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Share Name | Share Symbol | Market | Type |
---|---|---|---|
Lifeway Foods Inc | NASDAQ:LWAY | NASDAQ | Common Stock |
Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
---|---|---|---|---|---|---|---|---|---|---|
0.28 | 1.15% | 24.63 | 23.74 | 25.19 | 27.45 | 24.325 | 25.44 | 345,609 | 01:00:00 |
(Mark One)
|
|
☒
|
QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|
☐
|
TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|
Illinois
|
36-3442829
|
(State or Other Jurisdiction of
Incorporation or Organization)
|
(I.R.S. Employer
Identification No.)
|
Large accelerated filer
☐
|
Accelerated filer ☒
|
Non-accelerated filer
☐
|
Smaller reporting company ☒
|
PART I – FINANCIAL INFORMATION
|
||
Item 1.
|
Financial Statements (Unaudited).
|
3 |
Item 2.
|
Management's Discussion and Analysis of Financial Condition and Results of Operations.
|
19 |
Item 3.
|
Quantitative and Qualitative Disclosures About Market Risk.
|
24 |
Item 4.
|
Controls and Procedures.
|
24 |
PART II – OTHER INFORMATION
|
||
Item 1.
|
Legal Proceedings.
|
27 |
Item 1 A.
|
Risk Factors.
|
27 |
Item 2.
|
Unregistered Sales of Equity Securities and Use of Proceeds.
|
27 |
Item 3.
|
Defaults Upon Senior Securities.
|
27 |
Item 4.
|
Mine Safety Disclosure.
|
27 |
Item 5.
|
Other Information.
|
28 |
Item 6.
|
Exhibits.
|
29 |
Signatures.
|
30 | |
Index of Exhibits.
|
31 |
|
September 30,
2016
(Unaudited)
|
December 31,
2015
|
||||||
Current assets
|
||||||||
Cash and cash equivalents
|
$
|
9,164
|
$
|
5,646
|
||||
Investments, at fair value
|
—
|
2,216
|
||||||
Certificates of deposits in financial institutions
|
—
|
513
|
||||||
Inventories
|
9,186
|
7,664
|
||||||
Accounts receivable, net of allowance for doubtful accounts and
discounts & allowances of $1,800 at September 30, 2016 and
December 31, 2015
|
10,426
|
9,604
|
||||||
Prepaid expenses and other current assets
|
550
|
201
|
||||||
Deferred income taxes
|
509
|
556
|
||||||
Refundable income taxes
|
521
|
449
|
||||||
Total current assets
|
30,356
|
26,849
|
||||||
|
||||||||
Property and equipment, net
|
21,603
|
21,375
|
||||||
|
||||||||
Intangible assets
|
||||||||
Goodwill & indefinite-lived intangibles
|
14,068
|
14,068
|
||||||
Other intangible assets, net
|
1,815
|
2,344
|
||||||
Total intangible assets
|
15,883
|
16,412
|
||||||
|
||||||||
Other Assets
|
368
|
282
|
||||||
Total assets
|
$
|
68,210
|
$
|
64,918
|
||||
|
||||||||
Current liabilities
|
||||||||
Current maturities of notes payable
|
$
|
840
|
$
|
840
|
||||
Accounts payable
|
8,762
|
8,393
|
||||||
Accrued expenses
|
2,002
|
1,538
|
||||||
Accrued income taxes
|
267
|
52
|
||||||
Total current liabilities
|
11,871
|
10,823
|
||||||
|
||||||||
Notes payable
|
6,489
|
7,119
|
||||||
|
||||||||
Deferred income taxes
|
2,162
|
1,719
|
||||||
Total liabilities
|
20,522
|
19,661
|
||||||
|
||||||||
Stockholders' equity
|
||||||||
Common stock, no par value; 40,000 shares authorized;
|
||||||||
17,274, shares issued; 16,141 and 16,210 shares
|
||||||||
outstanding at September 30, 2016 and December 31, 2015 respectively
|
6,509
|
6,509
|
||||||
Paid-in-capital
|
2,133
|
2,033
|
||||||
Treasury stock, at cost
|
(10,468
