CORRECTION - Lifeway Foods Announces Record Fourth Quarter and Full Year 2012 Financial Results

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Fourth Quarter and Full Year 2012 Highlights

  • Net sales increased 24% to $20.8 million for the quarter, and net sales increased 16% to $81.4 million for the year
  • Gross profit increased 86% from the fourth quarter 2012 when compared to the same period in 2011, and 29% for 2012 when compared to 2011
  • Gross profit margin increased to 33% for the fourth quarter 2012, from 22% in 2011, and to 34% for the year, from 30% in 2011
  • Record earnings per diluted share of $0.07 for the quarter, and record earnings per diluted share of $0.34 for the year

"In 2012, we continued to execute on our strategic goals as we increased awareness and distribution of Lifeway's kefir products to report record sales and earnings results," said Julie Smolyansky, CEO of Lifeway Foods, Inc.  "We are confident about our future growth and we expect 2013 to be another year of strong sales and profitability as new and existing consumers choose Lifeway Foods as a provider of wholesome, nutritious kefir products for themselves and their families.  Additionally, we expect gross revenues for our first quarter 2013, which ended March 29, 2013, to be approximately 30% higher when compared to the same period in 2012, and we expect to continue this momentum throughout the year."

Fourth Quarter Results
Fourth quarter of 2012 gross sales increased 22% to $22.9 million compared to $18.7 million for the fourth quarter of 2011.  This increase is primarily attributable to increased sales and awareness of the Company's flagship line, Kefir, as well as ProBugs® Organic Kefir for kids and BioKefir™.

Fourth quarter total consolidated net sales increased 24% to $20.8 million from $16.8 million in the fourth quarter of 2011.  Net sales are recorded as gross sales less promotional activities such as slotting fees paid, couponing, spoilage and promotional allowances as well as early payment terms given to customers.  The total allowance for promotions and discounts in the fourth quarter of 2012 was approximately $2.0 million or 10% of gross sales, compared to $2.0 million or 10.5% of gross sales in the same period last year. 

Cost of goods sold as a percentage of net sales, excluding depreciation expense, were approximately 65% during the fourth quarter of 2012, compared to approximately 76% during the same period in 2011. Gross profit for the fourth quarter of 2012 increased 86% to approximately $6.8 million, compared to approximately $3.7 million in the fourth quarter of the prior year. The gross profit margin increased to 33% in the fourth quarter 2012 versus 22% in the fourth quarter of 2011. The increase was primarily attributable to lower costs of transportation and other petroleum-based production supplies, and the decreased cost of conventional milk, the Company's largest raw material.  The total cost of milk was approximately 5% lower during the fourth quarter 2012 when compared to the same period in 2011. 

Operating expenses as a percentage of net sales were approximately 24% during the fourth quarter of 2012, compared to approximately 25% during the same period in 2011.  This was primarily attributable to an increase in selling expenses, which increased by $0.6 million to $3.2 million during the fourth quarter of 2012, from $2.6 million during the same period in 2011.

The Company reported income from operations of $1.80 million during the fourth quarter of 2012, an improvement of $2.3 million from a loss of $0.5 million during the same period in 2011.

Provision for income tax was $0.7 million or a 40% effective tax rate for the fourth quarter compared to a benefit of $0.1 million during the same period in 2011.

Total net income was $1.1 million, or $0.07 per diluted share, for the three-month period ended December 31, 2012 compared to a net loss of $0.4 million, or a loss of $0.02 per diluted share, in the same period in 2011.

2012 Year End Results
Total consolidated gross sales increased 16% or $12.6 million to approximately $89.8 million during the twelve-month period ended December 31, 2012 from $77.1 during the same twelve-month period in 2011.  This increase is primarily attributable to increased sales and awareness of the Company's flagship line, Kefir, as well as ProBugs® Organic Kefir for kids and BioKefir™. 

Total consolidated net sales increased 16% or $11.4 million to $81.4 million during the twelve-month period ended December 31, 2012 from $70.0 million during the same twelve month period in 2011.

Cost of goods sold as a percentage of net sales, excluding depreciation expense, were approximately 64% during the twelve-month period ended December 31, 2012, compared to approximately 67% during the same period in 2011. Gross profit for 2012 increased 29% to $27.4 million, compared to $21.3 million in 2011. The Company's gross profit margin increased to 34% versus 30% in 2011.

Total operating income increased $3.8 million, or approximately 74%, to $8.8 million during the twelve-month period ended December 31, 2012, from $5.1 million during the same period in 2011.

Total net income was $5.6 million, or $0.34 per share, for the twelve-month period ended December 31, 2012 compared to $2.9 million, or $0.17 per share, in the same period in 2011.

