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Form 8-K LIFEWAY FOODS INC For: Nov 09

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November 9, 2015 4:21 PM EST
 
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON D.C.  20549
 
 
FORM 8-K
CURRENT REPORT
 
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
 
Date of Report (Date of earliest event reported):   November 9, 2015
 
 
 
LIFEWAY FOODS, INC.
(Exact name of registrant as specified in its charter)
 
         
ILLINOIS
  
000-17363
  
36-3442829
(State or other jurisdiction of
incorporation)
  
(Commission File Number)
  
(I.R.S. Employer Identification No.)
         
         
6431 West Oakton St. Morton Grove, IL
  
60053
(Address of principal executive offices)
  
(Zip code)
 
 
Registrant’s telephone number, including area code: (847) 967-1010

 
N/A
(Former name or former address, if changed since last report)
 

 
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

o   Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
o   Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
o   Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
o   Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
 
 
 
 
 
 
 
Item 2.02 
Results of Operations and Financial Condition.

On November 9, 2015, Lifeway Foods, Inc. (the “Company”) issued a press release reporting its financial results for the quarter ended September 30, 2015.

A copy of the press release is attached as Exhibit 99.1 to this Form 8-K.  This Form 8-K and Exhibit 99.1 are each being furnished to the Securities and Exchange Commission (the “SEC”) pursuant to Item 2.02 of Form 8-K and are therefore not to be considered “filed” with the SEC.
 
 
 

Item 9.01 
Financial Statements and Exhibits.

(d)           Exhibits.
 
99.1         Press release date November 9, 2015.

 
 
 
 
2
 
SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
 
 

 
 
LIFEWAY FOODS, INC.
 
 
  
Dated:    November 9, 2015
By:  
/s/ Edward Smolyansky  
  
   
Edward Smolyansky 
  
   
Chief Financial and Accounting Officer, Secretary and Treasurer
  
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
3
 
 
 
EXHIBIT INDEX
 
 
 

 
Exhibit No.
Description
 
99.1 
Press release dated November 9, 2015.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
4
 
EXHIBIT 99.1
 
 
 
Lifeway Foods, Inc. to Announce Results for the Third Quarter Ended September 30, 2015

Morton Grove, IL — November 9, 2015 — Lifeway Foods, Inc., (Nasdaq: LWAY), the leading U.S. supplier of kefir cultured dairy products, today reported financial results for the third quarter of its fiscal 2015 ended September 30, 2015.

“This year we have made good progress on our strategic initiatives as evidenced by our solid results for the third quarter,” said Julie Smolyansky, CEO of Lifeway Foods, Inc. “We are committed to providing the highest quality kefir products and our performance demonstrates the strong and continued demand for Lifeway Kefir. Our team is diligently focused on creating innovative products, expanding distribution across new and existing retail channels, and growing Lifeway’s brand awareness. We are confident in our ability to develop our business into a global, healthy food products company as we execute on the tremendous opportunities ahead of us.”

Third Quarter Results
Third quarter 2015 total consolidated net sales decreased 2% to $29.6 million from $30.1 million in the third quarter of 2014. The Company’s third quarter net sales were impacted by significantly higher customer promotional allowances.

Cost of goods sold as a percentage of net sales, excluding depreciation expense, was approximately 67% during the third quarter compared to approximately 72% for the same period last year. This decrease was primarily driven by lower milk prices partially offset by an increase in promotional allowances and discounts given to customers. Gross profit as a percent of net sales increased to 31% from 26% last year.

Selling expenses decreased approximately 4% to $2.7 million during the third quarter of 2015 from $2.8 million in the third quarter of 2014.

General and administrative expenses increased $1.5 million to $4.1 million from $2.6 million in the same three-month period last year. The increase is primarily a result of increases in salaries and professional fees primarily associated with the Company’s delayed SEC filings.

Provision for income taxes was $0.9 million, or a 50.9% effective rate, for the third quarter of 2015 compared to $1.2 million, or a 54.2% effective tax rate, during the same period in 2014.

