Lifeway Foods Announces Results for Fourth Quarter and Full Year 2011
2011 Net Sales Increased 20% to $70.4 Million
2011 Gross Profit Increased 32% to $22.5 Million
Company Expects First Quarter 2012 Net Sales to Increase Approximately 14% to $21.0 Million
Company Plans to Initiate Dividend and New Share Repurchase Program
MORTON GROVE, Ill., April 2, 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 fourth quarter and full year ended December 31, 2011.
(Logo: http://photos.prnewswire.com/prnh/20120119/AQ36947LOGO-b)
Fourth Quarter Results
Fourth quarter of 2011 gross sales increased 16% to $18.7 million compared to $16.1 million for the fourth quarter of 2010. 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™. In addition, Lifeway's Frozen Kefir line, which was launched in April 2011, contributed approximately $0.4 million to sales during the fourth quarter of 2011.
Fourth quarter total consolidated net sales increased 14% to $16.8 million from $14.7 million in the fourth quarter of 2010. 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. The total allowance for promotions and discounts in the fourth quarter of 2011 was approximately $2.0 million or 10.5% of gross sales, compared to $1.4 million or 8.6% of gross sales in the same period last year. This allowance increase of $0.5 million year-over-year is due to an adjustment made during the fourth quarter of 2011 associated with write-offs of accounts receivable balances outstanding as of December 31, 2011 for known discounts.
Gross profit for the fourth quarter of 2011 increased 27% to $4.1 million, compared to $3.8 million in the fourth quarter of the prior year. The Company's gross profit margin increased to 23% in the fourth quarter versus 20% in the fourth quarter of 2010. The increase in gross profit margin is primarily due to the lower cost of transportation and other petroleum-based production supplies, partially offset by the increase in the price of conventional and organic milk, the Company's largest raw material. The total cost of milk was approximately 20% higher during the fourth quarter of 2011 when compared to the same period in 2010.
Operating expenses as a percentage of net sales were approximately 25% during the fourth quarter of 2011, compared to approximately 24% during the same period in 2010. This increase was primarily attributable to increased selling expenses as compared to the same period in 2010. Selling related expenses increased by $0.4 million to $2.4 million during the fourth quarter of 2011 approximately equal to the same period in 2010. This increase is directly attributable to increases in marketing and advertising of the Company's flagship line, Kefir, as well as ProBugs Organic Kefir for kids, BioKefir and Lifeway's Frozen Kefir.
The company reported a loss in operations of $0.5 million during the fourth quarter of 2011, an improvement of $79,343 from $0.5 million during the same period in 2010.
Income tax benefit was $0.1 million for the fourth quarter approximately equal to the same period in 2010.
Total net loss was $0.4 million or a loss of $0.02 per diluted share for the three-month period ended December 31, 2011 compared to a net loss of $0.2 million or a loss of $0.01 per diluted share in the same period in 2010.
"We are very pleased with our 2011 financial results and are excited to continue this strong momentum into 2012," said Julie Smolyansky, CEO of Lifeway Foods, Inc. "In 2012 we will begin limited distribution of our Kefir products in Target, including 189 PFresh and 249 SuperTarget stores. In addition, our frozen kefir continues to gain momentum and we expect it to produce approximately $0.6 million in sales in the first quarter of 2012."
Mrs. Smolyansky continued, "We believe our product offerings are extremely on-trend as consumers continue to demand healthy and delicious food products. Going forward, we are very confident in our future growth. We believe the combination of increased sales and lower milk prices will help us generate approximately $100 million in gross sales and record profitability in 2012."
2011 Year End Results
Total consolidated gross sales increased 21% or $13.6 million to approximately $77.1 million during the twelve-month period ended December 31, 2011 from $63.5 during the same twelve-month period in 2010. 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™. In addition, Lifeway's Frozen Kefir line, which was launched in April 2011, contributed approximately $0.7 million to sales during the twelve month period ended December 31, 2011.
