Lifeway Foods, Inc. Announces Results For The Fourth Quarter And Fiscal Year Ended December 31, 2015

MORTON GROVE, Ill., March 15, 2016 (GLOBE NEWSWIRE) -- Lifeway Foods, Inc., (Nasdaq:LWAY), the leading U.S. supplier of kefir cultured dairy products, today reported financial results for the fourth quarter and fiscal year ended December 31, 2015.

"In 2015, we took decisive steps to better position Lifeway for future growth," said Julie Smolyansky, CEO of Lifeway Foods, Inc. "These include strategic investments in new product innovation, continued investment in Lifeway's production capabilities, and new additions to our team. Additionally, we ramped up our marketing and advertising initiatives as well as increased our investments in trade promotions, both of which have led to a strong start thus far in 2016."

Fourth Quarter Results

Fourth quarter 2015 net sales decreased 2% to $29.5 million from $30.2 million in the fourth quarter of 2014. Gross sales increased 4.9% driven by higher sales of the Company's Kefir products that were more than offset by increased trade promotions and allowances.

Gross profit as a percent of net sales improved to 24.2% from 22.9%% in the year ago period. The margin rate improvement reflects lower milk costs, offset partially by increased trade promotion and higher labor costs.

Selling expenses decreased approximately 28% to $3.3 million during the fourth quarter of 2015 from $4.6 million in the fourth quarter of 2014. The reduction reflects reduced salaries and administrative related costs in the fourth quarter of 2015. General and administrative expenses increased $0.5 million to $2.8 million from $2.3 million compared to the same period last year primarily due to the elevated level of professional fees.

Net income was approximately $328,000, or $0.02 per diluted share, in the fourth quarter of 2015 compared to a loss of $26,000, or $0.00 per diluted share, in the same period in 2014.

Fiscal 2015Net sales for the year ended December 31, 2015 were $118.6 million, essentially consistent with the $119.0 million reported last year. The net sales performance reflects a 5.4% increase in gross sales driven by higher volume of the Company's drinkable Kefir. The total volume increase was slightly more than offset by elevated trade promotions and allowances.

Gross profit as a percent of net sales improved to 26.6% from 24.3% in the year ago period. The margin rate improvement reflects lower milk costs, offset partially by increased trade promotion and higher labor costs.

Selling expenses decreased approximately 12% to $12.8 million in fiscal 2015 from $14.5 million in the prior year. The decline in selling expenses reflects reduced salaries and administrative expenses, partially offset by higher advertising costs. General and administrative expenses increased $4.3 million to $13.7 million in fiscal 2015 from $9.4 million last year. The higher general and administrative expenses is primarily a result of higher salaries and higher professional fees due in part to costs associated with remediating internal accounting controls and the related delays in the Company's financial reporting as well as redundancies associated with and the change in Lifeway's certified public accountants. 

The effective tax rate for fiscal 2015 was 50.6%% compared to 53.4% in the same period in 2014. The higher tax rate in 2014 reflects provisions for tax exposures that did not recur in 2015.

Net income was $2.0 million, or $0.12 per share, for the year ended December 31, 2015 compared to $2.0 million, or $0.12 per share, in fiscal 2014.  

Balance Sheet/Cash Flow HighlightsThe Company had cash and cash equivalents of approximately $5.6 million as of December 31, 2015 compared to cash and cash equivalents of $3.3 million as of December 31, 2014. The Company generated $6.7 million in cash from operating activities during 2015 compared to $5.1 million during 2014 primarily driven by reductions in net working capital.

Conference CallThe Company will host a conference call to discuss these results with additional comments and details on Wednesday, March 16, 2016 at 10:00 a.m. ET. The call will be broadcast live over the Internet hosted at the Investor Relations section of Lifeway Foods' website at www.lifewaykefir.com, and will be archived online through March 29, 2016. 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, Ed Smolyansky, Chief Operating Officer, and John Waldron, Chief Financial Officer.

About Lifeway FoodsLifeway Foods, Inc. (LWAY), recently named 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 frozen kefir, specialty cheeses and a ProBugs line for kids. Lifeway's tart and tangy cultured dairy products are available throughout the United States and on a small, but growing basis, in Canada, Latin America and the United Kingdom. Learn how Lifeway is good for more than just you at www.lifewaykefir.com.

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.

 
  LIFEWAY FOODS, INC. AND SUBSIDIARIES
  Consolidated Statements of Income and Comprehensive Income
  December 31, 2015, 2014 and 2013   
  (In thousands, except per share data)
            2015         2014       2013  
  Gross Sales       $ 137,244       $ 130,216     $ 108,966  
  Less: discounts and allowances         (18,657       (11,256     (11,442
  Net sales         118,587         118,960       97,524  
                                 
  Cost of goods sold         84,573         87,561       68,275  
  Depreciation expense         2,413         2,536       1,626  
  Total cost of goods sold         86,986         90,097       69,901  
                                 
  Gross profit         31,601         28,863       27,623  
                                 
  Selling expenses         12,752         14,534       11,296  
  General and administrative         13,730         9,378       7,583  
  Amortization expense         716         716       713  
  Total operating expenses         27,198         24,628       19,592  
                                 
  Income from operations         4,403         4,235       8,031  
                                 
  Other income (expense):                              
  Interest and dividend income         112         122       116  
  Rental income         7         4       12  
  Interest expense         (236 )       (277 )     ( 203 )
  Gain (Loss) on sale of investments, net reclassified from OCI         (72       99       195  
  Gain (Loss) on sale of equipment         253         7       (305 )
  Impairment of investments         (475 )       --       --  
  Other Income (Expense)         --         8       11  
  Total other income (expense)         (411 )       (37 )     (174 )
                                 
