Document And Entity Information
Document And Entity Information - shares | 9 Months Ended | |
Sep. 30, 2016 | Nov. 01, 2016 | |
Document And Entity Information | ||
Entity Registrant Name | LIFEWAY FOODS INC | |
Entity Central Index Key | 814,586 | |
Document Type | 10-Q | |
Document Period End Date | Sep. 30, 2016 | |
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 | Accelerated Filer | |
Entity Common Stock, Shares Outstanding | 16,140,633 | |
Document Fiscal Period Focus | Q3 | |
Document Fiscal Year Focus | 2,016 |
Consolidated Balance Sheets
Consolidated Balance Sheets - USD ($) $ in Thousands | Sep. 30, 2016 | Dec. 31, 2015 |
Current assets | ||
Cash and cash equivalents | $ 9,164 | $ 5,646 |
Investments, at fair value | 2,216 | |
Certificates of deposits in financial institutions | 513 | |
Inventories | 9,186 | 7,664 |
Accounts receivable, net of allowance for doubtful accounts and discounts & allowances of $1,800 at September 30, 2016 and December 31, 2015 | 10,426 | 9,604 |
Prepaid expenses and other current assets | 550 | 201 |
Deferred income taxes | 509 | 556 |
Refundable income taxes | 521 | 449 |
Total current assets | 30,356 | 26,849 |
Property and equipment, net | 21,603 | 21,375 |
Intangible assets | ||
Goodwill & indefinite-lived intangibles | 14,068 | 14,068 |
Other intangible assets, net | 1,815 | 2,344 |
Total intangible assets | 15,883 | 16,412 |
Other Assets | 368 | 282 |
Total assets | 68,210 | 64,918 |
Current liabilities | ||
Current maturities of notes payable | 840 | 840 |
Accounts payable | 8,762 | 8,393 |
Accrued expenses | 2,002 | 1,538 |
Accrued income taxes | 267 | 52 |
Total current liabilities | 11,871 | 10,823 |
Notes payable | 6,489 | 7,119 |
Deferred income taxes | 2,162 | 1,719 |
Total liabilities | 20,522 | 19,661 |
Stockholders' equity | ||
Common stock, no par value; 40,000 shares authorized; 17,274, shares issued; 16,141 and 16,210 shares outstanding at September 30, 2016 and December 31, 2015 respectively | 6,509 | 6,509 |
Paid-in-capital | 2,133 | 2,033 |
Treasury stock, at cost | (10,468) | (9,730) |
Retained earnings | 49,514 | 46,516 |
Accumulated other comprehensive income (loss), net of taxes | (71) | |
Total stockholders' equity | 47,688 | 45,257 |
Total liabilities and stockholders' equity | $ 68,210 | $ 64,918 |
Consolidated Balance Sheets (Pa
Consolidated Balance Sheets (Parenthetical) - USD ($) $ in Thousands | Sep. 30, 2016 | Dec. 31, 2015 |
Current assets | ||
Allowance for doubtful accounts and discounts & allowances | $ 1,800 | $ 1,800 |
Stockholders' equity | ||
Common stock, par value | $ 0 | $ 0 |
Common stock, shares authorized | 40,000 | 40,000 |
Common stock, shares issued | 17,274 | 17,274 |
Common stock, shares outstanding | 16,141 | 16,210 |
Consolidated Statements of Inco
Consolidated Statements of Income and Comprehensive Income (Unaudited) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2016 | Sep. 30, 2015 | Sep. 30, 2016 | Sep. 30, 2015 | |
Consolidated Statements Of Income And Comprehensive Income | ||||
Net sales | $ 29,990 | $ 29,599 | $ 93,691 | $ 89,042 |
Cost of goods sold | 21,478 | 20,049 | 65,480 | 63,916 |
Depreciation expense | 533 | 614 | 1,797 | 1,809 |
Total cost of goods sold | 22,011 | 20,663 | 67,277 | 65,725 |
Gross profit | 7,979 | 8,936 | 26,414 | 23,317 |
Selling expenses | 4,306 | 2,706 | 10,733 | 8,626 |
General and administrative | 3,308 | 3,998 | 10,300 | 10,643 |
Amortization expense | 176 | 179 | 529 | 537 |
Total operating expenses | 7,790 | 6,883 | 21,562 | 19,806 |
Income from operations | 189 | 2,053 | 4,852 | 3,511 |
Other income (expense): | ||||
Interest expense | (56) | (55) | (161) | (179) |
Gain / (Loss) on sale of investments, net reclassified from OCI | 12 | 1 | (15) | (21) |
Impairment of investments | (205) | 0 | (385) | |
(Loss) / Gain on sale of property and equipment | (156) | (307) | 243 | |
Other income (expense), net | 28 | 26 | 105 | 173 |
Total other income (expense) | (172) | (233) | (378) | (169) |
Income before provision for income taxes | 17 | 1,820 | 4,474 | 3,342 |
Provision for income taxes | 81 | 927 | 1,476 | 1,697 |
Net income (loss) | $ (64) | $ 893 | $ 2,998 | $ 1,645 |
Basic earnings (loss) per common share | $ 0 | $ 0.05 | $ 0.19 | $ 0.1 |
Diluted earnings (loss) per common share | $ 0 | $ 0.05 | $ 0.19 | $ 0.1 |
Weighted average number of shares outstanding - Basic | 16,141 | 16,346 | 16,159 | 16,346 |
Weighted average number of shares outstanding - Diluted | 16,161 | 16,346 | 16,181 | 16,346 |
COMPREHENSIVE INCOME (LOSS) | ||||
Net income (loss) | $ (64) | $ 893 | $ 2,998 | $ 1,645 |
Other comprehensive income (loss), net of tax: | ||||
Unrealized gains (losses) on investments, net of taxes | 6 | (183) | 62 | (247) |
Reclassifications to earnings: | ||||
Other than temporary impairment of investments, net of taxes | ||||
Realized (gains) losses on investments, net of taxes | (8) | 124 | 9 | 247 |
Comprehensive income (loss) | $ (66) | $ 834 | $ 3,069 | $ 1,645 |
Statement - Consolidated Statem
Statement - Consolidated Statements of Stockholders' Equity (Unaudited) - USD ($) $ in Thousands | Common Stock | Treasury Stock | Paid-In Capital | Retained Earnings | Accumulated Other Comprehensive Income (Loss) Net of Tax | Total |
Beginning Balance, Shares issued at Dec. 31, 2014 | 17,274 | |||||
Beginning Balance, Treasury stock shares at Dec. 31, 2014 | (928) | |||||
Beginning Balance, Amount at Dec. 31, 2014 | $ 6,509 | $ (8,188) | $ 2,033 | $ 44,544 | $ (198) | $ 44,700 |
Other comprehensive income | ||||||
Stock based compensation | ||||||
Net income | 1,645 | 1,645 | ||||
Ending Balance, Shares issued at Sep. 30, 2015 | 17,274 | |||||
Ending Balance, Treasury stock shares at Sep. 30, 2015 | (928) | |||||
Ending Balance, Amount at Sep. 30, 2015 | $ 6,509 | $ (8,188) | 2,033 | 46,189 | (198) | 46,345 |
Beginning Balance, Shares issued at Dec. 31, 2015 | 17,274 | |||||
Beginning Balance, Treasury stock shares at Dec. 31, 2015 | (1,064) | |||||
Beginning Balance, Amount at Dec. 31, 2015 | $ 6,509 | $ (9,730) | 2,033 | 46,516 | (71) | 45,257 |
Other comprehensive income | 71 | 71 | ||||
Treasury stock purchased, Shares | (69) | |||||
Treasury stock purchased, Amount | $ (738) | (738) | ||||
Stock based compensation | 100 | 100 | ||||
Net income | 2,998 | 2,998 | ||||
Ending Balance, Shares issued at Sep. 30, 2016 | 17,274 | |||||
Ending Balance, Treasury stock shares at Sep. 30, 2016 | (1,133) | |||||
Ending Balance, Amount at Sep. 30, 2016 | $ 6,509 | $ (10,468) | $ 2,133 | $ 49,514 | $ 47,688 |
Consolidated Statements of Cash
Consolidated Statements of Cash Flows (Unaudited) - USD ($) $ in Thousands | 9 Months Ended | |
Sep. 30, 2016 | Sep. 30, 2015 | |
Cash flows from operating activities: | ||
Net income | $ 2,998 | $ 1,645 |
Adjustments to reconcile net income to operating cash flow: | ||
Depreciation and amortization | 2,326 | 2,346 |
Loss on sale of investments, net | 15 | 21 |
Impairment of investments | 0 | 385 |
Deferred income taxes | 444 | (472) |
Reserve for inventory obsolescence | 89 | |
Stock based compensation | 100 | |
Loss (Gain) on sale of property and equipment | 307 | (243) |
(Increase) decrease in operating assets: | ||
Accounts receivable | (823) | (540) |
Inventories | (1,611) | (1,118) |
Refundable income taxes | (72) | 1,011 |
Prepaid expenses and other current assets | (310) | 252 |
Increase (decrease) in operating liabilities: | ||
Accounts payable | 370 | (396) |
Accrued expenses | 465 | 1,038 |
Accrued income taxes | 215 | 449 |
Net cash provided by operating activities | 4,513 | 4,378 |
Cash flows from investing activities: | ||
Purchases of investments | (559) | (1,369) |
Proceeds from sale of investments | 2,751 | 1,230 |
Redemption of certificates of deposit | 513 | 250 |
