Lifeway Foods Reports Year End Results

MORTON GROVE, Ill., March 31, 2005 /PRNewswire-FirstCall via COMTEX/ -- Lifeway Foods, Inc. (LWAY) announced its financial results for the 2004 fiscal year as well as strong 2005 first quarter top-line results.

For the year ended December 31, 2004, Lifeway Foods reported a 9.7 percent increase in sales to $16,319,000 from $14,878,000 in 2003. Net income was $2,052,000, or 24 cents a share, compared to $2,222,000, or 26 cents a share, for 2003. The weighted average shares outstanding for 2004 increased slightly to 8,439,159 from 8,436,888 in 2003.

"We are pleased, but by no means satisfied, with our 2004 results," said Julie Smolyansky, Chief Executive Officer of Lifeway Foods. "Our top-line continued to grow as our products continued to gain broader consumer awareness and market penetration. However, our bottom line results were dramatically impacted by the significant rise in milk prices during the year. Milk, which is our largest component ingredient, experienced a 30 to 35 percent increase from the prior year."

"This increase in raw material costs lead to a 15 percent increase in our cost of goods sold. A majority of this increase occurred during the middle portion of the year and we were unable to pass along the entire cost to consumers," Smolyansky said.

The balance sheet continued to strengthen with current assets growing 12 percent to $15,783,000 from $14,012,000 in 2003. The current ratio stands at a robust 17.9 to 1 compared to 13.9 to 1 a year ago. Shareholders' equity rose 13.5 percent to $17,918,000 from $15,793,000 in 2003, and book value grew 13 percent to $2.12 a share from $1.87 a share in 2003. The company remains relatively debt-free.

"We remained focused on creating shareholder value as demonstrated by our continued balance sheet improvements. Also, we are seeing positive results from our 2004 acquisition of the assets of Ilya's Farms through increased distribution of our existing Lifeway product lines. We expect this operation to have a significant impact on our growth plans on the East Coast," stated Smolyansky.

For the first quarter, ended March 31 2005, Lifeway's sales were approximately $4,650,000, or an 18 percent increase from $3,935,000, in the first quarter of 2004. Excluding the one-time sales to the Sav-a-Lot account, which accounted for $362,000 in sales for first quarter 2004, the sales would have increased approximately 30 percent in 2005.

"We are extremely encouraged by our current sales trends and expect this to be a record year for Lifeway Foods. Our weekly sales run rate has improved to more than $400,000. This climb in sales came as a result of increased orders from existing customers, and not by having a large, new account complete initial stocking. In addition, we believe our new packaging has improved our point-of-sale education, as well as heightened the products' visibility among mainstream consumers," continued Smolyansky.

"In addition, during the first quarter, we sampled our products in one of the largest club chains in the U.S. and have been in talks to expand the product line with other large retail and club outlets," Smolyansky concluded.

Lifeway, named as Chicago's 25th fastest-growing public firms by Crain's Chicago Business and Fortune Small Business' 47th Fastest Growing Small Business, is a manufacturer of cultured, probiotic and functional food products in the health food industry, and is America's leading supplier of the cultured dairy product known as kefir. The Company markets 12 flavors of kefir, and America's first and only no sugar added, low carb kefir, Slim 6(TM). The Company also participates in the organic and soy markets with Lifeway Organic(TM), Organic Kefir and Kefir Cheese, and America's first soy kefir called SoyTreat(TM).

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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