Reeds Inc. Reports Operating Results (10-Q)

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Nov 14, 2012
Reeds Inc. (REED, Financial) filed Quarterly Report for the period ended 2012-09-30.

Reeds, Inc. has a market cap of $87.4 million; its shares were traded at around $7.6 with and P/S ratio of 3.5.

Highlight of Business Operations:

Sales of $7,888,000 for the three months ended September 30, 2012 represented an increase of 23% from $6,400,000 in the prior year same period. Sales growth was driven primarily by continued increases in sales volume in our branded products as we expand our distribution networks. We have been steadily adding distributors and expanding our product offerings to existing customers. Increases in private label sales also contributed to our overall sales increases, with private label revenues contributing approximately 15% of overall sales in the quarter ended September 30, 2012, as compared to approximately 9% in 2011.

Our gross profit of $2,457,000 in the three months ended September 30, 2012 represents an increase of $432,000, or 21% from 2011. As a percentage of sales, our gross profit decreased to 31% in 2012 as compared to 32% in 2011. The decrease is primarily due to the negative impact of our plant idle capacity on our gross profit percentage, mitigated by lower costs of tangible goods sold and sales volume increases.

Selling and marketing expenses consist primarily of direct charges for staff compensation costs, advertising, sales promotion, marketing and trade shows. Selling and marketing costs increased overall to $818,000 in the three months ended September 30, 2012 from $570,000 in 2011. The $248,000 increase is primarily due to increased trade show and advertising costs of $145,000, increased compensation and travel costs of $119,000; offset by a decrease in delivery and facilities related costs of $27,000. We have provided new promotional incentives to several of our distributors and have experienced positive results. We are increasing our sales staff in a conservative manner as our sales territories continue to grow.

Sales of $22,258,000 for the nine months ended September 30, 2012 represented an increase of 26% from $17,731,000 in the prior year same period. Sales growth was driven primarily by continued increases in sales volume in our branded products as we expand our distribution networks. We have been steadily adding distributors and expanding our product offerings to existing customers. Increases in private label sales also contributed to our overall sales increases, with private label revenues contributing approximately 14% of overall sales in the quarter ended September 30, 2012, as compared to approximately 9% in 2011.

Selling and marketing expenses consist primarily of direct charges for staff compensation costs, advertising, sales promotion, marketing and trade shows. Selling and marketing costs increased overall to $2,239,000 in the nine months ended September 30, 2012 from $1,751,000 in 2011. The $488,000 increase is primarily due to increased trade show and advertising costs of $297,000, increased compensation and travel costs of $138,000, and an increase in delivery and facilities related costs of $53,000.

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