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| 8-K - FORM 8K - MARCH 16, 2015 - Lifeway Foods, Inc. | form8k_17785.htm |
EXHIBIT 99.1
Lifeway Foods Announces Full Year and Fourth Quarter 2014 Financial Results
Full Year 2014 Net Sales Increase 22% to $119.0 Million
Fourth Quarter Net Sales Increase 15% to $30.2 Million
Morton Grove, IL — March 16, 2015 — Lifeway Foods, Inc., (Nasdaq: LWAY), a leading supplier of cultured dairy products known as kefir and organic kefir, today announced results for the full year and fourth quarter ended December 31, 2014.
“We are pleased to report another year of strong financial results,” said Julie Smolyansky, CEO of Lifeway Foods, Inc. “Fiscal 2014 was an exciting year for Lifeway, in which we achieved many important milestones including the launch of our first ever national television commercial. We are extremely pleased with the positive response we have seen thus far and believe our increased brand awareness will lead to continued success for Lifeway. We are committed to our key growth strategies are confident about our future growth opportunities.”
2014 Year End Results
Total consolidated gross sales increased 20% or $21.3 million to approximately $130.2 million during the twelve-month period ended December 31, 2014 from $109.0 million during the same twelve-month period in 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™.
Total consolidated net sales increased 22% or $21.4 million to $119.0 million during the twelve-month period ended December 31, 2014 from $97.5 million during the same twelve- month period in 2013.
Cost of goods sold as a percentage of net sales, excluding depreciation expense, were approximately 74% during the twelve- month period ended December 31, 2014, compared to approximately 71% during the same period in 2013. Gross profit for 2014 increased 8% to $28.9 million, compared to $26.7 million in 2013. The Company's gross profit margin was 24% compared to 27% in 2013.
Total operating income decreased $3.6 million, or approximately 45%, to $4.4 million during the twelve-month period ended December 31, 2014, from $8.0 million during the same period in 2013. The gross profit margin decline was primarily attributable to the cost of conventional and organic milk, our largest raw material. The total cost of milk was approximately 30% higher in 2014 versus 2013.
Total net income was $2.8 million, or $0.17 per diluted share, for the twelve-month period ended December 31, 2014 compared to $5.0 million, or $0.31 per diluted share, in the same period in 2013.
Fourth Quarter Results
Fourth quarter of 2014 gross sales increased 14% to $32.9 million compared to $28.9 million for the fourth 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™.
Fourth quarter 2014 total consolidated net sales increased 15% to $30.2 million from $26.3 million in the fourth 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.
Total net income was $0.1 million, or $0.00 per diluted share, for the three-month period ended December 31, 2014 compared to a loss of $0.5 million, or $0.02 per diluted share, in the same period in 2013. Net loss for the period ended December 31, 2013 included a $0.3 million pre-tax loss on disposition of assets due to the closing of a Starfruit store location which was viewed as a one-time, non-cash expense.
Balance Sheet/Cash Flow Highlights
The Company had cash and cash equivalents of approximately $3.3 million as of December 31, 2014 compared to cash and cash equivalents of $3.3 million as of December 31, 2013.
Working capital increased to $16.5 million from $15.9, or an increase of $0.7 million when compared to the period last year. Total stockholder’s equity increased $2.6 million to $45.6 million as of December 31, 2014, primarily due the increase in retained earnings of approximately $2.8 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, March 16, 2015 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 March 30, 2015. 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 (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 now sold across the United States, 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.
Contact:
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Lifeway Foods, Inc.
