Lifeway Foods Announces Record Fourth Quarter and Full Year 2012 Financial Results PR Newswire MORTON GROVE, Ill., April 1, 2013 MORTON GROVE, Ill., April 1, 2013 /PRNewswire/ -- Lifeway Foods, Inc., (Nasdaq: LWAY),a leading supplier of cultured dairy products known as kefir and organic kefir, today announced results for the fourth quarter and full year ended December 31, 2012. (Logo: http://photos.prnewswire.com/prnh/20120119/AQ36947LOGO-b) Fourth Quarter and Full Year 2012 Highlights oNet sales increased 24% to $20.8 million for the quarter, and net sales increased 16% to $81.4 million for the year oGross profit increased 86% from the fourth quarter 2012 when compared to the same period in 2011, and 29% for 2012 when compared to 2011 oGross profit margin increased to 33% for the fourth quarter 2012, from 22% in 2011, and to 34% for the year, from 30% in 2011 oRecord earnings per diluted share of $0.07 for the quarter, and record earnings per diluted share of $0.34 for the year "In 2012, we continued to execute on our strategic goals as we increased awareness and distribution of Lifeway's kefir products to report record sales and earnings results," said JulieSmolyansky, CEO of Lifeway Foods, Inc. "We are confident about our future growth and we expect 2013 to be another year of strong sales and profitability as new and existing consumers choose Lifeway Foods as a provider of wholesome, nutritious kefir products for themselves and their families. Additionally, we expect gross revenues for our first quarter 2013, which ended March 29, 2013, to be approximately 30% higher when compared to the same period in 2012, and we expect to continue this momentum throughout the year." Fourth Quarter Results Fourth quarter of 2012 gross sales increased 22% to $22.9 million compared to $18.7 million for the fourth quarter of 2011. 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™. Fourth quarter total consolidated net sales increased 24% to $20.8 million from $16.8 million in the fourth quarter of 2011. Net sales are recorded as gross sales less promotional activities such as slotting fees paid, couponing, spoilage and promotional allowances as well as early payment terms given to customers. The total allowance for promotions and discounts in the fourth quarter of 2012 was approximately $2.0 million or 10% of gross sales, compared to $2.0 million or 10.5% of gross sales in the same period last year. Cost of goods sold as a percentage of net sales, excluding depreciation expense, were approximately 65% during the fourth quarter of 2012, compared to approximately 76% during the same period in 2011. Gross profit for the fourth quarter of 2012 increased 86% to approximately $6.8 million, compared to approximately $3.7 million in the fourth quarter of the prior year. The gross profit margin increased to 33% in the fourth quarter 2012 versus 22% in the fourth quarter of 2011. The increase was primarily attributable to lower costs of transportation and other petroleum-based production supplies, and the decreased cost of conventional milk, the Company's largest raw material. The total cost of milk was approximately 5% lower during the fourth quarter 2012 when compared to the same period in 2011. Operating expenses as a percentage of net sales were approximately 24% during the fourth quarter of 2012, compared to approximately 25% during the same period in 2011. This was primarily attributable to an increase in selling expenses, which increased by $0.6 million to $3.2 million during the fourth quarter of 2012, from $2.6 million during the same period in 2011. The Company reported income from operations of $1.80 million during the fourth quarter of 2012, an improvement of $2.3 million from a loss of $0.5 million during the same period in 2011. Provision for income tax was $0.7 million or a 40% effective tax rate for the fourth quarter compared to a benefit of $0.1 million during the same period in 2011. Total net income was $1.1 million, or $0.07 per diluted share, for the three-month period ended December 31, 2012 compared to a net loss of $0.4 million, or a loss of $0.02 per diluted share, in the same period in 2011. 2012 Year End Results Total consolidated gross sales increased 16% or $12.6 million to approximately $89.8 million during the twelve-month period ended December 31, 2012 from $77.1 during the same twelve-month period in 2011. 