SOURCE: Reed's, Inc.

Reed's, Inc.

March 26, 2015 16:15 ET

Reed's Inc. Announces Year-End 2014 Results

LOS ANGELES, CA--(Marketwired - Mar 26, 2015) - 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, 2014.

Financial Highlights for Full Year 2014 versus 2013:

  • Net sales increased 16% to a record $43.4 million driven by:
    • 20% gross sales growth of Reed's Ginger Brews
    • 16.5% gross sales growth in Virgil's Craft Soda
    • 38% gross sales growth in Kombucha
    • Partially offset by 25% decline in Private Label business
  • Topline promotional activity decreased to 9.6% of sales versus 12.0% in the prior full year
  • Gross profit dollars increased 20% to $13 million - an increase $2.2 million
  • Plant efficiency improved by $521,000 to 5% of net sales versus 7% of net sales in 2013
  • Gross margin improved from 29% in 2013 to 30% in 2014
  • Operating expenses decreased as a percent of sales from 31% in 2013 to 30% in 2014
  • Renegotiated credit facility and decreased effective interest rate from 13.5% to 9%
  • Operating income for 2014 was $41,000 versus a loss of ($869,000) in 2013
  • EBITDA improved to $1.2 million in 2014 versus $13,000 in 2013

Operational Highlights:

  • Reed's #1 sku Reed's Extra growing at almost 30% for the year
  • Syndicated data shows Reed's growing +30% in latest 52 weeks and +31% in the latest 12 weeks
  • Reed's exhibits at NACS (National Assoc. of Convenience Stores) for first time opening up new channels of business.
  • Hired PR/Social Media Agency generating millions of impressions and consumer awareness
  • Reed's launches first-ever national TV campaign, sponsors Van's International Surfing Championships, implements record number of print, retailer and distributor ads and conducts sampling events and demos to mark 25th Anniversary
  • Launched our innovative and "first ever" Coffee Kombucha
  • Continued plant upgrades to increase plant capacity
  • Kosher Certification on all beverages
  • Reed's & Virgil's have been and continue to be certified GMO free
  • Reed's Culture Club Kombucha authorized at Safeway, Hy-Vee and Dierbergs
  • Reed's & Virgil's authorized at Lowes Foods, Books-A-Million, Spartan Nash, Food Lion
  • DSD Distribution expansion with RC of Asheville, Next Generation Beer Co., Senuca Beverages, Stagnaro Distributing, Superior Beverage and Haralambos Distribution
  • Partnered with OTG Management, an airport operator of dining and convenience stores,   for sale and distribution of Reed's and Reed's Culture Club Kombucha in key airports throughout North America.
  • Manhattan Beer initiated distribution of Reed's Culture Club Kombucha
  • Partnering with some of the largest liquor companies in the world, utilizing our Reed's Extra as a premium mixer for Moscow Mules and Dark & Stormy's across the US.
  • Implemented new sales tracking/targeting software system in partnership with our DSD distributor partners to accelerate the focus of our field sales force.
  • Increased brand presence by more than 4000+ stores
  • Developed new partnerships with Club Stores accounts across the US
  • Reed's Sponsors Van's International Surfing Championships in Huntington Beach, CA
  • The making of  Virgil's Root Beer featured on the "Food Factory" TV Show in US & Canada