|
)
|
(9,730
|
)
|
||||
Retained earnings
|
49,514
|
46,516
|
||||||
Accumulated other comprehensive income (loss), net of taxes
|
—
|
(71
|
)
|
|||||
Total stockholders' equity
|
47,688
|
45,257
|
||||||
|
||||||||
Total liabilities and stockholders' equity
|
$
|
68,210
|
$
|
64,918
|
Three Months Ended
September 30,
|
Nine Months Ended
September 30,
|
|||||||||||||||
(Revised)
|
(Revised)
|
|||||||||||||||
2016
|
2015
|
2016
|
2015
|
|||||||||||||
Net sales
|
$
|
29,990
|
$
|
29,599
|
$
|
93,691
|
$
|
89,042
|
||||||||
Cost of goods sold
|
21,478
|
20,049
|
65,480
|
63,916
|
||||||||||||
Depreciation expense
|
533
|
614
|
1,797
|
1,809
|
||||||||||||
Total cost of goods sold
|
22,011
|
20,663
|
67,277
|
65,725
|
||||||||||||
Gross profit
|
7,979
|
8,936
|
26,414
|
23,317
|
||||||||||||
Selling expenses
|
4,306
|
2,706
|
10,733
|
8,626
|
||||||||||||
General and administrative
|
3,308
|
3,998
|
10,300
|
10,643
|
||||||||||||
Amortization expense
|
176
|
179
|
529
|
537
|
||||||||||||
Total operating expenses
|
7,790
|
6,883
|
21,562
|
19,806
|
||||||||||||
Income from operations
|
189
|
2,053
|
4,852
|
3,511
|
||||||||||||
Other income (expense):
|
||||||||||||||||
Interest expense
|
(56
|
)
|
(55
|
)
|
(161
|
)
|
(179
|
)
|
||||||||
Gain / (Loss) on sale of investments, net reclassified from OCI
|
12
|
1
|
(15
|
)
|
(21
|
)
|
||||||||||
Impairment of investments
|
—
|
(205
|
)
|
—
|
(385
|
)
|
||||||||||
(Loss) / Gain on sale of property and equipment
|
(156
|
)
|
—
|
(307
|
)
|
243
|
||||||||||
Other income (expense), net
|
28
|
26
|
105
|
173
|
||||||||||||
Total other income (expense)
|
(172
|
)
|
(233
|
)
|
(378
|
)
|
(169
|
)
|
||||||||
Income before provision for income taxes
|
17
|
1,820
|
4,474
|
3,342
|
||||||||||||
Provision for income taxes
|
81
|
927
|
1,476
|
1,697
|
||||||||||||
Net income (loss)
|
$
|
(64
|
)
|
$
|
893
|
$
|
2,998
|
$
|
1,645
|
|||||||
Basic earnings (loss) per common share
|
$
|
(0.00
|
)
|
$
|
0.05
|
$
|
0.19
|
$
|
0.10
|
|||||||
Diluted earnings (loss) per common share
|
$
|
(0.00
|
)
|
$
|
0.05
|
$
|
0.19
|
$
|
0.10
|
|||||||
Weighted average number of shares outstanding – Basic
|
16,141
|
16,346
|
16,159
|
16,346
|
||||||||||||
Weighted average number of shares outstanding – Diluted
|
16,161
|
16,346
|
16,181
|
16,346
|
||||||||||||
COMPREHENSIVE INCOME (LOSS)
|
||||||||||||||||
Net income (loss)
|
$
|
(64
|
)
|
$
|
893
|
$
|
2,998
|
$
|
1,645
|
|||||||
Other comprehensive income (loss), net of tax:
|
||||||||||||||||
Unrealized gains (losses) on investments, net of taxes
|
6
|
(183
|
)
|
62
|
(247
|
)
|
||||||||||
Reclassifications to earnings:
|
||||||||||||||||
Other than temporary impairment of investments, net of taxes
|
||||||||||||||||
Realized (gains) losses on investments, net of taxes
|
(8
|
)
|
124
|
9
|
247
|
|||||||||||
Comprehensive income (loss)
|
$
|
(66
|
)
|
$
|
834
|
$
|
3,069
|
$
|
1,645
|
Common Stock
|
||||||||||||||||||||||||||||||||
Issued
|
In treasury
|
Paid In
|
Retained
|
Accumulated Other Comprehensive Income (Loss),
|
Total
Stockholders'
|
|||||||||||||||||||||||||||
Shares
|
$
|
Shares
|
$
|
Capital
|
Earnings
|
Net of Tax
|
Equity
|
|||||||||||||||||||||||||
Balances at January 1, 2015
|
17,274
