Reed's Inc. Announces 2011 Financial Results

LOS ANGELES, CA–(Marketwire – Mar 26, 2012) – Reed’s, Inc. (NASDAQ: REED), maker of the top-selling sodas in natural food stores nationwide, today announced the financial results for its fiscal year ending December 31, 2011.

Financial Highlights:

  • Revenues increased to over $25 million in 2011, a 23% increase from 2010. The overall revenue increase of $4.6 million was derived from a $3.3 million increase in branded business and $1.3 million increase in private label business.
  • Our top ten branded SKUs, which drive almost 70% of our business, grew more than 24% in 2011.
  • Overall, gross profit of 30% remained the same vs. 2010, despite cost increase pressures in 2011.
  • Sales and marketing costs increased by 7%, to $2.5 million in 2011. As a percentage of revenues, selling and marketing costs decreased to 10% in 2011, compared to 11% in 2010.
  • General and administrative expenses, before one-time charges of $327,000, decreased by approximately 7% in 2011, as compared to 2010.
  • Earnings before non-cash items and finance costs (modified EBITDA) increased 83% to $834,000 during 2011, as compared to $456,000 in the prior year period. (See EBITDA table at end of this release for further non-GAAP information).
  • Net loss for 2011 decreased 28% to $941,000, or $0.09 per share, compared to a loss of $1,310,000 a year earlier.
  • Working capital as of December 31, 2011 increased 44% to $2.6 million, as compared to $1.8 million at December 31, 2010.

Operational Highlights:

  • New credit facility obtained, expanding available access to capital at lower interest rates
  • Achieved quality control standard SQF 2000 plant certification for expanded Private Label capability
  • New branded product releases include Flying Cauldron Butterscotch Cream Soda and Virgil’s Dr. Better
  • New introduction of Virgil’s Sparkling 100% Juices in 3 flavors and launches in Whole Foods
  • New introduction of Reed’s Extra 55 Light Ginger Brew, the low calorie version of our #1 SKU Reed’s Extra Ginger Brew
  • Strengthened our private label capabilities introducing new Tea and Sparkling Mineral Water flavors to retail customers, expanding our current private label brand mix
  • Expanded our mainstream DSD distribution model to include Las Vegas, regions of Michigan, full state of Florida, Arizona, Louisiana and Georgia
  • Gained new retail penetration for our brands, opening Winn-Dixie Stores, Stop & Shop Supermarket, Total Wine & More, while gaining increased ACV presence in Publix, Kroger, Harris Teeter, The Fresh Market

“Our multi-front strategies for increasing revenues are paying off,” stated Chris Reed, Founder, Chairman and CEO of Reed’s Inc. “We are taking bold steps to capitalize on our many capabilities and to introduce new products and extend the reach of our great brands.”

“Our business is accelerating, and all systems are firing,” stated James Linesch, Reed’s Chief Financial Officer. “Our sales and distribution network is expanding, our production capabilities are increasing and improving, and we have a great pipeline of new products. 2012 will be a pivotal year for our company.”

Conference Call

The Company will conduct a conference call @ 4:15PM EDT on Monday, March 26th to discuss its 2011 results and outlook for the rest of 2012. 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 10,500 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: http://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-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.
STATEMENTS OF OPERATIONS
For the Years Ended December 31, 2011 and 2010
2011 2010
Sales $ 25,013,000 $ 20,376,000
Cost of tangible goods sold 15,847,000 13,118,000
Cost of goods sold – idle capacity 1,761,000 1,195,000
Gross profit 7,405,000 6,063,000
Operating expenses:
Delivery and handling expenses 2,307,000 1,728,000
Selling and marketing expense 2,470,000 2,319,000
General and administrative expense 2,878,000 2,740,000
Total operating expenses 7,655,000 6,787,000
Loss from operations (250,000 ) (724,000 )
Interest expense (691,000 ) (586,000 )
Net loss (941,000 ) (1,310,000 )
Preferred stock dividend (65,000 ) (73,000 )
Net loss attributable to common stockholders $ (1,006,000 ) $ (1,383,000 )
Loss per share available to common stockholders – basic and diluted $ (0.09 ) $ (0.14 )
Weighted average number of shares outstanding – basic and diluted 10,785,719 10,186,600
MODIFIED EBITDA SCHEDULE
Year ended December 31,
2011 2010
(unaudited) (unaudited)
Net loss $ (941,000 ) $ (1,310,000 )
Modified EBITDA adjustments:
Depreciation and amortization 653,000 616,000
Interest expense 691,000 586,000
Stock option and warrant compensation 300,000 198,000
Other stock compensation for services and finance fees 131,000 366,000
Total EBITDA adjustments 1,775,000 1,766,000
Modified EBITDA income from operations $ 834,000 $ 456,000

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.
BALANCE SHEETS
December 31,
2011
December 31,
2010
ASSETS
Current assets:
Cash $ 713,000 $ 1,084,000
Inventory 6,099,000 4,555,000
Trade accounts receivable, net of allowance for doubtful accounts and returns and discounts of $135,000 and $105,000, respectively 1,626,000 1,295,000
Prepaid inventory 168,000 138,000
Prepaid and other current assets 123,000 78,000
Total Current Assets 8,729,000 7,150,000
Property and equipment, net of accumulated depreciation of $1,739,000 and $1,178,000, respectively 3,512,000 3,650,000
Brand names 1,029,000 1,029,000
Deferred financing fees, net of amortization of $50,000 and $8,000, respectively 85,000 47,000
Total assets $ 13,355,000 $ 11,876,000
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current Liabilities:
Accounts payable $ 2,310,000 $ 2,586,000
Accrued expenses 196,000 162,000
Dividends payable 83,000 44,000
Recycling fees payable 111,000 325,000
Line of credit 3,095,000 2,038,000
Current portion of long term financing obligation 71,000 55,000
Current portion of capital leases payable 56,000 39,000
Current portion of note payable - 71,000
Current portion of term loan 152,000 -
Total current liabilities 6,074,000 5,320,000
Long term financing obligation, less current portion, net of discount of $626,000 and $677,000, respectively 2,247,000 2,268,000
Capital leases payable, less current portion 153,000 146,000
Term loan, less current portion 576,000 -
Total Liabilities 9,050,000 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, 80,415 and 85,766 shares issued and outstanding, respectively 804,000 858,000
Common stock, $.0001 par value, 19,500,000 shares authorized, 10,885,833 and 10,446,090 shares issued and outstanding, respectively 1,000 1,000
Additional paid in capital 22,924,000 21,701,000
Accumulated deficit (19,890,000 ) (18,884,000 )
Total stockholders’ equity 4,305,000 4,142,000
Total liabilities and stockholders’ equity $ 13,355,000 $ 11,876,000