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Drinks Americas Announces Fiscal Second Quarter 2009 Financial Results

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  Published in House and Home on Friday, December 19th 2008 at 12:02 GMT by Market Wire
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WILTON, Conn.--([ BUSINESS WIRE ])--Drinks Americas Holdings, Ltd. (OTC BB: DKAM) (the "Company"), a leading owner, developer and marketer of premium beverages, today announced financial results for its fiscal second quarter 2009.

Comparison of Three months ended October 31, 2008 to October 31, 2007

• In the second quarter of fiscal 2009 the Company's business was impacted by tightening credit terms of producers, particularly the Company's Dutch Vodka supplier Wanders, interruption of timely access to the Company's asset credit facility and the unplanned delay of the Company's planned launch of Cognac and Sparkling Vodka.
• The Company has taken steps to secure cash through a shareholder warrant conversion, to insure the continuation of production and supply of product and has resumed the timely access to its asset credit facility, resulting in significant shipments planned for the third quarter. The Company has started to sell and is shipping Cognac. Sparkling Vodka and Kid Rock Beer will ship in the third and fourth quarter.
• The acquisition of Olifant, a premium vodka and a product positioned in a lower consumer price bracket, will also close in the coming weeks, further positioning the Company to expand its business.
• Net sales reflecting shipments to wholesalers, but not direct reflection of retail sales, for the second quarter fiscal 2009 aggregated $0.6 million compared to $1.5 million for the second quarter of fiscal 2008. The decrease is predominantly due to inventory shortfalls and a short term interruption in the Company's access to its asset credit facility, and the impact of recent events in the credit market resulting in the tightening of supplier credit and finally the timing of certain product launches and shipments.
• Net dollar sales for the second quarter fiscal 2009 were comprised 49 percent from Trump Vodka sales, 8 percent from Old Whiskey River Bourbon, 2 percent from Aguila Tequila, 6 percent from Damiana Liqueur, 31 percent from our international wines, and 4 percent from Newman's Own Sparkling Fruit Drinks and Sparkling Waters. Net sales for the second quarter fiscal 2008 were comprised 52 percent from Trump Vodka, 13 percent from Old Whiskey River, 1 percent from Aquila Tequila, 3 percent from Damiana Liqueur, 18 percent from international wines, and 13 percent from Newman's Own products.
• Gross profit margin for our wine and spirits business, exclusive of our reserve for slow moving inventory, was 26.6 percent for the second quarter fiscal 2009 compared to 42.4 percent for the prior year. The decrease is due primarily to the strategic close out at deep discount of components of the companies wine business. A further reduction is due to the dollar exchange rate with the Euro for purchases from Holland, and a decrease in the percentage of direct import sales which resulted in increased freight costs and excise taxes.
• Selling, General and Administrative Expenses totals declined 46 percent to $1.1 million for the second quarter fiscal 2009 compared to $2.0 million for the second quarter fiscal 2008.
• Selling and marketing costs were reduced by 60% and are beginning to reach "normalized" per case selling and marketing spending. Selling and marketing expenses aggregated $0.4 million for the second quarter fiscal 2009 compared to $1.0 million second quarter fiscal 2008, a decrease of 60 percent. Marketing spend will continue to decrease as our Icon partners deliver the majority of our marketing support for introductions of new products.
• Interest expense was $35,000 for the second quarter fiscal 2009 compared to $64,000 for the second quarter fiscal 2008. The second quarter fiscal 2009 includes an additional accrual of $100,000, which is the result of a bank error in calculating interest by our lender Sovereign Bank on our working capital line from the inception of the line June 2006. The Company intends to vigorously contest the amount. We have accrued the full amount indicated by the lender.
• Net loss for the second quarter fiscal 2009 was $1.2 million, or $0.01 per share, compared to a net loss of $1.5 million, or $0.02 per share, for the second quarter fiscal 2008.