|
$
|
6,509
|
(928
|
)
|
$
|
(8,188
|
)
|
$
|
2,033
|
$
|
44,544
|
$
|
(198
|
)
|
$
|
44,700
|
|||||||||||||||
Other comprehensive income
|
—
|
—
|
—
|
—
|
—
|
—
|
—
|
—
|
||||||||||||||||||||||||
Net income for the nine months ended September 30, 2015
|
—
|
—
|
—
|
—
|
—
|
1,645
|
—
|
1,645
|
||||||||||||||||||||||||
Balances at September 30, 2015
|
17,274
|
$
|
6,509
|
(928
|
)
|
$
|
(8,188
|
)
|
$
|
2,033
|
$
|
46,189
|
$
|
(198
|
)
|
$
|
46,345
|
|||||||||||||||
Balances at January 1, 2016
|
17,274
|
$
|
6,509
|
(1,064
|
)
|
$
|
(9,730
|
)
|
$
|
2,033
|
$
|
46,516
|
$
|
(71
|
)
|
$
|
45,257
|
|||||||||||||||
Other comprehensive income
|
—
|
—
|
—
|
—
|
—
|
—
|
71
|
71
|
||||||||||||||||||||||||
Treasury stock purchased
|
—
|
—
|
(69
|
)
|
(738
|
)
|
—
|
—
|
—
|
(738
|
)
|
|||||||||||||||||||||
Stock based compensation
|
—
|
—
|
—
|
—
|
100
|
—
|
—
|
100
|
||||||||||||||||||||||||
Net income for the nine months ended September 30, 2016
|
—
|
—
|
—
|
—
|
—
|
2,998
|
—
|
2,998
|
||||||||||||||||||||||||
Balances at September 30, 2016
|
17,274
|
$
|
6,509
|
(1,133
|
)
|
$
|
(10,468
|
)
|
$
|
2,133
|
$
|
49,514
|
$
|
—
|
$
|
47,688
|
||||||||||||||||
Cash flows from operating activities:
|
2016
|
2015
|
||||||
Net income
|
$
|
2,998
|
$
|
1,645
|
||||
Adjustments to reconcile net income to operating cash flow:
|
||||||||
Depreciation and amortization
|
2,326
|
2,346
|
||||||
Loss on sale of investments, net
|
15
|
21
|
||||||
Impairment of investments
|
—
|
385
|
||||||
Deferred income taxes
|
444
|
(472
|
)
|
|||||
Reserve for inventory obsolescence
|
89
|
—
|
||||||
Stock based compensation
|
100
|
—
|
||||||
Loss (Gain) on sale of property and equipment
|
307
|
(243
|
)
|
|||||
(Increase) decrease in operating assets:
|
||||||||
Accounts receivable
|
(823
|
)
|
(540
|
)
|
||||
Inventories
|
(1,611
|
)
|
(1,118
|
)
|
||||
Refundable income taxes
|
(72
|
)
|
1,011
|
|||||
Prepaid expenses and other current assets
|
(310
|
)
|
252
|
|||||
Increase (decrease) in operating liabilities:
|
||||||||
Accounts payable
|
370
|
(396
|
)
|
|||||
Accrued expenses
|
465
|
1,038
|
||||||
Accrued income taxes
|
215
|
449
|
||||||
Net cash provided by operating activities
|
4,513
|
4,378
|
||||||
|
||||||||
Cash flows from investing activities:
|
||||||||
Purchases of investments
|
(559
|
)
|
(1,369
|
)
|
||||
Proceeds from sale of investments
|
2,751
|
1,230
|
||||||
Redemption of certificates of deposits
|
513
|
250
|
||||||
Investments in certificates of deposit
|
—
|
(635
|
)
|
|||||
Purchases of property and equipment
|
(2,481
|
)
|
(1,619
|
)
|
||||
Proceeds from sale of property and equipment
|
149
|
343
|
||||||
Net cash provided by (used in) investing activities
|
373
|
(1,800
|
)
|
|||||
|
||||||||
Cash flows from financing activities:
|
||||||||
Purchase of treasury stock
|
(738
|
)
|
—
|
|||||
Repayment of notes payable
|
(630
|
)
|
(827
|
)
|
||||
Net cash used in financing activities
|
(1,368
|
)
|
(827
|
)
|
||||
|
||||||||
Net increase in cash and cash equivalents
|
3,518
|
1,751
|
||||||
Cash and cash equivalents at the beginning of the period
|
5,646
|
3,260
|
||||||
Cash and cash equivalents at the end of the period
|
$
|
9,164
|
$
|
5,011
|
||||
