Drinks Americas Holdings, Ltd. (DKAM)

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Drinks Americas Announces Fiscal First Quarter 2009 Financial Results
Last update: 9/18/2008 1:58:01 PM
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In the first quarter of fiscal 2009, the Company achieved net sales of $1.1 million. The Company's Old Whiskey River Bourbon, Aguila Tequila and Damiana Liquor and international wine brands all continued to increase in sales versus last year. While shipments of Trump Vodka decreased in the quarter at the wholesale level, depletions (sales to retailers from wholesalers) continued to grow at an average rate of 12%.

The Company continues to execute a strategy of creating branded beverages in partnership with iconic figures that have significant trademark value and instant consumer recognition in the domestic US and International markets. In the coming week, the Company will provide further updates and conduct a conference call to outline iconic brand additions and developments, details of our coming cognac and sparkling vodka launch, expansion of Drinks Americas' brand portfolio through acquisition, key international market expansion and increased financial resources to accelerate our capacity to produce our products.

The Company has completed the development, formulation, packaging and branding for iconic branded entries into the cognac and newly emerging sparkling vodka categories. The Company now has almost 1,200 cases of cognac on order for the US prior to even commencing sales or exposing the brand and marketing to customers.

Following the cognac introduction, the Company will introduce a unique new line of 80-proof flavored and unflavored sparkling vodkas. The Company continues to focus substantial efforts to create valuable iconic trademark brands and to expand the distribution of its iconic beverages on an international basis. Drinks Americas will meet all the milestones it set for the addition of iconic brands this year and is well ahead of its plan on structuring international business relationships going forward as a foundation for expansion.

J. Patrick Kenny, CEO of the Company, stated, "A number of studies show that spirits brands can do particularly well in tough economic times. One such study was posted on Just-Drinks.com this week. Our iconic advantage in marketing and our economic advantage in creating brand awareness without costly advertising, position Drinks Americas to continue to succeed. Iconic brands we are introducing and international markets we are entering will dramatically grow the top line revenue of the Company. Our management team has continued to streamline costs and has done a good job managing economic pressures like shipping and glass costs that could have otherwise dramatically impacted our margins. Our strategy of creating premium branded beverages in partnership with icons continues to prove its foresight and long term viability, with great brand value creation enhanced by reduced capital requirements and the ability to leverage favorable production and supply contracts".

Comparison of First Quarter Fiscal 2009 with First Quarter Fiscal 2008

-- Net sales for the first quarter fiscal 2009 aggregated $1.1 million compared to $1.3 million for the first quarter of fiscal 2008. The decrease is predominantly due to the timing of the shipment of inventory and product sold to introduce Trump Vodka this time last year in the Texas market.

-- Trump Vodka depletions at the distributor level (sales to retailers) are tracking at +12%. Net sales (shipments to distributors) of Trump Vodka for the first quarter fiscal '09 aggregated $0.6 million compared to net sales of $0.8 million in shipments to distributors in the first quarter fiscal 2008. The launch of Trump Vodka in Texas in this period of July 2007 contributed to a greater proportion of sales for the first quarter fiscal 2008.

-- Net dollar sales for the first quarter fiscal 2009 were comprised 49 percent from Trump Vodka sales, 9 percent from Old Whiskey River Bourbon, 3 percent from Aguila Tequila, 7 percent from Damiana Liqueur, 7 percent from our international wines, and 25 percent from Newman's Own Sparkling Fruit Drinks and Sparkling Waters. Net sales for the first quarter fiscal 2008 were comprised 60 percent from Trump Vodka, 5 percent from Old Whiskey River, 2 percent from Aquila Tequila, 4 percent from Damiana Liqueur, 5 percent from international wines, and 24 percent from Newman's Own products.

-- For the first quarter fiscal 2009, net sales of Old Whiskey River increased 42 percent over the prior year ($96,000, compared to $68,000); net sales of our international wines increased 8 percent ($72,000 compared to $67,000); net sales of our Damiana Liqueur increased 61 percent ($74,000 compared to $46,000); Aguila Tequila increased 22 percent ($32,000 compared to $26,000); Newman's Own products decreased 14 percent ($273,000 compared to $318,000).

-- Gross profit margin for our wine and spirits business was 34.8 percent for the first quarter fiscal 2009 compared to 43.5 percent for the prior year due to increased shipping costs related to fuel, the dollar exchange rate with the Euro for purchases from Holland and price competition. Gross profit margin for our non-alcoholic business increased to 22.2 percent for the first quarter fiscal 2009 compared to 18.5 percent for the first quarter fiscal 2008. The increase in gross profit margin of our Newman's Own products is the result of increases in selling price the company took to offset shipping costs. Gross profit margin of our wines increased to 28.2 percent for the fist quarter fiscal 2009 compared to 24.2 percent for the first quarter fiscal 2008 due to a more targeted selection.

-- The reduced marketing and capital requirements for the brands to be introduced in the balance of the fiscal year and the higher margin structure of the categories Drinks is adding will further improve the Company margin structure and results. The Company also expects improved margins for its brands as a result of strategic planning and execution including (a) transferring additional glass production to China, (b) modifying bottle formats on our Newman's business, (c) implementing price increases and reducing price supports and (d) the cost of goods savings volume discounts will drive when the acquisition of Olifant is completed. These factors, combined with further manufacturing and sourcing improvements, will enable the Company to achieve continuously improving profit margins for all its brands.

-- Selling, General and Administrative Expenses totals declined 18.5% to $1.6 million for the first quarter fiscal 2009 compared to $2.0 million for the first quarter fiscal 2008. Selling and marketing expenses aggregated $0.8 million for the first quarter fiscal 2009 compared to $1.1 million first quarter fiscal 2008.

-- Selling and marketing costs are expected to continue to decrease further as we continue to reach "normalized" selling and marketing spending levels and our Icon partners deliver the bulk of our marketing support for introductions of new products. The marketing leverage the Company has with its forward going initiatives, and most importantly credit terms we have negotiated with our future suppliers and strategic production partners will further drive costs per case downward.

-- Interest expense was reduced to $24,000 for the first quarter fiscal 2009 compared to $53,000 for the first quarter fiscal 2008.

-- Net loss for the first quarter fiscal 2009 was $1.3 million, or $0.016 per share, compared to a net loss of $1.6 million, or $0.020 per share, for the first quarter fiscal 2008.

More information on the Company's quarterly results can be found in its 10-