LOS ANGELES, Aug. 13, 2015 (GLOBE NEWSWIRE) -- 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 second quarter ending June 30, 2015.
Financial Overview: Second Quarter 2015 Compared to Second Quarter 2014
- Net revenue increased 9% to a record $12.2 million
- Promotional spend decreased from 9.5% to 7.5% of gross sales
- Gross profit decreased slightly to $3.6 million
- Gross profit margin decreased 300 basis points to 30%
- Company had a net loss of ($691,000) or ($0.05) per diluted share
- Modified EBITDA was $94,000 during the 2015 second quarter (See EBITDA table at end of this release for further non-GAAP information).
- Reed's Ginger Brew sales increased by 22%
- Reed's Culture Club Kombucha sales increased by 15%
- Successful launch of private label Kombucha offering
Operational Highlights:
- Reed's enters into a marketing partnership with Pernod-Ricard (Absolut Vodka) to develop co-branding packages, advertising, distribution and promotions to launch into retail channels across the US.
- Reed's entire Ginger Brew portfolio grew at +22%, lead by Reed's Extra Ginger Brew growing at +36%
- SPINS syndicated scan data for conventional supermarkets in the latest 52 weeks ending 7/12/15 indicates that the Reed's Ginger Brew portfolio growth is accelerating from +35% in the latest 52 weeks to +45% in the latest 4 weeks.
- Enters Costco San Diego division with Reed's Extra Ginger Brew 12 pack. Early success opens up additional SKU's to be authorized in the remainder of the year.
- Invited to attend and present at the annual BJ's Wholesale Club Supplier Summit in Orlando, FL. Presentation leads to various Reed's and Virgil's SKU's being authorized nationally.
- Enters the South African marketplace with distribution through SpringBok Companies, a leading independent distributor with extensive supermarket, convenience store and drug store distribution experience.
- Reed's Culture Club Kombucha gains authorization in Shaws Supermarkets. Successful store test leads to Reed's Kombucha being rolled out to 150 locations.
- Invited to exhibit at the invitation-only 8th annual Fare Conference sponsored by Sysco in Nashville, TN.
- Continues distribution expansion into south central region with RBI Beverages of Arkansas.
- Reed's and Virgil's gain distribution into the Reasors Supermarket chain headquartered in Oklahoma.
- Co-sponsored the 2015 Portland Rose festival and 2015 Molallo Buckeroo rodeo.
- Exhibits at the 2015 Nightclub and Bar Show in Los Vegas, NV.
- Exhibits at the 2015 National Restaurant Association (NRA) show in Chicago and the Summer Fancy Food Show in New York City in June.
- Feature Story in June issue of Beverage World "Putting the pop back in Soda" http://www.nxtbook.com/nxtbooks/macfadden/bw0615/index.php#/14
According to Chris Reed, Reed's Inc. Founder and CEO, "The numbers for the quarter do not reflect the true accomplishments of the company. Our new facility was not ready during the quarter and we shorted sales by approximately $2 million. We would have posted a 25% increase instead of 9%. The issue with making enough product should be solved shortly.
Behind the scenes, our new management is having a dramatic impact on the infrastructure of the company that will benefit us going forward. We are deep in R&D creating the next generation natural fountain beverages based on our popular brands with a prospective client that could double the size of the company. In addition, during this quarter our company exhibited at the trade shows for the Nightclub and Bar industry and National Restaurant Show introducing our brands to these industries for the first time to a great reception. Also, Absolut Vodka and the parent company Pernod Ricard began marketing our products together, our largest liquor partner ever. We still feel the momentum of our brands and are as excited as ever."
"I am excited to be at Reeds, the home of the #1 brand in natural soda and craft sodas," said Daniel Miles, Reed's, Inc. new Chief Financial Officer. "The second quarter challenges have been clearly identified and solutions implemented to correct supply chain deficiencies. The east coast operations impacted Reeds ability to grow sales while at the same time backed up the unwinding of raw material inventory. As of today, Reeds is optimizing the east coast supply chain so that delivery costs will decline in alignment with past freight costs. Reeds is not considering raising additional funds as we unwind the inventory."
The Company will conduct a conference call @ 4:30PM EST today, August 13th, to discuss its 2015 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 (800) 768-2481. International callers should dial +1 (212) 231-2921.
A replay of the call will be available on the Reed's website at www.reedsinc.com in the "Investors" section following the earnings call within a day.
About Reed's, Inc.