Supplemental cash flow information:
|
||||||||
Cash paid for income taxes, net of refunds
|
$
|
886
|
$
|
795
|
||||
Cash paid for interest
|
$
|
162
|
$
|
178
|
|
(Unaudited)
Three Months Ended
March 31, 2016
|
(Unaudited)
Six Months Ended
June 30, 2016
|
||||||||||||||||||||||
|
As Previously Reported
|
Adjustment
|
As Revised
|
As Previously Reported
|
Adjustment
|
As Revised
|
||||||||||||||||||
Net Sales
|
$
|
32,570
|
$
|
—
|
$
|
32,570
|
$
|
63,701
|
$
|
—
|
$
|
63,701
|
||||||||||||
Cost of Goods Sold
|
23,351
|
519
|
23,870
|
44,290
|
976
|
45,266
|
||||||||||||||||||
Gross Profit
|
9,219
|
(519
|
)
|
8,700
|
19,411
|
(976
|
)
|
18,435
|
||||||||||||||||
Selling expenses
|
2,964
|
—
|
2,964
|
6,427
|
—
|
6,427
|
||||||||||||||||||
General & administrative
|
4,465
|
(519
|
)
|
3,946
|
7,968
|
(976
|
)
|
6,992
|
||||||||||||||||
Amortization
|
176
|
—
|
176
|
353
|
—
|
353
|
||||||||||||||||||
Operating expenses
|
7,605
|
(519
|
)
|
7,086
|
14,748
|
(976
|
)
|
13,772
|
||||||||||||||||
Income from Operations
|
$ |
1,614
|
$ |
—
|
$ |
1,614
|
$ |
4,663
|
$ |
—
|
$ |
4,663
|
|
(Unaudited)
Three Months Ended
March 31, 2015
|
(Unaudited)
Six Months Ended
June 30, 2015
|
||||||||||||||||||||||
|
As Previously Reported
(a)
|
Adjustment
|
As Revised
|
As Previously Reported
(a)
|
Adjustment
|
As Revised
|
||||||||||||||||||
Net Sales
|
$
|
29,622
|
$
|
—
|
$
|
29,622
|
$
|
59,443
|
$
|
—
|
$
|
59,443
|
||||||||||||
Cost of Goods Sold
|
21,239
|
458
|
21,697
|
44,044
|
1,017
|
45,061
|
||||||||||||||||||
Gross Profit
|
8,383
|
(458
|
)
|
7,925
|
15,399
|
(1,017
|
)
|
14,382
|
||||||||||||||||
Selling expenses
|
3,302
|
—
|
3,302
|
5,920
|
—
|
5,920
|
||||||||||||||||||
General & administrative
|
3,492
|
(458
|
)
|
3,034
|
7,662
|
(1,017
|
)
|
6,645
|
||||||||||||||||
Amortization
|
179
|
—
|
179
|
358
|
—
|
358
|
||||||||||||||||||
Operating expenses
|
6,973
|
(458
|
)
|
6,515
|
13,940
|
(1,017
|
)
|
12,923
|
||||||||||||||||
Income from Operations
|
$
|
1,410
|
$
|
—
|
$
|
1,410
|
$
|
1,459
|
$
|
—
|
$
|
1,459
|
(a)
|
As previously reported in our first and second quarter 2016 Form 10Q filings.
|
|
(Unaudited)
Nine Months Ended
September 30, 2015
|
Twelve Months Ended
December 31, 2015
|
||||||||||||||||||||||
As Previously Reported
|
Adjustment
(b)
|
As Revised
|
As Previously Reported
|
Adjustment
(b)
|
As Revised
|
|||||||||||||||||||
Net Sales
|
$
|
89,042
|
$
|
—
|
$
|
89,042
|
$
|
118,587
|
$
|
—
|
$
|
118,587
|
||||||||||||
Cost of Goods Sold
|
64,588
|
1,137
|
65,725
|
86,986
|
1,556
|
88,542
|
||||||||||||||||||
Gross Profit
|
24,454
|
(1,137
|
)
|
23,317
|
31,601
|
(1,556
|
)
|
30,045
|
||||||||||||||||
Selling expenses
|
9,486
|
(860
|
)
|
8,626
|
12,752
|
(860
|
)
|
11,892
|
||||||||||||||||
General & administrative
|
10,920
|
(277
|
)
|
10,643
|
13,730
|
(696
|
)
|
13,034
|
||||||||||||||||
Amortization
|
537
|
—
|
537
|
716
|
—
|
716
|
||||||||||||||||||
Operating expenses
|
20,943
|
(1,137
|
)
|
19,806
|
27,198
|
(1,556
|
)
|
25,642
|
||||||||||||||||
Income from Operations
|
$
|
3,511
|
$
|
—
|
$
|
3,511
|
$
|
4,403
|
$
|
—
|
$
|
4,403
|
(b)
|
Includes the reclassification of certain executive compensation from Selling to General and administrative expenses.
