Document And Entity Information
Document And Entity Information - shares | 6 Months Ended | |
Jun. 30, 2015 | Sep. 24, 2015 | |
Document And Entity Information | ||
Entity Registrant Name | LIFEWAY FOODS INC | |
Entity Central Index Key | 814,586 | |
Document Type | 10-Q | |
Document Period End Date | Jun. 30, 2015 | |
Amendment Flag | false | |
Current Fiscal Year End Date | --12-31 | |
Is Entity a Well-known Seasoned Issuer | No | |
Is Entity a Voluntary Filer | No | |
Is Entity's Reporting Status Current | Yes | |
Entity Filer Category | Smaller Reporting Company | |
Entity Common Stock, Shares Outstanding | 16,346,017 | |
Document Fiscal Period Focus | Q2 | |
Document Fiscal Year Focus | 2,015 |
Consolidated Statements Of Fina
Consolidated Statements Of Financial Condition - USD ($) | Jun. 30, 2015 | Dec. 31, 2014 |
Current assets | ||
Cash and cash equivalents | $ 5,873,079 | $ 3,260,244 |
Investments, at fair value | 2,849,752 | 2,779,140 |
Certificates of deposits in financial institutions | 434,981 | 149,965 |
Inventories | 6,289,816 | 5,814,219 |
Accounts receivable, net of allowance for doubtful accounts and discounts of $2,100,000 and $1,050,000 at June 30, 2015 and December 31, 2014, respectively | 10,349,813 | 10,213,541 |
Prepaid expenses and other current assets | 113,751 | 251,922 |
Other receivables | 28,794 | 134,338 |
Deferred income taxes | 451,198 | 408,340 |
Refundable income taxes | 741,302 | 1,140,796 |
Total current assets | 27,132,486 | 24,152,505 |
Property and equipment, net | 21,974,931 | 21,892,395 |
Intangible assets | ||
Goodwill | 14,068,091 | 14,068,091 |
Other intangible assets, net | 2,701,925 | 3,059,764 |
Total intangible assets | 16,770,016 | 17,127,855 |
Other Assets | ||
Long-term accounts receivable net of current portion | 267,458 | 251,683 |
Total assets | 66,144,891 | 63,424,438 |
Current liabilities | ||
Current maturities of notes payable | 840,000 | 872,285 |
Accounts payable | 5,725,222 | 5,586,755 |
Accrued expenses | 4,702,762 | $ 2,066,076 |
Accrued income taxes | 14,600 | |
Total current liabilities | 11,282,584 | $ 8,525,116 |
Notes payable | 7,539,328 | 8,124,515 |
Deferred income taxes | 1,812,296 | 2,075,095 |
Total liabilities | 20,634,208 | 18,724,726 |
Stockholders' equity | ||
Common stock, no par value; 40,000,000 shares authorized; 17,273,776 shares issued; 16,346,017 shares outstanding at June 30, 2015 and December 31, 2014 | 6,509,267 | 6,509,267 |
Paid-in-capital | 2,032,516 | 2,032,516 |
Treasury stock, at cost | (8,187,682) | (8,187,682) |
Retained earnings | 45,296,249 | 44,543,618 |
Accumulated other comprehensive loss, net of taxes | (139,667) | (198,007) |
Total stockholders' equity | 45,510,683 | 44,699,712 |
Total liabilities and stockholders' equity | $ 66,144,891 | $ 63,424,438 |
Consolidated Statements Of Fin3
Consolidated Statements Of Financial Condition (Parenthetical) - USD ($) | Jun. 30, 2015 | Dec. 31, 2014 |
Current assets | ||
Allowance for doubtful accounts and discounts | $ 2,100,000 | $ 1,050,000 |
Stockholders' equity | ||
Common stock, no par value | $ 0 | $ 0 |
Common stock, shares authorized | 40,000,000 | 40,000,000 |
Common stock, shares issued | 17,273,776 | 17,273,776 |
Common stock, shares outstanding | 16,346,017 | 16,346,017 |
Consolidated Statements Of Inco
Consolidated Statements Of Income And Comprehensive Income (Unaudited) - USD ($) | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2015 | Jun. 30, 2014 | Jun. 30, 2015 | Jun. 30, 2014 | |
Consolidated Statements Of Income And Comprehensive Income | ||||
Gross sales | $ 36,291,842 | $ 32,594,048 | $ 69,394,925 | $ 64,655,195 |
Less: discounts and promotional allowances | (6,470,654) | (3,028,637) | (9,951,613) | (5,958,073) |
Net sales | 29,821,188 | 29,565,411 | 59,443,312 | 58,697,122 |
Cost of goods sold | 22,201,129 | 21,432,624 | 42,849,096 | 43,114,535 |
Depreciation expense | 604,531 | 627,878 | 1,195,158 | 1,411,238 |
Total cost of goods sold | 22,805,660 | 22,060,502 | 44,044,254 | 44,525,773 |
Gross profit | 7,015,528 | 7,504,909 | 15,399,058 | 14,171,349 |
Selling expenses | 2,617,399 | 3,693,821 | 6,779,802 | 7,173,509 |
General and administrative | 4,170,155 | 2,107,197 | 6,802,051 | 4,487,827 |
Amortization expense | 178,920 | 178,919 | 357,839 | 357,839 |
Total operating expenses | 6,966,474 | 5,979,937 | 13,939,692 | 12,019,175 |
Income from operations | 49,054 | 1,524,972 | 1,459,366 | 2,152,174 |
Other income (expense): | ||||
Interest and dividend income | 35,739 | 35,227 | 61,218 | 63,925 |
Rental income | 1,800 | 1,200 | 3,600 | 1,700 |
Interest expense | (58,429) | (66,724) | (123,770) | (132,293) |
(Loss)/Gain on sale of investments, net reclassified from OCI | (16,844) | 57,321 | (21,937) | 62,130 |
Gain on sale of property and equipment | 207,083 | (76,484) | 243,083 | (76,484) |
Other income (expense), net | 136 | 1,672 | (98,796) | 1,672 |
Total other income (expense) | 169,485 | (47,788) | 63,398 | (79,350) |
Income before provision for income taxes | 218,539 | 1,477,184 | 1,522,764 | 2,072,824 |
Provision for income taxes | 119,626 | 807,768 | 770,133 | 1,106,229 |
Net income | $ 98,913 | $ 669,416 | $ 752,631 | $ 966,595 |
Basic and diluted earnings per common share | $ 0.01 | $ 0.04 | $ 0.05 | $ 0.06 |
Weighted average number of common shares outstanding | 16,346,017 | 16,346,017 | 16,346,017 | 16,346,017 |
COMPREHENSIVE INCOME | ||||
Net income | $ 98,913 | $ 669,416 | $ 752,631 | $ 966,595 |
Other comprehensive income (loss), net of tax: | ||||
Unrealized gains (losses) on investments (net of tax) | (18,215) | 63,111 | (64,475) | 71,155 |
Less reclassification adjustment for (gains) losses and other than temporary impairments included in net income (net of taxes) | 10,435 | (34,393) | 122,815 | (37,110) |
Comprehensive income | $ 91,133 | $ 698,134 | $ 810,971 | $ 1,000,640 |
Consolidated Statements of Chan
Consolidated Statements of Changes in Stockholders' Equity (Unaudited) - USD ($) | Common Stock | Treasury Stock | Paid-In Capital | Retained Earnings | Accumulated Other Comprehensive Income (Loss), Net of Tax | Total |
Beginning Balance, Amount at Dec. 31, 2013 | $ 6,509,267 | $ (8,187,682) | $ 2,032,516 | $ 42,587,214 | $ 7,807 | $ 42,949,122 |
Beginning Balance, Shares at Dec. 31, 2013 | 17,273,776 | (927,759) | ||||
Other comprehensive income | $ 34,045 | 34,045 | ||||
Net Loss | $ 966,595 | 966,595 | ||||
Ending Balance, Amount at Jun. 30, 2014 | $ 6,509,267 | $ (8,187,682) | $ 2,032,516 | 43,553,809 | $ 41,852 | 43,949,762 |
Ending Balance, Shares at Jun. 30, 2014 | 17,273,776 | (927,759) | ||||
Beginning Balance, Amount at Dec. 31, 2014 | $ 6,509,267 | $ (8,187,682) | $ 2,032,516 | $ 44,543,618 | (198,007) | 44,699,712 |
Beginning Balance, Shares at Dec. 31, 2014 | 17,273,776 | (927,759) | ||||
Other comprehensive income | $ 58,340 | 58,340 | ||||
Net Loss | $ 752,631 | 752,631 | ||||
Ending Balance, Amount at Jun. 30, 2015 | $ 6,509,267 | $ (8,187,682) | $ 2,032,516 | $ 45,296,249 | $ (139,667) | $ 45,510,683 |
Ending Balance, Shares at Jun. 30, 2015 | 17,273,776 | (927,759) |
Consolidated Statements Of Cash
Consolidated Statements Of Cash Flows (Unaudited) - USD ($) | 6 Months Ended | |
Jun. 30, 2015 | Jun. 30, 2014 | |
Cash flows from operating activities: | ||
Net income | $ 752,631 | $ 966,595 |
Adjustments to reconcile net income to net cash flows from operating activities: | ||
Depreciation and amortization | 1,552,997 | 1,769,077 |
Loss (gain) on sale of investments, net | 21,937 | $ (62,130) |
Impairment of investments | 179,500 | |
Deferred income taxes | (351,818) | $ (440,285) |
Bad Debt expense | 250 | 156,049 |
Gain on sale of property and equipment | (243,083) | 76,484 |
(Increase) decrease in operating assets: | ||
Accounts receivable | (166,829) | 728,281 |
Other receivables | 105,544 | 46,591 |
Inventories | (475,597) | 88,467 |
Refundable income taxes | 399,494 | (562,986) |
Prepaid expenses and other current assets | 138,171 | (28,125) |
Increase (decrease) in operating liabilities: | ||
Accounts payable | 138,467 | (1,972,157) |
Accrued expenses | 2,636,686 | $ 1,336,163 |
Accrued income taxes | 14,600 | |
Net cash provided by operating activities | 4,702,950 | $ 2,102,024 |
Cash flows from investing activities: | ||
Purchases of investments | (1,286,664) | (1,774,734) |
Proceeds from sale of investments | 1,133,647 | 1,419,362 |
Redemption of certificates of deposit | 99,965 | $ 15,000 |
Investments in certificates of deposit | (384,981) | |
Purchases of property and equipment | (1,377,390) | $ (1,761,401) |
Proceeds from sale of property and equipment | 342,780 | 4,000 |
Net cash used in investing activities | (1,472,643) | (2,097,773) |
Cash flows from financing activities: | ||
Repayment of notes payable | (617,472) | (441,221) |
Net cash used in financing activities | (617,472) | (441,221) |
Net (decrease) increase in cash and cash equivalents | 2,612,835 | (436,970) |
Cash and cash equivalents at the beginning of the period | 3,260,244 | 3,306,608 |
Cash and cash equivalents at the end of the period | 5,873,079 | 2,869,638 |
Supplemental cash flow information | ||
Cash paid for income taxes | 1,120,000 | 2,109,500 |
Cash paid for interest | $ 124,043 | $ 132,415 |
Nature Of Business
Nature Of Business | 6 Months Ended |
Jun. 30, 2015 | |
Notes to Financial Statements | |
