Lifeway Foods, Inc., (Nasdaq:LWAY), the leading U.S. supplier of
kefir cultured dairy products, today reported financial results for
the second quarter ended June 30, 2017.
“In the face of a retail business climate that continues to
prove challenging, our focus on both the consumer and the customer
is producing important and meaningful results,” said CEO Julie
Smolyanksy. “Lifeway posted a 1.9% increase in net sales for the
quarter led by increased consumption of our flagship products and
the encouraging launch of our new cupped kefir product line.
Our leadership team has never been more inspired to execute against
our strategic framework as we partner with the trade to deliver
sustainable growth not only with category-expanding innovation but
through our core kefir portfolio.”
Second Quarter Results
Second quarter net sales increased by $602 or 1.9% to $31,733.
Higher volumes of our branded drinkable kefir, private label
products and the impact of our new cupped kefir were partially
offset by increased trade promotion to support expanded
distribution of drinkable and cupped kefir.”
Gross profit as a percent of net sales decreased to 29.2% during
the three-month period ended June 30, 2017 from 31.3% during the
same three-month period in 2016. The lower gross profit percent
reflects higher milk costs and increased trade promotion partially
offset by lower delivery costs.
Selling expenses decreased by $63 or 1.8% to $3,400 during the
three-month period ended June 30, 2017 from $3,463 during the same
period in 2016. The decline in selling expenses was driven by lower
advertising costs mostly offset by higher sales salaries. The
lower level of advertising in the second quarter is largely due to
timing as we promoted our Pro Bugs product line with an ad campaign
last year and had no comparable campaign this year. The
higher sales salaries reflects our strategic initiative to elevate
customer focus and improve selling effectiveness supported by an
augmented sales organization which was launched in the first
quarter of 2017. Selling expenses as a percentage of net
sales were 10.7% for the three-month period ended June 30, 2017
compared to 11.1% for the same period in 2016.
General and administrative expenses increased $767 or 25.2% to
$3,813 during the three-month period ended June 30, 2017 from
$3,046 during the same period in 2016. The increase is primarily a
result of higher compensation partially offset by lower
professional fees.
Our effective tax rate for the three months ended June 30, 2017
was 43.6% compared to an effective tax rate of 27.2% in the same
period last year. We reported net income of $1,036 or $0.06 per
basic and diluted common share for the three-month period ended
June 30, 2017 compared to net income of $2,107 or $0.13 per basic
and diluted common share in the same period in 2016.
First Six Months of Fiscal 2016
Year to date net sales increased by $149, or approximately 0.2%,
to $63,850 during the six-month period ended June 30, 2017 from
$63,701 during the same six-month period in 2016. Sales of
private label products and our new cupped kefir contributed to a 1%
volume gain that was partially offset by higher trade promotion in
2017.
Gross profit as a percent of net sales decreased to 27.8% from
28.9% in the same period last year. The lower gross profit
percent reflects higher milk costs and increased trade promotion
partially offset by lower delivery costs.
Selling expenses increased by $1,211 or 18.8% to $7,638 during
the first six months of 2017 from $6,427 in the first six months of
2016. As a percentage of net sales, selling expenses
increased to 12.0% compared to 10.1% in the same period last
year.
Our effective tax rate for the six months ended June 30, 2017
was 43.1% compared to an effective tax rate of 31.3% in the same
period last year. We reported net income of $1,160 or $0.07
per basic and diluted common share for the six-month period ended
June 30, 2017 compared to net income of $3,062 or $0.19 per basic
and diluted common share in the same period in 2016.
Balance Sheet
Cash and cash equivalents increased $0.5 million to $9.3
million during the six months ended June 30, 2017. As of June 30,
2017, the Company had outstanding borrowings of approximately $6.7
million, of which $3.4 becomes due in May of 2018. The Company had
additional borrowing capacity of $5 million under its line of
credit as of June 30, 2017.
About Lifeway Foods, Inc.
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,
Ireland, and the United Kingdom. Learn how Lifeway is good for more
than just you at www.lifewaykefir.com.
