exh99-1_17403.htm

EXHIBIT 99.1

Lifeway Foods Announces Results for the Third Quarter of 2012

Third Quarter 2012 Net Sales Increase 16% to $20.6 Million

Company Reports Record Third Quarter Earnings per Diluted Share of $0.09 Compared to $0.06 Last Year

Morton Grove, IL — November 14, 2012—Lifeway Foods, Inc., (Nasdaq: LWAY), a leading supplier of cultured dairy products known as kefir and organic kefir, today announced results for the third quarter ended September 30, 2012.

“We are excited to announce another quarter of record growth with our quarterly earnings increasing at more than double the corresponding increase in our rate of sales,“ said Julie Smolyansky, CEO of Lifeway Foods, Inc. “In the third quarter, we were also able to strengthen our balance sheet and increase our cash flows, while returning value to our shareholders through a dividend. Going forward, we believe that our growth strategies combined with improved operating efficiencies will enable us to report the strongest results in our Company’s history.”

Third Quarter Results

Third quarter of 2012 gross sales increased 16% to $22.5 million compared to $19.4 million for the third quarter of 2011. 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™. Lifeway’s Frozen Kefir line contributed approximately $0.7 million to sales during the third quarter of 2012.

Total consolidated net sales increased 16% or $2.9 million to $20.6 million during the three-month period ended September 30, 2012 from $17.7 million during the same three-month period in 2011. 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.

Gross profit for the third quarter of 2012 increased 18% to $7.5 million, compared to $6.3 million in the third quarter of the prior year. The Company's gross profit margin was 33% in the third quarter, which was approximately the same in the third quarter of 2011. This was primarily attributable to a 20% decrease in the cost of conventional milk, the Company’s largest raw material, partially offset by a 10% increase in the cost of organic milk.

Total operating expenses increased 13% or $0.6 million to $5.4 million during the third quarter of 2012, from $4.8 million during the same period in 2011. This increase was primarily attributable to increased general and administrative expenses.

Total operating income increased $0.5 million to $2.1 million during the third quarter of 2012, from $1.6 million during the same period in 2011. The increase in operating income is related to the increase in gross profit.

The Company’s third quarter 2012 effective tax rate was 32% compared to 30% in the same period last year.

Total net income was $1.4 million or $0.09 per diluted share for the three-month period ended September 30, 2012 compared to $1.0 million or $0.06 per diluted share in the same period in 2011.

Balance Sheet/Cash Flow Highlights

The Company had $2.4 million in cash and cash equivalents as of September 30, 2012 compared to a $0.86 million at September 30, 2011. Total stockholder’s equity was $38.4 million as of September 30, 2012, which is an increase of $2.6 million when compared to September 30, 2011.

Net cash provided by operating activities increased $3.5 million to $6.1 million for the first nine months of 2012. This increase reflects the Company’s improvement in operating efficiencies.

Net cash used in investing activities was $1.2 million during the nine-months ended September 30, 2012 compared to net cash used in operating activities of $2.1 during the same period in 2011. This decrease is primarily attributable to the decrease in purchases of investments of $0.7 million.

Conference Call

The Company will host a conference call to discuss these results with additional comments and details on Thursday, November 15, 2012 at 9:00 a.m. ET. The call will be broadcast live over the Internet hosted at the Investor Relations section of Lifeway Foods’ website at www.lifeway.net, and will be archived online through November 29, 2012. In addition, listeners may dial 877-407-3982 in North America, and international listeners may dial 201-493-6780. Participants from the Company will be Julie Smolyansky, President and Chief Executive Officer, and Edward Smolyansky, Chief Financial Officer.

About Lifeway Foods

Lifeway Foods, Inc. (LWAY), recently named one of Fortune Small Business' Fastest Growing Companies for the fifth consecutive year, is America’s leading supplier of the cultured dairy products known as kefir and organic kefir. Lifeway Kefir is a dairy beverage that contains 10 exclusive live and active probiotic cultures plus ProBoost™. In addition to its line of Kefir products, the company produces a variety of Frozen Kefir and probiotic cheese products. Lifeway also sells frozen kefir, kefir smoothies and kefir parfaits through its Starfruit™ retail stores. Find Lifeway Foods, Inc. on Facebook: www.facebook.com/lifewaykefir Follow Lifeway Foods on Twitter: http://twitter.com/lifeway_kefir YouTube: http://www.youtube.com/user/lifewaykefir.