Total consolidated net sales increased 20% or $11.9 million to $70.4 million during the twelve-month period ended December 31, 2011 from $58.5 million during the same twelve month period in 2010. 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 first twelve months of 2011 increased 32% to $22.5 million, compared to $20.2 million in the fourth quarter of the prior year. The Company's gross profit margin decreased to 32% in the first twelve months versus 34% in the same period last year. The gross profit margin decline was primarily attributable to the cost of conventional and organic milk, the Company's largest raw material. The total cost of milk was approximately 20 to 25% higher during the twelve-month period ended December 31, 2011 when compared to the same period in 2010.
Operating expenses as a percentage of net sales were approximately 25% during the twelve-month period ended December 31, 2011 compared to approximately 24% during the same period in 2010. Selling related expenses increased 34% or $2.6 million to $10.2 million during the twelve-month period ended December 31, 2011, from $7.6 million during the same period in 2010. This increase is directly attributable to the Company recording an approximate $0.7 million expense related its 25th Anniversary Cross Country Mobile tour, which occurred in the second quarter and was expensed during the second quarter of 2011. The Company views this as a non-recurring advertising expense.
Total net income was $2.9 million or $0.17 per share for the twelve-month period ended December 31, 2011 compared to $3.6 million or $0.22 per share in the same period in 2010.
Balance Sheet/Cash Flow Highlights
The Company had a net decrease in cash and cash equivalents of $2.1 million during the twelve-month period ended December 31, 2011 compared to a net increase in cash and cash equivalents of $2.6 million during the same period in 2010. The Company had cash and cash equivalents of $1.1 million as of December 31, 2011 compared to cash and cash equivalents of $3.2 million as of December 31, 2010.
Total stockholder's equity was $35.4 million as of December 31, 2011, which is an increase of $1.7 million when compared to December 31, 2010. This is primarily due the increase in retained earnings of $2.9 million when compared to December 31, 2010.
Dividend and Share Repurchase Program
The Company today also announced plans to initiate an annual dividend. Subject to declaration by the Board of Directors, the Company plans to initiate its first ever annual dividend sometime in the third quarter of fiscal 2012.
Additionally, on February 6, 2012 the Company's Board of Directors authorized a new share repurchase program for up to 200,000 shares. The new share repurchase program replaces the existing share repurchase authorization of 250,000 shares beginning in fiscal 2011 under which the Company repurchased approximately 130,000 shares.
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 Monday, April 2, 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 April 16, 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.
For more information about Lifeway Kefir, please visit http://www.lifewaykefir.com.
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About Lifeway Foods
Lifeway Foods, Inc. (NASDAQ: 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™. While most regular yogurt contains only two or three of these "friendly" cultures, Lifeway Kefir products offer greater nutritional benefits and support a healthier life. Lifeway produces various different flavors of its drinkable Kefir and Organic Kefir beverage, and recently introduced a series of innovative new products such as a children's line of Organic Kefir called ProBugs™ with a no-spill pouch and kid-friendly flavors like Goo Berry Pie and Strawnana Split. In addition to its line of Kefir products, the company produces a variety of probiotic cheese products. Lifeway also sells frozen kefir, kefir smoothies and kefir parfaits through its Starfruit™ retail stores.
