EX-99.1 2 ex99-1_17654.htm PRESS RELEASE ex99-1_17654.htm
EXHIBIT 99.1
 

 
Lifeway Foods Announces First Quarter 2014 Financial Results

First Quarter Gross Sales Increase 16% to $32.1 Million

First Quarter Net Sales Increase 20% to $29.1 Million

Morton Grove, IL — May 12, 2014 — Lifeway Foods, Inc., (Nasdaq: LWAY), a leading supplier of cultured dairy products known as kefir and organic kefir, today announced results for the first quarter ended March 31, 2014.

“We are pleased to report our results for the first quarter in which we achieved robust sales growth,” said Julie Smolyansky, CEO of Lifeway Foods, Inc. “I believe this demonstrates a strong start to the 2014 fiscal year. I am impressed with our team’s ability to closely manage expenses despite increased margin pressure due to milk prices. We believe that the progress we have made in product innovation and the positive consumer response to our products has positioned us well to capitalize on our growth opportunities. We continue to add new distribution in the US and to expand Lifeway’s kefir probiotic reach. Looking ahead, our team remains committed to delivering increased financial results and we expect fiscal 2014 to be another record year.”

First Quarter Results
First quarter of 2014 gross sales increased approximately 16% to $32.1 million compared to $27.6 million for the first quarter of 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™.

First quarter total consolidated net sales increased approximately 20% to $29.1 million from $24.4 million in the first quarter of 2013.  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 first quarter of 2014 was approximately $2.9 million or 9% of gross sales, compared to $3.2 million or approximately 12% of gross sales in the same period last year.

Cost of goods sold as a percentage of net sales, excluding depreciation expense, were approximately 74% during the first quarter of 2014, compared to approximately 63% during the same period in 2013. Gross profit for the first quarter of 2014 decreased 18% to approximately $7.1 million, compared to approximately $8.6 million in the first quarter of the prior year. The gross profit margin decreased to 24% in the first quarter 2014 versus 35% in the first quarter of 2013. The decrease was primarily attributable to the increased cost of conventional milk, the Company’s largest raw material.  The total cost of milk was approximately 35% higher during the first quarter 2014 when compared to the same period in 2013.
 
Operating expenses as a percentage of net sales were approximately 21% during the first quarter of 2014, compared to approximately 20% during the same period in 2013.  This was primarily attributable to an increase in selling related expenses, which increased approximately 24% to $3.5 million during the first quarter of 2014, from $2.8 million during the same period in 2013.

The Company reported income from operations of $1.0 million during the first quarter of 2014 compared to $3.7 million during the same period in 2013.

Provision for income tax was $0.3 million or a 34% effective tax rate for the first quarter compared to a provision for income tax of $1.4 million or a 37% effective tax rate during the same period in 2013.

Total net income was $0.7 million, or $0.04 per diluted share, for the three-month period ended March 31, 2014 compared to $2.4 million, or $0.14 per diluted share, in the same period in 2013.

 
 
 
 

 
Balance Sheet/Cash Flow Highlights
The Company had cash and cash equivalents of $2.5 million as of March 31, 2014 compared to cash and cash equivalents of $3.3 million as of December 31, 2013.

Total stockholder’s equity was $43.6 million as of March 31, 2014, which is an increase of $0.7 million when compared to December 31, 2013.  This is primarily due to the increase in retained earnings of $0.7 million when compared to December 31, 2013.
 
Conference Call
The Company will host a conference call to discuss these results with additional comments and details on Monday, May 12, 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 May 26, 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
March 31, 2014 and 2013 (Unaudited) and December 31, 2013
 
 
   
March 31,
   
December 31,
 
   
2014
   
2013
   
2013
 
ASSETS
                 
                   
Current assets
                 
Cash and cash equivalents
  $ 2,474,708     $ 2,739,957     $ 3,306,608  
Investments
    2,790,935       2,062,343       2,516,380  
Certificates of deposits in financial institutions
          250,000       15,373  
Inventories
    7,355,884       7,080,899       6,899,008  
Accounts receivable, net of allowance for doubtful
                       
accounts and discounts ($1,300,000 and $1,350,000 and $1,050,000)
    10,794,866       11,915,981       10,444,839  
Prepaid expenses and other current assets
    39,855       92,827       128,323  
Other receivables
    91,628       5,165       103,272  
Deferred income taxes
    360,110       295,701       322,071  
Refundable income taxes
    2,580,323       84,828       1,014,947  
Total current assets
    26,488,309       24,527,701       24,750,821  
                         
Property and equipment, net
    21,248,982       14,917,260       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
                       
$4,734,478, $4,020,598 and $4,555,559 at March 31, 2014
                       
and 2013 and at December 31, 2013, respectively
    3,571,522       4,285,403       3,750,441  
Total intangible assets
    17,639,613       18,353,494       17,818,532  
                         
Other Assets
                       
Long-term accounts receivable net of current portion
    273,000       294,000       280,000  
Total assets
  $ 65,649,904     $ 58,092,455     $ 63,673,801  
                         
