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EX-32.2 - 906 CERTIFICATION OF THE C.F.O. - Lifeway Foods, Inc.exh32-2_17684.htm
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EX-31.2 - 302 CERTIFICATION OF THE C.F.O. - Lifeway Foods, Inc.exh31-2_17684.htm
EXHIBIT 99.1
 


Lifeway Foods Announces Results for the Second Quarter of 2014

Second Quarter Net Sales Increase 28% to $29.6 Million
 
Morton Grove, IL — August 11, 2014 — Lifeway Foods, Inc., (Nasdaq: LWAY), a leading supplier of cultured dairy products known as kefir and organic kefir, today announced results for the second quarter ended June 30, 2014.

“We are pleased with our performance in the second quarter of fiscal 2014 driven by a strong net sales increase of 28% and growing trend of consumers looking for healthy food alternatives,” said Julie Smolyansky, CEO of Lifeway Foods, Inc. “Our team has successfully executed on our ongoing initiative to expand our brand recognition which in turn allows us to increase distribution of our nutritious probiotic kefir products. We expect the momentum we have built in the first half of fiscal 2014 to continue for the remainder of the year and are optimistic about our long-term growth opportunities.”

Second Quarter Results
Total consolidated net sales increased 28% or $6.5 million to $29.6 million during the three-month period ended June 30, 2014 from $23.1 million during the same three-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™.

Gross profit for the second quarter of 2014 was $7.5 million compared to $7.6 million in the second quarter of the prior year. The Company's gross profit margin decreased to 25% in the second quarter of 2014 versus 33% in the second quarter of 2013. The decrease was primarily attributable to a 30% increase in the cost of milk, the Company’s largest raw material, compared to the same period last year.

Total operating expenses increased 17% or $0.9 million to $6.0 million during the second quarter of 2014, from $5.1 million during the same period in 2013. This increase was primarily attributable to an increase in selling expenses.

Total operating income decreased $1.0 million to $1.5 million during the second quarter of 2014, from $2.5 million during the same period in 2013.  The decrease in operating income is related to the decrease in gross profit and increased operating expenses.

The Company’s second quarter 2014 effective tax rate was 26% compared to 45% in the same period last year.

Total net income was $1.1 million or $0.07 per diluted share for the three-month period ended June 30, 2014 compared to $1.4 million or $0.09 per diluted share in the same period in 2013.
 
 

 
 
 

 
Six Month Results
Total consolidated net sales increased by $11.2 million, or approximately 24%, to $58.7 million during the six-month period ended June 30, 2014 from $47.5 million during the same six-month period in 2013. 

Gross profit for the first six-months of 2014 decreased 9% to $14.6 million, compared to $16.0 million in the same period in the prior year. The Company's gross profit margin was 25% in the first six-months of 2014 compared to 34% in the same period last year.

Total net income was $1.8 million or $0.11 per share for the six-month period ended June 30, 2014 compared to $3.8 million or $0.23 per share in the same period in 2013.

Balance Sheet/Cash Flow Highlights
The Company had $2.9 million in cash and cash equivalents as of June 30, 2014 compared to $4.9 million at June 30, 2013. This decrease is primarily due to the $7.4 million acquisition of the Golden Guernsey dairy plant in the second quarter of 2013. Total stockholder’s equity was $44.7 million as of June 30, 2014, which is an increase of $3.0 million when compared to June 30, 2013.

Net cash provided by operating activities decreased $2.9 million to $2.1 million for the first six months of 2014. This decrease is primarily attributable to the decrease in accounts payable.

Net cash used in investing activities was $2.1 million during the six-months ended June 30, 2014 compared to net cash used in investing activities of $0.8 million during the same period in 2013.

Conference Call
The Company will host a conference call to discuss these results with additional comments and details on Monday, August 11, 2014 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 August 25, 2014. 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, Inc. (Nasdaq: LWAY), recently named one of Fortune Small Business' Fastest Growing Companies for the sixth consecutive year, is America's leading supplier of the cultured dairy products known as kefir and organic kefir. Lifeway Kefir is a dairy beverage that contains 10 exclusive live and active probiotic cultures plus ProBoost™. In addition to its line of Kefir products, the company produces a variety of Frozen Kefir and probiotic cheese products. Lifeway also sells frozen kefir, kefir smoothies and kefir parfaits through its Starfruit™ retail stores.

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:
   
Lifeway Foods, Inc.
 
