HIGHLIGHTS:
Leading Brands, Inc. (NASDAQ:LBIX), North
America’s only fully integrated healthy branded beverage company,
announces results for its second quarter of fiscal 2016, which
ended August 31, 2016. All financial amounts are denominated
in Canadian dollars, with all financial figures rounded to the
nearest $000.
The Company experienced a breakthrough in sales of its branded
beverage portfolio, delivering an increase in branded sales revenue
of 108.3% in Q2 and 54.0% YTD.
Sales of HappyWater® led the way with a remarkable increase in
revenue of 94.2% in Q2 and 66.2% YTD.
YTD net income was $147,000 or $0.05 per share ($0.05 fully
diluted) versus net loss of ($424,000) or ($0.15) per share in the
first half of last year. Q2 2016 net loss was ($148,000) or
($0.05) per share (($0.05) fully diluted) versus net loss of
($13,000) or $0.00 per share in the same quarter of fiscal
2015.
YTD net income before SBC was $147,000 or $0.05 per share ($0.05
fully diluted), compared to net loss of ($340,000) or ($0.12) per
share a year ago. Q2 2016 net loss before stock based compensation
(SBC) was ($148,000) or ($0.05) per share (($0.05) fully diluted)
versus net income of $71,000 or $0.03 per share in the same quarter
last year.
Q2 2016 EBITDAS (Earnings Before Interest, Depreciation,
Amortization and SBC) was $(13,000) or $0.00 per share ($0.00 fully
diluted), versus $242,000 or $0.09 per share during the same period
last year. YTD EBITDAS was $479,000 or $0.17 per share ($0.17 fully
diluted), versus ($67,000) or ($0.02) per share in the first half
of last year.
Leading Brands Chairman and CEO Ralph McRae stated: “We have
been working diligently for the past three years to re-establish
our portfolio of premium brands as leaders in their respective
categories. I am personally gratified to see these results as
a vindication of our approach and those efforts. In
particular, our breakthrough in Asia, and specifically China, has
been a long time coming. Much of our success was based on the
coalescence of our determined commitment to that market with a
realization by our international customers that safe, premium,
quality food products are critical to the health and wellbeing of
their families. When it comes to those attributes,
established Canadian suppliers such as Leading Brands have a
distinct advantage.”
“These major gains in our branded business have for the past
several years been overshadowed by the relentless decline in
volumes of our principal co-pack customer. As a result, the
company has decided to exit the co-pack business to focus our
efforts and resources where they can deliver the growth and returns
our shareholders expect and deserve. The company will wind
down operations at its hot fill bottling plant over the next few
months in connection with the previously scheduled expiration of
our current co-pack agreement. This will likely result in a
non-cash write down of certain assets as well as our incurring
associated termination costs in the current fiscal year. This
transition may have a material adverse impact on our reported
results, which we are intently focused on minimizing in both
magnitude and duration.”
Non-GAAP Net Income (Loss) before SBC is determined as
follows:
|
|
|
Q2 2016 |
|
Q2 2015 |
|
YTD 2016 |
|
YTD 2015 |
Net Income (Loss) |
|
$ |
|
(148,000 |
) |
$ |
|
(13,000 |
) |
$ |
147,000 |
$ |
|
(424,000 |
) |
Add Back SBC |
|
|
|
- |
|
|
|
84,000 |
|
|
- |
|
|
84,000 |
|
Net income (loss) before
SBC |
|
$ |
|
(148,000 |
) |
$ |
|
71,000 |
|
$ |
147,000 |
$ |
|
(340,000 |
) |
Non-GAAP Net Income (Loss) per share before SBC is
determined as follows:
|
|
|
Q2 2016 |
|
Q2 2015 |
|
YTD 2016 |
|
YTD 2015 |
Net Income (Loss) |
|
$ |
|
