2014

Lifeway Foods Announces Results for the Second Quarter of 2012 Second Quarter 2012 Net Sales Increase 13% to $20.6 Million

Company Reports Record Second Quarter Earnings Per Diluted Share of $0.13 Compared to $0.02 Last Year, an Increase of 650%

MORTON GROVE, Ill., Aug. 14, 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 second quarter ended June 30, 2012. 

(Logo: http://photos.prnewswire.com/prnh/20120119/AQ36947LOGO-b)

"We are extremely pleased with our record second quarter financial performance," said Julie Smolyansky, CEO of Lifeway Foods, Inc.  "Our higher net sales combined with the benefit from lower milk prices and tightly controlled expenses enabled us to report a quarterly earnings increase of 650%, the strongest in our Company's history."

Second Quarter Results

Second quarter of 2012 gross sales increased 14% to $22.7 million compared to $19.9 million for the second 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™.  Lifeway's Frozen Kefir line contributed approximately $0.8 million to sales during the second quarter of 2012.

Total consolidated net sales increased 13% or $2.4 million to $20.6 million during the three-month period ended June 30, 2012 from $18.2 million during the same three-month period in 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.

Gross profit for the second quarter of 2012 increased 46% to $8.0 million, compared to $5.5 million in the second quarter of the prior year. The Company's gross profit margin increased to 39% in the second quarter versus 30% in the second quarter of 2011. The increase was primarily attributable to a 20% decrease in the cost of conventional, the Company's largest raw material, partially offset by a 5% increase in the cost of organic milk.

Total operating expenses increased 2% or $0.1 million to $4.9 million during the second quarter of 2012, from $4.8 million during the same period in 2011. This increase was primarily attributable to increased general and administrative expenses, partially offset by a decrease in selling and amortization expenses.

Total operating income increased $2.4 million to $3.1 million during the second quarter of 2012, from $0.7 million during the same period in 2011.  The increase in operating income is related to the increase in gross profit.

The Company's second quarter 2012 effective tax rate was 34% compared to 59% in the same period last year.

Total net income was $2.0 million or $0.13 per diluted share for the three-month period ended June 30, 2012 compared to $0.3 million or $0.02 per diluted share in the same period in 2011.

Balance Sheet/Cash Flow Highlights

The Company had $2.0 million in cash and cash equivalents as of June 30, 2012 compared to a $1.4 million at June 30, 2011.   Total stockholder's equity was $37.1 million as of June 30, 2012, which is an increase of $2.5 million when compared to June 30, 2011. 

Net cash provided by operating activities increased $3.3 million to $4.1 million for the second quarter of 2012. This increase reflects the Company's improvement in operating efficiencies. 

Net cash used in investing activities was $0.56 million during the six-months ended June 30, 2012 compared to net cash used in operating activities of $0.85 during the same period in 2011.  This decrease is primarily attributable to the decrease in purchases of property and equipment of $268,822.

Six Month Results

Total consolidated gross sales increased by $5.3 million, or approximately 14%, to $44.3 million during the six-month period ended June 30, 2012 from $39.0 million during the same six-month period in 2011.  This increase is primarily attributable to increased sales and awareness of Lifeway's flagship line, Kefir, as well as ProBugs® Organic Kefir for kids and BioKefir™.  Lifeway Frozen Kefir line contributed approximately $1.5 million to net sales during the second quarter 2012.

Total consolidated net sales increased by $4.5 million, or approximately 13%, to $40.0 million during the six-month period ended June 30, 2012 from $35.5 million during the same six-month period in 2011. 

Gross profit for the first six-months of 2012 increased 14% to $14.8 million, compared to $13.0 million in the same period in the prior year. The Company's gross profit margin increased to 37% in the first six-months of 2012 versus 36% in the same period last year.

Total net income was $3.3 million or $0.19 per share for the six-month period ended June 30, 2011 compared to $2.2 million or $0.13 per share in the same period in 2011.

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 Tuesday, August 14, 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 August 28, 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.

About Lifeway Foods

Lifeway Foods, Inc. (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

June 30, 2012 and 2011 (Unaudited) and December 31, 2011










(Unaudited)







June 30,



December 31,




2012



2011



2011


ASSETS




















Current assets










Cash and cash equivalents


$

2,000,325



$

1,398,523



$

1,115,150


Investments



1,867,234




1,172,193




1,695,044


Certificates of deposits in financial institutions



300,000




300,000




300,000


Inventories



5,426,715




5,608,151




4,954,475


Accounts receivable, net of allowance for doubtful accounts and discounts



9,486,141




8,891,068




7,950,276


Prepaid expenses and other current assets



96,860




199,866




79,630


Other receivables



104,009




9,825




224,204


Deferred income taxes



512,260




394,376




338,690


Refundable income taxes



0




0




41,316


Total current assets



19,793,544




17,974,002




16,698,785















Property and equipment, net



14,865,789




15,237,279




15,198,822















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 $3,465,349 and $2,696,023 at June 30, 2012 and 2011 and 3,087,940 at December 31, 2011, respectively