Phone: 877.281.3874
 
Email: info@Lifeway.net
 
 
Investor Relations:
 
   
ICR
 
   
Katie Turner
 
John Mills
646.277.1228
 







 
 

 
LIFEWAY FOODS, INC. AND SUBSIDIARIES
Consolidated Statements of Financial Condition
June 30, 2014 and 2013 (Unaudited) and December 31, 2013
 
   
June 30,
   
December 31,
 
   
2014
   
2013
   
2013
 
ASSETS
                 
                   
Current assets
                 
Cash and cash equivalents
  $ 2,869,638     $ 4,939,948     $ 3,306,608  
Investments
    2,986,329       2,483,673       2,516,380  
Certificates of deposits in financial institutions
          115,373       15,373  
Inventories
    6,810,541       7,807,150       6,899,008  
Accounts receivable, net of allowance for doubtful accounts and discounts ($1,300,000 and $1,350,000 and $1,050,000)
    9,538,188       9,911,305       10,444,839  
Prepaid expenses and other current assets
    13,612       31,797       128,323  
Other receivables
    56,680       5,400       103,272  
Deposits
    142,836       580,974        
Deferred income taxes
    293,445       391,139       322,071  
Refundable income taxes
    1,965,933       28,123       1,014,947  
Total current assets
    24,677,202       26,294,882       24,750,821  
                         
Property and equipment, net
    21,494,127       14,718,760       20,824,448  
                         
Intangible assets
                       
Goodwill and other non amortizable brand assets
    14,068,091       14,068,091       14,068,091  
Other intangible assets, net of accumulated amortization of $4,913,397, $4,198,439 and $4,555,559 at June 30, 2014 and 2013 and at December 31, 2013, respectively
    3,417,602       4,107,561       3,750,441  
Total intangible assets
    17,485,693       18,175,652       17,818,532  
                         
Other Assets
                       
Long-term accounts receivable, net of current portion
    279,921       280,000       280,000  
Total assets
  $ 63,936,943     $ 59,469,294     $ 63,673,801  
                         
                         
LIABILITIES AND STOCKHOLDERS' EQUITY
                       
                         
Current liabilities
                       
Current maturities of notes payable
  $ 877,062     $ 545,494     $ 875,002  
Accounts payable
    6,471,442       7,166,377       6,723,179  
Accrued expenses
    899,803       1,094,820       1,284,060  
Accrued income taxes
          1,224,115        
Total current liabilities
    8,248,307       10,030,806       8,882,241  
                         
Notes payable
    8,555,731       4,726,472       8,999,012  
                         
Deferred income taxes
    2,395,143       3,018,629       2,843,426  
Total liabilities
    19,199,181       17,775,907       20,724,679  
                         
Stockholders' equity
                       
Common stock, no par value; 40,000,000 shares authorized;
                       
17,273,776 shares issued; 16,346,017 shares outstanding at June 30, 2014; 17,273,776 shares issued; 16,346,017 shares outstanding at June 30, 2013 and 16,346,017 shares outstanding at December 31, 2013
    6,509,267       6,509,267       6,509,267  
Paid-in-capital
    2,032,516       2,032,516       2,032,516  
Treasury stock, at cost
    ( 8,187,682 )     ( 8,187,682 )     ( 8,187,682 )
Retained earnings
    44,341,809       41,366,495       42,587,214  
Accumulated other comprehensive income (loss), net of taxes
    41,852       ( 27,209 )     7,807  
Total stockholders' equity
    44,737,762       41,693,387       42,949,122  
                         
Total liabilities and stockholders' equity
  $ 63,936,943     $ 59,469,294     $ 63,673,801  
 
 

 
LIFEWAY FOODS, INC. AND SUBSIDIARIES
Consolidated Statements of Income and Comprehensive Income
For the Three and Six Months Ended June 30, 2014 and 2013 (unaudited)

 
   
(Unaudited)
   
(Unaudited)
 
   
Three Months Ended
   
Six Months Ended
 
   
June 30,
   
June 30,
 
   
2014
   
2013
   
2014
   
2013
 
Sales
  $ 32,594,048           $ 25,838,058           $ 64,655,195           $ 53,428,680        
Less: discounts and allowances
    ( 3,028,637 )           ( 2,760,174 )           ( 5,958,073 )           ( 5,963,765 )      
Net sales
    29,565,411       29,565,411       23,077,884       23,077,884       58,697,122       58,697,122       47,464,915       47,464,915  
                                                                 
Cost of goods sold
            21,432,624               15,058,461               43,114,535               30,607,446  
Depreciation expense
            627,878               421,707               1,011,238               815,832  
                                                                 
Total cost of goods sold
            22,060,502               15,480,168               44,125,773               31,423,278  
                                                                 
Gross profit
            7,504,909               7,597,716               14,571,349               16,041,637  
                                                                 
