Document And Entity Information
Document And Entity Information - shares | 6 Months Ended | |
Jun. 30, 2018 | Aug. 05, 2018 | |
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, 2018 | |
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 | 15,879,391 | |
Document Fiscal Period Focus | Q2 | |
Document Fiscal Year Focus | 2,018 | |
Entity Small Business | true |
Consolidated Balance Sheets (Un
Consolidated Balance Sheets (Unaudited) - USD ($) $ in Thousands | Jun. 30, 2018 | Dec. 31, 2017 |
Current assets | ||
Cash and cash equivalents | $ 3,632 | $ 4,978 |
Accounts receivable, net of allowance for doubtful accounts and discounts & allowances of $1,700 and $2,010 at June 30, 2018 and December 31, 2017 respectively | 8,590 | 8,676 |
Inventories, net | 7,183 | 7,697 |
Prepaid expenses and other current assets | 1,599 | 983 |
Refundable income taxes | 2,811 | 2,347 |
Total current assets | 23,815 | 24,681 |
Property, plant and equipment, net | 25,243 | 24,645 |
Intangible assets | ||
Goodwill & indefinite-lived intangibles | 14,068 | 14,068 |
Other intangible assets, net | 648 | 975 |
Total intangible assets | 14,716 | 15,043 |
Other Assets | 150 | 150 |
Total assets | 63,924 | 64,519 |
Current liabilities | ||
Current maturities of notes payable | 0 | 3,166 |
Accounts payable | 7,271 | 6,848 |
Accrued expenses | 3,388 | 2,984 |
Accrued income taxes | 82 | 203 |
Total current liabilities | 10,741 | 13,201 |
Line of credit | 5,984 | 0 |
Notes payable | 0 | 3,113 |
Deferred income taxes, net | 840 | 840 |
Other long-term liabilities | 554 | 775 |
Total liabilities | 18,119 | 17,929 |
Stockholders' equity | ||
Preferred stock, no par value; 2,500 shares authorized; no shares issued or outstanding at June 30, 2018 and December 31, 2017, respectively | 0 | 0 |
Common stock, no par value; 40,000 shares authorized; 17,274 shares issued; 15,879 and 16,008 outstanding at June 30, 2018 and December 31, 2017, respectively | 6,509 | 6,509 |
Paid-in-capital | 2,184 | 2,244 |
Treasury stock, at cost | (12,777) | (11,812) |
Retained earnings | 49,889 | 49,649 |
Total stockholders' equity | 45,805 | 46,590 |
Total liabilities and stockholders' equity | $ 63,924 | $ 64,519 |
Consolidated Balance Sheets (U3
Consolidated Balance Sheets (Unaudited) (Parenthetical) - USD ($) shares in Thousands, $ in Thousands | Jun. 30, 2018 | Dec. 31, 2017 |
Current assets | ||
Allowance for doubtful accounts and discounts | $ 1,700 | $ 2,010 |
Stockholders' equity | ||
Preferred stock, no par value | $ 0 | $ 0 |
Preferred stock, shares authorized | 2,500 | 2,500 |
Preferred stock, shares issued | 0 | 0 |
Preferred stock, shares outstanding | 0 | 0 |
Common stock, no par value | $ 0 | $ 0 |
Common stock, shares authorized | 40,000 | 40,000 |
Common stock, shares issued | 17,274 | 17,274 |
Common stock, shares outstanding | 15,879 | 16,008 |
Consolidated Statements of Inco
Consolidated Statements of Income and Comprehensive Income (Unaudited) - USD ($) shares in Thousands, $ in Thousands | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2018 | Jun. 30, 2017 | Jun. 30, 2018 | Jun. 30, 2017 | |
Income Statement [Abstract] | ||||
Net sales | $ 27,096 | $ 31,733 | $ 55,838 | $ 63,850 |
Cost of goods sold | 19,495 | 21,857 | 39,520 | 44,931 |
Depreciation expense | 725 | 597 | 1,405 | 1,183 |
Total cost of goods sold | 20,220 | 22,454 | 40,925 | 46,114 |
Gross profit | 6,876 | 9,279 | 14,913 | 17,736 |
Selling expenses | 3,383 | 3,400 | 7,401 | 7,638 |
General and administrative | 2,996 | 3,813 | 6,701 | 7,598 |
Amortization expense | 164 | 168 | 327 | 336 |
Total operating expenses | 6,543 | 7,381 | 14,429 | 15,572 |
Income from operations | 333 | 1,898 | 484 | 2,164 |
Other income (expense): | ||||
Interest expense | (75) | (61) | (138) | (118) |
Loss on sale of property and equipment | (1) | 0 | 14 | (5) |
Other income, net | 3 | 0 | 8 | 0 |
Total other income (expense) | (73) | (61) | (116) | (123) |
Income before provision for income taxes | 260 | 1,837 | 368 | 2,041 |
Provision for income taxes | 90 | 801 | 128 | 881 |
Net income | $ 170 | $ 1,036 | $ 240 | $ 1,160 |
Earnings per common share - Basic | $ 0.01 | $ 0.06 | $ 0.02 | $ 0.07 |
Earnings per common share - Diluted | $ 0.01 | $ 0.06 | $ 0.02 | $ 0.07 |
Weighted average number of shares - Basic | 15,879 | 16,154 | 15,893 | 16,154 |
Weighted average number of shares - Diluted | 15,992 | 16,203 | 16,026 | 16,211 |
Consolidated Statements of Stoc
Consolidated Statements of Stockholders' Equity (Unaudited) - USD ($) shares in Thousands, $ in Thousands | Common Stock | In Treasury | Paid-In Capital | Retained Earnings | Total |
Beginning Balance, Shares at Dec. 31, 2016 | 17,274 | ||||
Beginning Balance, Treasury stock shares at Dec. 31, 2016 | (1,120) | ||||
Beginning Balance, Amount at Dec. 31, 2016 | $ 6,509 | $ (10,340) | $ 2,198 | $ 49,995 | $ 48,362 |
Stock-based compensation | 38 | 38 | |||
Net income | 1,160 | 1,160 | |||
Ending Balance, Shares at Jun. 30, 2017 | 17,274 | ||||
Ending Balance, Treasury stock shares at Jun. 30, 2017 | (1,120) | ||||
Ending Balance, Amount at Jun. 30, 2017 | $ 6,509 | $ (10,340) | 2,236 | 51,155 | 49,560 |
Beginning Balance, Shares at Dec. 31, 2017 | 17,274 | ||||
Beginning Balance, Treasury stock shares at Dec. 31, 2017 | (1,266) | ||||
Beginning Balance, Amount at Dec. 31, 2017 | $ 6,509 | $ (11,812) | 2,244 | 49,649 | 46,590 |
Issuance of common stock in connection with stock-based compensation, Shares | 22 | ||||
Issuance of common stock in connection with stock-based compensation, Amount | $ 203 | (71) | 132 | ||
Treasury stock purchased, Shares | (151) | ||||
Treasury stock purchased, Amount | $ (1,168) | (1,168) | |||
Stock-based compensation | 11 | 11 | |||
Net income | 240 | 240 | |||
Ending Balance, Shares at Jun. 30, 2018 | 17,274 | ||||
Ending Balance, Treasury stock shares at Jun. 30, 2018 | (1,395) | ||||
Ending Balance, Amount at Jun. 30, 2018 | $ 6,509 | $ (12,777) | $ 2,184 | $ 49,889 | $ 45,805 |
Consolidated Statements of Cash
Consolidated Statements of Cash Flows (Unaudited) - USD ($) $ in Thousands | 6 Months Ended | |
Jun. 30, 2018 | Jun. 30, 2017 | |
Cash flows from operating activities: | ||
Net income | $ 240 | $ 1,160 |
Adjustments to reconcile net income to operating cash flow: | ||
Depreciation and amortization | 1,732 | 1,519 |
Non-cash interest expense | 3 | 0 |
Bad debt expense | 20 | 0 |
Reserve for inventory obsolescence | 271 | 131 |
Stock-based compensation | 495 | 775 |
Deferred revenue | (48) | 0 |
(Gain) loss on sale of property and equipment | (14) | 5 |
(Increase) decrease in operating assets: | ||