4,840,652




5,609,977




5,218,060


Total intangible assets



18,908,743




19,678,068




19,286,151















Other Assets













Long-term accounts receivable net of current portion



191,590




0




289,550















Total assets


$

53,759,666



$

52,889,349



$

51,473,308















LIABILITIES AND STOCKHOLDERS' EQUITY


























Current liabilities













Checks written in excess of bank balances


$

711,597



$

1,709,050



$

592,040


Current maturities of notes payable



540,478




1,892,042




1,540,716


Accounts payable



4,769,851




4,174,835




4,386,239


Accrued expenses



593,412




552,058




553,725


Accrued income taxes



1,639,515




378,482




0


Total current liabilities



8,254,853




8,706,467




7,072,720















Notes payable



5,228,395




5,957,795




5,539,836















Deferred income taxes



3,240,826




3,329,537




3,503,595


Total liabilities



16,724,074




17,993,799




16,116,151















Stockholders' equity













Common stock, no par value; 20,000,000 shares authorized; 17,273,776 shares issued; 16,372,217 shares outstanding at June 30, 2012; 17,273,776 shares issued; 16,430,809 shares outstanding at June 30, 2011; 17,273,776 shares issued; 16,409,317 shares outstanding at December 31, 2011



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



(7,947,418)




( 7,397,344)




( 7,606,974)


Retained earnings



36,429,095




33,767,188




34,431,296


Accumulated other comprehensive income, (loss) net of taxes



12,132




( 16,077)




( 8,948)


Total stockholders' equity



37,035,592




34,895,550




35,357,157















Total liabilities and stockholders' equity


$

53,759,666



$

52,889,349



$

51,473,308










LIFEWAY FOODS, INC. AND SUBSIDIARIES

Consolidated Statements of Income and Comprehensive Income

For the Three and Six Months Ended June 30, 2012 and 2011 (unaudited)











(Unaudited)

Three Months Ended

June 30,



(Unaudited)

Six Months Ended

June 30,





2012



2011



2012



2011





























Sales


$

22,713,958





$


19,913,003





$


44,259,854






$

38,960,269






Less: discounts and

allowances



(2,160,578)







(1,715,085)







(4,309,276)







(3,458,448)






Net Sales



20,553,380








18,197,918




18,197,918




39,950,578








35,501,821




35,501,821





































Cost of goods sold







12,102,841








12,306,764








24,341,182








21,711,256



Depreciation expense







413,109








390,694








812,154








767,207





































Total cost of goods sold







12,515,950








12,697,458








25,153,336








22,478,463





































Gross profit







8,037,430








5,500,460








14,797,242








13,023,358





































Selling expenses







2,622,275








2,897,118








5,326,515








5,248,157



General and administrative







2,099,699








1,707,171








4,094,035








3,417,449



Amortization expense







188,705








195,957








377,409








391,916





































Total Operating Expenses







4,910,679








4,800,246








9,797,959








9,057,522





































Income from operations







3,126,751








700,214








4,999,283








3,965,836





































Other income (expense):


































Interest and dividend income







24,478








17,094








36,049








34,687



Rental income







3,018








650








6,017








650



Interest expense







(43,918)








(72,298)








(94,103)








(134,428)



Impairment of investments







0








0








0








0



Gain (loss) on sale of investments, net







4,406








541








22,390








(2,056)



Total other income (expense)







(12,016)




'




(54,013)








(29,647)








(101,147)





































Income before provision for income taxes







3,114,735








646,201








4,969,636








3,864,689





































Provision for income taxes







1,065,607








380,659








1,825,520








1,673,376





































Net income






$

2,049,128







$

265,542








3,144,116







$

2,191,313





































Basic and diluted earnings per common share







.13








0.02








.19








0.13





































Weighted average number of shares outstanding







16,376,601








16,434,314








16,389,674








16,461,981













































































LIFEWAY FOODS, INC. AND SUBSIDIARIES

Consolidated Statements of Cash Flows

For the Six Months Ended June 30, 2012 and 2011 (Unaudited)







(Unaudited)




June 30,




2012



2011


Cash flows from operating activities:






Net income

$

3,144,116

$

2,191,313


Adjustments to reconcile net income to net






cash flows from operating activities, net of acquisition:






Depreciation and amortization


1,189,563


1,159,123


Loss (gain) on sale of investments, net


(22,390)


2,056


Loss on disposition of equipment


0


0


Impairment of investments


0


0


Deferred income taxes


(480,311)


(156,040)


Bad Debt Expense


172,303


20,000


(Increase) decrease in operating assets:






Accounts receivable


(1,610,208)


(2,117,792)


Other receivables


120,195


94,855


Inventories


(472,240)


(1,622,777)


Refundable income taxes


41,316


906,748


Prepaid expenses and other current assets


(17,230)


(41,551)


Increase (decrease) in operating liabilities:






Accounts payable


383,612


(8,646)


Accrued expenses


39,687


42,599


Income taxes payable


1,639,515


378,482


Net cash provided by operating activities


4,127,928


848,370








Cash flows from investing activities:






Purchases of investments


(743,675)


(582,697)


Proceeds from sale of investments


658,233


532,640


Investments in certificates of deposits


0


(50,000)


Proceeds from redemption of certificates of deposit


0


0


Purchases of property and equipment


(478,428)


(747,250)


Net cash used in provided by investing activities


(563,870)


(847,307)








Cash flows from financing activities:






Proceeds of note payable


0


250,000


Checks written in excess of bank balances


119,557


367,840


Purchases of treasury stock


(340,444)


(971,798)


Dividends Paid


(1,146,317)


0


Repayment of notes payable


(1,311,679)


(1,478,521)


Net cash used in financing activities


(2,678,883)


(1,832,479)








Net (decrease) increase in cash and cash equivalents


885,175


(1,831,416)








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

$

2,000,325

$

1,398,523









SOURCE Lifeway Foods, Inc.



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