Lifeway Foods Announces Results for Fourth Quarter and Full Year 2011

2011 Net Sales Increased 20% to $70.4 Million

2011 Gross Profit Increased 32% to $22.5 Million

Company Expects First Quarter 2012 Net Sales to Increase Approximately 14% to $21.0 Million

Company Plans to Initiate Dividend and New Share Repurchase Program

02 Apr, 2012, 16:05 ET from Lifeway Foods, Inc.

MORTON GROVE, Ill., April 2, 2012 /PRNewswire/ -- Lifeway Foods, Inc., (Nasdaq: LWAY), a leading supplier of cultured dairy products known as kefir and organic kefir, today announced results for the fourth quarter and full year ended December 31, 2011.  

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Fourth Quarter Results

Fourth quarter of 2011 gross sales increased 16% to $18.7 million compared to $16.1 million for the fourth quarter of 2010.  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™.  In addition, Lifeway's Frozen Kefir line, which was launched in April 2011, contributed approximately $0.4 million to sales during the fourth quarter of 2011.

Fourth quarter total consolidated net sales increased 14% to $16.8 million from $14.7 million in the fourth quarter of 2010.  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 2011 was approximately $2.0 million or 10.5% of gross sales, compared to $1.4 million or 8.6% of gross sales in the same period last year.  This allowance increase of $0.5 million year-over-year is due to an adjustment made during the fourth quarter of 2011 associated with write-offs of accounts receivable balances outstanding as of December 31, 2011 for known discounts.  

Gross profit for the fourth quarter of 2011 increased 27% to $4.1 million, compared to $3.8 million in the fourth quarter of the prior year. The Company's gross profit margin increased to 23% in the fourth quarter versus 20% in the fourth quarter of 2010. The increase in gross profit margin is primarily due to the lower cost of transportation and other petroleum-based production supplies, partially offset by the increase in the price of conventional and organic milk, the Company's largest raw material.  The total cost of milk was approximately 20% higher during the fourth quarter of 2011 when compared to the same period in 2010.  

Operating expenses as a percentage of net sales were approximately 25% during the fourth quarter of 2011, compared to approximately 24% during the same period in 2010.   This increase was primarily attributable to increased selling expenses as compared to the same period in 2010.  Selling related expenses increased by $0.4 million to $2.4 million during the fourth quarter of 2011 approximately equal to the same period in 2010.  This increase is directly attributable to increases in marketing and advertising of the Company's flagship line, Kefir, as well as ProBugs Organic Kefir for kids, BioKefir and Lifeway's Frozen Kefir.

The company reported a loss in operations of $0.5 million during the fourth quarter of 2011, an improvement of $79,343 from $0.5 million during the same period in 2010.

Income tax benefit was $0.1 million for the fourth quarter approximately equal to the same period in 2010.  

Total net loss was $0.4 million or a loss of $0.02 per diluted share for the three-month period ended December 31, 2011 compared to a net loss of $0.2 million or a loss of $0.01 per diluted share in the same period in 2010.

"We are very pleased with our 2011 financial results and are excited to continue this strong momentum into 2012," said Julie Smolyansky, CEO of Lifeway Foods, Inc.  "In 2012 we will begin limited distribution of our Kefir products in Target, including 189 PFresh and 249 SuperTarget stores.  In addition, our frozen kefir continues to gain momentum and we expect it to produce approximately $0.6 million in sales in the first quarter of 2012."

Mrs. Smolyansky continued, "We believe our product offerings are extremely on-trend as consumers continue to demand healthy and delicious food products. Going forward, we are very confident in our future growth.  We believe the combination of increased sales and lower milk prices will help us generate approximately $100 million in gross sales and record profitability in 2012."

2011 Year End Results

Total consolidated gross sales increased 21% or $13.6 million to approximately $77.1 million during the twelve-month period ended December 31, 2011 from $63.5 during the same twelve-month period in 2010.  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™.  In addition, Lifeway's Frozen Kefir line, which was launched in April 2011, contributed approximately $0.7 million to sales during the twelve month period ended December 31, 2011.

Total consolidated net sales increased 20% or $11.9 million to $70.4 million during the twelve-month period ended December 31, 2011 from $58.5 million during the same twelve month period in 2010.  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.

Gross profit for the first twelve months of 2011 increased 32% to $22.5 million, compared to $20.2 million in the fourth quarter of the prior year. The Company's gross profit margin decreased to 32% in the first twelve months versus 34% in the same period last year. The gross profit margin decline was primarily attributable to the cost of conventional and organic milk, the Company's largest raw material.  The total cost of milk was approximately 20 to 25% higher during the twelve-month period ended December 31, 2011 when compared to the same period in 2010.  

