Lifeway Foods Announces Results for the Second Quarter of 2014

Second Quarter Net Sales Increase 28% to $29.6 Million

Aug 11, 2014, 16:05 ET from Lifeway Foods, Inc.

MORTON GROVE, Ill., Aug. 11, 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 second quarter ended June 30, 2014. 

"We are pleased with our performance in the second quarter of fiscal 2014 driven by a strong net sales increase of 28% and growing trend of consumers looking for healthy food alternatives," said Julie Smolyansky, CEO of Lifeway Foods, Inc. "Our team has successfully executed on our ongoing initiative to expand our brand recognition which in turn allows us to increase distribution of our nutritious probiotic kefir products. We expect the momentum we have built in the first half of fiscal 2014 to continue for the remainder of the year and are optimistic about our long-term growth opportunities."

Second Quarter Results
Total consolidated net sales increased 28% or $6.5 million to $29.6 million during the three-month period ended June 30, 2014 from $23.1 million during the same three-month period in 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™. 

Gross profit for the second quarter of 2014 was $7.5 million compared to $7.6 million in the second quarter of the prior year. The Company's gross profit margin decreased to 25% in the second quarter of 2014 versus 33% in the second quarter of 2013. The decrease was primarily attributable to a 30% increase in the cost of milk, the Company's largest raw material, compared to the same period last year.

Total operating expenses increased 17% or $0.9 million to $6.0 million during the second quarter of 2014, from $5.1 million during the same period in 2013. This increase was primarily attributable to an increase in selling expenses.

Total operating income decreased $1.0 million to $1.5 million during the second quarter of 2014, from $2.5 million during the same period in 2013.  The decrease in operating income is related to the decrease in gross profit and increased operating expenses.

The Company's second quarter 2014 effective tax rate was 26% compared to 45% in the same period last year.

Total net income was $1.1 million or $0.07 per diluted share for the three-month period ended June 30, 2014 compared to $1.4 million or $0.09 per diluted share in the same period in 2013.

Six Month Results
Total consolidated net sales increased by $11.2 million, or approximately 24%, to $58.7 million during the six-month period ended June 30, 2014 from $47.5 million during the same six-month period in 2013. 

Gross profit for the first six-months of 2014 decreased 9% to $14.6 million, compared to $16.0 million in the same period in the prior year. The Company's gross profit margin was 25% in the first six-months of 2014 compared to 34% in the same period last year.

Total net income was $1.8 million or $0.11 per share for the six-month period ended June 30, 2014 compared to $3.8 million or $0.23 per share in the same period in 2013.

Balance Sheet/Cash Flow Highlights
The Company had $2.9 million in cash and cash equivalents as of June 30, 2014 compared to $4.9 million at June 30, 2013. This decrease is primarily due to the $7.4 million acquisition of the Golden Guernsey dairy plant in the second quarter of 2013. Total stockholder's equity was $44.7 million as of June 30, 2014, which is an increase of $3.0 million when compared to June 30, 2013.

Net cash provided by operating activities decreased $2.9 million to $2.1 million for the first six months of 2014. This decrease is primarily attributable to the decrease in accounts payable.

Net cash used in investing activities was $2.1 million during the six-months ended June 30, 2014 compared to net cash used in investing activities of $0.8 million during the same period in 2013. 

Conference Call
The Company will host a conference call to discuss these results with additional comments and details on Monday, August 11, 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 August 25, 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

June 30, 2014 and 2013 (Unaudited) and December 31, 2013

June 30,

December 31,

2014

2013

2013

ASSETS

Current assets

Cash and cash equivalents

$     2,869,638

$     4,939,948

$     3,306,608

Investments

2,986,329

2,483,673

2,516,380

Certificates of deposits in financial institutions

---

115,373

15,373

Inventories

6,810,541

7,807,150

6,899,008

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

9,538,188

9,911,305

10,444,839

Prepaid expenses and other current assets

13,612

31,797

128,323

Other receivables

56,680

5,400

103,272

Deposits

142,836

580,974

-

Deferred income taxes

293,445

391,139

322,071

Refundable income taxes

1,965,933

28,123

1,014,947

Total current assets

24,677,202

26,294,882

24,750,821

Property and equipment, net

21,494,127

14,718,760

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 $4,913,397, $4,198,439 and $4,555,559 at June 30, 2014 and 2013 and at December 31, 2013, respectively

3,417,602

4,107,561

3,750,441

Total intangible assets

17,485,693

18,175,652

17,818,532

Other Assets

Long-term accounts receivable, net of current portion

279,921

280,000

280,000

Total assets

$63,936,943

$59,469,294

$63,673,801

LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities

Current maturities of notes payable

$        877,062

$        545,494

$        875,002

Accounts payable

6,471,442

7,166,377

6,723,179

Accrued expenses

899,803

1,094,820

1,284,060

Accrued income taxes

---

1,224,115

---

Total current liabilities

8,248,307

10,030,806

8,882,241

Notes payable

8,555,731

4,726,472

8,999,012

Deferred income taxes

2,395,143

3,018,629

2,843,426

Total liabilities

19,199,181

17,775,907

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 June 30, 2014; 17,273,776 shares issued; 16,346,017 shares outstanding at June 30, 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

