Net Sales for Full Year 2007 Increased 25% to $13.1 Million. Company Expects Q1 2008 Sales to Increase in a Range of 20% - 30% Over Prior Year
LOS ANGELES--(BUSINESS WIRE)--Reed’s (NASDAQ:REED) announced
its financial results for the year ended December 31, 2007.
Fiscal 2007 Highlights:
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Net Sales increased 25% to $13.1 million compared to the same period
last year
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Refocused and strengthened Executive management and sales team
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Expanded distribution network with entrance into 20 key markets
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Expanded product line to include diet Virgil’s
sodas and 7 oz package of Reed’s Extra
Ginger Brew
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Products remain top selling soft drinks in the natural foods industry
“2007 was a transformational year for Reed’s
marked by accelerated revenue growth, an expanded distribution network
and continued investment in our infrastructure,”
commented Chris Reed, Founder and Chief Executive Officer. “Our
products remain the number 1, 2, 3 and 4 top selling soft drinks in
natural foods and outsold the next most popular ginger ales and root
beers by 450-500% in 2007. This ranking and performance is consistent
with prior years. We achieved year-over-year revenue growth of 25%,
demonstrating the continued demand for our core Reed’s
and Virgil’s product lines. We attribute our
performance to the significant progress of our sales force in expanding
Reed’s presence within the mainstream
marketplace and our continued ability to offer new and innovative
products to consumers. Specifically, we entered over 20 key markets in
2007 through new relationships with mainstream distributors, expanding
our reach beyond our core natural and specialty retail accounts.”
Mr. Reed continued, “In 2007, we executed two
major sales efforts. The first effort was selling to the 3,000 natural
and 7,500 mainstream supermarket stores that carry Reed’s
products nationwide. The second effort was selling to new beverage
distributors in the 20 key markets we opened. While, we were pleased
with the results of both approaches, we experienced greater success with
selling to large supermarket chains. Prior to hiring our new Senior Vice
President of Sales, Neal Cohane, our relationship with these large
supermarket accounts had been minimal. Neal has since leveraged his
significant experience with Pepsi and SoBe to expand our relationships
with these large retailers into exciting partnerships.”
Mr. Reed continued, “As a result, our primary
sales focus in 2008 will be on increasing sales to our existing 10,500
natural and mainstream supermarket customers. Natural food and beverage
products continue to expand into the mainstream marketplace as a result
of increasing consumer demand for natural, better-for-you products. Reed’s
top selling soft drinks in natural foods are uniquely positioned to
fulfill that demand. Additionally, we introduced a couple of new
products in 2007 including our new 7 oz package of Reed’s
Extra Ginger Brew and launched Diet Versions of our Virgil’s
line of sodas, broadening our consumer audience.
“Investing in our infrastructure remained a
key priority during 2007. We strengthened our executive management and
sales team and utilized the funds from our June 2007 capital raise to
broaden our sales and marketing efforts to meet the growing demand for
Reed’s products both domestically and abroad.
As we enter 2008, we believe we have the right management team and
strategy in place to drive growth and improve margins.”
2008 Strategic Initiatives Expected to Increase Revenue and Improve
Margins
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Increase sales in our existing 10,500 supermarket accounts
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Add approximately 3,500 additional supermarket accounts
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Expanded line of offerings including Virgil’s
Real Cola, draft versions of our Virgil’s
Root Beer, and our other sodas.
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Improve gross margin by:
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-- Convert current direct distribution in Southern California to
local distributors,
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-- Leverage our increased volume to re-negotiate production
co-packing fees allowing for larger, more efficient production
plants to produce Reed's
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-- Manage the use of promotional discounting by the sales force
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Decrease general and administrative expenses on an absolute basis as
compared to 2007
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Target additional regional mainstream beverage distributors to deliver
our product
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The new direction of sales focused on supermarkets has allowed us to
reduce our sales force from 33 to 17 people. This reduction is
expected to generate approximately $2.0 million in direct annualized
expenses.
Fiscal 2007 Year End Results
For the year ended December 31, 2007, net sales increased 24.6% to
$13,058,813 from $10,484,353 for the prior year. Sales growth was
primarily driven by a 44.9% increase in the Company’s
Virgil’s product line and a 13.2% increase in
the Company’s Reed’s
Ginger Brews product line. The strong growth within the Virgil’s
product line was due to an increase in sales of the Virgil’s
5 liter party keg and the introduction of Virgil’s
diet soda line.
The increase in sales was also attributable to additional sales from
newly introduced mainstream distributors and increased sales from
existing distribution channels of natural food distributors and
retailers, partially offset by a decrease in sales to international
customers. In 2007, net sales to distributors that cater to mainstream
consumers totaled $0.4 million; net sales to distributors specializing
in natural foods increased 23.6% to $9.7 million from $7.9 million; net
sales to mainstream customers including chains, club stores and mass
merchants increased 21.9% to $3.0 million from $2.4 million.
Gross profit for the year ended December 31, 2007 decreased 1.9% to
$2,019,236 or 15.5% of sales, from $2,057,579 or 19.6% of sales for the
prior year. The decline in gross margin was primarily due to increased
promotion discounting and increased costs of production, packaging and
ingredients at the Company’s main co-pack
production facility. The Company is currently evaluating alternative
co-pack production facilities to reduce its co-pack production costs,
its largest expense, and expects to reach arrangements with alternative
co-pack facilities by the end of the first quarter of 2008.
Additionally, the Company is actively negotiating packaging and raw
material prices with its suppliers.
Operating expenses for the full year 2007 increased 94.3% to $7,508,125
from $3,864,169 for the prior year period. The increase in general,
administrative and selling expenses was primarily due to building out
the infrastructure to support the anticipated growth in sales and
production capacities. Specifically, this resulted in increased salaries
and commissions in the Company’s sales and
sales support staff, increased recruiting costs of sales personnel and
higher advertising and promotional expense and increased general and
administrative expense resulting from higher legal and accounting
expenses associated with being a public company and costs of additional
support in the form of personnel and computer systems. These increased
costs were partially offset by the elimination of rescission offer
expenses in 2007, which were incurred in 2006. We do not expect to
increase selling or general and administrative expenses in 2008.
For the year ended December 31, 2007, interest expense decreased to
$182,402 compared to interest expense of $414,792 in 2006. Interest
expense decreased in 2007 principally due to the pay down of the Company’s
lines of credit and certain long-term debt.
The net loss attributable to common stockholders for the year ended
December 31, 2007 was $5,578,999 compared to a net loss attributable to
common stockholders of $2,243,079 for the year ended December 31, 2006.
The net loss per share attributable to common stockholders - basic and
fully diluted was $0.70 for the year ended December 31, 2007 and $0.41
for the year ended December 31, 2006.
For the year ended December 31, 2007, cash and cash equivalents were
$742,719 working capital was $2,942,909 total debt (including long-term
debt and obligations on lines of credit) was $793,084 stockholders’
equity was $7,239,461 and the accumulated deficit was $11,081,141.
Inventory for the year ended December 31, 2007 was $3,028,450, an
increase of 100.4% from $1,511,230 at December 31, 2006. The growth in
inventory reflects the Company’s strategy to
create increased flexibility to meet demand as the Company increases
points of distribution within new and existing markets.
Source: Integrated Corporate Relations