call, a replay will be available by
calling (888) 203-1112 (U.S.) or (719) 457-0820 (international). The access code
is 5301461. A digital audio recording of the conference call will also be
available on the Castle Brands website approximately one hour after the
conclusion of the conference call. The replay will be available for at least 30
days following the conference call.
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For more information on Castle Brands Inc., please contact:
Amelia Gary
VP - Investor Relations
Castle Brands Inc.
570 Lexington Avenue, 29th Floor
New York, NY 10022
Phone: 800-882-8140
ir@castlebrandsinc.com
www.castlebrandsinc.com
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CASTLE BRANDS INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
THREE MONTHS ENDED SIX MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
------------------------- -------------------------
2006 2005 2006 2005
----------- ----------- ----------- -----------
Sales, net.............................................................. $ 6,252,062 $ 5,175,144 $11,712,467 $10,091,538
Cost of sales........................................................... 4,231,445 3,162,084 7,795,504 6,315,276
----------- ----------- ----------- -----------
Gross profit............................................................ 2,020,617 2,013,060 3,916,963 3,776,262
----------- ----------- ----------- -----------
Selling expense*........................................................ 4,694,074 3,212,398 8,236,646 6,349,785
General and administrative expense**.................................... 1,898,702 1,235,794 4,134,493 2,373,270
Depreciation and amortization........................................... 245,794 220,343 480,288 441,828
----------- ----------- ----------- -----------
Net operating loss...................................................... (4,817,953) (2,655,475) (8,934,464) (5,388,621)
----------- ----------- ----------- -----------
Other income............................................................ 2,644 34,132 3,944 34,132
Other expense........................................................... (9,558) (9,154) (15,866) (18,609)
Foreign exchange gain/(loss)............................................ 262,377 15,247 659,789 (297,724)
Interest expense, net................................................... (75,931) (365,274) (498,607) (624,204)
Write-off of deferred financing costs in connection with conversion of
6% subordinated convertible notes.................................... -- -- (295,368) --
Current (charge)/credit on derivative financial instrument.............. (8,666) (1,752) (10,858) 15,050
Income tax benefit...................................................... 37,038 37,038 74,076 74,076
Minority interests...................................................... 391,855 94,898 735,214 224,057
----------- ----------- ----------- -----------
Net loss................................................................ (4,218,194) (2,850,340) (8,282,140) (5,981,843)
Preferred stock dividends............................................... -- 386,583 48,238 691,762
----------- ----------- ----------- -----------
Net loss attributable to common stockholders............................ $(4,218,194) $(3,236,923) $(8,330,378) $(6,673,605)
=========== =========== =========== ===========
Net loss attributable to common stockholders per common share
Basic................................................................ $ (0.35) $ (1.04) $ (0.71) $ (2.15)
=========== =========== =========== ===========
Diluted.............................................................. $ (0.35) $ (1.04) $ (0.71) $ (2.15)
=========== =========== =========== ===========
Weighted average shares used in computation
Basic................................................................ 12,009,741 3,106,666 11,716,233 3,106,666
=========== =========== =========== ===========
Diluted.............................................................. 12,009,741 3,106,666 11,716,233 3,106,666
=========== =========== =========== ===========
* Includes amortization of stock based compensation of $136,603 for the three
month period and $221,472 for the six month period, each ended September
30, 2006, as a result of the prospective adoption of SFAS 123(R) as of
April 1, 2006.
** Includes amortization of stock based compensation of $140,318 for the three
month period and $549,943 for the six month period, each ended September
30, 2006, as a result of the prospective adoption of SFAS 123(R) as of
April 1, 2006.