Operating expenses as a percentage of net sales were approximately 25% during the twelve-month period ended December 31, 2011 compared to approximately 24% during the same period in 2010.  Selling related expenses increased 34% or $2.6 million to $10.2 million during the twelve-month period ended December 31, 2011, from $7.6 million during the same period in 2010. This increase is directly attributable to the Company recording an approximate $0.7 million expense related its 25th Anniversary Cross Country Mobile tour, which occurred in the second quarter and was expensed during the second quarter of 2011.  The Company views this as a non-recurring advertising expense.  

Total net income was $2.9 million or $0.17 per share for the twelve-month period ended December 31, 2011 compared to $3.6 million or $0.22 per share in the same period in 2010.

Balance Sheet/Cash Flow Highlights

The Company had a net decrease in cash and cash equivalents of $2.1 million during the twelve-month period ended December 31, 2011 compared to a net increase in cash and cash equivalents of $2.6 million during the same period in 2010.  The Company had cash and cash equivalents of $1.1 million as of December 31, 2011 compared to cash and cash equivalents of $3.2 million as of December 31, 2010.

Total stockholder's equity was $35.4 million as of December 31, 2011, which is an increase of $1.7 million when compared to December 31, 2010.  This is primarily due the increase in retained earnings of $2.9 million when compared to December 31, 2010.

Dividend and Share Repurchase Program

The Company today also announced plans to initiate an annual dividend. Subject to declaration by the Board of Directors, the Company plans to initiate its first ever annual dividend sometime in the third quarter of fiscal 2012.

Additionally, on February 6, 2012 the Company's Board of Directors authorized a new share repurchase program for up to 200,000 shares. The new share repurchase program replaces the existing share repurchase authorization of 250,000 shares beginning in fiscal 2011 under which the Company repurchased approximately 130,000 shares.  

Conference Call

The Company will host a conference call to discuss these results with additional comments and details. The conference call is scheduled to begin at 4:30 p.m. ET on Monday, April 2, 2012. 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 April 16, 2012.  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.

For more information about Lifeway Kefir, please visit http://www.lifewaykefir.com.
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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™. While most regular yogurt contains only two or three of these "friendly" cultures, Lifeway Kefir products offer greater nutritional benefits and support a healthier life. Lifeway produces various different flavors of its drinkable Kefir and Organic Kefir beverage, and recently introduced a series of innovative new products such as a children's line of Organic Kefir called ProBugs™ with a no-spill pouch and kid-friendly flavors like Goo Berry Pie and Strawnana Split. In addition to its line of Kefir products, the company produces a variety of probiotic cheese products. Lifeway also sells frozen kefir, kefir smoothies and kefir parfaits through its Starfruit™ retail stores.

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

Press:

SSPR – Lauren Kaminski

lkaminski@sspr.com

847.415.9317

LIFEWAY FOODS, INC. AND SUBSIDIARIES

Consolidated Statements of Financial Condition

For the Years Ended December 31, 2011 and 2010

December 31,

2011

2010

ASSETS

Current assets

Cash and cash equivalents

$                  1,115,150

$                 3,229,939

Investments

1,695,044

1,079,232

Certificates of deposits in financial institutions

300,000

250,000

Inventories

4,954,475

3,985,374

Accounts receivable, net of allowance for doubtful accounts and discounts

7,950,276

6,793,276

Prepaid expenses and other current assets

79,630

158,315

Other receivables

224,204

104,680

Deferred income taxes

338,690

328,470

Refundable income taxes

41,316

906,748

Total current assets

16,698,785

16,836,034

Property and equipment, net

15,198,822

15,152,713

Intangible assets

Goodwill and other non amortizable brand assets

14,068,091

14,068,091

Other intangible assets, net of accumulated amortization of $3,087,940 and $2,304,107 at December 31, 2011 and 2010, respectively

5,218,060

6,001,893

Total intangible assets

19,286,151

20,069,984

Other assets

Long-term accounts receivable net of current portion

289,550

---

Total assets

$             51,473,308

$            52,058,731

LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities

Checks written in excess of bank balances

$                     592,040

$                 1,341,210

Current maturities of notes payable

1,540,716

2,851,610

Accounts payable

4,386,239

4,183,481

Accrued expenses

553,725

509,459

Total current liabilities

7,072,720

8,885,760

Notes payable

5,539,836

6,122,225

Deferred income taxes

3,503,595

3,401,728

Total liabilities

16,116,151

18,409,713

Stockholders' equity

Common stock, no par value; 20,000,000 shares authorized; 17,273,776 shares issued; 16,409,317 shares outstanding at December 31, 2011; 17,273,776 shares issued; 16,536,657 shares outstanding at December 31, 2010

