Lifeway Foods, Inc. Launches Strategic Plan, “Lifeway 2.0” to Reinvigorate Growth
November 14 2018 - 9:00AM
Focus on Expansion of Core Kefir Product
Distribution Introduces Convenient, On-the-Go
Health and Wellness Product InnovationBuilds
Lifeway Brand Awareness & Consumer
LoyaltyAnnounces Third Quarter 2018 Financial
Results
Lifeway Foods, Inc. (Nasdaq: LWAY), the leading U.S. supplier of
kefir fermented dairy and probiotic products to support the
microbiome, today announced a new strategic plan, “Lifeway 2.0” to
reinvigorate growth. The Company also reported financial
results for the three and nine months ended September 30, 2018.
Julie Smolyansky, Lifeway’s CEO commented, “We
are excited to launch Lifeway 2.0, our strategic long-term plan to
meaningfully reinvigorate growth. We expect to deliver sustainable
top-line growth based on three core strategies. These include a
focus on rebuilding our core kefir product distribution in new and
existing sales channels, introducing product innovation for today’s
on-the-go consumers focused on health and wellness, and enhancing
Lifeway’s brand awareness and consumer loyalty. Over the last few
months we have aligned our organizational structure to
significantly reduce costs and create efficiencies, while also
continuing to make investments in people, processes, manufacturing
and sales and marketing. We believe we have the right team,
strategic plan, and compelling industry fundamentals to generate
the growth we are confident Lifeway is capable of achieving
long-term.”
Smolyansky continued, “We believe the
disciplined actions we have taken in light of the recent
inflationary cost pressures and dairy industry challenges have
further strengthened our foundation for growth. Importantly,
recent research from Harvard University has reinforced the benefits
of fermented dairy on gut health and microbiome support,
information we look forward to educating more consumers about going
forward. At Lifeway, we have strong health and wellness heritage
which began in the 1980s, and our team remains intently focused on
providing products that are positive for digestive health, high in
protein and low in sugar to help consumers maintain a healthier
lifestyle.”
Lifeway 2.0 Strategic Growth
PrioritiesTo reinvigorate growth in 2019 and over the next
several years, Lifeway is focused on the following strategic growth
initiatives:
- Expand Core Kefir Product Distribution
- Lifeway will focus on rebuilding core kefir product
distribution in new and existing sales channels. This includes in
existing mass, grocery and natural retail partners as well as the
complementary convenience, club, foodservice, drug store,
e-commerce, hospital and university sales channels.
- Introduce Convenient, Probiotic and Protein Rich-Product
Innovation
- Lifeway will introduce product innovation for today’s on-the-go
consumers focused on health and wellness. This includes
single-serve, 8 ounce Lifeway Kefir and newly released organic
varieties. Year-to-date through September 30, 2018 Lifeway branded
8 ounce Kefir retail sales for measured channels grew approximately
39% over the prior year period off of a low-base.
- The Company is also focused on completing the development of
its dairy-free, plant-based probiotic drinks with distribution
beginning in 2019.
- Enhance Consumer Experience
- Lifeway will utilize existing customer insights and
technologies to increase trial and repurchase rates as it looks to
expand kefir household penetration. The Company believes there is a
tremendous opportunity to re-engage with existing consumers and
bring new consumers to the Lifeway brand.
- Lifeway believes these single-serve purchase opportunities,
along with increased demos at traditional retail, will help support
its objective to increase exposure, shopper occasions and introduce
new consumers to the brand.
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 North 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 “gain,” “position,” “vision,”
“ongoing,” “intend,” “innovate,” “continue.” 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, 2017, 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
SUBSIDIARIES |
|
Consolidated Balance Sheets |
|
September 30, 2018 and December 31,
2017 |
|
(In thousands) |
|
|
|
|
|
September 30,
2018(Unaudited) |
|
|
December 31,
2017 |
|
Current
assets |
|
|
|
|
|
|
|
|
Cash and
cash equivalents |
|
$ |
2,726 |
|
|
$ |
4,978 |
|
Investments, at fair value |
|
|
500 |
|
|
|
– |
|
Accounts
receivable, net of allowance for doubtful accounts and discounts
& allowances of $1,550 and $2,010 at September 30, 2018 and
December 31, 2017 respectively |
|
|
8,073 |
|
|
|
8,676 |
|
Inventories, net |
|
|
6,837 |
|
|
|
7,697 |
|
Prepaid
expenses and other current assets |
|
|
1,298 |
|
|
|
983 |
|
Refundable income taxes |
|
|
