Lifeway Foods, Inc. Announces Results for the Fourth Quarter and Fiscal Year Ended December 31, 2015


MORTON GROVE, Ill., March 15, 2016 (GLOBE NEWSWIRE) -- Lifeway Foods, Inc., (Nasdaq:LWAY), the leading U.S. supplier of kefir cultured dairy products, today reported financial results for the fourth quarter and fiscal year ended December 31, 2015.

“In 2015, we took decisive steps to better position Lifeway for future growth,” said Julie Smolyansky, CEO of Lifeway Foods, Inc. “These include strategic investments in new product innovation, continued investment in Lifeway’s production capabilities, and new additions to our team. Additionally, we ramped up our marketing and advertising initiatives as well as increased our investments in trade promotions, both of which have led to a strong start thus far in 2016.”

Fourth Quarter Results

Fourth quarter 2015 net sales decreased 2% to $29.5 million from $30.2 million in the fourth quarter of 2014. Gross sales increased 4.9% driven by higher sales of the Company’s Kefir products that were more than offset by increased trade promotions and allowances.

Gross profit as a percent of net sales improved to 24.2% from 22.9%% in the year ago period. The margin rate improvement reflects lower milk costs, offset partially by increased trade promotion and higher labor costs.

Selling expenses decreased approximately 28% to $3.3 million during the fourth quarter of 2015 from $4.6 million in the fourth quarter of 2014. The reduction reflects reduced salaries and administrative related costs in the fourth quarter of 2015. General and administrative expenses increased $0.5 million to $2.8 million from $2.3 million compared to the same period last year primarily due to the elevated level of professional fees.

Net income was approximately $328,000, or $0.02 per diluted share, in the fourth quarter of 2015 compared to a loss of $26,000, or $0.00 per diluted share, in the same period in 2014.

Fiscal 2015
Net sales for the year ended December 31, 2015 were $118.6 million, essentially consistent with the $119.0 million reported last year. The net sales performance reflects a 5.4% increase in gross sales driven by higher volume of the Company’s drinkable Kefir. The total volume increase was slightly more than offset by elevated trade promotions and allowances.

Gross profit as a percent of net sales improved to 26.6% from 24.3% in the year ago period. The margin rate improvement reflects lower milk costs, offset partially by increased trade promotion and higher labor costs.

Selling expenses decreased approximately 12% to $12.8 million in fiscal 2015 from $14.5 million in the prior year. The decline in selling expenses reflects reduced salaries and administrative expenses, partially offset by higher advertising costs. General and administrative expenses increased $4.3 million to $13.7 million in fiscal 2015 from $9.4 million last year. The higher general and administrative expenses is primarily a result of higher salaries and higher professional fees due in part to costs associated with remediating internal accounting controls and the related delays in the Company’s financial reporting as well as redundancies associated with and the change in Lifeway’s certified public accountants. 

The effective tax rate for fiscal 2015 was 50.6%% compared to 53.4% in the same period in 2014. The higher tax rate in 2014 reflects provisions for tax exposures that did not recur in 2015.

Net income was $2.0 million, or $0.12 per share, for the year ended December 31, 2015 compared to $2.0 million, or $0.12 per share, in fiscal 2014.  

Balance Sheet/Cash Flow Highlights
The Company had cash and cash equivalents of approximately $5.6 million as of December 31, 2015 compared to cash and cash equivalents of $3.3 million as of December 31, 2014. The Company generated $6.7 million in cash from operating activities during 2015 compared to $5.1 million during 2014 primarily driven by reductions in net working capital.

Conference Call
The Company will host a conference call to discuss these results with additional comments and details on Wednesday, March 16, 2016 at 10:00 a.m. ET. The call will be broadcast live over the Internet hosted at the Investor Relations section of Lifeway Foods’ website at www.lifewaykefir.com, and will be archived online through March 29, 2016. 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, Ed Smolyansky, Chief Operating Officer, and John Waldron, Chief Financial Officer.

About Lifeway Foods
Lifeway Foods, Inc. (LWAY), recently named one of Forbes’ Best Small Companies, is America’s leading supplier of the probiotic fermented beverage known as kefir. In addition to its line of drinkable kefir, the company also produces frozen kefir, specialty cheeses and a ProBugs line for kids. Lifeway’s tart and tangy cultured dairy products are available throughout the United States and on a small, but growing basis, in Canada, Latin America and the United Kingdom. Learn how Lifeway is good for more than just you at www.lifewaykefir.com.

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.

 

 LIFEWAY FOODS, INC. AND SUBSIDIARIES
 Consolidated Statements of Income and Comprehensive Income
 December 31, 2015, 2014 and 2013  
 (In thousands, except per share data)
      2015    2014   2013 
 Gross Sales   $137,244   $130,216  $108,966 
 Less: discounts and allowances    (18,657   (11,256  (11,442
 Net sales    118,587    118,960   97,524 
                 
 Cost of goods sold    84,573    87,561   68,275 
 Depreciation expense    2,413    2,536   1,626 
 Total cost of goods sold    86,986    90,097   69,901 
                 
 Gross profit    31,601    28,863   27,623 
                 
 Selling expenses    12,752    14,534   11,296 
 General and administrative    13,730    9,378   7,583 
 Amortization expense    716    716   713 
 Total operating expenses    27,198    24,628   19,592 
                 