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CASTLE BRANDS INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
SEPTEMBER 30, MARCH 31,
2006 2006
------------- ------------
(UNAUDITED)
ASSETS
CURRENT ASSETS
Cash and cash equivalents ........................................ $ 13,509,471 $ 1,392,016
Accounts receivable - net of allowance for doubtful accounts of
$463,351 and $395,207 ......................................... 6,454,173 3,511,215
Due from affiliates .............................................. 1,032,287 953,616
Inventories ...................................................... 8,777,275 6,673,235
Prepaid expenses and other current assets ........................ 1,308,656 1,021,369
------------ ------------
TOTAL CURRENT ASSETS ............................................. 31,081,862 13,551,451
------------ ------------
EQUIPMENT - net ..................................................... 470,193 407,983
OTHER ASSETS
Intangible assets - net of accumulated amortization of $1,788,096
and $1,379,389 ................................................ 13,631,672 13,936,427
Goodwill ......................................................... 11,649,430 11,649,430
Deferred registration costs ...................................... -- 2,823,594
Restricted cash .................................................. 475,814 362,293
Other assets ..................................................... 548,741 913,032
------------ ------------
TOTAL ASSETS ..................................................... $ 57,857,712 $ 43,644,210
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIENCY)
CURRENT LIABILITIES
Current maturities of notes payable and capital leases ........... $ 1,563,941 $ 3,678,547
Accounts payable ................................................. 3,325,502 3,757,515
Accrued expenses, put warrant payable and derivative instrument .. 2,466,191 2,986,188
Due to stockholders and affiliates ............................... 2,058,941 2,121,334
Convertible stockholder notes payable ............................ -- 1,660,148
Stockholder notes payable ........................................ -- 147,113
------------ ------------
TOTAL CURRENT LIABILITIES ........................................ 9,414,575 14,350,845
------------ ------------
LONG TERM LIABILITIES
Senior notes payable ............................................. 4,605,088 4,594,791
Notes payable and capital leases, less current maturities ........ 9,007,380 15,350,640
Preferred stock and preferred membership units dividends payable.. -- 1,546,480
Deferred tax liability ........................................... 2,629,439 2,703,515
------------ ------------
25,656,482 38,546,271
------------ ------------
REDEEMABLE CONVERTIBLE PREFERRED STOCK
Redeemable convertible preferred stock Series A, B, C; ...........
4,103,750 shares designated; 4,089,463 shares outstanding at
March 31, 2006, liquidation preference of $ 33,326,484 ........... -- 28,447,683
------------ ------------
COMMITMENTS AND CONTINGENCIES (NOTE 14)
MINORITY INTERESTS .................................................. 1,939,517 2,674,731
------------ ------------
STOCKHOLDERS' EQUITY (DEFICIENCY)
Common stock, $.01 par value, 20,500,000 shares authorized,
12,009,741 and 3,106,666 shares issued and outstanding at
September 30, 2006 and March 31, 2006, respectively ........... 120,098 31,067
Additional paid in capital ....................................... 82,049,026 17,182,405
Accumulated deficiency ........................................... (51,687,027) (43,404,887)
Accumulated other comprehensive (loss)/income .................... (220,384) 166,940
------------ ------------
TOTAL STOCKHOLDERS' EQUITY (DEFICIENCY) .......................... 30,261,713 (26,024,475)
------------ ------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIENCY) ............. $ 57,857,712 $ 43,644,210
============ ============
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CASTLE BRANDS INC. AND SUBSIDIARIES
GEOGRAPHIC AND CATEGORY CASE SALES
THREE MONTHS ENDED SIX MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
------------------ ----------------
2006 2005 2006 2005
------ ------ ------- -------
TOTAL
United States 48,107 41,294 90,637 73,972
International 32,011 29,645 59,976 57,913
------ ------ ------- -------
Total 80,118 70,939 150,613 131,885
====== ====== ======= =======
VODKA
United States 15,343 12,534 29,709 22,990
International 23,829 18,952 43,327 40,283
------ ------ ------- -------
Total 39,172 31,486 73,036 63,273
------ ------ ------- -------
RUM
United States 19,180 15,412 34,920 30,443
International 3,942 3,579 8,065 6,680
------ ------ ------- -------
Total 23,122 18,991 42,985 37,123
------ ------ ------- -------
WHISKEY
United States 1,166 732 2,354 1,676
International 3,451 4,043 7,126 7,022
------ ------ ------- -------
Total 4,617 4,775 9,480 8,698
------ ------ ------- -------
LIQUEURS/CORDIALS
United States 12,418 12,616 23,654 18,863
International 789 3,071 1,458 3,928
------ ------ ------- -------
Total 13,207 15,687 25,112 22,791
------ ------ ------- -------
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