Accounts receivable | 66 | (793) |
Inventories | 243 | (185) |
Refundable income taxes | (463) | (33) |
Prepaid expenses and other current assets | (584) | (500) |
Increase (decrease) in operating liabilities: | ||
Accounts payable | 423 | 564 |
Accrued expenses | (154) | 1,259 |
Accrued income taxes | (121) | (579) |
Net cash provided by operating activities | 2,109 | 3,323 |
Cash flows from investing activities: | ||
Purchases of property and equipment | (2,024) | (2,400) |
Proceeds from sale of property and equipment | 35 | 34 |
Net cash used in investing activities | (1,989) | (2,366) |
Cash flows from financing activities: | ||
Borrowings under revolving credit facility | 6,050 | 0 |
Payment of deferred financing costs | (69) | 0 |
Purchase of treasury stock | (1,168) | 0 |
Repayment of notes payable | (6,279) | (420) |
Net cash used in financing activities | (1,466) | (420) |
Net (decrease) increase in cash and cash equivalents | (1,346) | 537 |
Cash and cash equivalents at the beginning of the period | 4,978 | 8,812 |
Cash and cash equivalents at the end of the period | 3,632 | 9,349 |
Supplemental cash flow information: | ||
Cash paid for income taxes, net of refunds | 712 | 1,493 |
Cash paid for interest | $ 108 | $ 118 |
1. Basis of presentation
1. Basis of presentation | 6 Months Ended |
Jun. 30, 2018 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Basis of presentation | Note 1 – Basis of Presentation Basis of presentation The accompanying unaudited consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the U.S. (“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 our Annual Report on Form 10-K as of and for the year ended December 31, 2017. 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. 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. |
2. Significant Accounting Polic
2. Significant Accounting Policies | 6 Months Ended |
Jun. 30, 2018 | |
Accounting Policies [Abstract] | |
Significant Accounting Policies | 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 valuation of goodwill and intangible assets, stock-based and incentive compensation, and deferred income taxes. Revenue Recognition We sell food and beverage products across select product categories to customers predominantly within the United States (see Note 11, Segments, Products and Customers). We also sell bulk cream, a byproduct of our fluid milk manufacturing process. We recognize revenue when control over the products transfers to our customers, which generally occurs upon delivery to our customers or their common carriers. We account for product shipping and handling as fulfillment activities with revenues for these activities recorded within net revenue and costs recorded within cost of goods sold. Any taxes collected on behalf of government authorities are excluded from net revenues. Revenues are recorded net of discounts and allowances to our customers and consumers. Known or expected pricing or revenue adjustments, such as trade discounts, allowances for non-saleable products, product returns, and coupon redemption, are estimated at the time of sale. We base these estimates of expected amounts principally on historical utilization and redemption rates. Estimates that affect revenue, such as trade incentives and coupon redemptions, are monitored and adjusted each period until the incentives realized or the coupons expire. Key sales terms, such as pricing and quantities ordered, are established on a frequent basis such that most customer arrangements and related incentives have a one year or shorter duration. As such, we do not capitalize contract inception costs and we capitalize product fulfillment costs in accordance with U.S. GAAP and our inventory policies. We do not have any significant deferred revenue or unbilled receivables at the end of a period. We generally do not receive noncash consideration for the sale of goods nor do we grant payment financing terms greater than one year. Deferred Financing Costs We record deferred financing costs incurred in conjunction with its debt obligations. These costs are capitalized and amortized over the lives of the associated debt to interest expense using the effective interest method. Debt issuance costs associated with term debt and lines of credit are recorded as a direct deduction from the face amount of the debt. Total deferred financing costs, net of accumulated amortization, at June 30, 2018 and December 31, 2017 were $66 and $0, respectively. Advertising and promotional costs Lifeway expenses advertising costs as incurred. For the six months ended June 30, 2018 and 2017 total advertising expenses were $2,585 and $2,811 respectively. For the three months ended June 30, 2018 and 2017 total advertising expenses were $1,196 and $1,043 respectively. Recently Adopted Accounting Pronouncements In June 2018, the FASB issued ASU 2018-07, Improvements to Nonemployee Share-Based Payment Accounting . In May 2017, the Financial Accounting Standards Board ("FASB”) issued ASU No. 2017-09, Compensation – Stock Compensation (Topic 718): Scope of Modification Accounting. The new guidance provides clarity and reduces both diversity in practice and cost of complexity when accounting for a change to the terms of or conditions of a share-based payment award. The amendments in this update provide guidance about which changes to the terms or conditions of a share-based payment award require an entity to apply modification accounting in Topic 718. This guidance was effective January 1, 2018. The adoption of this amendment had no impact on the consolidated financial statements. In August 2016, the FASB issued ASU No. 2016-15, Statement of Cash Flows: Classification of Certain Cash Receipts and Cash Payments. The new guidance is intended 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. This guidance was effective January 1, 2018. The adoption of this amendment had no impact on the consolidated financial statements. In January 2016, the FASB issued ASU No. 2016-01, Recognition and Measurement of Financial Assets and Financial Liabilities. The new guidance modifies how entities measure equity investments and present changes in the fair value of 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. This guidance was effective January 1, 2018. The adoption of this amendment had no impact on the consolidated financial statements. In May 2014, the 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 an entity expects to be entitled in exchange for those goods or services. The standard allows for either “full retrospective” adoption, meaning