Note 1 - Nature Of Business | Lifeway Foods, Inc. (the Company or Lifeway), an Illinois corporation, commenced operations in February 1986, and was incorporated under the laws of the State of Illinois on May 19, 1986. The Companys principal business activity is the manufacturing of probiotic, cultured, functional dairy health food products. Lifeways primary product is kefir, a dairy beverage similar to but distinct from yogurt, in several flavors and in several packages. In addition to kefir, Lifeway manufactures Lifeway Farmer Cheese, a line of various farmer cheeses. Lifeway distributes its products throughout the United States and in London, England. The Company manufactures all of its products distributed in the United States at Company-owned facilities. In the Chicago metropolitan area, Lifeway distributes its products on its own trucks and via distributors. The Company directly distributes its products in the Philadelphia and Tri State metropolitan areas using its own trucks. The Company distributes its products throughout the remainder of the United States via distributors. The Companys products distributed in London are manufactured and shipped to stores by a third party co-packer. Products sold by the Company to distributors in the United States may be resold by such distributors within or outside of the United States, including in Mexico, Costa Rica and the Caribbean. The Companys products are also manufactured and distributed in Canada by a third party co-packer. |
Summary Of Significant Accounti
Summary Of Significant Accounting Policies | 6 Months Ended |
Jun. 30, 2015 | |
Notes to Financial Statements | |
Note 2 - Summary Of Significant Accounting Policies | Corrections of prior period financial statements As reported in the Companys fiscal 2014 annual report on Form 10-K, the Company recorded out-of-period adjustments during fiscal 2014 to correct the accounting for certain errors related primarily to the provision for income taxes and an understatement of depreciation expense arising from assigning incorrect useful lives. The Company has revised its previously issued interim consolidated financial statements to correct for these matters. The adjustments decreased previously reported second quarter net income by approximately $425,000. There was no impact to quarterly cash flows in 2014 as the increase in net income was offset by the decrease in the non-cash reconciling items for depreciation expense and refundable income taxes. The Company does not believe that these adjustments are material to the results of operations, financial position or cash flows for any of its previously filed interim consolidated financial statements. Accordingly, the June 30, 2014 interim consolidated financial statements included herein have been revised to reflect the adjustments discussed above. The Company will also revise its 2014 third quarter financial statements prospectively within its 2015 third quarter interim consolidated Quarterly Report on Form 10-Q. The net-of-tax effect of these adjustments decreases the Companys previously reported 2014 earnings per common and diluted share by $0.02 for the quarter ended March 31, 2014, $0.03 for the quarter ended June 30, 2014 and increases the Companys 2014 earnings per common and diluted share by $0.05 for the quarter ended December 31, 2014. Basis of presentation The accompanying unaudited consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (U.S. GAAP) for interim financial information, and do not include all of the information and disclosures required for complete, audited financial statements. In the opinion of management, all adjustments, consisting only of normal recurring adjustments, considered necessary for a fair presentation, have been included. For further information, refer to the consolidated financial statements and disclosures included in the consolidated financial statements included in the Companys Annual Report on Form 10-K for the year ended December 31, 2014. Principles of consolidation The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries, Helios Nutrition, Ltd., Pride of Main Street, L.L.C., Starfruit, L.L.C., Fresh Made, Inc. and Starfruit Franchisor, L.L.C. and Lifeway Wisconsin, Inc. Lifeway Wisconsin, Inc. was created to facilitate the operation of a production facility in Wisconsin. All significant intercompany accounts and transactions have been eliminated. Use of estimates The preparation of consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Significant estimates made in preparing the consolidated financial statements include the reserve for promotional allowances, the fair value of investment securities, the valuation of goodwill and intangible assets, and deferred taxes. Revenue Recognition Sales of Company produced dairy products are recorded at the time of shipment and the following four criteria have been met: (i) The product has been shipped and the Company has no significant remaining obligations; (ii) Persuasive evidence of an agreement exists; (iii) The price to the buyer is fixed or determinable and (iv) Collection is probable. In addition, shipping costs invoiced to the customers are included in net sales and the related cost in cost of sales. The Company routinely offers sales allowances and discounts to our customers and consumers. These programs include rebates, in-store display and demo allowances, allowances for non-salable product, coupons and other trade promotional activities. These allowances are considered reductions in the price of our products and thus are recorded as reductions to gross sales. Some of these incentives are recorded by estimating incentive costs based on our historical experience and expected levels of performance of the trade promotion. We maintain a reserve at the end of each period for the estimated allowances incurred but unpaid. Differences between estimated and actual allowances are normally insignificant and are recognized in earnings in the period such differences are determined. Product returns have historically not been material. Bulk cream is a by-product of the Companys fluid milk manufacturing process. The Company does not use bulk cream in any of its end products, but rather disposes of it through sales to other companies. Bulk cream by-product sales are included in gross sales. Customer Concentration Sales are predominately to companies in the retail food industry, located within the United States of America. Two major customers accounted for approximately 29% and 29% of gross sales for the six months ended June 30, 2015 and 2014, respectively. Two major customers accounted for approximately 27% and 29% of gross sales for the three months ended June 30, 2015 and 2014, respectively. Cash and cash equivalents All highly liquid investments purchased with an original maturity of three months or less are considered to be cash equivalents. Investments All investment securities are classified as available-for-sale and are carried at fair value. Unrealized gains and losses on available-for-sale securities are reported as a separate component of stockholders equity to the extent they are considered temporary in nature. Amortization, accretion, interest and dividends, realized gains and losses, and declines in fair value judged to be other-than-temporary on available-for-sale securities are recorded as a component of other income. All of the Companys securities are subject to a periodic impairment evaluation. This evaluation depends on the specific facts and circumstances. Factors that we consider in determining whether an other-than-temporary decline in fair value has occurred include: the fair value of the security in relation to its carrying amount; the financial condition of the investee; and the intent and ability to retain the investment for a sufficient period of time to allow for possible recovery in the fair value of the investment. Accounts receivable Credit terms are extended to customers in the normal course of business. The Company performs ongoing credit evaluations of its customers financial condition and generally requires no collateral. Balances expected to be collected beyond one year are classified as long-term. Accounts receivable are recorded at invoice amounts, and reduced to their estimated net realizable value by recognition of an allowance for doubtful accounts and anticipated discounts. The Companys estimate of the allowance for doubtful accounts and anticipated discounts are based upon historical experience, its evaluation of the current status and contract terms of specific receivables, and unusual circumstances, if any. Accounts are considered past due if payment is not made on a timely basis in accordance with the Companys credit terms. Accounts considered uncollectible are charged against the allowance. Inventories Inventories are stated at the lower of cost or market. Our products are valued using the first in, first out method. The costs of inventories include raw materials, direct labor and indirect production and overhead costs. Property and equipment Property and equipment are recorded at cost and depreciated using the straight-line method over the estimated useful lives of the related assets. When assets are retired or otherwise disposed of, the cost and related accumulated depreciation are removed from the accounts, and any resulting gain or loss is recognized in income for the period. The cost of maintenance and repairs is charged to expense as incurred; significant renewals and betterments are capitalized. Property and equipment is being depreciated over the following useful lives: Category Years Buildings and improvements 31 and 39 Machinery and equipment 5 12 Office equipment 5 7 