Reed's, Inc. (NASDAQ: REED), maker of the top selling sodas in
natural food stores nationwide, today announced its financial
results for the fiscal year ended December 31, 2008.
Fiscal 2008 Highlights:
-- Net Sales increased 17% to $15.3 million compared to 2007
-- Gross Margin expands 700 basis points to over 22%
-- Gross Profit increases 68% over 2007 to $3.4 million
-- Implemented cost cutting initiatives during 2008 that decreased
operating expenses (OPEX) from $2.5 million in Q1 to $1.4 million in Q4,
and a further OPEX reduction of about $0.3 million per quarter forecast for
2009
-- Refocused and strengthened Executive management and sales team
-- Expanded product line to include new 12-pack packaging, Virgil's
Orange Cream Soda and diet Virgil's sodas
Fiscal 2009 Outlook:
-- Anticipates additional improvement in 2009 gross profit of 20% - 40%
-- Expects to achieve over $2.5 million in additional OPEX savings during
2009 over 2008
-- Anticipates 2009 operating cash flow to be breakeven as a result of
gross profit expansion and additional operating expense savings
"2008 was a transformational year for Reed's, characterized by a
successfully realigned sales strategy, an expanded product
assortment and solid financial performance," commented Chris Reed,
Founder and Chief Executive Officer. "During 2008, we refocused our
sales strategy on increasing our product placement within the
estimated 10,500 supermarkets nationwide. This strategy enables our
sales personnel to leverage Reed's success at natural food grocery
stores to establish new and enhanced relationships with mainstream
grocery stores as well as capitalize on the increasing consumer
demand for natural and 'good-for-you' products. The initial success
of our re-aligned sales strategy is reflected in our solid 17%
revenue growth in fiscal 2008, driven by continued strength in our
core Reed's and Virgil's brands as well as our new product
introductions including diet versions of our Virgil's sodas,
Virgil's Orange Cream Soda, and the launch of new products in
specialty packaging, the consumer response to which has been very
positive. We view our ability to deliver year-over-year revenue
growth as a strong accomplishment, particularly in light of the
challenging macro-economic environment."
Mr. Reed continued, "In addition to driving top-line growth, we
implemented several strategic initiatives aimed at improving gross
margins and delivering operating expense savings in 2008. Our 700
basis point improvement in gross margin reflects the benefit of
several strategic decisions including raising the prices of our
Reed's Ginger Brews by approximately 20%, in-line with competitors,
renegotiating our production costs from our largest co-packer and
better management of promotional discounting. In connection with
our re-aligned sales strategy, we reduced our sales force by 16
employees, which we believe will result in OPEX savings of
approximately $2.5 million in 2009. The positive impact of these
strategic cost savings decisions is reflected in our reduction in
loss from operations which improved to a loss of $3.5 million in
2008."
Fiscal 2008 Year End Results
For the year ended December 31, 2008, sales increased 17% to
$15.3 million from $13.1 million for the prior year. Sales growth
was driven by increased sales of the Company's Virgil's and Reed's
Ginger Brews product lines in existing natural food supermarkets,
increased sales to newly introduced mainstream distributors and the
launch of new products and specialty packaging.
Gross profit for the year ended December 31, 2008, increased 68%
to $3.4 million, or 22% of sales, from $2.0 million or 15% of
sales, for the prior year. The increase in gross margin is due
primarily to pricing increases on the Reed's Ginger Brew product
line by approximately 20% implemented in 2008, better management of
promotional discounting by the sales force and renegotiated
production costs from the Company's largest co-packer.
Operating expenses for the full year 2008 decreased 7% to $7.0
million from $7.5 million for the prior year. The decrease in
operating expenses was primarily due to decreased selling expense
associated with the re-alignment of Reed's sales force in 2008. The
Company's strategic direction in sales is to focus on increasing
its product placements in its estimated 10,500 supermarkets
nationwide. In connection with this sales strategy, the Company
reduced its sales organization by 16 employees at year-end 2008 as
compared to year-end 2007. The decrease in selling expenses was
partially offset by increased general and administrative expense
associated with higher professional fees and increased legal and
accounting costs. In addition, the Company incurred a one-time
non-cash expense of approximately $300,000 in the fourth quarter of
2008 for professional services, for which Reed's issued stock.
