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 reported financial results for the
fourth quarter and full year ended December 31, 2020.
“I am very pleased to report another exciting
and strong year of growth here at Lifeway, particularly in light of
this difficult year defined by the COVID-19 pandemic,” commented
Julie Smolyansky, CEO and President of Lifeway. “Of note, our net
sales grew 8.9% to $102.0 million compared to 2019, and our net
income increased from $0.5 million in 2019 to $3.2 million in
2020. The food retail environment has been majorly reshaped this
year, and our decision to focus on digital engagement has paid
dividends in continuing to attract more and more consumers to our
multi-serve, immune supporting products. I am very encouraged by
the ongoing market trends towards healthy products like Lifeway’s,
and I believe this momentum will carry on far past just 2021. Our
current retail partnerships are seeing gains, illustrated by our
strong results, as we continue to enhance category growth, and we
plan on both expanding the current and identifying new profitable
relationships in the year ahead. Finally, this year we will
continue to invest in customer acquisition strategies because we
want more and more people to hear the Lifeway story. We are looking
forward to an outstanding 2021.”
Full Year 2020 Results
Net sales were $102.0 million for the year ended
December 31, 2020, an increase of $8.4 million or 8.9% versus prior
year. The net sales increase was primarily driven by higher volumes
of our branded drinkable kefir, partially offset by lower cream
revenues associated with a decline in the market price of butter
fat.
Gross profit as a percentage of net sales
increased to 26.4% for the year ended December 31, 2020 from 23.6%
during the same period in 2019. The increase versus the prior year
was primarily due to the impact of favorable milk pricing, and to a
lesser extent favorable freight costs.
Selling expenses decreased $0.9 million, or 7.8%, to $10.2
million for the year ended December 31, 2020 from $11.1 million in
2019. Selling expenses as a percentage of net sales were 10.0% in
2020 compared to 11.8% in 2019.
General and administrative expenses decreased
$1.2 million, or 9.1%, to $11.7 million for the year ended December
31, 2020 from $12.8 million during the same period in 2019. The
decrease is primarily a result of lower compensation expense due to
organizational changes made in 2019 and lower incentive
compensation, partially offset by increased professional fee
expense.
Income tax expense was $1.6 million for the year
ended December 31, 2020, compared to $0.8 million during the same
period in 2019. Our effective income tax rate (ETR) for the year
ended December 31, 2020 was 33.1% compared to an ETR of 63.3% in
the same period last year.
The Company reported net income of $3.2 million
or $0.21 per basic and diluted common share for the year ended
December 31, 2020 compared to a net income of $0.5 million or $0.03
per basic and diluted common share in 2019.
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
frozen kefir, specialty cheeses, and a ProBugs line for kids.
Lifeway’s tart and tangy fermented dairy products are now sold
across the United States, Mexico, Ireland and the United Kingdom,
with limited distribution in additional countries. 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 fiscal
year ended December 31, 2020, 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, 2020 and
2019(In thousands)
|
|
December 31, |
|
|
|
2020 |
|
|
2019 |
Current assets |
|
|
|
|
|
|
|
|
|
Cash and cash equivalents |
|
$ |
7,926 |
|
|
|
$ |
3,836 |
|
Accounts receivable, net of allowance for doubtful accounts and
discounts & allowances of $1,350 and $1,100 at December 31,
2020 and 2019, respectively |
|
|
8,002 |
|
|
|
|
6,692 |
|
Inventories, net |
|
|
6,930 |
|
|
|
|
6,392 |
|
Prepaid expenses and other current assets |
|
|
1,163 |
|
|
|
|
1,598 |
|
Refundable income taxes |
|
|
31 |
|
|
|
|
681 |
|
Total current assets |