Vehicles 5 Leasehold improvements Shorter of expected useful life or lease term Intangible assets acquired in business combinations Intangible assets acquired in a business combination are recorded at their estimated fair values at the date of acquisition. Goodwill represents the excess purchase price over the fair value of the net tangible and other identifiable intangible assets acquired. Goodwill is not amortized, but is reviewed for impairment at least annually. The Company amortizes other intangible assets over their estimated useful lives, as disclosed in the table below. The Company reviews intangible assets and their related useful lives at least once per year to determine if any adverse conditions exist that would indicate the carrying value of these assets may not be recoverable. The Company conducts more frequent impairment assessments if certain conditions exist, including: a change in the competitive landscape, any internal decisions to pursue new or different strategies, a loss of a significant customer, or a significant change in the market place including changes in the prices paid for the Companys products or changes in the size of the market for the Companys products. If the estimate of an intangible assets remaining useful life is changed, the remaining carrying amount of the intangible asset is amortized prospectively over the revised remaining useful life. Intangible assets are being amortized over the following useful lives: Category Years Recipes 4 Trade names 8-15 Formula 10 Customer relationships 8-12 Income taxes Deferred income taxes are the result of temporary differences that arise from income and expense items reported for financial accounting and tax purposes in different periods. Deferred taxes are classified as current or non-current, depending on the classification of the assets and liabilities to which they relate. Deferred taxes arising from temporary differences that are not related to an asset or liability are classified as current or non-current depending on the periods in which the temporary differences are expected to reverse. The principal sources of temporary differences are different depreciation and amortization methods for financial statement and tax purposes, unrealized gains or losses related to investments, capitalization of indirect costs for tax purposes, purchase price adjustments, and the recognition of an allowance for doubtful accounts and discounts for financial statement purposes. The Company has analyzed filing positions in all of the federal and state jurisdictions where it is required to file income tax returns, as well as all open tax years in these jurisdictions. Periods subject to examination for the Companys federal returns are the 2012, 2013 and 2014 tax years. The amount of unrecognized tax benefits that, if recognized, would impact the annual effective tax rate was not significant as of June 30, 2015 and December 31, 2014. The total amount of unrecognized tax benefits can change due to audit settlements, tax examination activities, statute expirations and the recognition and measurement criteria under accounting for uncertainty in income taxes. Treasury stock Treasury stock is recorded using the cost method. Advertising and promotional costs The Company expenses advertising costs as incurred. For the six months ended June 30, 2015 and 2014 total advertising expenses were $2,741,835 and $1,824,524 respectively. For the three months ended June 30, 2015 and 2014 total advertising expenses were $867,297 and $1,006,016 respectively. Earnings per common share Earnings per common share were computed by dividing net income available to common stockholders by the weighted average number of common shares outstanding during the period. For the three and six months ended June 30, 2015 and 2014 the weighted average number of shares outstanding used in the calculation of diluted and basic earnings per share were the same. Segments The Company has two separate operating segments, the sale of fermented dairy products and three retail locations in Illinois that sell the Companys fermented dairy products. The Company has determined reportable segments based on how the Companys chief operating decision maker manages the business and in a manner consistent with the internal reporting provided to the chief operating decision maker. The chief operating decision maker, who is responsible for allocating resources and assessing performance of the operating segments, has been identified as the Chief Financial Officer and the board of directors that makes strategic decisions. Substantially all of the consolidated revenues of the Company relate to the sale of fermented dairy products which are produced using the same processes and materials and are sold to consumer retail food sellers through direct delivery and distributors in the United States. Recent Accounting Pronouncements In May 2014, the Financial Accounting Standards Board (FASB) issued ASU No. 2014-09, Revenue from Contracts with Customers (Topic 606) (ASU 2014-09), which supersedes the revenue recognition requirements in Topic 605, Revenue Recognition, including most industry-specific requirements. ASU 2014-09 establishes a five-step revenue recognition process in which an entity will recognize revenue when it transfers promised goods or services to customers in an amount that reflects the consideration to which the company expects to be entitled in exchange for those goods or services. ASU 2014-09 also requires enhanced disclosures regarding the nature, amount, timing and uncertainty of revenues and cash flows from contracts with customers. In August 2015 the FASB delayed the effective date for implementation of ASU 2014-09. Under the delayed effective date, the Company is required to adopt the new standard not later than January 1, 2018. Management is currently evaluating the impact the adoption of ASU 2014-09 will have on the Companys consolidated financial position, results of operations or cash flows and the method of retrospective application, either full or modified. In July 2015, the FASB issued new accounting guidance for measuring inventory. The core principal of the guidance is that an entity should measure inventory at the lower of cost and net realizable value. Net realizable value is the estimated selling prices in the ordinary course of business, less reasonably predictable costs of completion, disposal, and transportation. This guidance does not apply to inventory that is being measured using the Last-In, First-Out (LIFO) or the retail inventory method. The guidance is effective for financial statements issued for annual and interim periods beginning after December 15, 2016 on a prospective basis. Early adoption is permitted. Management is currently evaluating the impact this will have on the consolidated financial statements. |
Intangible Assets
Intangible Assets | 6 Months Ended |
Jun. 30, 2015 | |
Notes to Financial Statements | |
Note 3 - Intangible Assets | Intangible assets, net consists of the following: As of June 30, 2015 December 31, 2014 Recipes $ 43,600 $ 43,600 Customer lists and other customer related intangibles 4,529,200 4,529,200 Customer relationship 985,000 985,000 Trade names 2,248,000 2,248,000 Formula 438,000 438,000 Subtotal 8,243,800 8,243,800 Accumulated amortization (5,541,875 ) (5,184,036 ) Intangible assets, net $ 2,701,925 $ 3,059,764 |
Investments
Investments | 6 Months Ended |
Jun. 30, 2015 | |
Notes to Financial Statements | |
Note 4 - Investments | The cost and fair value of investments classified as available for sale are as follows: June 30, 2015 Cost Unrealized Gains Unrealized Losses Fair Value Common Stocks & ETFs $ 1,027,735 $ 22,941 $ (66,129 ) $ 984,547 Mutual Funds 58,102 0 (4,916 ) 53,186 Preferred Securities 97,405 675 0 98,080 Corporate Bonds 1,887,218 9,885 (183,164 ) 1,713,939 Total $ 3,070,460 $ 33,501 $ (254,209 ) $ 2,849,752 December 31, 2014 Cost Unrealized Gains Unrealized Losses Fair Value Common Stocks & ETFs $ 530,328 $ 19,608 $ (64,046 ) $ 485,890 Mutual Funds 445,337 0 (10,624 ) 434,713 Preferred Securities 180,120 195 (2,075 ) 178,240 Corporate Bonds 1,948,596 1,880 (270,179 ) 1,680,297 Total $ 3,104,381 $ 21,683 $ (346,924 ) $ 2,779,140 Proceeds from the sale of investments were $1,133,647and $1,419,362for the six months ended June 30, 2015 and 2014, respectively. Proceeds from the sale of investments were $440,424 and $864,753 for the three months ended June 30, 2015 and 2014, respectively. Gross gains of $13,047and $34,984and gross losses of $80,822and $151,472were realized on these sales during the six months ended June 30, 2015 and 2014, respectively. Gross gains of $7,545 and $15,333 and gross losses of $70,227 and $136,629 were realized on these sales during the three months ended June 30, 2015 and 2014, respectively. The following table shows the gross unrealized losses and fair value of the Companys investments with unrealized losses that are not deemed to be other-than-temporarily impaired, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position, at June 30, 2015 and December 31, 2014: Less Than 12 Months 12 Months or Greater Total June 30, 2015 Fair Value Unrealized Losses Fair Value Unrealized Losses Fair Value Unrealized Losses Common Stocks & ETFs $ 419,655 $ (39,292 ) $ 157,897 $ (26,837 ) $ 577,552 $ (66,129 ) Mutual Funds 47,858 (3,204 ) 5,328 (1,712 ) 53,186 (4,916 ) Preferred Securities 0 0 0 0 0 0 Corporate Bonds 692,965 (61,201 ) 749,771 (121,963 ) 1,442,736 (183,164 ) $ 1,160,478 $ (103,697 ) $ 912,996 $ (150,512 ) $ 2,073,474 $ (254,209 ) Less Than 12 Months 12 Months or Greater Total December 31, 2014 Fair Value Unrealized Losses Fair Value Unrealized Losses Fair Value Unrealized Losses Common Stocks & ETFs $ 162,268 $ (49,053 ) $ 141,417 $ (14,993 ) $ 303,685 $ (64,046 ) Mutual Funds 434,713 (10,624 ) 0 0 434,713 (10,624 ) Preferred Securities 80,640 (2,075 ) 0 0 80,640 (2,075 ) Corporate Bonds 1,056,140 (194,641 ) 497,277 (75,538 ) 1,553,417 (270,179 ) $ 1,733,761 $ (256,393 ) $ 638,694 $ (90,531 ) $ 2,372,455 $ (346,924 ) The Companys investments in equity securities, mutual funds, preferred securities, and corporate bonds consist of investments in common stock, preferred stock, structured notes and other debt securities of companies in various industries. During the first quarter of 2015, the Company recorded other-than-temporary impairment losses of approximately $180,000 with respect to three structured notes. The impairment loss is included in other income (expense), net in the accompanying consolidated statements of income and comprehensive income. The structured notes allow the issuer to settle at less than par in certain circumstances. In reaching a conclusion to record these other-than-temporary impairment losses, the Company evaluated the near-term prospects of the issuers and determined it was probable the issuers would have the ability to settle the bonds for an amount less than par value at maturity. With respect to one other corporate bond with unrealized losses greater than 12 months, the Company evaluated the near-term prospects of the issuer in relation to the severity and duration of the impairment. Based on that evaluation and the Companys ability and intent to hold these investments for a reasonable period of time sufficient for a forecasted recovery of fair value, the Company did not consider the investment to be other-than-temporarily impaired at June 30, 2015. |
Inventories
Inventories | 6 Months Ended |
Jun. 30, 2015 | |
Notes to Financial Statements | |
Note 5 - Inventories | Inventories consist of the following: June 30, 2015 December 31, 2014 Finished goods $ 1,820,587 $ 2,373,476 Production supplies 2,565,425 2,069,742 Raw materials 1,903,804 1,371,001 Total inventories $ 6,289,816 $ 5,814,219 |
Property And Equipment
Property And Equipment | 6 Months Ended |
Jun. 30, 2015 | |
Notes to Financial Statements | |
Note 6 - Property And Equipment | Property and equipment consist of the following: June 30, 2015 December 31, 2014 Land $ 1,756,673 $ 1,856,370 Buildings and improvements 16,417,110 15,125,803 Machinery and equipment 22,697,235 20,434,910 Vehicles 1,310,527 1,244,560 Office equipment 602,087 465,801 Construction in process 30,260 2,408,754 42,813,892 41,536,198 Less accumulated depreciation 20,838,961 19,643,803 Total property and equipment $ 21,974,931 $ 21,892,395 |
Accrued Expenses
Accrued Expenses | 6 Months Ended |
Jun. 30, 2015 | |
Notes to Financial Statements | |
Note 7 - Accrued Expenses | Accrued expenses consist of the following: June 30, 2015 December 31, 2014 Accrued payroll and payroll taxes $ 1,201,895 $ 891,763 Accrued property tax 352,169 331,278 Other 3,148,698 843,035 $ 4,702,762 $ 2,066,076 |
Notes Payable
Notes Payable | 6 Months Ended |
Jun. 30, 2015 | |
Notes to Financial Statements | |
Note 8 - Notes Payable | Notes payable consist of the following: June 30, 2015 December 31, 2014 Note payable to Private Bank in monthly installments of $42,222, plus variable interest rate (currently 2.67%) with a balloon payment for the remaining balance. Collateralized by substantially all assets of the Company. Maturity date - May 31, 2018. $ 4,098,889 $ 4,352,222 Note payable to Private Bank in monthly installments of $27,778, plus variable interest rate (currently 2.67%) with a balloon payment for the remaining balance, maturing on May 31, 2019, collateralized by substantially all assets of the Company. 4,280,439 4,583,333 Notes payable to Ford Credit Corp. payable in monthly installments of $1,778 at 5.99%, paid in March 2015. 12,198 Note payable to Fletcher Jones of Chicago, Ltd LLC in monthly installments of $1,769 at 6.653%, paid in March 2015. 49,047 Total notes payable 8,379,328 8,996,800 Less current maturities 840,000 872,285 Total long-term portion $ 7,539,328 $ 8,124,515 In addition, as of June 30, 2015 the Company had a $5 million revolving credit facility with The Private Bank. Borrowings under the facility were subject to interest at the prime rate or LIBOR plus 2.5%. At June 30, 2015 there were no borrowings under the facility. The facility expires on July 31, 2016. Maturities of notes payables are as follows: For the 12 Months Ended June 30, 2016 $ 840,000 2017 840,000 2018 840,000 2019 2,912,233 2020 2,947,095 Total $ 8,379,328 |
Commitments And Contingencies
Commitments And Contingencies | 6 Months Ended |
Jun. 30, 2015 | |
Notes to Financial Statements | |
Note 9 - Commitments And Contingencies | The Company leases three stores for its Starfruit subsidiary. Total expense for these leases was $134,733 and $150,566 for the six months ended June 30, 2015 and 2014, respectively. The Company is also responsible for additional rent equal to real estate taxes and other operating expenses. Future annual minimum base rental payments for the leases as of June 30, 2015 are approximately as follows: For the 12 months ending June 30, 2016 $ 73,000 2017 75,000 2018 63,000 2019 29,000 Total $ 240,000 |
Provision For Income Taxes
Provision For Income Taxes | 6 Months Ended |
Jun. 30, 2015 | |
Notes to Financial Statements | |
Note 10 - Provision For Income Taxes | The effective tax rate for the three and six months ended June 30, 2015 was 54.7% and 50.6% respectively compared to 54.7% and 53.4% respectively for the three and six months ended March 31, 2014. The difference between the statutory and effective tax rate reflects certain operating expenses that are not fully deductible for federal income tax purposes. |
Fair Value Measurements
Fair Value Measurements | 6 Months Ended |
Jun. 30, 2015 | |
Notes to Financial Statements | |
Note 11 - Fair Value Measurements | Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC) 820, Fair Value Measurements and Disclosures, provides the framework for measuring fair value. That framework provides a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (level 1 measurement) and the lowest priority to unobservable inputs (level 3 measurements). The three levels of the fair value hierarchy under FASB ASC 820 are described as follows: Level 1. Level 2. 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. If the asset or liability has a specified (contractual) term, the level 2 input must be observable for substantially the full term of the asset or liability. Level 3. The asset or liabilitys fair value measurement level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement. Valuation techniques used need to maximize the use of observable inputs and minimize the use of unobservable inputs. Following is a description of the valuation methodologies used for assets measured at fair value on a recurring basis. There have been no changes in the methodologies used as of June 30, 2015 and December 31, 2014. The majority of the Companys fair value measurements for investments are classified within Level 1 or Level 2 of the fair value hierarchy. The Companys Level 1 fair value measurements, which include mutual funds and common stock, is based on quoted market prices in active markets for identical securities. The Companys Level 2 fair value measurements, which include corporate bonds, is based on other observable inputs, specifically a valuation model which utilized vendor pricing for similar securities. The preceding methods described may produce a fair value calculation that may not be indicative of net realizable value or reflective of future fair values. Furthermore, although the Company believes the valuation methods are appropriate and consistent with other market participants, the use of different methodologies or assumptions to determine the fair value of certain financial instruments could result in a different fair value measurement at the reporting date. The following table sets forth by level, within the fair value hierarchy, the Companys financial assets measured at fair value on a recurring basis as of June 30, 2015 and December 31, 2014. Assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurement: Assets and Liabilities at Fair Value as of June 30, 2015 Level 1 Level 2 Level 3 Total Mutual Funds $ 53,186 $ $ $ 53,186 Common Stocks & ETFs 984,547 984,547 Preferred Securities 98,080 98,080 Corporate Bonds 1,629,219 84,720 1,713,939 Assets and Liabilities at Fair Value as of December 31, 2014 Level 1 Level 2 Level 3 Total Mutual Funds $ 434,713 $ $ $ 434,713 Common Stocks & ETFs 485,890 485,890 Preferred Securities 178,240 178,240 Corporate Bonds 1,680,297 1,680,297 The Companys financial assets and liabilities which are not carried at fair value on a recurring basis include cash and cash equivalents, certificates of deposit, accounts receivable, other receivables, accounts payable and notes payable for which carrying value approximates fair value. |
Litigation
Litigation | 6 Months Ended |
Jun. 30, 2015 | |
Notes to Financial Statements | |
Note 12 - Litigation | The Company is named a party to lawsuits in the normal course of business. In the opinion of management, the resolution of these lawsuits will not have a material adverse effect on the Companys consolidated financial position or results of operations. |
