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Reed's, Inc. Announces Record Fourth Quarter and Year-End 2015 Results

LOS ANGELES, March 23, 2016 (GLOBE NEWSWIRE) -- Reed's, Inc. (NYSE MKT:REED), the leading maker of craft sodas nationwide, today announced the financial results for its fourth quarter and fiscal year ending December 31, 2015.

Financial Highlights for Fourth Quarter 2015 versus 2014

  • Fourth quarter net sales increased 13.0% to a record $12.4 million from $11.0 million
  • Gross profit increased 25.5% to $3.1 million from $2.5 million
  • Gross margin increased 250 basis points to 25.4% from 22.9%
  • Operating expenses decreased 6.3% driven by:
    • Delivery and handling expenses decreased 14.9% to $1.1 million from $1.3 million
    • Sales and marketing expenses decreased 11% to $1.1 million from $1.2 million
    • G&A expenses increased 12.9% to $1.0 million from $0.9 million
  • Net loss improved to ($0.5 million) from ($1.2 million)

Financial Highlights for Full Year 2015 versus 2014:

  • Net sales increased 6% to a record $45.9 million driven by Reed’s Ginger Brew that grew 19% during the full year
  • Topline promotional activity decreased to 7.6% of sales versus 9.7% in the prior full year
  • Gross profit dollars decreased 11% to $11.6 million due to inventory write downs in 2015
  • Gross margin decreased from 30.0% to 25.3% in 2015 related to write downs in 2015
  • Operating expenses increased as a percent of sales from 29.9% to 31.2% in 2015
  • The Company improved its year-end cash position to $1.8 million from $1.0 million

Operational Highlights:

  • Reed’s #1 sku Reed’s Extra, which represents 27% of product mix grew +23% for the year
  • Syndicated data shows Reed’s growing +37% in latest 52 weeks and +29% in the latest 12 weeks
  • Stronger Ginger Brew introduced and launched at Expo West
  • DSD Distribution expansion with DP Distribution in Caribbean, Wonderland Distributing Co. in Northern California, SpringBok Companies in South Africa, RBI Beverages in south central U.S.
  • Sonoma Sparklers launches in all 4600 Rite locations nationwide
  • Reed’s enters into a marketing partnership with Pernod-Ricard (Absolut Vodka) to develop co-branding packages, advertising, distribution and promotions to launch into retail channels across the US
  • Chris Reed invited as a featured speaker, along with other ‘top-level’ beverage executives to Beverage Digest’s Future Smarts conference, one of the most influential conferences in the industry.
  • Supply chain enhanced and brewing capacity increased with addition of two co-packers
  • Continued plant upgrades to increase plant capacity
  • Reed’s Culture Club Kombucha gains authorization in Shaws Supermarkets. Successful store test leads to Reed’s Kombucha rolling out to 150 locations.
  • Reed’s and Virgil’s gain distribution into the Reasors Supermarket chain headquartered in Oklahoma.
  • 2015 tradeshows included: Natural Products Expo West, Nightclub & Bar Show, National Restaurant Show, Fancy Food Show NYC, Natural Products Expo East, National Association of Convenience Stores, Annual BJ’s Wholesale Supplier Summit, FARE Conference sponsored by Sysco
  • Beverage World - Feature Story in June issue “Putting the pop back in Soda”
  • Bar Business Magazine –July issue cover story touting the resurgence of the Moscow Mule focused on Reed’s Stronger Ginger Brew
  • Progressive Grocer Magazine – 2015 Editors Pick “Reed’s Stronger Ginger Brew” – Represented only beverage selected
  • Beverage World Magazine – 2015 Liquid Refreshment Power Players of the Year – Reed’s selected as one of the top five movers and shakers in the market
  • Bar Biz Spirits 2015 Competition – Reed’s wins best carbonated mixer

“Going into the second quarter of 2015, Reed’s had gathered quite a head of steam. We had planned on a new facility being up and running to handle the near capacity situation. Not only did the new plant not come online until late in the third quarter, our primary plant had its first big hiccup in over 20 years of producing for us. We left at least $7 million in sales on the table during this time and created a considerable supply chain nightmare. By the fourth quarter we had two new facilities online and were getting our customers back on track. We feel the supply chain issues are behind us, with not one, but two new facilities supplying us. Our west coast plant is in the midst of a major upgrade, which will add even more production capability and reduce production costs. The shelf placements that we lost during our supply chain interruption are still being recovered and sales are starting to build again.

