Lifeway Foods, Inc. Announces Fourth Quarter and Full Year Ended December 31, 2020

Net Sales increase 8.9% Year-over-Year to $102 million

Morton Grove, Illinois, UNITED STATES


MORTON GROVE, Ill., March 25, 2021 (GLOBE NEWSWIRE) -- Lifeway Foods, Inc. (Nasdaq: LWAY) (“Lifeway” or “the Company”), the leading U.S. supplier of kefir and fermented probiotic products to support the microbiome, today reported financial results for the fourth quarter and full year ended December 31, 2020.

“I am very pleased to report another exciting and strong year of growth here at Lifeway, particularly in light of this difficult year defined by the COVID-19 pandemic,” commented Julie Smolyansky, CEO and President of Lifeway. “Of note, our net sales grew 8.9% to $102.0 million compared to 2019, and our net income increased from $0.5 million in 2019 to $3.2 million in 2020. The food retail environment has been majorly reshaped this year, and our decision to focus on digital engagement has paid dividends in continuing to attract more and more consumers to our multi-serve, immune supporting products. I am very encouraged by the ongoing market trends towards healthy products like Lifeway’s, and I believe this momentum will carry on far past just 2021. Our current retail partnerships are seeing gains, illustrated by our strong results, as we continue to enhance category growth, and we plan on both expanding the current and identifying new profitable relationships in the year ahead. Finally, this year we will continue to invest in customer acquisition strategies because we want more and more people to hear the Lifeway story. We are looking forward to an outstanding 2021.”

Full Year 2020 Results

Net sales were $102.0 million for the year ended December 31, 2020, an increase of $8.4 million or 8.9% versus prior year. The net sales increase was primarily driven by higher volumes of our branded drinkable kefir, partially offset by lower cream revenues associated with a decline in the market price of butter fat.

Gross profit as a percentage of net sales increased to 26.4% for the year ended December 31, 2020 from 23.6% during the same period in 2019. The increase versus the prior year was primarily due to the impact of favorable milk pricing, and to a lesser extent favorable freight costs.

Selling expenses decreased $0.9 million, or 7.8%, to $10.2 million for the year ended December 31, 2020 from $11.1 million in 2019. Selling expenses as a percentage of net sales were 10.0% in 2020 compared to 11.8% in 2019.

General and administrative expenses decreased $1.2 million, or 9.1%, to $11.7 million for the year ended December 31, 2020 from $12.8 million during the same period in 2019. The decrease is primarily a result of lower compensation expense due to organizational changes made in 2019 and lower incentive compensation, partially offset by increased professional fee expense.

Income tax expense was $1.6 million for the year ended December 31, 2020, compared to $0.8 million during the same period in 2019. Our effective income tax rate (ETR) for the year ended December 31, 2020 was 33.1% compared to an ETR of 63.3% in the same period last year.

The Company reported net income of $3.2 million or $0.21 per basic and diluted common share for the year ended December 31, 2020 compared to a net income of $0.5 million or $0.03 per basic and diluted common share in 2019.

About Lifeway Foods, Inc.

Lifeway Foods, Inc., which has been recognized as 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 fermented dairy products are now sold across the United States, Mexico, Ireland and the United Kingdom, with limited distribution in additional countries. Learn how Lifeway is good for more than just you at www.lifewaykefir.com.

Forward-Looking Statements

This release (and oral statements made regarding the subjects of this release) contains “forward-looking statements” as defined in the Private Securities Litigation Reform Act of 1995 regarding, among other things, future operating and financial performance, product development, market position, business strategy and objectives. These statements use words, and variations of words, such as “continue,” “build,” “future,” “increase,” “drive,” “believe,” “look,” “ahead,” “confident,” “deliver,” “outlook,” “expect,” and “predict.” Other examples of forward looking statements may include, but are not limited to, (i) statements of Company plans and objectives, including the introduction of new products, or estimates or predictions of actions by customers or suppliers, (ii) statements of future economic performance, and (III) statements of assumptions underlying other statements and statements about Lifeway or its business. You are cautioned not to rely on these forward-looking statements. These statements are based on current expectations of future events and thus are inherently subject to uncertainty. If underlying assumptions prove inaccurate or known or unknown risks or uncertainties materialize, actual results could vary materially from Lifeway’s expectations and projections. These risks, uncertainties, and other factors include: price competition; the decisions of customers or consumers; the actions of competitors; changes in the pricing of commodities; the effects of government regulation; possible delays in the introduction of new products; and customer acceptance of products and services. A further list and description of these risks, uncertainties, and other factors can be found in Lifeway’s Annual Report on Form 10-K for the fiscal year ended December 31, 2020, and the Company’s subsequent filings with the SEC. Copies of these filings are available online at https://www.sec.gov, http://lifewaykefir.com/investor-relations/, or on request from Lifeway. Information in this release is as of the dates and time periods indicated herein, and Lifeway does not undertake to update any of the information contained in these materials, except as required by law. Accordingly, YOU SHOULD NOT RELY ON THE ACCURACY OF ANY OF THE STATEMENTS OR OTHER INFORMATION CONTAINED IN ANY ARCHIVED PRESS RELEASE.

