Reed's, Inc. (NASDAQ: REED) (OTCBB: REEDP), maker of the
top-selling sodas in natural food stores nationwide, today
announced its financial results for its first fiscal quarter ended
March 31, 2011.
Financial Highlights:
-- First quarter sales increased 28% to $5.1 million
-- Gross profit was 28% of sales during the first quarter, as compared to
34% in 2010
-- Operating expenses increased by 9% in the quarter due primarily to
increased delivery and handling costs
-- Modified EBITDA for the first quarter 2011 was $30,000, as compared to
$171,000 in the first quarter of 2010. (See EBITDA table at end of this
release for further non-GAAP information)
-- Net loss for the quarter was $365,000, or $0.04 per share, compared to
$273,000 a year earlier
-- Working capital at March 31, 2011 was $2.2 million, as compared to $1.8
million at December 31, 2010
-- Cash availability was $1.0 million at September 30, 2010, as compared
to $1.1 million at December 31, 20010
First Quarter Operational Highlights:
-- Completed rollout of new ZERO line of Virgil's Stevia-sweetened diet
sodas with total diet sales increasing by over 50% from the prior year
-- Gained Safety Quality in Foods (SQF) certification for the Los Angeles
plant.
-- Opened up new markets with mainstream DSD distributors in Southern
California, Georgia, Arizona and Florida
-- Expanded Virgil's line through a co-developed Virgil's Sparkling 100%
Juice brand, featured in 3 flavors. This new line launched exclusively
with one of the largest natural retail companies in the US.
-- Created new Virgil's "all-natural" line extension flavor with a launch
scheduled for June 2011 (Q2)
-- Reed's & Virgil's Expands presence on College Campuses. University of
Texas, Miami University in Oxford, OH and San Francisco State
University
"Our double-digit growth has averaged about 35% over the past
five quarters," stated Chris Reed, Founder, Chairman and CEO of
Reed's, Inc. "We are seeing an expansion of opportunities for both
near and long term with no end in sight. During the quarter, we
gained SQF compliance for our plant, immediately increasing the
customers for our private label production. We also completed and
are about to introduce a new Virgil's soda line extension, in both
regular and ZERO. We are continuing to innovate while we rapidly
build our base of business. 2011 is just getting going."
Neal Cohane, Reed's Senior Vice President of Sales and Marketing
states, "We continue to build demand for our brands, delivering
another quarter of double digit volume increases. While our
strength and longevity are well established in the natural foods
grocery channel, we are still driving organic growth as reflected
in our performance. Coupled with these gains is our success in
delivering new incremental volume in DSD distribution and
mainstream grocery stores. First quarter saw a renewed focus in our
social media campaigns through Facebook & Twitter. These new
media tools will be critical in our communication to the all
important youth market that is just discovering the Reed's &
Virgil's brands. Over 100,000 college students can now pick up a
Reed's or Virgil's on their campuses at the University of Texas,
Miami University in Oxford, Ohio, and San Francisco State
University. Momentum continues to build and the team continues to
drive expansion throughout the U.S."
"Our gross profit decrease is due to three factors of roughly
equal impact," stated James Linesch, Reed's chief financial
officer. "First, our ingredient and packaging costs have increased
during the past few quarters, a challenge impacting our entire
industry. We are taking measures to mitigate these increases
through collective buying and better sourcing. We are also making
selective price increases. Second, our promotions are up from the
prior year as a percentage of sales, which is a deduction from
revenues. This represents opportunistic promotional activities, as
described by Neal above. Third, our plant utilization was off,
causing more fixed costs that were not allocated to product costs.
This was mostly due to down time for the conversion of the plant to
SQF standards, and we anticipate improvements in future quarters.
Based on changes enacted in all three of these areas, we are
already seeing margin improvements that we anticipate will continue
for the remainder of the year."
James Linesch concluded, "We are pleased to introduce a new
income statement format this quarter that provides investors with
much more transparency and comparability of our results to other
companies in our industry. We have moved delivery and handling
costs to operating expenses, an industry standard policy, and have
broken out our cost of goods sold between tangible product costs
and other operating costs. By separating these three categories, we
are providing readers with a much deeper insight to our
results."
