Lifeway Foods, Inc. Announces Results For The First Quarter Ended March 31, 2016

MORTON GROVE, Ill., May 10, 2016 (GLOBE NEWSWIRE) -- Lifeway Foods, Inc., (Nasdaq:LWAY), the leading U.S. supplier of kefir cultured dairy products, today reported financial results for the first quarter ended March 31, 2016.

"We are pleased to announce an encouraging start to 2016 in which we achieved double-digit top-line revenue growth and a sequential increase in profitability," said Julie Smolyansky, CEO of Lifeway Foods, Inc. "Our solid first quarter results demonstrate the success of our strategic initiatives. In addition, increased distribution and brand awareness of our probiotic and functional dairy health food products drove our improved operational and financial performance. This positive momentum has us well-positioned for growth and we are confident in our ability to increase value for our shareholders."

First Quarter Results

First quarter of 2016 net sales increased 10.0% to $32.6 million from $29.6 million in the first quarter of 2015.  Gross sales increased 12% driven by higher sales of the Company's Kefir products slightly offset by increased trade promotions and allowances.

Gross profit as a percent of net sales declined to 26.4% from 28.3% in the same period last year.  The first quarter of 2016 gross margin decline reflects increased manufacturing costs primarily related to the ramp up of the Waukesha facility, which continued to expand its production volumes during the quarter. Milk prices were essentially flat versus the year ago period.

Selling expenses decreased approximately 10.8% to $2.9 million during the first quarter of 2016 from $3.3 million in the first quarter of 2015.  The decrease in selling expenses reflects lower advertising programs. General and administrative expenses increased $0.9 million to $4.4 million from $3.5 million compared to the same period last year primarily due to the increased professional fees associated with legal and regulatory functions.

Net income was approximately $0.6 million, or $0.04 per diluted share for the quarter ended March 31, 2016, consistent with the first quarter of 2015.

The effective tax rate for first quarter of 2016 was 38.8% compared to 49.9% in the first quarter of 2015.  The lower tax rate in the first quarter of 2016 was driven by the deductibility of certain operating expenses for federal income tax purposes that were not fully deductible in 2015.

Balance Sheet

Cash and cash equivalents were approximately $3.8 million as of March 31, 2016 compared to cash and cash equivalents of $5.6 million as of December 31, 2015 reflecting the unfavorable timing of payments to suppliers and service providers as well as share repurchase activity. 

The Company repurchased approximately 39,000 shares of common stock at a cost of $0.4 million in the three months ended March 31, 2016. Approximately 76,000 shares remained available to repurchase under this program as of March 31, 2016.  The stock repurchase program has no expiration date and may be suspended or discontinued at any time. 

Conference CallThe Company will host a conference call to discuss these results with additional comments and details on Tuesday, May 10, 2016 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.lifewaykefir.com, and will be archived online through May 24, 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 Balance Sheets  
March 31, 2016 and December 31, 2015  
(In thousands)  
   
    March 31, 2016 (Unaudited)     December 31, 2015  
Current assets            
Cash and cash equivalents   $ 3,786     $ 5,646  
Investments, at fair value     2,484       2,216  
Certificates of deposits in financial institutions     150       513  
Inventories     8,291       7,664  
Accounts receivable, net of allowance for doubtful accounts and discounts of $1,600 and $1,800 at March 31, 2016 and December 31, 2015 respectively     10,187       9,604  
Prepaid expenses and other current assets     287       201  
Deferred income taxes     532       556  
Refundable income taxes     877       449  
Total current assets     26,594       26,849  
                 
Property and equipment, net     21,080       21,375  
                 
Intangible assets                
Goodwill & indefinite-lived intangibles     14,068       14,068  
Other intangible assets, net     2,166       2,344  
Total intangible assets     16,234       16,412  
                 
Other Assets                
Long-term accounts receivable, net of current portion     270       282  
Total assets   $ 64,178     $ 64,918  
                 
Current liabilities                
Current maturities of notes payable   $ 840     $ 840  
Accounts payable     7,339       8,393  
Accrued expenses     1,849       1,538  
Accrued income taxes           52  
Total current liabilities     10,028       10,823  
                 
Notes payable     6,909       7,119  
                 
Deferred income taxes     1,719       1,719  
Total liabilities     18,656       19,661  
                 
