Lifeway Foods Reports Fourth Quarter, and 2006 Full Year Earnings Results

MORTON GROVE, Ill., April 2, 2007 /PRNewswire-FirstCall via COMTEX/ -- Lifeway Foods, Inc., (LWAY) , makers of a nutritious, milk-based cultured beverage called kefir, announced today for the fourth quarter ended December 31, 2006, sales increased 52% to $7,893,644 from $5,207,578 during the same period a year ago. Earnings per share were $.03 in the fourth quarter 2006, compared to $.04 per share for the same three-month period in 2005.

For the full twelve months ended December 31, 2006, sales increased 38% to $27,720,713 from $20,131,654 during 2005. Operating income increased 25% to $4,230,126 from $3,401,362 during the same period a year ago. Earnings per share increased to $.17 per share in 2006, up from $.15 per share in 2005. Included in the 2006 EPS was approximately $120,000 in amortization expenses related to the Helios acquisition as well as approximately $133,000 in interest expense related to the financing of the Helios acquisition that were not present in the 2005 EPS.

Edward Smolyansky, CFO commented, "We are extremely pleased with our fourth quarter and full 2006 results. We absorbed the about $2.170 million in sales from the Helios acquisition from August 2006 to the end of the year, but also absorbed about $2.170 million in costs as the Helios business model was not nearly as profitable as Lifeway's. However, we have moved about 25% of the Helios production to our main facility in Illinois, and as 2007 continues, we expect to be able to further consolidate out some expenses. On an operating cash flow basis however, we have never been stronger. In 2006 cash flow from operations was $2,157,503 compared to $1,592,491 in 2005. In addition, we continue to increase our advertising and marketing expenses as this will be a key factor in our future sales growth and market penetration."

Julie Smolyansky, CEO commented, "2006 was another great year for Lifeway. Sales eclipsed our expectations; we introduced many new and innovative products including ProBugs(TM), and acquired our top competitor, Helios Nutrition. All of these developments have further strengthened our position as the top supplier of Kefir, which is one of the fastest growing products in the booming probiotic dairy market. The investments we have made by our marketing and advertising program, as well as the acquisition of Helios really makes the future for Lifeway that much more brighter."

Please join the conference call scheduled for Tuesday, April 3, 2007 at 11:00 AM EDT as Lifeway Foods discusses their 2006 financial results and operations. Participant dial in number is 800-869-6581, and an operator will prompt instructions to ask questions. The passcode is Lifeway.

About Lifeway Foods, Inc.
Lifeway, recently named Fortune Small Business' 94th Fastest Growing Small Business, and one of only 20 companies to ever be named to the list three straight years in a row, is America's leading supplier of the cultured dairy product known as kefir, and now America's only supplier of Organic Kefir. Lifeway Kefir is a dairy beverage that contains Lifeway's exclusive 10 Live and Active probiotic cultures. While most regular yogurt only contains two or three of these "friendly" cultures, Lifeway kefir products offer more nutritional benefits. Lifeway offers 12 different flavors of its Kefir beverage, Organic Kefir and SoyTreat (a soy based kefir). Lifeway recently introduced a series of innovative new products such as pomegranate kefir, Greek-style kefir, a children's line of organic kefir products called ProBugs (TM) in a no-spill pouch in kid-friendly flavors like Orange Creamy Crawler and Sublime Slime Lime, and a line of organic whole milk kefir. Lifeway also produces a line of products marketed in US Hispanic communities, called La Fruta, Drinkable Yogurt (yogurt drinks distinct from kefir). In addition to its line of Kefir products, the company produces a variety of cheese products and recently introduced a line of organic pudding called It's Pudding!.

For more information, contact Lifeway Foods, Inc. at (847) 967-1010 or e- mail at [email protected] and visit .

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.

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