Investments in certificates of deposit | (635) | |
Purchases of property and equipment | (2,481) | (1,619) |
Proceeds from sale of property and equipment | 149 | 343 |
Net cash provided by (used in) investing activities | 373 | (1,800) |
Cash flows from financing activities: | ||
Purchase of treasury stock | (738) | |
Repayment of notes payable | (630) | (827) |
Net cash used in financing activities | (1,368) | (827) |
Net increase in cash and cash equivalents | 3,518 | 1,751 |
Cash and cash equivalents at the beginning of the period | 5,646 | 3,260 |
Cash and cash equivalents at the end of the period | 9,164 | 5,011 |
Supplemental cash flow information: | ||
Cash paid for income taxes, net of refunds | 886 | 795 |
Cash paid for interest | $ 162 | $ 178 |
Basis of Presentation
Basis of Presentation | 9 Months Ended |
Sep. 30, 2016 | |
Notes to Financial Statements | |
Note 1 - Basis of Presentation | 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 Company's Annual Report on Form 10-K as of and for the year ended December 31, 2015. Certain amounts in prior-year financial statements were reclassified to conform to the current-year presentation. The results for the period are not necessarily indicative of the results to be expected for other interim periods or the full year. New presentation format. Corrections of errors and revisions of prior period financial statements During the third quarter of fiscal 2016, the Company recorded adjustments to properly classify indirect manufacturing overhead costs related to certain production facilities within our manufacturing platform as an element of Cost of Goods Sold in our Statements of Income (Loss) and Comprehensive Income (Loss). In prior periods these costs were incorrectly classified in General and Administrative expenses. Additionally, in the first and second quarter of 2015, certain executive compensation was classified in Selling expenses that more appropriately should be classified as General and Administrative expenses. We previously corrected these classification errors in our first and second quarter 2016 filings on Form 10-Q with the SEC. Collectively, these adjustments had the following impact on our Consolidated Statements of Income (Loss) and Comprehensive Income (Loss): (Unaudited) Three Months Ended March 31, 2016 (Unaudited) Six Months Ended June 30, 2016 As Previously Reported Adjustment As Revised As Previously Reported Adjustment As Revised Net Sales $ 32,570 $ $ 32,570 $ 63,701 $ $ 63,701 Cost of Goods Sold 23,351 519 23,870 44,290 976 45,266 Gross Profit 9,219 (519 ) 8,700 19,411 (976 ) 18,435 Selling expenses 2,964 2,964 6,427 6,427 General & administrative 4,465 (519 ) 3,946 7,968 (976 ) 6,992 Amortization 176 176 353 353 Operating expenses 7,605 (519 ) 7,086 14,748 (976 ) 13,772 Income from Operations $ 1,614 $ $ 1,614 $ 4,663 $ $ 4,663 (Unaudited) Three Months Ended March 31, 2015 (Unaudited) Six Months Ended June 30, 2015 As Previously Reported (a) Adjustment As Revised As Previously Reported (a) Adjustment As Revised Net Sales $ 29,622 $ $ 29,622 $ 59,443 $ $ 59,443 Cost of Goods Sold 21,239 458 21,697 44,044 1,017 45,061 Gross Profit 8,383 (458 ) 7,925 15,399 (1,017 ) 14,382 Selling expenses 3,302 3,302 5,920 5,920 General & administrative 3,492 (458 ) 3,034 7,662 (1,017 ) 6,645 Amortization 179 179 358 358 Operating expenses 6,973 (458 ) 6,515 13,940 (1,017 ) 12,923 Income from Operations $ 1,410 $ $ 1,410 $ 1,459 $ $ 1,459 (a) As previously reported in our first and second quarter 2016 Form 10Q filings. (Unaudited) Nine Months Ended September 30, 2015 Twelve Months Ended December 31, 2015 As Previously Reported Adjustment (b) As Revised As Previously Reported Adjustment (b) As Revised Net Sales $ 89,042 $ $ 89,042 $ 118,587 $ $ 118,587 Cost of Goods Sold 64,588 1,137 65,725 86,986 1,556 88,542 Gross Profit 24,454 (1,137 ) 23,317 31,601 (1,556 ) 30,045 Selling expenses 9,486 (860 ) 8,626 12,752 (860 ) 11,892 General & administrative 10,920 (277 ) 10,643 13,730 (696 ) 13,034 Amortization 537 537 716 716 Operating expenses 20,943 (1,137 ) 19,806 27,198 (1,556 ) 25,642 Income from Operations $ 3,511 $ $ 3,511 $ 4,403 $ $ 4,403 (b) Includes the reclassification of certain executive compensation from Selling to General and administrative expenses. Further, these adjustments had no impact on the measurement of Income before provision for incomes taxes, Net income (loss), Basic and diluted earnings (loss) per common share or any element of the Consolidated Balance Sheets or Statements of Cash Flows for any of the respective periods. The Company determined these adjustments to be immaterial, individually and in the aggregate, to our previously filed consolidated financial statements. Principles of consolidation Our Consolidated Financial Statements include the accounts of Lifeway Foods, Inc. and all its wholly owned subsidiaries (collectively "Lifeway" or the "Company"). All significant intercompany accounts and transactions have been eliminated. |
Significant Accounting Policies
Significant Accounting Policies | 9 Months Ended |
Sep. 30, 2016 | |
Notes to Financial Statements | |
Note 2 - Significant Accounting Policies | 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 consolidated 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 income taxes. Revenue Recognition The Company records sales when 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 costs are included 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 for the estimated allowances incurred but unpaid. Differences between estimated and actual allowances are normally insignificant and are recognized in income in the period such differences are determined. Product returns have historically not been material. Bulk cream is a by-product of the Company's 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 net sales. Advertising and promotional costs The Company expenses advertising costs as incurred. For the nine months ended September 30, 2016 and 2015 total advertising expenses were $5,418 and $4,145 respectively. For the three months ended September 30, 2016 and 2015 total advertising expenses were $2,665 and $1,324 respectively. Recent Accounting Pronouncements In August 2016, the Financial Accounting Standards Board ("FASB") issued new guidance to address the diversity in practice in how certain cash receipts and cash payments are presented and classified in the statement of cash flows, such as debt prepayment or debt extinguishment costs, contingent consideration payments made after an acquisition, proceeds from the settlement of insurance claims, and other topics. The new guidance will be effective for fiscal years beginning on or after December 15, 2017 and interim periods within those years. Early adoption of the guidance is permitted. Management is currently evaluating the impact that the new guidance will have on the consolidated financial statements. In March 2016, the FASB issued new guidance regarding certain aspects of the accounting for employee share-based payment transactions including the accounting for income taxes, forfeitures, and statutory tax withholding requirements, as well as classification in the statement of cash flows. The new guidance will be effective for fiscal years beginning on or after December 15, 2016 and interim periods within those years. Early adoption of the guidance is permitted. Management is currently evaluating the impact that the new guidance will have on the consolidated financial statements. In February 2016, the FASB issued new guidance regarding leases. The guidance requires lessees to recognize the assets and liabilities that arise from leases on the balance sheet. A lessee should recognize on the balance sheet a liability to make lease payments (the lease liability) and a right-of-use asset representing its right to use the underlying asset for the lease term. The new guidance is effective for financial statements issued for fiscal years beginning after December 15, 2018, and interim periods within those years. Management is currently evaluating the impact that the new guidance will have on the consolidated financial statements. In January, 2016, the FASB issued new guidance regarding the recognition and measurement of financial assets and liabilities. The new guidance modifies how entities measure equity investments and present changes in the fair value of certain financial liabilities. Under the new guidance, entities will have to measure equity investments that do not result in consolidation and are not accounted under the equity method at fair value and recognize any changes in fair value in net income unless certain conditions exist. The new guidance will be effective for fiscal years beginning on or after December 15, 2017 and interim periods within those years. Other than for recognition and measurement, early adoption of the guidance is permitted. Management is currently evaluating the impact that the new guidance will have on the consolidated financial statements. In November 2015, the FASB issued new guidance regarding the balance sheet classification of deferred income taxes. This new guidance requires that all deferred tax assets and liabilities, along with any related valuation allowance, be classified as noncurrent on the balance sheet. Previous guidance required deferred tax assets and liabilities to be separated into current and noncurrent amounts on the balance sheet. The guidance is effective for fiscal years beginning on or after December 15, 2016, and interim periods within those years. Management is currently evaluating the impact that the new guidance will have on the consolidated financial statements. 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. In May 2014, the FASB issued new guidance regarding revenue recognition. Additional revenue recognition guidance clarifications have been issued subsequent to May 2014. Collectively the new revenue recognition guidance supersedes the revenue recognition requirements in Topic 605, Revenue Recognition, including most industry-specific requirements. The new guidance 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. The new guidance also requires enhanced disclosures regarding the nature, amount, timing and uncertainty of revenues and cash flows from contracts with customers. The Company is required to adopt the new guidance not later than January 1, 2018. Management is currently evaluating the impact that the new guidance will have on the consolidated financial statements and the method of retrospective application, either full or modified. |
Intangible Assets
Intangible Assets | 9 Months Ended |
Sep. 30, 2016 | |
Notes to Financial Statements | |
Note 3 - Intangible Assets | Goodwill & indefinite-lived intangible assets consists of the following: September 30, 2016 December 31, 2015 Goodwill $ 10,368 $ 10,368 Brand names 3,700 3,700 Goodwill & indefinite lived intangible assets $ 14,068 $ 14,068 Other intangible assets, net consists of the following: September 30, 2016 December 31, 2015 Recipes $ 44 $ 44 Customer lists and other customer related intangibles 4,529 4,529 Customer relationship 985 985 Trade names 2,248 2,248 Formula 438 438 8,244 8,244 Accumulated amortization (6,429 ) (5,900 ) Intangible assets, net $ 1,815 $ 2,344 |
Investments
Investments | 9 Months Ended |
Sep. 30, 2016 | |
Notes to Financial Statements | |
Note 4 - Investments | The cost and fair value of investments classified as available for sale are as follows: September 30, 2016 Cost Unrealized Gains Unrealized Losses Fair Value Common stocks & ETF's $ $ $ $ Mutual Funds Preferred Securities Corporate Bonds Total $ $ $ $ December 31, 2015 Cost Unrealized Gains Unrealized Losses Fair Value Common stocks & ETF's $ 690 $ 17 $ (94 ) $ 613 Mutual Funds 27 (1 ) 26 Preferred Securities 98 6 104 Corporate Bonds 1,518 43 (88 ) 1,473 Total $ 2,333 $ 66 $ (183 ) $ 2,216 Gross gains of $185 and $14 and gross losses of $200 and $35 were realized on these sales during the nine months ended September 30, 2016 and 2015, respectively. Gross gains of $120 and $1 and gross losses of $108 and $0 were realized on these sales during the three months ended September 30, 2016 and 2015 respectively. The following table shows the gross unrealized losses and fair value of the Company's 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 September 30, 2016 and December 31, 2015: Less Than 12 Months 12 Months or Greater Total September 30, 2016 Fair Value Unrealized Losses Fair Value Unrealized Losses Fair Value Unrealized Losses Common stocks & ETF's $ $ $ $ $ $ Mutual Funds Preferred Securities Corporate Bonds $ $ $ $ $ $ Less Than 12 Months 12 Months or Greater Total December 31, 2015 Fair Value Unrealized Losses Fair Value Unrealized Losses Fair Value Unrealized Losses Common stocks & ETF's $ 225 $ (72 ) $ 152 $ (22 ) $ 377 $ (94 ) Mutual Funds 26 (1 ) 26 (1 ) Preferred Securities Corporate Bonds 370 (32 ) 479 (56 ) 849 (88 ) $ 621 $ (105 ) $ 631 $ (78 ) $ 1,252 $ (183 ) The Company's investments in equity securities, mutual funds, preferred securities, and corporate bonds consisted of investments in common stock, preferred stock, structured notes and other debt securities of companies in various industries. The Company recorded other-than-temporary impairment losses related to certain structured notes of $0 and $385 during the nine months ended September 30, 2016 and 2015 respectively. The structured notes allow the issuer to settle at an amount 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. |
Inventories
Inventories | 9 Months Ended |
Sep. 30, 2016 | |
Notes to Financial Statements | |
Note 5 - Inventories | Inventories consist of the following: September 30, 2016 December 31, 2015 Finished goods $ 3,357 $ 2,946 Production supplies 3,168 2,636 Raw materials 2,661 2,082 Total inventories $ 9,186 $ 7,664 |
Property And Equipment
Property And Equipment | 9 Months Ended |
Sep. 30, 2016 | |
Notes to Financial Statements | |
Note 6 - Property And Equipment | Property and equipment consist of the following: September 30, 2016 December 31, 2015 Land $ 1,747 $ 1,807 Buildings and improvements 16,387 16,387 Machinery and equipment 22,533 22,907 Vehicles 848 1,298 Office equipment 709 709 Construction in process 1,765 311 43,989 43,419 Accumulated depreciation (22,386 ) (22,044 ) Total property and equipment $ 21,603 $ 21,375 |
Accrued Expenses
Accrued Expenses | 9 Months Ended |
Sep. 30, 2016 | |
Notes to Financial Statements | |
Note 7 - Accrued Expenses | Accrued expenses consist of the following: September 30, 2016 December 31, 2015 Accrued payroll and payroll taxes $ 1,462 $ 859 Accrued property tax 297 377 Other 243 302 Total accrued expenses $ 2,002 $ 1,538 |
Notes Payable
Notes Payable | 9 Months Ended |
Sep. 30, 2016 | |
Notes to Financial Statements | |