Net income was $0.9 million, or $0.05 per diluted share, in the three-month period ended September 30, 2015 compared to net income of $1.0 million, or $0.06 per diluted share, in the same period in 2014.

 
 
 
First Nine Months of Fiscal 2015
Total consolidated net sales increased by $0.2 million, or approximately 0.3%, to $89.0 million during the nine-month period ended September 30, 2015 from $88.8 million during the same nine-month period in 2014.

Cost of goods sold as a percentage of net sales, excluding depreciation expense, was approximately 71% during the first nine months of fiscal 2015 compared to approximately 73% for the same period last year. This improvement was primarily driven by lower milk prices partially offset by an increase in promotional allowances and discounts given to customers. Gross profit as a percent of net sales increased to 28% from 25% last year.

Selling expenses decreased approximately 5% to $9.5 million during the first nine months of 2015 from $10.0 million in the first nine months of 2014.

General and administrative expenses increased $3.8 million to $10.9 million from $7.1 million in the same nine-month period last year. The increase is primarily a result of increases in salaries, Wisconsin facilities expenses, and professional fees primarily associated with the Company’s delayed SEC filings in 2015

Provision for income taxes was $1.7 million, or a 50.8% effective rate, for the first nine months of 2015 compared to $2.3 million, or a 53.8% effective tax rate, during the same period in 2014.

Net income was $1.6 million or $0.10 per share for the nine-month period ended September 30, 2015 compared to $2.0 million or $0.12 per share in the same period in 2014.

Balance Sheet/Cash Flow Highlights
The Company had cash and cash equivalents of approximately $5.0 million as of September 30, 2015 compared to cash and cash equivalents of $3.3 million as of December 31, 2014.  The Company also generated $4.4 million in cash from operating activities in the first nine-months of 2015 compared to $3.7 million in the year ago period.

Stock Repurchase Program
In September, the Company’s Board of Directors authorized a stock repurchase program for up to 250,000 shares of common stock or up to $3.5 million. There were no share repurchases during the nine months ended September 30, 2015.

Conference Call
The Company will host a conference call to discuss these results with additional comments and details on Monday, November 9, 2015 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 November 23, 2015. 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 (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 now sold across the United States, 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.

 
Contact:
   
Lifeway Foods, Inc.
  
Phone: 877.281.3874
  
 
  
Investor Relations:
  
   
ICR
  
   
Katie Turner
Hunter Wells
  
646.277.1228
  






















 
 
 
LIFEWAY FOODS, INC. AND SUBSIDIARIES
Consolidated Statements of Financial Condition
September 30, 2015 and December 31, 2014

   
September 30,
    
December 31,
  
   
2015
    
2014
  
   
(Unaudited)
        
ASSETS
            
             
Current assets
            
Cash and cash equivalents
  
$
5,010,669
    
$
3,260,244
  
Investments, at fair value
    
2,512,537
      
2,779,140
  
Certificates of deposits in financial institutions
    
534,678
      
149,965
  
Inventories
    
6,931,773
      
5,814,219
  
Accounts receivable, net of allowance for doubtful accounts and discounts of $1,100,000and $1,050,000 at September 30, 2015 and  December 31, 2014, respectively
    
10,753,485
      
10,213,541
  
Prepaid expenses and other current assets
    
53,966
      
251,922
  
Other receivables
    
37,850
      
134,338
  
Deferred income taxes
    
612,159
      
408,340
  
Refundable income taxes
    
129,426
      
1,140,796
  
Total current assets
    
26,576,273
      
24,152,505
  
                 
Property and equipment, net
    
21,602,426
      
21,892,395
  
                 
Intangible assets
                
Goodwill
    
14,068,091
      
14,068,091
  
Other intangible assets, net
    
2,523,006
      
3,059,764
  
Total intangible assets
    
16,591,097
      
17,127,855
  
                 
Other Assets
                
Long-term accounts receivable, net of current portion
    
294,767
      
251,683
  
Total assets
  
$
65,064,563
    
$
63,424,438
  
                 
                 