Loss from operations for the full year 2008 decreased to $3.5
million from $5.5 million in 2007. The improvement was due to
increased sales, expanding gross margins and decreased selling
expenses. In addition, the Company has implemented cost cutting
measures throughout its business during 2008 that Reed's expects
will result in over $2.5 million in additional expense savings in
2009.
For the year ended December 31, 2008, interest expense increased
to approximately $244,000 compared to interest expense of
approximately $182,000 in 2007. Interest expense increased in 2008
due to increased borrowing under Reed's long-term mortgage and line
of credit.
The net loss attributable to common stockholders for the year
ended December 31, 2008 was $3.8 million compared to a net loss
attributable to common stockholders of $5.6 million for the year
ended December 31, 2007. The net loss per share attributable to
common stockholders -- basic and fully diluted was $0.43 for the
year ended December 31, 2008 and $0.70 for the year ended December
31, 2007.
For the year ended December 31, 2008, cash and cash equivalents
were approximately $229,000, working capital was approximately
$636,000, total debt (including long-term debt and obligations on
lines of credit) was $3.4 million, stockholders' equity was $4.0
million and the accumulated deficit was $14.9 million.
2009 Outlook
Mr. Reed stated, "We expect further gross margin expansion and
we are anticipating additional improvement in 2009 gross profit by
20% - 40%. We also believe we will be able to cut our expenses by
another $2.5 million this year, which, we believe, will enable
Reed's to be operating cash flow break-even in 2009.
"We expect to provide full year 2009 revenue guidance in our
second quarter 2009 earnings report as we factor in new and
expanded relationships with our existing supermarket customers.
While consumer demand for our products has continued to be strong,
despite the significantly weak economy, the overall current
economic and consumer retail environment in which we operate has
softened compared to historical levels.
"Looking ahead, we will continue to build upon our momentum in
2008 by growing our presence in mainstream grocery store accounts,
expanding our product offering through new products and packaging
introductions, adding additional high-volume distribution and by
increasing our domestic and international points of presence to
position Reed's for continued market share growth in 2009."
About Reed's, Inc.
Reed's, Inc. makes the top selling sodas in natural food markets
nationwide and is currently selling in 10,500 supermarkets in
natural foods and mainstream. 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. In addition, 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.
Reed's products are sold through specialty gourmet and natural
food stores, mainstream supermarket chains, retail stores and
restaurants nationwide, and in Canada. For more information about
Reed's, please visit the company's website at:
http://www.reedsgingerbrew.com or call 800-99-REEDS.
Follow Reed's on Twitter at:
http://www.twitter.com/reedsgingerbrew
Reed's Facebook Fan Page at:
http://www.facebook.com/pages/Reeds-Ginger-Brew-and-Virgils-Natural-Sodas/57143529039?ref=nf
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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.
REED?S, INC.
BALANCE SHEETS
December 31, December 31,
2008 2007
------------ ------------
ASSETS
Current assets:
Cash $ 229,000 $ 743,000
Inventory 2,837,000 3,028,000
Trade accounts receivable, net of allowance
for doubtful accounts and returns and
discounts of $97,000 as of December 31, 2008
and $408,000 as of December 31, 2007 897,000 1,161,000
Prepaid and other current assets 68,000 93,000
------------ ------------
Total Current Assets 4,031,000 5,025,000
Property and equipment, net 4,133,000 4,249,000
Brand names 800,000 800,000
Deferred offering costs 77,000 -
Deferred financing fees 62,000 13,000
------------ ------------
Total assets $ 9,103,000 $ 10,087,000
============ ============
LIABILITIES AND STOCKHOLDERS? EQUITY
Current Liabilities:
Accounts payable $ 1,929,000 $ 1,997,000
Lines of credit 1,354,000 -
Current portion of long term debt 16,000 27,000
Accrued interest - 4,000
Accrued expenses 96,000 54,000
------------ ------------
Total current liabilities 3,395,000 2,082,000
Long term debt, less current portion 1,747,000 766,000
------------ ------------
Total Liabilities 5,142,000 2,848,000
------------ ------------
Commitments and contingencies
Stockholders? equity:
Preferred stock, $10 par value, 500,000
shares authorized, 47,121 shares outstanding
at December 31, 2008 and 48,121 shares
outstanding at December 31, 2007 471,000 481,000
Common stock, $.0001 par value, 19,500,000
shares authorized, 8,979,341 shares
issued and outstanding at December 31, 2008
and 8,751,721 shares issued and outstanding
at December 31, 2007 1,000 1,000
Additional paid in capital 18,408,000 17,838,000
Accumulated deficit (14,919,000) (11,081,000)
------------ ------------
Total stockholders? equity 3,961,000 7,239,000
------------ ------------
Total liabilities and stockholders? equity $ 9,103,000 $ 10,087,000
============ ============
The accompanying notes in the company's 10-K filing are an integral part of
these financial statements
REED?S, INC.