Our largest opportunity to date, the first natural soda fountain, continues to move forward. Late 2014 we were approached by a large fast casual restaurant chain to develop the next generation of fountain sodas. After 18 months of R&D, we presented at the Natural Products Expo in March the future of the soda on fountain. Our flavors are natural, with fresh exciting new flavors, reduced calories and preservative free. We have partnered with some of the largest soda fountain equipment manufacturers to create a new look and feel for soda fountain equipment. This newly developed equipment will match the quality and progressive nature of these new fountain sodas.

We are looking forward to a much more exciting and profitable 2016. Not only will our core brands and products continue their march, but also we anticipate increasingly better margins as we bring online our new facilities for production. We are looking forward to the advent of the first natural soda fountain as we unleash it into the marketplace”, stated Chris Reed, Founder and CEO.

Dan Miles, Chief Financial Officer stated, “It should be recognized that while the supply chain interruption caused a significant negative impact on the Company, the fourth quarter record results illustrate that the company is on the way to recovery. The Company now has operations in place to meet sales orders as they occur at a delivery expense level in line with experience. With the expectation that the LA Brewery upgrade is completed in the near term, we expect that our customer’s demands for great natural beverages will be exceeded during the peak summer selling season.

Our working capital has stabilized and the margins have returned to 26%. We have identified specific area for margin improvement including price increases that should enable the company to return to historic margin rates of 30%. If the company reaches the 30% margin by year-end and maintains growth, the company will be cash flow positive for the year and reach profitability for the year.”

Conference Call Details

The Company will be hosting a conference call to discuss its fourth quarter and full year results today at 1:30 pm pacific time. To participate in the call, please dial the following number 5 to 10 minutes prior to the 1:30 pm scheduled call start time:

U.S. Callers: 800-785-6380
International callers: +1 212-231-2927

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: http://www.reedsinc.com/investors/

About Reed's, Inc.

Reed's, Inc. makes the top-selling sodas in the natural and specialty foods industry and are sold in over 15,000 natural and mainstream supermarkets nationwide. Reed's products are sold through an additional estimated 40,000 accounts that include specialty gourmet, natural food stores, retail stores, convenience stores and restaurants nationwide and in select international markets. Reed’s has sold over 500 million bottles since inception in June 1989 and is considered the leader of the fast growing craft soda category. 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.

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.
BALANCE SHEETS
For the Years Ended December 31, 2015 and 2014
December 31, 2015 December 31, 2014
ASSETS
Current assets:
Cash $1,816,000 $959,000
Inventory, net of reserves of $290,000 and $90,000, respectively 7,927,000 6,306,000
Trade accounts receivable, net of allowance for doubtful accounts and returns and discounts of $356,000 and $253,000, respectively 2,894,000 2,500,000
Prepaid inventory 47,000 1,287,000
Prepaid and other current assets 769,000 447,000
Total Current Assets 13,453,000 11,499,000
Property and equipment, net of accumulated depreciation of $4,216,000 and $3,405,000, respectively 5,369,000 4,572,000
Brand names 1,029,000 1,029,000
Total assets $19,851,000 $17,100,000
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current Liabilities:
Accounts payable $7,458,000 $5,894,000
Accrued expenses 168,000 130,000
Line of credit 4,443,000 3,009,000
Current portion of long term financing obligation 160,000 134,000
Current portion of capital leases payable 153,000 125,000
Term loans 341,000 -
Total current liabilities 12,723,000 9,292,000
Long term financing obligation, less current portion, net of discount of $935,000 and $1,031,000, respectively 1,443,000 1,508,000
Capital leases payable, less current portion 490,000 476,000
Capital Expansion Loan 1,542,000 672,000
Term loan, less current portion, net of discount of $132,000 and $0, respectively 2,868,000 1,500,000
Total Liabilities 19,066,000 13,448,000
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, 13,160,860 and 13,068,058 shares issued and outstanding, respectively 1,000 1,000
Additional paid in capital 27,399,000 26,300,000
Accumulated deficit (26,709,000) (22,743,000)
Total stockholders’ equity 785,000 3,652,000
Total liabilities and stockholders’ equity $19,851,000 $17,100,000


REED’S, INC.
STATEMENTS OF OPERATIONS
For the Years Ended December 31, 2015 and 2014
2015 2014
Sales, net $45,948,000 $43,422,000
Cost of goods sold 34,343,000 30,416,000
Gross profit 11,605,000 13,006,000
Operating expenses:
Delivery and handling expenses 5,100,000 4,478,000
Selling and marketing expenses 4,867,000 4,838,000
General and administrative expenses 4,368,000 3,414,000
Total operating expenses 14,335,000 12,730,000
Income (Loss) from operations (2,730,000) 276,000
Interest expense (1,231,000) (1,028,000)
Loss before provision for income taxes (3,961,000) (752,000)
Income taxes - (2,000)
Net loss (3,961,000) (754,000)
Preferred stock dividend (5,000) (5,000)
Net loss attributable to common stockholders $(3,966,000) $(759,000)
Loss per share attributable to common stockholders - basic and diluted $(0.30) $(0.06)
Weighted average number of shares outstanding - basic and diluted 13,147,815 13,043,927


