2014

Lifeway Foods Announces Results for the Second Quarter of 2013

MORTON GROVE, Ill., Aug. 14, 2013 /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, 2013. 

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

"We are pleased with our second quarter results as we continued to execute on our plan to increase distribution in new and existing retailers and strengthen awareness of our nutritious probiotic kefir products among health conscious consumers," said Julie Smolyansky, CEO of Lifeway Foods, Inc.  "In the quarter, we also focused on the integration of our new dairy manufacturing facility and we believe this will help expand our margins and support our future growth opportunities long-term. We look forward to this facility being fully operational at the end of the year."

Second Quarter Results
Second quarter of 2013 gross sales increased 14% to $25.8 million compared to $22.7 million for the second quarter of 2012.  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 12% or $2.5 million to $23.1 million during the three-month period ended June 30, 2013 from $20.6 million during the same three-month period in 2012. 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 2013  was $7.6 million, unchanged compared to the second quarter of the prior year. The Company's gross profit margin decreased to 33% in the second quarter versus 37% in the second quarter of 2012. The decrease was primarily attributable to a 20% increase in the cost of milk, the Company's largest raw material, compared to the same period last year.

Total operating expenses increased 14% or $0.6 million to $5.1 million during the second quarter of 2013, from $4.5 million during the same period in 2012. This increase was primarily attributable to an increase in general and administrative and selling expenses, partially offset by a decrease in amortization expense. The Company incurred $0.3 million in professional fees related to the acquisition of the Golden Guernsey Dairy Plant, the Company's new manufacturing facility, and views this as a non-recurring expense.

Total operating income decreased $0.6 million to $2.5 million during the second quarter of 2013, from $3.1 million during the same period in 2012.  The decrease in operating income is related to the decrease in gross profit and increased operating expenses.

The Company's second quarter 2013 effective tax rate was 45% compared to 34% in the same period last year.

Total net income was $1.4 million or $0.09 per diluted share for the three-month period ended June 30, 2013 compared to $2.1 million or $0.13 per diluted share in the same period in 2012.

Six Month Results
Total consolidated gross sales increased by $9.2 million, or approximately 21%, to $53.4  million during the six-month period ended June 30, 2013 from $44.3 million during the same six-month period in 2012. 

Total consolidated net sales increased by $7.5 million, or approximately 19%, to $47.5 million during the six-month period ended June 30, 2013 from $40.0 million during the same six-month period in 2012. 

Gross profit for the first six-months of 2013 increased 17% to $16.0 million, compared to $13.7 million in the same period in the prior year. The Company's gross profit margin was 34% in the first six-months of 2013, unchanged compared to the same period last year.

Total net income was $3.8 million or $0.23 per share for the six-month period ended June 30, 2013 compared to $3.1 million or $0.19 per share in the same period in 2012.

Balance Sheet/Cash Flow Highlights
The Company had $4.9 million in cash and cash equivalents as of June 30, 2013 compared to $2.0 million at June 30, 2012.   Total stockholder's equity was $41.7 million as of June 30, 2013, which is an increase of $4.7 million when compared to June 30, 2012. 

Net cash provided by operating activities increased $0.9 million to $5.0 million for the first six months of 2013. This increase reflects the Company's improvement in operating efficiencies. 

Net cash used in investing activities was $0.8 million during the six-months ended June 30, 2013 compared to net cash used in operating activities of $0.6 million during the same period in 2012. 

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 today, Wednesday, August 14, 2013. 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, 2013. 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. (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, 2013 and 2012 (Unaudited) and December 31, 2012








(Unaudited)





June 30,


December 31,



2013


2012


2012

ASSETS














Current assets







Cash and cash equivalents


$     4,939,948


$     2,000,325


$      2,286,226

Investments


2,483,673


1,867,234


1,869,888

Certificates of deposits in financial institutions


115,373


300,000


450,000

Inventories


7,807,150


5,426,715


5,939,186

Accounts receivable, net of allowance for doubtful accounts and discounts


9,911,305


9,486,141


8,723,737

Prepaid expenses and other current assets


31,797


96,860


97,138

Other receivables


5,400


104,009


8,825

Deposits


580,974


---


---

Deferred income taxes


391,139


512,260


234,687

Refundable income taxes


28,123


---


84,828

Total current assets


26,294,882


19,793,544


19,694,515








Property and equipment, net


14,718,760


14,865,789


14,986,776








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 $4,198,439 and $3,465,349 at June 30, 2013 and 2012 and $3,842,756 at December 31, 2012, respectively


4,107,561


4,840,652


4,463,242

Total intangible assets


18,175,652


18,908,743


18,531,333








Other Assets







Long-term accounts receivable net of current portion


280,000


191,590


294,000

Total assets


$59,469,294


$53,759,666


$ 53,506,624















LIABILITIES AND STOCKHOLDERS' EQUITY














Current liabilities







Checks written in excess of bank balances 


$                 ---


$        711,597


$                  ---

Current maturities of notes payable


545,494


540,478


542,981

Accounts payable


7,166,377


4,769,851


4,256,725

Accrued expenses


1,094,820


593,412


1,155,677

Accrued income taxes


1,224,115


1,639,515


254,311

Total current liabilities


10,030,806


8,254,853


6,209,694








Notes payable


4,726,472


5,228,395


4,955,945








Deferred income taxes


3,018,629


3,240,826


3,028,518

Total liabilities


17,775,907


16,724,074


14,194,157








Stockholders' equity







Common stock, no par value; 40,000,000 shares authorized; 17,273,776 shares issued; 16,346,017 shares outstanding at June 30, 2013; 17,273,776 shares issued; 16,372,217 shares outstanding at June 30, 2012; 17,273,776 shares issued; 16,346,017 shares outstanding at December 31, 2012