Forward-Looking Statements
All statements in this release (and oral statements made
regarding the subjects of this release) contains “forward-looking
statements” as defined in the Private Securities Litigation Reform
Act of 1995 regarding, among other things, future operating and
financial performance, product development, market position,
business strategy and objectives. These statements use words, and
variations of words, such as “will,” “expect,” “next,” “project,”
“potential,” “continue,” “expand,” and “grow.” Other examples of
forward looking statements may include, but are not limited to, (i)
statements of Company plans and objectives, including the
introduction of new products, or estimates or predictions of
actions by customers or suppliers, (ii) statements of future
economic performance, and (III) statements of assumptions
underlying other statements and statements about Lifeway or its
business. You are cautioned not to rely on these forward-looking
statements. These statements are based on current expectations of
future events and thus are inherently subject to uncertainty. If
underlying assumptions prove inaccurate or known or unknown risks
or uncertainties materialize, actual results could vary materially
from Lifeway’s expectations and projections. These risks,
uncertainties, and other factors include: price competition; the
decisions of customers or consumers; the actions of competitors;
changes in the pricing of commodities; the effects of government
regulation; possible delays in the introduction of new products;
and customer acceptance of products and services. A further list
and description of these risks, uncertainties, and other factors
can be found in Lifeway’s Annual Report on Form 10-K for the fiscal
year ended December 31, 2016, and the Company’s subsequent filings
with the SEC. Copies of these filings are available online at
https://www.sec.gov, http://lifewaykefir.com/investor-relations/,
or on request from Lifeway. Information in this release is as of
the dates and time periods indicated herein, and Lifeway does not
undertake to update any of the information contained in these
materials, except as required by law. Accordingly, YOU SHOULD NOT
RELY ON THE ACCURACY OF ANY OF THE STATEMENTS OR OTHER INFORMATION
CONTAINED IN ANY ARCHIVED PRESS RELEASE.
LIFEWAY FOODS, INC. AND
SUBSIDIARIES |
Consolidated Balance Sheets |
June 30, 2017 and December 31,
2016 |
(In thousands) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 2017 (Unaudited) |
|
December 31, 2016 |
Current
assets |
|
|
|
|
|
|
Cash and
cash equivalents |
|
|
|
9,349 |
|
|
8,812 |
|
Accounts
receivable, net of allowance for doubtful accounts and |
|
|
|
|
|
|
discounts
and allowances of $1,500 and $1,600 at June 30, 2017 and |
|
|
|
|
|
|
December
31, 2016 respectively |
|
|
|
10,388 |
|
|
9,594 |
|
Inventories, net |
|
|
|
8,097 |
|
|
8,042 |
|
Prepaid
expenses and other current assets |
|
|
|
1,285 |
|
|
785 |
|
Refundable income taxes |
|
|
|
342 |
|
|
309 |
|
Total current assets |
|
|
|
29,461 |
|
|
27,542 |
|
|
|
|
|
|
|
|
Property, plant and equipment, net |
|
|
|
23,010 |
|
|
21,832 |
|
|
|
|
|
|
|
|
Intangible assets |
|
|
|
|
|
|
Goodwill
and other indefinite-lived intangibles |
|
|
|
14,068 |
|
|
14,068 |
|
Other
intangible assets, net |
|
|
|
1,311 |
|
|
1,647 |
|
Total intangible assets |
|
|
|
15,379 |
|
|
15,715 |
|
|
|
|
|
|
|
|
Other Assets |
|
|
|
125 |
|
|
125 |
|
Total
assets |
|
|
|
67,975 |
|
|
65,214 |
|
|
|
|
|
|
|
|
Current