REED’S, INC.
STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY
For the Years Ended December 31, 2015 and 2014
Series A Additional Total
Common Stock Preferred Stock Paid In Accumulated Shareholder
Shares Amount Shares Amount Capital Deficit Equity
Balance, January 1, 2013 $12,922,832 $1,000 $9,411 $94,000 $25,276,000 $(21,984,000) $3,387,000
Fair Value of common stock issued for services 2,807 - - - 13,000 13,000
Exercise of stock options 141,362 - - - 26,000 26,000
Fair value of warrants granted as valuation discount - - - 584,000 584,000
Fair value vesting of options issued to employees - - - - 396,000 396,000
Series A preferred stock dividend 1,057 - - - 5,000 (5,000) -
Net Loss (754,000) (754,000)
Balance, December 31, 2014 $13,068,058 $1,000 $9,411 $94,000 $26,300,000 $(22,743,000) $3,652,000
Fair Value of common stock issued for services 247 1,000 1,000
Exercise of stock options 57,112
Exercise of stock warrants 34,692 75,000 75,000
Fair value of warrants granted as valuation discount 141,000 141,000
Fair value vesting of options issued to employees 877,000 877,000
Series A preferred stock dividend 751 5,000 (5,000) -
Net Loss (3,961,000) (3,961,000)
Balance, December 31, 2015 $13,160,860 $1,000 $9,411 $94,000 $27,399,000 $(26,709,000) $785,000


REED’S, INC.
STATEMENTS OF CASH FLOWS
For the Years Ended December 31, 2015 and 2014
2015 2014
Cash flows from operating activities:
Net loss $(3,961,000) $(754,000)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
Depreciation and amortization 933,000 755,000
Fair value vesting of stock options issued to employees 877,000 396,000
Fair value of common stock issued for services 1,000 13,000
(Decrease) increase in allowance for doubtful accounts 103,000 71,000
Changes in operating assets and liabilities:
Accounts receivable (497,000) (428,000)
Inventory (1,621,000) (13,000)
Prepaid inventory 1,240,000 (1,031,000)
Prepaid expenses and other current assets (25,000) (269,000)
Accounts payable 1,564,000 2,282,000
Accrued expenses 38,000 (6,000)
Net cash provided by (used in) operating activities (1,348,000) 1,016,000
Cash flows from investing activities:
Purchase of property and equipment (532,000) (330,000)
Net cash used in investing activities (532,000) (330,000)
Cash flows from financing activities:
Proceeds from stock option and warrant exercises 75,000 26,000
Payments for deferred financing fees - (7,000)
Principal repayments on note term loan - (150,000)
Borrowing on term loan 1,500,000 1,003,000
Principal repayments on long term financing obligation (134,000) (111,000)
Principal repayments on capital lease obligation (138,000) (77,000)
Net borrowings (repayments) on existing line of credit 1,434,000 (1,515,000)
Net cash provided by (used in) financing activities 2,737,000 (831,000)
Net (decrease) in cash 857,000 (145,000)
Cash at beginning of year 959,000 1,104,000
Cash at end of year $1,816,000 $959,000
Supplemental Disclosures of Cash Flow Information:
Cash paid during the year for:
Interest $1,187,000 $693,000
Taxes $- $2,000
Non Cash Investing and Financing Activities
Series B preferred stock dividend payable in common stock $5,000 $5,000
Property and equipment acquired through capital lease obligation $179,000 $493,000
Fair value of warrants granted as valuation discount $141,000 $584,000
Property and Equipment acquired through Capital Expansion loan $915,000 $672,000
Other current assets acquired through Capital Expansion loan $297,000 $-


REED’S, INC.
MODIFIED EBITDA SCHEDULE
For the Years Ended December 31, 2015 and 2014
Year ended December 31,
2015
2014
(unaudited)
(unaudited)
Net loss $(3,961,000) $(754,000)
Modified EBITDA adjustments:
Depreciation and amortization 933,000 755,000
Interest expense 1,231,000 793,000
Stock option and warrant compensation 877,000 396,000
Stock compensation for services 1,000 13,000
Taxes 2,000
Total EBITDA adjustments 3,042,000 1,959,000
Modified EBITDA income from operations $(919,000) $1,205,000


Reed's, Inc. Investor Relations (310) 217-9400 ext. 18 Email: ir@reedsinc.com www.reedsinc.com

Source:Reed's Inc.