MORTON GROVE, Ill., Aug. 16 /PRNewswire-FirstCall/ -- Lifeway Foods, Inc., , makers of the nutritious, probiotic dairy beverage, Kefir, today reported financial results for the second quarter ended June 30, 2010. In addition, the company announced an exclusive, nationwide distribution agreement with Whole Foods to bring three flavors of their new BioKefir(TM) drink to all store locations.
Financial Highlights for Second Quarter 2010 -- Sales increased more than seven percent to $15,546,556 -- Increased marketing fueling organic growth -- Working capital increased more than 11 percent to $8,682,934 Other Recent Highlights -- Signed a 90-day exclusive distribution agreement with Whole Foods to bring three flavors of new BioKefir to store locations nationwide -- Paid outstanding debt notes totaling approximately $850,000 on August 5th, six months ahead of schedule, due to strong cash flow -- Purchased 101,476 shares during the second quarter, due to strong cash flow
For the quarter ended June 30, 2010, total sales increased more than seven percent to $15,546,556 from $14,479,429 during the same period a year ago. Total net income was $1,184,504, or $0.07 per share, compared to $2,531,905, or $0.15 per share, in the same period in 2009. This decrease in net income, of approximately 53 percent, is due largely to disallowed research and development credits from 2007 and 2008 that resulted in approximately $220,000 in additional taxes that were paid in the 2010 second quarter and represent a non-recurring expense.
Sales increased by $3,295,206, (approximately 12%) to $31,510,715 during the six month period ended June 30, 2010 from $28,215,509 during the same six-month period in 2009. This increase is primarily attributable to increased sales and awareness of Lifeway's flagship line, Kefir, as well as Lifeway's kids Kefir drink, ProBugs®.
"We are pleased with our continued growth in sales as it was purely organic and not the result of new distribution," said Edward Smolyansky, Lifeway Food Inc.'s chief financial officer. "The decrease in net income was primarily driven by three factors including higher conventional milk prices, which rose about 45% from last years second quarter record lows, the payment of past taxes from disallowed R&D unit credits, and our increased advertising and marketing initiatives. We believe our marketing program is building greater awareness of the health benefits of Kefir, and is driving demand for Lifeway's flagship line, as well as ProBugs(TM) Organic Kefir for kids."
Cost of goods sold as a percentage of sales was approximately 61 percent, compared to approximately 58 percent during the same period in 2009. The increase was primarily due to a 45 percent rise in the costs for conventional milk, our largest raw material, when compared to the second quarter 2009. However, the increase represents a return to more normalized levels from the historically low prices a year ago. Gross profit decreased approximately two percent during the second quarter compared with the same period in 2009.
Operating expenses as a percentage of sales were approximately 25 percent, compared to about 21 percent during the same period in 2009. This increase is primarily attributable to increased advertising and marketing expenditures. The company also had expenses of approximately $100,000 related tot the development of it's new BioKefir(TM) product line.
Total operating income decreased by $1,000,310 (approximately 32 percent) to $2,154,337, from $3,154,647 during the same period a year ago.
Net cash provided by operating activities was $2,271,542 during the six months ended June 30, 2010, which is a decrease of $1,119,173 when compared to the same period in 2009.
Interest expense during the second quarter 2010 decreased to $80,164 compared to $110,090 during the same period a year ago. This lower interest expense is primarily due to a reduction of principal in the note payable related to the February 6, 2009 Fresh Made acquisition.
Provision for income taxes for the second quarter 2010 was $1,029,688, or a 47 percent effective tax rate, compared to $623,918, or a 20 percent effective tax rate, during the same period in 2009. In addition to the higher rate, the company's tax expense was higher due to disallowed research and development credits from 2007 and 2008 that resulted in approximately $220,000 in additional taxes being paid in the 2010 second quarter.
During the second quarter 2010, Lifeway Foods continued to strengthen its balance sheet. The company's working capital increased more than 11 percent to $8,682,934, from $7,800,056 during the same period a year ago. The company's current ratio remains strong at 2.0 to 1. In addition, the company reported that it paid off approximately $850,000 of its notes payable from its strong cash flow, six months ahead of schedule on August 5, 2010.