Stockholders' equity                
Common stock, no par value; 40,000 shares authorized;                
  17,274, shares issued; 16,171 and 16,210 shares                
  outstanding at March 31, 2016 and December 31, 2015 respectively     6,509       6,509  
Paid-in-capital     2,054       2,033  
Treasury stock, at cost     (10,170     (9,730 )
Retained earnings     47,164       46,516  
Accumulated other comprehensive loss, net of taxes     (35     (71 )
Total stockholders' equity     45,522       45,257  
                 
Total liabilities and stockholders' equity   $ 64,178     $ 64,918  
                 

   
  LIFEWAY FOODS, INC. AND SUBSIDIARIES
  Consolidated Statements of Income and Comprehensive Income
  For the three months ended March 31, 2016 and 2015
  (Unaudited)
  (In thousands, except per share data)
   
          2016       2015  
  Gross Sales     $ 37,030     $ 33,103  
  Less: discounts and allowances       (4,460     (3,481
  Net sales       32,570       29,622  
                   
  Cost of goods sold       23,351       20,648  
  Depreciation expense       631       591  
  Total cost of goods sold       23,982       21,239  
                   
  Gross profit       8,588       8,383  
                   
  Selling expenses       2,944       3,302  
  General and administrative       4,356       3,492  
  Amortization expense       176       179  
  Total operating expenses       7,476       6,973  
                   
  Income from operations       1,112       1,410  
                   
  Other income (expense):                
  Interest expense       (58 )     (65
  Loss on sale of investments, net reclassified from OCI       (12     (5
  Gain on sale of equipment             36  
  Impairment of investments             (180
  Other income (expense), net       17       108  
  Total other income (expense)       (53 )     (106
                   
  Income before provision for income taxes       1,059       1,304  
                   
  Provision for income taxes       411       650  
                   
  Net income     $ 648     $ 654  
                   
  Basic and diluted earnings per common share     $ 0.04     $ 0.04  
                   
  Weighted average number of shares outstanding       16,189       16,346  
  COMPREHENSIVE INCOME                
  Net income     $ 648     $ 654  
  Other comprehensive income (loss), net of tax:                
    Unrealized gains (losses) on investments, net of $(23) and $23 of taxes       36       (35
  Reclassifications to earnings:                
    Other than temporary impairment of investments, net of $(76) of taxes             104  
    Realized (gains) losses on investments, net of $-- and $2 of taxes             (3 )
  Comprehensive income     $ 684     $ 720  
                     

 
LIFEWAY FOODS, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
For the Three Months Ended March 31, 2016 and 2015
(Unaudited)
(In thousands, except per share data)
                 
Cash flows from operating activities:     2016       2015  
Net income   $ 648     $ 654  
Adjustments to reconcile net income to operating cash flow:                
  Depreciation and amortization     807       770  
  Loss on sale of investments, net     12       5  
  Impairment of investments           180  
  Deferred income taxes           (196 )
  Stock based compensation     21        
  (Gain) on sale of equipment           (36
(Increase) decrease in operating assets:                
  Accounts receivable     (584     (33 )
  Inventories     (627     (513 )
  Refundable income taxes     (427 )     1,050  
  Prepaid expenses and other current assets     (71 )     180  
Increase (decrease) in operating liabilities:                
  Accounts payable     (1,054 )     (1,464
  Accrued expenses     311       1,395  
  Income taxes payable     (52     145  
Net cash (used in) provided by operating activities     (1,016 )     2,137  
                 
Cash flows from investing activities:                
Purchases of investments     (373 )     (1,005 )
Proceeds from sale of investments     152       693  
Redemption of certificates of deposits     363       100  
Investments in certificates of deposit           (85
Purchases of property and equipment     (336 )     (1,040 )
Proceeds from sale of equipment           36  
Net cash used in investing activities     (194 )     (1,301 )
                 
Cash flows from financing activities:                
                 
Purchase of treasury stock     (440      
Repayment of notes payable     (210 )     (271 )
Net cash used in financing activities     (650 )     (271
                 
Net increase (decrease) in cash and cash equivalents     (1,860 )     565  
Cash and cash equivalents at the beginning of the year     5,646       3,260  
Cash and cash equivalents at the end of the year   $ 3,786     $ 3,825  
                 
Supplemental cash flow information:                
  Cash paid for income taxes, net of refunds   $ 886     $ 40  
  Cash paid for interest   $ 58     $ 65  

 
Contact:Lifeway Foods, Inc.	 Phone: 877.281.3874	 Email: info@Lifeway.net	 Investor Relations:	  	 ICR	  	 Katie TurnerHunter Wells	 646.277.1228

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