Comparison of Six months ended October 31, 2008 to October 31, 2007

• Net sales for the six months ended October 31, 2008 aggregated $1.7 million compared to $2.8 million for the six months ended of fiscal 2007. In addition to the temporary inventory shortfalls, net sales were also affected by issues relating to our California distributor, which are being corrected, and the launch of Trump Super Premium Vodka in Texas in July 2007 which contributed to greater sales during the six months ended October 31, 2007.
• Net dollar sales for the six months ended October 31, 2008 were comprised 49 percent from Trump Vodka sales, 9 percent from Old Whiskey River Bourbon, 3 percent from Aguila Tequila, 6 percent from Damiana Liqueur, 15 percent from our international wines, and 18 percent from Newman's Own Sparkling Fruit Drinks and Sparkling Waters. Net dollar sales for the six months ended October 31, 2007 were comprised 56 percent from Trump Vodka, 10 percent from Old Whiskey River, 1 percent from Aquila Tequila, 3 percent from Damiana Liqueur, 12 percent from international wines, and 18 percent from Newman's Own products.
• Gross profit margin for our wine and spirits business, exclusive of our reserve for slow moving inventory, was 29.4 percent for the six months ended October 31, 2008 compared to 38.5 percent for the prior year. The reduction is due to a decrease in the percentage of direct sales, the dollar exchange rate with the Euro for purchases from Holland and price competition. The aforementioned close-out of certain wines negatively affected our gross profit for the six months ended October 31, 2008. Gross profit margin for our non-alcoholic business increased to 19.4 percent for the six months ended October 31, 2008 compared to 18.6 percent for the six months ended October 31, 2007.
• Selling, General and Administrative Expenses totals declined $1.3 million or 32.4 percent to $2.7 million for the six months ended October 31, 2008 compared to $4.0 million for the six months ended October 31, 2007. Selling and marketing expenses were reduced $0.8 million for the six months ended October 31, 2008 compared to the six months ended October 31, 2007. Total selling and Marketing for first six months fiscal 2008 aggregated $1.2 million compared to $2.0 million for the six months ended October 31, 2007, a decrease of 40 percent.
• Interest expense for the six months ended October 31, 2008 quarter was $57,000. An additional charge of the aforementioned $100,000 cumulative adjustment has been accrued pending contesting of that cost. The interest expense for the six months ended October 31, 2007 was $116,000.
• Net loss for the six months ended October 31, 2008 decreased by .01 per share from the loss for the six months ended October 31, 2007. Net loss for the six months ended October 31, 2008 was $2.5 million, or $0.03 per share, compared to a net loss of $3.0 million, or $0.04 per share, for the six months ended October 31, 2007.

The Company recently released a shareholder letter outlining its developing business and addressing the expansion of Leyrat Cognac, Sparkling Vodka and Trump Vodka. The shareholder letter also reviewed the Company's international market expansion. The shareholder letter can be viewed at [ www.drinksamericas.com ] under Latest News section.

More information on the Company's quarterly results can be found in its 10-Q filing with the SEC.

About Drinks Americas

Drinks Americas develops, owns, markets, and nationally distributes alcoholic and non-alcoholic premium beverages associated with renowned icon celebrities. Drinks Americas' portfolio of premium alcoholic beverages includes Trump Super Premium Vodka and Willie Nelson's Old Whiskey River Bourbon. The Company's non-alcoholic brands include the distribution of Paul Newman's Own Lightly Sparkling Fruit Juice Drinks and Flavored Waters. The Company also has a venture with Universal Music's Interscope, Geffen, A&M Records to jointly develop Iconic beverage products for the market, as well as agreement to produce, market and distribute Kid Rock Beer.

Other products owned and distributed by Drinks Americas include award-winning Damiana Liqueur and Aguila Tequila from Mexico. Damiana, Old Whiskey River, and Aguila Tequila are Gold and Silver Medal award winners respectively from the International Beverage Tasting Institute and the San Francisco International Wine and Spirits Competition. For further information, please visit our website at [ www.drinksamericas.com ]

Drinks Americas was founded in 2004 by J. Patrick Kenny, a leading expert in beverage sales and marketing. Mr. Kenny developed his industry expertise in a variety of management positions at the world's leading beverage companies, including Joseph E. Seagram and Sons and The Coca-Cola Company. He has also acted as advisor to several Fortune 500 beverage marketing companies, and has participated in several beverage industry transactions.

Safe Harbor

Except for the historical information contained herein, the matters set forth in this press release, including the description of the Company and its product offerings, are forward-looking statements within the meaning of the "safe harbor" provision of the Private Securities Litigation Reform Act of 1995. These forward-looking statements are subject to risks and uncertainties that may cause actual results to differ materially, including the historical volatility and low trading volume of our stock, the risk and uncertainties inherent in the early stages of growth companies, the Company's need to raise substantial additional capital to proceed with its business, risks associated with competitors, and other risks detailed from time to time in the Company's most recent filings with the Securities and Exchange Commission. These forward-looking statements speak only as of the date hereof. The Company disclaims any intent or obligation to update these forward-looking statements.