Lifeway Foods, Inc. Increases Production to Support Accelerated Demand and Local Communities during COVID-19 Health Crisis
April 14 2020 - 4:50PM
Lifeway Foods, Inc. (Nasdaq: LWAY) (“Lifeway” or “the Company”),
the leading U.S. supplier of kefir and fermented probiotic products
to support the microbiome, today provided a business update in
conjunction with reporting its fourth quarter and full year results
for the period ended December 31, 2019 which was filed today with
the Securities and Exchange Commission. Lifeway also announced that
it expects preliminary, unaudited first quarter 2020 net sales to
increase 2% to 4% as compared to the first quarter of 2019 with the
month of March net sales up 13% year-over-year.
“We are pleased with our solid end to the year and strong start
to 2020. Our team’s execution of our long-term strategic
plan, Lifeway 2.0, is demonstrated by the sequential improvement in
our sales trends in the fourth quarter resulting in our ability to
reinvigorate growth which has accelerated into the first quarter of
2020 with net sales expected to be up 2% to 4% year-over-year
including a really strong March monthly sales,” commented Julie
Smolyansky, Lifeway’s Chief Executive Officer. “Our current focus
is the health, safety and wellbeing of our employees, as well as
local and national communities during this time of unprecedented
uncertainty and crisis related to COVID-19. At Lifeway, we
are committed to supporting the accelerated demand for retail sales
and community aid donations through an increase in our kefir
production, and we are instituting the Lifeway Heroes Commitment
Award, an hourly bonus for employees in our production and
warehouse facilities in recognition of their incredible work. In
addition, Lifeway is providing donations to Singer and songwriter
Jewel’s Inspiring Children, Mount Sinai Hospital, Meals on Wheels
Chicago, Food Bank for New York City and other local and national
food pantries to help ensure first responders and those in need
have access to microbiome-supporting products and are able to
nourish themselves and their families. To date, Lifeway has donated
over 45,000 servings of kefir, and we plan to continue providing
additional product for as long as needed.”
Ms. Smolyansky continued, “During this time of shelter-in-place
as a result of COVID-19, 40% of Americans are more proactively
taking care of their physical and emotional health and 17% are
consuming more immunity and overall self-care supporting products
such as probiotics and vitamins, according to IRI. In the first
quarter of 2020, we have increased our production to meet
accelerated demand at both grocery retail and online grocery as
more consumers focus on self-care and nutrition to aid in their
overall health and wellness needs. Kefir has emerged as a top 2020
consumer choice for gut health and it continues to rise with people
becoming increasingly educated on the importance of a healthy,
functioning gut and how it can determine consumers overall
well-being. Based on a 2017 study from The Nutrition Society the
health benefits of fermented milk drinks such as kefir included
improved digestion, anti-inflammatory effects and the stimulation
of antioxidants which can aid disease prevention. We believe
Lifeway is well positioned for long-term growth and value creation
with strong industry tailwinds to fuel our business as we
increasingly serve consumers looking for more self-care, immunity
and gut health options during this time of global health crisis and
uncertainty.”
Lifeway expects to continue to benefit in 2020 from strong
industry tailwinds including lower dairy and oil prices as well as
the following highlights:
- According to IRI:
- Dairy is up 11% on a dollar basis for the Total U.S. MULO for
the year-to-date 2020 period ended March 22, 2020
- Social Chatter is increasingly focused on self-care with a 438%
Surge vs. the average in mentions as U.S. COVID-19 confirmed cases
increase
- In the 52 weeks ended March 8, 2020, the total supplement
market was up more than 6%. For the one-week period ended March 8,
2020, during which coronavirus concerns in the U.S. began to scale,
sales growth for overall dietary supplements skyrocketed to more
than 35%
- According to Mordor Intelligence:
- For fermented dairy, including kefir, a 9% compound annual
growth rate is expected between 2019 and 2029
- According to the New York Times analysis of data from Earnest
Research:
- In a 7-day period that ended on March 18, grocery sales were up
79% from the previous year
- Between March 26 and April 1, sales were up 7%. Among the
biggest winners: online grocery delivery services and meal kit
companies
Conference Call A pre-recorded conference call
and webcast with Julie Smolyansky discussing these results with
additional comments and details will be available today at 5:00
p.m. ET. The webcast will be available over the Internet through
the “Investor Relations” section of the Company’s website at
https://lifewaykefir.com/webinars-reports/. An audio replay will be
available through April 28, 2020. North American listeners may dial
844-512-2921 and international listeners may dial 412-317-6671. The
passcode is 1139162.