LIABILITIES AND STOCKHOLDERS’ EQUITY
                
                 
Current liabilities
                
Current maturities of notes payable
  
$
840,000
    
$
872,285
  
Accounts payable
    
5,190,593
      
5,586,755
  
Accrued expenses
    
3,104,452
      
2,066,076
  
Accrued income taxes
    
448,891
      
—
  
Total current liabilities
    
9,583,936
      
8,525,116
  
                 
Notes payable
    
7,329,328
      
8,124,515
  
                 
Deferred income taxes
    
1,806,539
      
2,075,095
  
Total liabilities
    
18,719,803
      
18,724,726
  
                 
Stockholders’ equity
                
Common stock, no par value; 40,000,000 shares authorized;
                
17,273,776 shares issued; 16,346,017 shares outstanding
                
at September 30, 2015 and December 31, 2014
    
6,509,267
      
6,509,267
  
Paid-in-capital
    
2,032,516
      
2,032,516
  
Treasury stock, at cost
    
(8,187,682
)
    
(8,187,682
)
Retained earnings
    
46,189,101
      
44,543,618
  
Accumulated other comprehensive loss, net of taxes
    
(198,442
 )    
(198,007
)
Total stockholders’ equity
    
46,344,760
      
44,699,712
  
                 
Total liabilities and stockholders’ equity
  
$
65,064,563
    
$
63,424,438
  
 
 
 
 
 
LIFEWAY FOODS, INC. AND SUBSIDIARIES
Consolidated Statements of Income and Comprehensive Income
For the Three Months and Nine Months Ended September 30, 2015 and 2014
(Unaudited)
 
   
Three Months Ended September 30,
      
Nine Months Ended September 30,
  
   
2015
    
2014
      
2015
      
2014
  
Gross sales
  
$
33,519,071
    
$
32,704,435
    
$
102,913,996
    
$
97,359,630
  
Less: discounts and promotional allowances
    
(3,920,406
 )    
(2,594,213
)
    
(13,872,019
)
    
(8,552,286
)
Net sales
    
29,598,665
      
30,110,222
      
89,041,977
      
88,807,344
  
                                 
Cost of goods sold
    
19,929,639
      
21,697,954
      
62,778,735
      
64,812,489
  
Depreciation expense
    
613,830
      
610,966
      
1,808,988
      
2,022,204
  
                                 
Total cost of goods sold
    
20,543,469
      
22,308,920
      
64,587,723
      
66,834,693
  
                                 
Gross profit
    
9,055,196
      
7,801,302
      
24,454,254
      
21,972,651
  
                                 
Selling expenses
    
2,706,375
      
2,804,127
      
9,486,177
      
9,977,636
  
General and administrative
    
4,117,811
      
2,627,566
      
10,919,862
      
7,115,393
  
Amortization expense
    
178,919
      
178,919
      
536,758
      
536,758
  
                                 
Total operating expenses
    
7,003,105
      
5,610,612
      
20,942,797
      
17,629,787
  
                                 
Income from operations
    
2,052,091
      
2,190,690
      
3,511,457
      
4,342,864
  
                                 
Other income (expense):
                                
Interest and dividend income
    
25,259
      
22,739
      
86,477
      
86,664
  
Rental income
    
1,800
      
1,201
      
5,400
      
2,900
  
Interest expense
    
(55,698
)
    
(62,084
)
    
(179,468
)
    
(194,377
)
(Loss)/Gain on sale of investments, net
                                
reclassified from OCI
    
839
      
(22,940
 )    
(21,098
)
    
39,190
  
Gain on sale of property and equipment
    
200
      
85,077
      
243,283
      
8,592
  
Other income (expense), net
    
(205,000
)
    
—
      
(303,796
)
    
1,674
  
Total other income (expense)
    
(232,600
)
    
23,993
      
(169,202
)
    
(55,357
)
                                 
