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Leading Brands, Inc. Announces Q2 And YTD Fiscal 2005 Results
Q2 Net loss of $0.01 US per share Q2 US dollar gross revenue grows 2.5% YTD Net Income of $0.01 US per share
VANCOUVER, CANADA - October 11, 2005 - LEADING BRANDS, INC. (NASDAQ Capital Market: LBIX), North America's only fully integrated premium beverage company, announces results for the second quarter and the first six months of its fiscal year, both of which ended August 31, 2005.
The Company's net loss for the second quarter was $158,000 US [$193,000 Cdn] or $0.01 US [$0.01 Cdn] per share, versus a net income of $512,000 US ($682,000 Cdn) or $0.03 US [$0.04 Cdn] per share in the prior fiscal year. Gross revenue for the quarter was $11,395,000 US [$13,929,000 Cdn] versus $11,113,000 US [$14,790,000 Cdn] the prior year, a US dollar increase of 2.5%.
The Company reported net income for the first six months of the year of $142,000 US [$178,000 Cdn] or $0.01 US [$0.01 Cdn] versus a net income of $909,000 US ($1,216,000 Cdn) or $0.06 US [$0.08 Cdn] per share in the first half of the prior fiscal year. Year to date gross revenue was $20,551,000 US [$25,241,000 Cdn] versus $20,495,000 US [$27,443,000 Cdn] the prior year.
The difference in net income, when comparing both the quarter and year to date performance, is directly attributable to increases in sales and marketing costs – including grocery chain slotting fees - totaling $683,000 US [$698,000 Cdn] for the six month period and a one time gain of $667,000 US [$887,000 Cdn] for a contract termination payment received in Q2 of last year. The increased sales and marketing expenses were necessarily invested to support the North American-wide launch of the Company's TrueBlue® blueberry brand. The Company has adopted a policy of expensing all grocery chain slotting fees over a twelve-month period and those expenses were a material cost in Q2.
The majority of incremental sales and marketing expenses were incurred in the United States as the Company successfully expanded sales there. Consequently, the Company recorded income tax expense of $164,000 US [$200,000 Cdn] in the quarter ($381,000 US [$469,000 Cdn] year to date) in connection with earnings in its Canadian subsidiary.
Leading Brands Chairman and CEO Ralph McRae said: "If you add back our increase in spending on sales and marketing and the one time contract termination gain in Q2 2004, Q2 this year was a much improved financial result over last year. Most importantly, our three-year revenue decline has stopped, and now reversed itself. The investment we made in expanding the distribution of our brands during the first half of this year has resulted in sales growth in Q2 that is accelerating in the first part of Q3. We continue to see rising per store sales of TrueBlue® and our listing base is increasing every month."
Mr. McRae continued: "It on average takes 12 weeks between the date we obtain the initial approval for chain listing of one of our brands and the date the product becomes available for sale to the consumer. Consequently, sales and marketing expenses will precede by a quarter or so the corresponding increase in revenues. Once the product is on the shelf, we need to bring it to the consumers' attention. In the early days, that is accomplished by a series of displays, samplings and promotions. That activity does not occur for free. After that we begin to reap the financial benefits of our efforts and investment. Those months are shortly ahead."
Mr. McRae added: "Year to date EBITDA was $1,146,000 US [$1,412,000 Cdn]. This was contributed to by strong operational performance in our plants and our ability to sustain gross profit margins in the face of rising raw material costs. Our cash flow was principally applied to reduce long term debt and fund increased working capital to support rising sales."
During the quarter the Company discontinued it's Pez® 100% Juice™ brand to focus on more successful and profitable products. The Company's revenues will not be impacted materially from this event and the Company has sufficient financial reserves to deal with the disposition of any remaining inventory.
In conjunction with this release, you are invited to listen to the Company's conference call, which will be held on Tuesday, October 11, 2005, at 8:00 am, Pacific Time, (11:00 am Eastern Time), with Ralph McRae, Chairman and CEO of Leading Brands, Inc.
TO PARTICIPATE IN THE CONFERENCE CALL PLEASE DIAL-IN:
1-416-641-6714
The Company will continue to provide operational updates in its monthly newsletter on the first of most months, posted at www.LBIX.com. LEADING BRANDS, INC.