About Lifeway Foods, Inc.
Lifeway Foods, Inc., which has been recognized as 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 cupped kefir and
cheese, frozen kefir, specialty cheeses, probiotic supplements and
a ProBugs line for kids. Lifeway’s tart and tangy fermented dairy
and non-dairy products are now sold across the United States,
Mexico, Ireland and the United Kingdom. Learn how Lifeway is good
for more than just you at www.lifewaykefir.com.
Forward-Looking Statements
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 “continue,” “build,” “future,” “increase,” “drive,”
“believe,” “look,” “ahead,” “confident,” “deliver,” “outlook,”
“expect,” and “predict.” 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 full year ended December 31,
2019, 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.
Contact:
Lifeway Foods, Inc.Phone: 847-967-1010Email:
info@lifeway.net
LIFEWAY FOODS, INC. AND
SUBSIDIARIESConsolidated Balance
SheetsDecember 31, 2019 and
2018(In thousands)
|
December 31, |
|
|
2019 |
|
|
2018 |
|
Current assets |
|
|
|
|
|
|
|
Cash and cash equivalents |
$ |
3,836 |
|
|
$ |
2,998 |
|
Accounts receivable, net of
allowance for doubtful accounts and discounts & allowances of
$1,100 and $1,220 at December 31, 2019 and 2018, respectively |
|
6,692 |
|
|
|
6,276 |
|
Inventories, net |
|
6,392 |
|
|
|
5,817 |
|
Prepaid expenses and other current assets |
|
1,598 |
|
|
|
1,077 |
|
Refundable income taxes |
|
681 |
|
|
|
2,748 |
|
Total current assets |
|
19,199 |
|
|
|
18,916 |
|
|
|
|
|
|
|
|
|
Property, plant and equipment, net |
|
22,274 |
|
|
|
24,573 |
|
Operating lease right-of use asset |
|
738 |
|
|
|
– |
|
|
|
|
|
|
|
|
|
Intangible assets |
|
|
|
|
|
|
|
Goodwill and indefinite-lived intangibles |
|
12,824 |
|
|
|
12,824 |
|
Other intangible assets, net |
|
152 |
|
|
|
344 |
|
Total intangible assets |
|
12,976 |
|
|
|
13,168 |
|
|
|
|
|
|
|
|
|
Other Assets |
|
1,800 |
|
|
|
150 |
|
Total assets |
$ |
56,987 |
|
|
$ |
56,807 |
|
|
|
|
|
|
|
|
|
Current liabilities |
|
|
|
|
|
|
|
Accounts payable |
$ |
5,282 |
|
|
$ |
4,570 |
|
Accrued expenses |
|
4,087 |
|
|
|
2,777 |
|
Accrued income taxes |
|
154 |
|
|
|
106 |
|
Total current liabilities |
|
9,523 |
|
|
|
7,453 |
|
Line of credit |
|
2,745 |
|
|
|
5,995 |
|
Operating lease liabilities |
|
488 |
|
|
|
– |
|
Deferred income taxes, net |
|
922 |
|
|
|
390 |
|
Other long-term liabilities |
|
58 |
|
|
|
564 |
|
Total liabilities |
|
13,736 |
|
|
|
14,402 |
|
|
|
|
|
|
|
|
|
Stockholders’ equity |
|
|
|
|
|
|
|
Preferred stock, no par value;
2,500 shares authorized; no shares issued or outstanding at 2019
and 2018 |
|
– |
|
|
|
– |
|
Common stock, no par value;
