Reed's Inc. Announces Year-End 2012 Results

LOS ANGELES, CA–(Marketwire – Mar 25, 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 fiscal year ending December 31, 2012.

Financial Highlights for the Quarter:

  • Revenues increased 20% to $30 million in 2012, compared to 2011.
  • Gross profit increased 23% to $9.1 million in 2012.
  • Earnings before non-cash items and finance costs (modified EBITDA) increased to $1 million during 2012. (See EBITDA table at end of this release for further non-GAAP information).
  • Net loss for the 2012 fiscal year was $524,000 compared to a loss of $941,000 a year earlier.
  • Working capital at December 31, 2012 was $2.3 million, as compared to $2.7 million at December 31, 2011.

Operational Highlights:

  • Introduced our Culture Club Kombucha in July 2012 and increased distribution into a minimum of 800+ new retailers throughout the US and into select Whole Foods.
  • Volume of branded Reed’s and Virgil’s products shipped grew at a rate of 20% over last year
  • Expanded network of DSD distribution in numerous key regions increasing sales through this distribution channel by approximately 50%.
  • Expanded distributor sales by over 30% by partnering in marketing efforts and focusing on sales support for distributors.
  • Secured three new private label brand contracts with some of the largest retailers in the US

“2012 represents another solid year of growth here at Reed’s,” stated Chris Reed, Founder and CEO at Reed’s Inc. “We have introduced an entirely new product line in our Culture Club Kombucha while we also expanded sales and distribution channels for our Reed’s Ginger Brew and Virgil’s branded products. Our EBITDA positive results have enabled us to fund our product rollouts and increased promotional spend without the requirement of additional equity or debt financing. We expect 2013 to be a great year.”

James Linesch, Chief Financial Officer, stated, “Our strong business model is producing continually improving results in key areas. Our branded product revenues continue to increase at strong organic growth rates, while we also improved our gross margins. During 2012, our direct gross margin percentage, before promotional discounts, improved by an average of about 2%. Recurring general & administrative costs, before one-time costs, increased by less than 10% in 2012 while sales and gross profit contribution increased at over twice that rate, indicating improved economies of scale. Sales and marketing costs in 2012 were approximately 10% of net revenues, the same as in 2011. Our organizational structure is healthy and we have excellent brands that we are promoting in effective ways.

Linesch continued, “Our fourth quarter losses were primarily due to continued production challenges on our kombucha, resulting in higher unallocated plant costs, and to lighter than expected private label revenues from one customer. We have addressed the production issues surrounding our kombucha in our current quarter and we anticipate increased margin contribution going forward. Our underlying business is stronger than ever, however, and we feel that we have laid the foundation for improved financial performance in 2013.”

The Company will conduct a conference call @ 4:15PM EDT on March 25th to discuss its 2012 fiscal year end 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) 578-1005. 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.  
STATEMENTS OF OPERATIONS  
For the Years Ended December 31, 2012 and 2011  
   
   
    2012     2011  
                 
Sales   $ 30,007,000     $ 25,013,000  
                 
Cost of tangible goods sold     18,943,000       15,847,000  
Cost of goods sold – idle capacity     1,920,000       1,761,000  
  Gross profit     9,144,000       7,405,000  
                 
Operating expenses:                
                 
Delivery and handling expenses     2,634,000       2,307,000  
Selling and marketing expense     3,145,000       2,470,000  
General and administrative expense     3,229,000       2,878,000  
  Total operating expenses     9,008,000       7,655,000  
                 
  Income (loss) from operations     136,000       (250,000 )
                 
Interest expense     (660,000 )     (691,000 )
                 
  Net loss     (524,000 )     (941,000 )
                 
Preferred stock dividend     (45,000 )     (65,000 )
                 
  Net loss attributable to common stockholders   $ (569,000 )   $ (1,006,000 )
                 
Loss per share attributable to common stockholders – basic and diluted   $ (0.05 )   $ (0.09 )
Weighted average number of shares outstanding – basic and diluted     11,361,053       10,785,719  
                 
                 
                 
MODIFIED EBITDA SCHEDULE  
   
    Year ended December 31,  
    2012     2011  
    (unaudited)     (unaudited)  
Net loss   $ (524,000 )   $ (941,000 )
                 
Modified EBITDA adjustments:                
                 
Depreciation and amortization     738,000       653,000  
Interest expense     660,000       691,000  
Stock option and warrant compensation     107,000       300,000  
Other stock compensation for services and finance fees     23,000       131,000  
  Total EBITDA adjustments     1,528,000       1,775,000  
                 
Modified EBITDA income from operations   $ 1,004,000     $ 834,000  
                 
                 
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.  
BALANCE SHEETS  
   
    December 31,
2012
    December 31,
2011
 
ASSETS                
Current assets:                
  Cash   $ 1,163,000     $ 713,000  
  Inventory     5,794,000       6,099,000  
  Trade accounts receivable, net of allowance for doubtful accounts and returns and discounts of $399,000 and $135,000, respectively     1,961,000       1,626,000  
  Prepaid inventory     201,000       168,000  
  Prepaid and other current assets     212,000       123,000  
    Total Current Assets     9,331,000       8,729,000  
                 
Property and equipment, net of accumulated depreciation of $2,351,000 and $1,739,000, respectively     3,422,000       3,512,000  
Brand names     1,029,000       1,029,000  
Deferred financing fees, net of amortization of $50,000 and $8,000, respectively     54,000       85,000  
                 
    Total assets   $ 13,836,000     $ 13,355,000  
                 
LIABILITIES AND STOCKHOLDERS’ EQUITY                
Current Liabilities:                
  Accounts payable   $ 3,368,000     $ 2,310,000  
  Accrued expenses     214,000       196,000  
  Dividends payable     74,000       83,000  
  Recycling fees payable     19,000       111,000  
  Line of credit     3,023,000       3,095,000  
  Current portion of long term financing obligation     90,000       71,000  
  Current portion of capital leases payable     69,000       56,000  
  Current portion of term loan     176,000       152,000  
    Total current liabilities     7,033,000       6,074,000  
                 
Long term financing obligation, less current portion, net of discount of $576,000 and $626,000, respectively     2,208,000       2,247,000  
Capital leases payable, less current portion     98,000       153,000  
Term loan, less current portion     399,000       576,000  
    Total Liabilities     9,738,000       9,050,000  
                 
Commitments and contingencies                
                 
Stockholders’ equity:                
  Series A Convertible Preferred stock, $10 par value, 500,000 shares authorized, 10,411 and 46,621 shares issued and outstanding, respectively     104,000       466,000  
  Series B Convertible Preferred stock, $10 par value, 500,000 shares authorized, 45,602 and 80,415 shares issued and outstanding, respectively     456,000       804,000  
  Common stock, $.0001 par value, 19,500,000 shares authorized, 12,084,673 and 10,885,883 shares issued and outstanding, respectively     1,000       1,000  
  Additional paid in capital     23,996,000       22,924,000  
  Accumulated deficit     (20,459,000 )     (19,890,000 )
    Total stockholders’ equity     4,098,000       4,305,000  
    Total liabilities and stockholders’ equity   $ 13,836,000     $ 13,355,000