GlobeNewswire Inc | Mar 25, 2021 09:00AM EDT

March 25, 2021

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 $0.5million 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 Lifeways, 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 Americas 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. Lifeways 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 Lifeways 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 Lifeways Annual Report on Form 10-K for the fiscal year ended December 31, 2020, and the Companys 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: 847-967-1010Email: info@lifeway.net

LIFEWAY FOODS, INC. AND SUBSIDIARIESConsolidated Balance SheetsDecember 31, 2020 and 2019(In thousands)

December 31, 2020 2019Current assets Cash and cash equivalents $ 7,926 $ 3,836 Accounts receivable, net of allowance fordoubtful accounts and discounts & allowances of 8,002 6,692 $1,350 and $1,100 at December 31, 2020 and 2019,respectivelyInventories, 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 sharesauthorized; no shares issued or outstanding at ? ? 2020 and 2019Common stock, no par value; 40,000 sharesauthorized; 17,274 shares issued; 15,604 and 6,509 6,509 15,710 shares outstanding at 2020 and 2019Paid-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 SUBSIDIARIESConsolidated Statements of OperationsFor the three months and twelve months ended December 31, 2020 and 2019 (In thousands, except per share data)

Three Months Ended Twelve months Ended December 31, 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 19,154 18,055 75,093 71,513 sold Gross profit 6,431 5,110 26,933 22,149 Selling expenses 2,786 2,553 10,197 11,062 General and 2,980 3,728 11,661 12,828 administrativeAmortization expense 35 40 152 192 Total operating 5,801 6,321 22,010 24,082 expenses Income (loss) income 630 (1,211 ) 4,923 (1,933 )from operations Other income (expense):Interest expense (22 ) (47 ) (118 ) (249 )Fair value gain on ? 1,731 ? 1,731 investmentsRealized gain on ? 1,413 4 1,413 investments, netLoss (gain) on saleof property and ? 6 (28 ) 189 equipmentOther income 45 2 47 84 Total other 23 3,105 (95 ) 3,168 (expense) income Income beforeprovision for income 653 1,894 4,828 1,235 taxes Provision for income 373 840 1,596 782 taxes 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 SUBSIDIARIESConsolidated Statements of Cash FlowsFor 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 3,836 2,998 periodCash 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 ? 944 transitionOperating lease liability recognized at ASU 2016-02 ? 997 transitionIncrease (decrease) in right-of-use assets andoperating lease obligations recognized after ASU (44 ) 305 2016-02 transitionNon-cash financing activities Issuance of common stock under equity incentive 522 ? plans