40,000 shares authorized; 17,274 shares issued; 15,710 and 15,814
shares outstanding at 2019 and 2018 |
|
6,509 |
|
|
|
6,509 |
|
Paid-in capital |
|
2,380 |
|
|
|
2,303 |
|
Treasury stock, at cost |
|
(12,601 |
) |
|
|
(12,970 |
) |
Retained earnings |
|
46,963 |
|
|
|
46,563 |
|
Total stockholders’ equity |
|
43,251 |
|
|
|
42,405 |
|
|
|
|
|
|
|
|
|
Total liabilities and
stockholders’ equity |
$ |
56,987 |
|
|
$ |
56,807 |
|
LIFEWAY FOODS, INC. AND
SUBSIDIARIESConsolidated Statements of
OperationsFor the Years Ended December 31, 2019
and 2018(In thousands, except per share
data)
|
2019 |
|
|
2018 |
|
|
|
|
|
|
|
Net sales |
$ |
93,662 |
|
|
$ |
103,350 |
|
|
|
|
|
|
|
|
|
Cost of goods sold |
|
68,367 |
|
|
|
74,646 |
|
Depreciation expense |
|
3,146 |
|
|
|
2,846 |
|
Total cost of goods sold |
|
71,513 |
|
|
|
77,492 |
|
|
|
|
|
|
|
|
|
Gross profit |
|
22,149 |
|
|
|
25,858 |
|
|
|
|
|
|
|
|
|
Selling expenses |
|
11,062 |
|
|
|
13,477 |
|
General and administrative |
|
12,828 |
|
|
|
13,616 |
|
Goodwill and intangible asset impairment |
|
– |
|
|
|
1,244 |
|
Amortization expense |
|
192 |
|
|
|
631 |
|
Total operating expenses |
|
24,082 |
|
|
|
28,968 |
|
|
|
|
|
|
|
|
|
Loss from operations |
|
(1,933 |
) |
|
|
(3,110 |
) |
|
|
|
|
|
|
|
|
Other income (expense): |
|
|
|
|
|
|
|
Interest expense |
|
(249 |
) |
|
|
(271 |
) |
Fair value gain on investments |
|
1,731 |
|
|
|
– |
|
Realized gain on investments, net |
|
1,413 |
|
|
|
– |
|
Gain on sale of property and equipment |
|
189 |
|
|
|
54 |
|
Other income |
|
84 |
|
|
|
16 |
|
Total other income (expense) |
|
3,168 |
|
|
|
(201 |
) |
|
|
|
|
|
|
|
|
Income (loss) before provision for income
taxes |
|
1,235 |
|
|
|
(3,311 |
) |
|
|
|
|
|
|
|
|
Provision (benefit) for income taxes |
|
782 |
|
|
|
(225 |
) |
|
|
|
|
|
|
|
|
Net income (loss) |
$ |
453 |
|
|
$ |
(3,086 |
) |
|
|
|
|
|
|
|
|
Basic loss per common share |
$ |
0.03 |
|
|
$ |
(0.19 |
) |
|
|
|
|
|
|
|
|
Diluted loss per common share |
$ |
0.03 |
|
|
$ |
(0.19 |
) |
|
|
|
|
|
|
|
|
Weighted average number of shares outstanding -
Basic |
|
15,748 |
|
|
|
15,872 |
|
|
|
|
|
|
|
|
|
Weighted average number of shares outstanding -
Diluted |
|
15,804 |
|
|
|
16,319 |
|
LIFEWAY FOODS, INC. AND
SUBSIDIARIESConsolidated Statements of Cash
FlowsFor the Years Ended December 31, 2019 and
2018(In thousands)
|
2019 |
|
|
2018 |
|
|
|
|
|
|
|
Cash flows from operating activities: |
|
|
|
|
|
|
|
Net income (loss) |
$ |
453 |
|
|
$ |
(3,086 |
) |
Adjustments to reconcile net income (loss) to operating
cash flow: |
|
|
|
|
|
|
|
Depreciation and amortization |
|
3,338 |
|
|
|
3,477 |
|
Non-cash interest expense |
|
23 |
|
|
|
14 |
|