Note 8 - Notes Payable | September 30, 2016 December 31, 2015 Variable rate bank notes due May 31, 2018. Principal and interest payable monthly with a balloon payment due at maturity. $ 3,465 $ 3,846 Variable rate bank notes due May 31, 2019. Principal and interest payable monthly with a balloon payment due at maturity. 3,864 4,113 Total notes payable 7,329 7,959 Less current maturities 840 840 Total long-term portion $ 6,489 $ 7,119 The variable rate bank notes are subject to interest at the prime rate or at the LIBOR rate plus 2.5% and are collateralized by substantially all of the assets of the Company. In addition, under the terms of the related agreements, the Company is subject to minimum fixed charged ratio and tangible net worth thresholds, which among other things may limit the Company's ability to pay dividends or repurchase shares of its common stock. The Company was in compliance with these financial covenants at September 30, 2016. Further, under the agreements the Company is required to deliver its annual and quarterly financial statements and related SEC filings within specified timeframes. At the time of filing this Form 10-Q the Company was in compliance with these requirements. In addition, the Company has a $5 million revolving credit facility. Borrowings under the facility are subject to interest at the prime rate or LIBOR plus 2.5%. As of September 30, 2016 and December 31, 2015 there were no borrowings under the facility. The facility expires in July 2017. |
Commitments And Contingencies
Commitments And Contingencies | 9 Months Ended |
Sep. 30, 2016 | |
Notes to Financial Statements | |
Note 9 - Commitments And Contingencies | Lease obligations Litigation The Company records accruals for outstanding legal matters when it believes it is probable that a loss will be incurred and the amount of such loss can be reasonably estimated. The Company evaluates, on a periodic basis, developments in legal matters that could affect the amount of any accrual and developments that would make a loss contingency both probable and reasonably estimable. If a loss contingency is not both probable and estimable, the Company does not establish an accrued liability. Currently, none of the Company's accruals for outstanding legal matters are material individually or in the aggregate to the Company's financial position and it is management's opinion that the ultimate resolution of these outstanding legal matters will not have a material adverse effect on our business, financial condition, results of operation, or cash flows. However, if the Company ultimately is required to make payments in connection with an adverse outcome, it is possible that it could have a material adverse effect on the Company's business, financial condition, results of operations or cash flows. The Company's contingencies are subject to substantial uncertainties, including for each such contingency the following, among other factors: (i) the procedural status of the case; (ii) whether the case has or may be certified as a class action suit; (iii) the outcome of preliminary motions; (iv) the impact of discovery; (v) whether there are significant factual issues to be determined or resolved; (vi) whether the proceedings involve a large number of parties and/or parties and claims in multiple jurisdictions or jurisdictions in which the relevant laws are complex or unclear; (vii) the extent of potential damages, which are often unspecified or indeterminate; and (viii) the status of settlement discussions, if any, and the settlement posture of the parties. Consequently, the Company cannot predict with any reasonable certainty the timing or outcome of such contingencies, and the Company is unable to estimate a possible loss or range of loss. |
Income Taxes
Income Taxes | 9 Months Ended |
Sep. 30, 2016 | |
Notes to Financial Statements | |
Note 10 - Income taxes | For each interim period, the Company estimates the effective tax rate (ETR) expected to be applicable for the full year and applies that rate to income before provision for income taxes for the period. Additionally, the Company records discrete income tax items such as enacted tax rate changes and completed tax audits in the period in which they occur. The effective tax rate for the three months ended September 30, 2016 exceeded 100% compared to an ETR of 50.9% for the three months ended September 30, 2015. The ETR for the three-month period ended September 30, 2016 reflects a change in the estimated U.S. manufacturing deduction and the relatively small amount of income before provision for income taxes. The ETR for the three-month period ended September 30, 2015 reflects certain operating expenses that were not fully deductible for federal income tax purposes. The effective tax rate for the nine months ended September 30, 2016 was 33.0% compared to an ETR of 50.8% for the nine months ended September 30, 2015. During the nine months ended September 30, 2016 we recorded an income tax benefit of $265 as a result of the favorable settlement of uncertain tax positions, which reduced the ETR by 5.9%. During the nine months ended September 30, 2015 we incurred certain operating expenses that were not fully deductible for federal income tax purposes, which increased the ETR by 8.1%. |
Fair Value Measurements
Fair Value Measurements | 9 Months Ended |
Sep. 30, 2016 | |
Notes to Financial Statements | |
Note 11 - Fair Value Measurements | 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 liability's 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. The 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 September 30, 2016 and December 31, 2015. The majority of the Company's fair value measurements for investments are classified within Level 1 or Level 2 of the fair value hierarchy. The Company's 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 Company's Level 2 fair value measurements, which include corporate bonds and preferred securities, is based on quoted prices in inactive markets for identical or similar assets. The company's level 3 fair value measurements which include other than temporarily impaired bonds are based on the present value of the estimated proceeds expected to be received at maturity of the bond. Those bonds were reclassified to level 3 from level 2 during 2015. 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 Company's financial assets measured at fair value on a recurring basis as of September 30, 2016 and December 31, 2015. Assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurement: Assets at Fair Value as of September 30, 2016 Level 1 Level 2 Level 3 Total Mutual Funds $ $ $ $ Common Stocks & ETF's Preferred Securities Corporate Bonds Assets at Fair Value as of December 31, 2015 Level 1 Level 2 Level 3 Total Mutual Funds $ 26 $ $ $ 26 Common Stocks & ETF's 613 613 Preferred Securities 104 104 Corporate Bonds 1,149 324 1,473 The Company's 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, accrued expenses and notes payable for which carrying value approximates fair value. |
Stock-based and Other Compensat
Stock-based and Other Compensation | 9 Months Ended |
Sep. 30, 2016 | |
Notes to Financial Statements | |
Note 12 - Stock-based and Other Compensation | In December 2015, Lifeway shareholders approved the 2015 Omnibus Incentive Plan, which authorized the issuance of an aggregate of 3.5 million shares to satisfy awards of stock options, stock appreciation rights, unrestricted stock, restricted stock, restricted stock units, performance shares and performance units. The Company has not established a pace for the frequency of awards under the Omnibus Incentive Plan, and may choose to suspend the issuance of new awards in the future and may grant additional awards at any time including issuing special grants of restricted stock, restricted stock units and stock options to attract and retain new and existing executives. Pursuant to the Omnibus Incentive Plan, Lifeway granted 26 stock options to certain key employees of the company effective January 1, 2016 and 24 stock options on July 1, 2016 (the "2016 options"). The 2016 options generally vest over a three-year period, on a relatively accelerated basis. The accelerated vesting reflects the landmark nature of the awards and the relative tenure of individual participants. For the three and nine months ended September 30, 2016 total pre-tax stock-based compensation expense recognized in the consolidated statements of income (loss) and comprehensive income (loss) was $58 and $100, respectively. For the three and nine months ended September 30, 2016 tax-related benefits of $22 and $37 The following table summarizes stock option activity during the nine months ended September 30, 2016: Options Weighted average exercise price Weighted average remaining contractual life Aggregate intrinsic value Outstanding at December 31,2015 $ Granted 50 $ 10.37 Exercised $ Terminated $ Outstanding at September 30, 2016 50 $ 10.37 9.50 $ 329 Exercisable at September 30, 2016 7 $ 9.57 9.75 $ 50 We measure the fair value of stock options using the Black-Scholes option pricing model. The expected term of options granted was based on the weighted average time of vesting and the end of the contractual term. We utilized this simplified method as we do not have sufficient historical exercise data to provide a reasonable basis upon which to estimate the expected term. The following assumptions were used for the grants in 2016: Three Months Ended September 30, 2016 Risk free interest rate 1.00 - 1.11% Expected dividend yield 0.27% Expected volatility 38.96 - 39.94% Expected term 5.03 - 5.88 We expense stock options on a straight-line basis over the service period. As of September 30, 2016, the total remaining unearned compensation related to non-vested stock options was $94, which will be amortized over the weighted-average remaining service period of 1.15 years. In March 2016 Lifeway established an incentive-based compensation program for certain senior executives (the "participants"). The incentive compensation is based on the achievement of certain sales and EBITDA performance levels versus respective targets in 2016. Under the program, collectively the participants may earn cash and equity-based incentive compensation in amounts ranging from $0 to $4,000 during 2016 depending on the performance levels compared to the respective targets. The participants' achievement of equity-based compensation during the balance of 2016 is not considered to be probable. At September 30, 2016 bonuses of $1,280 had been earned under the program, including $200 of equity-based awards. The company has a defined contribution plan which is available to substantially all full-time employees. Under the terms of the plan the company matches employee contributions under a prescribed formula. For the nine months ended September 30, 2016 and 2015 total contribution expense recognized in the consolidated statements of income (loss) and comprehensive income (loss) was $255 and $200 respectively. For the three months ended September 30, 2016 and 2015 total contribution expense recognized in the consolidated statements of income (loss) and comprehensive income (loss) was $82 and $53 respectively. |
Segments, Products and Customer
Segments, Products and Customers | 9 Months Ended |
Sep. 30, 2016 | |
Notes to Financial Statements | |
Note 13 - Segments, Products and Customers | The Company manufactures probiotic, cultured, functional dairy health food products. The Company's primary product is kefir, a dairy beverage similar to but distinct from yogurt, in several flavors and in several package configurations. In addition to the drinkable products, Lifeway manufactures "Lifeway Farmer Cheese," a line of various farmer cheeses. The Company has determined that it has one reportable segment based on how the Company's 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 company performance, has been identified collectively as the Chief Financial Officer, the Chief Operating Officer, the Chief Executive Officer and Chairman of the board of directors. 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 consumers through a network of distributors and retailers in the United States. Net sales of products by category were as follows: Nine months ended September 30, Three months ended September 30, 2016 2015 2016 2015 Cream and Drinkable Kefir other than ProBugs $ 80,135 $ 76,723 $ 25,533 $ 25,902 Pro Bugs 4,962 5,999 1,606 1,702 Lifeway Farmer Cheese 7,579 5,125 2,479 1,661 Frozen Kefir 1,015 1,195 372 334 Net Sales $ 93,691 $ 89,042 $ 29,990 $ 29,599 Significant Customers --Sales are predominately to companies in the retail food industry, located within the United States. Two major customers accounted for approximately 23% and 22% of net sales for the nine months ended September 30, 2016 and 2015, respectively and 22% and 20% of net sales for the three months ended September 30, 2016 and 2015 respectively. |
Related party transactions
Related party transactions | 9 Months Ended |
Sep. 30, 2016 | |
Notes to Financial Statements | |
Note 14 - Related Party Transactions | The Company obtains consulting services from the Chairman of its board of directors. Fees earned by the Chairman are included in general and administrative expense in the accompanying consolidated statements of income (loss) and comprehensive income (loss) and were $787 and $727 during the nine months ended September 30, 2016 and 2015 respectively, and $248 and $340 during the three months ended September 30, 2016 and 2015 respectively. Beginning in 2016 the Company is also a party to a royalty agreement with the Chairman of its board of directors under which the Company pays the Chairman a royalty based on the sale of certain Lifeway product, not to exceed $50 in any fiscal month. Royalties of $450 and $150 were earned by the Chairman during the nine months and three months ended September 30, 2016 respectively and were included in selling expenses in the accompanying consolidated statements of income (loss) and comprehensive income (loss). |
Significant Accounting Polici21
Significant Accounting Policies (Policy) | 9 Months Ended |
Sep. 30, 2016 | |
Significant Accounting Policies Policy | |
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 consolidated 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 income taxes. |
Revenue Recognition | The Company records sales when 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 costs are included 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 for the estimated allowances incurred but unpaid. Differences between estimated and actual allowances are normally insignificant and are recognized in income in the period such differences are determined. Product returns have historically not been material. Bulk cream is a by-product of the Company's 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 net sales. |
Advertising And Promotional Costs | The Company expenses advertising costs as incurred. For the nine months ended September 30, 2016 and 2015 total advertising expenses were $5,418 and $4,145 respectively. For the three months ended September 30, 2016 and 2015 total advertising expenses were $2,665 and $1,324 respectively. |
