Lifeway Foods Announces First Quarter 2014 Financial Results

First Quarter Gross Sales Increase 16% to $32.1 Million

First Quarter Net Sales Increase 20% to $29.1 Million

May 12, 2014, 16:05 ET from Lifeway Foods, Inc.

MORTON GROVE, Ill., May 12, 2014 /PRNewswire/ -- Lifeway Foods, Inc., (Nasdaq: LWAY), a leading supplier of cultured dairy products known as kefir and organic kefir, today announced results for the first quarter ended March 31, 2014. 

"We are pleased to report our results for the first quarter in which we achieved robust sales growth," said Julie Smolyansky, CEO of Lifeway Foods, Inc. "I am impressed with our team's ability to closely manage expenses despite increased margin pressure due to record high milk prices. The progress we have made in product innovation and the positive consumer response to our products has positioned us well to capitalize on our growth opportunities. We continue to add new distribution in the US and to expand Lifeway's kefir probiotic reach. Looking ahead, our team remains committed to delivering increased financial results and we expect fiscal 2014 to be another record year."

First Quarter Results
First quarter of 2014 gross sales increased approximately 16% to $32.1 million compared to $27.6 million for the first quarter of 2013.  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™.

First quarter total consolidated net sales increased approximately 20% to $29.1 million from $24.4 million in the first quarter of 2013.  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 first quarter of 2014 was approximately $2.9 million or 9% of gross sales, compared to $3.2 million or approximately 12% of gross sales in the same period last year.

Cost of goods sold as a percentage of net sales, excluding depreciation expense, were approximately 74% during the first quarter of 2014, compared to approximately 63% during the same period in 2013. Gross profit for the first quarter of 2014 decreased 18% to approximately $7.1 million, compared to approximately $8.6 million in the first quarter of the prior year. The gross profit margin decreased to 24% in the first quarter 2014 versus 35% in the first quarter of 2013. The decrease was primarily attributable to the increased cost of conventional milk, the Company's largest raw material.  The total cost of milk was approximately 35% higher during the first quarter 2014 when compared to the same period in 2013. 

Operating expenses as a percentage of net sales were approximately 21% during the first quarter of 2014, compared to approximately 20% during the same period in 2013.  This was primarily attributable to an increase in selling related expenses, which increased approximately 24% to $3.5 million during the first quarter of 2014, from $2.8 million during the same period in 2013.

The Company reported income from operations of $1.0 million during the first quarter of 2014 compared to $3.7 million during the same period in 2013.

Provision for income tax was $0.3 million or a 34% effective tax rate for the first quarter compared to a provision for income tax of $1.4 million or a 37% effective tax rate during the same period in 2013.

Total net income was $0.7 million, or $0.04 per diluted share, for the three-month period ended March 31, 2014 compared to $2.4 million, or $0.14 per diluted share, in the same period in 2013.

Balance Sheet/Cash Flow Highlights
The Company had cash and cash equivalents of $2.5 million as of March 31, 2014 compared to cash and cash equivalents of $3.3 million as of December 31, 2013.

Total stockholder's equity was $43.6 million as of March 31, 2014, which is an increase of $0.7 million when compared to December 31, 2013.  This is primarily due to the increase in retained earnings of $0.7 million when compared to December 31, 2013.

Conference Call
The Company will host a conference call to discuss these results with additional comments and details on Monday, May 12, 2014 at 4:30 p.m. ET. The call will be broadcast live over the Internet hosted at the Investor Relations section of Lifeway Foods' website at www.lifeway.net, and will be archived online through May 26, 2014. In addition, listeners may dial 877-407-3982 in North America, and international listeners may dial 201-493-6780. Participants from the Company will be Julie Smolyansky, President and Chief Executive Officer, and Edward Smolyansky, Chief Financial Officer and Chief Operating Officer.

About Lifeway Foods
Lifeway Foods, Inc. (Nasdaq: LWAY), recently named one of Fortune Small Business' Fastest Growing Companies for the sixth 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

March 31, 2014 and 2013 (Unaudited) and December 31, 2013

March 31,

December 31,

2014

2013

2013

ASSETS

Current assets

Cash and cash equivalents

$     2,474,708

$     2,739,957

$     3,306,608

Investments

2,790,935

2,062,343

2,516,380

Certificates of deposits in financial institutions

-

250,000

15,373

Inventories

7,355,884

7,080,899

6,899,008

Accounts receivable, net of allowance for doubtful accounts and discounts ($1,300,000 and $1,350,000 and $1,050,000)

10,794,866

11,915,981

10,444,839

Prepaid expenses and other current assets

39,855

92,827

128,323

Other receivables

91,628

5,165

103,272

Deferred income taxes

360,110

295,701

322,071

Refundable income taxes

2,580,323

84,828

1,014,947

Total current assets

26,488,309

24,527,701

24,750,821

Property and equipment, net

21,248,982

14,917,260

20,824,448

Intangible assets

Goodwill and other non amortizable brand assets

14,068,091

14,068,091

14,068,091

Other intangible assets, net of accumulated amortization of $4,734,478, $4,020,598 and $4,555,559 at March 31, 2014 and 2013 and at December 31, 2013, respectively