Chris Reed, Founder and CEO of Reed's Inc. stated, "Every year we improve the performance of the company.  We are building an infrastructure that will support the future growth of volume and distribution we are seeing on all of our brands.  I am particularly enthused with the strength our core Reed's brands are showing.  Consumer demand is strong across all channels of business and we are capitalizing on all opportunities.  We are also excited about the response to our latest line extension called Reed's Stronger Ginger Brew. With 50% more ginger than our flagship product Reed's Extra Ginger Brew, Stronger Ginger Brew is creating a large buzz in the natural food industry and in the cocktail mixer world.  The Reed's company is at a truly exciting inflection point, and our plan is to accelerate our growth at a faster pace. Reed's is driving fundamental change in the carbonated soft drink category within conventional supermarkets, club stores and convenience stores across the US.  Prominent national retailers are having a gestalt moment and recognizing that Reed's brands deliver higher margins and larger gross profits than the cola giants. More retail doors are opening and more space is being allocated for our brands across the country.  To help propel our operational capabilities as we accelerate, we hired Mark Beaton to serve as our new COO.  Mark was previously VP of Operations at Dr. Pepper Snapple Group and will be instrumental in whipping our operations and new plant improvements into shape.  We are truly excited to have Mark as part of our team.  We are a 25-year young company at the beginning of greatness."

For the full year 2015, the company's net sales target is $50 million with moderate profitability.

The Company will conduct a conference call at 4:30 PM EDT on March 26th to discuss its 2014 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: International callers should dial +1 (212) 231-2936. Toll free: 800-758-5606.

A replay will be available within a few hours of the conclusion of the call in the investor relations section of the Company's website at:

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: or call 800-99-REEDS.

Follow Reed's on Twitter at Reed's Facebook Fan Page at


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.