Segments And Products
Segments And Products | 6 Months Ended |
Jun. 30, 2015 | |
Notes to Financial Statements | |
Note 13 - Segments And Products | The Company manufactures probiotic, cultured, functional dairy health food products. The Companys primary product is kefir, a dairy beverage similar to but distinct from yogurt, in several flavors and in several packages. In addition to the drinkable products, Lifeway manufactures Lifeway Farmer Cheese, a line of various farmer cheeses. Net sales of products by category for the six months ended June 30 were as follows: Six months ended June 30, Three months ended June 30, 2015 2014 2015 2014 Drinkable Kefir other than ProBugs $ 50,821,289 $ 50,651,559 $ 25,233,948 $ 25,563,748 Pro Bugs 4,296,976 3,683,935 2,290,905 1,820,038 Lifeway Farmer Cheese 3,464,377 3,367,789 1,741,985 1,681,601 Frozen Kefir 860,670 993,839 554,350 500,024 Net Sales $ 59,443,312 $ 58,697,122 $ 29,821,188 $ 29,565,411 The Company has two operating segments, the sale of fermented dairy products and three retail locations in Illinois that sell the Companys fermented dairy products. The Company has determined reportable segments based on how the Companys chief operating decision maker manages the business and in a manner consistent with the internal reporting provided to the chief operating decision maker. The chief operating decision maker, who is responsible for allocating resources and assessing performance of the operating segments, has been identified as the Chief Financial Officer and the board of directors that makes strategic decisions. Substantially all of the consolidated revenues of the Company relate to the sale of fermented dairy products which are produced using the same processes and materials and are sold to consumer retail food sellers through direct delivery and distributors in the United States. The Company has less than $1 million in revenues attributable to its retail locations during the three and six months ended June 30, 2015 and 2014. The annual revenues attributable to the three retail locations are not material and accordingly the Company has not presented financial information separately for this operating segment. Substantially all of the consolidated revenues and assets of the Company are within the United States. |
Subsequent Events
Subsequent Events | 6 Months Ended |
Jun. 30, 2015 | |
Notes to Financial Statements | |
Note 14 - Subsequent Event | On April 6, 2015, May 14, 2015 and August 25, 2015 the Company received letters (the Nasdaq Notices) from The NASDAQ Stock Market LLC (Nasdaq) notifying the Company that because it had not yet filed with the SEC its Annual Report on Form 10-K for the fiscal year ended December 31, 2014 (the Form 10-K) and its Quarterly Reports on Form 10-Q for the fiscal quarters ended March 31, 2015 (the First Quarter Form 10-Q) and June 30, 2015 (the Second Quarter Form 10-Q), the Company is not in compliance with the periodic filing requirements for continued listing set forth in Nasdaq Listing Rule 5250(c)(1). The Company filed the Form 10-K on August 14, 2015, the First Quarter Form 10-Q on September 29, 2015 and the Second Quarter Form 10-Q on September 30, 2015. On August 11, 2015, The Private Bank agreed to extend the due date for the Company to deliver its Annual Report on Form 10-K for the fiscal year ended December 31, 2014 until August 14, 2015 as well as the due date for the Company to deliver its First Quarter Form 10-Q to September 30, 2015 and its Second Quarter Form 10-Q to October 15, 2015. On August 11, 2015, The Private Bank also extended the maturity date for the revolving credit facility to July 31, 2016. On September 24, 2015, the Companys Board of Directors authorized a stock repurchase program under which the Company may repurchase up to $3,500,000 of the Companys common stock not to exceed an aggregate of 250,000 shares, in the open market or in privately negotiated transactions, in accordance with all applicable securities laws and regulations, including Rule 10b-18 of the Securities Exchange Act of 1934, as amended. The extent to which the Company repurchases its shares and the timing of such repurchases will depend upon a variety of factors, including market conditions, regulatory requirements and other corporate considerations, as determined by management. The repurchase program may be suspended or discontinued at any time. |
Summary Of Significant Accoun21
Summary Of Significant Accounting Policies (Policy) | 6 Months Ended |
Jun. 30, 2015 | |
Summary Of Significant Accounting Policies Policy | |
Corrections of prior period financial statements | As reported in the Companys fiscal 2014 annual report on Form 10-K, the Company recorded out-of-period adjustments during fiscal 2014 to correct the accounting for certain errors related primarily to the provision for income taxes and an understatement of depreciation expense arising from assigning incorrect useful lives. The Company has revised its previously issued interim consolidated financial statements to correct for these matters. The adjustments decreased previously reported second quarter net income by approximately $425,000. There was no impact to quarterly cash flows in 2014 as the increase in net income was offset by the decrease in the non-cash reconciling items for depreciation expense and refundable income taxes. The Company does not believe that these adjustments are material to the results of operations, financial position or cash flows for any of its previously filed interim consolidated financial statements. Accordingly, the June 30, 2014 interim consolidated financial statements included herein have been revised to reflect the adjustments discussed above. The Company will also revise its 2014 third quarter financial statements prospectively within its 2015 third quarter interim consolidated Quarterly Report on Form 10-Q. The net-of-tax effect of these adjustments decreases the Companys previously reported 2014 earnings per common and diluted share by $0.02 for the quarter ended March 31, 2014, $0.03 for the quarter ended June 30, 2014 and increases the Companys 2014 earnings per common and diluted share by $0.05 for the quarter ended December 31, 2014. |
Basis Of Presentation | The accompanying unaudited consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (U.S. GAAP) for interim financial information, and do not include all of the information and disclosures required for complete, audited financial statements. In the opinion of management, all adjustments, consisting only of normal recurring adjustments, considered necessary for a fair presentation, have been included. For further information, refer to the consolidated financial statements and disclosures included in the consolidated financial statements included in the Companys Annual Report on Form 10-K for the year ended December 31, 2014. |
Principles Of Consolidation | The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries, Helios Nutrition, Ltd., Pride of Main Street, L.L.C., Starfruit, L.L.C., Fresh Made, Inc. and Starfruit Franchisor, L.L.C. and Lifeway Wisconsin, Inc. Lifeway Wisconsin, Inc. was created to facilitate the operation of a production facility in Wisconsin. All significant intercompany accounts and transactions have been eliminated. |
Use Of Estimates | The preparation of consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Significant estimates made in preparing the consolidated financial statements include the reserve for promotional allowances, the fair value of investment securities, the valuation of goodwill and intangible assets, and deferred taxes. |
Revenue Recognition | Sales of Company produced dairy products are recorded at the time of shipment and the following four criteria have been met: (i) The product has been shipped and the Company has no significant remaining obligations; (ii) Persuasive evidence of an agreement exists; (iii) The price to the buyer is fixed or determinable and (iv) Collection is probable. In addition, shipping costs invoiced to the customers are included in net sales and the related cost in cost of sales. The Company routinely offers sales allowances and discounts to our customers and consumers. These programs include rebates, in-store display and demo allowances, allowances for non-salable product, coupons and other trade promotional activities. These allowances are considered reductions in the price of our products and thus are recorded as reductions to gross sales. Some of these incentives are recorded by estimating incentive costs based on our historical experience and expected levels of performance of the trade promotion. We maintain a reserve at the end of each period for the estimated allowances incurred but unpaid. Differences between estimated and actual allowances are normally insignificant and are recognized in earnings in the period such differences are determined. Product returns have historically not been material. Bulk cream is a by-product of the Companys fluid milk manufacturing process. The Company does not use bulk cream in any of its end products, but rather disposes of it through sales to other companies. Bulk cream by-product sales are included in gross sales. |
Customer Concentration | Sales are predominately to companies in the retail food industry, located within the United States of America. Two major customers accounted for approximately 29% and 29% of gross sales for the six months ended June 30, 2015 and 2014, respectively. Two major customers accounted for approximately 27% and 29% of gross sales for the three months ended June 30, 2015 and 2014, respectively. |
