Lifeway Foods, a supplier of cultured dairy products known as kefir and organic kefir, today announced results for the third quarter ended September 30, 2014.
"Our strong double digit net sales growth in the third quarter demonstrates the continued demand for our nutritious probiotic kefir products," said Julie Smolyansky, CEO of Lifeway Foods, Inc. "Greater brand awareness, increased distribution, and successful new product innovation helped us deliver another quarter of profitability despite continued pressure from increased milk prices. We are committed to executing on our long-term growth strategy and believe there are compelling opportunities ahead as we expand with new and existing customers."
Third Quarter Results
Total consolidated net sales increased 27%, or $6.3 million, to $30.1 million during the three-month period ended September 30, 2014 from $24.0 million during the same three-month period in 2013.
Gross profit for the third quarter of 2014 was $7.4 million compared to $6.9 million in the third quarter of the prior year. The Company's gross profit margin decreased to 25% in the third quarter of 2014 versus 29% in the third quarter of 2013. The decrease was primarily attributable to an approximate 20% increase in the cost of milk, the Company's largest raw material, compared to the same period last year. In addition, gross profit for the quarter was impacted by an increase in depreciation expense of $0.6 million related to a true-up on Starfruit leasehold improvements and expense associated with assets placed in service at the Lifeway Wisconsin location.
In the third quarter, general and administrative expenses increased to $2.6 million from $1.7 million the prior year. This increase is primarily due to start up costs associated with the purchase of the Golden Guernsey dairy plant.
Total operating expenses increased 20% or $1.0 million to $5.6 million during the third quarter of 2014, from $4.7 million during the same period in 2013. This increase was primarily attributable to an increase in general and administrative expenses.
Total operating income was $1.8 million during the third quarter of 2014, from $2.2 million during the same period in 2013. The slight decrease in operating income is related to the decrease in gross profit and increased operating expenses.
The Company's third quarter 2014 effective tax rate was 43% compared to 29% in the same period last year. The company expects the full year tax rate for fiscal 2014 to be comparable to the full year tax rate for fiscal 2013.
Total net income was $1.0 million, or $0.06 per diluted share, for the three-month period ended September 30, 2014 compared to $1.7 million, or $0.10 per diluted share, in the same period in 2013.
Nine Month Results
Total consolidated net sales increased by $17.6 million, or approximately 25%, to $88.8 million during the nine-month period ended September 30, 2014 from $71.3 million during the same nine-month period in 2013.
Gross profit for the first nine-months of 2014 decreased to $22.0 million, compared to $22.8 million in the same period in the prior year. The Company's gross profit margin was 25% in the first nine-months of 2014 compared to 32% in the same period last year.
Total net income was $2.8 million, or $0.17 per share, for the nine-month period ended September 30, 2014 compared to $5.5 million, or $0.33 per share, in the same period in 2013.
Balance Sheet/Cash Flow Highlights
The Company had $2.8 million in cash and cash equivalents as of September 30, 2014 compared to $1.2 million at September 30, 2013. This increase is primarily due to the acquisition of the Golden Guernsey dairy plant in the second quarter of 2013. Total stockholder's equity was $45.7 million as of September 30, 2014, which is an increase of $2.3 million when compared to September 30, 2013.
