Castle Brands reports fiscal Q3 net loss of US$477,000, compared with year-ago loss of US$1.3M, as net sales increase 21.8% to US$10.6M

Nevin Barich

NEW YORK , February 14, 2013 (press release) – Castle Brands Inc. (NYSE MKT: ROX), a developer and international marketer of premium and super-premium branded spirits, today reported financial results for the three and nine month periods ended December 31, 2012.

Operating highlights for the quarter ended December 31, 2012:

Net sales increased 21.8% to $10.6 million for the quarter ended December 31, 2012, as compared to $8.7 million for the comparable prior-year period

Total case sales of beverage alcohol products increased 19.4% to 96,599 cases compared to 80,888 cases in the prior-year period

Strong growth of the Jefferson’s bourbons and rye lead to a 66.4% increase in whiskey revenues from the prior-year period

Gosling’s Black Seal Rum exceeded 100,000 cases sold in the U.S. for the 12 months ended December 31, 2012

Gosling's Stormy Ginger Beer case sales increased 79.7% to 55,074 cases compared to 30,644 cases in the prior-year period

EBITDA, as adjusted, improved by 78.6% to a loss of ($0.1) million, compared to a loss of ($0.5) million for the three months ended December 31, 2011

“Castle Brands continued to deliver on the key elements of our plan. Case sales and revenues from our spirits brands increased strongly for the quarter and the year-to-date, well ahead of industry average. Cost containment continued to cause our operating margins to improve. As a result, cash consumed by operations, as measured by EBITDA, as adjusted, declined significantly,” stated Richard J. Lampen, President and Chief Executive Officer of Castle Brands.

“This is an exciting time for Castle Brands. We are particularly pleased with the increased penetration that Gosling’s Rums and Jefferson’s Bourbons continue to gain in key U.S. markets and we plan to boost the marketing programs, event sponsorships and promotions for these brands throughout the year. Furthermore, during the last nine months, our Irish portfolio, including our Irish whiskeys and Brady’s Irish Cream, achieved double digit year-over-year growth,” stated John Glover, Chief Operating Officer of Castle Brands. “During our fourth quarter, we will introduce Castello Mio, our new Sambuca, strengthening our liqueur portfolio.”

The Company had net sales of $10.6 million in the third quarter of fiscal 2013, an increase of 21.8% from $8.7 million in the comparable prior-year period. This sales growth was driven by increased rum and whiskey sales in the U.S. and international markets. Loss from operations was ($0.4) million for the three months ended December 31, 2012, an improvement of 44.3% from a loss of ($0.8) million for the comparable fiscal 2012 period. Including the ($0.2) million dividend accrued under the terms of the Series A Preferred Stock, the Company had a net loss attributable to common shareholders of ($0.8) million, or $(0.01) per basic and diluted share, in the fiscal 2013 third quarter, compared to a net loss attributable to common shareholders of ($1.4) million or $(0.01) per basic and diluted share, in the comparable fiscal 2012 period.

EBITDA, as adjusted, for the third 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 nine months ended December 31, 2012, the Company had net sales of $30.6 million, a 20.2% increase from $25.5 million in the prior-year period. Loss from operations was ($1.7) million for the nine months ended December 31, 2012, an improvement of 40.9% from a loss of ($2.9) million for the comparable fiscal 2012 period. Including the ($0.6) million dividend accrued under the terms of the Series A Preferred Stock, the Company had a net loss attributable to common shareholders of ($2.9) million, or $(0.03) per basic and diluted share, in the first nine months of fiscal, compared to a net loss attributable to common shareholders of ($4.5) million or $(0.04) per basic and diluted share, in the comparable fiscal 2012 period.

EBITDA, as adjusted, for the nine months ended December 31, 2012 improved to a loss of ($0.7) million, compared to a loss of ($2.1) 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 and obsolete inventory, 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 Company's 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 management's estimates, such as allowances for doubtful accounts and obsolete inventory, 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: Gosling's Rum®, Jefferson's®, Jefferson's Presidential SelectTM and Jefferson's Reserve® Bourbon, Boru® Vodka, Pallini® Limoncello, Raspicello and Peachcello, Knappogue Castle Whiskey®, Clontarf® Irish Whiskey, Betts & SchollTM wines, cc: winesTM, Celtic Crossing® Liqueur, Brady's® Irish Cream, A. De Fussigny® cognacs, Travis Hasse's Original®Liqueurs, TierrasTM tequila and the CC:TM line of wines. Additional information concerning the Company is available on the Company's website, www.castlebrandsinc.com.

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