Lifeway Foods, Inc. Announces Results for the First Quarter Ended March 31, 2016

First Quarter Net Sales Increase 10% Year-Over-Year to $32.6 Million


MORTON GROVE, Ill., May 10, 2016 (GLOBE NEWSWIRE) -- Lifeway Foods, Inc., (Nasdaq:LWAY), the leading U.S. supplier of kefir cultured dairy products, today reported financial results for the first quarter ended March 31, 2016.

“We are pleased to announce an encouraging start to 2016 in which we achieved double-digit top-line revenue growth and a sequential increase in profitability,” said Julie Smolyansky, CEO of Lifeway Foods, Inc. “Our solid first quarter results demonstrate the success of our strategic initiatives. In addition, increased distribution and brand awareness of our probiotic and functional dairy health food products drove our improved operational and financial performance. This positive momentum has us well-positioned for growth and we are confident in our ability to increase value for our shareholders.”

First Quarter Results

First quarter of 2016 net sales increased 10.0% to $32.6 million from $29.6 million in the first quarter of 2015.  Gross sales increased 12% driven by higher sales of the Company’s Kefir products slightly offset by increased trade promotions and allowances.

Gross profit as a percent of net sales declined to 26.4% from 28.3% in the same period last year.  The first quarter of 2016 gross margin decline reflects increased manufacturing costs primarily related to the ramp up of the Waukesha facility, which continued to expand its production volumes during the quarter. Milk prices were essentially flat versus the year ago period.

Selling expenses decreased approximately 10.8% to $2.9 million during the first quarter of 2016 from $3.3 million in the first quarter of 2015.  The decrease in selling expenses reflects lower advertising programs. General and administrative expenses increased $0.9 million to $4.4 million from $3.5 million compared to the same period last year primarily due to the increased professional fees associated with legal and regulatory functions.

Net income was approximately $0.6 million, or $0.04 per diluted share for the quarter ended March 31, 2016, consistent with the first quarter of 2015.

The effective tax rate for first quarter of 2016 was 38.8% compared to 49.9% in the first quarter of 2015.  The lower tax rate in the first quarter of 2016 was driven by the deductibility of certain operating expenses for federal income tax purposes that were not fully deductible in 2015.

Balance Sheet

Cash and cash equivalents were approximately $3.8 million as of March 31, 2016 compared to cash and cash equivalents of $5.6 million as of December 31, 2015 reflecting the unfavorable timing of payments to suppliers and service providers as well as share repurchase activity. 

The Company repurchased approximately 39,000 shares of common stock at a cost of $0.4 million in the three months ended March 31, 2016. Approximately 76,000 shares remained available to repurchase under this program as of March 31, 2016.  The stock repurchase program has no expiration date and may be suspended or discontinued at any time. 

Conference Call
The Company will host a conference call to discuss these results with additional comments and details on Tuesday, May 10, 2016 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.lifewaykefir.com, and will be archived online through May 24, 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 Balance Sheets 
March 31, 2016 and December 31, 2015 
(In thousands) 
  
  March 31, 2016
(Unaudited)
  December 31,
2015
 
Current assets      
Cash and cash equivalents $3,786  $5,646 
Investments, at fair value  2,484   2,216 
Certificates of deposits in financial institutions  150   513 
Inventories  8,291   7,664 
Accounts receivable, net of allowance for doubtful accounts and discounts of
$1,600 and $1,800 at March 31, 2016 and December 31, 2015 respectively
  10,187   9,604 
Prepaid expenses and other current assets  287   201 
Deferred income taxes  532   556 
Refundable income taxes  877   449 
Total current assets  26,594   26,849 
         
Property and equipment, net  21,080   21,375 
         
Intangible assets        
Goodwill & indefinite-lived intangibles  14,068   14,068 
Other intangible assets, net  2,166   2,344 
Total intangible assets  16,234   16,412 
         
Other Assets        
Long-term accounts receivable, net of current portion  270   282 
Total assets $64,178  $64,918 
         
Current liabilities        
Current maturities of notes payable $840  $840 
Accounts payable  7,339   8,393 
Accrued expenses  1,849   1,538 
Accrued income taxes     52 
Total current liabilities  10,028   10,823 
         