Contact:

Lifeway Foods, Inc.
Phone: 847-967-1010
Email: info@lifeway.net



LIFEWAY FOODS, INC. AND SUBSIDIARIES
Consolidated Balance Sheets
December 31, 2020 and 2019
(In thousands)

  December 31, 
  2020   2019
Current assets         
Cash and cash equivalents $7,926   $3,836 
Accounts receivable, net of allowance for doubtful accounts and discounts & allowances of $1,350 and $1,100 at December 31, 2020 and 2019, respectively  8,002    6,692 
Inventories, net  6,930    6,392 
Prepaid expenses and other current assets  1,163    1,598 
Refundable income taxes  31    681 
Total current assets  24,052    19,199 
          
Property, plant and equipment, net  21,048    22,274 
Operating lease right-of use asset  345    738 
          
Intangible assets         
Goodwill and indefinite-lived intangibles  12,824    12,824 
Other intangible assets, net      152 
Total intangible assets  12,824    12,976 
          
Other Assets  1,800    1,800 
Total assets $60,069   $56,987 
          
Current liabilities         
Accounts payable $5,592   $5,282 
Accrued expenses  2,196    4,087 
Accrued income taxes  653    154 
Total current liabilities  8,441    9,523 
Line of credit  2,768    2,745 
Operating lease liabilities  165    488 
Deferred income taxes, net  1,764    922 
Other long-term liabilities  77    58 
Total liabilities  13,215    13,736 
          
Stockholders’ equity         
Preferred stock, no par value; 2,500 shares authorized; no shares issued or outstanding at 2020 and 2019       
Common stock, no par value; 40,000 shares authorized; 17,274 shares issued; 15,604 and 15,710 shares outstanding at 2020 and 2019  6,509    6,509 
Paid-in capital  2,600    2,380 
Treasury stock, at cost  (12,450)   (12,601)
Retained earnings  50,195    46,963 
Total stockholders’ equity  46,854    43,251 
          
Total liabilities and stockholders’ equity $60,069   $56,987 



LIFEWAY FOODS, INC. AND SUBSIDIARIES
Consolidated Statements of Operations
For the three months and twelve months ended December 31, 2020 and 2019
(In thousands, except per share data)

  Three Months Ended
December 31,
  Twelve months Ended
December 31,
 
  2020   2019
  2020   2019 
               
Net sales $25,585   $ 23,165   $102,026   $93,662 
                   
Cost of goods sold  18,393    17,144    72,006    68,367 
Depreciation expense  761    911    3,087    3,146 
Total cost of goods sold  19,154    18,055    75,093    71,513 
                   
Gross profit  6,431    5,110    26,933    22,149 
                   
Selling expenses  2,786    2,553    10,197    11,062 
General and administrative  2,980    3,728    11,661    12,828 
Amortization expense  35    40    152    192 
Total operating expenses  5,801    6,321    22,010    24,082 
                   
Income (loss) income from operations  630    (1,211)   4,923    (1,933
                   
Other income (expense):                  
Interest expense  (22)   (47)   (118)   (249)
Fair value gain on investments      1,731        1,731 
Realized gain on investments, net      1,413    4    1,413 
Loss (gain) on sale of property and equipment      6    (28)   189 
Other income  45    2    47    84 
Total other (expense) income  23    3,105    (95)   3,168 
                   
Income before provision for income taxes  653    1,894    4,828    1,235 
                   
Provision for income taxes  373    840    1,596    782 
                   
Net income $280   $1,054   $3,232   $453 
                   
Earnings per common share:                  
Basic $0.02   $0.07   $0.21   $0.03 
Diluted $0.02   $0.07   $0.21   $0.03 
                   
Weighted average common shares:                  
Basic  15,604    15,709    15,597    15,748 
Diluted  15,797    15,821    15,766    15,804 



LIFEWAY FOODS, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
For the Years Ended December 31, 2020 and 2019
(In thousands)

  2020   2019 
        
Cash flows from operating activities:         
Net income $3,232   $453 
Adjustments to reconcile net income to operating cash flow:         
Depreciation and amortization  3,239    3,338 
Non-cash interest expense  23    23 
Non-cash rent expense  (37)   (17)
Bad debt expense  (6)   7 
Deferred Revenue  (91)   (97)
Reserve for inventory obsolescence      (52)
Stock-based compensation  393    838 
Deferred income taxes  841    533 
Fair value gain on investment      (1,731)
Net gain on sale of investment      (1,413)
(Loss) gain on sale of property and equipment  28    (189)
(Increase) decrease in operating assets:         
Accounts receivable  (1,304)   (423)
Inventories  (538)   (523)
Refundable income taxes  649    2,067 
Prepaid expenses and other current assets  423    (526)
Increase (decrease) in operating liabilities:         
Accounts payable  311    710 
Accrued expenses  (1,278)   783 
Operating lease asset amortization/liability      (17)
Accrued income taxes  500    47 
Net cash provided by operating activities  6,385    3,811 
          
Cash flows from investing activities:         
Purchases of investments      (15)
Proceeds from sale of investments      1,509 
Purchases of property and equipment  (1,895)   (1,178)
Proceeds from sale of property and equipment  5    522 
Net cash (used in) provided by investing activities  (1,890)   838 
          
Cash flows from financing activities:         
Purchase of treasury stock  (405)   (538)
Repayment of line of credit      (3,273)
Net cash used in financing activities  (405)   (3,811)
          
Net increase in cash and cash equivalents  4,090    838 
Cash and cash equivalents at the beginning of the period  3,836    2,998 
Cash and cash equivalents at the end of the period $7,926   $3,836 
          
Supplemental cash flow information:         
Cash paid for income taxes, net of (refunds) $(426)  $(1,865)
Cash paid for interest  99    259 
Non-cash investing activities         
Right-of-use assets recognized at ASU 2016-02 transition      944 
Operating lease liability recognized at ASU 2016-02 transition      997 
Increase (decrease) in right-of-use assets and operating lease obligations recognized after ASU 2016-02 transition  (44)   305 
Non-cash financing activities         
Issuance of common stock under equity incentive plans  522