Selling expenses
            3,693,821               2,876,635               7,173,509               5,514,354  
General and administrative
            2,107,197               2,057,581               4,487,827               3,955,425  
Amortization expense
            178,919               177,842               357,839               355,683  
                                                                 
Total operating expenses
            5,979,937               5,112,058               12,019,175               9,825,462  
                                                                 
Income from operations
            1,524,972               2,485,658               2,552,174               6,216,175  
                                                                 
Other income (expense):
                                                               
Interest and dividend income
            35,227               30,622               63,925               45,631  
Rental income
            1,200               3,389               1,700               6,658  
Interest expense
            ( 66,724 )             ( 37,424 )             ( 132,293 )             ( 73,723 )
Gain on sale of investments, net reclassified from OCI
            57,321               56,944               62,130               121,280  
Loss on sale of equipment
            (76,484 )                           (76,484 )              
Other Income
            1,672               10,229               1,672               10,229  
Total other income (expense)
            (47,788 )             63,760               (79,350 )             110,075  
                                                                 
Income before provision for income taxes
            1,477,184               2,549,418               2,472,824               6,326,250  
                                                                 
Provision for income taxes
            382,768               1,145,478               718,229               2,556,671  
                                                                 
Net income
          $ 1,094,416             $ 1,403,940             $ 1,754,595             $ 3,769,579  
                                                                 
Basic and diluted earnings per common share
            0.07               0.09               0.11               0.23  
                                                                 
Weighted average number of shares outstanding
            16,346,017               16,346,017               16,346,017               16,346,017  
                                                                 
COMPREHENSIVE INCOME
                                                               
                                                                 
Net income
          $ 1,094,416             $ 1,403,940             $ 1,754,595             $ 3,769,579  
                                                                 
Other comprehensive income
                                                               
    (loss), net of tax:
                                                               
    Unrealized gains (losses) on
                                                               
      investments (net of tax)
            63,111               ( 63,811 )             71,155               ( 12,277 )
    Less reclassification adjustment
                                                               
      for (gains) losses included in
                                                               
      net income (net of taxes)
            (34,393 )             ( 32,174 )             (37,110 )             ( 68,523 )
                                                                 
Comprehensive income
          $ 1,123,134             $ 1,307,955             $ 1,788,640             $ 3,688,779  
 

 
 

 
LIFEWAY FOODS, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
For the Six Months Ended June 30, 2014 and 2013 (Unaudited)
 

 
 
   
(Unaudited)
 
   
June 30,
 
   
2014
   
2013
 
             
Cash flows from operating activities:
           
Net income
  $ 1,754,595     $ 3,769,579  
Adjustments to reconcile net income to net
               
cash flows from operating activities:
               
Depreciation and amortization
    1,369,077       1,171,515  
Gain on sale of investments, net
    ( 62,130 )     ( 121,280 )
Deferred income taxes
    ( 440,285 )     ( 104,133 )
Bad Debt Expense
    156,049       26,819  
Loss on sale of equipment
    76,484        
(Increase) decrease in operating assets:
               
Accounts receivable
    728,281       ( 1,211,015 )
Other receivables
    46,591       3,425  
Inventories
    88,467       ( 1,867,964 )
Refundable income taxes
    ( 950,986 )     56,705  
Prepaid expenses and other current assets
    ( 28,125 )     ( 515,633 )
Increase (decrease) in operating liabilities:
               
Accounts payable
    ( 1,972,157 )     2,909,652  
Accrued expenses
    1,336,163       ( 60,857 )
Income taxes payable
          969,804  
Net cash provided by operating activities
    2,102,024       5,026,617  
                 
Cash flows from investing activities:
               
Purchases of investments
    ( 1,774,734 )     ( 2,573,721 )
Proceeds from sale of investments
    1,419,362       1,948,839  
Redemption of certificates of deposits
    15,000       334,627  
Purchases of property and equipment
    ( 1,761,401 )     ( 547,819 )
Proceeds from sale of equipment
    4,000        
Net cash used in investing activities
    (2,097,773 )     (838,074 )
                 
Cash flows from financing activities:
               
Dividends paid
          (1,307,861 )
Repayment of notes payable
    ( 441,221 )     ( 226,960 )
Net cash used in financing activities
    ( 441,221 )     ( 1,534,821 )
                 
Net (decrease) increase in cash and cash equivalents
    (436,970 )     2,653,722  
                 
Cash and cash equivalents at the beginning of the period
    3,306,608       2,286,226  
                 
Cash and cash equivalents at the end of the period
  $ 2,869,638     $ 4,939,948