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Phone: 877.281.3874
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Email: info@Lifeway.net
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Investor Relations:
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ICR
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Katie Turner
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John Mills
646.277.1228
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LIFEWAY FOODS, INC. AND SUBSIDIARIES
Consolidated Statements of Financial Condition
December 31, 2014 (Unaudited) and December 31, 2013
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December 31,
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2014
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2013
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ASSETS
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Current assets
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Cash and cash equivalents
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$ | 3,260,244 | $ | 3,306,608 | ||||
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Investments
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2,779,140 | 2,516,380 | ||||||
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Certificates of deposits in financial institutions
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149,965 | 15,373 | ||||||
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Inventories
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5,814,219 | 6,899,008 | ||||||
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Accounts receivable, net of allowance for doubtful accounts and discounts of $1,050,000 in 2014 and 2013
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10,213,541 | 10,444,839 | ||||||
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Prepaid expenses and other current assets
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96,825 | 128,323 | ||||||
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Other receivables
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31,204 | 103,272 | ||||||
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Deferred income taxes
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408,340 | 322,071 | ||||||
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Refundable income taxes
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1,826,664 | 1,014,947 | ||||||
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Total current assets
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24,580,142 | 24,750,821 | ||||||
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Property and equipment, net
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21,860,273 | 20,824,448 | ||||||
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Intangible assets
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Goodwill
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14,068,091 | 14,068,091 | ||||||
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Other intangible assets, net of accumulated amortization of $5,184,036 and $4,468,359 in 2014 and 2013, respectively
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3,059,764 | 3,750,441 | ||||||
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Total intangible assets
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17,127,855 | 17,818,532 | ||||||
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Other Assets
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Long-term accounts receivable, net of current portion
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251,683 | 280,000 | ||||||
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Total assets
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$ | 63,819,953 | $ | 63,673,801 | ||||
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LIABILITIES AND STOCKHOLDERS' EQUITY
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Current liabilities
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Current maturities of notes payable
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$ | 872,285 | $ | 875,002 | ||||
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Accounts payable
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5,586,755 | 6,723,179 | ||||||
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Accrued expenses
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1,577,785 | 1,284,060 | ||||||
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Total current liabilities
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8,036,825 | 8,882,241 | ||||||
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Notes payable
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8,124,515 | 8,999,012 | ||||||
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Deferred income taxes
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2,075,095 | 2,843,426 | ||||||
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Total liabilities
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18,236,435 | 20,724,679 | ||||||
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Stockholders' equity
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Common stock, no par value; 40,000,000 shares authorized;
17,273,776 shares issued;16,346,017 shares outstanding at 2014 and 2013 |
6,509,267 | 6,509,267 | ||||||
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Paid-in-capital
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2,032,516 | 2,032,516 | ||||||
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Treasury stock, at cost
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( 8,187,682 | ) | ( 8,187,682 | ) | ||||
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Retained earnings
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45,427,424 | 42,587,214 | ||||||
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Accumulated other comprehensive income (loss), net of taxes
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( 198,007 | ) | 7,807 | |||||
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Total stockholders' equity
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45,583,518 | 42,949,122 | ||||||
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Total liabilities and stockholders' equity
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$ | 63,819,953 | $ | 63,673,801 | ||||
LIFEWAY FOODS, INC. AND SUBSIDIARIES
Consolidated Statements of Income and Comprehensive Income
December 31, 2014 (Unaudited), December 31, 2013, and December 31, 2012
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Years Ended
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December 31,
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2014
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2013
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2012
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Sales
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$ | 130,215,716 | $ | 108,966,094 | $ | 89,754,007 | ||||||||||||||||||
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Less: discounts and allowances
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( 11,256,103 | ) | ( 11,441,952 | ) | ( 8,402,742 | ) | ||||||||||||||||||
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Net sales
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118,959,613 | 118,959,613 | 97,524,142 | 97,524,142 | 81,351,265 | 81,351,265 | ||||||||||||||||||
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Cost of goods sold
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87,560,837 | 69,186,473 | 53,098,191 | |||||||||||||||||||||
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Depreciation expense
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2,535,937 | 1,626,575 | 1,629,594 | |||||||||||||||||||||
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Total cost of goods sold
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90,096,774 | 70,813,048 | 54,727,785 | |||||||||||||||||||||
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Gross profit
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28,862,839 | 26,711,094 | 26,623,480 | |||||||||||||||||||||
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Selling expenses
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14,557,184 | 11,296,381 | 10,703,980 | |||||||||||||||||||||
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General and administrative
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9,167,370 | 6,670,598 | 6,319,972 | |||||||||||||||||||||
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Amortization expense
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715,677 | 712,803 | 754,817 | |||||||||||||||||||||
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Total operating expenses
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24,440,231 | 18,679,782 | 17,778,769 | |||||||||||||||||||||
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Income from operations
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4,422,608 | 8,031,312 | 8,844,711 | |||||||||||||||||||||
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Other income (expense):
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Interest and dividend income
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122,018 | 116,380 | 85,383 | |||||||||||||||||||||
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Rental income
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4,300 | 11,727 | 12,285 | |||||||||||||||||||||
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Interest expense
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( 266,095 | ) | ( 203,365 | ) | ( 177,622 | ) | ||||||||||||||||||
