Lifeway Foods Announces Results for the Second Quarter of 2014 Second Quarter Net Sales Increase 28% to $29.6 Million

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

 

Logo - http://photos.prnewswire.com/prnh/20131010/AQ95965LOGO

SOURCE Lifeway Foods, Inc.



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