Lifeway Foods Announces Results for the Third Quarter of 2013 Third Quarter 2013 Net Sales Increase 15% to $23.8 Million

MORTON GROVE, Ill., Nov. 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 third quarter ended September 30, 2013. 

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"We are pleased to report another strong quarter, which demonstrates our steady progress in growing Lifeway into a leading health food brand," said Julie Smolyansky, CEO of Lifeway Foods. "Our team has remained focused on creating delicious and nutritious kefir products for our customers and the demand for Lifeway Foods continues to increase. The investments we have made in our business have created strong momentum and we are on track to report record results this year. Looking ahead, we believe that we will continue to deliver consistent returns to our shareholders as we grow the distribution of our products in the United States and abroad."

Third Quarter Results
Third quarter of 2013 gross sales increased 18% to $26.6 million compared to $22.6 million for the third 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 15% or $3.2 million to $23.8 million during the three-month period ended September 30, 2013 from $20.6 million during the same three-month period in 2012.

Gross profit for the third quarter of 2013 was $6.9 million, which was approximately the same in the third quarter of the prior year. The Company's gross profit margin was 29% in the third quarter of 2013 compared to 33% in the third quarter of 2012. This was primarily attributable to a 35% increase in the cost of milk, the Company's largest raw material.

Total operating expenses decreased 3% or $0.1 million to $4.7 million during the third quarter of 2013, from $4.8 million during the same period in 2012. This decrease was primarily attributable to a decrease selling related expenses.

Total operating income increased $0.1 million to $2.2 million during the third quarter of 2013, from $2.1 million during the same period in 2012.

During the 3 month period ended September 30, 2013, the company sold certain assets that were acquired in the Golden Guernsey Wisconsin production facility in July 2013 for net sale proceeds of $537,500.  In connection with the sale of those assets, the company recognized a gain of approximately $209,000, which is included in other income. 

The Company's third quarter 2013 effective tax rate was 29% compared to 32% in the same period last year.

Total net income was $1.7 million or $0.10 per diluted share for the three-month period ended September 30, 2013 compared to $1.4 million or $0.09 per diluted share in the same period in 2013.

Nine Month Results
Total consolidated gross sales increased by $13.2 million, or approximately 20%, to $80.0 million during the nine-month period ended September 30, 2013 from $66.9 million during the same nine-month period in 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 by $10.7 million, or approximately 18%, to $71.3 million during the nine-month period ended September 30, 2013 from $60.6 million during the same nine-month period in 2012. 

Gross profit for the first nine months of 2013 increased 11% to $22.8 million, compared to $20.6 million in the third quarter of the prior year. The Company's gross profit margin decreased to 32% in the first nine months versus 34% in the same period last year. Gross profit was negatively impacted primarily by the increased price of milk, the Company's largest raw material.  The cost of milk was approximately 25% higher compared to the first nine months of 2012.

Operating expenses as a percentage of net sales were approximately 20% during the nine-month period ended September 30, 2013 compared to approximately 22% during the same period in 2012.  General and administrative expenses increased by $0.9 million (approximately 20%) to $5.6 million during the nine-month period ended September 30, 2013, from $4.6 during the same period in 2012.

Total net income was $5.5 million or $0.33 per share for the nine-month period ended September 30, 2013 compared to $4.6 million or $0.28 per share in the same period in 2012.

Balance Sheet/Cash Flow Highlights
The Company had $1.2 million in cash and cash equivalents as of September 30, 2013 compared to $2.4 million at September 30, 2012.   Total stockholder's equity was $43.4 million as of September 30, 2013, which is an increase of $5.0 million when compared to September 30, 2012. 

Net cash provided by operating activities decreased $2.5 million to $3.6 million for the first nine months of 2013.

Net cash used in investing activities was $7.9 million during the nine-months ended September 30, 2013 compared to net cash used in operating activities of $1.2 during the same period in 2012.  This increase is primarily attributable to purchases of property and equipment of $7.4 million.