Reed's, Inc. makes the top-selling natural sodas in the natural foods industry and is sold in over 15,000 natural and mainstream supermarkets nationwide. In addition, Reed's products are sold through specialty gourmet, natural food stores, retail stores, convenience stores and restaurants nationwide and select international markets. Its seven 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 its Reed's Culture Club Kombucha line of organic live beverages. Other product lines include: Reed's Ginger Candies and Reed's Ginger Ice Creams. The company celebrated 25 years of hand crafting the best sodas in the world, naturally, in 2014.
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 BALANCE SHEETS | ||
| June 30, 2015 | December 31, 2014 | |
| (Unaudited) | ||
| ASSETS | ||
| Current assets: | ||
| Cash | $ 215,000 | $ 959,000 |
| Trade accounts receivable, net of allowance for doubtful accounts and returns and discounts of $333,000 and $253,000, respectively | 3,586,000 | 2,500,000 |
| Inventory, net of reserve for obsolescence of $75,000 and $90,000, respectively | 8,937,000 | 6,306,000 |
| Prepaid inventory | 1,301,000 | 1,287,000 |
| Prepaid and other current assets | 530,000 | 447,000 |
| Total Current Assets | 14,569,000 | 11,499,000 |
| Property and equipment, net of accumulated depreciation of $3,817,000 and $3,405,000, respectively | 5,057,000 | 4,572,000 |
| Brand names | 1,029,000 | 1,029,000 |
| Total assets | $ 20,655,000 | $ 17,100,000 |
| LIABILITIES AND STOCKHOLDERS' EQUITY | ||
| Current Liabilities: | ||
| Accounts payable | $ 7,538,000 | $ 5,894,000 |
| Accrued expenses | 155,000 | 130,000 |
| Line of credit | 4,635,000 | 3,009,000 |
| Current portion of long term financing obligation | 147,000 | 134,000 |
| Current portion of capital leases payable | 127,000 | 125,000 |
| Total current liabilities | 12,602,000 | 9,292,000 |
| Long term financing obligation, less current portion, net of discount of $990,000 and $1,031,000, respectively | 1,473,000 | 1,508,000 |
| Capital leases payable, less current portion | 411,000 | 476,000 |
| Capital expansion loan | 1,389,000 | 672,000 |
| Term loan | 1,500,000 | 1,500,000 |
| Total Liabilities | 17,375,000 | 13,448,000 |
| Commitments and contingencies | ||
| Stockholders' equity: | ||
| Series A Convertible Preferred stock, $10 par value, 500,000 shares authorized, 9,411 shares issued and outstanding | 94,000 | 94,000 |
| Common stock, $.0001 par value, 19,500,000 shares authorized, 13,117,573 and 13,068,058 shares issued and outstanding, respectively | 1,000 | 1,000 |
| Additional paid in capital | 26,891,000 | 26,300,000 |
| Accumulated deficit | (23,705,000) | (22,743,000) |
| Total stockholders' equity | 3,281,000 | 3,652,000 |
| Total liabilities and stockholders' equity | $ 20,655,000 | $ 17,100,000 |
| The accompanying notes are an integral part of these condensed financial statements | ||
| REED'S, INC. | ||||
| CONDENSED STATEMENTS OF OPERATIONS | ||||
| For the Three and Six Months Ended June 30, 2015 and 2014 | ||||
| (Unaudited) | ||||
| Three months ended June 30, | Six months ended June 30, | |||
| 2015 | 2014 | 2015 | 2014 | |
| Sales, net | $ 12,178,000 | $ 11,187,000 | $ 22,850,000 | $ 20,136,000 |
| Cost of goods sold | 8,538,000 | 7,483,000 | 15,950,000 | 13,530,000 |
| Gross profit | 3,640,000 | 3,704,000 | 6,900,000 | 6,606,000 |
| Operating expenses: | ||||
| Delivery and handling expenses | 1,429,000 | 926,000 | 2,597,000 | 1,821,000 |
| Selling and marketing expense | 1,335,000 | 1,049,000 | 2,528,000 | 2,117,000 |
| General and administrative expense | 1,369,000 | 913,000 | 2,338,000 | 1,885,000 |
| Total operating expenses | 4,133,000 | 2,888,000 | 7,463,000 | 5,823,000 |
| Income (loss) from operations | (493,000) | 816,000 | (563,000) | 783,000 |
| Interest expense | (193,000) | (178,000) | (394,000) | (365,000) |
| Net income (loss) | (686,000) | 638,000 | (957,000) | 418,000 |
| Preferred stock dividends | (5,000) | (5,000) | (5,000) | (5,000) |