the standard is applied to all of the periods presented, or “modified retrospective” adoption, meaning the standard is applied only to the most current period presented in the financial statements. ASU 2014-09 also requires enhanced disclosures regarding the nature, amount, timing and uncertainty of revenues and cash flows from contracts with customers. On August 12, 2015 the FASB approved a one year delay of the effective date to reporting periods beginning after December 15, 2017, while permitting companies to voluntarily adopt the new standard as of the original effective date. In December 2016, the FASB issued ASU No. 2016-20, Technical Corrections and Improvements to Topic 606, Revenue from Contracts with Customers, which clarifies narrow aspects of ASC 606 or corrects unintended application of the guidance. The effective date and transition requirements for ASU 2016-20 are the same as the effective date and transition requirements for ASU 2014-09. Under the delayed effective date, this guidance was effective January 1, 2018. We adopted the new standard on January 1, 2018 on a modified retrospective basis. The adoption of this amendment had no impact on the consolidated financial statements. Refer to the Revenue Recognition section above and Note 11, Segment, Products, and Customers for additional information. Recently Issued Accounting Pronouncements In January 2017, the FASB issued ASU No. 2017-04, Intangibles - Goodwill and Other: Simplifying the Test for Goodwill Impairment. The new guidance simplifies the subsequent measurement of goodwill by removing the second step of the two-step impairment test. The amendment requires an entity to perform its annual or interim goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount. An entity still has the option to perform the qualitative assessment for a reporting unit to determine if the quantitative impairment test is necessary. The new guidance will be effective for annual periods or any interim goodwill impairment tests in fiscal years beginning after December 15, 2019. The amendment should be applied on a prospective basis. Early adoption is permitted for interim or annual goodwill impairment tests performed on testing dates after January 1, 2017. The adoption of this amendment is not expected to have a material impact on the consolidated financial statements. In February 2016, the FASB issued ASU No. 2016-02, Leases. The guidance requires lessees to recognize lease assets and lease liabilities in the balance sheet and disclose key information about leasing arrangements, such as information about variable lease payments and options to renew and terminate leases. The amended guidance will require both operating and finance leases to be recognized in the balance sheet. A lessee should recognize in the statement of financial position 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. Early adoption is permitted. The amendments in this ASU should be adopted using a modified retrospective transition approach, which requires application of the new guidance at the beginning of the earliest comparative period presented in the year of adoption. Management is currently evaluating the impact that the new guidance will have on the consolidated financial statements. |
3. Inventories, net
3. Inventories, net | 6 Months Ended |
Jun. 30, 2018 | |
Inventory Disclosure [Abstract] | |
Inventories | Note 3 – Inventories, net Inventories consisted of the following: June 30, 2018 December 31, 2017 Ingredients $ 1,659 $ 1,717 Packaging 2,229 2,453 Finished goods 3,295 3,527 Total inventories $ 7,183 $ 7,697 |
4. Property, Plant and Equipmen
4. Property, Plant and Equipment, net | 6 Months Ended |
Jun. 30, 2018 | |
Property, Plant and Equipment [Abstract] | |
Property, Plant and Equipment, net | Note 4 – Property, Plant and Equipment, net Property, plant and equipment consisted of the following: June 30, 2018 December 31, 2017 Land $ 1,747 $ 1,747 Buildings and improvements 17,379 17,260 Machinery and equipment 29,774 27,539 Vehicles 901 901 Office equipment 879 734 Construction in process 1,089 1,683 51,769 49,864 Less accumulated depreciation (26,526 ) (25,219 ) Total property, plant and equipment, net $ 25,243 $ 24,645 |
5. Intangible Assets
5. Intangible Assets | 6 Months Ended |
Jun. 30, 2018 | |
Goodwill and Intangible Assets Disclosure [Abstract] | |
Intangible Assets | Note 5 – Intangible Assets Goodwill & indefinite-lived intangible assets consisted of the following: June 30, 2018 December 31, 2017 Goodwill $ 10,368 $ 10,368 Brand names 3,700 3,700 Goodwill and indefinite-lived intangible assets $ 14,068 $ 14,068 Other intangible assets, net consisted of the following: June 30, 2018 December 31, 2017 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 (7,596 ) (7,269 ) Other intangible assets, net $ 648 $ 975 |
6. Accrued Expenses
6. Accrued Expenses | 6 Months Ended |
Jun. 30, 2018 | |
Payables and Accruals [Abstract] | |
Accrued Expenses | Note 6 – Accrued Expenses Accrued expenses consisted of the following: June 30, 2018 December 31, 2017 Payroll and incentive compensation $ 2,474 $ 2,208 Real estate taxes 374 371 Other 540 405 $ 3,388 $ 2,984 |
7. Debt
7. Debt | 6 Months Ended |
Jun. 30, 2018 | |
Debt Disclosure [Abstract] | |
Debt | Note 7 – Debt Notes Payable June 30, 2018 December 31, 2017 Variable rate term loan due May 31, 2018. Principal and interest payable monthly with a balloon payment due at maturity. Paid in full. $ – $ 2,832 Variable rate term loan due May 31, 2019. Principal and interest payable monthly with a balloon payment due at maturity. Paid in full. – 3,447 Total term loans – 6,279 Less current portion – (3,166 ) Total long-term portion $ – $ 3,113 The variable rate term loans were subject to interest at the prime rate or at the LIBOR plus 2.5% and were collateralized by substantially all of Lifeway’s assets. The two term loans were refinanced and paid in full on May 7, 2018. See Line of Credit below. Line of Credit On May 7, 2018, Lifeway entered into an Amended and Restated Loan and Security Agreement (the “Revolving Credit Facility”) with its existing lender. The Revolving Credit Facility provides for a revolving line of credit up to a maximum of $10 million (the “Revolving Loan”) with an incremental facility not to exceed $5 million (the “Incremental Facility” and together with the Revolving Loan, the “Loans”). The proceeds of the Loans were used to pay off Lifeway’s existing debt with the lender under the Loan and Security Agreement, Revolving Note, and Term Note entered into on February 6, 