Cash And Cash Equivalents | All highly liquid investments purchased with an original maturity of three months or less are considered to be cash equivalents. |
Investments | All investment securities are classified as available-for-sale and are carried at fair value. Unrealized gains and losses on available-for-sale securities are reported as a separate component of stockholders equity to the extent they are considered temporary in nature. Amortization, accretion, interest and dividends, realized gains and losses, and declines in fair value judged to be other-than-temporary on available-for-sale securities are recorded as a component of other income. All of the Companys securities are subject to a periodic impairment evaluation. This evaluation depends on the specific facts and circumstances. Factors that we consider in determining whether an other-than-temporary decline in fair value has occurred include: the fair value of the security in relation to its carrying amount; the financial condition of the investee; and the intent and ability to retain the investment for a sufficient period of time to allow for possible recovery in the fair value of the investment. |
Accounts Receivable | Credit terms are extended to customers in the normal course of business. The Company performs ongoing credit evaluations of its customers financial condition and generally requires no collateral. Balances expected to be collected beyond one year are classified as long-term. Accounts receivable are recorded at invoice amounts, and reduced to their estimated net realizable value by recognition of an allowance for doubtful accounts and anticipated discounts. The Companys estimate of the allowance for doubtful accounts and anticipated discounts are based upon historical experience, its evaluation of the current status and contract terms of specific receivables, and unusual circumstances, if any. Accounts are considered past due if payment is not made on a timely basis in accordance with the Companys credit terms. Accounts considered uncollectible are charged against the allowance. |
Inventories | Inventories are stated at the lower of cost or market. Our products are valued using the first in, first out method. The costs of inventories include raw materials, direct labor and indirect production and overhead costs. |
Property And Equipment | Property and equipment are recorded at cost and depreciated using the straight-line method over the estimated useful lives of the related assets. When assets are retired or otherwise disposed of, the cost and related accumulated depreciation are removed from the accounts, and any resulting gain or loss is recognized in income for the period. The cost of maintenance and repairs is charged to expense as incurred; significant renewals and betterments are capitalized. Property and equipment is being depreciated over the following useful lives: Category Years Buildings and improvements 31 and 39 Machinery and equipment 5 12 Office equipment 5 7 Vehicles 5 Leasehold improvements Shorter of expected useful life or lease term |
Intangible Assets Acquired In Business Combinations | Intangible assets acquired in a business combination are recorded at their estimated fair values at the date of acquisition. Goodwill represents the excess purchase price over the fair value of the net tangible and other identifiable intangible assets acquired. Goodwill is not amortized, but is reviewed for impairment at least annually. The Company amortizes other intangible assets over their estimated useful lives, as disclosed in the table below. The Company reviews intangible assets and their related useful lives at least once per year to determine if any adverse conditions exist that would indicate the carrying value of these assets may not be recoverable. The Company conducts more frequent impairment assessments if certain conditions exist, including: a change in the competitive landscape, any internal decisions to pursue new or different strategies, a loss of a significant customer, or a significant change in the market place including changes in the prices paid for the Companys products or changes in the size of the market for the Companys products. If the estimate of an intangible assets remaining useful life is changed, the remaining carrying amount of the intangible asset is amortized prospectively over the revised remaining useful life. Intangible assets are being amortized over the following useful lives: Category Years Recipes 4 Trade names 8-15 Formula 10 Customer relationships 8-12 |
Income Taxes | Deferred income taxes are the result of temporary differences that arise from income and expense items reported for financial accounting and tax purposes in different periods. Deferred taxes are classified as current or non-current, depending on the classification of the assets and liabilities to which they relate. Deferred taxes arising from temporary differences that are not related to an asset or liability are classified as current or non-current depending on the periods in which the temporary differences are expected to reverse. The principal sources of temporary differences are different depreciation and amortization methods for financial statement and tax purposes, unrealized gains or losses related to investments, capitalization of indirect costs for tax purposes, purchase price adjustments, and the recognition of an allowance for doubtful accounts and discounts for financial statement purposes. The Company has analyzed filing positions in all of the federal and state jurisdictions where it is required to file income tax returns, as well as all open tax years in these jurisdictions. Periods subject to examination for the Companys federal returns are the 2012, 2013 and 2014 tax years. The amount of unrecognized tax benefits that, if recognized, would impact the annual effective tax rate was not significant as of June 30, 2015 and December 31, 2014. The total amount of unrecognized tax benefits can change due to audit settlements, tax examination activities, statute expirations and the recognition and measurement criteria under accounting for uncertainty in income taxes. |
Treasury Stock | Treasury stock is recorded using the cost method. |
Advertising And Promotional Costs | The Company expenses advertising costs as incurred. For the six months ended June 30, 2015 and 2014 total advertising expenses were $2,741,835 and $1,824,524 respectively. For the three months ended June 30, 2015 and 2014 total advertising expenses were $867,297 and $1,006,016 respectively. |
Earnings Per Common Share | Earnings per common share were computed by dividing net income available to common stockholders by the weighted average number of common shares outstanding during the period. For the three and six months ended June 30, 2015 and 2014 the weighted average number of shares outstanding used in the calculation of diluted and basic earnings per share were the same. |
Segments | The Company has two separate operating segments, the sale of fermented dairy products and three retail locations in Illinois that sell the Companys fermented dairy products. The Company has determined reportable segments based on how the Companys chief operating decision maker manages the business and in a manner consistent with the internal reporting provided to the chief operating decision maker. The chief operating decision maker, who is responsible for allocating resources and assessing performance of the operating segments, has been identified as the Chief Financial Officer and the board of directors that makes strategic decisions. Substantially all of the consolidated revenues of the Company relate to the sale of fermented dairy products which are produced using the same processes and materials and are sold to consumer retail food sellers through direct delivery and distributors in the United States. |
Recent Accounting Pronouncements | In May 2014, the Financial Accounting Standards Board (FASB) issued ASU No. 2014-09, Revenue from Contracts with Customers (Topic 606) (ASU 2014-09), which supersedes the revenue recognition requirements in Topic 605, Revenue Recognition, including most industry-specific requirements. ASU 2014-09 establishes a five-step revenue recognition process in which an entity will recognize revenue when it transfers promised goods or services to customers in an amount that reflects the consideration to which the company expects to be entitled in exchange for those goods or services. ASU 2014-09 also requires enhanced disclosures regarding the nature, amount, timing and uncertainty of revenues and cash flows from contracts with customers. In August 2015 the FASB delayed the effective date for implementation of ASU 2014-09. Under the delayed effective date, the Company is required to adopt the new standard not later than January 1, 2018. Management is currently evaluating the impact the adoption of ASU 2014-09 will have on the Companys consolidated financial position, results of operations or cash flows and the method of retrospective application, either full or modified. In July 2015, the FASB issued new accounting guidance for measuring inventory. The core principal of the guidance is that an entity should measure inventory at the lower of cost and net realizable value. Net realizable value is the estimated selling prices in the ordinary course of business, less reasonably predictable costs of completion, disposal, and transportation. This guidance does not apply to inventory that is being measured using the Last-In, First-Out (LIFO) or the retail inventory method. The guidance is effective for financial statements issued for annual and interim periods beginning after December 15, 2016 on a prospective basis. Early adoption is permitted. Management is currently evaluating the impact this will have on the consolidated financial statements. |