|
|
24,052 |
|
|
|
|
19,199 |
|
|
|
|
|
|
|
|
|
|
|
Property, plant and equipment, net |
|
|
21,048 |
|
|
|
|
22,274 |
|
Operating lease right-of use asset |
|
|
345 |
|
|
|
|
738 |
|
|
|
|
|
|
|
|
|
|
|
Intangible assets |
|
|
|
|
|
|
|
|
|
Goodwill and indefinite-lived intangibles |
|
|
12,824 |
|
|
|
|
12,824 |
|
Other intangible assets, net |
|
|
– |
|
|
|
|
152 |
|
Total intangible assets |
|
|
12,824 |
|
|
|
|
12,976 |
|
|
|
|
|
|
|
|
|
|
|
Other Assets |
|
|
1,800 |
|
|
|
|
1,800 |
|
Total assets |
|
$ |
60,069 |
|
|
|
$ |
56,987 |
|
|
|
|
|
|
|
|
|
|
|
Current liabilities |
|
|
|
|
|
|
|
|
|
Accounts payable |
|
$ |
5,592 |
|
|
|
$ |
5,282 |
|
Accrued expenses |
|
|
2,196 |
|
|
|
|
4,087 |
|
Accrued income taxes |
|
|
653 |
|
|
|
|
154 |
|
Total current liabilities |
|
|
8,441 |
|
|
|
|
9,523 |
|
Line of credit |
|
|
2,768 |
|
|
|
|
2,745 |
|
Operating lease liabilities |
|
|
165 |
|
|
|
|
488 |
|
Deferred income taxes, net |
|
|
1,764 |
|
|
|
|
922 |
|
Other long-term liabilities |
|
|
77 |
|
|
|
|
58 |
|
Total liabilities |
|
|
13,215 |
|
|
|
|
13,736 |
|
|
|
|
|
|
|
|
|
|
|
Stockholders’ equity |
|
|
|
|
|
|
|
|
|
Preferred stock, no par value; 2,500 shares authorized; no shares
issued or outstanding at 2020 and 2019 |
|
|
– |
|
|
|
|
– |
|
Common stock, no par value; 40,000 shares authorized; 17,274 shares
issued; 15,604 and 15,710 shares outstanding at 2020 and 2019 |
|
|
6,509 |
|
|
|
|
6,509 |
|
Paid-in capital |
|
|
2,600 |
|
|
|
|
2,380 |
|
Treasury stock, at cost |
|
|
(12,450 |
) |
|
|
|
(12,601 |
) |
Retained earnings |
|
|
50,195 |
|
|
|
|
46,963 |
|
Total stockholders’ equity |
|
|
46,854 |
|
|
|
|
43,251 |
|
|
|
|
|
|
|
|
|
|
|
Total liabilities and
stockholders’ equity |
|
$ |
60,069 |
|
|
|
$ |
56,987 |
|
LIFEWAY FOODS, INC. AND
SUBSIDIARIESConsolidated Statements of
OperationsFor the three months and twelve months
ended December 31, 2020 and 2019 (In thousands,
except per share data)
|
|
Three Months Ended December
31, |
|
|
Twelve months Ended December
31, |
|
|
|
2020 |
|
|
2019 |
|
|
2020 |
|
|
2019 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net sales |
|
$ |
25,585 |
|
|
|
$ |
23,165 |
|
|
|
$ |
102,026 |
|
|
|
$ |
93,662 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of goods sold |
|
|
18,393 |
|
|
|
|
17,144 |
|
|
|
|
72,006 |
|
|
|
|
68,367 |
|
Depreciation expense |
|
|
761 |
|
|
|
|
911 |
|
|
|
|
3,087 |
|
|
|
|
3,146 |
|
Total cost of goods sold |
|
|
19,154 |
|
|
|
|
18,055 |
|
|
|
|
75,093 |
|
|
|
|
71,513 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit |
|
|
6,431 |
|
|
|
|
5,110 |
|
|
|
|
26,933 |
|
|
|
|
22,149 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Selling expenses |
|
|
2,786 |
|
|
|
|
2,553 |
|
|
|
|
10,197 |
|
|
|
|
11,062 |
|
General and administrative |
|
|
2,980 |
|
|
|
|
3,728 |
|
|
|
|
11,661 |
|
|
|
|
12,828 |
|
Amortization expense |
|
|
35 |
|
|
|
|
40 |
|
|
|
|
152 |
|
|
|
|
192 |
|
Total operating expenses |
|
|
5,801 |
|
|
|
|
6,321 |
|
|
|
|
22,010 |
|
|
|
|
24,082 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) income from operations |
|
|
630 |
|
|
|
|
(1,211 |
) |
|
|
|
4,923 |
|
|
|
|
(1,933 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other income (expense): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense |
|
|
(22 |
) |
|
|
|
(47 |
) |
|
|
|
(118 |
) |
|
|
|
(249 |
) |
Fair value gain on investments |
|
|
– |
|
|
|
|
1,731 |
|
|
|
|
– |
|
|
|
|
1,731 |
|
Realized gain on investments, net |
|
|
– |
|
|
|
|
1,413 |
|
|
|
|
4 |
|
|
|
|
1,413 |
|
Loss (gain) on sale of property and equipment |
|
|
– |
|
|
|
|
6 |
|
|
|
|
(28 |
) |
|
|
|
189 |
|
Other income |
|
|
45 |
|
|
|
|
2 |
|
|
|
|
47 |
|
|
|
|
84 |
|
Total other (expense) income |
|
|
23 |
|
|
|
|
3,105 |
|
|
|
|
(95 |
) |
|
|
|
3,168 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before provision for income taxes |
|
|
653 |
|
|
|
|
1,894 |
|
|
|
|
4,828 |
|
|
|
|
1,235 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Provision for income taxes |
|
|
373 |
|
|
|
|
840 |
|