2009, and for general working capital purposes. Upon closing, we retired all the then-outstanding term loans described above. As of June 30, 2018, we have $5,984, net of $66 of unamortized deferred financing costs, outstanding under the New Revolving Credit Facility. We have approximately $3,950 available under the Borrowing Base for future borrowings as of June 30, 2018. All outstanding amounts under the Loans bear interest, at Lifeway’s election, at either the lender Base Rate (the greater of either the Federal Funds Rate plus 0.5%, or the Prime Rate) or the LIBOR plus 2.50%, payable monthly in arrears. Lifeway is also required to pay a quarterly unused line fee and, in conjunction with the issuance of any letters of credit, a letter of credit fee. Lifeway’s average interest rate on debt outstanding under our Credit Agreement for the period May 7, 2018 through June 30, 2018 was 4.52% - 4.86%. The commitment under the Revolving Credit Facility matures May 7, 2021. The new revolving line of credit is presented as a long-term debt obligation as of June 30, 2018. The Loans and all other amounts due and owed under the Revolving Credit Facility and related documents are secured by substantially all of our assets. Amounts available for borrowing under the Loans equal the lesser of (i) the Borrowing Base (as defined below), or (ii) $10 million (plus the amount of any Incremental Facility requested by Lifeway and approved by lender), in each case, as the same is reduced by the aggregate principal amount outstanding under the Loans. “Borrowing Base” under the Revolving Credit Facility means, generally, an amount equal to our cash and cash equivalents plus our eligible accounts receivable and eligible inventory, less certain reserves, divided by 1.5. The Revolving Credit Facility contains customary representations, warranties, and covenants on the part of Lifeway, including financial covenants requiring us to achieve a minimum EBITDA threshold for each of the fiscal quarters through December 31, 2018; maintain (a) a fixed charge coverage ratio of no less than 1.25 to 1.0, and (b) a Senior Debt to EBITDA ratio of not more than 3.00 to 1.0 at December 31, 2018 and for each of the succeeding fiscal quarters ending through the expiration date. The Revolving Credit Facility also provides for events of default, including failure to repay principal and interest when due and failure to perform or violation of the provisions or covenants of the agreement, as a result of which amounts due under the Revolving Credit Facility may be accelerated. |
8. Commitments And Contingencie
8. Commitments And Contingencies | 6 Months Ended |
Jun. 30, 2018 | |
Commitments and Contingencies Disclosure [Abstract] | |
Commitments And Contingencies | Note 8 – Commitments and contingencies Lease obligations We lease three retail stores for our Lifeway Kefir Shop subsidiary, certain machinery and equipment, and office space under operating leases. Total lease expense was $375 and $322 for the six months ended June 30, 2018 and 2017, respectively. Total lease expense was $195 and $165 for the three months ended June 30, 2018 and 2017, respectively. Litigation Lifeway is engaged in various legal actions, claims, and proceedings arising in the normal course of business, including commercial disputes, product liabilities, intellectual property matters and employment-related matters resulting from our business activities. We record accruals for outstanding legal matters when we believe it is probable that a loss will be incurred and the amount of such loss can be reasonably estimated. We evaluate, 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, we do not establish an accrued liability. Currently, none of our accruals for outstanding legal matters are material individually or in the aggregate to our 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 operations, or cash flows. However, if we ultimately are required to make payments in connection with an adverse outcome, it is possible that it could have a material adverse effect on our business, financial condition, results of operations or cash flows. Lifeway’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, Lifeway cannot predict with any reasonable certainty the timing or outcome of such contingencies, and we are unable to estimate a possible loss or range of loss. In a letter dated May 19, 2016, Lifeway received a request to voluntarily produce documents in connection with a confidential, informal inquiry by the Division of Enforcement of the SEC concerning Lifeway’s internal controls, disclosure controls procedures, and internal control over financial reporting for fiscal years 2013 through the date of the letter. The SEC has informed Lifeway that the inquiry should not be construed as an indication that any violation of any federal securities law has occurred or as a reflection upon the merits of any person, company, or securities involved. Since receiving the letter, Lifeway has been cooperating with the SEC and will continue to do so. |
9. Income taxes
9. Income taxes | 6 Months Ended |
Jun. 30, 2018 | |
Income Tax Disclosure [Abstract] | |
Income taxes | Note 9 – Income taxes For each interim period, Lifeway 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, we record 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 June 30, 2018 was 34.6% compared to 43.6% for the three months ended June 30, 2017. The effective tax rate for the six months ended June 30, 2018 was 34.8% compared to 43.1% for the six months ended June 30, 2017. On December 22, 2017, Congress enacted the Tax Cuts and Jobs Act of 2017. The Act contains several key tax provisions that affected us, including without limitation a reduction of the federal corporate income tax rate to 21% effective January 1, 2018, and the repeal of the domestic manufacturing deduction for 2018. In 2018, our effective income tax rate reflects the current federal statutory rate of 21%, while the rate for 2017 reflects the then-current federal statutory rate of 35%. The relative mix of pre-tax earnings (or losses), the underlying income tax rates applicable to various state and local taxing jurisdictions, and the impact of non-deductible items can also affect our periodic effective income tax rate. |
10. Stock-based and Other Compe
10. Stock-based and Other Compensation | 6 Months Ended |
Jun. 30, 2018 | |
Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | |