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Gain on sale of investments, net reclassified from OCI
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98,953 | 195,500 | 71,286 | |||||||||||||||||||||
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Gain on sale of equipment
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6,592 | (304,958 | ) | |||||||||||||||||||||
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Other Income (Expense)
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8,192 | 10,577 | ( 11,169 | ) | ||||||||||||||||||||
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Total other income (expense)
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(26,040 | ) | (174,139 | ) | (19,837 | ) | ||||||||||||||||||
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Income before provision for
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income taxes
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4,396,568 | 7,857,173 | 8,824,874 | |||||||||||||||||||||
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Provision for income taxes
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1,556,358 | 2,866,875 | 3,205,076 | |||||||||||||||||||||
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Net income
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$ | 2,840,210 | $ | 4,990,298 | $ | 5,619,798 | ||||||||||||||||||
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Basic and diluted earnings
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per common share
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0.17 | 0.31 | 0.34 | |||||||||||||||||||||
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Weighted average number of
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shares outstanding
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16,346,017 | 16,346,017 | 16,373,224 | |||||||||||||||||||||
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COMPREHENSIVE INCOME
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Net income
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$ | 2,840,210 | $ | 4,990,298 | $ | 5,619,798 | ||||||||||||||||||
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Other comprehensive income (loss), net of tax:
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Unrealized gains (losses) on investments (net of tax), $93,540, $49,793 and $79,159 for 2014, 2013 and 2012, respectively
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( 145,571 | ) | 64,674 | 102,816 | ||||||||||||||||||||
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Less reclassification adjustment for (gains) losses included in net income (net of taxes), $38,711, $85,042 and $31,009 for 2014, 2013 and 2012, respectively
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(60,243 | ) | ( 110,458 | ) | ( 40,277 | ) | ||||||||||||||||||
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Comprehensive income
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$ | 2,634,396 | $ | 4,944,514 | $ | 5,682,337 | ||||||||||||||||||
LIFEWAY FOODS, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
December 31, 2014 (Unaudited), December 31, 2013, and December 31, 2012
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December 31,
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2014
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2013
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2012
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Cash flows from operating activities:
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Net income
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$ | 2,840,210 | $ | 4,990,298 | $ | 5,619,798 | ||||||
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Adjustments to reconcile net income to net
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cash flows from operating activities:
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Depreciation and amortization
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3,251,614 | 2,339,378 | 2,384,411 | |||||||||
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Gain on sale of investments, net
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( 98,953 | ) | ( 195,500 | ) | ( 71,286 | ) | ||||||
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Deferred income taxes
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( 719,778 | ) | ( 238,804 | ) | ( 434,896 | ) | ||||||
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Bad debt expense
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204,700 | 32,604 | 435,344 | |||||||||
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(Gain) Loss on sale of equipment
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(6,592 | ) | 304,958 | 11,169 | ||||||||
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(Increase) decrease in operating assets:
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Accounts receivable
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54,915 | ( 1,741,759 | ) | ( 1,213,253 | ) | |||||||
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Other receivables
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72,068 | ( 94,447 | ) | 215,379 | ||||||||
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Inventories
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1,084,789 | ( 959,822 | ) | ( 984,711 | ) | |||||||
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Refundable income taxes
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( 811,717 | ) | ( 930,119 | ) | ( 43,512 | ) | ||||||
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Prepaid expenses and other current assets
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31,498 | ( 6,185 | ) | ( 17,508 | ) | |||||||
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Increase (decrease) in operating liabilities:
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Accounts payable
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( 1,136,424 | ) | 2,466,454 | ( 129,514 | ) | |||||||
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Accrued expenses
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293,725 | 128,383 | 601,952 | |||||||||
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Income taxes payable
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— | (254,311 | ) | 254,311 | ||||||||
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Net cash provided by operating activities
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5,060,055 | 5,841,128 | 6,627,684 | |||||||||
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Cash flows from investing activities:
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Purchases of investments
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( 3,280,157 | ) | ( 3,518,781 | ) | ( 1,452,672 | ) | ||||||
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Proceeds from sale of investments
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2,773,570 | 3,001,016 | 1,475,730 | |||||||||
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Redemption of certificates of deposits
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15,000 | 423,997 | — | |||||||||
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Investments in certificates of deposit
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( 149,965 | ) | — | (150,255 | ) | |||||||
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Purchases of property and equipment
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( 3,652,246 | ) | ( 8,479,886 | ) | ( 1,428,717 | ) | ||||||
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Proceeds from sale of equipment
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64,593 | 710,681 | — | |||||||||
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Net cash used in investing activities
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(4,229,205 | ) | (7,862,973 | ) | (1,555,914 | ) | ||||||
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Cash flows from financing activities:
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Checks written in excess of bank balance
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— | — | (592,040 | ) | ||||||||
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Purchase of treasury stock
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— | — | (580,708 | ) | ||||||||
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Dividends paid
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— | (1,307,861 | ) | (1,146,317 | ) | |||||||
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Net proceeds from debt issuance
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— | 4,975,000 | 250,000 | |||||||||
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Repayment of notes payable
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( 877,214 | ) | ( 624,912 | ) | ( 1,831,626 | ) | ||||||
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Net cash provided by (used in) financing activities
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( 877,214 | ) | 3,042,227 | ( 3,900,691 | ) | |||||||
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Net (decrease) increase in cash and cash equivalents
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(46,364 | ) | 1,020,382 | 1,171,079 | ||||||||
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Cash and cash equivalents at the beginning of the year
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3,306,608 | 2,286,226 | 1,115,150 | |||||||||
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Cash and cash equivalents at the end of the year
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$ | 3,260,244 | $ | 3,306,608 | $ | 2,286,229 | ||||||