2,959 |
|
|
|
2,347 |
|
Total current
assets |
|
|
22,393 |
|
|
|
24,681 |
|
|
|
|
|
|
|
|
|
|
Property, plant
and equipment, net |
|
|
25,035 |
|
|
|
24,645 |
|
|
|
|
|
|
|
|
|
|
Intangible
assets |
|
|
|
|
|
|
|
|
Goodwill
& indefinite-lived intangibles |
|
|
14,068 |
|
|
|
14,068 |
|
Other
intangible assets, net |
|
|
485 |
|
|
|
975 |
|
Total
intangible assets |
|
|
14,553 |
|
|
|
15,043 |
|
|
|
|
|
|
|
|
|
|
Other
assets |
|
|
150 |
|
|
|
150 |
|
Total
assets |
|
$ |
62,131 |
|
|
$ |
64,519 |
|
|
|
|
|
|
|
|
|
|
Current
liabilities |
|
|
|
|
|
|
|
|
Current
maturities of notes payable |
|
$ |
– |
|
|
$ |
3,166 |
|
Accounts
payable |
|
|
6,263 |
|
|
|
6,848 |
|
Accrued
expenses |
|
|
3,118 |
|
|
|
2,984 |
|
Accrued
income taxes |
|
|
82 |
|
|
|
203 |
|
Total current
liabilities |
|
|
9,463 |
|
|
|
13,201 |
|
|
|
|
|
|
|
|
|
|
Line of
credit |
|
|
5,990 |
|
|
|
– |
|
Notes
payable |
|
|
– |
|
|
|
3,113 |
|
Deferred income
taxes, net |
|
|
840 |
|
|
|
840 |
|
Other long-term
liabilities |
|
|
661 |
|
|
|
775 |
|
Total
liabilities |
|
|
16,954 |
|
|
|
17,929 |
|
|
|
|
|
|
|
|
|
|
Stockholders'
equity |
|
|
|
|
|
|
|
|
Preferred stock, no par
value; 2,500 shares authorized; no shares issued or outstanding at
September 30, 2018 and December 31, 2017, respectively |
|
|
– |
|
|
|
– |
|
Common stock, no par
value; 40,000 shares authorized; 17,274 shares issued; 15,838 and
16,008 outstanding at September 30, 2018 and December 31, 2017,
respectively |
|
|
6,509 |
|
|
|
6,509 |
|
Paid-in capital |
|
|
2,211 |
|
|
|
2,244 |
|
Treasury stock, at
cost |
|
|
(12,918 |
) |
|
|
(11,812 |
) |
Retained earnings |
|
|
49,375 |
|
|
|
49,649 |
|
Total
stockholders' equity |
|
|
45,177 |
|
|
|
46,590 |
|
|
|
|
|
|
|
|
|
|
Total
liabilities and stockholders' equity |
|
$ |
62,131 |
|
|
$ |
64,519 |
|
|
|
LIFEWAY FOODS, INC. AND
SUBSIDIARIES |
|
Consolidated Statements of
Operations |
|
For the three months and nine months ended
September 30, 2018 and 2017 |
|
(Unaudited) |
|
(In thousands, except per share
data) |
|
|
|
|
|
Three Months Ended September
30, |
|
|
Nine months Ended September
30, |
|
|
|
2018 |
|
|
2017 |
|
|
2018 |
|
|
2017 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
sales |
|
$ |
24,480 |
|
|
$ |
28,786 |
|
|
$ |
80,318 |
|
|
$ |
92,636 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of goods sold |
|
|
17,892 |
|
|
|
20,331 |
|
|
|
57,412 |
|
|
|
65,262 |
|
Depreciation
expense |
|
|
738 |
|
|
|
618 |
|
|
|
2,143 |
|
|
|
1,801 |
|
Total cost of goods
sold |
|
|
18,630 |
|
|
|
20,949 |
|
|
|
59,555 |
|
|
|
67,063 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross
profit |
|
|
5,850 |
|
|
|
7,837 |
|
|
|
20,763 |
|
|
|
25,573 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Selling expenses |
|
|
3,136 |
|
|
|
4,010 |
|
|
|
10,537 |
|
|
|
11,648 |
|
General and
administrative |
|
|
3,150 |
|
|
|
3,145 |
|
|
|
9,851 |
|
|
|
10,743 |
|
Amortization
expense |
|
|
163 |
|
|
|
168 |
|
|
|
490 |
|
|
|
504 |
|
Total operating
expenses |
|
|
6,449 |
|
|
|
7,323 |
|
|
|
20,878 |
|
|
|
22,895 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Loss) income
from operations |
|
|
(599 |
) |
|
|
514 |
|
|
|
(115 |
) |
|
|
2,678 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other income
(expense): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense |
|
|
(82 |
) |
|
|
(62 |
) |
|
|
(220 |
) |
|
|
(180 |
) |
Gain (loss) on sale of
property and equipment |
|
|
28 |
|
|
|
(34 |
) |
|
|
42 |
|
|
|
(39 |
) |
Other income, net |
|
|
3 |
|
|
|
– |
|
|
|
11 |
|
|
|
– |
|
Total other income
(expense) |
|
|
(51 |
) |
|
|
(96 |
) |
|
|
(167 |
) |
|
|
(219 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Loss) income
before provision for income taxes |
|
|
(650 |
) |
|
|
418 |
|
|
|
(282 |
) |
|
|
2,459 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Benefit) provision for
income taxes |
|
|
(136 |
) |
|
|
175 |
|
|
|
(8 |
) |
|
|
1,056 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (loss)
income* |
|
$ |
(514 |
) |
|
$ |
243 |
|
|
$ |
(274 |
) |
|
$ |
1,403 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Loss) earnings
per common share: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
|
$ |
(0.03 |
) |
|
$ |
0.02 |
|
|
$ |
(0.02 |
) |
|
$ |
0.09 |
|
Diluted |
|
$ |
(0.03 |
) |
|
$ |
0.02 |
|
|
$ |
(0.02 |
) |
|
$ |
0.09 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted
average common shares: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
|
|
15,872 |
|
|
|
16,093 |
|
|
|
15,886 |
|
|
|
16,123 |
|
Diluted |
|
|
16,256 |
|
|
|
16,168 |
|
|
|
16,354 |
|
|
|
16,218 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
*2018 third quarter net income includes a $0.3
million non-cash inventory write-off expense due to the Company’s
discontinued products and the flow through from the Probugs
packaging change.