Recent Accounting Pronouncements | In August 2016, the Financial Accounting Standards Board ("FASB") issued new guidance to address the diversity in practice in how certain cash receipts and cash payments are presented and classified in the statement of cash flows, such as debt prepayment or debt extinguishment costs, contingent consideration payments made after an acquisition, proceeds from the settlement of insurance claims, and other topics. The new guidance will be effective for fiscal years beginning on or after December 15, 2017 and interim periods within those years. Early adoption of the guidance is permitted. Management is currently evaluating the impact that the new guidance will have on the consolidated financial statements. In March 2016, the FASB issued new guidance regarding certain aspects of the accounting for employee share-based payment transactions including the accounting for income taxes, forfeitures, and statutory tax withholding requirements, as well as classification in the statement of cash flows. The new guidance will be effective for fiscal years beginning on or after December 15, 2016 and interim periods within those years. Early adoption of the guidance is permitted. Management is currently evaluating the impact that the new guidance will have on the consolidated financial statements. In February 2016, the FASB issued new guidance regarding leases. The guidance requires lessees to recognize the assets and liabilities that arise from leases on the balance sheet. A lessee should recognize on the balance sheet a liability to make lease payments (the lease liability) and a right-of-use asset representing its right to use the underlying asset for the lease term. The new guidance is effective for financial statements issued for fiscal years beginning after December 15, 2018, and interim periods within those years. Management is currently evaluating the impact that the new guidance will have on the consolidated financial statements. In January, 2016, the FASB issued new guidance regarding the recognition and measurement of financial assets and liabilities. The new guidance modifies how entities measure equity investments and present changes in the fair value of certain financial liabilities. Under the new guidance, entities will have to measure equity investments that do not result in consolidation and are not accounted under the equity method at fair value and recognize any changes in fair value in net income unless certain conditions exist. The new guidance will be effective for fiscal years beginning on or after December 15, 2017 and interim periods within those years. Other than for recognition and measurement, early adoption of the guidance is permitted. Management is currently evaluating the impact that the new guidance will have on the consolidated financial statements. In November 2015, the FASB issued new guidance regarding the balance sheet classification of deferred income taxes. This new guidance requires that all deferred tax assets and liabilities, along with any related valuation allowance, be classified as noncurrent on the balance sheet. Previous guidance required deferred tax assets and liabilities to be separated into current and noncurrent amounts on the balance sheet. The guidance is effective for fiscal years beginning on or after December 15, 2016, and interim periods within those years. Management is currently evaluating the impact that the new guidance will have on the consolidated financial statements. 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. In May 2014, the FASB issued new guidance regarding revenue recognition. Additional revenue recognition guidance clarifications have been issued subsequent to May 2014. Collectively the new revenue recognition guidance supersedes the revenue recognition requirements in Topic 605, Revenue Recognition, including most industry-specific requirements. The new guidance 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. The new guidance also requires enhanced disclosures regarding the nature, amount, timing and uncertainty of revenues and cash flows from contracts with customers. The Company is required to adopt the new guidance not later than January 1, 2018. Management is currently evaluating the impact that the new guidance will have on the consolidated financial statements and the method of retrospective application, either full or modified. |
Basis of Presentation (Tables)
Basis of Presentation (Tables) | 9 Months Ended |
Sep. 30, 2016 | |
Basis Of Presentation Tables | |
Consolidated Statements of Income (Loss) and Comprehensive Income (Loss): | (Unaudited) Three Months Ended March 31, 2016 (Unaudited) Six Months Ended June 30, 2016 As Previously Reported Adjustment As Revised As Previously Reported Adjustment As Revised Net Sales $ 32,570 $ $ 32,570 $ 63,701 $ $ 63,701 Cost of Goods Sold 23,351 519 23,870 44,290 976 45,266 Gross Profit 9,219 (519 ) 8,700 19,411 (976 ) 18,435 Selling expenses 2,964 2,964 6,427 6,427 General & administrative 4,465 (519 ) 3,946 7,968 (976 ) 6,992 Amortization 176 176 353 353 Operating expenses 7,605 (519 ) 7,086 14,748 (976 ) 13,772 Income from Operations $ 1,614 $ $ 1,614 $ 4,663 $ $ 4,663 (Unaudited) Three Months Ended March 31, 2015 (Unaudited) Six Months Ended June 30, 2015 As Previously Reported (a) Adjustment As Revised As Previously Reported (a) Adjustment As Revised Net Sales $ 29,622 $ $ 29,622 $ 59,443 $ $ 59,443 Cost of Goods Sold 21,239 458 21,697 44,044 1,017 45,061 Gross Profit 8,383 (458 ) 7,925 15,399 (1,017 ) 14,382 Selling expenses 3,302 3,302 5,920 5,920 General & administrative 3,492 (458 ) 3,034 7,662 (1,017 ) 6,645 Amortization 179 179 358 358 Operating expenses 6,973 (458 ) 6,515 13,940 (1,017 ) 12,923 Income from Operations $ 1,410 $ $ 1,410 $ 1,459 $ $ 1,459 (Unaudited) Nine Months Ended September 30, 2015 Twelve Months Ended December 31, 2015 As Previously Reported Adjustment (b) As Revised As Previously Reported Adjustment (b) As Revised Net Sales $ 89,042 $ $ 89,042 $ 118,587 $ $ 118,587 Cost of Goods Sold 64,588 1,137 65,725 86,986 1,556 88,542 Gross Profit 24,454 (1,137 ) 23,317 31,601 (1,556 ) 30,045 Selling expenses 9,486 (860 ) 8,626 12,752 (860 ) 11,892 General & administrative 10,920 (277 ) 10,643 13,730 (696 ) 13,034 Amortization 537 537 716 716 Operating expenses 20,943 (1,137 ) 19,806 27,198 (1,556 ) 25,642 Income from Operations $ 3,511 $ $ 3,511 $ 4,403 $ $ 4,403 |
Intangible Assets (Tables)
Intangible Assets (Tables) | 9 Months Ended |
Sep. 30, 2016 | |
Intangible Assets Tables | |
Goodwill & indefinite-lived intangible assets | September 30, 2016 December 31, 2015 Goodwill $ 10,368 $ 10,368 Brand names 3,700 3,700 Goodwill & indefinite lived intangible assets $ 14,068 $ 14,068 |
Schedule Of Accumulated Amortization Of Intangible Assets | September 30, 2016 December 31, 2015 Recipes $ 44 $ 44 Customer lists and other customer related intangibles 4,529 4,529 Customer relationship 985 985 Trade names 2,248 2,248 Formula 438 438 8,244 8,244 Accumulated amortization (6,429 ) (5,900 ) Intangible assets, net $ 1,815 $ 2,344 |
Investments (Tables)
Investments (Tables) | 9 Months Ended |
Sep. 30, 2016 | |
Investments Tables | |
Schedule Of Cost And Fair Value Of Available For Sale Investments | September 30, 2016 Cost Unrealized Gains Unrealized Losses Fair Value Common stocks & ETF's $ $ $ $ Mutual Funds Preferred Securities Corporate Bonds Total $ $ $ $ December 31, 2015 Cost Unrealized Gains Unrealized Losses Fair Value Common stocks & ETF's $ 690 $ 17 $ (94 ) $ 613 Mutual Funds 27 (1 ) 26 Preferred Securities 98 6 104 Corporate Bonds 1,518 43 (88 ) 1,473 Total $ 2,333 $ 66 $ (183 ) $ 2,216 |
Schedule Of Gross Unrealized Loss On Investments | Less Than 12 Months 12 Months or Greater Total September 30, 2016 Fair Value Unrealized Losses Fair Value Unrealized Losses Fair Value Unrealized Losses Common stocks & ETF's $ $ $ $ $ $ Mutual Funds Preferred Securities Corporate Bonds $ $ $ $ $ $ Less Than 12 Months 12 Months or Greater Total December 31, 2015 Fair Value Unrealized Losses Fair Value Unrealized Losses Fair Value Unrealized Losses Common stocks & ETF's $ 225 $ (72 ) $ 152 $ (22 ) $ 377 $ (94 ) Mutual Funds 26 (1 ) 26 (1 ) Preferred Securities Corporate Bonds 370 (32 ) 479 (56 ) 849 (88 ) $ 621 $ (105 ) $ 631 $ (78 ) $ 1,252 $ (183 ) |
Inventories (Tables)
Inventories (Tables) | 9 Months Ended |
Sep. 30, 2016 | |
Inventories Tables | |
Schedule Of Inventories | September 30, 2016 December 31, 2015 Finished goods $ 3,357 $ 2,946 Production supplies 3,168 2,636 Raw materials 2,661 2,082 Total inventories $ 9,186 $ 7,664 |
Property And Equipment (Tables)
Property And Equipment (Tables) | 9 Months Ended |
Sep. 30, 2016 | |
Property And Equipment Tables | |
