Lifeway Foods, a leading supplier of cultured dairy products known as kefir and organic kefir, announced results for the first quarter ended March 31, 2014.
First quarter of 2014 gross sales increased approximately 16% to $32.1 million compared to $27.6 million for the first quarter of 2013. 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 20% to $29.1 million from $24.4 million in the first quarter of 2013.
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 2014 was approximately $2.9 million or 9% of gross sales, compared to $3.2 million or approximately 12% of gross sales in the same period last year.
Cost of goods sold as a percentage of net sales, excluding depreciation expense, were approximately 74% during the first quarter of 2014, compared to approximately 63% during the same period in 2013. Gross profit for the first quarter of 2014 decreased 18% to approximately $7.1 million, compared to approximately $8.6 million in the first quarter of the prior year.
The gross profit margin decreased to 24% in the first quarter 2014 versus 35% in the first quarter of 2013. The decrease was primarily attributable to the increased cost of conventional milk, the Company's largest raw material. The total cost of milk was approximately 35% higher during the first quarter 2014 when compared to the same period in 2013.
Operating expenses as a percentage of net sales were approximately 21% during the first quarter of 2014, compared to approximately 20% during the same period in 2013.
This was primarily attributable to an increase in selling related expenses, which increased approximately 24% to $3.5 million during the first quarter of 2014, from $2.8 million during the same period in 2013.
The Company reported income from operations of $1.0 million during the first quarter of 2014 compared to $3.7 million during the same period in 2013.
Total net income was $0.7 million, or $0.04 per diluted share, for the three-month period ended March 31, 2014 compared to $2.4 million, or $0.14 per diluted share, in the same period in 2013.