Summary Of Significant Accoun22
Summary Of Significant Accounting Policies (Tables) | 6 Months Ended |
Jun. 30, 2015 | |
Summary Of Significant Accounting Policies Tables | |
Schedule Of Property And Equipment, Estimated Useful Lives | Property and equipment is being depreciated over the following useful lives: Category Years Buildings and improvements 31 and 39 Machinery and equipment 5 12 Office equipment 5 7 Vehicles 5 Leasehold improvements Shorter of expected useful life or lease term |
Schedule Of Intangible Assets Useful Lives | Intangible assets are being amortized over the following useful lives: Category Years Recipes 4 Trade names 8-15 Formula 10 Customer relationships 8-12 |
Intangible Assets (Tables)
Intangible Assets (Tables) | 6 Months Ended |
Jun. 30, 2015 | |
Intangible Assets Tables | |
Intangible assets, net | Intangible assets, net consists of the following: As of June 30, 2015 December 31, 2014 Recipes $ 43,600 $ 43,600 Customer lists and other customer related intangibles 4,529,200 4,529,200 Customer relationship 985,000 985,000 Trade names 2,248,000 2,248,000 Formula 438,000 438,000 Subtotal 8,243,800 8,243,800 Accumulated amortization (5,541,875 ) (5,184,036 ) Intangible assets, net $ 2,701,925 $ 3,059,764 |
Investments (Tables)
Investments (Tables) | 6 Months Ended |
Jun. 30, 2015 | |
Investments Tables | |
Schedule Of Cost And Fair Value Of Available For Sale Investments | The cost and fair value of investments classified as available for sale are as follows: June 30, 2015 Cost Unrealized Gains Unrealized Losses Fair Value Common Stocks & ETFs $ 1,027,735 $ 22,941 $ (66,129 ) $ 984,547 Mutual Funds 58,102 0 (4,916 ) 53,186 Preferred Securities 97,405 675 0 98,080 Corporate Bonds 1,887,218 9,885 (183,164 ) 1,713,939 Total $ 3,070,460 $ 33,501 $ (254,209 ) $ 2,849,752 December 31, 2014 Cost Unrealized Gains Unrealized Losses Fair Value Common Stocks & ETFs $ 530,328 $ 19,608 $ (64,046 ) $ 485,890 Mutual Funds 445,337 0 (10,624 ) 434,713 Preferred Securities 180,120 195 (2,075 ) 178,240 Corporate Bonds 1,948,596 1,880 (270,179 ) 1,680,297 Total $ 3,104,381 $ 21,683 $ (346,924 ) $ 2,779,140 |
Schedule Of Gross Unrealized Loss On Investments | The following table shows the gross unrealized losses and fair value of the Companys investments with unrealized losses that are not deemed to be other-than-temporarily impaired, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position, at June 30, 2015 and December 31, 2014: Less Than 12 Months 12 Months or Greater Total June 30, 2015 Fair Value Unrealized Losses Fair Value Unrealized Losses Fair Value Unrealized Losses Common Stocks & ETFs $ 419,655 $ (39,292 ) $ 157,897 $ (26,837 ) $ 577,552 $ (66,129 ) Mutual Funds 47,858 (3,204 ) 5,328 (1,712 ) 53,186 (4,916 ) Preferred Securities 0 0 0 0 0 0 Corporate Bonds 692,965 (61,201 ) 749,771 (121,963 ) 1,442,736 (183,164 ) $ 1,160,478 $ (103,697 ) $ 912,996 $ (150,512 ) $ 2,073,474 $ (254,209 ) Less Than 12 Months 12 Months or Greater Total December 31, 2014 Fair Value Unrealized Losses Fair Value Unrealized Losses Fair Value Unrealized Losses Common Stocks & ETFs $ 162,268 $ (49,053 ) $ 141,417 $ (14,993 ) $ 303,685 $ (64,046 ) Mutual Funds 434,713 (10,624 ) 0 0 434,713 (10,624 ) Preferred Securities 80,640 (2,075 ) 0 0 80,640 (2,075 ) Corporate Bonds 1,056,140 (194,641 ) 497,277 (75,538 ) 1,553,417 (270,179 ) $ 1,733,761 $ (256,393 ) $ 638,694 $ (90,531 ) $ 2,372,455 $ (346,924 ) |
Inventories (Tables)
Inventories (Tables) | 6 Months Ended |
Jun. 30, 2015 | |
Inventories Tables | |
Schedule Of Inventories | June 30, 2015 December 31, 2014 Finished goods $ 1,820,587 $ 2,373,476 Production supplies 2,565,425 2,069,742 Raw materials 1,903,804 1,371,001 Total inventories $ 6,289,816 $ 5,814,219 |
Property And Equipment (Tables)
Property And Equipment (Tables) | 6 Months Ended |
Jun. 30, 2015 | |
Property And Equipment Tables | |
Schedule Of Property And Equipment | June 30, 2015 December 31, 2014 Land $ 1,756,673 $ 1,856,370 Buildings and improvements 16,417,110 15,125,803 Machinery and equipment 22,697,235 20,434,910 Vehicles 1,310,527 1,244,560 Office equipment 602,087 465,801 Construction in process 30,260 2,408,754 42,813,892 41,536,198 Less accumulated depreciation 20,838,961 19,643,803 Total property and equipment $ 21,974,931 $ 21,892,395 |
Accrued Expenses (Tables)
Accrued Expenses (Tables) | 6 Months Ended |
Jun. 30, 2015 | |
Accrued Expenses Tables | |
Schedule Of Accrued Expenses | June 30, 2015 December 31, 2014 Accrued payroll and payroll taxes $ 1,201,895 $ 891,763 Accrued property tax 352,169 331,278 Other 3,148,698 843,035 $ 4,702,762 $ 2,066,076 |
Notes Payable (Tables)
Notes Payable (Tables) | 6 Months Ended |
Jun. 30, 2015 | |
Notes Payable Tables | |
Schedule Of Notes Payable | June 30, 2015 December 31, 2014 Note payable to Private Bank in monthly installments of $42,222, plus variable interest rate (currently 2.67%) with a balloon payment for the remaining balance. Collateralized by substantially all assets of the Company. Maturity date - May 31, 2018. $ 4,098,889 $ 4,352,222 Note payable to Private Bank in monthly installments of $27,778, plus variable interest rate (currently 2.67%) with a balloon payment for the remaining balance, maturing on May 31, 2019, collateralized by substantially all assets of the Company. 4,280,439 4,583,333 Notes payable to Ford Credit Corp. payable in monthly installments of $1,778 at 5.99%, paid in March 2015. 12,198 Note payable to Fletcher Jones of Chicago, Ltd LLC in monthly installments of $1,769 at 6.653%, paid in March 2015. 49,047 Total notes payable 8,379,328 8,996,800 Less current maturities 840,000 872,285 Total long-term portion $ 7,539,328 $ 8,124,515 |
Maturities Of Notes Payable | Maturities of notes payables are as follows: For the 12 Months Ended June 30, 2016 $ 840,000 2017 840,000 2018 840,000 2019 2,912,233 2020 2,947,095 Total $ 8,379,328 |
Commitments And Contingencies (
Commitments And Contingencies (Tables) | 6 Months Ended |
Jun. 30, 2015 | |
Commitments And Contingencies Tables | |
Schedule Of Annual Minimum Base Rental Payments | Future annual minimum base rental payments for the leases as of June 30, 2015 are approximately as follows: For the 12 months ending June 30, 2016 $ 73,000 2017 75,000 2018 63,000 2019 29,000 Total $ 240,000 |
Fair Value Measurements (Tables
Fair Value Measurements (Tables) | 6 Months Ended |
Jun. 30, 2015 | |
Fair Value Measurements Tables | |
Schedule Of Fair Value Assets And Liabilities As Classified | The following table sets forth by level, within the fair value hierarchy, the Companys financial assets measured at fair value on a recurring basis as of June 30, 2015 and December 31, 2014. Assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurement: Assets and Liabilities at Fair Value as of June 30, 2015 Level 1 Level 2 Level 3 Total Mutual Funds $ 53,186 $ $ $ 53,186 Common Stocks & ETFs 984,547 984,547 Preferred Securities 98,080 98,080 Corporate Bonds 1,629,219 84,720 1,713,939 Assets and Liabilities at Fair Value as of December 31, 2014 Level 1 Level 2 Level 3 Total Mutual Funds $ 434,713 $ $ $ 434,713 Common Stocks & ETFs 485,890 485,890 Preferred Securities 178,240 178,240 Corporate Bonds 1,680,297 1,680,297 |
Segments And Products (Tables)
Segments And Products (Tables) | 6 Months Ended |
Jun. 30, 2015 | |
Segments And Products Tables | |
Summary of sales of products | Net sales of products by category for the six months ended June 30 were as follows: Six months ended June 30, Three months ended June 30, 2015 2014 2015 2014 Drinkable Kefir other than ProBugs $ 50,821,289 $ 50,651,559 $ 25,233,948 $ 25,563,748 Pro Bugs 4,296,976 3,683,935 2,290,905 1,820,038 Lifeway Farmer Cheese 3,464,377 3,367,789 1,741,985 1,681,601 Frozen Kefir 860,670 993,839 554,350 500,024 Net Sales $ 59,443,312 $ 58,697,122 $ 29,821,188 $ 29,565,411 |
Summary Of Significant Accoun32
Summary Of Significant Accounting Policies (Details) | 6 Months Ended |
Jun. 30, 2015 | |
Buildings And improvements [Member] | Minimum [Member] | |
Property and equipment, useful life | 31 years |
Buildings And improvements [Member] | Maximum [Member] | |
Property and equipment, useful life | 39 years |
Machinery And Equipment [Member] | Minimum [Member] | |
Property and equipment, useful life | 5 years |
Machinery And Equipment [Member] | Maximum [Member] | |
Property and equipment, useful life | 12 years |
Office Equipment [Member] | Minimum [Member] | |
Property and equipment, useful life | 5 years |
Office Equipment [Member] | Maximum [Member] | |
Property and equipment, useful life | 7 years |
Vehicles [Member] | |
Property and equipment, useful life | 5 years |
Leasehold improvements [Member] | |
Property and equipment, useful life | 0 years |
Summary Of Significant Accoun33
Summary Of Significant Accounting Policies (Details 1) | 6 Months Ended |
Jun. 30, 2015 | |
Recipes [Member] | |
Intangible assets, useful lives | 4 years |
Trade Names [Member] | Minimum [Member] | |