  Income before provision for income taxes         3,992         4,198       7,857  
                                 
  Provision for income taxes         2,020         2,242       2,867  
                                 
  Net income       $ 1,972       $ 1,956     $ 4,990  
                                 
  Basic and diluted earnings per common share       $ 0.12       $ 0.12     $ 0.31  
                                 
  Weighted average number of shares outstanding         16,331         16,346       16,346  
                                 
  COMPREHENSIVE INCOME                              
  Net income       $ 1,972       $ 1,956     $ 4,990  
  Other comprehensive income (loss), net of tax:                              
  Unrealized gains (losses) on investments, net of $30, $94 and ($50) of taxes         (47 )       (146     64  
  Reclassifications to earnings:                              
  Other than temporary impairment of investments, net of $84 of taxes         130         --       --  
  Realized (gains) losses on investments, net of ($28), $39 and $85 of taxes         44         (60 )     (110 )
  Comprehensive income       $ 2,099       $ 1,750     $ 4,944  

LIFEWAY FOODS, INC. AND SUBSIDIARIES  
Consolidated Balance Sheets  
December 31, 2015 and 2014  
(In thousands)  
    December 31,  
    2015     2014  
Current assets            
Cash and cash equivalents   $ 5,646     $ 3,260  
Investments, at fair value     2,216       2779  
Certificates of deposits in financial institutions     513       150  
Inventories     7,664       5,814  
Accounts receivable, net of allowance for doubtful accounts and discounts of                
$1,800 and $1,050 in 2015 and 2014 respectively     9,604       10,214  
Prepaid expenses and other current assets     156       252  
Other receivables     45       134  
Deferred income taxes     556       408  
Refundable income taxes     449       1,141  
Total current assets     26,849       24,152  
                 
Property and equipment, net     21,375       21,892  
                 
Intangible assets                
Goodwill & indefinite-lived intangibles     14,068       14,068  
Other intangible assets, net     2,344       3,060  
Total intangible assets     16,412       17,128  
                 
Other Assets                
Long-term accounts receivable, net of current portion     282       252  
Total assets   $ 64,918     $ 63,424  
                 
Current liabilities                
Current maturities of notes payable   $ 840     $ 872  
Accounts payable     7,138       5,587  
Accrued expenses     2,793       2,066  
Accrued income taxes     52       --  
Total current liabilities     10,823       8,525  
                 
Notes payable     7,119       8,125  
                 
Deferred income taxes     1,719       2,074  
Total liabilities     19,661       18,724  
                 
Stockholders' equity                
Common stock, no par value; 40,000 shares authorized;                
17,274, shares issued; 16,210 and 16,346  shares                
outstanding at 2015 and 2014     6,509       6,509  
Paid-in-capital     2,033       2,033  
Treasury stock, at cost     (9,730 )   (8,188 )
Retained earnings     46,516       44,544  
Accumulated other comprehensive loss, net of taxes     (71 )   (198 )
Total stockholders' equity     45,257       44,700   
                 
Total liabilities and stockholders' equity   $ 64,918     $ 63,424  

LIFEWAY FOODS, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
For the Years Ended December 31, 2015, 2014 and 2013
(In thousands)
    December 31,   
    2015   2014   2013  
Cash flows from operating activities:                        
Net income   $ 1,972     $ 1,956     $ 4,990  
Adjustments to reconcile net income to operating cash flow:                        
Depreciation and amortization     3,129       3,252       2,339  
Loss (Gain) on sale of investments, net     72       (99 )     (196 )
Impairment of investments     475              
Deferred income taxes     (585 )     (720 )     (238 )
Bad debt expense     73       205       33  
(Gain) Loss on sale of equipment     (253 )     (7     305  
(Increase) decrease in operating assets:                        
Accounts receivable     537       55       (1,742 )
Other receivables     59       (31 )     (94
Inventories     (1,849     1,085       (960 )
Refundable income taxes     691       (126 )     (930 )
Prepaid expenses and other current assets     95       (124 )     (6 )
Increase (decrease) in operating liabilities:                        
Accounts payable     1,551       (1,136     2,466  
Accrued expenses     726       782       128  
Income taxes payable     52             (254
Net cash provided by operating activities     6,745       5,092       5,841  
                         
Cash flows from investing activities:                        
Purchases of investments     (1,489 )     (3,280 )     (3,519 )
Proceeds from sale of investments     1,714       2,774       3,001  
Redemption of certificates of deposits     272       15       424  
Investments in certificates of deposit     (635 )     (150      
Purchases of property and equipment     (1,995 )     (3,684 )     (8,480 )
Proceeds from sale of equipment     353       65       711  
Net cash used in investing activities     (1,780 )     (4,261 )     (7,863 )
                         
Cash flows from financing activities:                        
                         
Purchase of treasury stock     (1,542            
Dividends paid                 (1,308 )
Net proceeds from debt issuance                 4,975  
Repayment of notes payable     (1,037 )     (877 )     (625 )
Net cash provided by (used in) financing activities     (2,579 )     (877     3,042  
                         
Net increase (decrease) in cash and cash equivalents     2,386       (46     1,020  
                         
Cash and cash equivalents at the beginning of the year     3,260       3,306       2,286  
                         
Cash and cash equivalents at the end of the year   $ 5,646     $ 3,260     $ 3,306  
                         
Supplemental cash flow information:                        
Cash paid for income taxes   $ 2,245     $ 3,080     $ 4,363  
Cash paid for interest   $ 235     $ 267     $ 206  

Contact:	Lifeway Foods, Inc.	Phone: 877.281.3874	Email: info@Lifeway.net	Investor Relations:ICRKatie TurnerHunter Wells646.277.1228

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