|
|
September 30, 2016
|
December 31, 2015
|
||||||
Goodwill
|
$
|
10,368
|
$
|
10,368
|
||||
Brand names
|
3,700
|
3,700
|
||||||
Goodwill & indefinite lived intangible assets
|
$
|
14,068
|
$
|
14,068
|
|
September 30, 2016
|
December 31, 2015
|
||||||
Recipes
|
$
|
44
|
$
|
44
|
||||
Customer lists and other customer related intangibles
|
4,529
|
4,529
|
||||||
Customer relationship
|
985
|
985
|
||||||
Trade names
|
2,248
|
2,248
|
||||||
Formula
|
438
|
438
|
||||||
8,244
|
8,244
|
|||||||
Accumulated amortization
|
(6,429
|
)
|
(5,900
|
)
|
||||
Intangible assets, net
|
$
|
1,815
|
$
|
2,344
|
September 30, 2016
|
Cost
|
Unrealized
Gains
|
Unrealized
Losses
|
Fair
Value
|
||||||||||||
|
||||||||||||||||
Common stocks & ETF's
|
$
|
—
|
$
|
—
|
$
|
—
|
$
|
—
|
||||||||
Mutual Funds
|
—
|
—
|
—
|
—
|
||||||||||||
Preferred Securities
|
—
|
—
|
—
|
—
|
||||||||||||
Corporate Bonds
|
—
|
—
|
—
|
—
|
||||||||||||
Total
|
$
|
—
|
$
|
—
|
$
|
—
|
$
|
—
|
December 31, 2015
|
Cost
|
Unrealized
Gains
|
Unrealized
Losses
|
Fair
Value
|
||||||||||||
|
||||||||||||||||
Common stocks & ETF's
|
$
|
690
|
$
|
17
|
$
|
(94
|
)
|
$
|
613
|
|||||||
Mutual Funds
|
27
|
—
|
(1
|
)
|
26
|
|||||||||||
Preferred Securities
|
98
|
6
|
—
|
104
|
||||||||||||
Corporate Bonds
|
1,518
|
43
|
(88
|
)
|
1,473
|
|||||||||||
Total
|
$
|
2,333
|
$
|
66
|
$
|
(183
|
)
|
$
|
2,216
|
Less Than 12 Months |
12 Months or Greater
|
Total
|
||||||||||||||||||||||
September 30, 2016
|
Fair Value
|
Unrealized Losses
|
Fair Value
|
Unrealized Losses
|
Fair Value
|
Unrealized Losses
|
||||||||||||||||||
Common stocks & ETF's
|
$
|
—
|
$
|
—
|
$
|
—
|
$
|
—
|
$
|
—
|
$
|
—
|
||||||||||||
Mutual Funds
|
—
|
—
|
—
|
—
|
—
|
—
|
||||||||||||||||||
Preferred Securities
|
—
|
—
|
—
|
—
|
—
|
—
|
||||||||||||||||||
Corporate Bonds
|
—
|
—
|
—
|
—
|
—
|
—
|
||||||||||||||||||
|
$
|
—
|
$
|
—
|
$
|
—
|
$
|
—
|
$
|
—
|
$
|
—
|
Less Than 12 Months
|
12 Months or Greater
|
Total
|
||||||||||||||||||||||
December 31, 2015
|
Fair Value
|
Unrealized Losses
|
Fair Value
|
Unrealized Losses
|
Fair Value
|
Unrealized Losses
|
||||||||||||||||||
Common stocks & ETF's
|
$
|
225
|
$
|
(72
|
)
|
$
|
152
|
$
|
(22
|
)
|
$
|
377
|
$
|
(94
|
)
|
|||||||||
Mutual Funds
|
26
|
(1
|
)
|
—
|
—
|
26
|
(1
|
)
|
||||||||||||||||
Preferred Securities
|
—
|
—
|
—
|
—
|
—
|
—
|
||||||||||||||||||
Corporate Bonds
|
370
|
(32
|
)
|
479
|
(56
|
)
|
849
|
(88
|
)
|
|||||||||||||||
|
$
|
621
|
$
|
(105
|
)
|
$
|
631
|
$
|
(78
|
)
|
$
|
1,252
|
$
|
(183
|
)
|
September 30,
2016
|
December 31,
2015
|
|||||||
Finished goods
|
$
|
3,357
|
$
|
2,946
|
||||
Production supplies
|
3,168
|
2,636
|
||||||
Raw materials
|
2,661
|
2,082
|
||||||
Total inventories
|
$
|
9,186
|
$
|
7,664
|
September 30,
2016
|
December 31,
2015
|
|||||||
Land
|
$
|
1,747
|
$
|
1,807
|
||||
Buildings and improvements
|
16,387
|
16,387
|
||||||
Machinery and equipment
|
22,533
|
22,907
|
||||||
Vehicles
|
848
|
1,298
|
||||||
Office equipment
|
709
|
709
|
||||||
Construction in process
|
1,765
|
311
|
||||||
43,989
|
43,419
|
|||||||
Accumulated depreciation
|
(22,386
|
)
|
(22,044
|
)
|
||||
Total property and equipment
|
$
|
21,603
|
$
|
21,375
|
September 30,
2016
|
December 31,
2015
|
|||||||
Accrued payroll and payroll taxes
|
$
|
1,462
|
$
|
859
|
||||
Accrued property tax
|
297
|
377
|
||||||
Other
|
243
|
302
|
||||||
Total accrued expenses
|
$
|
2,002
|
$
|
1,538
|
|
September 30,
2016
|
December 31, 2015
|
||||||
|
||||||||
Variable rate bank notes due May 31, 2018. Principal and interest payable monthly with a balloon payment due at maturity.