See financial statements and EBITDA schedule at the end of this
release.
Conference Call
The Company will conduct a conference call at 4:15 p.m. Eastern
Daylight Time on Monday, May 16th, 2011 to discuss its 2011 1st QT
results and outlook for the rest 2011. To participate in the call,
please dial the following number five to ten minutes prior to the
scheduled call time: 605-562-3000. International callers should
dial 001-605-562-3000. The conference ID for this call is 1019143#.
Conference call will be recorded and be available on
www.reedsinc.com
About Reed's, Inc.
Reed's, Inc. makes the top selling natural sodas in the natural
foods industry sold in over 10,500 natural food markets and
supermarkets nationwide. In 2009, Reed's started producing Private
Label natural beverages for select national chains. Its six
award-winning non-alcoholic Ginger Brews are unique in the beverage
industry, being brewed, not manufactured and using fresh ginger,
spices and fruits in a brewing process that predates commercial
soft drinks. The Company owns the top selling root beer line in
natural foods, the Virgil's Root Beer product line, and the top
selling cola line in natural foods, the China Cola product line.
Recently, Reed's introduced its Reed's All Natural Ginger Nausea
Relief product for the over-the-counter stomach aisle for all
retail channels and acquired the Sonoma Sparkler brand, a sparkling
juice celebration drink with an established customer base. Other
product lines include: Reed's Ginger Candies and Reed's Ginger Ice
Creams.
Reed's products are sold through specialty gourmet and natural
food stores, mainstream supermarket chains, retail stores and
restaurants nationwide, and in Canada, as well as through private
label relationships with major supermarket chains. For more
information about Reed's, please visit the company's website at:
http://www.reedsinc.com or call 800-99-REEDS.
Follow Reed's on Twitter at
http://twitter.com/reedsgingerbrew
Reed's Facebook Fan Page at:
http://www.facebook.com/pages/Reeds-Ginger-Brew-and-Virgils-Natural-Sodas/57143529039?ref=nf
SAFE HARBOR STATEMENT
Some portions of this press release, particularly those
describing Reed's goals and strategies, contain "forward-looking
statements." These forward-looking statements can generally be
identified as such because the context of the statement will
include words, such as "expects," "should," "believes,"
"anticipates" or words of similar import. Similarly, statements
that describe future plans, objectives or goals are also
forward-looking statements. While Reed's is working to achieve
those goals and strategies, actual results could differ materially
from those projected in the forward-looking statements as a result
of a number of risks and uncertainties. These risks and
uncertainties include difficulty in marketing its products and
services, maintaining and protecting brand recognition, the need
for significant capital, dependence on third party distributors,
dependence on third party brewers, increasing costs of fuel and
freight, protection of intellectual property, competition and other
factors, any of which could have an adverse effect on the business
plans of Reed's, its reputation in the industry or its expected
financial return from operations and results of operations. In
light of significant risks and uncertainties inherent in
forward-looking statements included herein, the inclusion of such
statements should not be regarded as a representation by Reed's
that they will achieve such forward-looking statements. For further
details and a discussion of these and other risks and
uncertainties, please see our most recent reports on Form 10-KSB
and Form 10-Q, as filed with the Securities and Exchange
Commission, as they may be amended from time to time. Reed's
undertakes no obligation to publicly update any forward-looking
statement, whether as a result of new information, future events,
or otherwise.
-- FINANCIAL TABLES FOLLOW --
REED'S, INC.