Forward Looking Statements

Investors and readers are cautioned that certain statements contained in this news release, as well as some statements in periodic press releases and some oral statements of Lifeway officials during presentations about Lifeway, along with Lifeway’s filings with the Securities and Exchange Commission, including Lifeway’s registration statements, quarterly reports on Form 10-Q and annual report on Form 10-K, are "forward-looking'' statements within the meaning of the Private Securities Litigation Reform Act of 1995 (the "Act''). Forward-looking statements include statements that are predictive in nature, which depend upon or refer to future events or conditions, which include words such as "expects," "anticipates,'' "intends,'' "plans,'' "could," "might," "believes,'' "seeks," "estimates'' or similar expressions. In addition, any statements concerning future financial performance (including future revenues, earnings or growth rates), ongoing business strategies or prospects, and possible future actions, which may be provided by Lifeway’s management, are also forward-looking statements within the meaning of the Act. Forward-looking statements are based on current expectations and projections about future events and are subject to various risks, uncertainties and assumptions including, but not limited to, competitive pressures and other important factors detailed in the Company’s reports filed with the Securities and Exchange Commission. Investors are cautioned that actual results may differ materially from such forward-looking statements. These statements are not guarantees of future performance and Lifeway undertakes no specific obligation or intention to update these statements after the date of this release.

Contact:


Lifeway Foods, Inc.
Phone: 877.281.3874
Email: info@Lifeway.net
Investor Relations:

ICR

Katie Turner
John Mills 646.277.1228

LIFEWAY FOODS, INC. AND SUBSIDIARIES

Consolidated Statements of Financial Condition

September 30, 2012 and 2011 (Unaudited) and December 31, 2011

	(Unaudited)
	September 30,						December 31,
	2012			2011			2011
ASSETS

Current assets
Cash and cash equivalents	$	2,379,565		$	860,683		$	1,115,150
Investments		2,032,598			1,814,344			1,695,044
Certificates of deposits in financial institutions		450,000			300,000			300,000
Inventories		5,569,887			5,779,926			4,954,475
Accounts receivable, net of allowance for doubtful
accounts and discounts		10,002,065			9,362,672			7,950,276
Prepaid expenses and other current assets		45,350			86,402			79,630
Other receivables		3,946			14,833			224,204
Deferred income taxes		315,887			458,001			338,690
Refundable income taxes		84,828			---			41,316
Total current assets		20,884,126			18,676,861			16,698,785

Property and equipment, net		14,754,312			15,380,717			15,198,822

Intangible assets
Goodwill and other non amortizable brand assets		14,068,091			14,068,091			14,068,091
Other intangible assets, net of accumulated amortization of
$3,662,477 and $2,891,981 at September 30, 2012 and 2011
and 3,087,940 at December 31, 2011, respectively		4,643,523			5,414,019			5,218,060
Total intangible assets		18,711,614			19,482,110			19,286,151

Other Assets
Long-term accounts receivable net of current portion		162,522			---			289,550
Total assets	$	54,512,574		$	53,539,688		$	51,473,308


LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities
Checks written in excess of bank balances	$	---		$	870,987		$	592,040
Current maturities of notes payable		580,781			1,923,436			1,540,716
Accounts payable		5,118,902			4,529,757			4,386,239
Accrued expenses		894,092			857,862			553,725
Accrued income taxes		1,341,652			351,107			---
Total current liabilities		7,935,427			8,533,149			7,072,720

Notes payable		5,096,675			5,882,691			5,539,836

Deferred income taxes		3,112,529			3,313,092			3,503,595
Total liabilities		16,144,631			17,728,932			16,116,151

Stockholders' equity
Common stock, no par value; 20,000,000 shares authorized;
17,273,776 shares issued; 16,359,017 shares
outstanding at September 30, 2012; 17,273,776 shares
issued; 16,425,809 shares outstanding at September 30,
2011; 17,273,776 shares issued; 16,409,317 shares
outstanding at December 31, 2011		6,509,267			6,509,267			6,509,267
Paid-in-capital		2,032,516			2,032,516			2,032,516
Treasury stock, at cost		( 8,077,239	)		( 7,447,975	)		( 7,606,974	)
Retained earnings		37,831,275			34,797,229			34,431,296
Accumulated other comprehensive loss, net of taxes		72,124			( 80,281	)		( 8,948	)
Total stockholders' equity		38,367,943			35,810,756			35,357,157

Total liabilities and stockholders' equity	$	54,512,574		$	53,539,688		$	51,473,308

LIFEWAY FOODS, INC. AND SUBSIDIARIES

Consolidated Statements of Income and Comprehensive Income

For the Three and Nine Months Ended September 30, 2012 and 2011 (Unaudited)

	(Unaudited)												(Unaudited)
	Three Months Ended												Nine Months Ended
	September 30,												September 30,
	2012						2011						2012						2011