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™. Total consolidated net sales increased 16% or $11.4 million to $81.4 million during the twelve-month period ended December 31, 2012 from $70.0 million during the same twelve month period in 2011. Cost of goods sold as a percentage of net sales, excluding depreciation expense, were approximately 64% during the twelve-month period ended December 31, 2012, compared to approximately 67% during the same period in 2011. Gross profit for 2012 increased 29% to $27.4 million, compared to $21.3 million in 2011. The Company's gross profit margin increased to 34% versus 30% in 2011. Total operating income increased $3.8 million, or approximately 74%, to $8.8 million during the twelve-month period ended December 31, 2012, from $5.1 million during the same period in 2011. Total net income was $5.6 million, or $0.34 per share, for the twelve-month period ended December 31, 2012 compared to $2.9 million, or $0.17 per share, in the same period in 2011. On March 29, 2013, the Company concluded that the consolidated statements of income for the year-to-date periods ended March 31, 2012, June 30, 2012 and September 30, 2012, including comparatively presented periods, that were previously included in its Quarterly Reports on Forms 10-Q filed in 2012 should be restated as a result to update the accounting presentation of production activity within cost of goods sold from general and administrative operating expenses. These restatements result in increases in cost of goods sold and corresponding decreases in general and administrative operating expenses. These restatements had no impact on the Company's previously reported net income, condensed consolidated balance sheets or consolidated statements of cash flows. Further information regarding this restatement can be found in the Company's Form 8-K filing dated April 1, 2013. Balance Sheet/Cash Flow Highlights The Company had a net increase in cash and cash equivalents of $1.2 million during the twelve-month period ended December 31, 2012 compared to a net decrease in cash and cash equivalents of $2.1 million during the same period in 2011. The Company had cash and cash equivalents of $2.3 million as of December 31, 2012 compared to cash and cash equivalents of $1.1 million as of December 31, 2011. Total stockholder's equity was $39.3 million as of December 31, 2012, which is an increase of $4.0 million when compared to December 31, 2011. This is primarily due the increase in retained earnings of $4.5 million when compared to December 31, 2011. Conference Call The Company will host a conference call to discuss these results with additional comments and details today, Monday, April 1, 2013 at 4:35 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 April 15, 2013. 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. About Lifeway Foods Lifeway Foods, Inc. (Nasdaq: LWAY), recently named one of Fortune Small Business' Fastest Growing Companies for the fifth 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 For the Years Ended December 31, 2012 and 2011 December 31 2012 2011 ASSETS Current assets Cash and cash equivalents $ 2,286,226 $ 1,115,150 Investments 1,869,888 1,695,044 Certificates of deposits in financial 450,000 300,000 institutions Inventories 5,939,186 4,954,475 Accounts receivable, net of allowance for doubtful accounts and discounts 8,723,737 7,950,276 Prepaid expenses and other current 97,138 79,630 assets Other receivables 8,825 224,204 Deferred income taxes 234,687 338,690 Refundable income taxes 84,828 41,316 Total current assets 19,694,515 16,698,785 Property and equipment, net 14,986,776 15,198,822 Intangible assets Goodwill and other non amortizable 14,068,091 14,068,091 brand assets Other intangible assets, net of accumulated amortization of $3,842,757 and 3,087,940 at December 4,463,244 5,218,060 31, 2012 and 2011, respectively Total intangible assets 18,531,335 19,286,151 Other Assets Long-term accounts receivable net of 294,000 289,550 current portion Total assets $53,506,626 $51,473,308 LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities Checks written in excess of bank $ --- $ 592,040 balances Current maturities of notes payable 542,981 1,540,716 Accounts payable 4,256,725 4,386,239 Accrued expenses 1,155,677 553,725 Accrued income taxes 254,311 --- Total current liabilities 