|
$
|
3,465
|
$
|
3,846
|
||||
|
||||||||
Variable rate bank notes due May 31, 2019. Principal and interest payable monthly with a balloon payment due at maturity.
|
3,864
|
4,113
|
||||||
|
||||||||
Total notes payable
|
7,329
|
7,959
|
||||||
Less current maturities
|
840
|
840
|
||||||
Total long-term portion
|
$
|
6,489
|
$
|
7,119
|
● | Quoted prices for similar assets or liabilities in active markets; |
● | Quoted prices for identical or similar assets or liabilities in inactive markets; |
● | Inputs other than quoted prices that are observable for the asset or liability; |
● | Inputs that are derived principally from or corroborated by observable market data by correlation or other means. |
|
Assets at Fair Value as of September 30, 2016
|
|||||||||||||||
|
Level 1
|
Level 2
|
Level 3
|
Total
|
||||||||||||
|
||||||||||||||||
Mutual Funds
|
$
|
—
|
$
|
—
|
$
|
—
|
$
|
—
|
||||||||
Common Stocks & ETF's
|
—
|
—
|
—
|
—
|
||||||||||||
Preferred Securities
|
—
|
—
|
—
|
—
|
||||||||||||
Corporate Bonds
|
—
|
—
|
—
|
—
|
|
Assets at Fair Value as of December 31, 2015
|
|||||||||||||||
|
Level 1
|
Level 2
|
Level 3
|
Total
|
||||||||||||
|
||||||||||||||||
Mutual Funds
|
$
|
26
|
$
|
—
|
$
|
—
|
$
|
26
|
||||||||
Common Stocks & ETF's
|
613
|
—
|
—
|
613
|
||||||||||||
Preferred Securities
|
—
|
104
|
—
|
104
|
||||||||||||
Corporate Bonds
|
—
|
1,149
|
324
|
1,473
|
Options
|
Weighted
average
exercise price
|
Weighted
average
remaining
contractual life
|
Aggregate
intrinsic value
|
|||||||||||||
|
||||||||||||||||
Outstanding at December 31,2015
|
—
|
$ | ||||||||||||||
Granted
|
50
|
$
|
10.37
|
|||||||||||||
Exercised
|
—
|
$
|
—
|
|||||||||||||
Terminated
|
—
|
$
|
—
|
|||||||||||||
Outstanding at September 30, 2016
|
50
|
$
|
10.37
|
9.50
|
$
|
329
|
||||||||||
Exercisable at September 30, 2016
|
7
|
$
|
9.57
|
9.75
|
$
|
50
|
||||||||||
Three Months Ended
September 30, 2016
|
||||||
Risk free interest rate
|
1.00 - 1.11%
|
|
||||
Expected dividend yield
|
0.27%
|
|
||||
Expected volatility
|
38.96 - 39.94%
|
|
||||
Expected term
|
5.03 - 5.88
|
Nine months ended
September 30, |
Three months ended
September 30, |
|||||||||||||||
2016
|
2015
|
2016
|
2015
|
|||||||||||||
Cream and Drinkable Kefir other than ProBugs
|
$
|
80,135
|
$
|
76,723
|
$
|
25,533
|
$
|
25,902
|
||||||||
Pro Bugs
|
4,962
|
5,999
|
1,606
|
1,702
|
||||||||||||
Lifeway Farmer Cheese
|
7,579
|
5,125
|
2,479
|
1,661
|
||||||||||||
Frozen Kefir
|
1,015
|
1,195
|
372
|
334
|
||||||||||||
Net Sales
|
$
|
93,691
|
$
|
89,042
|
$
|
29,990
|
$
|
29,599
|
Three months ended September 30,
|
Change
|
|||||||||||||||
2016
|
(Revised)
2015
|
$ |
%
|
|||||||||||||
Net sales
|
$
|
29,990
|
$
|
29,599
|
$
|
391
|
1.3
|
%
|
||||||||
Cost of goods sold
|
$
|
21,478
|
$
|
20,049
|
$
|
1,429
|
||||||||||
Depreciation expense
|
533
|
614
|
(81
|
)
|
||||||||||||
Total cost of goods sold
|
$
|
22,011
|
$
|
20,663
|
$
|
(1,348
|
)
|
(6.5
|
%)
|
|||||||
|
||||||||||||||||
Gross profit
|
$
|
7,979
|
$
|
8,936
|
$
|
(957
|
)
|
(10.7
|
%)
|
|||||||
Gross Profit % to net sales
|
26.6
|
%
|
30.2
|
%
|
||||||||||||
Selling expenses
|
$
|
4,306
|
$
|
2,706
|
$
|
(1,600
|
)
|
(59.1
|
%)
|
|||||||
Selling expenses % to net sales
|
14.4
|
%
|
9.1
|
%
|
||||||||||||
General & administrative expenses
|
$
|
3,308
|
$
|
3,998
|
$
|
690
|
17.3
|