Sales	$	22,617,132					$	19,423,533					$	66,876,986					$	58,383,802
Less: discounts and allowances		( 1,997,399	)					( 1,721,929	)					( 6,306,675	)					( 5,180,377	)
Net sales		20,619,733			20,619,733			17,701,604			17,701,604			60,570,311			60,570,311			53,203,425			53,203,425

Cost of goods sold					12,738,310						10,958,115						37,079,491						32,883,760
Depreciation expense					407,567						396,732						1,219,721						1,163,939

Total cost of goods sold					13,145,877						11,354,847						38,299,212						34,047,699

Gross profit					7,473,856						6,346,757						22,271,099						19,155,726

Selling expenses					2,974,294						2,661,983						8,300,810						7,545,239
General and administrative					2,225,224						1,921,111						6,319,259						5,489,072
Amortization expense					197,129						195,958						574,538						587,874

Total operating expenses					5,396,647						4,779,052						15,194,607						13,622,185

Income from operations					2,077,209						1,567,705						7,076,492						5,533,541

Other income (expense):
Interest and dividend income					16,270						14,465						52,321						49,152
Rental income					4,270						4,546						10,284						5,196
Interest expense					( 41,897	)					( 61,074	)					( 136,000	)					( 195,502	)
Gain (loss) on sale of investments,					4,024						( 33,477	)					26,415						( 35,533	)
net
Loss on disposition of assets					---						( 20,135	)					---						( 20,135	)
Total other income (expense)					( 17,333	)					( 95,675	)					( 46,980	)					( 196,822	)

Income before provision for
income taxes					2,059,876						1,472,030						7,029,512						5,336,719

Provision for income taxes					657,697						441,989						2,483,216						2,115,365

Net income				$	1,402,179					$	1,030,041					$	4,546,296					$	3,221,354

Basic and diluted earnings
per common share					0.09						0.06						0.28						0.20

Weighted average number of
shares outstanding					16,365,741						16,428,005						16,380,061						16,450,973

COMPREHENSIVE INCOME

Net income				$	1,402,179					$	1,030,041					$	4,546,296					$	3,221,354

Other comprehensive income
(loss), net of tax:
Unrealized gains (losses) on
investments (net of tax)					62,266						( 83,118	)					95,996						( 57,263	)
Less reclassification adjustment
for (gains) losses included in
net income (net of taxes)					(2,274	)					18,914						(14,924	)					20,076

Comprehensive income				$	1,462,171					$	965,837					$	4,627,368					$	3,184,167

LIFEWAY FOODS, INC. AND SUBSIDIARIES

Consolidated Statements of Cash Flows

For the Nine Months Ended September 30, 2012 and 2011 (Unaudited)

	(Unaudited)
	September 30
	2012			2011

Cash flows from operating activities:
Net income	$	4,546,296		$	3,221,354
Adjustments to reconcile net income to net
cash flows from operating activities, net of acquisition:
Depreciation and amortization		1,794,259			1,751,813
Loss (gain) on sale of investments, net		( 26,415	)		35,533
Loss on disposition of equipment		---			20,135
Deferred income taxes		( 458,424	)		( 186,677	)
Bad Debt Expense		332,301			80,000
(Increase) decrease in operating assets:
Accounts receivable		( 2,106,020	)		( 2,649,396	)
Other receivables		220,258			89,847
Inventories		( 615,412	)		( 1,794,552	)
Refundable income taxes		( 43,512	)		906,748
Prepaid expenses and other current assets		34,280			71,913
Increase (decrease) in operating liabilities:
Accounts payable		732,663			346,276
Accrued expenses		340,367			348,403
Income taxes payable		1,341,652			351,107
Net cash provided by operating activities		6,092,293			2,592,504

Cash flows from investing activities:
Purchases of investments		( 1,092,976	)		( 1,806,564	)
Proceeds from sale of investments		802,026			990,397
Investments in certificates of deposits		( 150,000	)		( 50,000	)
Purchases of property and equipment		( 775,210	)		( 1,241,388	)
Net cash (used in) provided by investing activities		( 1,216,160	)		( 2,107,555	)

Cash flows from financing activities:
Proceeds of note payable		---			1,000,000
Checks written in excess of bank balances		( 592,040	)		( 470,223	)
Purchases of treasury stock		( 470,265	)		( 1,022,429	)
Dividends paid		( 1,146,317	)		---
Repayment of notes payable		( 1,403,096	)		( 2,361,553	)
Net cash used in financing activities		( 3,611,718	)		( 2,854,205	)

Net (decrease) increase in cash and cash equivalents		1,264,415			( 2,369,256	)

Cash and cash equivalents at the beginning of the period		1,115,150			3,229,939

Cash and cash equivalents at the end of the period	$	2,379,565		$	860,683