(0.05 |
) |
$ |
- |
$ |
0.05 |
$ |
|
(0.15 |
) |
Add Back SBC |
|
|
|
- |
|
|
0.03 |
|
- |
|
|
0.03 |
|
Net income (loss)
before SBC - Basic |
|
$ |
|
(0.05 |
) |
$ |
0.03 |
$ |
0.05 |
$ |
|
(0.12 |
) |
Pro-forma results for EBITDAS, as defined below, are
determined as follows:
|
|
|
Q2 2016 |
|
Q2 2015 |
|
YTD 2016 |
|
YTD 2015 |
Net Income (Loss) |
|
$ |
|
(148,000 |
) |
$ |
|
(13,000 |
) |
$ |
|
147,000 |
|
$ |
|
(424,000 |
) |
Add Back: |
|
|
|
|
|
|
|
|
|
Interest, net |
|
|
|
- |
|
|
|
(1,000 |
) |
|
|
- |
|
|
|
(4,000 |
) |
Depreciation and
amortization |
|
|
|
172,000 |
|
|
|
172,000 |
|
|
|
342,000 |
|
|
|
342,000 |
|
Non-cash stock based
compensation |
|
|
|
- |
|
|
|
84,000 |
|
|
|
- |
|
|
|
84,000 |
|
Non-cash income tax
expense |
|
|
|
(37,000 |
) |
|
|
- |
|
|
|
(10,000 |
) |
|
|
(65,000 |
) |
Total Add Backs |
|
|
|
135,000 |
|
|
|
255,000 |
|
|
|
332,000 |
|
|
|
357,000 |
|
EBITDAS |
|
$ |
|
(13,000 |
) |
$ |
|
242,000 |
|
$ |
|
479,000 |
|
$ |
|
(67,000 |
) |
EBITDAS per share reconciles to earnings per share as
follows:
|
|
|
Q2 2016 |
|
Q2 2015 |
|
YTD 2016 |
|
YTD 2015 |
Net Income (Loss) |
|
$ |
|
(0.05 |
) |
$ |
- |
$ |
0.05 |
$ |
|
(0.15 |
) |
Add Back: |
|
|
|
|
|
|
|
|
|
Interest, net |
|
|
|
- |
|
|
- |
|
- |
|
|
- |
|
Depreciation and
amortization |
|
|
|
0.06 |
|
|
0.06 |
|
0.12 |
|
|
0.12 |
|
Non-cash stock based
compensation |
|
|
|
- |
|
|
0.03 |
|
- |
|
|
0.03 |
|
Non-cash income tax
expense |
|
|
|
(0.01 |
) |
|
- |
|
- |
|
|
(0.02 |
) |
Total Add Backs |
|
|
|
0.05 |
|
|
0.09 |
|
0.12 |
|
|
0.13 |
|
EBITDAS |
|
$ |
|
0.00 |
|
$ |
0.09 |
$ |
0.17 |
$ |
|
(0.02 |
) |
Gross profit margin for the quarter was 33.7%, down from 38.2%
in the same quarter last year, due to a change in product
mix. The company continues to feel the drag of decreasing
volumes from its principal co-pack customer and is now in a
position to take constructive steps to address that trend.
Gross revenue for Q2 2016 was $3,227,000, versus $3,888,000 in
the comparative period of last year. A decrease in revenue for
co-packaging services was the primary contributor to both the drop
in revenue and gross profit margin in the quarter.
Discounts, rebates and slotting fees were $261,000 in Q2 2016,
an increase of $149,000 compared to the same period of the prior
year as a result of new listing fees for Happy Water®. Selling,
General and Administrative Expenses (“SG&A”) were $974,000 in
Q2 of fiscal 2016, versus $1,277,000 in Q2 of the previous
year. This shows the benefit of cost cutting measures
implemented throughout much of 2015.
As at August 31, 2016 the Company had outstanding 2,802,412
common shares.
About Leading Brands, Inc.
Leading Brands, Inc. (NASDAQ:LBIX) is North America’s only fully
integrated healthy beverage company. Leading Brands creates,
designs, bottles, distributes and markets its own proprietary
premium beverage brands via its unique Integrated Distribution
System (IDS)™ which involves the Company finding the best and most
cost-effective route to market.
Non-GAAP Measures
Any non-GAAP financial measures referenced in this release do
not have any standardized meaning prescribed by GAAP and are
therefore unlikely to be comparable to similar measures presented
by other issuers.
EBITDAS is a non-GAAP financial measure. EBITDAS is
defined as net income (loss) before income taxes, interest expense,
depreciation and amortization and stock-based compensation.
EBITDAS should not be construed as a substitute for net income (as
determined in accordance with GAAP) for the purpose of analyzing
operating performance, as EBITDAS is not defined by GAAP.
However, the Company regards EBITDAS as a complement to net income
and income before taxes.