Stock-based and Other Compensation | Note 10 – Stock-based and Other Compensation Stock Options 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. At June 30, 2018, 3.469 million shares remain available under the Omnibus Incentive Plan. We have 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. The following table summarizes stock option activity during the six months ended June 30, 2018: Options Weighted average exercise price Weighted average remaining contractual life Aggregate intrinsic value Outstanding at December 31, 2017 45 $ 10.45 Granted – $ – Exercised – $ – Forfeited (3) $ 11.10 Outstanding at June 30, 2018 42 $ 10.40 7.70 $ – Exercisable at June 30, 2018 33 $ 10.50 7.70 $ – For the six months ended June 30, 2018 and 2017 total pre-tax stock-based compensation expense recognized in the consolidated statements of operations was $7 and $29, respectively. For the six months ended June 30, 2018 and 2017 tax-related benefits of $2 and $11 were also recognized. For the three months ended June 30, 2018 and 2017 total pre-tax stock-based compensation expense recognized in the consolidated statements of operations was $3 and $14, respectively. For the three months ended June 30, 2018 and 2017 tax-related benefits of $0 and $5 were also recognized. As of June 30, 2018, the total remaining unearned compensation related to non-vested stock options was $6, which is expected to be amortized over the weighted-average remaining service period of 0.82 years. Restricted Stock Units Lifeway granted 20 Restricted Stock Units (“RSUs”) to certain independent directors in June 2018. An RSU represents the right to receive one share of common stock in the future. RSUs have no exercise price. The following table summarizes RSU activity during the six months ended June 30, 2018: RSU’s Outstanding at December 31, 2017 – Granted 20 Shares issued upon vesting – Forfeited – Outstanding at June 30, 2018 20 Weighted average grant date fair value per share $ 6.18 We expense RSU’s over the service period. For the six months ended June 30, 2018 and 2017 total pre-tax stock-based compensation expense recognized in the consolidated statements of operations was $4 and $9, respectively. For the six months ended June 30, 2018 and 2017 tax-related benefits of $1 and $4 were also recognized. For the three months ended June 30, 2018 and 2017 total pre-tax stock-based compensation expense recognized in the consolidated statements of operations was $3 and $4, respectively. For the three months ended June 30, 2018 and 2017 tax-related benefits of $1 and $2 were also recognized. As of June 30, 2018, the total remaining unearned compensation related to non-vested RSU’s was $118, which is expected to be amortized over the weighted-average remaining service period of 2.90 years. Incentive Compensation In January 2017, Lifeway established an incentive-based compensation program for fiscal year 2017 (the “2017 Plan”) for certain senior executives and key employees (the “participants”). We established a similar plan for participants for fiscal year 2018 (the “2018” Plan). Under both the 2017 Plan and the 2018 Plan, incentive compensation is based on (a) Lifeway’s achievement of certain sales and adjusted EBITDA performance levels versus respective targets established by the Board for each fiscal year, and (b) for certain senior executives other than our CEO and COO, the achievement of individual performance objectives. Under the 2017 Plan, collectively the participants had the opportunity to earn cash and equity-based incentive compensation in amounts ranging from $0 to $11,025 depending on Lifeway’s performance levels compared to the respective targets and the senior executive’s performance compared to their individual objectives. The equity portion of the incentive compensation is payable in restricted stock that vests one-third in each of the three years from the 2017 grant dates. For the six months ended June 30, 2018, $412 was expensed under the 2017 Plan as stock-based compensation expense in the consolidated statements of operations. For the six months ended June 30, 2017, $1,985 was expensed under the 2017 Plan, of which $1,248 was recorded as cash bonus expense and $737 was recorded as stock-based compensation expense in the consolidated statements of operations. For the three months ended June 30, 2018, $126 was expensed under the 2017 Plan as stock-based compensation expense in the consolidated statements of operations. For the three months ended June 30, 2017, $1,167 was expensed under the 2017 Plan, of which $859 was recorded as cash bonus expense and $308 was recorded as stock-based compensation expense in the consolidated statements of operations. As of June 30, 2018, the total remaining unearned compensation related to the 2017 Plan was $633, of which $278 is expected to be recognized through the balance of fiscal year 2018 subject to vesting; and $303 and $52 is expected to be recognized in 2019 and 2020, respectively, subject to vesting. Under the 2018 Plan, collectively the participants have the opportunity to earn cash and equity-based incentive compensation in amounts ranging from $0 to $11,200 depending on Lifeway’s performance levels compared to the respective targets and the senior executive’s performance compared to their individual objectives. The equity portion of the incentive compensation is payable in restricted stock that vests one-third in each of the three years from the 2018 grant dates. For the six months ended June 30, 2018, $146 was expensed under the 2018 Plan, of which $76 was recorded as cash bonus expense and $70 was recorded as stock-based compensation expense in the consolidated statements of operations. For the three months ended June 30, 2018, $(25) was expensed under the 2018 Plan as stock-based compensation expense in the consolidated statements of operations. Retirement Benefits Lifeway has a defined contribution plan which is available to substantially all full-time employees. Under the terms of the plan, we match employee contributions under a prescribed formula. For the six months ended June 30, 2018 and 2017 total contribution expense recognized in the consolidated statements of operations was $229 and $237, respectively. For the three months ended June 30, 2018 and 2017 total contribution expense recognized in the consolidated statements of operations was $97 and $134, respectively, due to timing of bonus payments. |
11. Segments, Products and Cust
11. Segments, Products and Customers | 6 Months Ended |
Jun. 30, 2018 | |
Segment Reporting [Abstract] | |
