Delivers Another Sequential Quarter of Sales Improvement with Strong Industry Tailwinds
First Quarter Net Sales Increase 3% In-Line with ExpectationsMORTON GROVE, Ill., June 26, 2020 (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 first quarter ended March 31, 2020.“We started the first quarter off strong, culminating in a double-digit sales increase in the month of March compared to prior year period. This resulted in another quarter of sales improvement, which is in-line with our expectations as we continue to execute on our long-term strategic plan for sustainable, profitable growth,” commented Julie Smolyansky, Lifeway’s President and Chief Executive Officer. “During the quarter, our operations team worked to increase production to meet accelerated demand for retail sales and charitable donations, and our marketing team pivoted to reach shoppers online in the absence of in-store promotions and events. We see kefir becoming a top choice to aid in gut health and microbiome support as consumers focus on self-care, nutrition and wellness improvements to stay healthy this year and beyond. Lifeway remains committed to creating value for all stakeholders through capitalizing on the compelling kefir industry tailwinds across distribution channels and with our innovative product offerings to fuel future growth and success.”First Quarter ResultsNet sales were $25.4 million for the first quarter of 2020, an increase of 3.1% from $24.6 million in the first quarter of 2019.Gross profit as a percentage of net sales was 23.6% for the first quarter of 2020, an increase of 150 basis points from 22.1% for the fourth quarter of 2019. Gross profit percentage was 25.6% in prior year period. The decrease versus the prior year was primarily due to the impact of increased strategic promotional investment, partially offset by a reduction in variable costs. Additionally, depreciation expense increased reflecting the continued investment in manufacturing improvements.Selling expenses decreased $0.5 million or 18% to $2.6 million for the first quarter of 2020 from $3.1 million during the same period in 2019. The decrease versus prior year primarily reflects a reduction in advertising and marketing expense, such as trade shows and other marketing events which were postponed due to COVID-19 and the lower planned spending on in-store demonstrations in the first quarter of 2020 compared to the first quarter of 2019. Selling expenses as a percentage of net sales were 10.1% for the first quarter of 2020 compared to 12.8% for the same period in 2019.General and administrative expenses decreased $0.4 million or 9.9% to $3.1 million for the first quarter of 2020 from $3.5 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.The effective income tax rate for the first quarter of 2020 was 27.5% compared to 12.2% in the same period last year. The increase in the effective tax rate was primarily due to non-deductible officer compensation expense, non-deductible compensation expense related to equity incentive awards, separate state tax rates, and the provision for unrecognized tax benefits. The increase was partially offset by the benefit from a net operating loss carryback provision of the CARES Act which went into effect during the first quarter of fiscal year 2020. The increase in the effective tax rate from 2019 to 2020 is due to the fact that the Company has a number of items that are nondeductible or are discrete adjustments to tax expense. Although similar items were reflected in 2019, the percentage effect is substantially different due to the difference in pre-tax income in 2020 compared to the pre-tax loss in 2019.The Company reported earnings of $0.01 per diluted share for the first quarter of 2020 compared to a net loss of $(0.02) per diluted share in the first quarter of 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 cupped kefir and cheese, frozen kefir, specialty cheeses, probiotic supplements and a ProBugs line for kids. Lifeway’s tart and tangy fermented dairy and non-dairy products are now sold across the United States, Mexico, Ireland and the United Kingdom. Learn how Lifeway is good for more than just you at www.lifewaykefir.com.Forward-Looking StatementsThis 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 “from time to time,” “intend,” “plan,” “ongoing,” “realize,” “should,” “may,” “could,” “believe,” “future,” “depend,” “expect,” “will,” “result,” “can,” “remain,” “assurance,” “subject to,” “require,” “limit,” “impose,” “guarantee,” “restrict,” “continue,” “become,” “likely,” “opportunities,” “effect,” “change,” “estimate,” “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. Forward looking statements are based on management’s beliefs, assumptions, estimates and observations of future events based on information available to our management at the time the statements are made and include any statements that do not relate to any historical or current fact. These statements are not guarantees of future performance and they involve certain risks, uncertainties and assumptions that are difficult to predict. Actual outcomes and results may differ materially from what is expressed, implied or forecast by our forward looking statements due in part to the risks, uncertainties, and assumptions that include: the decisions of consumers, our ability to successfully implement our business strategy, changes in the pricing of commodities, the effects of government regulations, the impact of the COVID-19 outbreak on our business, suppliers, consumers, customers and employees, and disruptions in our supply chain or our manufacturing and distribution capabilities, including those due to cyber security threats and the COVID-19 outbreak. 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, 2019, 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.netLIFEWAY FOODS, INC. AND SUBSIDIARIES
Consolidated Balance Sheets
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Consolidated Statements of Operations
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