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. 

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"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