Income before provision for
                                
   income taxes
    
1,819,491
      
2,214,683
      
3,342,255
      
4,287,507
  
                                 
Provision for income taxes
    
926,639
      
1,201,005
      
1,696,772
      
2,307,234
  
                                 
Net income
  
$
892,852
    
$
1,013,678
    
$
1,645,483
    
$
1,980,273
  
                                 
Basic and diluted earnings
                                
   per common share
  
$
0.05
    
$
0.06
    
$
0.10
    
$
0.12
  
                                 
Weighted average number of
                                
common shares outstanding
    
16,346,017
      
16,346,017
      
16,346,017
      
16,346,017
  
                                 
COMPREHENSIVE INCOME
                                
                                 
Net income
  
$
892,852
    
$
1,013,678
    
$
1,645,483
    
$
1,980,273
  
                                 
Other comprehensive income
                                
(loss), net of tax:
                                
Unrealized gains (losses) on
                                
    investments (net of tax)
    
(183,170
)
    
(93,679
)
    
(247,645
)
    
(22,524
)
Less reclassification adjustment
                                
    for (gains) losses and other than
    temporary impairments included in
                                
    net income (net of taxes)
    
124,395
      
13,702
      
247,210
      
(23,408
)
                                 
Comprehensive income
  
$
834,047
    
$
933,701
    
$
1,645,048
    
$
1,934,341
  
 
 
 
 
 
 
LIFEWAY FOODS, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
For the Nine Months Ended September 30, 2015 and 2014
(Unaudited)

 
   
September 30,
  
Cash flows from operating activities:
  
2015
    
2014
  
Net income
  
$
1,645,483
    
$
1,980,273
  
Adjustments to reconcile net income to net
                
cash flows from operating activities:
                
Depreciation and amortization
    
2,345,746
      
2,558,962
  
Loss (gain) on sale of investments, net
    
21,098
      
(39,190
)
Impairment of investments
    
384,500
      
—
  
Deferred income taxes
    
(472,375
)
    
(783,607
)
Bad debt expense
    
250
      
76,049
  
Gain on sale of property and equipment
    
(243,083
)
    
(8,592
)
(Increase) decrease in operating assets:
                
Accounts receivable
    
(540,194
)
    
(1,548,110
)
Other receivables
    
53,674
      
76,552
  
Inventories
    
(1,117,554
)
    
(235,849
)
Refundable income taxes
    
1,011,370
      
972,522
  
Prepaid expenses and other current assets
    
197,956
      
73,379
  
Increase (decrease) in operating liabilities:
                
Accounts payable
    
(396,162
)
    
595,333
  
Accrued expenses
    
1,038,376
      
(40,184
)
Accrued income taxes
    
448,891
      
—
  
Net cash provided by operating activities
    
4,377,976
      
3,677,538
  
                 
Cash flows from investing activities:
                
Purchases of investments
    
(1,369,285
)
    
(2,319,742
)
Proceeds from sale of investments
    
1,229,855
      
1,736,946
  
Redemption of certificates of deposits
    
249,965
      
15,000
  
Investments in certificates of deposits
    
(634,678
)
    
—
  
Purchases of property and equipment
    
(1,618,716
)
    
(3,052,303
)
Proceeds from sale of property and equipment
    
342,780
      
89,076
  
Net cash used in investing activities
    
(1,800,079
)
    
(3,531,023
)
                 
Cash flows from financing activities:
                
Repayment of notes payable
    
(827,472
)
    
(657,694
)
Net cash used in financing activities
    
(827,472
)
    
(657,694
)
                 
Net (decrease) increase in cash and cash equivalents
    
1,750,425
      
(511,179
)
                 
Cash and cash equivalents at the beginning of the period
    
3,260,244
      
3,306,608
  
                 
Cash and cash equivalents at the end of the period
  
$
5,010,669
    
$
2,795,429
  
 
Supplemental cash flow information
 
Cash paid for income taxes
  
$
1,120,000
    
$
2,131,658
  
Cash paid for interest
  
$
177,521
    
$
195,275
  

 

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