Reed's Inc. Announces Year-End 2013 Results
LOS ANGELES, CA--(Marketwired - Mar 25, 2014) - Reed's, Inc. (NYSE MKT: REED), maker of the top-selling sodas in natural food stores nationwide, today announced the financial results for its fiscal year ending December 31, 2013.
Financial Highlights for the Year:
Gross revenues increased 28% to $42.2 million in 2013, compared to 2012. Net revenues increased 24% to $37.3 million in 2013.
Gross profit increased 18% to $10.8 million in 2013.
Earnings before non-cash items and finance costs (modified EBITDA) decreased $1 million during 2013 to $13,000. (See modified EBITDA schedule at end of this release for further non-GAAP information).
Net loss for the 2013 fiscal year was $1,520,000 compared to a loss of $524,000 a year earlier.
Working capital at December 31, 2013 was $1.3 million, as compared to $2.3 million at December 31, 2012.
Increased the credit limit on our revolving line of credit from $4 million to $4.5 million
Operational Highlights:
Began production/shipment of four new flavors of Reed's Culture Club Kombucha: Coconut Water Lime, Cabernet Grape, Pomegranate Ginger and Mango Passion Ginger
Opened up kombucha markets with mainstream DSD distributors in the Midwest, NY Metro Market, Maryland, San Francisco, Pacific Northwest and Southeast markets
Gained kombucha distribution in Kroger, Wegmans, Fresh Market, Giant Eagle, and JewelOsco Supermarket Chains
Started selling Reed's and Virgil's to WinCo Foods
Established a distribution relationship with Lassonde, one of Canada's largest food companies
Moved to the NYSE MKT from NASDAQ
Continued Los Angeles plant upgrades designed to increase capacity and efficiency
Announced that all of Reed's, Inc. products are GMO free
Promoted Reed's Ginger Brews through MindGardens organic gardening for inner city youth project with Snoop Dogg and his 22 million Facebook followers
Partnered with Life is Good company as a sponsor at their annual fundraising concert series attended by 30,000
"Another solid year of growth here at Reed's," stated Chris Reed, Founder and CEO at Reed's, Inc. "Our Reed's Culture Club Kombucha became the number two Kombucha line in the country in its first full year and we launched four more flavors to great response. We also expanded sales and distribution channels for our Reed's Ginger Brew and Virgil's branded products. We continue to fine tune our production model for our products which should continue to improve the economics of making our products. We have initiated programs to evaluate the performance of our different marketing efforts and expect to see smarter, more focused marketing spends with less top line discounting. We expect 2014 to be another great year."
David Williams, Interim Chief Financial Officer, stated, "We are focused on driving improved results in key areas. Our beverage products continued to achieve strong organic growth rates and led to an 18% increase in gross margin dollars. During 2013, our direct gross margin percentage, before promotional discounts, improved by an average of 150 basis points. Driven by economies of scale, general & administrative costs were 9.4% of net revenue -- a 140 basis point improvement from 10.8% in the prior year. Sales and marketing costs in 2013 were approximately 11.2% of net revenues, an increase from 10.5% in 2012 as we focused on additional distribution channels and increased distribution of our Kombucha product line. Our organizational structure is healthy and we have excellent brands that we are promoting in effective ways."
Mr. Williams continued, "Working capital was $1,347,000 at year-end, a decrease of nearly $1 million from 2012. This decrease in working capital is attributable to net losses, pay downs on long-term debt and increases to our inventory levels. Currently, we have ample capital for operations. Our forecasts show that by the end of the year we will have significantly replenished our working capital. Another important way we are increasing our working capital is by reducing the trade spend that erodes our top line. In 2013, nearly $5 million was spent out of gross sales for trade discounts in the aggressive launch of our new Kombucha line. In 2014, we are focusing on reducing this spend and evaluating which programs are more effective at building our brands and stimulating growth. We made significant advances to reduce our production costs by 2% in 2013, which offset our 3% top line margin erosion and resulted in a 1% gross margin loss over 2012. Through managing inventory levels and marketing discounts, we believe the business will achieve an increase to its working capital of over $2 million in 2014. We believe there is no current necessity to approach the capital markets to improve our liquidity."
The Company will conduct a conference call at 4:30 PM EDT on March 25th to discuss its 2013 fiscal year end results and outlook for the future. To participate in the call, please dial the following number 5 to 10 minutes prior to the scheduled call time: (866) 578-1005. International callers should dial (713) 481-0091.
A replay will be available within a few days after the meeting in the investor relations section of the Company's website at: http://www.reedsinc.com/investors/.
About Reed's, Inc.
Reed's, Inc. makes the top-selling natural sodas in the natural foods industry sold in over 13,000 natural food and mainstream supermarkets nationwide. In addition, Reed's products can be found in convenience stores, bars, restaurants and gourmet retailers. The company's products can also be found in Canada, Mexico and other international markets. 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 a top-selling cola line in natural foods, the China Cola product line. In 2012, the Company launched Reed's Culture Club Kombucha line of organic live beverages. Other product lines include: Reed's Ginger Candies and Reed's Ginger Ice Creams. In 2009, Reed's started producing private label natural beverages for select national 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 https://www.facebook.com/ReedsGingerBrew
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-K 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.
