MORTON GROVE, Ill., May 20, 2019 (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 first quarter ended March 31, 2019.
“We are encouraged with our solid start to 2019,” said Julie Smolyansky, CEO of Lifeway Foods, Inc. “We believe the sequential improvements in net sales and profitability from the fourth quarter of 2018 demonstrate the positive effects of our organizational changes, including key operational efficiencies to support our new strategic growth initiatives. Looking ahead, we remain excited about our opportunities to build consumer awareness of our kefir and fermented probiotic products through distribution expansion and our robust 2019 product innovation as we generate further progress across our business.”
First Quarter Results
Net sales were $24.6 million for the first quarter of 2019, an increase of 7.0% from $23.0 million in the fourth quarter of 2018 and a decrease of $4.1 million, or 14.4% versus prior year period.
Gross profit as a percentage of net sales was 25.6% for the first quarter of 2019, an increase of 350 basis points from 22.1% for the fourth quarter of 2018. Gross profit percentage was 28.0% in prior year period. The decline versus the prior year period was primarily due to the unfavorable impact of operating leverage that arises from lower net sales relative to fixed costs, increased trade promotion investment, and higher freight costs, partially offset by an increase in pricing which commenced during second quarter 2018, and a reduction in variable costs. Additionally, depreciation expense increased reflecting the continued investment in manufacturing improvements.
Selling expenses decreased by $0.9 million or 21.9% to $3.1 million for the first quarter of 2019 from $4.0 million during the same period in 2018. The decrease versus prior year period, primarily reflects a reduction in advertising and marketing programs with lower efficiency, and to a lesser extent compensation savings from organizational changes made in 2018, and broker commissions. Selling expenses as a percentage of net sales were 12.8% for the first quarter of 2019 compared to 14.0% for the same period in 2018.
General and administrative expenses decreased $0.2 million or 5.7% to $3.5 million for the first quarter of 2019 from $3.7 million during the same period in 2018. The decrease is primarily a result of lower compensation expense due to organizational changes made in 2018, and decreased incentive compensation.
The effective income tax rate for the first quarter of 2019 was 12.2% compared to 35.1% in the same period last year. The lower effective tax rate was primarily due to the separate state tax rates, change in valuation allowance and non-deductible expense amounts being a higher percentage of pre-tax income (loss). During the three-month period ended March 31, 2019, the Company recognized non-deductible compensation expense related to the 2017 LTIP awards. This resulted in a permanent rate effect and was considered in the estimated full year tax rate.
The Company reported a net loss of $(0.02) per diluted share for the first quarter of 2019, an improvement from the net loss of $(0.17) per diluted share in the fourth quarter of 2018, and as compared to net income of $0.07 million or $0.00 per diluted share in the first quarter of 2018.
About Lifeway Foods, Inc.
Lifeway Foods, Inc., which has been recognized as one of Forbes’ Best Small Companies, is America’s leading supplier of the probiotic, fermented beverage known as kefir. In addition to its line of drinkable kefir, the company also produces the non-dairy Plantiful probiotic beverages, cupped kefir and skyr, frozen kefir, specialty cheeses, probiotic supplements and a ProBugs line for kids. Lifeway’s tart and tangy fermented dairy and non-dairy products are now sold across North America, Ireland and the United Kingdom. Learn how Lifeway is good for more than just you at www.lifewaykefir.com.