|
|
LIFEWAY FOODS, INC. AND
SUBSIDIARIES |
|
Consolidated Statements of Cash
Flows |
|
For the Nine months Ended September 30, 2018
and 2017 |
|
(Unaudited) |
|
(In thousands) |
|
|
|
|
|
2018 |
|
|
2017 |
|
Cash flows from operating activities: |
|
|
|
|
|
|
|
|
Net (loss) income |
|
$ |
(274 |
) |
|
$ |
1,403 |
|
Adjustments to reconcile net income to operating cash
flow: |
|
|
|
|
|
|
|
|
Depreciation and amortization |
|
|
2,633 |
|
|
|
2,305 |
|
Non-cash interest expense |
|
|
9 |
|
|
|
– |
|
Bad debt expense |
|
|
50 |
|
|
|
– |
|
Reserve for inventory obsolescence |
|
|
580 |
|
|
|
320 |
|
Stock-based compensation |
|
|
827 |
|
|
|
901 |
|
Deferred revenue |
|
|
(72 |
) |
|
|
– |
|
(Gain) loss on sale of property and equipment |
|
|
(42 |
) |
|
|
39 |
|
(Increase) decrease in operating assets: |
|
|
|
|
|
|
|
|
Accounts receivable |
|
|
553 |
|
|
|
(814 |
) |
Inventories |
|
|
280 |
|
|
|
(328 |
) |
Refundable income taxes |
|
|
(612 |
) |
|
|
(462 |
) |
Prepaid expenses and other current assets |
|
|
(291 |
) |
|
|
(231 |
) |
Increase (decrease) in operating liabilities: |
|
|
|
|
|
|
|
|
Accounts payable |
|
|
(586 |
) |
|
|
1,384 |
|
Accrued expenses |
|
|
(588 |
) |
|
|
252 |
|
Accrued income taxes |
|
|
(121 |
) |
|
|
(580 |
) |
Net cash provided by operating activities |
|
|
2,346 |
|
|
|
4,189 |
|
|
|
|
|
|
|
|
|
|
Cash flows from investing activities: |
|
|
|
|
|
|
|
|
Purchases of investments |
|
|
(500 |
) |
|
|
(25 |
) |
Purchases of property and equipment |
|
|
(2,581 |
) |
|
|
(3,932 |
) |
Proceeds from sale of property and equipment |
|
|
90 |
|
|
|
37 |
|
Net cash used in investing activities |
|
|
(2,991 |
) |
|
|
(3,920 |
) |
|
|
|
|
|
|
|
|
|
Cash flows from financing activities: |
|
|
|
|
|
|
|
|
Borrowings under revolving credit facility |
|
|
6,050 |
|
|
|
– |
|
Payment of deferred financing costs |
|
|
(69 |
) |
|
|
– |
|
Purchase of treasury stock |
|
|
(1,309 |
) |
|
|
(1,187 |
) |
Repayment of notes payable |
|
|
(6,279 |
) |
|
|
(630 |
) |
Net cash used in financing activities |
|
|
(1,607 |
) |
|
|
(1,817 |
) |
|
|
|
|
|
|
|
|
|
Net decrease in cash and cash equivalents |
|
|
(2,252 |
) |
|
|
(1,548 |
) |
|
|
|
|
|
|
|
|
|
Cash
and cash equivalents at the beginning of the period |
|
|
4,978 |
|
|
|
8,812 |
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents at the end of the
period |
|
$ |
2,726 |
|
|
$ |
7,264 |
|
|
|
|
|
|
|
|
|
|
Supplemental cash flow information: |
|
|
|
|
|
|
|
|
Cash paid for income taxes, net of refunds |
|
$ |
724 |
|
|
$ |
2,098 |
|
Cash paid for interest |
|
$ |
189 |
|
|
$ |
180 |
|
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