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: [email protected]
Investor Relations:
ICR
Katie Turner
John Mills
646.277.1228
Press:
SSPR – Lauren Kaminski
847.415.9317
LIFEWAY FOODS, INC. AND SUBSIDIARIES |
|||||
Consolidated Statements of Financial Condition |
|||||
For the Years Ended December 31, 2011 and 2010 |
|||||
December 31, |
|||||
2011 |
2010 |
||||
ASSETS |
|||||
Current assets |
|||||
Cash and cash equivalents |
$ 1,115,150 |
$ 3,229,939 |
|||
Investments |
1,695,044 |
1,079,232 |
|||
Certificates of deposits in financial institutions |
300,000 |
250,000 |
|||
Inventories |
4,954,475 |
3,985,374 |
|||
Accounts receivable, net of allowance for doubtful accounts and discounts |
7,950,276 |
6,793,276 |
|||
Prepaid expenses and other current assets |
79,630 |
158,315 |
|||
Other receivables |
224,204 |
104,680 |
|||
Deferred income taxes |
338,690 |
328,470 |
|||
Refundable income taxes |
41,316 |
906,748 |
|||
Total current assets |
16,698,785 |
16,836,034 |
|||
Property and equipment, net |
15,198,822 |
15,152,713 |
|||
Intangible assets |
|||||
Goodwill and other non amortizable brand assets |
14,068,091 |
14,068,091 |
|||
Other intangible assets, net of accumulated amortization of $3,087,940 and $2,304,107 at December 31, 2011 and 2010, respectively |
5,218,060 |
6,001,893 |
|||
Total intangible assets |
19,286,151 |
20,069,984 |
|||
Other assets |
|||||
Long-term accounts receivable net of current portion |
289,550 |
--- |
|||
Total assets |
$ 51,473,308 |
$ 52,058,731 |
|||
LIABILITIES AND STOCKHOLDERS' EQUITY |
|||||
Current liabilities |
|||||
Checks written in excess of bank balances |
$ 592,040 |
$ 1,341,210 |
|||
Current maturities of notes payable |
1,540,716 |
2,851,610 |
|||
Accounts payable |
4,386,239 |
4,183,481 |
|||
Accrued expenses |
553,725 |
509,459 |
|||
Total current liabilities |
7,072,720 |
8,885,760 |
|||
Notes payable |
5,539,836 |
6,122,225 |
|||
Deferred income taxes |
3,503,595 |
3,401,728 |
|||
Total liabilities |
16,116,151 |
18,409,713 |
|||
Stockholders' equity |
|||||
Common stock, no par value; 20,000,000 shares authorized; 17,273,776 shares issued; 16,409,317 shares outstanding at December 31, 2011; 17,273,776 shares issued; 16,536,657 shares outstanding at December 31, 2010 |
6,509,267 |
6,509,267 |
|||
Paid-in-capital |
2,032,516 |
2,032,516 |
|||
Treasury stock, at cost |
(7,606,974) |
(6,425,546) |
|||
Retained earnings |
34,431,296 |
31,575,875 |
|||
Accumulated other comprehensive (loss), net of taxes |
(8,948) |
(43,094) |
|||
Total stockholders' equity |
35,357,157 |
33,649,018 |
|||
Total liabilities and stockholders' equity |
$ 51,473,308 |
$ 52,058,731 |
|||
LIFEWAY FOODS, INC. AND SUBSIDIARIES |
|||||||||
Consolidated Statements of Income and Comprehensive Income |
|||||||||
For the Years Ended December 31, 2011 and 2010 |
|||||||||
December 31, |
|||||||||
2011 |
2010 |
||||||||
Gross sales |
$ 77,122,999 |
$ 63,543,445 |
|||||||
Less: discounts and allowances |
(7,152,590) |
(5,043,552) |
|||||||
Net sales |
69,970,409 |
69,970,409 |
58,499,893 |
58,499,893 |
|||||
Cost of goods sold |
45,866,632 |
36,926,973 |
|||||||
Depreciation expense |
1,552,961 |
1,393,745 |
|||||||
Total cost of goods sold |
47,419,593 |
38,320,718 |
|||||||
Gross profit |
22,550,816 |
20,179,175 |
|||||||
Selling expenses |
10,205,441 |
7,603,098 |
|||||||
General and administrative |
6,485,051 |
5,576,908 |
|||||||
Amortization expense |
783,833 |
724,537 |
|||||||
Total operating expenses |
17,474,325 |
13,904,543 |
|||||||
Income from operations |
5,076,491 |
6,274,632 |
|||||||
Other income (expense): |
|||||||||
Interest and dividend income |
70,611 |
260,552 |
