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Reed's Inc. : Continues Profitable Growth

11/15/2012 | 01:39pm US/Eastern

Reed's Inc. Continues Profitable Growth

LOS ANGELES, CA -- (Marketwire) -- 11/14/12 -- Reed's, Inc. (NASDAQ: REED), maker of the top-selling sodas in natural food stores nationwide, today announced the financial results for its third fiscal quarter ending September 30, 2012.

Financial Highlights for the Quarter:

  • Revenues increased 23% to $7.9 million in 2012, compared to 2011.
  • Gross profit increased to $2.5 million in 2012, an increase of 21% from 2011.
  • Earnings before non-cash items and finance costs (modified EBITDA) increased to $395,000 during 2012, as compared to $269,000 in the prior year period (See EBITDA table at end of this release for further non-GAAP information).
  • Net income for the 2012 second quarter was $22,000 compared to a loss of $175,000 a year earlier.
  • Working capital at June 30, 2012 was $3.2 million, as compared to $2.7 million at December 31, 2011.

Operational Highlights:

  • Volume of branded Reed's and Virgil's products shipped grew at a rate of 16% versus same quarter prior year and is up over 20% YTD over last year.
  • New distribution partnership with Central Beverage of Chicago.
  • New distribution arrangement with Geyser Beverage of the Greater San Francisco Bay area market.
  • Expanded Reed's and Virgil's into Tops Friendly Markets located upstate NY and PA.
  • New distribution agreement with Zip Beverage of Montana.
  • Secured three new private label brand contracts with some of the largest retailers in the US.
  • Introduced Reed's and Virgil's products to the Asian market attending the Natural Products Expo Asia show for first time.
  • Reed's introduces Culture Club Kombucha in Baltimore, MD, becoming a title sponsor of Natural Products Show Expo East and sampling more than 10,000 retailers, distributors and attendees.
  • Gained Culture Club Kombucha distribution into a minimum of 800+ new retailers throughout the US and into select Whole Foods regions with more to come.
  • Snoop Lion Partners With Reed's Ginger Brew and Causes.com to Raise Awareness for the Mind Gardens Project in Jamaica.
  • Continued Los Angeles plant upgrades designed to increase capacity and efficiency, including doubling tank capacity to accommodate fast expansion of the new Kombucha line.

"We have now expanded our business at over 20% for the last twelve quarters. Brand growth continues to be the main driver for this expansion. Our recent launch of Reed's Culture Club Kombucha has taken off and could possibly be our biggest growth driver for 2013 and beyond. We have set our goal at being the number one or two in this $250-300 million fast growing Kombucha category," stated Chris Reed, Founder and CEO at Reed's Inc.

Chris Reed further commented, "Additionally, our private label business is accelerating as we become more accepted as a reliable supplier. Revenues from private label brands grew twofold over same quarter prior year due to the development of two new partnerships with national retail chains."

James Linesch, Chief Financial Officer, stated, "Our business has continued its healthy organic expansion in the third quarter. Gross margins on our branded products improved slightly over last year and gross margins on our private label products are running about 5% higher than last year. Our kombucha launch has involved an increase in production costs as well as promotional costs, both of which affected our overall margins and profitability in the quarter. As our kombucha rollout progresses, however, these start-up costs will come down. We anticipate that all of our product lines will contribute strong net margins in 2013."

The Company will conduct a conference call @ 4:15PM EST today, November 14th, to discuss its 2012 third 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/investor-relations/.

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 the top-selling cola line in natural foods, the China Cola product line.

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


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.
      For the Three and Nine Months Ended September 30, 2012 and 2011

                            Three months ended         Nine months ended
                               September 30,             September 30,
                         ------------------------  ------------------------
                             2012         2011         2012         2011
                         -----------  -----------  -----------  -----------
Sales                    $ 7,888,000  $ 6,400,000  $22,258,000  $17,731,000
Cost of tangible goods
 sold                      4,810,000    3,970,000   13,691,000   11,053,000
Cost of goods sold -
 idle capacity               621,000      405,000    1,428,000    1,300,000
                         -----------  -----------  -----------  -----------

  Gross profit             2,457,000    2,025,000    7,139,000    5,378,000
                         -----------  -----------  -----------  -----------

Operating expenses:
Delivery and handling
 expenses                    763,000      587,000    1,827,000    1,519,000
Selling and marketing
 expense                     818,000      570,000    2,239,000    1,751,000
General and
 administrative expense      693,000      867,000    2,238,000    2,198,000
                         -----------  -----------  -----------  -----------
  Total operating
   expenses                2,274,000    2,024,000    6,304,000    5,468,000
                         -----------  -----------  -----------  -----------

  Income (loss) from
   operations                183,000        1,000      835,000      (90,000)

Interest expense            (161,000)    (175,000)    (493,000)    (504,000)
                         -----------  -----------  -----------  -----------

