Leading Brands, Inc. (NASDAQ: LBIX) Buzz Stock of the Day

Posted on Thursday, September 24th, 2009

Shares of Leading Brands, Inc. (NASDAQ: LBIX) jumped nearly 33 percent in morning trading Thursday after the company reported promising financials for the second quarter 2009 ending August 31, 2009. Leading Brands is the only fully-integrated healthy beverage company in North America. Please note all amounts are recorded in Canadian dollars.

In the second quarter of 2009, the company generated non-cash, after-tax net income of $809,000 compared with a net loss of $291,000 for the same period last year. These earnings represent a $0.04 per share gain versus a loss of $0.01 per share for the same period last year. Additionally, the company reported non-cash income taxes of $380,000 for the second quarter, indicating before tax non-cash earnings of $1,189,000.

For the past year, Leading Brands has been focused on restructuring and cost reduction and for the second quarter reported a 41 percent decrease in selling, general, and administrative expenses. The company believes these current SG&A expenses are at a stable and sustainable level and will continue to be so.

The company reported an increase in gross profit margin of 8.6 percent over the same quarter last year, recording a margin of 52.7 percent for the second quarter 2009, compared with 44.1 percent for the second quarter and 43.2 percent for the first quarter of the fiscal year 2008. The solid gains in gross profit margin can be attributed to the company’s continued focus on cost reduction and efficient management as well as an improved and expanding product line.

Furthermore, Leading Brands has ceased distribution of its low-margin legacy food products and now focuses solely on its core healthy branded beverage products; as a result, the company reported gross revenue for Q2 of this year of $6,624,000, down from $9,562,000 for the same quarter last year, a year-over-year decrease of 30.7 percent. However, the Leading Brands is steadily gaining as the company reported gross revenue increase from the first quarter to the second quarter of $725,000, a quarter-over-quarter increase of 12.3 percent.

Finally, Leading Brands recorded net income for the first two quarters of 2009 of $1,012,000 compared with a net loss of $849,000 for the same two quarters in the previous year, an increase of $1,861,000. Year-to-date gross revenue fell $6,403,000 from $18,926,000 in the second quarter last year to $12,523,000 for the same period this year. The decrease in gross revenue is the result of Leading Brands’ decision to eliminate the low-margin food distribution business.

Leading Brands, attempting to stay profitable while facing the recent economic downturn, launched a massive restructuring and cost reducing initiative. In the past 18 months, the company has been working to eliminate unprofitable product lines, improve efficiency as well as enhance and expand profitable product lines.

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