44,341,809

41,366,495

42,587,214

Accumulated other comprehensive income (loss), net of taxes

41,852

(27,209)

7,807

Total stockholders' equity

44,737,762

41,693,387

42,949,122

Total liabilities and stockholders' equity

$63,936,943

$59,469,294

$63,673,801

 

 

LIFEWAY FOODS, INC. AND SUBSIDIARIES

Consolidated Statements of Income and Comprehensive Income

For the Three and Six Months Ended June 30, 2014 and 2013 (unaudited)

(Unaudited)

(Unaudited)

Three Months Ended

Six Months Ended

June 30,

June 30, 

2014

2013

2014

2013

Sales

$ 32,594,048

$ 25,838,058

$ 64,655,195

$ 53,428,680

Less: discounts and allowances

(3,028,637)

(2,760,174)

(5,958,073)

(5,963,765)

Net sales

29,565,411

29,565,411

23,077,884

23,077,884

58,697,122

58,697,122

47,464,915

47,464,915

Cost of goods sold

21,432,624

15,058,461

43,114,535

30,607,446

Depreciation expense

627,878

421,707

1,011,238

815,832

Total cost of goods sold

22,060,502

15,480,168

44,125,773

31,423,278

Gross profit

7,504,909

7,597,716

14,571,349

16,041,637

Selling expenses

3,693,821

2,876,635

7,173,509

5,514,354

General and administrative

2,107,197

2,057,581

4,487,827

3,955,425

Amortization expense

178,919

177,842

357,839

355,683

Total operating expenses

5,979,937

5,112,058

12,019,175

9,825,462

Income from operations

1,524,972

2,485,658

2,552,174

6,216,175

Other income (expense):

Interest and dividend income

35,227

30,622

63,925

45,631

Rental income

1,200

3,389

1,700

6,658

Interest expense

(66,724)

(37,424)

(132,293)

(73,723)

Gain on sale of investments, net

reclassified from OCI

57,321

56,944

62,130

121,280

Loss on sale of equipment

(76,484)

---

(76,484)

---

Other Income

1,672

10,229

1,672

10,229

Total other income (expense)

(47,788)

63,760

(79,350)

110,075

Income before provision for

income taxes

1,477,184

2,549,418

2,472,824

6,326,250

Provision for income taxes

382,768

1,145,478

718,229

2,556,671

Net income

$ 1,094,416

$ 1,403,940

$ 1,754,595

$ 3,769,579

Basic and diluted earnings per common share

0.07

0.09

0.11

0.23

Weighted average number of shares outstanding

16,346,017

16,346,017

16,346,017

16,346,017

COMPREHENSIVE INCOME

Net income

$ 1,094,416

$ 1,403,940

$ 1,754,595

$ 3,769,579

Other comprehensive income (loss), net of tax:

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

63,111

(63,811)

71,155

(12,277)

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

(34,393)

(32,174)

(37,110)

(68,523)

Comprehensive income

$ 1,123,134

$ 1,307,955

$ 1,788,640

$ 3,688,779

 

 

LIFEWAY FOODS, INC. AND SUBSIDIARIES

Consolidated Statements of Cash Flows

For the Six Months Ended June 30, 2014 and 2013 (Unaudited)

(Unaudited)

June 30,

2014

2013

Cash flows from operating activities:

Net income

$ 1,754,595

$ 3,769,579

Adjustments to reconcile net income to net cash flows from operating activities:

Depreciation and amortization

1,369,077

1,171,515

Gain on sale of investments, net

(62,130)

(121,280)

Deferred income taxes

(440,285)

(104,133)

Bad Debt Expense

156,049

26,819

Loss on sale of equipment

76,484

---

(Increase) decrease in operating assets:

Accounts receivable

728,281

(1,211,015)

Other receivables

46,591

3,425

Inventories

88,467

(1,867,964)

Refundable income taxes

(950,986)

56,705

Prepaid expenses and other current assets

(28,125)

(515,633)

Increase (decrease) in operating liabilities:

Accounts payable

(1,972,157)

2,909,652

Accrued expenses

1,336,163

(60,857)

Income taxes payable

---

969,804

Net cash provided by operating activities

2,102,024

5,026,617

Cash flows from investing activities:

Purchases of investments

(1,774,734)

(2,573,721)

Proceeds from sale of investments

1,419,362

1,948,839

Redemption of certificates of deposits

15,000

334,627

Purchases of property and equipment

(1,761,401)

(547,819)

Proceeds from sale of equipment

4,000

---

Net cash used in investing activities

(2,097,773)

(838,074)

Cash flows from financing activities:

Dividends paid

---

(1,307,861)

Repayment of notes payable

(441,221)

(226,960)

Net cash used in financing activities

(441,221)

( 1,534,821)

Net (decrease) increase in cash and cash equivalents

(436,970)

2,653,722

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

$ 2,869,638

$ 4,939,948

 

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SOURCE Lifeway Foods, Inc.



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