EX-99.1 6 exh99-1_17545.htm PRESS RELEASE DATED AUGUST 14, 2013 exh99-1_17545.htm
EXHIBIT 99.1

 
Lifeway Foods Announces Results for the Second Quarter of 2013
 
Morton Grove, IL — August 14, 2013—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.

“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, Tuesday, 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
      
0
      
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
  
$
0
    
$
711,597
    
$
0
  
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)
Three Months Ended
June 30,
    
(Unaudited)
Six Months Ended
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               0               10,229               0  
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
      
0
  
Purchases of property and equipment
    
(547,819
 )    
(478,428
 )
Net cash used in 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