Reed's Inc. Announces Second Quarter 2013 Results

Marketwired

LOS ANGELES, CA--(Marketwired - Aug 14, 2013) - Reed's, Inc. (NYSE MKT: REED) maker of the top-selling sodas in natural food stores nationwide today announced the financial results for its second quarter ended June 30, 2013.

Financial Highlights:

  • Revenues increased 22% in the second quarter to $9.5 million in 2013, compared to 2012. Six month revenues increased 23% to $17.6 million.
  • The Company sustained a one-time loss on a private label contract in the amount of $412,000 during the second quarter.
  • Gross profit decreased 9% to $2.5 million in the second quarter 2013. Without the one-time loss, gross profit would have increased at 6%.
  • Net loss for the 2013 second quarter was $494,000 compared to net income of $444,000 a year earlier.
  • Loss before non-cash items and finance costs (modified EBITDA) was $147,000 during the 2013 second quarter. (See EBITDA table at end of this release for further non-GAAP information).
  • Working capital at June 30, 2013 was $1.8 million, as compared to $2.3 million at December 31, 2012.

Operational Highlights:

  • Reed's Culture Club Kombucha sales volume increased by 75% in the 2nd quarter over the 1st quarter 2013
  • Reed's and Virgil's 12oz case volume continues to show increased demand and momentum delivering over 20% growth for the quarter
  • Reed's Culture Club Kombucha gains approval for distribution into over 1500 mainstream stores nationally
  • Reed's Culture Club Kombucha gains distribution in Sprouts Farmers Market, The Fresh Market, Giant Eagle, Natural Grocers by Vitamin Cottage, Bristol Farms, Lassen's and many more
  • Reed's and Virgil's gain distribution into WinCo Foods
  • Developed new national Canadian distribution partnership with Lassonde Inc.
  • Invested approximately $300,000 in plant improvements designed to increase productivity in the Los Angeles Brewery.

"All of our branded product categories are showing consistently strong growth," stated Chris Reed, Founder and CEO at Reed's Inc. "Demand for our brands outstripped our production capabilities leaving us short of our true potential for the quarter. We are working quickly to upgrade our operational efficiencies to capture all the increased demand from around the country we are presently experiencing. The investments that we've been making in rolling out our kombucha nationally are just starting to pay off, and we anticipate that rapid growth will continue in this category."

James Linesch, CFO at Reed's Inc. commented, "Our second quarter results were overshadowed by the loss reserve that we provided on a private label contract. Had that contract been completed as planned, our revenues for the quarter would have been close to $10 million and we would have posted profits for the quarter."

The Company will conduct a conference call @ 4:15PM EDT on August 14th to discuss its 2013 second quarter 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) 240-5139. 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 markets and supermarkets nationwide. 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. 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 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.
CONDENSED STATEMENTS OF OPERATIONS
For the Three and Six Months Ended June 30, 2013 and 2012
(Unaudited)
 
    Three months ended June 30,     Six months ended June 30,  
    2013     2012     2013     2012  
Sales   $ 9,519,000     $ 7,831,000     $ 17,645,000     $ 14,370,000  
Cost of tangible goods sold     6,630,000       4,774,000       11,629,000       9,018,000  
Cost of goods sold - idle capacity     432,000       360,000       1,024,000       670,000  
                                 
    Gross profit     2,457,000       2,697,000       4,992,000       4,682,000  
                                 
Operating expenses:                                
Delivery and handling expenses     954,000       585,000       1,860,000       1,064,000  
Selling and marketing expense     960,000       699,000       1,840,000       1,421,000  
General and administrative expense     912,000       805,000       1,900,000       1,545,000  
  Total operating expenses     2,826,000       2,089,000       5,600,000       4,030,000  
                                 
    Income (loss) from operations     (369,000 )     608,000       (608,000 )     652,000  
                                 
Interest expense     (125,000 )     (164,000 )     (289,000 )     (332,000 )
                                 
Net income (loss)     (494,000 )     444,000       (897,000 )     320,000  
                                 
Preferred stock dividends     (5,000 )     (23,000 )     (5,000 )     (32,000 )
Net income (loss) attributable to common stockholders   $ (499,000 )   $ 421,000     $ (902,000 )   $ 288,000  
                                 