    December 31, 2014     December 31, 2013  
Current assets:                
  Cash   $ 959,000     $ 1,104,000  
  Inventory     6,306,000       6,293,000  
  Trade accounts receivable, net of allowance for doubtful accounts and returns and discounts of $253,000 and $324,000, respectively     2,500,000       2,143,000  
  Prepaid inventory     1,287,000       256,000  
  Prepaid and other current assets     447,000       178,000  
    Total Current Assets     11,499,000       9,974,000  
Property and equipment, net of accumulated depreciation of $3,405,000 and $2,796,000, respectively     4,572,000       3,686,000  
Brand names     1,029,000       1,029,000  
Deferred financing fees, net of amortization of $107,000 and $40,000, respectively     -       60,000  
    Total assets   $ 17,100,000     $ 14,749,000  
Current Liabilities:                
  Accounts payable   $ 5,894,000     $ 3,612,000  
  Accrued expenses     130,000       136,000  
  Line of credit     3,009,000       4,524,000  
  Current portion of long term financing obligation     134,000       111,000  
  Current portion of capital leases payable     125,000       79,000  
  Current portion of term loan     -       165,000  
    Total current liabilities     9,292,000       8,627,000  
Long term financing obligation, less current portion, net of discount of $1,031,000 and $526,000, respectively     1,508,000       2,147,000  
Capital leases payable, less current portion     476,000       106,000  
Capital Expansion Loan     672,000       -  
Term loan, less current portion     1,500,000       482,000  
    Total Liabilities     13,448,000       11,362,000  
Commitments and contingencies                
Stockholders' equity:                
  Series A Convertible Preferred stock, $10 par value, 500,000 shares authorized, 9,411 and 9,411 shares issued and outstanding, respectively     94,000       94,000  
  Common stock, $.0001 par value, 19,500,000 shares authorized, 13,068,058 and 12,922,832 shares issued and outstanding, respectively     1,000       1,000  
  Additional paid in capital     26,300,000       25,276,000  
  Accumulated deficit     (22,743,000 )     (21,984,000 )
    Total stockholders' equity     3,652,000       3,387,000  
    Total liabilities and stockholders' equity   $ 17,100,000     $ 14,749,000  
For the Years Ended December 31, 2014 and 2013  
    2014     2013  
Sales, net   $ 43,422,000     $ 37,281,000  
Cost of goods sold     30,416,000       26,487,000  
  Gross profit     13,006,000       10,794,000  
Operating expenses:                
Delivery and handling expenses     4,478,000       3,977,000  
Selling and marketing expenses     4,838,000       4,180,000  
General and administrative expenses     3,649,000       3,506,000  
  Total operating expenses     12,965,000       11,663,000  
  Income (Loss) from operations     41,000       (869,000 )
Interest expense     (793,000 )     (651,000 )
Loss before provision for income taxes     (752,000 )     (1,520,000 )
Income taxes     (2,000 )     0  
Net loss     (754,000 )     (1,520,000 )
Preferred stock dividend     (5,000 )     (5,000 )
Net loss attributable to common stockholders   $ (759,000 )   $ (1,525,000 )
Loss per share attributable to common stockholders - basic and diluted   $ (0.06 )   $ (0.12 )
Weighted average number of shares outstanding - basic and diluted     13,043,927       12,541,074  
For the Years Ended December 31, 2014 and 2013  
    2014     2013  
Cash flows from operating activities:                
  Net loss   $ (754,000 )   $ (1,520,000 )
  Adjustments to reconcile net loss to net cash provided by operating activities:                
    Depreciation and amortization     755,000       550,000  
    Fair value vesting of stock options issued to employees     396,000       327,000  
    Fair value of common stock issued for services     13,000       5,000  
    (Decrease) increase in allowance for doubtful accounts     71,000       (75,000 )
    Changes in operating assets and liabilities:                
      Accounts receivable     (428,000 )     (107,000 )
      Inventory     (13,000 )     (499,000 )
      Prepaid inventory     (1,031,000 )     (55,000 )
      Prepaid expenses and other current assets     (269,000 )     34,000  
      Accounts payable     2,282,000       244,000  
      Accrued expenses     (6,000 )     (97,000 )
        Net cash provided by operating activities     1,016,000       1,193,000  
Cash flows from investing activities:                
  Purchase of property and equipment     (330,000 )     (602,000 )
        Net cash used in investing activities     (330,000 )     (602,000 )
Cash flows from financing activities:                
  Proceeds from stock option and warrant exercises     26,000       403,000  
  Payments for deferred financing fees     (7,000 )     (61,000 )
  Principal repayments on note term loan     (150,000 )     (145,000 )
  Borrowing on term loan     1,003,000       217,000  
  Principal repayments on long term financing obligation     (111,000 )     (90,000 )
  Principal repayments on capital lease obligation     (77,000 )     (89,000 )
  Net borrowings (repayments) on existing line of credit     (1,515,000 )     1,501,000  
        Net cash provided by (used in) financing activities     (831,000 )     1,736,000  
        Net (decrease) in cash     (145,000 )     (59,000 )
Cash at beginning of year     1,104,000       1,163,000  
Cash at end of year   $ 959,000     $ 1,104,000  
Supplemental Disclosures of Cash Flow Information:                
Cash paid during the year for:                
  Interest   $ 693,000     $ 712,000  
  Taxes   $ 2,000     $ -  
Non Cash Investing and Financing Activities                
  Series A preferred stock converted to common stock   $ 0     $ 10,000  
  Series B preferred stock converted to common stock   $ 0     $ 456,000  
  Common Stock issued in settlement of Series A and Series B preferred stock dividend   $ 0     $ 5,000  
  Series B preferred stock dividend payable in common stock   $ 5,000     $ 74,000  
  Property and equipment acquired through capital lease obligation   $ 493,000     $ 107,000  
  Fair value of warrants granted as valuation discount   $ 584,000     $ 0  
  Property and Equipment acquired through Capital Expansion loan   $ 672,000     $ 0  
    Year ended December 31,  
    2014     2013  
    (unaudited)     (unaudited)  
Net loss   $ (754,000 )   $ (1,520,000 )
Modified EBITDA adjustments:                
Depreciation and amortization     755,000       550,000  
Interest expense     793,000       651,000  
Stock option and warrant compensation     396,000       327,000  
Stock compensation for services     13,000       5,000  
Taxes     2,000       -  
  Total EBITDA adjustments     1,959,000       1,533,000  
Modified EBITDA income from operations   $ 1,205,000     $ 13,000