STATEMENTS OF OPERATIONS
For the Years Ended December 31, 2008 and 2007
2008 2007
------------ ------------
Sales $ 15,277,000 $ 13,059,000
Cost of sales 11,891,000 11,040,000
------------ ------------
Gross profit 3,386,000 2,019,000
------------ ------------
Operating expenses:
Selling and marketing expense 3,817,000 4,587,000
General and administrative expense 3,140,000 2,621,000
Write-off note receivable - 300,000
------------ ------------
Total operating expenses 6,957,000 7,508,000
------------ ------------
Loss from operations (3,571,000) (5,489,000)
Interest income 1,000 120,000
Interest expense (244,000) (182,000)
------------ ------------
Net loss (3,814,000) (5,551,000)
Preferred stock dividend (24,000) (28,000)
------------ ------------
Net loss attributable to common stockholders $ (3,838,000) $ (5,579,000)
============ ============
Loss per share available to common stockholders
- basic and diluted $ (0.43) $ (0.70)
============ ============
Weighted average number of shares outstanding -
basic and diluted 8,884,338 8,009,009
============ ============
The accompanying notes in the company's 10-K filing are an integral part of
these financial statements
REED?S, INC.
STATEMENTS OF CASH FLOWS
For the Years Ended December 31, 2008 and 2007
2008 2007
------------ ------------
Cash flows from operating activities:
Net loss $ (3,814,000) $ (5,551,000)
Adjustments to reconcile net loss to net
cash used in operating activities:
Depreciation and amortization 355,000 205,000
Loss on disposal of equipment 5,000 -
Fair value of stock options issued to
employees 144,000 420,000
Fair value of common stock issued for
services or bonuses 392,000 4,000
Write off of note receivable - 300,000
Changes in assets and liabilities:
Accounts receivable 264,000 23,000
Inventory 191,000 (1,517,000)
Prepaid expenses and other current
assets 25,000 96,000
Accounts payable (68,000) 302,000
Accrued expenses 42,000 (64,000)
Accrued interest (4,000) (24,000)
------------ ------------
Net cash used in operating
activities (2,468,000) (5,806,000)
------------ ------------
Cash flows from investing activities:
Purchase of property and equipment (191,000) (2,651,000)
Increase in notes receivable - (300,000)
------------ ------------
Net cash used in investing
activities (191,000) (2,951,000)
------------ ------------
Cash flows from financing activities:
Proceeds from issuance of common stock - 7,626,000
Payments for offering costs (77,000) (55,000)
Payments for deferred financing fees (102,000) -
Decrease in restricted cash - 1,581,000
Proceeds from exercise of warrants - 165,000
Net borrowings (repayments) on existing
lines of credit 1,354,000 (1,356,000)
Principal repayments on notes (800,000) (263,000)
Proceeds received from borrowings on debt 1,770,000 163,000
------------ ------------
Net cash provided by financing
activities 2,145,000 7,861,000
------------ ------------
Net decrease in cash (514,000) (896,000)
Cash at beginning of year 743,000 1,639,000
------------ ------------
Cash at end of year $ 229,000 $ 743,000
============ ============
Supplemental Disclosures of Cash Flow
Information:
Cash paid during the year for:
Interest $ 248,000 $ 207,000
Taxes $ - $ -
Non Cash Investing and Financing Activities
Preferred Stock converted to common stock $ 10,000 $ 108,000
Common Stock issued in settlement of preferred
stock dividend $ 24,000 $ 28,000
Common Stock issued in acquisition of property
and equipment $ - $ 7,000
The accompanying notes in the company's 10-K filing are an integral part of
these financial statements
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