CONDENSED STATEMENTS OF OPERATIONS
For the Three Months Ended March 31, 2011 and 2010
(Unaudited)
Three months ended March 31,
----------------------------
2011 2010
------------- -------------
Sales $ 5,140,000 $ 4,012,000
Cost of tangible goods sold 3,321,000 2,388,000
Cost of goods sold - idle capacity 402,000 241,000
------------- -------------
Gross profit 1,417,000 1,383,000
------------- -------------
Operating expenses:
Delivery and handling expenses 388,000 317,000
Selling and marketing expense 580,000 524,000
General and administrative expense 655,000 652,000
------------- -------------
Total operating expenses 1,623,000 1,493,000
------------- -------------
Loss from operations (206,000) (110,000)
Interest expense (159,000) (149,000)
------------- -------------
Net loss (365,000) (259,000)
Preferred stock dividend (11,000) (14,000)
------------- -------------
Net loss attributable to common
stockholders $ (376,000) $ (273,000)
============= =============
Loss per share available to common
stockholders - basic and diluted $ (0.04) $ (0.03)
============= =============
Weighted average number of shares outstanding
- basic and diluted 10,619,242 9,834,696
============= =============
MODIFIED EBITDA SCHEDULE
Three Months Ended
March 31,
----------------------
2011 2010
---------- ----------
Net loss $ (365,000) $ (259,000)
---------- ----------
Modified EBITDA adjustments:
Depreciation and amortization 144,000 148,000
Interest expense 159,000 149,000
Stock option compensation 50,000 57,000
Other stock compensation for services 42,000 76,000
---------- ----------
Total EBITDA adjustments 395,000 430,000
---------- ----------
Modified EBITDA income from operations $ 30,000 $ 171,000
========== ==========
The Company defines modified EBITDA (a non-GAAP measurement) as net loss
before interest, taxes, depreciation and amortization, and non-cash expense
for securities. Other companies may calculate modified EBITDA differently.
Management believes that the presentation of modified EBITDA provides a
measure of performance that approximates cash flow before interest expense,
and is meaningful to investors.
REED'S, INC.
CONDENSED BALANCE SHEETS
March 31, December 31,
2011 2010
------------ -------------
ASSETS (unaudited)
Current assets:
Cash $ 1,024,000 $ 1,084,000
Inventory 4,157,000 4,555,000
Trade accounts receivable, net of
allowance for doubtful accounts and
returns and discounts of $105,000 and
$105,000, respectively 1,568,000 1,295,000
Prepaid inventory 146,000 138,000
Prepaid and other current assets 49,000 78,000
------------- -------------
Total Current Assets 6,944,000 7,150,000
Property and equipment, net of accumulated
depreciation of $1,300,000 and $1,178,000,
respectively 3,695,000 3,650,000
Brand names 1,029,000 1,029,000
Deferred financing fees, net of amortization
of $17,000 and $8,000, respectively 37,000 47,000
------------- -------------
Total assets $ 11,705,000 $ 11,876,000
============= =============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable $ 2,078,000 $ 2,586,000
Accrued expenses 144,000 162,000
Dividends payable 53,000 44,000
Recycling fees payable 294,000 325,000
Line of credit 2,035,000 2,038,000
Current portion of long term financing
obligation 59,000 55,000
Current portion of capital leases payable 41,000 39,000
Current portion of note payable 44,000 71,000
------------- -------------
Total current liabilities 4,748,000 5,320,000
Long term financing obligation, less current
portion, net of discount of $664,000 and
$677,000, respectively 2,265,000 2,268,000
Capital leases payable, less current portion 135,000 146,000
------------- -------------
Total Liabilities 7,148,000 7,734,000
------------- -------------
Commitments and contingencies
Stockholders' equity:
Series A Convertible Preferred stock, $10
par value, 500,000 shares authorized,
46,621 shares issued and outstanding 466,000 466,000
Series B Convertible Preferred stock, $10
par value, 500,000 shares authorized,
81,866 and 85,766 shares issued and
outstanding, respectively 819,000 858,000
Common stock, $.0001 par value, 19,500,000
shares authorized, 10,808,091 and
10,446,090 shares issued and outstanding,
respectively 1,000 1,000
Additional paid in capital 22,531,000 21,701,000
Accumulated deficit (19,260,000) (18,884,000)
------------- -------------
Total stockholders' equity 4,557,000 4,142,000
------------- -------------
Total liabilities and stockholders'
equity $ 11,705,000 $ 11,876,000
============= =============
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