 Income from operations    4,403    4,235   8,031 
                 
 Other income (expense):               
 Interest and dividend income    112    122   116 
 Rental income    7    4   12 
 Interest expense    (236)   (277)  ( 203)
 Gain (Loss) on sale of investments, net reclassified from OCI    (72   99   195 
 Gain (Loss) on sale of equipment    253    7   (305)
 Impairment of investments    (475)   --   -- 
 Other Income (Expense)    --    8   11 
 Total other income (expense)    (411)   (37)  (174)
                 
 Income before provision for income taxes    3,992    4,198   7,857 
                 
 Provision for income taxes    2,020    2,242   2,867 
                 
 Net income   $1,972   $1,956  $4,990 
                 
 Basic and diluted earnings per common share   $0.12   $0.12  $0.31 
                 
 Weighted average number of shares outstanding    16,331    16,346   16,346 
                 
 COMPREHENSIVE INCOME               
 Net income   $1,972   $1,956  $4,990 
 Other comprehensive income (loss), net of tax:               
 Unrealized gains (losses) on investments, net of $30, $94 and ($50) of taxes    (47)   (146  64 
 Reclassifications to earnings:               
 Other than temporary impairment of investments, net of $84 of taxes    130    --   -- 
 Realized (gains) losses on investments, net of ($28), $39 and $85 of taxes    44    (60)  (110)
 Comprehensive income   $2,099   $1,750  $4,944 


LIFEWAY FOODS, INC. AND SUBSIDIARIES 
Consolidated Balance Sheets 
December 31, 2015 and 2014 
(In thousands) 
  December 31,
 
  2015  2014 
Current assets      
Cash and cash equivalents $5,646  $3,260 
Investments, at fair value  2,216   2779 
Certificates of deposits in financial institutions  513   150 
Inventories  7,664   5,814 
Accounts receivable, net of allowance for doubtful accounts and discounts of        
$1,800 and $1,050 in 2015 and 2014 respectively  9,604   10,214 
Prepaid expenses and other current assets  156   252 
Other receivables  45   134 
Deferred income taxes  556   408 
Refundable income taxes  449   1,141 
Total current assets  26,849   24,152 
         
Property and equipment, net  21,375   21,892 
         
Intangible assets        
Goodwill & indefinite-lived intangibles  14,068   14,068 
Other intangible assets, net  2,344   3,060 
Total intangible assets  16,412   17,128 
         
Other Assets        
Long-term accounts receivable, net of current portion  282   252 
Total assets $64,918  $63,424 
         
Current liabilities        
Current maturities of notes payable $840  $872 
Accounts payable  7,138   5,587 
Accrued expenses  2,793   2,066 
Accrued income taxes  52   -- 
Total current liabilities  10,823   8,525 
         
Notes payable  7,119   8,125 
         
Deferred income taxes  1,719   2,074 
Total liabilities  19,661   18,724 
         
Stockholders' equity        
Common stock, no par value; 40,000 shares authorized;        
17,274, shares issued; 16,210 and 16,346  shares        
outstanding at 2015 and 2014  6,509   6,509 
Paid-in-capital  2,033   2,033 
Treasury stock, at cost  (9,730) (8,188)
Retained earnings  46,516   44,544 
Accumulated other comprehensive loss, net of taxes  (71) (198)
Total stockholders' equity  45,257   44,700   
         
Total liabilities and stockholders' equity $64,918  $63,424 


LIFEWAY FOODS, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
For the Years Ended December 31, 2015, 2014 and 2013
(In thousands)
  December 31,  
  2015 2014 2013 
Cash flows from operating activities:            
Net income $1,972  $1,956  $4,990 
Adjustments to reconcile net income to operating cash flow:            
Depreciation and amortization  3,129   3,252   2,339 
Loss (Gain) on sale of investments, net  72   (99)  (196)
Impairment of investments  475       
Deferred income taxes  (585)  (720)  (238)
Bad debt expense  73   205   33 
(Gain) Loss on sale of equipment  (253)  (7  305 
(Increase) decrease in operating assets:            
Accounts receivable  537   55   (1,742)
Other receivables  59   (31)  (94
Inventories  (1,849  1,085   (960)
Refundable income taxes  691   (126)  (930)
Prepaid expenses and other current assets  95   (124)  (6)
Increase (decrease) in operating liabilities:            
Accounts payable  1,551   (1,136  2,466 
Accrued expenses  726   782   128 
Income taxes payable  52      (254
Net cash provided by operating activities  6,745   5,092   5,841 
             
Cash flows from investing activities:            
Purchases of investments  (1,489)  (3,280)  (3,519)
Proceeds from sale of investments  1,714   2,774   3,001 
Redemption of certificates of deposits  272   15   424 
Investments in certificates of deposit  (635)  (150   
Purchases of property and equipment  (1,995)  (3,684)  (8,480)
Proceeds from sale of equipment  353   65   711 
Net cash used in investing activities  (1,780)  (4,261)  (7,863)
             
Cash flows from financing activities:            
             
Purchase of treasury stock  (1,542      
Dividends paid        (1,308)
Net proceeds from debt issuance        4,975 
Repayment of notes payable  (1,037)  (877)  (625)
Net cash provided by (used in) financing activities  (2,579)  (877  3,042 
             
Net increase (decrease) in cash and cash equivalents  2,386   (46  1,020 
             
Cash and cash equivalents at the beginning of the year  3,260   3,306   2,286 
             
Cash and cash equivalents at the end of the year $5,646  $3,260  $3,306 
             
Supplemental cash flow information:             
Cash paid for income taxes $2,245  $3,080  $4,363 
Cash paid for interest $235  $267  $206 



            

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