3,571,522

4,285,403

3,750,441

Total intangible assets

17,639,613

18,353,494

17,818,532

Other Assets

Long-term accounts receivable net of current portion

273,000

294,000

280,000

Total assets

$65,649,904

$58,092,455

$63,673,801

LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities

Current maturities of notes payable

$        879,354

$        543,591

$        875,002

Accounts payable

6,958,999

6,465,801

6,723,179

Accrued expenses

2,732,170

1,197,883

1,284,060

Accrued income taxes

---

462,593

---

Total current liabilities

10,570,523

8,669,868

8,882,241

Notes payable

8,775,587

4,820,160

8,999,012

Deferred income taxes

2,689,167

2,909,134

2,843,426

Total liabilities

22,035,277

16,399,162

20,724,679

Stockholders' equity

Common stock, no par value; 40,000,000 shares authorized; 17,273,776 shares issued; 16,346,017 shares outstanding

at March 31, 2014; 17,273,776 shares issued; 16,346,017 shares outstanding at March 31, 2013 and 16,346,017 shares outstanding at December 31, 2013

6,509,267

6,509,267

6,509,267

Paid-in-capital

2,032,516

2,032,516

2,032,516

Treasury stock, at cost

(8,187,682)

(8,187,682)

(8,187,682)

Retained earnings

43,247,392

41,270,416

42,587,214

Accumulated other comprehensive income (loss), net of taxes

13,134

68,776

7,807

Total stockholders' equity

43,614,627

41,693,293

42,949,122

Total liabilities and stockholders' equity

$65,649,904

$58,092,455

$63,673,801

 

LIFEWAY FOODS, INC. AND SUBSIDIARIES

Consolidated Statements of Income and Comprehensive Income

For the Three Months Ended March 31, 2014 and 2013 (Unaudited)

(Unaudited)

Three Months Ended

March 31,

2014

2013

Sales

$ 32,061,147

$ 27,590,622

Less: discounts and allowances

(2,929,436)

(3,203,591)

Net sales

29,131,711

29,131,711

24,387,031

24,387,031

Cost of goods sold

21,681,910

15,402,875

Depreciation expense

383,361

394,125

Total cost of goods sold

22,065,271

15,797,000

Gross profit

7,066,440

8,590,031

Selling expenses

3,479,688

2,813,572

General and administrative

2,380,631

1,868,100

Amortization expense

178,919

177,842

Total operating expenses

6,039,238

4,859,514

Income from operations

1,027,202

3,730,517

Other income (expense):

Interest and dividend income

28,698

15,009

Rental income

500

3,269

Interest expense

(65,569)

(36,299)

Gain (loss) on sale of investments, net reclassified from OCI

4,808

64,335

Total other income (expense)

(31,563)

46,314

Income before provision for income taxes

995,639

3,776,831

Provision for income taxes

335,461

1,411,192

Net income

$    660,178

$ 2,365,639

Basic and diluted earnings

per common share

0.04

0.14

Weighted average number of shares outstanding

16,346,017

16,346,017

COMPREHENSIVE INCOME

Net income

$    660,178

$ 2,365,639

Other comprehensive income (loss), net of tax:

    Unrealized gains (losses) on investments (net of tax)

8,044

51,535

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

(2,717)

(36,349)

Comprehensive income

$    665,505

$ 2,380,825

 

 

LIFEWAY FOODS, INC. AND SUBSIDIARIES

Consolidated Statements of Cash Flows

For the Three Months Ended March 31, 2014 and 2013 (Unaudited)

March 31,

2014

2013

Cash flows from operating activities:

Net income

$    660,178

$ 2,365,639

Adjustments to reconcile net income to net

cash flows from operating activities:

Depreciation and amortization

562,280

571,967

Loss (gain) on sale of investments, net

(4,808)

(64,335)

Deferred income taxes

(196,401)

(192,090)

Bad Debt Expense

126,049

51,819

Loss (Gain) on sale of equipment

---

---

(Increase) decrease in operating assets:

Accounts receivable

(468,826)

(3,244,063)

Other receivables

11,644

3,660

Inventories

(456,876)

(1,141,713)

Refundable income taxes

(1,565,376)

---

Prepaid expenses and other current assets

88,468

4,311

Increase (decrease) in operating liabilities:

Accounts payable

235,820

2,209,076

Accrued expenses

1,448,110

42,206

Income taxes payable

---

208,282

Net cash provided by operating activities

440,262

814,759

Cash flows from investing activities:

Purchases of investments

(814,804)

(1,271,516)

Proceeds from sale of investments

554,609

1,170,271

Investments in certificates of deposits

---

---

Redemption of certificates of deposits

15,000

200,000

Purchases of property and equipment

(807,894)

(324,608)

Proceeds from sale of equipment

---

---

Net cash (used in) provided by investing activities

(1,053,089)

(225,853)

Cash flows from financing activities:

Repayment of notes payable

(219,073)

(135,175)

Net cash provided (used in) financing activities

(219,073)

(135,175)

Net (decrease) increase in cash and cash equivalents

(831,900)

453,731

Cash and cash equivalents at the beginning of the period

3,306,608

2,286,226

Cash and cash equivalents at the end of the period

$ 2,474,708

$ 2,739,957

Logo - http://photos.prnewswire.com/prnh/20131010/AQ95965LOGO

SOURCE Lifeway Foods, Inc.