On March 29, 2013, the Company concluded that the consolidated statements of income for the year-to-date periods ended March 31, 2012, June 30, 2012 and September 30, 2012, including comparatively presented periods, that were previously included in its Quarterly Reports on Forms 10-Q filed in 2012 should be restated as a result to update the accounting presentation of production activity within cost of goods sold from general and administrative operating expenses. These restatements result in increases in cost of goods sold and corresponding decreases in general and administrative operating expenses. These restatements had no impact on the Company's previously reported net income, condensed consolidated balance sheets or consolidated statements of cash flows. Further information regarding this restatement can be found in the Company's Form 8-K filing dated April 1, 2013.

Balance Sheet/Cash Flow Highlights
The Company had a net increase in cash and cash equivalents of $1.2 million during the twelve-month period ended December 31, 2012 compared to a net decrease in cash and cash equivalents of $2.1 million during the same period in 2011.  The Company had cash and cash equivalents of $2.3 million as of December 31, 2012 compared to cash and cash equivalents of $1.1 million as of December 31, 2011.

Total stockholder's equity was $39.3 million as of December 31, 2012, which is an increase of $4.0 million when compared to December 31, 2011.  This is primarily due the increase in retained earnings of $4.5 million when compared to December 31, 2011.

Conference Call
The Company's conference call is archived on the Investor Relations section of Lifeway Foods' website at www.lifeway.net and will be available through April 15, 2013. 

About Lifeway Foods
Lifeway Foods, Inc. (Nasdaq: LWAY), recently named one of Fortune Small Business' Fastest Growing Companies for the fifth consecutive year, is America's leading supplier of the cultured dairy products known as kefir and organic kefir. Lifeway Kefir is a dairy beverage that contains 10 exclusive live and active probiotic cultures plus ProBoost™. In addition to its line of Kefir products, the company produces a variety of Frozen Kefir and probiotic cheese products. Lifeway also sells frozen kefir, kefir smoothies and kefir parfaits through its Starfruit™ retail stores.

Find Lifeway Foods, Inc. on Facebook: www.facebook.com/lifewaykefir 
Follow Lifeway Foods on Twitter: http://twitter.com/lifeway_kefir
YouTube: http://www.youtube.com/user/lifewaykefir

Forward Looking Statements
This news release contains forward-looking statements. Investors are cautioned that actual results may differ materially from such forward-looking statements. Forward-looking statements involve risks and uncertainties including, but not limited to, competitive pressures and other important factors detailed in the Company's reports filed with the Securities and Exchange Commission.

Contact:
Lifeway Foods, Inc.
Phone: 877.281.3874
Email: info@Lifeway.net

Investor Relations:
ICR
Katie Turner
John Mills
646.277.1228



LIFEWAY FOODS, INC. AND SUBSIDIARIES

Consolidated Statements of Financial Condition

December 31, 2012 and 2011

 


December 31,



2012


2011


ASSETS

 







Current assets







Cash and cash equivalents

$

2,286,226


$

1,115,150


Investments


1,869,888



1,695,044


Certificates of deposits in financial institutions


450,000



300,000


Inventories


5,939,186



4,954,475


Accounts receivable, net of allowance for doubtful accounts and discounts


8,723,737



7,950,276


Prepaid expenses and other current assets


97,138



79,630


Other receivables


8,825



224,204


Deferred income taxes


234,687



338,690


Refundable income taxes


84,828



41,316


Total current assets

$

19,694,515


$

16,698,785









Property and equipment, net


14,986,776



15,198,822









Intangible assets







Goodwill and other non-amortizable brand assets


14,068,091



14,068,091


Other intangible assets, net of accumulated amortization of $3,842,756 and 3,087,940 at December 31, 2012 and 2011, respectively


4,463,242



5,218,060


Total intangible assets


18,531,333



19,286,151









Other Assets







Long-term accounts receivable net of current portion


294,000



289,550


Total assets

$

53,506,624


$

51,473,308


 

LIABILITIES AND STOCKHOLDERS' EQUITY

 







Current liabilities







Checks written in excess of bank balances

$

0



592,040


Current maturities of notes payable


542,981



1,540,716


Accounts payable


4,256,725



4,386,239


Accrued expenses


1,155,677



553,725


Accrued income taxes


254,311



0


Total current liabilities


6,209,694



7,072,720









Notes payable


4,955,945



5,539,836









Deferred income taxes


3,028,518



3,503,595


Total liabilities


14,194,157



16,116,151









Stockholders' equity







Common stock, no par value; 20,000,000 shares authorized; 17,273,776 shares issued; 16,346,017 shares outstanding at December 31, 2012; 17,273,776 shares issued; 16,409,317 shares outstanding at December 31, 2011


