DEAR FELLOW SHAREHOLDERS:
Happy New Year to you all!
Last week I took a call from a reporter with a Vancouver business newspaper who was intent upon writing an article about our company. He wanted to ask a few questions of clarification about our business and I was pleased to oblige him. At one point during our discussion, he asked me if I would provide him with an indication of our future revenue potential. As I routinely do, I said that we did not issue forecasts or estimates, or give guidance. He persisted and tried several different ways to have me state a specific number. At one point he said: "Could the company do $X million in sales in three years?" My dismissive answer was: "possibly".
The headline he wrote was: "Leading Brands' TrueBlue venture tagged to lead transformation into a US$X million beverage empire". He then indicated that I had predicted that the Company's revenues "will skyrocket…in the next two or three years." Is the number he quoted "possible", sure it is. So are a virtually infinite number of other outcomes. Is it likely to be the case? No. Will our revenues "skyrocket"? Well, that sounds wonderful but, on reflection, I'm not even sure what that means and never used that word or said anything similar.
We remain very optimistic about our business and TrueBlue® in particular. It was, however, necessary in the face of that misleading article, to publish the corrective news release we did yesterday. I apologize for any confusion this may have caused.
In a similar vein, on Monday of this week I turned on CNBC to see a report on Glaceau Vitamin Water®. They are a private company that initiated the 'enhanced water' category in the late 1990s. I mention that report only because of a couple of specific metrics that CNBC focused on. Specifically, they indicated that Vitamin Water® sales were $350 million US in 2005 and that the brand was available in 50,000 'outlets'. The reporter then turned to how grocery chain slotting fees were a significant cost and necessary component of their growth.
In our last news release we stated that TrueBlue® would soon be available in 10,000 chain grocery stores in Canada and the US and I am concerned about the inevitable comparisons these similar statements might yield. First of all, as for the CNBC report, I was unable to discern whether the 50,000 'outlets' were all grocery stores or included convenience and other types of retailers. With that having been said, please do not simply extrapolate our number of retail 'outlets' to estimate our revenue potential. There are a great number of factors that weigh on that, including the nature of the products in question. One nice comparative fact that came out of the report was that Vitamin Water® contains only 50 calories per serving: the same number as LiteBlue®. That, however, is where the comparison should end.
Now to the facts... Sales continue to be brisk. Our 35% revenue growth last quarter was extremely encouraging as we enter a new year with major progress finally having been achieved in the US. Our growth indicates that not only are our brands becoming successful, but also that our strategy of focusing on more healthful offerings is the correct one. In support of that thought is another recent media assessment about two relatively large Canadian food and beverage companies whose sales are lagging and financial performance has deteriorated. It was pointed out that the core product lines of these businesses were less than healthful and that consequently the companies were fighting an uphill battle against consumer preferences.
We have recently obtained additional major Canadian-wide listings for Hansen's Monster®, Energy® and Lost® and are gaining traction in introducing TrueBlue® into the food service channel. We are close to launching the new version of TREK® Sports Drinks and Nitro® Energy Drinks in new packaging that will allow us a significantly lower price point. We will start that distribution in the US this spring.
Over the past month we were also able to re-negotiate our bank credit lines to increase our available working capital by approximately $2 million US. This also involved extending the amortization of our term loans to reduce the current portion of our balance sheet long-term debt, free up monthly cash flow for operations and further improve our financial ratios.
Thank you for your continued support.
LEADING BRANDS, INC.
Ralph D. McRae
Chairman & CEO
We Build Brands™
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.
Any non-GAAP financial measures referenced in this release such as “EBITDA”, “cash inflow from operations” or the like do not have any standardized meaning prescribed by GAAP and is therefore unlikely to be comparable to similar measures presented by other issuers.