| Net income (loss) attributable to common stockholders | $ (691,000) | $ 633,000 | $ (962,000) | $ 413,000 |
| Income (loss) per share available to common stockholders, basic | $ (0.05) | $ 0.05 | $ (0.07) | $ 0.03 |
| Weighted average number of shares outstanding - basic | 13,104,227 | 13,046,631 | 13,086,560 | 13,025,195 |
| Income (loss) per share available to common stockholders, diluted | $ (0.05) | $ 0.05 | $ (0.07) | $ 0.03 |
| Weighted average number of shares outstanding - diluted | 13,104,227 | 13,256,624 | 13,086,560 | 13,298,114 |
| The accompanying notes are an integral part of these condensed financial statements | ||||
| REED'S, INC. | ||
| CONDENSED STATEMENTS OF CASH FLOWS | ||
| For the Six Months Ended June 30, 2015 and 2014 | ||
| (Unaudited) | ||
| Six Months Ended June 30, | ||
| 2015 | 2014 | |
| Cash flows from operating activities: | ||
| Net Income (loss) | $ (957,000) | $ 418,000 |
| Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: | ||
| Depreciation and amortization | 453,000 | 361,000 |
| Fair value of stock options issued to employees | 560,000 | 217,000 |
| Fair value of common stock issued for services and bonus | -- | 10,000 |
| (Decrease) increase in allowance for doubtful accounts | (81,000) | (14,000) |
| Changes in assets and liabilities: | ||
| Accounts receivable | (1,005,000) | (724,000) |
| Inventory | (2,631,000) | 794,000 |
| Prepaid Inventory | (14,000) | (630,225) |
| Prepaid expenses and other current assets | 167,000 | 18,225 |
| Accounts payable | 1,644,000 | 519,000 |
| Accrued expenses | 20,000 | 4,000 |
| Net cash provided by (used in) operating activities | (1,844,000) | 973,000 |
| Cash flows from investing activities: | ||
| Purchase of property and equipment | (430,000) | (155,000) |
| Net cash used in investing activities | (430,000) | (155,000) |
| Cash flows from financing activities: | ||
| Proceeds from stock option and warrant exercises | 31,000 | 26,000 |
| Payment of deferred financing fees | -- | (7,000) |
| Principal repayments on long term financing obligation | (64,000) | (52,000) |
| Principal repayments on capital lease obligation | (63,000) | (56,000) |
| Principal repayments on term loan | -- | (79,000) |
| Net draw down (repayment) on line of credit | 1,626,000 | (541,000) |
| Net cash (used in) provided by financing activities | 1,530,000 | (709,000) |
| Net (decrease) increase in cash | (744,000) | 109,000 |
| Cash at beginning of period | 959,000 | 1,104,000 |
| Cash at end of period | $ 215,000 | $ 1,213,000 |
| Supplemental disclosures of cash flow information: | ||
| Cash paid during the period for: | ||
| Interest | $ 395,000 | $ 365,000 |
| Non Cash Investing and Financing Activities | ||
| Property and equipment acquired through capital expansion loan | $ 466,000 | $ -- |
| Other current assets acquired through capital expansion loan | 250,000 | -- |
| Dividends Payable in common stock | 5,000 | 5,000 |
| The accompanying notes are an integral part of these condensed financial statements | ||
| MODIFIED EBITDA SCHEDULE | ||
| Three Months Ended June 30, | ||
| 2015 | 2014 | |
| Net Income (loss) | $ (686,000) | $ 638,000 |
| Modified EBITDA adjustments: | ||
| Depreciation and amortization | 240,000 | 153,000 |
| Interest expense | 193,000 | 178,000 |
| Stock option compensation | 347,000 | 119,000 |
| Other stock compensation for services | -- | 10,000 |
| Total EBITDA adjustments | 780,000 | 460,000 |
| Modified EBITDA income from operations | $ 94,000 | $ 1,098,000 |
| The $1,004,000 decrease in modified EBITDA for the three months resulted from the increases in the EBITDA adjustments totaling $320,000 for the quarter ended June 30, 2015 less the $1,324,000 in net loss as described above. The $87,000 increase in Depreciation and amortization was due to the additional assets purchased, the increase in Interest expense was due to the increased loan balances and Stock option compensation was due to options granted to employees in transition. | ||