%
|
||||||||
General & administrative % to net sales
|
11.0
|
%
|
13.5
|
%
|
||||||||||||
Amortization expense
|
$
|
176
|
$
|
179
|
$
|
3
|
1.7
|
%
|
||||||||
Total operating expenses
|
$
|
7,790
|
$
|
6,883
|
$
|
(907
|
)
|
(13.2
|
%)
|
|||||||
Total operating expense % to net sales
|
26.0
|
%
|
23.3
|
%
|
||||||||||||
Income from operations
|
$
|
189
|
$
|
2,053
|
$
|
(1,864
|
)
|
(90.8
|
%)
|
|||||||
Income from operations % to net sales
|
0.6
|
%
|
6.9
|
%
|
Nine months ended September 30,
|
Change
|
|||||||||||||||
2016
|
(Revised)
2015
|
$ |
%
|
|||||||||||||
Net sales
|
$
|
93,691
|
$
|
89,042
|
$
|
4,649
|
5.2
|
%
|
||||||||
Cost of goods sold
|
$
|
65,480
|
$
|
63,916
|
$
|
1,564
|
||||||||||
Depreciation expense
|
1,797
|
1,809
|
(12
|
)
|
||||||||||||
Total cost of goods sold
|
$
|
67,277
|
$
|
65,725
|
$
|
(1,552
|
)
|
(2.4
|
%)
|
|||||||
|
||||||||||||||||
Gross profit
|
$
|
26,414
|
$
|
23,317
|
$
|
3,097
|
13.3
|
%
|
||||||||
Gross Profit % to net sales
|
28.2
|
%
|
26.2
|
%
|
||||||||||||
Selling expenses
|
$
|
10,733
|
$
|
8,626
|
$
|
(2,107
|
)
|
(24.4
|
%)
|
|||||||
Selling expenses % to net sales
|
11.5
|
%
|
9.7
|
%
|
||||||||||||
General & administrative expenses
|
$
|
10,300
|
$
|
10,643
|
$
|
343
|
3.2
|
%
|
||||||||
General & administrative % to net sales
|
11.0
|
%
|
12.0
|
%
|
||||||||||||
Amortization expense
|
$
|
529
|
$
|
537
|
$
|
8
|
1.5
|
%
|
||||||||
Total operating expenses
|
$
|
21,562
|
$
|
19,806
|
$
|
(1,756
|
)
|
(8.9
|
%)
|
|||||||
Total operating expense % to net sales
|
23.0
|
%
|
22.2
|
%
|
||||||||||||
Income from operations
|
$
|
4,852
|
$
|
3,511
|
$
|
1,341
|
38.2
|
%
|
||||||||
Income from operations % to net sales
|
5.2
|
%
|
3.9
|
%
|
(a)
|
Evaluation of Disclosure Controls and Procedures
|
(b)
|
Changes in Internal Control over Financial Reporting
|
·
|
Our leadership team remains committed to achieving and maintaining a strong control environment, high ethical standards and financial reporting integrity. This commitment continues to be communicated to and reinforced with our employees.
|
·
|
We continue to foster awareness and understanding of standards and principles for accounting and financial reporting. This includes the implementation and clarification of specific accounting policies and procedures.
|
·
|
We continue to enhance the development, communication, and monitoring of processes and controls to ensure that appropriate account reconciliations and journal entry controls are performed, documented, and reviewed as part of our standardized procedures.
|
·
|
We continue to improve the planning, coordination, communication and discipline in our period-end closing and financial statement preparation process in order to increase both its effectiveness and efficiency.
|
·
|
The audit committee of our board of directors has maintained an elevated frequency and depth of its discussions with management regarding financial reporting and internal control matters.
|
·
|
During the three months ended March 31, 2016 we took the following actions to improve our internal controls over financial reporting:
|
o
|
We in-sourced our fixed asset system and related transaction processing from a third party service provider, enabling the transacting of fixed asset additions and depreciation journal entries earlier in our quarterly close process.
