Reed's Inc. Announces Third Quarter 2011 Financial Results

LOS ANGELES, CA–(Marketwire – Nov 14, 2011) – 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, 2011.

Financial Highlights:

  • Revenues during the third quarter of 2011 increased by 18% to 6.4 million from 5.5 million 2010. Branded product sales comprised over 90% of sales and expanded by 19% over the prior year.
  • Gross profit increased by 28% in the quarter to $2.0 million, as compared to $1.6 million in 2011. As a percentage of sales, gross profit margin improved to 32% during the third quarter, as compared to 29% in 2010.
  • Sales and marketing costs remained unchanged overall during the third quarter, as compared to 2010, resulting in a lowering of the ratio of sales costs to gross revenues to 9% of sales, from 11% in 2010.
  • General and administrative expenses, before one-time charges, decreased by approximately 10% during the third quarter, compared to 2010.
  • Earnings before non-cash items and finance costs (modified EBITDA) increased to $269,000 during the third quarter, as compared to $32,000 in the prior year period. (See EBITDA table at end of this release for further non-GAAP information).
  • Net loss for the quarter was $174,000, or $0.02 per share, compared to a loss of $398,000 a year earlier.
  • Working capital at September 30, 2011 was $2.2 million, as compared to $1.8 million at December 31, 2010.

Operational Highlights:

  • Expanded distribution by adding key DSD distributors in Nevada, Michigan, Alabama and Louisiana
  • New private label partnerships with 2 retail chains in the greater Southeast marketplace
  • Completed initial production of Light 55 Calories Reed’s Extra Ginger Brew
  • Established a stronger partnership with our largest natural foods distributor (UNFI), which is anticipated to lead continued brand growth for 2011 and beyond

“This is our eighth quarter of significant growth,” stated Chris Reed, Founder, Chairman and CEO of Reed’s Inc. “We believe we will see continued sales growth and increasing margins moving forward for the foreseeable future.”

“Aside from one-time charges during the quarter, our ongoing business earned proforma net income,” stated James Linesch, Reed’s Chief Financial Officer. “We are moving into profitability at these sales levels, as we leverage our operations over a wider business base.”

Conference Call

The Company will conduct a conference call @ 4:15 EST on Tuesday, November 15th to discuss its 2011 third quarter results and outlook for the rest of 2011. To participate in the call, please dial the following number 5 to 10 minutes prior to the scheduled call time 1-877-283-1603. International Callers should dial 512-225-9559. The conference ID is 885913#. Conference Call will be recorded and be available on www.reedsinc.com.

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.
CONDENSED STATEMENTS OF OPERATIONS
For the Three and Nine months Ended September 30, 2011 and 2010
(Unaudited)
Three months ended September 30, Nine months ended September 30,
2011 2010 2011 2010
Sales $ 6,400,000 $ 5,428,000 $ 17,731,000 $ 14,345,000
Cost of tangible goods sold 3,970,000 3,583,000 11,053,000 9,034,000
Cost of goods sold – idle capacity 405,000 268,000 1,300,000 822,000
Gross profit 2,025,000 1,577,000 5,378,000 4,489,000
Operating expenses:
Delivery and handling expenses 587,000 514,000 1,519,000 1,191,000
Selling and marketing expense 570,000 570,000 1,751,000 1,632,000
General and administrative expense 867,000 742,000 2,198,000 2,066,000
Total operating expenses 2,024,000 1,826,000 5,468,000 4,889,000
Income (loss) from operations 1,000 (249,000 ) (90,000 ) (400,000 )
Interest expense (175,000 ) (149,000 ) (504,000 ) (421,000 )
Net loss (174,000 ) (398,000 ) (594,000 ) (821,000 )
Preferred stock dividends (11,000 ) (12,000 ) (55,000 ) (62,000 )
Net loss attributable to common stockholders $ (185,000 ) $ (410,000 ) $ (649,000 ) $ (883,000 )
Loss per share available to common stockholders, basic and diluted $ (0.02 ) $ (0.04 ) $ (0.06 ) $ (0.09 )
Weighted average number of shares outstanding – basic and diluted 10,835,858 10,298,739 10,758,529 10,117,906
MODIFIED EBITDA SCHEDULE
Three months ended September 30, Six months ended September 30,
2011 2010 2011 2010
Net loss $ (174,000 ) $ (398,000 ) $ (594,000 ) $ (821,000 )
Modified EBITDA adjustments:
Depreciation and amortization 164,000 160,000 472,000 465,000
Interest expense 175,000 149,000 504,000 421,000
Stock option and warrant compensation 59,000 35,000 189,000 139,000
Other stock compensation for services 45,000 86,000 122,000 170,000
Total EBITDA adjustments 443,000 430,000 1,287,000 1,195,000
Modified EBITDA $ 269,000 $ 32,000 $ 693,000 $ 374,000
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,
2011
December 31,
2010
ASSETS (unaudited)
Current assets:
Cash $ 554,000 $ 1,084,000
Inventory 6,121,000 4,555,000
Trade accounts receivable, net of allowance for doubtful accounts and returns and discounts of $135,000 and $105,000, respectively 2,164,000 1,295,000
Prepaid inventory 392,000 138,000
Prepaid and other current assets 77,000 78,000
Total Current Assets 9,308,000 7,150,000
Property and equipment, net of accumulated depreciation of $1,586,000 and $1,178,000, respectively 3,606,000 3,650,000
Brand names 1,029,000 1,029,000
Deferred financing fees, net of amortization of $34,000 and $8,000, respectively 55,000 47,000
Total assets $ 13,998,000 $ 11,876,000
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current Liabilities:
Accounts payable $ 3,742,000 $ 2,586,000
Accrued expenses 177,000 162,000
Dividends payable 96,000 44,000
Recycling fees payable 147,000 325,000
Line of credit 2,789,000 2,038,000
Current portion of long term financing obligation 67,000 55,000
Current portion of capital leases payable 54,000 39,000
Current portion of note payable - 71,000
Total current liabilities 7,072,000 5,320,000
Long term financing obligation, less current portion, net of discount of $639,000 and $677,000, respectively 2,254,000 2,268,000
Capital leases payable, less current portion 168,000 146,000
Total Liabilities 9,494,000 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, 10,859,813 and 10,446,090 shares issued and outstanding, respectively 1,000 1,000
Additional paid in capital 22,766,000 21,701,000
Accumulated deficit (19,533,000 ) (18,884,000 )
Total stockholders’ equity 4,504,000 4,142,000
Total liabilities and stockholders’ equity $ 13,998,000 $ 11,876,000