|||||||
Rental income |
7,150 |
11,785 |
|||||||
Interest expense |
(247,342) |
(350,997) |
|||||||
Impairment of investments |
(36,032) |
--- |
|||||||
Gain (loss) on sale of investments, net |
(29,256) |
250,480 |
|||||||
Other expense |
(8,364) |
--- |
|||||||
Total other income (expense) |
(243,233) |
171,820 |
|||||||
Income before provision for |
|||||||||
income taxes |
4,833,258 |
6,446,452 |
|||||||
Provision for income taxes |
1,977,837 |
2,823,986 |
|||||||
Net income |
$ 2,855,421 |
$ 3,622,466 |
|||||||
Basic and diluted earnings |
|||||||||
per common share |
0.17 |
0.22 |
|||||||
Weighted average number of |
|||||||||
shares outstanding |
16,422,948 |
16,663,557 |
|||||||
COMPREHENSIVE INCOME |
|||||||||
Net income |
$ 2,855,421 |
$ 3,622,466 |
|||||||
Other comprehensive income |
|||||||||
(loss), net of tax: |
|||||||||
Unrealized gains (losses) on |
|||||||||
investments (net of tax) |
17,616 |
114,297 |
|||||||
Less reclassification adjustment |
|||||||||
for (gains) losses included in |
|||||||||
net income (net of taxes) |
16,530 |
(147,032) |
|||||||
Comprehensive income |
$ 2,889,567 |
$ 3,589,731 |
|||||||
LIFEWAY FOODS, INC. AND SUBSIDIARIES |
|||||
Consolidated Statements of Cash Flows |
|||||
For the Years Ended December 31, 2011 and 2010 |
|||||
December 31, |
|||||
2011 |
2010 |
||||
Cash flows from operating activities: |
|||||
Net income |
$ 2,855,421 |
$ 3,622,466 |
|||
Adjustments to reconcile net income to net |
|||||
cash flows from operating activities, net of acquisition: |
|||||
Depreciation and amortization |
2,336,794 |
2,118,282 |
|||
Loss (Gain) on sale of investments, net |
29,256 |
(250,480) |
|||
Loss on disposition of equipment |
20,135 |
--- |
|||
Impairment of investments |
36,032 |
--- |
|||
Deferred income taxes |
68,217 |
(96,918) |
|||
Treasury stock issued for compensation |
--- |
154,245 |
|||
Bad debt expense |
48,240 |
17,754 |
|||
(Increase) decrease in operating assets: |
|||||
Accounts receivable |
(1,494,790) |
(811,292) |
|||
Other receivables |
(119,524) |
(54,922) |
|||
Inventories |
(969,101) |
(682,398) |
|||
Refundable income taxes |
865,432 |
402,230 |
|||
Prepaid expenses and other current assets |
78,685 |
(117,618) |
|||
Increase (decrease) in operating liabilities: |
|||||
Accounts payable |
202,758 |
1,419,479 |
|||
Accrued expenses |
84,466 |
(104,885) |
|||
Net cash provided by operating activities |
4,042,021 |
5,615,943 |
|||
Cash flows from investing activities: |
|||||
Purchases of investments |
(2,434,340) |
(2,161,552) |
|||
Proceeds from sale of investments |
1,810,816 |
5,669,158 |
|||
Investments in certificates of deposits |
(50,000) |
--- |
|||
Proceeds from redemption of certificates of deposit |
--- |
402,005 |
|||
Purchases of property and equipment |
(1,439,133) |
(2,229,274) |
|||
Acquisition of the assets of First Juice |
--- |
(270,000) |
|||
Net cash (used in) provided by investing activities |
(2,112,657) |
1,410,337 |
|||
Cash flows from financing activities: |
|||||
Proceeds from note payable |
2,000,000 |
250,000 |
|||
Checks written in excess of bank balances |
(749,170) |
998,234 |
|||
Purchases of treasury stock |
(1,181,428) |
(2,666,288) |
|||
Repayment of notes payable |
(4,113,555) |
(3,008,694) |
|||
Net cash used in financing activities |
(4,044,153) |
(4,426,748) |
|||
Net (decrease) increase in cash and cash equivalents |
(2,114,789) |
2,599,532 |
|||
Cash and cash equivalents at the beginning of the period |
3,229,939 |
630,407 |
|||
Cash and cash equivalents at the end of the period |
$ 1,115,150 |
$ 3,229,939 |
|||
SOURCE Lifeway Foods, Inc.
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