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Castle Brands Announces Fiscal 2012 Third Quarter Results

About Castle Brands Inc.

Castle Brands is a developer and international marketer of premium beverage alcohol brands including: Gosling's Rum ®, Jefferson's ®, Jefferson's Presidential Select TM and Jefferson's Reserve ® Bourbon, Boru ® Vodka, Pallini ® Limoncello, Raspicello and Peachcello, Knappogue Castle Whiskey ®, Clontarf ® Irish Whiskey, Betts & Scholl TM wines, cc: wines TM, Celtic Crossing ® Liqueur, Brady's ® Irish Cream, A. De Fussigny ® cognacs, Travis Hasse's Original ®Liqueurs, Tierras TM tequila and Betts & Scholl TM wines, including the CC: TM line of wines. Additional information concerning the Company is available on the Company's 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, 2011 and other reports we file 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.

   

CASTLE BRANDS INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Operations

(Unaudited)

 
Three months ended December 31, Nine months ended December 31,
2011   2010 2011   2010
Sales, net* $ 8,709,204 $ 8,719,754 $ 25,501,542 $ 23,048,823
Cost of sales* 5,499,113 5,994,034 16,252,323 15,073,438
Reversal of provision for obsolete inventory         (24,589 )
 
Gross profit   3,210,091   2,725,720   9,249,219   7,999,974
 
Selling expense 2,495,172 2,645,359 7,758,352 7,963,367
General and administrative expense 1,279,387 1,067,801 3,733,500 3,655,837
Depreciation and amortization   228,764   229,569   682,720   695,045
 
Loss from operations   (793,232 )   (1,217,009 )   (2,925,353 )   (4,314,275 )
 
Other income 957
Other expense (300 )
Gain (loss) from equity investment in non-consolidated affiliate 787 17,214 (16,562 ) 17,214
Foreign exchange loss (275,029 ) (118,578 ) (513,491 ) (172,824 )
Interest expense, net (131,708 ) (147,606 ) (485,980 ) (244,846 )
Net change in fair value of warrant liability (91,412 ) 93,613
Income tax benefit   37,038   37,038   111,114   111,114
 
Net loss (1,253,556 ) (1,428,941 ) (3,736,659 ) (4,602,960 )
Net loss (income) attributable to noncontrolling interests   19,294   (55,155 )   (185,285 )   (241,131 )
 
Net loss attributable to controlling interests   (1,234,262 )   (1,484,096 )   (3,921,944 )   (4,844,091 )
 
Dividend to preferred shareholders   (148,848 )     (528,235 )  
 
Net loss attributable to common shareholders $ (1,383,110 ) $ (1,484,096 ) $ (4,450,179 ) $ (4,844,091 )
 
Net loss per common share, basic and diluted, attributable to common shareholders $ (0.01 ) $ (0.01 ) $ (0.04 ) $ (0.05 )
 
Weighted average shares used in computation, basic and diluted, attributable to common shareholders   107,835,859   107,202,145   107,497,741   107,500,417
 

* Sales, net and Cost of sales include excise taxes of $1,227,204 and $1,229,257 for the three months ended December 31, 2011 and 2010, respectively, and $3,940,702 and $3,522,510 for the nine months ended December 31, 2011 and 2010, respectively.

 

CASTLE BRANDS INC. AND SUBSIDIARIES

Reconciliation of Net Loss to EBITDA, as adjusted

 
  Three months ended     Nine months ended
December 31, December 31,
2011   2010 2011     2010
Net loss attributable to common shareholders $ (1,383,110 ) $ (1,484,096 ) $ (4,450,179 ) $ (4,844,091 )
Adjustments:
Interest expense, net 131,708 147,606 485,980 244,846
Income tax benefit (37,038 ) (37,038 ) (111,114 ) (111,114 )
Depreciation and amortization   228,764   229,569   682,720   695,045
EBITDA (loss)   (1,059,676 )   (1,143,959 )   (3,392,593 )   (4,015,314 )
Allowance for doubtful accounts 8,024 (52,829 ) 26,058 (23,165 )
Allowance for obsolete inventory (24,589 )
Stock-based compensation expense 52,737 47,881 137,250 132,574
Other income (957 )
Other expense 300 300
Gain (loss) from equity investment in non-consolidated affiliate (787 ) (17,214 ) 16,562 (17,214 )
Foreign exchange loss 275,029 118,578 513,491 172,824
Net change in fair value of warrant liability 91,412 (93,613 )
Net income attributable to noncontrolling interests (19,294 ) 55,155 185,285 241,131
Dividend to preferred shareholders   148,848     528,235  
EBITDA, as adjusted   (503,707 )   (992,388 )   (2,079,325 )   (3,534,410 )




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