liabilities |
|
|
|
|
|
|
Current
maturities of notes payable |
|
|
|
3,419 |
|
|
840 |
|
Accounts
payable |
|
|
|
6,285 |
|
|
5,718 |
|
Accrued
expenses |
|
|
|
3,813 |
|
|
2,169 |
|
Accrued
income taxes |
|
|
|
75 |
|
|
654 |
|
Total current liabilities |
|
|
|
13,592 |
|
|
9,381 |
|
|
|
|
|
|
|
|
Notes
payable |
|
|
|
3,280 |
|
|
6,279 |
|
Deferred income
taxes, net |
|
|
|
1,192 |
|
|
1,192 |
|
Other long-term
liabilities |
|
|
|
351 |
|
|
- |
|
Total
liabilities |
|
|
|
18,415 |
|
|
16,852 |
|
|
|
|
|
|
|
|
Stockholders'
equity |
|
|
|
|
|
|
Common stock, no par
value; 40,000,000 shares authorized; 17,274 shares
|
|
|
|
|
|
|
issued;
16,154 outstanding |
|
|
|
6,509 |
|
|
6,509 |
|
Paid-in-capital |
|
|
|
2,236 |
|
|
2,198 |
|
Treasury
stock, at cost |
|
|
|
(10,340 |
) |
|
(10,340 |
) |
Retained
earnings |
|
|
|
51,155 |
|
|
49,995 |
|
Total stockholders' equity |
|
|
|
49,560 |
|
|
48,362 |
|
|
|
|
|
|
|
|
Total
liabilities and stockholders' equity |
|
|
|
67,975 |
|
|
65,214 |
|
LIFEWAY FOODS, INC. AND
SUBSIDIARIES |
Consolidated Statements of Income and
Comprehensive Income |
For the three and six months ended June 30,
2017 and 2016 |
(Unaudited) |
(In thousands, except per share
data) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30, |
|
Six Months Ended June 30, |
|
|
|
2017 |
|
|
|
2016 |
|
|
|
2017 |
|
|
|
2016 |
|
|
|
|
|
|
|
|
|
|
Net sales |
|
$ |
31,733 |
|
|
$ |
31,131 |
|
|
$ |
63,850 |
|
|
$ |
63,701 |
|
|
|
|
|
|
|
|
|
|
Cost of goods sold |
|
|
21,857 |
|
|
|
20,763 |
|
|
|
44,931 |
|
|
|
44,002 |
|
Depreciation
expense |
|
|
597 |
|
|
|
633 |
|
|
|
1,183 |
|
|
|
1,264 |
|
Total cost of goods
sold |
|
|
22,454 |
|
|
|
21,396 |
|
|
|
46,114 |
|
|
|
45,266 |
|
|
|
|
|
|
|
|
|
|
Gross
profit |
|
|
9,279 |
|
|
|
9,735 |
|
|
|
17,736 |
|
|
|
18,435 |
|
|
|
|
|
|
|
|
|
|
Selling expense |
|
|
3,400 |
|
|
|
3,463 |
|
|
|
7,638 |
|
|
|
6,427 |
|
General and
administrative expense |
|
|
3,813 |
|
|
|
3,046 |
|
|
|
7,598 |
|
|
|
6,992 |
|
Amortization
expense |
|
|
168 |
|
|
|
177 |
|
|
|
336 |
|
|
|
353 |
|
Total operating
expenses |
|
|
7,381 |
|
|
|
6,686 |
|
|
|
15,572 |
|
|
|
13,772 |
|
|
|
|
|
|
|
|
|
|
Income from operations |
|
|
1,898 |
|
|
|
3,049 |
|
|
|
2,164 |
|
|
|
4,663 |
|
|
|
|
|
|
|
|
|
|
Other income
(expense): |
|
|
|
|
|
|
|
|
Interest
expense |
|
|
(61 |
) |
|
|
(47 |
) |
|
|
(118 |
) |
|
|
(105 |
) |
Loss on
sale of investments, net reclassified from OCI |
|
|
- |
|
|
|
(15 |
) |
|
|
- |
|
|
|
(27 |
) |
Loss on
sale of equipment |
|
|
- |
|
|
|
(151 |
) |
|
|
(5 |
) |
|
|
(151 |
) |
Other
income, net |
|
|
- |
|
|
|
60 |
|
|
|
- |
|
|
|
77 |
|
Total
other income (expense) |
|
|
(61 |
) |
|
|
(153 |
) |
|
|
(123 |
) |
|
|
(206 |
) |
|
|
|
|
|
|
|
|
|
Income before
provision for income taxes |
|
|
1,837 |
|
|
|
2,896 |
|
|
|
2,041 |
|
|
|
4,457 |
|
|
|
|
|
|
|
|
|
|
Provision for income
taxes |
|
|
801 |
|
|
|
789 |
|
|
|
881 |
|
|
|
1,395 |
|
|
|
|
|
|
|
|
|
|
Net
income |
|
$ |
1,036 |
|
|
$ |
2,107 |
|
|
$ |
1,160 |
|
|
$ |
3,062 |
|
|
|
|
|
|
|
|
|
|
Earnings per
common share: |
|
|
|
|
|
|
|
|
Basic |
|
$ |
0.06 |
|
|
$ |
0.13 |
|
|
$ |
0.07 |
|
|
$ |
0.19 |
|
Diluted |
|
$ |
0.06 |
|
|
$ |
0.13 |
|
|
$ |
0.07 |
|
|
$ |
0.19 |
|
|
|
|
|
|
|
|
|
|
Weighted
average common shares: |
|
|
|
|
|
|
|
|
Basic |
|
|
16,154 |
|
|
|
16,149 |
|
|
|
16,154 |
|
|
|
16,169 |
|
Diluted |
|
|
16,203 |
|
|
|
16,149 |
|
|
|
16,211 |
|
|
|
16,169 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
COMPREHENSIVE
