CORRECTION - Lifeway Foods Announces Record Fourth Quarter and Full Year 2012 Financial Results

CORRECTION - Lifeway Foods Announces Record Fourth Quarter and Full Year 2012
                              Financial Results

PR Newswire

MORTON GROVE, Ill., April 5, 2013

MORTON GROVE, Ill., April 5, 2013 /PRNewswire/ --In the news release, Lifeway
Foods Announces Record Fourth Quarter and Full Year 2012 Financial Results,
issued April 1, 2013 by Lifeway Foods, Inc. (the "Company") over PRNewswire,
we are advised by the Company that certain ministerial errors occurred. The
complete, corrected release follows:

(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 Julie Smolyansky, 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's conference callis archivedon the Investor Relations section of
Lifeway Foods' website at www.lifeway.netand will be available through April
15, 2013.

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

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          8,723,737      7,950,276
doubtful accounts and discounts
Prepaid expenses and other current assets          97,138         79,630
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 brand assets    14,068,091     14,068,091
Other intangible assets, net of accumulated
amortization of $3,842,756 and 3,087,940 at        4,463,242      5,218,060
December 31, 2012 and 2011, respectively
Total intangible assets                            18,531,333     19,286,151
Other Assets
Long-term accounts receivable net of current       294,000        289,550
portion
Total assets                                     $ 53,506,624   $ 51,473,308


LIABILITIES AND STOCKHOLDERS' EQUITY


Current liabilities
Checks written in excess of bank balances        $ 0              592,040
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        0
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;           6,509,267      6,509,267
17,273,776 shares issued; 16,409,317 shares
outstanding at December 31, 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 income (loss),     53,591         (8,948)
net of taxes
Total stockholders' equity                         39,312,469     35,357,157

                                                 $ 53,506,626   $ 51,473,308
Total liabilities and stockholders' equity



LIFEWAY FOODS, INC. AND SUBSIDIARIES

Consolidated Statements of Income and Comprehensive Income

For the Years Ended December 31, 2012 and 2011


                  Year Ended

                  December 31,
                  2012                           2011
Sales             $ 89,754,007                   $ 77,122,999)
Less: discounts     (8,402,742)                    (7,152,590)
and allowances
Net sales           81,351,265      81,351,265     69,970,409      69,970,409
Cost of goods                       52,295,464                     47,151,776
sold
Depreciation                        1,629,594                      1,552,961
expense
Total cost of                       53,925,058                     48,704,737
goods 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                        754,817                        783,833
expense
Total operating                     18,581,496                     16,189,181
expenses
Income from                         8,844,711                      5,076,491
operations
Other income
(expense):
Interest and                        85,383                         70,611
dividend income
Rental income                       12,285                         7,150
Interest expense                    (177,622)                      (247,342)
Impairment of                       0                              (36,032)
Investment
Gain (loss) on
sale of                             71,286                         (29,256)
investments, net
Other Expense                       (11,169)                       (8,364)
Total other                         (19,837)                       (243,233)
income (expense)
Income before
provision for                       8,824,874                      4,833,258
income taxes
Provision for                       3,205,076                      1,977,837
income taxes
Net income                          $5,619,798                     2,855,421
Basic and diluted
earnings per                        .34                            0.17
common share
Weighted average
number of shares                    16,373,224                     16,442,948
outstanding
COMPREHENSIVE
INCOME
Net income                        $ 5,619,798                    $ 2,855,421
Other
comprehensive
income (loss),
net of tax:
Unrealized gains
on investments                      102,816                        17,616
(net of tax)
Less
reclassification
adjustment for
(gains) losses                      (40,277)                       16,530
included in net
income (net of
taxes)
Comprehensive                     $ 5,682,337                    $ 2,889,567
income



LIFEWAY FOODS, INC. AND SUBSIDIARIES
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:
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                          0               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         0
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 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          1,171,079       (2,114,789)
equivalents
Cash and cash equivalents at the beginning of     1,115,150       3,229,939
the period
Cash and cash equivalents at the end of the     $ 2,286,226     $ 1,115,150
period





SOURCE Lifeway Foods, Inc.

Website: http://www.kefir.com