                         
LIABILITIES AND STOCKHOLDERS' EQUITY
                       
                         
Current liabilities
                       
Current maturities of notes payable
  $ 879,354     $ 543,591     $ 875,002  
Accounts payable
    6,958,999       6,465,801       6,723,179  
Accrued expenses
    2,732,170       1,197,883       1,284,060  
Accrued income taxes
          462,593        
Total current liabilities
    10,570,523       8,669,868       8,882,241  
                         
Notes payable
    8,775,587       4,820,160       8,999,012  
                         
Deferred income taxes
    2,689,167       2,909,134       2,843,426  
Total liabilities
    22,035,277       16,399,162       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 March 31, 2014; 17,273,776 shares issued; 16,346,017 shares outstanding at March 31, 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
    43,247,392       41,270,416       42,587,214  
Accumulated other comprehensive income (loss), net of taxes
    13,134       68,776       7,807  
Total stockholders' equity
    43,614,627       41,693,293       42,949,122  
                         
Total liabilities and stockholders' equity
  $ 65,649,904     $ 58,092,455     $ 63,673,801  
 
 
 
 
 

 
LIFEWAY FOODS, INC. AND SUBSIDIARIES
Consolidated Statements of Income and Comprehensive Income
For the Three Months Ended March 31, 2014 and 2013
 
 
   
(Unaudited)
 
   
Three Months Ended
 
   
March 31,
 
   
2014
   
2013
 
Sales
  $ 32,061,147           $ 27,590,622        
Less: discounts and allowances
    ( 2,929,436 )           ( 3,203,591 )      
Net sales
    29,131,711       29,131,711       24,387,031       24,387,031  
                                 
Cost of goods sold
            21,681,910               15,402,875  
Depreciation expense
            383,361               394,125  
                                 
Total cost of goods sold
            22,065,271               15,797,000  
                                 
Gross profit
            7,066,440               8,590,031  
                                 
Selling expenses
            3,479,688               2,813,572  
General and administrative
            2,380,631               1,868,100  
Amortization expense
            178,919               177,842  
                                 
Total operating expenses
            6,039,238               4,859,514  
                                 
Income from operations
            1,027,202               3,730,517  
                                 
Other income (expense):
                               
Interest and dividend income
            28,698               15,009  
Rental income
            500               3,269  
Interest expense
            ( 65,569 )             ( 36,299 )
Gain (loss) on sale of investments, net
                               
reclassified from OCI
            4,808               64,335  
Loss on disposition of assets
                           
Other income (expense)
                           
Total other income (expense)
            (31,563 )             46,314  
                                 
Income before provision for
                               
   income taxes
            995,639               3,776,831  
                                 
Provision for income taxes
            335,461               1,411,192  
                                 
Net income
          $ 660,178             $ 2,365,639  
                                 
Basic and diluted earnings
                               
per common share
            0.04               0.14  
                                 
Weighted average number of
                               
  shares outstanding
            16,346,017               16,346,017  
                                 
COMPREHENSIVE INCOME
                               
                                 
Net income
          $ 660,178             $ 2,365,639  
                                 
Other comprehensive income
                               
    (loss), net of tax:
                               
    Unrealized gains (losses) on
                               
      investments (net of tax)
            8,044               51,535  
    Less reclassification adjustment
                               
      for (gains) losses included in
                               
      net income (net of taxes)
            (2,717 )             ( 36,349 )
                                 
Comprehensive income
          $ 665,505             $ 2,380,825  
 
 
 

 
LIFEWAY FOODS, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
For the Three Months Ended March 31, 2014 and 2013
 
 
   
March 31,
 
   
2014
   
2013
 
             
Cash flows from operating activities:
           
Net income
  $ 660,178     $ 2,365,639  
Adjustments to reconcile net income to net
               
cash flows from operating activities:
               
Depreciation and amortization
    562,280       571,967  
Loss (gain) on sale of investments, net
    (4,808 )     (64,335 )
Deferred income taxes
    (196,401 )     (192,090 )
Bad Debt Expense
    126,049       51,819  
Loss (Gain) on sale of equipment
           
(Increase) decrease in operating assets:
               
Accounts receivable
    (468,826 )     (3,244,063 )
Other receivables
    11,644       3,660  
Inventories
    (456,876 )     (1,141,713 )
Refundable income taxes
    (1,565,376 )      
Prepaid expenses and other current assets
    88,468       4,311  
Increase (decrease) in operating liabilities:
               
Accounts payable
    235,820       2,209,076  
Accrued expenses
    1,448,110       42,206  
Income taxes payable
          208,282  
Net cash provided by operating activities
    440,262       814,759  
                 
Cash flows from investing activities:
               
Purchases of investments
    (814,804 )     (1,271,516 )
Proceeds from sale of investments
    554,609       1,170,271  
Investments in certificates of deposits
           
Redemption of certificates of deposits
    15,000       200,000  
Purchases of property and equipment
    (807,894 )     (324,608 )
Proceeds from sale of equipment
           
Net cash (used in) provided by investing activities
    (1,053,089 )     (225,853 )
                 
Cash flows from financing activities:
               
Repayment of notes payable
    (219,073 )     (135,175 )
Net cash provided (used in) financing activities
    (219,073 )     (135,175 )
                 
Net (decrease) increase in cash and cash equivalents
    (831,900 )     453,731  
                 
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
  $ 2,474,708     $ 2,739,957