Income (loss) per share available to common stockholders, basic   $ (0.04 )   $ 0.04     $ (0.07 )   $ 0.03  
Weighted average number of shares outstanding - basic     12,543,983       11,041,558       12,413,958       10,981,317  
Income (loss) per share available to common stockholders, diluted   $ (0.04 )   $ 0.04     $ (0.07 )   $ 0.02  
Weighted average number of shares outstanding - diluted     12,543,983       11,940,343       12,413,958       11,647,148  
                                 
                                 
                                 
MODIFIED EBITDA SCHEDULE
    Three Months Ended June 30,
    2013     2012
Net (loss) income   $ (494,000 )   $ 444,000
               
Modified EBITDA adjustments:              
Depreciation and amortization     153,000       189,000
Interest expense     125,000       164,000
Stock option compensation     69,000       29,000
Other stock compensation for services     -       5,000
  Total EBITDA adjustments     347,000       387,000
               
Modified EBITDA (loss) income from operations   $ (147,000 )   $ 831,000
               
    Six Months Ended June 30,
    2013     2012
Net income (loss)   $ (897,000 )   $ 320,000
               
Modified EBITDA adjustments:              
Depreciation and amortization     298,000       372,000
Interest expense     289,000       332,000
Stock option compensation     188,000       55,000
Other stock compensation for services     5,000       20,000
  Total EBITDA adjustments     780,000       779,000
               
Modified EBITDA (loss) income from operations   $ (117,000 )   $ 1,099,000
               
               
               

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.
CONDENSED BALANCE SHEETS
 
    June 30,
2013
    December 31,
2012
 
ASSETS   (unaudited)        
Current assets:                
  Cash   $ 816,000     $ 1,163,000  
  Inventory     6,385,000       5,794,000  
    Trade accounts receivable, net of allowance for doubtful accounts and returns and discounts of $365,000 and $399,000, respectively    
3,235,000
     
1,961,000
 
  Prepaid inventory     330,000       201,000  
  Prepaid and other current assets     295,000       212,000  
  Total Current Assets     11,061,000       9,331,000  
                 
Property and equipment, net of accumulated depreciation of $2,600,000 and $2,351,000, respectively    
3,472,000
     
3,422,000
 
Brand names     1,029,000       1,029,000  
Deferred financing fees, net of amortization of $49,000 and $26,000, respectively     31,000       54,000  
  Total assets   $ 15,593,000     $ 13,836,000  
                 
LIABILITIES AND STOCKHOLDERS' EQUITY                
Current Liabilities:                
  Accounts payable   $ 4,730,000     $ 3,368,000  
  Accrued expenses     154,000       233,000  
  Dividends payable     5,000       74,000  
  Line of credit     4,072,000       3,023,000  
  Current portion of long term financing obligation     100,000       90,000  
  Current portion of capital leases payable     80,000       69,000  
  Current portion of term loan     155,000       176,000  
  Total current liabilities     9,296,000       7,033,000  
                 
Long term financing obligation, less current portion, net of discount of $550,000 and $576,000, respectively    
2,181,000
     
2,208,000
 
Capital leases payable, less current portion     67,000       98,000  
Term loan, less current portion     556,000       399,000  
  Total Liabilities     12,100,000       9,738,000  
                 
Commitments and contingencies                
Stockholders' equity:                
    Series A Convertible Preferred stock, $10 par value, 500,000 shares authorized, 10,411 and 10,411 shares issued and outstanding, respectively    
104,000
     
104,000
 
    Series B Convertible Preferred stock, $10 par value, 500,000 shares authorized, 0 and 45,062 shares issued and outstanding, respectively     -       456,000  
    Common stock, $.0001 par value, 19,500,000 shares authorized, 12,666,117 and 12,084,673 shares issued and outstanding, respectively     1,000       1,000  
  Additional paid in capital     24,749,000       23,996,000  
  Accumulated deficit     (21,361,000 )     (20,459,000 )
  Total stockholders' equity     3,493,000       4,098,000  
  Total liabilities and stockholders' equity   $ 15,593,000     $ 13,836,000  
                 

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