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)


(7,947,418)


(8,187,682)

Retained earnings


41,366,495


36,429,095


38,904,777

Accumulated other comprehensive income (loss), net of taxes


(27,209)


12,132


53,591

Total stockholders' equity


41,693,387


37,035,592


39,312,469








Total liabilities and stockholders' equity


$59,469,294


$53,759,666


$ 53,506,626

 

 

LIFEWAY FOODS, INC. AND SUBSIDIARIES

Consolidated Statements of Income and Comprehensive Income

For the Three and Six Months Ended June 30, 2013 and 2012 (unaudited)








(Unaudited)


(Unaudited)



Three Months Ended


Six Months Ended



June 30,


June 30,



2013


2012


2013


2012

Sales


$ 25,838,058




$ 22,713,958




$ 53,428,680




$ 44,259,854



Less: discounts and allowances


(2,760,174)




(2,160,578)




(5,963,765)




(4,309,276)



Net sales


23,077,884


23,077,884


20,553,380


20,553,380


47,464,915


47,464,915


39,950,578


39,950,578


















Cost of goods sold




15,058,461




12,522,609




30,607,446




25,429,331

Depreciation expense




421,707




413,109




815,832




812,154


















Total cost of goods sold




15,480,168




12,935,718




31,423,278




26,241,485


















Gross profit




7,597,716




7,617,662




16,041,637




13,709,093


















Selling expenses




2,876,635




2,622,275




5,514,354




5,326,515

General and administrative




2,057,581




1,679,931




3,955,425




3,005,886

Amortization expense




177,842




188,705




355,683




377,409


















Total operating expenses




5,112,058




4,490,911




9,825,462




8,709,810


















Income from operations




2,485,658




3,126,751




6,216,175




4,999,283


















Other income (expense):

















Interest and dividend income




30,622




24,478




45,631




36,049

Rental income




3,389




3,018




6,658




6,017

Interest expense




(37,424)




(43,918)




(73,723)




(94,103)

Gain (loss) on sale of investments, net,

reclassified from OCI




56,944




 

4,406




121,280




 

22,390

Other Income




10,229




---




10,229




---

Total other income (expense)




63,760




(12,016)




110,075




(29,647)


















Income before provision for income taxes




2,549,418




3,114,735




6,326,250




4,969,636


































Provision for income taxes




1,145,478




1,065,607




2,556,671




1,825,520


















Net income




$ 1,403,940




$ 2,049,128




$ 3,769,579




$ 3,144,116


















Basic and diluted earnings per common share




0.09




0.13




0.23




0.19


































Weighted average number of shares outstanding




16,346,017




16,376,601




16,346,017




16,389,674


































COMPREHENSIVE INCOME


































Net income




$ 1,403,940




$ 2,049,128




$ 3,769,579




$ 3,144,116


















Other comprehensive income (loss), net of tax:

































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




(63,811)




(15,593)




(12,277)




33,730

















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




(32,174)




(2,489)




(68,523)




(12,650)


















































Comprehensive income




$ 1,307,955




$ 2,031,046




$ 3,688,779




$ 3,165,196

 

LIFEWAY FOODS, INC. AND SUBSIDIARIES

Consolidated Statements of Cash Flows

For the Six Months Ended June 30, 2013 and 2012 (Unaudited)






(Unaudited)



June 30,



2013


2012






Cash flows from operating activities:





Net income


$ 3,769,579


$ 3,144,116

Adjustments to reconcile net income to net





cash flows from operating activities:





Depreciation and amortization


1,171,515


1,189,563

Loss (gain) on sale of investments, net


(121,280)


(22,390)

Deferred income taxes


(104,133)


(480,311)

Bad Debt Expense


26,819


172,303

(Increase) decrease in operating assets:





Accounts receivable


(1,211,015)


(1,610,208)

Other receivables


3,425


120,195

Inventories


(1,867,964)


(472,240)

Refundable income taxes


56,705


41,316

Prepaid expenses and other current assets


(515,633)


(17,230)

Increase (decrease) in operating liabilities:





Accounts payable


2,909,652


383,612

Accrued expenses


(60,857)


39,687

Income taxes payable


969,804


1,639,515

Net cash provided by operating activities


5,026,617


4,127,928






Cash flows from investing activities:





Purchases of investments


(2,573,721)


(743,675)

Proceeds from sale of investments


1,948,839


658,233

Redemption of certificates of deposits


334,627


---

Purchases of property and equipment


(547,819)


(478,428)

Net cash (used in) provided by investing activities


(838,074)


(563,870)






Cash flows from financing activities:





Checks written in excess of bank balances


---


119,557

Purchases of treasury stock


---


(340,444)

Dividends Paid


(1,307,861)


(1,146,317)

Repayment of notes payable


(226,960)


(1,311,679)

Net cash used in financing activities


(1,534,821)


(2,678,883)






Net (decrease) increase in cash and cash equivalents


2,653,722


885,175






Cash and cash equivalents at the beginning of the period


2,286,226


1,115,150






Cash and cash equivalents at the end of the period


$ 4,939,948


$ 2,000,325

SOURCE Lifeway Foods, Inc.



RELATED LINKS
http://www.lifeway.net

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