Segments, Products and Customers | Note 11 – Segments, Products and Customers Lifeway’s primary product is drinkable kefir, a cultured dairy product. Lifeway Kefir is a tart and tangy cultured milk smoothie that is high in protein, calcium and vitamin D. Thanks to our exclusive blend of kefir cultures, each cup of kefir contains 12 live and active cultures and 15 to 20 billion beneficial CFU (Colony Forming Units) at the time of manufacture. We manufacture (directly or through co-packers) our products under our own brand, as well as under private labels on behalf of certain customers. Lifeway offers over 50 varieties of our kefir products including more than 20 flavors. In addition to our core drinkable kefir products, we offer Kefir Cups, a strained, cupped version of our kefir; and Organic Farmer Cheese Cups, a cupped version of our soft cheeses, both served in resealable 5 oz. containers with mini-spoons. We also offer Lifeway Elixir, a line of non-dairy, sparkling organic probiotic beverages, as well as probiotic supplements for adults and children. In late 2017, we also announced that we would begin offering Skyr, a strained cupped Icelandic yogurt, and Plantiful, a plant-based probiotic beverage made from organic and non-GMO pea protein with 10 vegan kefir cultures. Our product categories are: · Drinkable Kefir, sold in a variety of organic and non-organic sizes, flavors, and types, including low fat, non-fat, whole milk, protein, BioKefir (a 3.5 oz. kefir with additional probiotic cultures), and Kefir with Oats. · Cheese, which includes European-style soft cheeses, and farmer cheese in resealable cups. · Cream and other, consists primarily of cream, a byproduct of our fluid milk manufacturing process, and non-dairy products. · ProBugs, a line of kefir products in drinkable, frozen, and freeze dried formats, designed for children. · Cupped Kefir and Skyr, which include Cupped Kefir and Icelandic Skyr, a line of strained kefir and yogurt products in resealable cups. · Frozen Kefir, available in both bars and pint-size containers. Lifeway has determined that it has one reportable segment based on how our 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 our performance, has been identified collectively as the Chief Financial Officer, the Chief Operating Officer, the Chief Executive Officer, and Chairperson of the board of directors. Substantially all of our consolidated revenues relate to the sale of cultured dairy products that we produce using the same processes and materials and are sold to consumers through a common network of distributors and retailers in the United States. Net sales of products by category were as follows for the six months ended June 30: Six months ended June 30, 2018 % 2017 % Drinkable Kefir other than ProBugs $ 42,378 76% $ 49,405 77% Cheese 5,787 10% 5,698 9% Cream and other 2,698 5% 3,438 5% Cupped Kefir and Skyr 2,455 4% 1,490 2% ProBugs Kefir 1,695 3% 2,857 5% Frozen Kefir (a) 825 2% 962 2% Net Sales $ 55,838 100% $ 63,850 100% (a) Includes Lifeway Kefir Shop sales Net sales of products by category were as follows for the three months ended June 30: Three months ended June 30, 2018 % 2017 % Drinkable Kefir other than ProBugs $ 20,715 76% $ 24,354 77% Cheese 2,853 11% 2,864 9% Cream and other 1,206 4% 1,714 5% Cupped Kefir and Skyr 1,118 4% 897 3% ProBugs Kefir 743 3% 1,378 4% Frozen Kefir (a) 461 2% 526 2% Net Sales $ 27,096 100% $ 31,733 100% (a) Includes Lifeway Kefir Shop sales Significant Customers |
12. Related party transactions
12. Related party transactions | 6 Months Ended |
Jun. 30, 2018 | |
Related Party Transactions [Abstract] | |
Related party transactions | Note 12 – Related party transactions Lifeway obtains consulting services from the Chairperson of its board of directors. Fees earned by the Chairperson are included in general and administrative expenses in the accompanying consolidated statements of operations and were $500 during each of the six months ended June 30, 2018 and 2017. Fees earned by the Chairperson are included in general and administrative expenses in the accompanying consolidated statements of operations and were $250 during each of the three months ended June 30, 2018 and 2017. Lifeway is also a party to a royalty agreement with the Chairperson of its board of directors under which we pay the Chairperson a royalty based on the sale of certain Lifeway products, not to exceed $50 in any fiscal month. Royalties earned by the Chairperson are included in selling expenses in the accompanying consolidated statements of operations and were $300 during the six months ended June 30, 2018 and 2017, and $150 during the three months ended June 30, 2018 and 2017. |
2. Summary Of Significant Accou
2. Summary Of Significant Accounting Policies (Policies) | 6 Months Ended |
Jun. 30, 2018 | |
Accounting Policies [Abstract] | |
Use Of Estimates | 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 valuation of goodwill and intangible assets, stock-based and incentive compensation, and deferred income taxes. |
Revenue Recognition | Revenue Recognition We sell food and beverage products across select product categories to customers predominantly within the United States (see Note 11, Segments, Products and Customers). We also sell bulk cream, a byproduct of our fluid milk manufacturing process. We recognize revenue when control over the products transfers to our customers, which generally occurs upon delivery to our customers or their common carriers. We account for product shipping and handling as fulfillment activities with revenues for these activities recorded within net revenue and costs recorded within cost of goods sold. Any taxes collected on behalf of government authorities are excluded from net revenues. Revenues are recorded net of discounts and allowances to our customers and consumers. Known or expected pricing or revenue adjustments, such as trade discounts, allowances for non-saleable products, product returns, and coupon redemption, are estimated at the time of sale. We base these estimates of expected amounts principally on historical utilization and redemption rates. Estimates that affect revenue, such as trade incentives and coupon redemptions, are monitored and adjusted each period until the incentives realized or the coupons expire. Key sales terms, such as pricing and quantities ordered, are established on a frequent basis such that most customer arrangements and related incentives have a one year or shorter duration. As such, we do not capitalize contract inception costs and we capitalize product fulfillment costs in accordance with U.S. GAAP and our inventory policies. We do not have any significant deferred revenue or unbilled receivables at the end of a period. We generally do not receive noncash consideration for the sale of goods nor do we grant payment financing terms greater than one year. |
