Lifeway Foods Inc., (Nasdaq: LWAY), a leading supplier of cultured dairy products known as kefir and organic kefir, announced results for the first quarter ended March 31, 2013.
First quarter 2013 highlights:
- Net sales increased approximately 26 percent to $24.4 million for the quarter
Gross profit increased approximately 41 percent and gross profit margin
increased to 35 percent for the quarter
- Record earnings per diluted share of $0.14 for the quarter
Cash and cash equivalents increased $1.6 million to $2.7 million for the
"We started the year off strong as our record sales increase, combined with a lower cost of milk and management of our expenses enabled us to see a 100 percent increase in earnings the first quarter of 2013," said Julie Smolyansky, CEO of Lifeway Foods, Inc. "We continue to add new distribution in the US and to expand Lifeway's kefir probiotic reach beyond dairy aisles into other areas of the store. We continue to focus on expanding our complementary product portfolio to appeal to the increasingly health conscious consumer. Looking ahead, we are prudently targeting new markets like the UK and remain optimistic about our future growth long-term both domestically and internationally."
First quarter results
First quarter of 2013 gross sales increased approximately 28 percent to $27.6 million compared to $21.6 million for the first quarter of 2012. This increase is primarily attributable to increased sales and awareness of the Company's flagship line, Kefir, as well as ProBugs® Organic Kefir for kids and BioKefir.
First quarter total consolidated net sales increased approximately 26 percent to $24.4 million from $19.4 million in the first quarter of 2012. Net sales are recorded as gross sales less promotional activities such as slotting fees paid, couponing, spoilage and promotional allowances as well as early payment terms given to customers. The total allowance for promotions and discounts in the first quarter of 2013 was approximately $3.2 million or 12 percent of gross sales, compared to $2.2 million or approximately 10 percent of gross sales in the same period last year.
Cost of goods sold as a percentage of net sales, excluding depreciation expense, were approximately 63 percent during the first quarter of 2013, compared to approximately 67 percent during the same period in 2012. Gross profit for the first quarter of 2012 increased 41 percent to approximately $8.6 million, compared to approximately $6.1 million in the first quarter of the prior year. The gross profit margin increased to 35 percent in the first quarter 2013 versus 31 percent in the first quarter of 2012. The increase was primarily attributable to the decreased cost of conventional milk, the Company's largest raw material. The total cost of milk was approximately 5 percent lower during the first quarter 2013 when compared to the same period in 2012.
Operating expenses as a percentage of net sales were approximately 20 percent during the first quarter of 2013, compared to approximately 22 percent during the same period in 2012. This was primarily attributable to an increase in selling related expenses, which increased approximately 3 percent to $2.8 million during the first quarter of 2013, from $2.7 million during the same period in 2012.
The Company reported income from operations of $3.7 million during the first quarter of 2013, an improvement of $1.9 million from $1.9 million during the same period in 2012.
Provision for income tax was $1.4 million or a 37 percent effective tax rate for the first quarter compared to a provision for income tax of $0.8 million or a 41 percent effective tax rate during the same period in 2012.
Total net income was $2.4 million, or $0.14 per diluted share, for the three-month period ended March 31, 2013 compared to $1.1 million, or $0.07 per diluted share, in the same period in 2012.
Balance sheet/cash flow highlights
The Company had a net increase of cash and cash equivalents of $1.6 million during the three-month period ended March 31, 2013 compared to the same period in 2012 and an increase of $0.5 million as compared to the December 31, 2012 cash and equivalent balance. The Company had cash and cash equivalents of $2.7 million as of March 31, 2013 compared to cash and cash equivalents of $1.2 million as of March 31, 2012.
Total stockholder's equity was $41.7 million as of March 31, 2013, which is an increase of $5.4 million when compared to March 31, 2012. This is primarily due the increase in retained earnings of $5.7 million when compared to March 31, 2012.