Schedule Of Property And Equipment | September 30, 2016 December 31, 2015 Land $ 1,747 $ 1,807 Buildings and improvements 16,387 16,387 Machinery and equipment 22,533 22,907 Vehicles 848 1,298 Office equipment 709 709 Construction in process 1,765 311 43,989 43,419 Accumulated depreciation (22,386 ) (22,044 ) Total property and equipment $ 21,603 $ 21,375 |
Accrued Expenses (Tables)
Accrued Expenses (Tables) | 9 Months Ended |
Sep. 30, 2016 | |
Accrued Expenses Tables | |
Schedule Of Accrued Expenses | September 30, 2016 December 31, 2015 Accrued payroll and payroll taxes $ 1,462 $ 859 Accrued property tax 297 377 Other 243 302 Total accrued expenses $ 2,002 $ 1,538 |
Notes Payable (Tables)
Notes Payable (Tables) | 9 Months Ended |
Sep. 30, 2016 | |
Notes Payable Tables | |
Schedule Of Notes Payable | September 30, 2016 December 31, 2015 Variable rate bank notes due May 31, 2018. Principal and interest payable monthly with a balloon payment due at maturity. $ 3,465 $ 3,846 Variable rate bank notes due May 31, 2019. Principal and interest payable monthly with a balloon payment due at maturity. 3,864 4,113 Total notes payable 7,329 7,959 Less current maturities 840 840 Total long-term portion $ 6,489 $ 7,119 |
Fair Value Measurements (Tables
Fair Value Measurements (Tables) | 9 Months Ended |
Sep. 30, 2016 | |
Fair Value Measurements Tables | |
Schedule Of Fair Value Assets And Liabilities As Classified | Assets at Fair Value as of September 30, 2016 Level 1 Level 2 Level 3 Total Mutual Funds $ $ $ $ Common Stocks & ETF's Preferred Securities Corporate Bonds Assets at Fair Value as of December 31, 2015 Level 1 Level 2 Level 3 Total Mutual Funds $ 26 $ $ $ 26 Common Stocks & ETF's 613 613 Preferred Securities 104 104 Corporate Bonds 1,149 324 1,473 |
Stock-based and Other Compens30
Stock-based and Other Compensation (Tables) | 9 Months Ended |
Sep. 30, 2016 | |
Stock-based And Other Compensation Tables | |
Summary of stock-based compensation expense recognized | Options Weighted average exercise price Weighted average remaining contractual life Aggregate intrinsic value Outstanding at December 31,2015 $ Granted 50 $ 10.37 Exercised $ Terminated $ Outstanding at September 30, 2016 50 $ 10.37 9.50 $ 329 Exercisable at September 30, 2016 7 $ 9.57 9.75 $ 50 |
Following weighted-average assumptions | Three Months Ended September 30, 2016 Risk free interest rate 1.00 - 1.11% Expected dividend yield 0.27% Expected volatility 38.96 - 39.94% Expected term 5.03 - 5.88 |
Segments, Products and Custom31
Segments, Products and Customers (Tables) | 9 Months Ended |
Sep. 30, 2016 | |
Segments Products And Customers Tables | |
Schedule of sales of products by category | Nine months ended September 30, Three months ended September 30, 2016 2015 2016 2015 Cream and Drinkable Kefir other than ProBugs $ 80,135 $ 76,723 $ 25,533 $ 25,902 Pro Bugs 4,962 5,999 1,606 1,702 Lifeway Farmer Cheese 7,579 5,125 2,479 1,661 Frozen Kefir 1,015 1,195 372 334 Net Sales $ 93,691 $ 89,042 $ 29,990 $ 29,599 |
Basis of Presentation (Details)
Basis of Presentation (Details) - USD ($) $ in Thousands | 3 Months Ended | 6 Months Ended | 9 Months Ended | 12 Months Ended | |||||
Sep. 30, 2016 | Mar. 31, 2016 | Sep. 30, 2015 | Mar. 31, 2015 | Jun. 30, 2016 | Jun. 30, 2015 | Sep. 30, 2016 | Sep. 30, 2015 | Dec. 31, 2015 | |
Net sales | $ 29,990 | $ 29,599 | $ 93,691 | $ 89,042 | |||||
Cost of goods sold | 21,478 | 20,049 | 65,480 | 63,916 | |||||
Total cost of goods sold | 22,011 | 20,663 | 67,277 | 65,725 | |||||
Gross profit | 7,979 | 8,936 | 26,414 | 23,317 | |||||
Selling expenses | 4,306 | 2,706 | 10,733 | 8,626 | |||||
General and administrative | 3,308 | 3,998 | 10,300 | 10,643 | |||||
Amortization expense | 176 | 179 | 529 | 537 | |||||
Total operating expenses | 7,790 | 6,883 | 21,562 | 19,806 | |||||
Income from operations | $ 189 | $ 2,053 | $ 4,852 | 3,511 | |||||
As Previously Reported [Member] | |||||||||
Net sales | $ 32,570 | $ 29,622 | $ 63,701 | $ 59,443 | 89,042 | $ 118,587 | |||
Cost of goods sold | 23,351 | 21,239 | 44,290 | 44,044 | 64,588 | 86,986 | |||
Total cost of goods sold | 9,219 | 8,383 | 19,411 | 15,399 | 24,454 | 31,601 | |||
Gross profit | 2,964 | 3,302 | 6,427 | 5,920 | 9,486 | 12,752 | |||
Selling expenses | 4,465 | 3,492 | 7,968 | 7,662 | 10,920 | 13,730 | |||
General and administrative | 176 | 179 | 353 | 358 | 537 | 716 | |||
Amortization expense | 7,605 | 6,973 | 14,748 | 13,940 | 20,943 | 27,198 | |||
Total operating expenses | 1,614 | 1,410 | 4,663 | 1,459 | 3,511 | 4,403 | |||
Adjustment [Member] | |||||||||
Net sales | |||||||||
Cost of goods sold | 519 | 458 | 976 | 1,017 | 1,137 | 1,556 | |||
Total cost of goods sold | (519) | (458) | (976) | (1,017) | (1,137) | (1,556) | |||
Gross profit | (860) | (860) | |||||||
Selling expenses | (519) | (458) | (976) | (1,017) | (277) | (696) | |||
General and administrative | |||||||||
Amortization expense | (519) | (458) | (976) | (1,017) | (1,137) | (1,556) | |||
Total operating expenses | |||||||||
As Revised [Member] | |||||||||
Net sales | 32,570 | 29,622 | 63,701 | 59,443 | 89,042 | 118,587 | |||
Cost of goods sold | 23,870 | 21,697 | 45,266 | 45,061 | 65,725 | 88,542 | |||
Total cost of goods sold | 8,700 | 7,925 | 18,435 | 14,382 | 23,317 | 30,045 | |||
Gross profit | 2,964 | 3,302 | 6,427 | 5,920 | 8,626 | 11,892 | |||
Selling expenses | 3,946 | 3,034 | 6,992 | 6,645 | 10,643 | 13,034 | |||
General and administrative | 176 | 179 | 353 | 358 | 537 | 716 | |||
Amortization expense | 7,086 | 6,515 | 13,772 | 12,923 | 19,806 | 25,642 | |||
Total operating expenses | $ 1,614 | $ 1,410 | $ 4,663 | $ 1,459 | $ 3,511 | $ 4,403 |
Significant Accounting Polici33
Significant Accounting Policies (Details Narrative) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2016 | Sep. 30, 2015 | Sep. 30, 2016 | Sep. 30, 2015 | |
Significant Accounting Policies Details Narrative | ||||
Advertising expenses | $ 2,665 | $ 1,324 | $ 5,418 | $ 4,145 |
Intangible Assets (Details)
Intangible Assets (Details) - USD ($) $ in Thousands | 9 Months Ended | 12 Months Ended |
Sep. 30, 2016 | Dec. 31, 2015 | |
Intangible Assets Details | ||
Goodwill | $ 10,368 | $ 10,368 |
Brand names | 3,700 | 3,700 |
Goodwill & indefinite lived intangible assets | $ 14,068 | $ 14,068 |
Intangible Assets (Details 1)
Intangible Assets (Details 1) - USD ($) $ in Thousands | Sep. 30, 2016 | Dec. 31, 2015 |
Cost | $ 8,244 | $ 8,244 |
Accumulated Amortization | (6,429) | (5,900) |
Intangible assets, net | 1,815 | 2,344 |
Recipes [Member] | ||
Cost | 44 | 44 |
Customer Lists And Other Customer Related Intangibles [Member] | ||
Cost | 4,529 | 4,529 |
Customer Relationships [Member] | ||
Cost | 985 | 985 |
Trade Names [Member] | ||
Cost | 2,248 | 2,248 |
Formula [Member] | ||
Cost | $ 438 | $ 438 |
Investments (Details)
Investments (Details) - USD ($) $ in Thousands | Sep. 30, 2016 | Dec. 31, 2015 |
Cost | $ 2,333 | |
Unrealized Gains | 66 | |
Unrealized Losses | (183) | |
Fair Value | 2,216 | |
Common stocks & ETF's [Member] | ||
Cost | 690 | |
Unrealized Gains | 17 | |
Unrealized Losses | (94) | |
Fair Value | 613 | |
Mutual Funds [Member] | ||
Cost | 27 | |
Unrealized Gains | ||
Unrealized Losses | (1) | |
Fair Value | 26 | |
Preferred Securities [Member] | ||
Cost | 98 | |
Unrealized Gains | 6 | |
Unrealized Losses | ||
Fair Value | 104 | |
Corporate Bond [Member] | ||
Cost | 1,518 | |
Unrealized Gains | 43 | |
Unrealized Losses | (88) | |
Fair Value | $ 1,473 |
Investments (Details 1)
Investments (Details 1) - USD ($) $ in Thousands | Sep. 30, 2016 | Dec. 31, 2015 |
Less Than 12 Months, Fair Value | $ 621 | |
Less Than 12 Months, Unrealized Losses | (105) | |
12 Months or Greater, Fair Value | 631 | |
12 Months or Greater, Unrealized Losses | (78) | |