Forward Looking Statements
Certain information contained in this press release includes
forward-looking statements. Words such as “believe”,
“expect,” “will,” or comparable terms, are intended to identify
forward-looking statements concerning the Company’s expectations,
beliefs, intentions, plans, objectives, future events or
performance and other developments. All forward-looking
statements included in this press release are based on information
available to the Company on the date hereof. Such statements
speak only as of the date hereof. Important factors that
could cause actual results to differ materially from the Company’s
estimations and projections are disclosed in the Company’s
securities filings and include, but are not limited to, the
following: general economic conditions, weather conditions,
changing beverage consumption trends, pricing, availability of raw
materials, economic uncertainties (including currency exchange
rates), government regulation, managing and maintaining growth, the
effect of adverse publicity, litigation, competition and other risk
factors described from time to time in securities reports filed by
Leading Brands, Inc. For all such forward-looking statements, we
claim the safe harbor for forward looking statements within the
meaning of the Private Securities Litigation Reform Act of
1995.
©2016 Leading Brands, Inc.
This news release is available at
www.LBIX.com (table follows)
LEADING BRANDS, INC. |
CONDENSED CONSOLIDATED INTERIM STATEMENT OF INCOME
(LOSS) |
(UNAUDITED) |
(EXPRESSED IN CANADIAN DOLLARS) |
|
|
|
|
Three months ended |
|
|
Six months ended |
|
|
|
August 31, 2016 |
|
August 31, 2015 |
|
|
August 31, 2016 |
|
August 31, 2015 |
|
|
|
|
|
|
|
|
|
|
|
Gross Revenue |
|
$ |
|
3,227,155 |
|
$ |
|
3,888,224 |
|
|
$ |
|
6,260,877 |
|
$ |
|
7,071,009 |
|
Less: Discount, rebates and slotting
fees |
|
|
|
(260,757 |
) |
|
|
(111,749 |
) |
|
|
|
(440,769 |
) |
|
|
(198,804 |
) |
Net Revenue |
|
|
|
2,966,398 |
|
|
|
3,776,475 |
|
|
|
|
5,820,108 |
|
|
|
6,872,205 |
|
|
|
|
|
|
|
|
|
|
|
|
Cost of sales |
|
|
|
1,966,771 |
|
|
|
2,333,201 |
|
|
|
|
3,715,751 |
|
|
|
4,465,911 |
|
Operations, selling, general &
administration expenses |
|
|
|
974,327 |
|
|
|
1,277,449 |
|
|
|
|
1,919,586 |
|
|
|
2,509,234 |
|
Depreciation of property, plant and
equipment |
|
|
|
171,846 |
|
|
|
172,030 |
|
|
|
|
342,099 |
|
|
|
342,499 |
|
Interest, net |
|
|
|
- |
|
|
|
(1,134 |
) |
|
|
|
- |
|
|
|
(3,599 |
) |
Change in fair value of derivative
liability |
|
|
|
38,715 |
|
|
|
7,715 |
|
|
|
|
12,673 |
|
|
|
46,656 |
|
Gain on disposal of assets |
|
|
|
- |
|
|
|
- |
|
|
|
|
(306,774 |
) |
|
|
- |
|
|
|
|
|
3,151,659 |
|
|
|
3,789,261 |
|
|
|
|
5,683,335 |
|
|
|
7,360,701 |
|
Net income (loss) before taxes |
|
|
|
(185,261 |
) |
|
|
(12,786 |
) |
|
|
|
136,773 |
|
|
|
(488,496 |
) |
|
|
|
|
|
|
|
|
|
|
|
Income tax expense |
|
|
|
(37,337 |
) |
|
|
- |
|
|
|
|
(10,178 |
) |
|
|
(64,939 |
) |
|
|
|
|
|
|
|
|
|
|
|
Net and comprehensive income
(loss) |
|
$ |
|
(147,924 |
) |
$ |
|
(12,786 |
) |
|
$ |
|
146,951 |
|
$ |
|
(423,557 |
) |
|
|
|
|
|
|
|
|
|
|
|
Earnings per share |
|
|
|
|
|
|
|
|
|
|
Basic income (loss) per share |
|
$ |
|
(0.05 |
) |
$ |
|
- |
|
|
$ |
|
0.05 |
|
$ |
|
(0.15 |
) |
Weighted average number of shares
outstanding – basic |
|
|
|
2,817,471 |
|
|
|
2,877,735 |
|
|
|
|
2,838,584 |
|
|
|
2,892,311 |
|
|
|
|
|
|
|
|
|
|
|
|
Fully diluted income (loss) per share |
|
$ |
|
(0.05 |
) |
$ |
|
- |
|
|
$ |
|
0.05 |
|
$ |
|
(0.15 |
) |
Weighted average number of shares
outstanding – diluted |
|
|
|
2,817,471 |
|
|
|
3,116,460 |
|
|
|
|
2,838,584 |
|
|
|
3,121,035 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CONTACT:
Leading Brands, Inc.
Tel: (604) 685-5200
Email: info@LBIX.com
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