Intangible assets, useful lives | 8 years |
Trade Names [Member] | Maximum [Member] | |
Intangible assets, useful lives | 15 years |
Formula [Member] | |
Intangible assets, useful lives | 10 years |
Customer Relationships [Member] | Minimum [Member] | |
Intangible assets, useful lives | 8 years |
Customer Relationships [Member] | Maximum [Member] | |
Intangible assets, useful lives | 12 years |
Summary Of Significant Accoun34
Summary Of Significant Accounting Policies (Details Narrative) - USD ($) | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2015 | Jun. 30, 2014 | Jun. 30, 2015 | Jun. 30, 2014 | |
Summary Of Significant Accounting Policies Details Narrative | ||||
Percentage of gross sales | 29.00% | 29.00% | ||
Total advertising expenses | $ 867,297 | $ 1,006,016 | $ 2,741,835 | $ 1,824,524 |
Intangible Assets (Details)
Intangible Assets (Details) - USD ($) | Jun. 30, 2015 | Dec. 31, 2014 |
Cost | $ 8,243,800 | $ 8,243,800 |
Accumulated Amortization | (5,541,875) | (5,184,036) |
Intangibles, net | 2,701,925 | 3,059,764 |
Recipes [Member] | ||
Cost | 43,600 | 43,600 |
Customer Lists And Other Customer Related Intangibles [Member] | ||
Cost | 4,529,200 | 4,529,200 |
Customer Relationships [Member] | ||
Cost | 985,000 | 985,000 |
Trade Names [Member] | ||
Cost | 2,248,000 | 2,248,000 |
Formula [Member] | ||
Cost | $ 438,000 | $ 438,000 |
Investments (Details)
Investments (Details) - USD ($) | Jun. 30, 2015 | Dec. 31, 2014 |
Cost | $ 3,070,460 | $ 3,104,381 |
Unrealized Gains | 33,501 | 21,683 |
Unrealized Losses | (254,209) | (346,924) |
Fair Value | 2,849,752 | 2,779,140 |
Common Stocks & ETFs [Member] | ||
Cost | 1,027,735 | 530,328 |
Unrealized Gains | 22,941 | 19,608 |
Unrealized Losses | (66,129) | (64,046) |
Fair Value | 984,547 | 485,890 |
Mutual Funds [Member] | ||
Cost | $ 58,102 | 445,337 |
Unrealized Gains | 0 | |
Unrealized Losses | $ (4,916) | (10,624) |
Fair Value | 53,186 | 434,713 |
Preferred Securities [Member] | ||
Cost | 97,405 | 180,120 |
Unrealized Gains | $ 675 | 195 |
Unrealized Losses | (2,075) | |
Fair Value | $ 98,080 | 178,240 |
Corporate Bond [Member] | ||
Cost | 1,887,218 | 1,948,596 |
Unrealized Gains | 9,885 | 1,880 |
Unrealized Losses | (183,164) | (270,179) |
Fair Value | $ 1,713,939 | $ 1,680,297 |
Investments (Details 1)
Investments (Details 1) - USD ($) | Jun. 30, 2015 | Dec. 31, 2014 |
Less Than 12 Months, Fair Value | $ 1,160,478 | $ 1,733,761 |
Less Than 12 Months, Unrealized Losses | (103,697) | (256,393) |
12 Months or Greater, Fair Value | 912,996 | 638,694 |
12 Months or Greater, Unrealized Losses | (150,512) | (90,531) |
Total, Fair Value | 2,073,474 | 2,372,455 |
Total, Unrealized Losses | (254,209) | (346,924) |
Common Stocks & ETFs [Member] | ||
Less Than 12 Months, Fair Value | 419,655 | 162,268 |
Less Than 12 Months, Unrealized Losses | (39,292) | (49,053) |
12 Months or Greater, Fair Value | 157,897 | 141,417 |
12 Months or Greater, Unrealized Losses | (26,837) | (14,993) |
Total, Fair Value | 577,552 | 303,685 |
Total, Unrealized Losses | (66,129) | (64,046) |
Mutual Funds [Member] | ||
Less Than 12 Months, Fair Value | 47,858 | 434,713 |
Less Than 12 Months, Unrealized Losses | (3,204) | (10,624) |
12 Months or Greater, Fair Value | 5,328 | 0 |
12 Months or Greater, Unrealized Losses | (1,712) | 0 |
Total, Fair Value | 53,186 | 434,713 |
Total, Unrealized Losses | (4,916) | (10,624) |
Preferred Securities [Member] | ||
Less Than 12 Months, Fair Value | 0 | 80,640 |
Less Than 12 Months, Unrealized Losses | 0 | (2,075) |
12 Months or Greater, Fair Value | 0 | 0 |
12 Months or Greater, Unrealized Losses | 0 | 0 |
Total, Fair Value | 0 | 80,640 |
Total, Unrealized Losses | 0 | (2,075) |
Corporate Bond [Member] | ||
Less Than 12 Months, Fair Value | 692,965 | 1,056,140 |
Less Than 12 Months, Unrealized Losses | (61,201) | (194,641) |
12 Months or Greater, Fair Value | 749,771 | 497,277 |
12 Months or Greater, Unrealized Losses | (121,963) | (75,538) |
Total, Fair Value | 1,442,736 | 1,553,417 |
Total, Unrealized Losses | $ (183,164) | $ (270,179) |
Investments (Details Narrative)
Investments (Details Narrative) - USD ($) | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2015 | Jun. 30, 2014 | Jun. 30, 2015 | Jun. 30, 2014 | |
Investments Details Narrative | ||||
Proceeds from sale of investments | $ 440,424 | $ 864,753 | $ 1,133,647 | $ 1,419,362 |
Gross realized gains | 7,545 | 15,333 | 13,047 | 34,984 |
Gross realized losses | $ 70,227 | $ 136,629 | $ 80,822 | $ 151,472 |
Inventories (Details)
Inventories (Details) - USD ($) | Jun. 30, 2015 | Dec. 31, 2014 |
Inventory Disclosure [Abstract] | ||
Finished goods | $ 1,820,587 | $ 2,373,476 |
Production supplies | 2,565,425 | 2,069,742 |
Raw materials | 1,903,804 | 1,371,001 |
Total inventories | $ 6,289,816 | $ 5,814,219 |
Property And Equipment (Details
Property And Equipment (Details) - USD ($) | Jun. 30, 2015 | Dec. 31, 2014 |
Property and equipment, gross | $ 42,813,892 | $ 41,536,198 |
Less accumulated depreciation | 20,838,961 | 19,643,803 |
Total property and equipment | 21,974,931 | 21,892,395 |
Land [Member] | ||
Property and equipment, gross | 1,756,673 | 1,856,370 |
Buildings And improvements [Member] | ||
Property and equipment, gross | 16,417,110 | 15,125,803 |
Machinery And Equipment [Member] | ||
Property and equipment, gross | 22,697,235 | 20,434,910 |
Vehicles [Member] | ||
Property and equipment, gross | 1,310,527 | 1,244,560 |
Office Equipment [Member] | ||
Property and equipment, gross | 602,087 | 465,801 |
Construction In Progress [Member] | ||
Property and equipment, gross | $ 30,260 | $ 2,408,754 |
Accrued Expenses (Details)
Accrued Expenses (Details) - USD ($) | Jun. 30, 2015 | Dec. 31, 2014 |
Accrued Expenses Details | ||
Accrued payroll and payroll taxes | $ 1,201,895 | $ 891,763 |
Accrued property tax | 352,169 | 331,278 |
Other | 3,148,698 | 843,035 |
Total accrued expenses | $ 4,702,762 | $ 2,066,076 |
Notes Payable (Details)
Notes Payable (Details) - USD ($) | 6 Months Ended | |
Jun. 30, 2015 | Dec. 31, 2014 | |
Total notes payable | $ 8,379,328 | $ 8,996,800 |
Less current maturities | 840,000 | 872,285 |
Total long-term portion | 7,539,328 | 8,124,515 |
Note Payable To Private Banks [Member] | ||
Total notes payable | 4,098,889 | 4,352,222 |
Debt instrument, monthly installments | $ 42,222 | |
Variable interest rate | 2.67% | |
Maturity date | May 31, 2018 | |
Note Payable To Private Bank One [Member] | ||
Total notes payable | $ 4,280,439 | 4,583,333 |
Debt instrument, monthly installments | $ 27,778 | |
Variable interest rate | 2.67% | |
Maturity date | May 31, 2019 | |
Notes Payable To Ford Credit Corp [Member] | ||
Total notes payable | 12,198 | |
Debt instrument, monthly installments | $ 1,778 | |
Variable interest rate | 5.99% | |
Maturity date | Jul. 1, 2015 | |
Note Payable To Fletcher Jones Of Chicago Ltd Llc [Member] | ||
Total notes payable | $ 49,047 | |
Debt instrument, monthly installments | $ 1,769 | |
Variable interest rate | 6.653% | |
Maturity date | Mar. 1, 2015 |
Notes Payable (Details 1)
Notes Payable (Details 1) - USD ($) | Jun. 30, 2015 | Dec. 31, 2014 |
Notes Payable Details 1 | ||
2,016 | $ 840,000 | |
2,017 | 840,000 | |
2,018 | 840,000 | |
2,019 | 2,912,233 | |
2,020 | 2,947,095 | |
Total notes payable | $ 8,379,328 | $ 8,996,800 |
Commitments And Contingencies44
Commitments And Contingencies (Details) | Jun. 30, 2015USD ($) |
Commitments And Contingencies Details | |
2,016 | $ 73,000 |
2,017 | 75,000 |
2,018 | 63,000 |
2,019 | 29,000 |
Total | $ 240,000 |
Commitments And Contingencies45
Commitments And Contingencies (Details Narrative) - USD ($) | 6 Months Ended | |
Jun. 30, 2015 | Jun. 30, 2014 | |
Commitments And Contingencies Details Narrative | ||
Total expenses on leases | $ 134,733 | $ 150,566 |
Provision For Income Taxes (Det
Provision For Income Taxes (Details Narrative) | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2015 | Jun. 30, 2014 | Jun. 30, 2015 | Jun. 30, 2014 | |
Provision For Income Taxes Details Narrative | ||||
Federal income tax expense computed at the statutory rate, percentage | 54.70% | 50.60% | 54.70% | 50.60% |
Fair Value Measurements (Detail
Fair Value Measurements (Details) - USD ($) | Jun. 30, 2015 | Dec. 31, 2014 |
Mutual Funds | $ 53,186 | $ 434,713 |
Common Stocks & ETF’s | 984,547 | 485,890 |
Preferred Securities | 98,080 | 178,240 |
Corporate Bonds | 1,713,939 | 1,680,297 |
Fair Value Inputs Level1 [Member] | ||
Mutual Funds | 53,186 | 434,713 |
Common Stocks & ETF’s | $ 984,547 | $ 485,890 |
Preferred Securities | ||
Corporate Bonds | ||
Fair Value Inputs Level2 [Member] | ||
Mutual Funds | ||
Common Stocks & ETF’s | ||
Preferred Securities | $ 98,080 | $ 178,240 |
Corporate Bonds | $ 1,629,219 | $ 1,680,297 |
Fair Value Inputs Level3 [Member] | ||
Mutual Funds | ||
Common Stocks & ETF’s | ||
Preferred Securities | ||
Corporate Bonds | $ 84,720 |
Segments And Products (Details)
Segments And Products (Details) - USD ($) | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2015 | Jun. 30, 2014 | Jun. 30, 2015 | Jun. 30, 2014 | |
Net Sales | $ 29,821,188 | $ 29,565,411 | $ 59,443,312 | $ 58,697,122 |
Drinkable Kefir other than ProBugs [Member] | ||||
Net Sales | 25,233,948 | 25,563,748 | 50,821,289 | 50,651,559 |
ProBugs [Member] | ||||
Net Sales | 2,290,905 | 1,820,038 | 4,296,976 | 3,683,935 |
Lifeway Farmer Cheese [Member] | ||||
Net Sales | 1,741,985 | 1,681,601 | 3,464,377 | 3,367,789 |
Frozen Kefir [Member] | ||||
Net Sales | $ 554,350 | $ 500,024 | $ 860,670 | $ 993,839 |