Total, Fair Value | 1,252 | |
Total, Unrealized Losses | (183) | |
Common stocks & ETF's [Member] | ||
Less Than 12 Months, Fair Value | 225 | |
Less Than 12 Months, Unrealized Losses | (72) | |
12 Months or Greater, Fair Value | 152 | |
12 Months or Greater, Unrealized Losses | (22) | |
Total, Fair Value | 377 | |
Total, Unrealized Losses | (94) | |
Mutual Funds [Member] | ||
Less Than 12 Months, Fair Value | 26 | |
Less Than 12 Months, Unrealized Losses | (1) | |
12 Months or Greater, Fair Value | ||
12 Months or Greater, Unrealized Losses | ||
Total, Fair Value | 26 | |
Total, Unrealized Losses | (1) | |
Preferred Securities [Member] | ||
Less Than 12 Months, Fair Value | ||
Less Than 12 Months, Unrealized Losses | ||
12 Months or Greater, Fair Value | ||
12 Months or Greater, Unrealized Losses | ||
Total, Fair Value | ||
Total, Unrealized Losses | ||
Corporate Bond [Member] | ||
Less Than 12 Months, Fair Value | 370 | |
Less Than 12 Months, Unrealized Losses | (32) | |
12 Months or Greater, Fair Value | 479 | |
12 Months or Greater, Unrealized Losses | (56) | |
Total, Fair Value | 849 | |
Total, Unrealized Losses | $ (88) |
Investments (Details Narrative)
Investments (Details Narrative) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2016 | Sep. 30, 2015 | Sep. 30, 2016 | Sep. 30, 2015 | |
Investments Details Narrative | ||||
Gross realized gains | $ 120 | $ 1 | $ 185 | $ 14 |
Gross realized losses | 108 | 0 | 200 | 35 |
Impairment losses | $ 205 | $ 0 | $ 385 |
Inventories (Details)
Inventories (Details) - USD ($) $ in Thousands | Sep. 30, 2016 | Dec. 31, 2015 |
Inventories Details | ||
Finished goods | $ 3,357 | $ 2,946 |
Production supplies | 3,168 | 2,636 |
Raw materials | 2,661 | 2,082 |
Total inventories | $ 9,186 | $ 7,664 |
Property And Equipment (Details
Property And Equipment (Details) - USD ($) $ in Thousands | Sep. 30, 2016 | Dec. 31, 2015 |
Property and equipment, gross | $ 43,989 | $ 43,419 |
Accumulated depreciation | (22,386) | (22,044) |
Total property and equipment | 21,603 | 21,375 |
Land [Member] | ||
Property and equipment, gross | 1,747 | 1,807 |
Buildings And improvements [Member] | ||
Property and equipment, gross | 16,387 | 16,387 |
Machinery And Equipment [Member] | ||
Property and equipment, gross | 22,533 | 22,907 |
Vehicles [Member] | ||
Property and equipment, gross | 848 | 1,298 |
Office Equipment [Member] | ||
Property and equipment, gross | 709 | 709 |
Construction In Progress [Member] | ||
Property and equipment, gross | $ 1,765 | $ 311 |
Accrued Expenses (Details)
Accrued Expenses (Details) - USD ($) $ in Thousands | Sep. 30, 2016 | Dec. 31, 2015 |
Accrued Expenses Details | ||
Accrued payroll and payroll taxes | $ 1,462 | $ 859 |
Accrued property tax | 297 | 377 |
Other | 243 | 302 |
Total accrued expenses | $ 2,002 | $ 1,538 |
Notes Payable (Details)
Notes Payable (Details) - USD ($) $ in Thousands | Sep. 30, 2016 | Dec. 31, 2015 |
Total notes payable | $ 7,329 | $ 7,959 |
Less current maturities | 840 | 840 |
Total long-term portion | 6,489 | 7,119 |
Variable rate bank notes due May 31, 2018 [Member] | ||
Total notes payable | 3,465 | 3,846 |
Variable rate bank notes due May 31, 2019 [Member] | ||
Total notes payable | $ 3,864 | $ 4,113 |
Notes Payable (Details Narrativ
Notes Payable (Details Narrative) | 9 Months Ended |
Sep. 30, 2016 | |
Notes Payable Details Narrative | |
Borrowings interest rate | 2.50% |
Commitments And Contingencies (
Commitments And Contingencies (Details Narrative) - USD ($) $ in Thousands | 9 Months Ended | |
Sep. 30, 2016 | Sep. 30, 2015 | |
Commitments And Contingencies Details Narrative | ||
Total expenses on leases | $ 171 | $ 93 |
Income Taxes (Details Narrative
Income Taxes (Details Narrative) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2016 | Sep. 30, 2015 | Sep. 30, 2016 | Sep. 30, 2015 | |
Income Taxes Details Narrative | ||||
Effective tax rate | 100.00% | 50.90% | 33.00% | 50.80% |
Income tax benefit | $ 265 | |||
Percentage of reduced tax positions | 5.90% | |||
Percentage of increased federal income tax purposes | 8.10% |
Fair Value Measurements (Detail
Fair Value Measurements (Details) - USD ($) $ in Thousands | Sep. 30, 2016 | Dec. 31, 2015 |
Mutual Funds | $ 26 | |
Common Stocks & ETF's | 613 | |
Preferred Securities | 104 | |
Corporate Bonds | 1,473 | |
Level 1 [Member] | ||
Mutual Funds | 26 | |
Common Stocks & ETF's | 613 | |
Preferred Securities | ||
Corporate Bonds | ||
Level2 [Member] | ||
Mutual Funds | ||
Common Stocks & ETF's | ||
Preferred Securities | 104 | |
Corporate Bonds | 1,149 | |
Level3 [Member] | ||
Mutual Funds | ||
Common Stocks & ETF's | ||
Preferred Securities | ||
Corporate Bonds | $ 324 |
Stock-based and Other Compens47
Stock-based and Other Compensation (Details) $ / shares in Units, $ in Thousands | 9 Months Ended |
Sep. 30, 2016USD ($)$ / sharesshares | |
Number of Options | |
Outstanding, Beginning | shares | |
Granted | shares | 50 |
Exercised | shares | |
Terminated | shares | |
Outstanding, Ending | shares | 50 |
Exercisable, Ending | shares | 7 |
Weighted Average Exercise Price | |
Outstanding, Beginning | $ / shares | |
Granted | $ / shares | 10.37 |
Exercised | $ / shares | |
Terminated | $ / shares | |
Outstanding, Ending | $ / shares | 10.37 |
Exercisable, Ending | $ / shares | $ 9.57 |
Weighted average remaining contractual life | |
Outstanding, Ending | 9 years 6 months |
Exercisable, Ending | 9 years 9 months |
Aggregate intrinsic value | |
Outstanding, Beginning | $ | $ 329 |
Outstanding, Ending | $ | $ 50 |
Stock-based and Other Compens48
Stock-based and Other Compensation (Details 1) | 3 Months Ended |
Sep. 30, 2016 | |
Minimum [Member] | |
Risk free interest rate | 1.00% |
Expected dividend yield | |
Expected volatility | 38.96% |
Expected term | 5 years 11 days |
Maximum [Member] | |
Risk free interest rate | 1.11% |
Expected dividend yield | 0.27% |
Expected volatility | 39.94% |
Expected term | 5 years 10 months 17 days |
Stock-based and Other Compens49
Stock-based and Other Compensation (Details Narrative) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2016 | Sep. 30, 2015 | Sep. 30, 2016 | Sep. 30, 2015 | |
Stock-based And Other Compensation Details Narrative | ||||
Stock based compensation | $ 58 | $ 100 | ||
Tax benefit related to stock based compensation | 22 | 37 | ||
Compensation related to non-vested stock options | $ 94 | |||
weighted-average remaining service | 1 year 1 month 24 days | |||
Cash bonuses | $ 1,280 | |||
Contribution expense | $ 82 | $ 53 | 255 | $ 200 |
Equity-based awards | $ 200 |
Segments, Products and Custom50
Segments, Products and Customers (Details) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2016 | Sep. 30, 2015 | Sep. 30, 2016 | Sep. 30, 2015 | |
Net sales | $ 29,990 | $ 29,599 | $ 93,691 | $ 89,042 |
Cream and Drinkable Kefir other than ProBugs [Member] | ||||
Net sales | 25,533 | 25,902 | 80,135 | 76,723 |
ProBugs[Member] | ||||
Net sales | 1,606 | 1,702 | 4,962 | 5,999 |
Lifeway Farmer Cheese [Member] | ||||
Net sales | 2,479 | 1,661 | 7,579 | 5,125 |
Frozen Kefir [Member] | ||||
Net sales | $ 372 | $ 334 | $ 1,015 | $ 1,195 |
Segments, Products and Custom51
Segments, Products and Customers (Details Narrative) | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2016 | Sep. 30, 2015 | Sep. 30, 2016 | Sep. 30, 2015 | |
Segments Products And Customers Details Narrative | ||||
Gross sales percentage | 20.00% | 22.00% | 23.00% | 22.00% |
Related Party Transactions (Det
Related Party Transactions (Details Narrative) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2016 | Sep. 30, 2015 | Sep. 30, 2016 | Sep. 30, 2015 | |
Related Party Transactions Details Narrative | ||||
Fees paid | $ 248 | $ 340 | $ 787 | $ 727 |
Royalties | $ 150 | $ 0 | $ 450 | $ 150 |