6,209,694 7,072,720 Notes payable 4,955,945 5,539,836 Deferred income taxes 3,028,518 3,503,595 Total liabilities 14,194,157 16,116,151 Stockholders' equity Common stock, no par value; 20,000,000 shares authorized; 17,273,776 shares issued; 16,346,017 shares outstanding at December 31, 2012; 17,273,776 shares issued; 16,409,317 shares outstanding at December 31, 6,509,267 6,509,267 2011 Paid-in-capital 2,032,516 2,032,516 Treasury stock, at cost (8,187,682) (7,606,974) Retained earnings 38,904,777 34,431,296 Accumulated other comprehensive 53,591 (8,948) income (loss), net of taxes Total stockholders' equity 39,312,469 35,357,157 Total liabilities and stockholders' $53,506,626 $51,473,308 equity Consolidated Statements of Income and Comprehensive Income For the Years Ended December 31, 2012 and 2011 Years Ended December 31, 2012 2011 Sales $ 89,754,007 $ 77,122,999 Less: discounts and (8,402,742) ( 7,152,590) allowances Net sales 81,351,265 81,351,265 69,970,409 69,970,409 Cost of goods sold 52,295,464 47,151,776 Depreciation expense 1,629,594 1,552,961 Total cost of goods 53,925,058 48,704,737 sold Gross profit 27,426,207 21,265,672 Selling expenses 11,506,707 10,114,902 General and 6,319,972 5,290,446 administrative Amortization expense 754,817 783,833 Total operating 18,581,496 16,189,181 expenses Income from operations 8,844,711 5,076,491 Other income (expense): Interest and dividend 85,383 70,611 income Rental income 12,285 7,150 Interest expense (177,622) (247,342) Impairment of --- (36,032) Investment Gain (loss) on sale of 71,286 (29,256) investments, net Loss on disposition of (11,169) --- assets Other Expense --- (8,364) Total other income (19,837) (243,233) (expense) Income before provision for income taxes 8,824,874 4,833,258 Provision for income 3,205,076 1,977,837 taxes Net income $ 5,619,798 $ 2,855,421 Basic and diluted earnings per common share 0.34 0.17 Weighted average number of shares outstanding 16,373,224 16,442,948 COMPREHENSIVE INCOME Net income $ 5,619,798 $ 2,855,421 Other comprehensive income (loss), net of tax: Unrealized gains (losses) on investments (net 102,816 17,616 of tax) Less reclassification adjustment for (gains) losses included in net income (net (40,277) 16,530 of taxes) Comprehensive income $ 5,682,337 $ 2,889,567 Consolidated Statements of Cash Flows For the Years Ended December 31, 2012 and 2011 December 31, 2012 2011 Cash flows from operating activities: Net income $ 5,619,798 $ 2,855,421 Adjustments to reconcile net income to net cash flows from operating activities, net of acquisition: Depreciation and amortization 2,384,411 2,336,794 Loss (gain) on sale of investments, net (71,286) 29,256 Loss on disposition of equipment 11,169 20,135 Impairment of Investment --- 36,032 Deferred income taxes (434,896) 68,217 Bad Debt Expense 435,344 48,240 (Increase) decrease in operating assets: Accounts receivable (1,213,253) (1,494,790) Other receivables 215,379 (119,524) Inventories (984,711) (969,101) Refundable income taxes (43,512) 865,432 Prepaid expenses and other current assets (17,508) 78,685 Increase (decrease) in operating liabilities: Accounts payable (129,514) 202,758 Accrued expenses 601,952 84,466 Income taxes payable 254,311 - Net cash provided by operating activities 6,627,684 4,042,021 Cash flows from investing activities: Purchases of investments (1,452,672) (2,434,340) Proceeds from sale of investments 1,475,730 1,810,816 Investments in certificates of deposits (150,255) (50,000) Purchases of property and equipment (1,428,717) (1,439,133) Net cash (used in) provided by investing activities (1,555,914) (2,112,657) Cash flows from financing activities: Proceeds of note payable 250,000 2,000,000 Checks written in excess of bank balances (592,040) (749,170) Purchases of treasury stock (580,708) (1,181,428) Dividends paid (1,146,317) --- Repayment of notes payable (1,831,626) (4,113,555) Net cash used in financing activities (3,900,691) (4,044,153) Net (decrease) increase in cash and cash equivalents 1,171,079 (2,114,789) Cash and cash equivalents at the beginning of the 1,115,150 3,229,939 period Cash and cash equivalents at the end of the period $ 2,286,229 $ 1,115,150 SOURCE Lifeway Foods, Inc. Website: http://www.lifeway.net
Lifeway Foods Announces Record Fourth Quarter and Full Year 2012 Financial Results
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