INCOME |
|
|
|
|
|
|
|
|
Net
income |
|
$ |
1,036 |
|
|
$ |
2,107 |
|
|
$ |
1,160 |
|
|
$ |
3,062 |
|
Other
comprehensive income (loss), net of tax: |
|
|
|
|
|
|
|
|
Unrealized gains on investments, net of taxes |
|
|
- |
|
|
|
12 |
|
|
|
- |
|
|
|
56 |
|
Reclassifications to earnings: |
|
|
|
|
|
|
|
|
Realized
gains on investments, net of taxes |
|
|
- |
|
|
|
24 |
|
|
|
- |
|
|
|
17 |
|
Comprehensive
income |
|
$ |
1,036 |
|
|
$ |
2,143 |
|
|
$ |
1,160 |
|
|
$ |
3,135 |
|
LIFEWAY FOODS, INC. AND
SUBSIDIARIES |
Consolidated Statements of Cash
Flows |
For the six months ended June 30, 2017 and
2016 |
(Unaudited) |
(In thousands) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2017 |
|
2016 |
Cash flows from
operating activities: |
|
|
|
|
|
|
|
|
|
Net Income |
|
|
|
|
|
|
|
1,160 |
|
|
|
3,062 |
|
Adjustments to reconcile net income to operating cash flow:
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization |
|
|
|
|
|
|
|
1,519 |
|
|
|
1,617 |
|
Loss on
sale of investments, net |
|
|
|
|
|
|
|
- |
|
|
|
27 |
|
Reserve
for inventory obsolescence |
|
|
|
|
|
|
|
131 |
|
|
|
- |
|
Stock-based compensation |
|
|
|
|
|
|
|
775 |
|
|
|
42 |
|
Loss on
sale of property and equipment |
|
|
|
|
|
|
|
5 |
|
|
|
151 |
|
(Increase) decrease in operating assets: |
|
|
|
|
|
|
|
|
|
Accounts
receivable |
|
|
|
|
|
|
|
(793 |
) |
|
|
(502 |
) |
Inventories |
|
|
|
|
|
|
|
(185 |
) |
|
|
(1,649 |
) |
Refundable income taxes |
|
|
|
|
|
|
|
(33 |
) |
|
|
(70 |
) |
Prepaid
expenses and other current assets |
|
|
|
|
|
|
|
(500 |
) |
|
|
(448 |
) |
Increase (decrease) in operating liabilities: |
|
|
|
|
|
|
|
|
|
Accounts
payable |
|
|
|
|
|
|
|
564 |
|
|
|
(1,710 |
) |
Accrued
expenses |
|
|
|
|
|
|
|
1,259 |
|
|
|
765 |
|
Accrued
income taxes |
|
|
|
|
|
|
|
(579 |
) |
|
|
576 |
|
Net cash
provided by operating activities |
|
|
|
|
|
|
|
3,323 |
|
|
|
1,861 |
|
|
|
|
|
|
|
|
|
|
|
Cash flows from
investing activities: |
|
|
|
|
|
|
|
|
|
Purchases of investments |
|
|
|
|
|
|
|
- |
|
|
|
(479 |
) |
Proceeds
from sale of investments |
|
|
|
|
|
|
|
- |
|
|
|
1,024 |
|
Redemption of certificates of deposits |
|
|
|
|
|
|
|
- |
|
|
|
513 |
|
Purchases of property and equipment |
|
|
|
|
|
|
|
(2,400 |
) |
|
|
(1,382 |
) |
Proceeds
from sale of property and equipment |
|
|
|
|
|
|
|
34 |
|
|
|
39 |
|
Net cash used
in investing activities |
|
|
|
|
|
|
|
(2,366 |
) |
|
|
(285 |
) |
|
|
|
|
|
|
|
|
|
|
Cash flows from
financing activities: |
|
|
|
|
|
|
|
|
|
Purchase
of treasury stock |
|
|
|
|
|
|
|
- |
|
|
|
(738 |
) |
Repayment of notes payable |
|
|
|
|
|
|
|
(420 |
) |
|
|
(420 |
) |
Net cash used
in financing activities |
|
|
|
|
|
|
|
(420 |
) |
|
|
(1,158 |
) |
|
|
|
|
|
|
|
|
|
|
Net increase in
cash and cash equivalents |
|
|
|
|
|
|
|
537 |
|
|
|
418 |
|
|
|
|
|
|
|
|
|
|
|
Cash and cash
equivalents at the beginning of the period |
|
|
|
|
|
|
|
8,812 |
|
|
|
5,646 |
|
|
|
|
|
|
|
|
|
|
|
Cash and cash
equivalents at the end of the period |
|
|
|
|
|
|
$ |
9,349 |
|
|
$ |
6,064 |
|
|
|
|
|
|
|
|
|
|
|
Supplemental
cash flow information: |
|
|
|
|
|
|
|
|
|
Cash paid
for income taxes, net of refunds |
|
|
|
|
|
|
$ |
1,493 |
|
|
$ |
886 |
|
Cash paid
for interest |
|
|
|
|
|
|
$ |
118 |
|
|
$ |
105 |
|
Contact:
Lifeway Foods, Inc.
Phone: 847-967-1010
Email: info@Lifeway.net
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Lifeway Foods (NASDAQ:LWAY)
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From Sep 2023 to Sep 2024