|
o
|
We consolidated our income tax accounting services and income tax return preparation under a single third party service provider. Consolidating these activities into a single service provider enhances our ability to close the books on timely and accurate basis.
|
·
|
During the three months ended June 30, 2016 we took the following actions to improve our internal controls over financial reporting:
|
o
|
We have increased the size and capabilities of our finance and accounting functions by establishing a new role that oversees financial planning and analysis. Our former corporate controller has begun transitioning into this new role. Also, in July 2016 we hired a new corporate controller with significant public accounting and financial reporting experience who has begun transitioning into his role.
|
o
|
We have implemented a management disclosure committee of representatives from our finance, accounting, and legal departments to enhance the review and operation of our disclosure controls and procedures. From time to time, we will supplement the committee with members from other areas of our management team and business, including our outsourced internal audit and investor relations functions.
|
o
|
We have centralized our payroll processing activities from three locations down to one. The centralization improves management's oversight and better segregates time and attendance activities from payroll processing activities.
|
o
|
We have updated and expanded our whistleblower policy and retained a new third-party service provider to manage the administrative aspects of our whistleblower hotline.
|
o
|
We have formalized our contract approval process. The formalized process establishes explicit levels of authority for contract approval and requires specific levels of review. The improved process includes a documented policy and enabling technology that will enhance governance over significant contracts.
|
·
|
During the three months ended September 30, 2016 we took the following actions to improve our internal controls over financial reporting:
|
o
|
We continued to transition our controllership responsibilities to our recently hired corporate controller.
|
o
|
We implemented additional procedures in our inventory accounting process, including expanded analytical reviews over our priced-out physical inventory, expanded completeness testing of the priced out physical inventory, expanded reviews of the accuracy of our bill of materials (BOM's) and expanded analytical reviews of gross margin.
|
o
|
Our management disclosure committee continued to meet formally and informally in tandem with our third quarter reporting process.
|
o
|
During the third quarter, we also put additional formality into our disclosure controls by establishing a cascaded certification process. While our existing policies create a foundation for organizational transparency, our cascaded certification process goes a step further by requiring key managers to inform the certifying officers in a structured way of any accounting or reporting matters in their areas of responsibility that could be relevant to such filings.
|
Period
|
Total number of shares purchased
|
Average price paid per share
|
Total number of shares purchased as part of a publicly announced program (a)
|
Approximate
Dollar Value of
Shares that may yet
be Purchased
Under the Plans or
Programs
($ in thousands)
|
||||||||||||
7/1/2016 to
7/31/2016
|
—
|
$
|
—
|
—
|
$
|
1,214
|
||||||||||
8/1/2016 to
8/30/2016
|
—
|
$
|
—
|
—
|
$
|
1,214
|
||||||||||
9/1/2016 to
9/30/2016
|
—
|
$
|
—
|
—
|
$
|
1,214
|
||||||||||
Total
|
—
|
$
|
—
|
—
|
$
|
1,214
|
||||||||||
(a)
|
During the fourth quarter of 2015, the company had a publicly announced share repurchase program. Under this program, which was announced on September 24, 2015, the company's Board of Directors authorized the purchase of up to $3.5 million of company stock. The program has no expiration date.
|
10.1
|
Employment Agreement dated March 5, 2016 with Douglas A. Hass
|
31.1
|
Officer's Certificate Pursuant to 15 U.S.C. 7241, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
|
31.2
|
Officer's Certificate Pursuant to 15 U.S.C. 7241, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
|
32.1
|
Certification of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
|
32.2
|
Certification of Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
|
99.1*
|
Press release dated November 9, 2016 reporting the Company's financial results for the nine months ended September 30, 2016.
|
101
|
Interactive Data Files.
|
LIFEWAY FOODS, INC.
|
|||
Date: November 9, 2016
|
By:
|
/s/ Julie Smolyansky
|
|
Julie Smolyansky
|
|||
Chief Executive Officer, President, and Director
|
|||
(Principal Executive Officer)
|
|||
Date: November 9, 2016
|
By:
|
/s/ John P. Waldron
|
|
John P. Waldron
|
|||
Chief Financial Officer
(Principal Financial and Accounting Officer)
|
10.1
|
Employment Agreement dated March 5, 2016 with Douglas A. Hass |
31.1
|
Officer's Certificate Pursuant to 15 U.S.C. 7241, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
|
31.2
|
Officer's Certificate Pursuant to 15 U.S.C. 7241, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
|
32.1
|
Certification of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
|
32.2
|
Certification of Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
|
99.1*
|
Press release dated November 9, 2016 reporting the Company's financial results for the nine months ended September 30, 2016.
|
101
|
Interactive Data Files.
|
1 Year Lifeway Foods Chart |
1 Month Lifeway Foods Chart |
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