Non-cash rent expense |
|
(17 |
) |
|
|
– |
|
Bad debt expense |
|
7 |
|
|
|
21 |
|
Deferred Revenue |
|
(97 |
) |
|
|
(97 |
) |
Reserve for inventory obsolescence |
|
(52 |
) |
|
|
558 |
|
Stock-based compensation |
|
838 |
|
|
|
802 |
|
Deferred income taxes |
|
533 |
|
|
|
(451 |
) |
Fair value gain on investment |
|
(1,731 |
) |
|
|
– |
|
Net gain on sale of investment |
|
(1,413 |
) |
|
|
– |
|
Gain on sale of property and equipment |
|
(189 |
) |
|
|
(54 |
) |
Goodwill impairment |
|
– |
|
|
|
1,244 |
|
(Increase) decrease in operating assets: |
|
|
|
|
|
|
|
Accounts receivable |
|
(423 |
) |
|
|
2,379 |
|
Inventories |
|
(523 |
) |
|
|
1,322 |
|
Refundable income taxes |
|
2,067 |
|
|
|
(401 |
) |
Prepaid expenses and other current assets |
|
(526 |
) |
|
|
(78 |
) |
Increase (decrease) in operating liabilities: |
|
|
|
|
|
|
|
Accounts payable |
|
710 |
|
|
|
(2,278 |
) |
Accrued expenses |
|
783 |
|
|
|
(858 |
) |
Operating lease asset amortization/liability |
|
(17 |
) |
|
|
– |
|
Accrued income taxes |
|
47 |
|
|
|
(97 |
) |
Net cash provided by operating activities |
|
3,811 |
|
|
|
2,417 |
|
|
|
|
|
|
|
|
|
Cash flows from investing activities: |
|
|
|
|
|
|
|
Purchases of investments |
|
(15 |
) |
|
|
(500 |
) |
Proceeds from sale of investments |
|
1,509 |
|
|
|
500 |
|
Purchases of property and equipment |
|
(1,178 |
) |
|
|
(2,824 |
) |
Proceeds from sale of property and equipment |
|
522 |
|
|
|
104 |
|
Net cash used in investing activities |
|
838 |
|
|
|
(2,720 |
) |
|
|
|
|
|
|
|
|
Cash flows from financing activities: |
|
|
|
|
|
|
|
Purchase of treasury stock |
|
(538 |
) |
|
|
(1,379 |
) |
Borrowings under revolving credit facility |
|
– |
|
|
|
6,050 |
|
Repayment of line of credit |
|
(3,273 |
) |
|
|
– |
|
Payment of deferred financing costs |
|
– |
|
|
|
(69 |
) |
Repayment of notes payable |
|
– |
|
|
|
(6,279 |
) |
Net cash used in financing activities |
|
(3,811 |
) |
|
|
(1,677 |
) |
|
|
|
|
|
|
|
|
Net increase (decrease) in cash and cash
equivalents |
|
838 |
|
|
|
(1,980 |
) |
Cash and cash equivalents at the beginning of the period |
|
2,998 |
|
|
|
4,978 |
|
Cash and cash equivalents at the end of the
period |
$ |
3,836 |
|
|
$ |
2,998 |
|
|
|
|
|
|
|
|
|
Supplemental cash flow information: |
|
|
|
|
|
|
|
Cash paid for income taxes, net of (refunds) |
$ |
(1,865 |
) |
|
$ |
723 |
|
Cash paid for interest |
|
259 |
|
|
|
261 |
|
Right-of-use assets and operating lease obligations recognized at
ASU 2016-02 transition |
|
997 |
|
|
|
– |
|
Right-of-use assets and operating lease obligations recognized
after ASU 2016-02 transition |
|
305 |
|
|
|
– |
|
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