Deferred Financing Costs | Deferred Financing Costs We record deferred financing costs incurred in conjunction with its debt obligations. These costs are capitalized and amortized over the lives of the associated debt to interest expense using the effective interest method. Debt issuance costs associated with term debt and lines of credit are recorded as a direct deduction from the face amount of the debt. Total deferred financing costs, net of accumulated amortization, at June 30, 2018 and December 31, 2017 were $66 and $0, respectively. |
Advertising and promotional costs | Advertising and promotional costs Lifeway expenses advertising costs as incurred. For the six months ended June 30, 2018 and 2017 total advertising expenses were $2,585 and $2,811 respectively. For the three months ended June 30, 2018 and 2017 total advertising expenses were $1,196 and $1,043 respectively. |
Recently Adopted Accounting Pronouncements | Recently Adopted Accounting Pronouncements In June 2018, the FASB issued ASU 2018-07, Improvements to Nonemployee Share-Based Payment Accounting . In May 2017, the Financial Accounting Standards Board ("FASB”) issued ASU No. 2017-09, Compensation – Stock Compensation (Topic 718): Scope of Modification Accounting. The new guidance provides clarity and reduces both diversity in practice and cost of complexity when accounting for a change to the terms of or conditions of a share-based payment award. The amendments in this update provide guidance about which changes to the terms or conditions of a share-based payment award require an entity to apply modification accounting in Topic 718. This guidance was effective January 1, 2018. The adoption of this amendment had no impact on the consolidated financial statements. In August 2016, the FASB issued ASU No. 2016-15, Statement of Cash Flows: Classification of Certain Cash Receipts and Cash Payments. The new guidance is intended 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. This guidance was effective January 1, 2018. The adoption of this amendment had no impact on the consolidated financial statements. In January 2016, the FASB issued ASU No. 2016-01, Recognition and Measurement of Financial Assets and Financial Liabilities. The new guidance modifies how entities measure equity investments and present changes in the fair value of 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. This guidance was effective January 1, 2018. The adoption of this amendment had no impact on the consolidated financial statements. In May 2014, the 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 an entity expects to be entitled in exchange for those goods or services. The standard allows for either “full retrospective” adoption, meaning the standard is applied to all of the periods presented, or “modified retrospective” adoption, meaning the standard is applied only to the most current period presented in the financial statements. ASU 2014-09 also requires enhanced disclosures regarding the nature, amount, timing and uncertainty of revenues and cash flows from contracts with customers. On August 12, 2015 the FASB approved a one year delay of the effective date to reporting periods beginning after December 15, 2017, while permitting companies to voluntarily adopt the new standard as of the original effective date. In December 2016, the FASB issued ASU No. 2016-20, Technical Corrections and Improvements to Topic 606, Revenue from Contracts with Customers, which clarifies narrow aspects of ASC 606 or corrects unintended application of the guidance. The effective date and transition requirements for ASU 2016-20 are the same as the effective date and transition requirements for ASU 2014-09. Under the delayed effective date, this guidance was effective January 1, 2018. We adopted the new standard on January 1, 2018 on a modified retrospective basis. The adoption of this amendment had no impact on the consolidated financial statements. Refer to the Revenue Recognition section above and Note 11, Segment, Products, and Customers for additional information. |
Recently Issued Accounting Pronouncements | Recently Issued Accounting Pronouncements In January 2017, the FASB issued ASU No. 2017-04, Intangibles - Goodwill and Other: Simplifying the Test for Goodwill Impairment. The new guidance simplifies the subsequent measurement of goodwill by removing the second step of the two-step impairment test. The amendment requires an entity to perform its annual or interim goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount. An entity still has the option to perform the qualitative assessment for a reporting unit to determine if the quantitative impairment test is necessary. The new guidance will be effective for annual periods or any interim goodwill impairment tests in fiscal years beginning after December 15, 2019. The amendment should be applied on a prospective basis. Early adoption is permitted for interim or annual goodwill impairment tests performed on testing dates after January 1, 2017. The adoption of this amendment is not expected to have a material impact on the consolidated financial statements. In February 2016, the FASB issued ASU No. 2016-02, Leases. The guidance requires lessees to recognize lease assets and lease liabilities in the balance sheet and disclose key information about leasing arrangements, such as information about variable lease payments and options to renew and terminate leases. The amended guidance will require both operating and finance leases to be recognized in the balance sheet. A lessee should recognize in the statement of financial position 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. Early adoption is permitted. The amendments in this ASU should be adopted using a modified retrospective transition approach, which requires application of the new guidance at the beginning of the earliest comparative period presented in the year of adoption. Management is currently evaluating the impact that the new guidance will have on the consolidated financial statements. |
3. Inventories (Tables)
3. Inventories (Tables) | 6 Months Ended |
Jun. 30, 2018 | |
Inventory Disclosure [Abstract] | |
Schedule Of Inventories | Inventories consisted of the following: June 30, 2018 December 31, 2017 Ingredients $ 1,659 $ 1,717 Packaging 2,229 2,453 Finished goods 3,295 3,527 Total inventories $ 7,183 $ 7,697 |
4. Property, Plant and Equipm21