REED'S, INC. | |||||||||
STATEMENTS OF OPERATIONS | |||||||||
For the Years Ended December 31, 2013 and 2012 | |||||||||
2013 | 2012 | ||||||||
Sales, net | $ | 37,281,000 | $ | 30,007,000 | |||||
Cost of goods sold | 26,487,000 | 20,863,000 | |||||||
Gross profit | 10,794,000 | 9,144,000 | |||||||
Operating expenses: | |||||||||
Delivery and handling expenses | 3,977,000 | 2,634,000 | |||||||
Selling and marketing expenses | 4,180,000 | 3,145,000 | |||||||
General and administrative expenses | 3,506,000 | 3,229,000 | |||||||
Total operating expenses | 11,663,000 | 9,008,000 | |||||||
Income (loss) from operations | (869,000 | ) | 136,000 | ||||||
Interest expense | (651,000 | ) | (660,000 | ) | |||||
Net loss | (1,520,000 | ) | (524,000 | ) | |||||
Preferred stock dividend | (5,000 | ) | (45,000 | ) | |||||
Net loss attributable to common stockholders | $ | (1,525,000 | ) | $ | (569,000 | ) | |||
Loss per share attributable to common stockholders - basic and diluted | $ | (0.12 | ) | $ | (0.05 | ) | |||
Weighted average number of shares outstanding - basic and diluted | 12,541,074 | 11,361,053 | |||||||
MODIFIED EBITDA SCHEDULE | |||||||||
Year ended December 31, | |||||||||
2013 | 2012 | ||||||||
(unaudited) | (unaudited) | ||||||||
Net loss | $ | (1,520,000 | ) | $ | (524,000 | ) | |||
Modified EBITDA adjustments: | |||||||||
Depreciation and amortization | 550,000 | 738,000 | |||||||
Interest expense | 651,000 | 660,000 | |||||||
Stock option and warrant compensation | 327,000 | 107,000 | |||||||
Other stock compensation for services and finance fees | 5,000 | 23,000 | |||||||
Total EBITDA adjustments | 1,533,000 | 1,528,000 | |||||||
Modified EBITDA income from operations | $ | 13,000 | $ | 1,004,000 | |||||
The Company defines modified EBITDA (a non-GAAP measurement) as net loss before interest, taxes, depreciation and amortization, and non-cash expense paid with company 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. | ||||||
BALANCE SHEETS | ||||||
December 31, | December 31, | |||||
ASSETS | ||||||
Current assets: | ||||||
Cash | $ 1,104,000 | $ 1,163,000 | ||||
Inventory | 6,293,000 | 5,794,000 | ||||
Trade accounts receivable, net of allowance for doubtful accounts and returns and discounts of $324,000 and $399,000, respectively |
|
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Prepaid inventory | 256,000 | 201,000 | ||||
Prepaid and other current assets | 178,000 | 212,000 | ||||
Total Current Assets | 9,974,000 | 9,331,000 | ||||
Property and equipment, net of accumulated depreciation of $2,796,000 and $2,351,000, respectively | 3,686,000 | 3,422,000 | ||||
Brand names | 1,029,000 | 1,029,000 | ||||
Deferred financing fees, net of amortization of $40,000 and $26,000, respectively | 60,000 | 54,000 | ||||
Total assets | $ 14,749,000 | $ 13,836,000 | ||||
LIABILITIES AND STOCKHOLDERS' EQUITY | ||||||
Current Liabilities: | ||||||
Accounts payable | $ 3,612,000 | $ 3,368,000 | ||||
Accrued expenses | 136,000 | 233,000 | ||||
Dividends payable | - | 74,000 | ||||
Line of credit | 4,524,000 | 3,023,000 | ||||
Current portion of long term financing obligation | 111,000 | 90,000 | ||||
Current portion of capital leases payable | 79,000 | 69,000 | ||||
Current portion of term loan | 165,000 | 176,000 | ||||
Total current liabilities | 8,627,000 | 7,033,000 | ||||
Long term financing obligation, less current portion, net of discount of $526,000 and $576,000, respectively | 2,147,000 | 2,208,000 | ||||
Capital leases payable, less current portion | 106,000 | 98,000 | ||||
Term loan, less current portion | 482,000 | 399,000 | ||||
Total Liabilities | 11,362,000 | 9,738,000 | ||||
Commitments and contingencies | ||||||
Stockholders' equity: | ||||||
Series A Convertible Preferred stock, $10 par value, 500,000 shares authorized, 9,411 and 10,411 shares issued and outstanding, respectively |
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| ||||
Series B Convertible Preferred stock, $10 par value, 500,000 shares authorized, no shares issued and outstanding at December 31, 2013, 45,602 shares issued and outstanding at December 31, 2012. | - | 456,000 | ||||
Common stock, $.0001 par value, 19,500,000 shares authorized, 12,922,832 and 12,084,673 shares issued and outstanding, respectively | 1,000 | 1,000 | ||||
Additional paid in capital | 25,276,000 | 23,996,000 | ||||
Accumulated deficit | (21,984,000) | (20,459,000) | ||||
Total stockholders' equity | 3,387,000 | 4,098,000 | ||||
Total liabilities and stockholders' equity | $ 14,749,000 | $ 13,836,000 | ||||