Conference Call
The Company will host a conference call to discuss these results with additional comments and details on Thursday, November 14, 2013 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 November 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 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 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
Investors and readers are cautioned that certain statements contained in this news release, as well as some statements in periodic press releases and some oral statements of Lifeway officials during presentations about Lifeway, along with Lifeway's filings with the Securities and Exchange Commission, including Lifeway's registration statements, quarterly reports on Form 10-Q and annual report on Form 10-K, are "forward-looking'' statements within the meaning of the Private Securities Litigation Reform Act of 1995 (the "Act''). Forward-looking statements include statements that are predictive in nature, which depend upon or refer to future events or conditions, which include words such as "expects," "anticipates,'' "intends,'' "plans,'' "could," "might," "believes,'' "seeks," "estimates'' or similar expressions. In addition, any statements concerning future financial performance (including future revenues, earnings or growth rates), ongoing business strategies or prospects, and possible future actions, which may be provided by Lifeway's management, are also forward-looking statements within the meaning of the Act. Forward-looking statements are based on current expectations and projections about future events and are subject to various risks, uncertainties and assumptions including, but not limited to, competitive pressures and other important factors detailed in the Company's reports filed with the Securities and Exchange Commission. Investors are cautioned that actual results may differ materially from such forward-looking statements. These statements are not guarantees of future performance and Lifeway undertakes no specific obligation or intention to update these statements after the date of this release.

 

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

September 30, 2013 and 2012 (Unaudited) and December 31, 2012








(Unaudited)





September 30,


December 31,



2013


2012


2012

ASSETS














Current assets







Cash and cash equivalents


$      1,240,730


$      2,379,565


$      2,286,226

Investments


2,506,463


2,032,598


1,869,888

Certificates of deposits in financial institutions


115,373


450,000


450,000

Inventories


8,382,287


5,569,887


5,939,186

Accounts receivable, net of allowance for doubtful







accounts and discounts


11,313,652


10,002,065


8,723,737

Prepaid expenses and other current assets


88,629


45,350


97,138

Other receivables


89,100


3,946


8,825

Deferred income taxes


394,277


315,887


234,687

Refundable income taxes


423,242


84,828


84,828

Total current assets


24,553,753


20,884,126


19,694,515








Property and equipment, net


21,637,492


14,754,312


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  $4,376,640 and $3,662,477 at September 30, 2013 and 2012 

and $3,842,756 at December 31, 2012, respectively














3,929,360


4,643,523


4,463,242

Total intangible assets


17,997,451


18,711,614


18,531,333








Other Assets







Long-term accounts receivable net of current portion


280,000


162,522


294,000

Total assets


$ 64,468,696


$ 54,512,574


$ 53,506,624















LIABILITIES AND STOCKHOLDERS' EQUITY














Current liabilities







Current maturities of notes payable


$         878,088


$         580,781


$         542,981

Accounts payable


5,429,988


5,118,902


4,256,725

Accrued expenses


1,323,213


894,092


1,155,677

Accrued income taxes


1,292,762


1,341,652


254,311

Total current liabilities


8,924,051


7,935,427


6,209,694








Notes payable


9,214,853


5,096,675


4,955,945








Deferred income taxes


2,917,213


3,112,529


3,028,518

Total liabilities


21,056,117


16,144,631


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 September 30, 2013; 17,273,776 shares issued; 16,359,017 shares outstanding at September 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)


(8,077,239)


(8,187,682)

Retained earnings


43,056,422


37,831,275


38,904,777

Accumulated other comprehensive income (loss), net of taxes


2,056


72,124


53,591

Total stockholders' equity


43,412,579


38,367,943


39,312,469








Total liabilities and stockholders' equity


$ 64,468,696


$ 54,512,574


$ 53,506,626

 

 

 

LIFEWAY FOODS, INC. AND SUBSIDIARIES

Consolidated Statements of Income and Comprehensive Income

For the Three and Nine Months Ended September 30, 2013 and 2012 (unaudited)








(Unaudited)


(Unaudited)



Three Months Ended


Nine Months Ended



September 30,


September 30,



2013


2012


2013


2012

Sales


$ 26,601,341




$ 22,617,132




$ 80,030,021




$ 66,876,986



Less: discounts and allowances


(2,808,811)




(1,997,399)




(8,772,576)




(6,306,675)