CONSOLIDATED STATEMENT OF INCOME (LOSS) AND DEFICIT
(UNAUDITED)
(EXPRESSED IN CANADIAN DOLLARS)
Three months Three months Six months Six months
ending ending ending ending
August 31 August 31 August 31 August 31
2005 2004 2005 2004
-------------------------------------------------------------------------------------------------
Gross sales $ 13,928,616 $ 14,790,003 $ 25,241,452 $ 27,443,515
Less: Discounts, allowances and rebates (469,988) (425,017) (691,046) (556,736)
------------ ------------ ------------ ------------
Net sales 13,458,628 14,364,986 24,550,406 26,886,779
Expenses (Income)
Cost of sales 9,543,483 10,046,588 16,823,735 18,545,596
Selling, general & administration expenses 3,522,168 3,279,863 6,314,683 5,858,518
Depreciation and amortization 283,708 305,329 566,083 607,504
Interest expense 101,597 99,464 198,832 203,642
Other expense (income) 501 (887,481) 184 (884,965)
------------ ------------ ------------ ------------
Total Expenses 13,451,457 12,843,763 23,903,517 24,330,295
------------ ------------ ------------ ------------
Net income before taxes 7,171 1,521,223 646,889 2,556,484
Income tax - current - (405)
Income tax - provision future income tax (200,418) (839,233) (468,917) (1,339,590)
------------ ------------ ------------ ------------
Net income (loss) (193,247) 681,990 177,972 1,216,489
------------ ------------ ------------ ------------
Deficit, beginning of period,
as previously reported (25,675,546) (26,318,594) (26,046,765) (25,735,980)
Adjustment for change in accounting for
stock-based compensation - - - (1,117,113)
------------ ------------ ------------ ------------
Accumulated deficit, beginning
of period, as restated (25,675,546) (26,318,594) (26,046,765) (26,853,093)
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------
Deficit, end of period (25,868,793) (25,636,604) (25,868,793) (25,636,604)
------------ ------------ ------------ ------------
EARNINGS PER SHARE
Basic ($0.01) $0.04 $0.01 $0.08
Diluted ($0.01) $0.04 $0.01 $0.08
Weighted average number of
shares outstanding 15,058,439 15,040,169 15,051,754 15,040,169
-------------------------------------------------------------------------------------------------LEADING BRANDS, INC.
CONSOLIDATED STATEMENT OF INCOME (LOSS) AND DEFICIT
(UNAUDITED)
(EXPRESSED IN UNITED STATES DOLLARS)
Three months Three months Six months Six months
ending ending ending ending
August 31 August 31 August 31 August 31
2005 2004 2005 2004
-------------------------------------------------------------------------------------------------
Gross sales $ 11,395,415 $ 11,112,783 $ 20,551,158 $ 20,495,485
Less: Discounts, allowances and rebates (384,511) (319,345) (563,419) (417,016)
------------ ------------ ------------ ------------
Net sales 11,010,904 10,793,438 19,987,739 20,078,469
Expenses (Income)
Cost of sales 7,807,807 7,548,717 13,699,886 13,850,815
Selling, general & administration expenses 2,881,590 2,464,395 5,141,638 4,376,493
Depreciation and amortization 232,110 229,416 460,643 453,481
Interest expense 83,120 74,734 161,814 151,982
Other expense (income) 410 (666,828) 153 (664,962)
------------ ------------ ------------ ------------
Total Expenses 11,005,037 9,650,434 19,464,134 18,167,809
------------ ------------ ------------ ------------
Net income before taxes 5,867 1,143,004 523,605 1,910,660
Income tax - current - - - (300)
Income tax - provision future income tax (163,968) (630,575) (381,270) (1,001,595)
------------ ------------ ------------ ------------
Net income (loss) (158,101) 512,429 142,335 908,765
------------ ------------ ------------ ------------
Deficit, beginning of period,
as previously reported (17,434,322) (17,964,065) (17,734,758) (17,524,051)
Adjustment for change in accounting for
stock-based compensation - - - (836,350)
------------ ------------ ------------ ------------
Accumulated deficit, beginning of
period, as restated (17,434,322) (17,964,065) (17,734,758) (18,360,401)
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------
Deficit, end of period (17,592,423) (17,451,636) (17,592,423) (17,451,636)
------------ ------------ ------------ ------------
EARNINGS PER SHARE
Basic ($0.01) $0.03 $0.01 $0.06
Diluted ($0.01) $0.03 $0.01 $0.06
Weighted average number of
shares outstanding 15,058,439 15,040,169 15,051,754 15,040,169
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About Leading Brands, Inc.
Leading Brands, Inc. (NASDAQ:LBIX) is North America’s only fully integrated premium beverage company. The Company’s unique Integrated Distribution System (IDS) ™ offers turnkey, one-stop shopping to food and beverage brand owners, including manufacturing, distribution, sales/marketing and licensing. In addition, Leading Brands produces their own line of beverages such as TrueBlue®, LiteBlue®, TREK® Natural Sports Drinks, NITRO® Energy Drinks, INFINITY® Health Water™, Country Harvest® Juices, and Caesar’s® Cocktails.
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.
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