|
|
|
1,596 |
|
|
|
|
782 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
|
$ |
280 |
|
|
|
$ |
1,054 |
|
|
|
$ |
3,232 |
|
|
|
$ |
453 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings per common share: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
|
$ |
0.02 |
|
|
|
$ |
0.07 |
|
|
|
$ |
0.21 |
|
|
|
$ |
0.03 |
|
Diluted |
|
$ |
0.02 |
|
|
|
$ |
0.07 |
|
|
|
$ |
0.21 |
|
|
|
$ |
0.03 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average common shares: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
|
|
15,604 |
|
|
|
|
15,709 |
|
|
|
|
15,597 |
|
|
|
|
15,748 |
|
Diluted |
|
|
15,797 |
|
|
|
|
15,821 |
|
|
|
|
15,766 |
|
|
|
|
15,804 |
|
LIFEWAY FOODS, INC. AND
SUBSIDIARIESConsolidated Statements of Cash
FlowsFor the Years Ended December 31, 2020 and
2019(In thousands)
|
|
2020 |
|
|
|
2019 |
|
|
|
|
|
|
|
|
|
Cash flows from operating activities: |
|
|
|
|
|
|
|
|
|
Net income |
|
$ |
3,232 |
|
|
|
$ |
453 |
|
Adjustments to reconcile net income to operating cash
flow: |
|
|
|
|
|
|
|
|
|
Depreciation and amortization |
|
|
3,239 |
|
|
|
|
3,338 |
|
Non-cash interest expense |
|
|
23 |
|
|
|
|
23 |
|
Non-cash rent expense |
|
|
(37 |
) |
|
|
|
(17 |
) |
Bad debt expense |
|
|
(6 |
) |
|
|
|
7 |
|
Deferred Revenue |
|
|
(91 |
) |
|
|
|
(97 |
) |
Reserve for inventory obsolescence |
|
|
– |
|
|
|
|
(52 |
) |
Stock-based compensation |
|
|
393 |
|
|
|
|
838 |
|
Deferred income taxes |
|
|
841 |
|
|
|
|
533 |
|
Fair value gain on investment |
|
|
– |
|
|
|
|
(1,731 |
) |
Net gain on sale of investment |
|
|
– |
|
|
|
|
(1,413 |
) |
(Loss) gain on sale of property and equipment |
|
|
28 |
|
|
|
|
(189 |
) |
(Increase) decrease in operating assets: |
|
|
|
|
|
|
|
|
|
Accounts receivable |
|
|
(1,304 |
) |
|
|
|
(423 |
) |
Inventories |
|
|
(538 |
) |
|
|
|
(523 |
) |
Refundable income taxes |
|
|
649 |
|
|
|
|
2,067 |
|
Prepaid expenses and other current assets |
|
|
423 |
|
|
|
|
(526 |
) |
Increase (decrease) in operating liabilities: |
|
|
|
|
|
|
|
|
|
Accounts payable |
|
|
311 |
|
|
|
|
710 |
|
Accrued expenses |
|
|
(1,278 |
) |
|
|
|
783 |
|
Operating lease asset amortization/liability |
|
|
– |
|
|
|
|
(17 |
) |
Accrued income taxes |
|
|
500 |
|
|
|
|
47 |
|
Net cash provided by operating activities |
|
|
6,385 |
|
|
|
|
3,811 |
|
|
|
|
|
|
|
|
|
|
|
Cash flows from investing activities: |
|
|
|
|
|
|
|
|
|
Purchases of investments |
|
|
– |
|
|
|
|
(15 |
) |
Proceeds from sale of investments |
|
|
– |
|
|
|
|
1,509 |
|
Purchases of property and equipment |
|
|
(1,895 |
) |
|
|
|
(1,178 |
) |
Proceeds from sale of property and equipment |
|
|
5 |
|
|
|
|
522 |
|
Net cash (used in) provided by investing
activities |
|
|
(1,890 |
) |
|
|
|
838 |
|
|
|
|
|
|
|
|
|
|
|
Cash flows from financing activities: |
|
|
|
|
|
|
|
|
|
Purchase of treasury stock |
|
|
(405 |
) |
|
|
|
(538 |
) |
Repayment of line of credit |
|
|
– |
|
|
|
|
(3,273 |
) |
Net cash used in financing activities |
|
|
(405 |
) |
|
|
|
(3,811 |
) |
|
|
|
|
|
|
|
|
|
|
Net increase in cash and cash equivalents |
|
|
4,090 |
|
|
|
|
838 |
|
Cash and cash equivalents at the beginning of the period |
|
|
3,836 |
|
|
|
|
2,998 |
|
Cash and cash equivalents at the end of the
period |
|
$ |
7,926 |
|
|
|
$ |
3,836 |
|
|
|
|
|
|
|
|
|
|
|
Supplemental cash flow information: |
|
|
|
|
|
|
|
|
|
Cash paid for income taxes, net of (refunds) |
|
$ |
(426 |
) |
|
|
$ |
(1,865 |
) |
Cash paid for interest |
|
|
99 |
|
|
|
|
259 |
|
Non-cash investing activities |
|
|
|
|
|
|
|
|
|
Right-of-use assets recognized at ASU 2016-02 transition |
|
|
– |
|
|
|
|
944 |
|
Operating lease liability recognized at ASU 2016-02 transition |
|
|
– |
|
|
|
|
997 |
|
Increase (decrease) in right-of-use assets and operating lease
obligations recognized after ASU 2016-02 transition |
|
|
(44 |
) |
|
|
|
305 |
|
Non-cash financing activities |
|
|
|
|
|
|
|
|
|
Issuance of common stock under equity incentive plans |
|
|
522 |
|
|
|
|
– |
|
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