Additionally, the company reported that it repurchased 101,476 shares during the 2010 second quarter and has approximately 170,000 shares remaining in its current buy-back program. The stock buy-backs were made as a result of the company's strong cash flow.
"We are encouraged about our progress in the third quarter, especially given the tough economic environment. To that end, we are excited about our exclusive product launch with Whole Foods as they begin to carry three flavors of our BioKefir in their stores nationwide. Whole Foods will have a 90-day exclusive to this product, and we expect to begin shipping by the end of August," Smolyansky said.
About Lifeway Foods
Lifeway, recently named Fortune Small Business' 97th Fastest Growing Small Business, and one of only 4 companies to ever be named to the list four straight years in a row, is America's leading supplier of the cultured dairy product known as kefir, and now America's only supplier of Organic Kefir. Lifeway Kefir is a dairy beverage that contains Lifeway's exclusive 10 Live and Active probiotic cultures. While most regular yogurt only contains two or three of these "friendly" cultures, Lifeway kefir products offer more nutritional benefits. Lifeway offers 12 different flavors of its Kefir beverage, Organic Kefir and SoyTreat (a soy based kefir). Lifeway recently introduced a series of innovative new products such as pomegranate kefir, Greek-style kefir, a children's line of organic kefir products called ProBugs (TM) in a no-spill pouch in kid-friendly flavors like Orange Creamy Crawler and Sublime Slime Lime, and a line of organic whole milk kefir. Lifeway also produces a line of products marketed in US Hispanic communities, called La Fruta, Drinkable Yogurt (yogurt drinks distinct from kefir). In addition to its line of Kefir products, the company produces a variety of cheese products and recently introduced a line of organic pudding called It's Pudding!
Live conference calls will now be on an annual basis to discuss fiscal full year results. For more information, contact Lifeway Foods, Inc. at (847) 967-1010 or e-mail at info@lifeway.net and visit http://www.lifeway.net/ .
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.
LIFEWAY FOODS, INC. AND SUBSIDIARIES Condensed Consolidated Statements of Income and Comprehensive Income For the Three and Six Months Ended June 30, 2010 and 2009 (Unaudited) and for the Year Ended December 31, 2009 (Unaudited) (Unaudited) Three Months Ended Six Months Ended June 30, June 30, -------- -------- 2010 2009 2010 2009 ---- ---- ---- ---- Sales 15,546,556 14,479,429 31,510,715 28,215,509 Cost of goods sold 9,273,872 7,978,110 17,892,871 16,102,691 Depreciation expense 281,220 353,654 684,595 570,428 ------- ------- ------- ------- Total cost of goods sold 9,555,092 8,331,764 18,577,466 16,673,119 --------- --------- ---------- ---------- Gross profit 5,991,464 6,147,665 12,933,249 11,542,390 Selling expenses 2,183,304 1,386,815 4,710,777 2,694,740 General and administrative 1,478,062 1,437,505 2,968,219 2,810,103 Amortization expense 175,761 168,698 351,521 339,388 ------- ------- ------- ------- Total Operating Expenses 3,837,127 2,993,018 8,030,517 5,844,231 Income from operations 2,154,337 3,154,647 4,902,732 5,698,159 Other income (expense): Interest and dividend income 53,176 48,506 107,684 110,717 Rental Income 2,800 11,947 4,035 21,294 Interest expense (80,164) (110,090) (176,106) (264,473) Loss on Disposition of Equipment --- (2,825) --- (2,825) Gain (loss) on sale of marketable securities, net 84,043 53,638 54,784 (96,152) ------ ------- Total other income (expense) 59,855 1,176 (9,603) (231,439) ------ ----- ------ -------- Income before provision for income taxes 2,214,192 3,155,823 4,893,129 5,466,720 Provision for income taxes 1,029,688 623,918 1,939,936 1,387,350 --------- ------- --------- --------- Net income $1,184,504 $2,531,905 $2,953,193 $4,079,370 ========== ========== ========== ========== Basic and diluted earnings per common share 0.07 0.15 0.18 0.24 ==== ==== ==== ==== Weighted average number of shares outstanding 16,701,539 16,823,691 16,731,549 16,823,691 ========== ========== ========== ========== Year Ended December 31, --------- 2009 ---- Sales 58,115,878 Cost of goods sold 36,083,553 Depreciation expense 1,134,404 --------- Total cost of goods sold 37,217,957 ---------- Gross profit 20,897,921 Selling expenses 5,987,917 General and administrative 5,294,550 Amortization expense 676,786 ------- Total Operating Expenses 11,959,253 Income from operations 8,938,668 Other income (expense): Interest and dividend income 199,047 Rental Income 35,240 Interest expense (442,703) Loss on Disposition of Equipment (2,826) Gain (loss) on sale of marketable securities, net (278,474) Total other income (expense) (489,716) -------- Income before provision for income taxes 8,448,952 Provision for income taxes 2,879,250 --------- Net income $5,569,702 ========== Basic and diluted earnings per common share 0.33 ==== Weighted average number of shares outstanding 16,798,164 ========== LIFEWAY FOODS, INC. AND SUBSIDIARIES Condensed Consolidated Statements of Cash Flows For the Six Months Ended June 30, 2010 and 2009 (Unaudited) and for the Year Ended December 31, 2009 (Unaudited) June 30, December 31, -------- ------------ 2010 2009 2009 ---- ---- ---- Cash flows from operating activities: ---------------------- Net income $2,953,193 $4,079,370 $5,569,702 Adjustments to reconcile net income to net cash flows from operating activities, net of acquisition: Depreciation and amortization 1,036,116 909,816 1,811,190 (Gain) Loss on sale of investments, net (54,784) 96,152 278,474 Loss on disposition of assets --- 2,825 2,826 Deferred income taxes (290,465) 179,796 389,754 Treasury stock issued for compensation 62,317 82,318 144,636 Decrease in allowance for doubtful accounts --- --- (75,000) (Increase) decrease in operating assets: Accounts receivable (1,780,774) (752,978) (612,915) Other receivables (92,631) (25,416) (7,758) Inventories (857,743) (346,800) 173,419 Refundable income taxes 1,308,978 (435,205) (475,635) Prepaid expenses and other current assets (29,433) 5,029 9,506 Increase (decrease) in operating liabilities: Accounts payable (504,764) (440,911) 298,800 Accrued expenses (82,791) 36,719 96,062 Accrued income taxes 604,323 --- --- ------- --- --- Net cash provided by financing activities 2,271,542 3,390,715 7,603,061 Cash flows from investing activities: ---------------------- Purchases of investments (538,852) (3,342,662) (6,156,682) Proceeds from sale of investments 1,502,724 4,127,666 6,928,321 Proceeds from redemption of certificates of deposit 102,545 --- --- Purchases of property and equipment (1,292,741) (714,052) (1,766,280) Acquisition of Fresh Made, net of cash acquired --- (10,498,224) (11,042,546) --- ----------- ----------- Net cash used in investing activities (226,324) (10,427,272) (12,037,187) Cash flows from financing activities: ---------------------- Proceeds of note payable 250,000 9,342,085 9,353,504 Checks written in excess of bank balances 504,398 --- 342,976 Purchases of treasury stock (1,418,657) (402,947) (905,607) Repayment of notes payable (1,152,876) (1,597,063) (4,003,588) Net cash (used in) provided by in financing activities (1,817,135) 7,342,075 4,787,285 ---------- --------- --------- Net increase in cash and cash equivalents 228,083 305,518 353,159 Cash and cash equivalents at the beginning of the period 630,407 277,248 277,248 ------- ------- ------- Cash and cash equivalents at the end of the period $858,490 $582,766 $630,407 ======== ======== ========
Lifeway Foods, Inc.
CONTACT: Lifeway Foods, Inc., +1-847-967-1010, info@lifeway.net
Web Site: http://www.kefir.com/
http://www.lifeway.net/