Net income (loss)             22,000     (174,000)     342,000     (594,000)

Preferred stock
 dividends                    (8,000)     (11,000)     (39,000)     (55,000)
                         -----------  -----------  -----------  -----------
Net income (loss)
 attributable to common
 stockholders            $    14,000  $  (185,000) $   303,000  $  (649,000)
                         ===========  ===========  ===========  ===========

Income (loss) per share
 available to common
 stockholders, basic               -  $     (0.02) $      0.03  $     (0.06)
                         ===========  ===========  ===========  ===========
Weighted average number
 of shares outstanding -
 basic                    11,501,152   10,835,858   11,155,860   10,758,529
                         ===========  ===========  ===========  ===========
Income (loss) per share
 available to common
 stockholders, diluted             -  $     (0.02) $      0.03  $     (0.06)
                         ===========  ===========  ===========  ===========
Weighted average number
 of shares outstanding -
 diluted                  12,288,503   10,835,858   11,706,186   10,758,529
                         ===========  ===========  ===========  ===========

                                Reed's Inc.
                          MODIFIED EBITDA SCHEDULE

                             Three months ended        Nine months ended
                                September 30,            September 30,
                           -----------------------  -----------------------
                               2012        2011         2012        2011
                           ----------- -----------  ----------- -----------
  Net loss                 $    22,000 $  (174,000) $   342,000 $  (594,000)
                           ----------- -----------  ----------- -----------

Modified EBITDA
  Depreciation and
   amortization                184,000     164,000      556,000     472,000
  Interest expense             161,000     175,000      493,000     504,000
  Stock option and warrant
   compensation                 26,000      59,000       81,000     189,000
  Other stock compensation
   for services                  2,000      45,000       23,000     123,000
                           ----------- -----------  ----------- -----------
    Total EBITDA
     adjustments               373,000     443,000    1,153,000   1,288,000
                           ----------- -----------  ----------- -----------

  Modified EBITDA          $   395,000 $   269,000  $ 1,495,000 $   694,000
                           =========== ===========  =========== ===========

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

                                               September 30,   December 31,
                                                    2012           2011
                                               -------------  -------------
ASSETS                                          (unaudited)
Current assets:
  Cash                                         $   1,429,000  $     713,000
  Inventory                                        5,963,000      6,099,000
  Trade accounts receivable, net of allowance
   for doubtful accounts and returns and
   discounts of $200,000 and $135,000,
   respectively                                    2,899,000      1,626,000
  Prepaid inventory                                  314,000        168,000
  Prepaid and other current assets                   159,000        123,000
                                               -------------  -------------
    Total Current Assets                          10,764,000      8,729,000

Property and equipment, net of accumulated
 depreciation of $2,199,000 and $1,739,000,
 respectively                                      3,385,000      3,512,000
Brand names                                        1,029,000      1,029,000
Deferred financing fees, net of amortization
 of $78,000 and $50,000, respectively                 32,000         85,000
                                               -------------  -------------
    Total assets                               $  15,210,000  $  13,355,000
                                               =============  =============

Current Liabilities:
  Accounts payable                             $   3,354,000  $   2,310,000
  Accrued expenses                                   204,000        196,000
  Dividends payable                                   71,000         83,000
  Recycling fees payable                              21,000        111,000
  Line of credit                                   3,574,000      3,095,000
  Current portion of long term financing
   obligation                                         85,000         71,000
  Current portion of capital leases payable           64,000         56,000
  Current portion of term loan                       170,000        152,000
                                               -------------  -------------
    Total current liabilities                      7,543,000      6,074,000

Long term financing obligation, less current
 portion, net of discount of $589,000 and
 $626,000, respectively                            2,219,000      2,247,000
Capital leases payable, less current portion         104,000        153,000
Term loan, less current portion                      445,000        576,000
                                               -------------  -------------
    Total Liabilities                             10,311,000      9,050,000
                                               -------------  -------------

Commitments and contingencies
Stockholders' equity:
  Series A Convertible Preferred stock, $10
   par value, 500,000 shares authorized,
   25,411 and 46,621 shares issued and
   outstanding, respectively                         254,000        466,000
  Series B Convertible Preferred stock, $10
   par value, 500,000 shares authorized,
   48,985 and 80,415 shares issued and
   outstanding, respectively                         490,000        804,000
  Common stock, $.0001 par value, 19,500,000
   shares authorized, 11,821,319 and
   10,885,833 shares issued and outstanding,
   respectively                                        1,000          1,000
  Additional paid in capital                      23,741,000     22,924,000
  Accumulated deficit                            (19,587,000)   (19,890,000)
                                               -------------  -------------
    Total stockholders' equity                     4,899,000      4,305,000
                                               -------------  -------------
    Total liabilities and stockholders' equity $  15,210,000  $  13,355,000
                                               =============  =============

Investor Relations
Reed's, Inc.
(310) 217-9400 ext. 18
Email: Email Contact

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