6,509,267



6,509,267


Paid-in-capital


2,032,516



2,032,516


Treasury stock, at cost


(8,187,682)



(7,606,974)


Retained earnings


38,904,777



34,431,296


Accumulated other comprehensive income (loss), net of taxes


53,591



(8,948)


Total stockholders' equity


39,312,469



35,357,157


 

Total liabilities and stockholders' equity

$

53,506,626


$

51,473,308



 

LIFEWAY FOODS, INC. AND SUBSIDIARIES

Consolidated Statements of Income and Comprehensive Income

For the Years Ended December 31, 2012 and 2011

 


Year Ended

December 31,


2012



2011

































Sales

$

89,754,007







$

77,122,999)






Less: discounts and allowances


(8,402,742)








(7,152,590)






Net sales


81,351,265




81,351,265




69,970,409




69,970,409


Cost of goods sold






52,295,464








47,151,776


Depreciation expense






1,629,594








1,552,961


Total cost of goods sold






53,925,058








48,704,737


Gross profit






27,426,207








21,265,672


Selling expenses






11,506,707








10,114,902


General and administrative






6,319,972








5,290,446


Amortization expense






754,817








783,833


















Total operating expenses






18,581,496








16,189,181


















Income from operations






8,844,711








5,076,491


















Other income (expense):
















Interest and dividend income






85,383








70,611


Rental income






12,285








7,150


Interest expense






(177,622)








(247,342)


Impairment of Investment






0








(36,032)


Gain (loss) on sale of investments, net






71,286








(29,256)


Other Expense






(11,169)








(8,364)


Total other income (expense)






(19,837)








(243,233)


















Income before provision for income taxes






8,824,874








4,833,258


















Provision for income taxes






3,205,076








1,977,837


Net income






$5,619,798








2,855,421


















Basic and diluted earnings per common share






.34








0.17


















Weighted average number of shares outstanding






16,373,224








16,442,948


















COMPREHENSIVE INCOME
































Net income





$

5,619,798







$

2,855,421


















Other comprehensive income (loss), net of tax:
















Unrealized gains on investments (net of tax)






102,816








17,616


Less reclassification adjustment for (gains) losses included in net income (net of taxes)






(40,277)








16,530


Comprehensive income





$

5,682,337







$

2,889,567


 

LIFEWAY FOODS, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows

For the Years Ended December 31, 2012 and 2011

 


December 31,


2012



2011










Cash flows from operating activities:








Net income

$

5,619,798



$

$2,855,421


Adjustments to reconcile net income to net cash flows from

operating activities:








Depreciation and amortization


2,384,411




2,336,794


Loss (gain) on sale of investments, net


(71,286)




29,256


Loss on disposition of equipment


11,169




20,135


Impairment of Investment


0




36,032


Deferred income taxes


(434,896)




68,217


Bad Debt Expense


435,344




48,240


(Increase) decrease in operating assets:








Accounts receivable


(1,213,253)




(1,494,790)


Other receivables


215,379




(119,524)


Inventories


(984,711)




(969,101)


Refundable income taxes


(43,512)




865,432


Prepaid expenses and other current assets


(17,508)




78,685


Increase (decrease) in operating liabilities:








Accounts payable


(129,514)




202,758


Accrued expenses


601,952




84,466


Income taxes payable


254,311




0


Net cash provided by operating activities


6,627,684




4,042,021










Cash flows from investing activities:








Purchases of investments


(1,452,672)




(2,434,340)


Proceeds from sale of investments


1,475,730




1,810,816


Investments in certificates of deposits


(150,255)




(50,000)


Purchases of property and equipment


(1,428,717)




(1,439,133)


Net cash used in investing activities


(1,555,914)




(2,112,657)










Cash flows from financing activities:








Proceeds of note payable


250,000




2,000,000


Checks written in excess of bank balances


(592,040)




(749,170)


Purchases of treasury stock


(580,708)




(1,181,428)


Dividends paid


(1,146,317)





Repayment of notes payable


(1,831,626)




(4,113,555)


Net cash used in financing activities


(3,900,691)




(4,044,153)










Net (decrease) increase in cash and cash equivalents


1,171,079




(2,114,789)










Cash and cash equivalents at the beginning of the period


1,115,150




3,229,939










Cash and cash equivalents at the end of the period

$

2,286,226



$

1,115,150


 

 

SOURCE Lifeway Foods, Inc.



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