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Lifeway Foods Announces Record Fourth Quarter and Full Year 2013 Financial Results

Full Year 2013 Gross Sales Increase 21% to $109.0 Million

MORTON GROVE, Ill., March 31, 2014 /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, 2013. 

Lifeway Foods logo.

"We are very pleased to report record net revenues for 2013, the highest in the Company's history, and are confident that our strong growth will continue in fiscal 2014," said Julie Smolyansky, CEO of Lifeway Foods, Inc.  "We are focused on our strategic plan to create innovative, healthy and nutritious food products for our customers while expanding distribution in the U.S. and abroad. We remain committed to wellness and continue to see positive business trends for Lifeway. We are already off to a strong start for 2014 and expect a 24% increase in net sales for the first quarter from the prior year. I am very excited for our future opportunities and believe we are well positioned for long-term sustainable growth that will allow us to increase value for shareholders."

Fourth Quarter Results
Fourth quarter of 2013 gross sales increased 26% to $28.9 million compared to $22.9 million for the fourth quarter of 2012.  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 2013 total consolidated net sales increased 26% to $26.3 million from $20.88 million in the fourth quarter of 2012. 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.

Cost of goods sold as a percentage of net sales, excluding depreciation expense, were approximately 80% during the fourth quarter of 2013, compared to approximately 65% during the same period in 2012. Gross profit for the fourth quarter of 2013 decreased 30% to approximately $4.8 million, compared to approximately $6.0 million in the fourth quarter of the prior year. The gross profit margin was 18% in the fourth quarter 2013 compared to 29% in the fourth quarter of 2012. The decrease was primarily attributable to the increased cost of conventional milk, the Company's largest raw material.  The total cost of milk was approximately 30% higher during the fourth quarter 2013 when compared to the same period in 2013. 

Operating expenses as a percentage of net sales were approximately 20% during the fourth quarter of 2013, compared to approximately 24% during the same period in 2012.  This was primarily attributable to a decrease in selling expenses, which decreased by $0.2 million to $3.0 million during the fourth quarter of 2013, from $3.2 million during the same period in 2012.

The Company reported a loss in operations of $0.4 million during the fourth quarter of 2013, a decrease of $2.2 million from reported income from operations of $1.8 million during the same period in 2012.

Provision for income tax was a benefit of $0.4 million for the fourth quarter 2013  compared to $0.7 million or a 40% effective tax rate during the same period in 2012.

Total net loss was $0.5 million, or $0.03 per diluted share, for the three-month period ended December 31, 2013 compared to net income of $1.1 million, or $0.07 per diluted share, in the same period in 2012. Net loss includes a $0.3 million pre-tax loss on disposition of assets due to the closing of a Starfruit store location. This is viewed as a one-time, non-cash expense. 

2013 Year End Results
Total consolidated gross sales increased 21% or $19.2 million to approximately $109.0 million during the twelve-month period ended December 31, 2013 from $90.0 million during the same twelve-month period in 2012.  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 20% or $16.2 million to $97.5 million during the twelve-month period ended December 31, 2013 from $81.4 million during the same twelve- month period in 2012.

Cost of goods sold as a percentage of net sales, excluding depreciation expense, were approximately 70% during the twelve- month period ended December 31, 2013, compared to approximately 65% during the same period in 2011. Gross profit for 2013 increased 4% to $27.6 million, compared to $26.6 million in 2012. The Company's gross profit margin was 28% compared to 33% in 2012.

Total operating income decreased $0.8 million, or approximately 9%, to $8.0 million during the twelve-month period ended December 31, 2013, from $8.8 million during the same period in 2012. The gross profit margin decline was primarily attributable to the cost of conventional and organic milk, our largest raw material.  The total cost of milk was approximately 25% higher in 2013 versus 2012.

Total net income was $5.0 million, or $0.30 per diluted share, for the twelve-month period ended December 31, 2013 compared to $5.6 million, or $0.34 per diluted share, in the same period in 2012.

Balance Sheet/Cash Flow Highlights
The Company had a net increase in cash and cash equivalents of  approximately $1.0 million during the twelve-month period ended December 31, 2013 compared to a net increase in cash and cash equivalents of $1.2 million during the same period in 2012.  The Company had cash and cash equivalents of approximately $3.3 million as of December 31, 2013 compared to cash and cash equivalents of $2.3 million as of December 31, 2012.

Total stockholder's equity was approximately $42.9 million as of December 31, 2013, which is an increase of approximately $3.6 million when compared to December 31, 2012.  This is primarily due the increase in retained earnings of approximately $3.7 million when compared to December 31, 2012.

Conference Call
The Company will host a conference call to discuss these results with additional comments and details on Monday, March 31, 2014 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.lifeway.net, and will be archived online through April 14, 2014. 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 and Chief Operating 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: [email protected]

Investor Relations:

ICR 
Katie Turner 
John Mills
646.277.1228

Logo- http://photos.prnewswire.com/prnh/20131010/AQ95965LOGO

  


Consolidated Statements of Income and Comprehensive Income
For the Years Ended December 31, 2013 and 2012




(Unaudited)



Years Ended



December 31, 2013



2013


2012

Sales


$ 108,966,094




$  89,754,007



Less: discounts and allowances


(  11,441,952)




(    8,402,742)



Net sales


97,524,142


97,524,142


81,351,265


81,351,265










Cost of goods sold




68,290,014




53,098,191

Depreciation expense




1,626,575




1,629,594










Total cost of goods sold




69,916,589




54,727,785










Gross profit




27,607,553




26,623,480










Selling expenses




11,296,381




10,703,980

General and administrative




7,582,397




6,319,972

Amortization expense




712,803




754,817










Total operating expenses




19,591,581




17,778,769










Income from operations




8,015,972




8,844,711










Other income (expense):









Interest and dividend income




116,380




85,383

Rental income




11,727




12,285

Interest expense




(   203,365)




(       177,622)

Gain (loss) on sale of investments, net









reclassified from OCI




195,500




71,286

Loss on disposition of assets




(   304,958)





Other income (expense)




10,577




(11,169)

Total other income (expense)




(174,139)




(         19,837)










Income before provision for









   income taxes




7,841,833




8,824,874










Provision for income taxes




2,866,875




3,205,076










Net income




$ 4,974,958




$     5,619,798










Basic and diluted earnings









per common share




0.30




0.34










Weighted average number of 









  shares outstanding




16,346,017




16,373,224










COMPREHENSIVE INCOME


















Net income




$ 4,974,958




$     5,619,798










Other comprehensive income









    (loss), net of tax:









    Unrealized gains (losses) on 









      investments (net of tax)




64,674




102,816

    Less reclassification adjustment 









      for (gains) losses included in









      net income (net of taxes)




(   110,458)




(40,277)










Comprehensive income




$ 4,929,174




$     5,682,337

SOURCE Lifeway Foods, Inc.

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