Notes payable  6,909   7,119 
         
Deferred income taxes  1,719   1,719 
Total liabilities  18,656   19,661 
         
Stockholders' equity        
Common stock, no par value; 40,000 shares authorized;        
  17,274, shares issued; 16,171 and 16,210 shares        
  outstanding at March 31, 2016 and December 31, 2015 respectively  6,509   6,509 
Paid-in-capital  2,054   2,033 
Treasury stock, at cost  (10,170  (9,730)
Retained earnings  47,164   46,516 
Accumulated other comprehensive loss, net of taxes  (35  (71)
Total stockholders' equity  45,522   45,257 
         
Total liabilities and stockholders' equity $64,178  $64,918 
         


  
 LIFEWAY FOODS, INC. AND SUBSIDIARIES
 Consolidated Statements of Income and Comprehensive Income
 For the three months ended March 31, 2016 and 2015
 (Unaudited)
 (In thousands, except per share data)
  
     2016   2015 
 Gross Sales  $37,030  $33,103 
 Less: discounts and allowances   (4,460  (3,481
 Net sales   32,570   29,622 
          
 Cost of goods sold   23,351   20,648 
 Depreciation expense   631   591 
 Total cost of goods sold   23,982   21,239 
          
 Gross profit   8,588   8,383 
          
 Selling expenses   2,944   3,302 
 General and administrative   4,356   3,492 
 Amortization expense   176   179 
 Total operating expenses   7,476   6,973 
          
 Income from operations   1,112   1,410 
          
 Other income (expense):        
 Interest expense   (58)  (65
 Loss on sale of investments, net reclassified from OCI   (12  (5
 Gain on sale of equipment      36 
 Impairment of investments      (180
 Other income (expense), net   17   108 
 Total other income (expense)   (53)  (106
          
 Income before provision for income taxes   1,059   1,304 
          
 Provision for income taxes   411   650 
          
 Net income  $648  $654 
          
 Basic and diluted earnings per common share  $0.04  $0.04 
          
 Weighted average number of shares outstanding   16,189   16,346 
 COMPREHENSIVE INCOME        
 Net income  $648  $654 
 Other comprehensive income (loss), net of tax:        
   Unrealized gains (losses) on investments, net of $(23) and $23 of taxes   36   (35
 Reclassifications to earnings:        
   Other than temporary impairment of investments, net of $(76) of taxes      104 
   Realized (gains) losses on investments, net of $-- and $2 of taxes      (3)
 Comprehensive income  $684  $720 
           


 
LIFEWAY FOODS, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
For the Three Months Ended March 31, 2016 and 2015
(Unaudited)
(In thousands, except per share data)
         
Cash flows from operating activities:  2016   2015 
Net income $648  $654 
Adjustments to reconcile net income to operating cash flow:        
  Depreciation and amortization  807   770 
  Loss on sale of investments, net  12   5 
  Impairment of investments     180 
  Deferred income taxes     (196)
  Stock based compensation  21    
  (Gain) on sale of equipment     (36
(Increase) decrease in operating assets:        
  Accounts receivable  (584  (33)
  Inventories  (627  (513)
  Refundable income taxes  (427)  1,050 
  Prepaid expenses and other current assets  (71)  180 
Increase (decrease) in operating liabilities:        
  Accounts payable  (1,054)  (1,464
  Accrued expenses  311   1,395 
  Income taxes payable  (52  145 
Net cash (used in) provided by operating activities  (1,016)  2,137 
         
Cash flows from investing activities:        
Purchases of investments  (373)  (1,005)
Proceeds from sale of investments  152   693 
Redemption of certificates of deposits  363   100 
Investments in certificates of deposit     (85
Purchases of property and equipment  (336)  (1,040)
Proceeds from sale of equipment     36 
Net cash used in investing activities  (194)  (1,301)
         
Cash flows from financing activities:        
         
Purchase of treasury stock  (440   
Repayment of notes payable  (210)  (271)
Net cash used in financing activities  (650)  (271
         
Net increase (decrease) in cash and cash equivalents  (1,860)  565 
Cash and cash equivalents at the beginning of the year  5,646   3,260 
Cash and cash equivalents at the end of the year $3,786  $3,825 
         
Supplemental cash flow information:         
  Cash paid for income taxes, net of refunds $886  $40 
  Cash paid for interest $58  $65 

 


            

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