Net sales


23,792,530


23,792,530


20,619,733


20,619,733


71,257,445


71,257,445


60,570,311


60,570,311


















Cost of goods sold




16,513,357




13,342,566




47,217,179




38,771,897

Depreciation expense




410,797




407,567




1,226,629




1,219,721


















Total cost of goods sold




16,924,154




13,750,133




48,443,808




39,991,618


















Gross profit




6,868,376




6,869,600




22,813,637




20,578,693


















Selling expenses




2,815,126




2,974,294




8,291,960




8,300,810

General and administrative




1,671,080




1,620,967




5,567,649




4,626,853

Amortization expense




178,201




197,129




533,884




574,538


















Total operating expenses




4,664,407




4,792,390




14,393,493




13,502,201


















Income from operations




2,203,969




2,077,210




8,420,144




7,076,492


















Other income (expense):

















Interest and dividend income




36,535




16,270




82,166




52,321

Rental income




2,231




4,270




8,889




10,284

Interest expense




(59,887)




(41,897)




(133,610)




(136,000)

Gain (loss) on sale of investments, net

















reclassified from OCI




161




4,024




121,441




26,415

Other Income




209,175




---




219,404




---

Total other income (expense)




188,215




(17,333)




298,290




(46,980)


















Income before provision for income taxes




















2,392,184




2,059,877




8,718,434




7,029,512


















Provision for income taxes




702,257




657,697




3,258,928




2,483,216


















Net income




$ 1,689,927




$ 1,402,180




$ 5,459,506




$ 4,546,296


















Basic and diluted earnings per common share




















0.10




0.09




0.33




0.28


















Weighted average number of shares outstanding




















16,346,017




16,366,974




16,346,017




16,380,793


















COMPREHENSIVE INCOME


































Net income




$ 1,689,927




$ 1,402,180




$ 5,459,506




$ 4,546,296


















Other comprehensive income (loss), net of tax:

































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




















29,356




62,266




17,079




95,996

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




































(91)




(2,274)




(68,614)




(14,924)


















Comprehensive income




$ 1,719,192




$ 1,462,172




$ 5,407,971




$ 4,627,368

 

 

 

LIFEWAY FOODS, INC. AND SUBSIDIARIES

Consolidated Statements of Cash Flows

For the Nine Months Ended September 30, 2013 and 2012 (Unaudited)






(Unaudited)



September 30,



2013


2012






Cash flows from operating activities:





Net income


$ 5,459,506


$ 4,546,296

Adjustments to reconcile net income to net





cash flows from operating activities:





Depreciation and amortization


1,760,513


1,794,259

Loss (gain) on sale of investments, net


(121,441)


(26,415)

Loss on disposition of equipment




---

Deferred income taxes


(231,218)


(458,424)

Bad Debt Expense


26,819


332,301

Loss (Gain) on sale of equipment


(209,175)



(Increase) decrease in operating assets:





Accounts receivable


(2,612,905)


(2,106,020)

Other receivables


(80,275)


220,258

Inventories


(2,443,101)


(615,412)

Refundable income taxes


(338,414)


(43,512)

Prepaid expenses and other current assets


8,510


34,280

Increase (decrease) in operating liabilities:





Accounts payable


1,173,263


732,663

Accrued expenses


167,536


340,367

Income taxes payable


1,038,451


1,341,652

Net cash provided by operating activities


3,598,069


6,092,293






Cash flows from investing activities:





Purchases of investments


(2,877,968)


(1,092,976)

Proceeds from sale of investments


2,281,792


802,026

Redemption of certificates of deposits


334,627


(150,000)

Purchases of property and equipment


(8,205,669)


(775,210)

Proceeds from sale of equipment


537,500


---

Net cash (used in) provided by investing activities


(7,929,718)


(1,216,160)






Cash flows from financing activities:





Checks written in excess of bank balances


---


(592,040)

Purchases of treasury stock


---


(470,265)

Dividends Paid


(1,307,861)


(1,146,317)

Net proceeds from debt issuance


4,975,000


---

Repayment of notes payable


(405,985)


(1,403,096)

Net cash provided (used in) financing activities


3,261,154


(3,611,718)






Net (decrease) increase in cash and cash equivalents


(1,070,495)


1,264,415






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


$ 1,215,731


$ 2,379,565

 

 

 

SOURCE Lifeway Foods, Inc.



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