6,509,267

6,509,267

Paid-in-capital

2,032,516

2,032,516

Treasury stock, at cost

(7,606,974)

(6,425,546)

Retained earnings

34,431,296

31,575,875

Accumulated other comprehensive (loss), net of taxes

(8,948)

(43,094)

Total stockholders' equity

35,357,157

33,649,018

Total liabilities and stockholders' equity

$             51,473,308

$            52,058,731

LIFEWAY FOODS, INC. AND SUBSIDIARIES

Consolidated Statements of Income and Comprehensive Income

For the Years Ended December 31, 2011 and 2010

December 31,

2011

2010

Gross sales

$      77,122,999

$       63,543,445

Less: discounts and allowances

(7,152,590)

(5,043,552)

Net sales

69,970,409

69,970,409

58,499,893

58,499,893

Cost of goods sold

45,866,632

36,926,973

Depreciation expense

1,552,961

1,393,745

Total cost of goods sold

47,419,593

38,320,718

Gross profit

22,550,816

20,179,175

Selling expenses

10,205,441

7,603,098

General and administrative

6,485,051

5,576,908

Amortization expense

783,833

724,537

Total operating expenses

17,474,325

13,904,543

Income from operations

5,076,491

6,274,632

Other income (expense):

Interest and dividend income

70,611

260,552

Rental income

7,150

11,785

Interest expense

(247,342)

(350,997)

Impairment of investments

(36,032)

---

Gain (loss) on sale of investments, net

(29,256)

250,480

Other expense

(8,364)

---

Total other income (expense)

(243,233)

171,820

Income before provision for

   income taxes

4,833,258

6,446,452

Provision for income taxes

1,977,837

2,823,986

Net income

$                 2,855,421

$            3,622,466

Basic and diluted earnings

per common share

0.17

0.22

Weighted average number of

   shares outstanding

16,422,948

16,663,557

COMPREHENSIVE INCOME

Net income

$                 2,855,421

$            3,622,466

Other comprehensive income

   (loss), net of tax:

   Unrealized gains (losses) on

   investments (net of tax)

17,616

114,297

Less reclassification adjustment

   for (gains) losses included in

   net income (net of taxes)

16,530

(147,032)

Comprehensive income

$                 2,889,567

$            3,589,731

LIFEWAY FOODS, INC. AND SUBSIDIARIES

Consolidated Statements of Cash Flows

For the Years Ended December 31, 2011 and 2010

December 31,

2011

2010

Cash flows from operating activities:

Net income

$                  2,855,421

$                     3,622,466

Adjustments to reconcile net income to net

cash flows from operating activities, net of acquisition:

   Depreciation and amortization

2,336,794

2,118,282

   Loss (Gain) on sale of investments, net

29,256

(250,480)

   Loss on disposition of equipment

20,135

---

   Impairment of investments

36,032

---

   Deferred income taxes

68,217

(96,918)

   Treasury stock issued for compensation

---

154,245

   Bad debt expense

48,240

17,754

(Increase) decrease in operating assets:

   Accounts receivable

(1,494,790)

(811,292)

   Other receivables

(119,524)

(54,922)

   Inventories

(969,101)

(682,398)

   Refundable income taxes

865,432

402,230

   Prepaid expenses and other current assets

78,685

(117,618)

Increase (decrease) in operating liabilities:

   Accounts payable

202,758

1,419,479

   Accrued expenses

84,466

(104,885)

Net cash provided by operating activities

4,042,021

5,615,943

Cash flows from investing activities:

Purchases of investments

(2,434,340)

(2,161,552)

Proceeds from sale of investments

1,810,816

5,669,158

Investments in certificates of deposits

(50,000)

---

Proceeds from redemption of certificates of deposit

---

402,005

Purchases of property and equipment

(1,439,133)

(2,229,274)

Acquisition of the assets of First Juice

---

(270,000)

Net cash (used in) provided by investing activities

(2,112,657)

1,410,337

Cash flows from financing activities:

Proceeds from note payable

2,000,000

250,000

Checks written in excess of bank balances

(749,170)

998,234

Purchases of treasury stock

(1,181,428)

(2,666,288)

Repayment of notes payable

(4,113,555)

(3,008,694)

Net cash used in financing activities

(4,044,153)

(4,426,748)

Net (decrease) increase in cash and cash equivalents

(2,114,789)

2,599,532

Cash and cash equivalents at the beginning of the period

3,229,939

630,407

Cash and cash equivalents at the end of the period

$                  1,115,150

$                     3,229,939

SOURCE Lifeway Foods, Inc.



RELATED LINKS

http://www.kefir.com