4. Property, Plant and Equipment, net (Tables) | 6 Months Ended |
Jun. 30, 2018 | |
Property, Plant and Equipment [Abstract] | |
Schedule of property, plant and equipment | Property, plant and equipment consisted of the following: June 30, 2018 December 31, 2017 Land $ 1,747 $ 1,747 Buildings and improvements 17,379 17,260 Machinery and equipment 29,774 27,539 Vehicles 901 901 Office equipment 879 734 Construction in process 1,089 1,683 51,769 49,864 Less accumulated depreciation (26,526 ) (25,219 ) Total property, plant and equipment, net $ 25,243 $ 24,645 |
5. Intangible Assets (Tables)
5. Intangible Assets (Tables) | 6 Months Ended |
Jun. 30, 2018 | |
Goodwill and Intangible Assets Disclosure [Abstract] | |
Goodwill & indefinite-lived intangible assets | Goodwill & indefinite-lived intangible assets consisted of the following: June 30, 2018 December 31, 2017 Goodwill $ 10,368 $ 10,368 Brand names 3,700 3,700 Goodwill and indefinite-lived intangible assets $ 14,068 $ 14,068 |
Schedule of other intangible assets | Other intangible assets, net consisted of the following: June 30, 2018 December 31, 2017 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 (7,596 ) (7,269 ) Other intangible assets, net $ 648 $ 975 |
6. Accrued Expenses (Tables)
6. Accrued Expenses (Tables) | 6 Months Ended |
Jun. 30, 2018 | |
Payables and Accruals [Abstract] | |
Schedule Of Accrued Expenses | Accrued expenses consisted of the following: June 30, 2018 December 31, 2017 Payroll and incentive compensation $ 2,474 $ 2,208 Real estate taxes 374 371 Other 540 405 $ 3,388 $ 2,984 |
7. Debt (Tables)
7. Debt (Tables) | 6 Months Ended |
Jun. 30, 2018 | |
Debt Disclosure [Abstract] | |
Schedule Of Notes Payable | Notes Payable June 30, 2018 December 31, 2017 Variable rate term loan due May 31, 2018. Principal and interest payable monthly with a balloon payment due at maturity. Paid in full. $ – $ 2,832 Variable rate term loan due May 31, 2019. Principal and interest payable monthly with a balloon payment due at maturity. Paid in full. – 3,447 Total term loans – 6,279 Less current portion – (3,166 ) Total long-term portion $ – $ 3,113 |
10. Stock-based and Other Com25
10. Stock-based and Other Compensation (Tables) | 6 Months Ended |
Jun. 30, 2018 | |
Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | |
Stock option activity | The following table summarizes stock option activity during the six months ended June 30, 2018: Options Weighted average exercise price Weighted average remaining contractual life Aggregate intrinsic value Outstanding at December 31, 2017 45 $ 10.45 Granted – $ – Exercised – $ – Forfeited (3) $ 11.10 Outstanding at June 30, 2018 42 $ 10.40 7.70 $ – Exercisable at June 30, 2018 33 $ 10.50 7.70 $ – |
RSU activity | The following table summarizes RSU activity during the six months ended June 30, 2018: RSU’s Outstanding at December 31, 2017 – Granted 20 Shares issued upon vesting – Forfeited – Outstanding at June 30, 2018 20 Weighted average grant date fair value per share $ 6.18 |
11. Segments, Products and Cu26
11. Segments, Products and Customers (Tables) | 6 Months Ended |
Jun. 30, 2018 | |
Segment Reporting [Abstract] | |
Schedule of sales of products by category | Net sales of products by category were as follows for the six months ended June 30: Six months ended June 30, 2018 % 2017 % Drinkable Kefir other than ProBugs $ 42,378 76% $ 49,405 77% Cheese 5,787 10% 5,698 9% Cream and other 2,698 5% 3,438 5% Cupped Kefir and Skyr 2,455 4% 1,490 2% ProBugs Kefir 1,695 3% 2,857 5% Frozen Kefir (a) 825 2% 962 2% Net Sales $ 55,838 100% $ 63,850 100% (a) Includes Lifeway Kefir Shop sales Net sales of products by category were as follows for the three months ended June 30: Three months ended June 30, 2018 % 2017 % Drinkable Kefir other than ProBugs $ 20,715 76% $ 24,354 77% Cheese 2,853 11% 2,864 9% Cream and other 1,206 4% 1,714 5% Cupped Kefir and Skyr 1,118 4% 897 3% ProBugs Kefir 743 3% 1,378 4% Frozen Kefir (a) 461 2% 526 2% Net Sales $ 27,096 100% $ 31,733 100% (a) Includes Lifeway Kefir Shop sales |
2. Summary Of Significant Acc27
2. Summary Of Significant Accounting Policies (Details Narrative) - USD ($) $ in Thousands | 3 Months Ended | 6 Months Ended | |||
Jun. 30, 2018 | Jun. 30, 2017 | Jun. 30, 2018 | Jun. 30, 2017 | Dec. 31, 2017 | |
Accounting Policies [Abstract] | |||||
Deferred financing costs | $ 66 | $ 66 | $ 0 | ||
Advertising expenses | $ 1,196 | $ 1,043 | $ 2,585 | $ 2,811 |
3. Inventories (Details)
3. Inventories (Details) - USD ($) $ in Thousands | Jun. 30, 2018 | Dec. 31, 2017 |
Inventory Disclosure [Abstract] | ||
Ingredients | $ 1,659 | $ 1,717 |
Packaging | 2,229 | 2,453 |
Finished goods | 3,295 | 3,527 |
Total inventories | $ 7,183 | $ 7,697 |
4. Property And Equipment (Deta
4. Property And Equipment (Details) - USD ($) $ in Thousands | Jun. 30, 2018 | Dec. 31, 2017 |
Property, plant and equipment, gross | $ 51,769 | $ 49,864 |
Less accumulated depreciation | (26,526) | (25,219) |
Property, plant and equipment, net | 25,243 | 24,645 |
Land [Member] | ||
Property, plant and equipment, gross | 1,747 | 1,747 |
Buildings And improvements [Member] | ||
Property, plant and equipment, gross | 17,379 | 17,260 |
Machinery And Equipment [Member] | ||
Property, plant and equipment, gross | 29,774 | 27,539 |
Vehicles [Member] | ||
Property, plant and equipment, gross | 901 | 901 |
Office Equipment [Member] | ||
Property, plant and equipment, gross | 879 | 734 |
Construction In Progress [Member] | ||
Property, plant and equipment, gross | $ 1,089 | $ 1,683 |
5. Intangible Assets (Details -
5. Intangible Assets (Details - Indefinite assets) - USD ($) $ in Thousands | Jun. 30, 2018 | Dec. 31, 2017 |
Goodwill and Intangible Assets Disclosure [Abstract] | ||
Goodwill | $ 10,368 | $ 10,368 |
Brand names | 3,700 | 3,700 |
Goodwill & indefinite lived intangible assets | $ 14,068 | $ 14,068 |
5. Intangible Assets (Details31
5. Intangible Assets (Details - Finite lived) - USD ($) $ in Thousands | Jun. 30, 2018 | Dec. 31, 2017 |
Intangible assets, gross | $ 8,244 | $ 8,244 |
Accumulated Amortization | (7,596) | (7,269) |
Intangible assets, net | 648 | 975 |
Recipes [Member] | ||
Intangible assets, gross | 44 | 44 |
Customer lists and other customer related intangibles [Member] | ||
Intangible assets, gross | 4,529 | 4,529 |
Customer relationships [Member] | ||
Intangible assets, gross | 985 | 985 |
Trade Names [Member] | ||
Intangible assets, gross | 2,248 | 2,248 |
Formula [Member] | ||
Intangible assets, gross | $ 438 | $ 438 |
6. Accrued Expenses (Details)
6. Accrued Expenses (Details) - USD ($) $ in Thousands | Jun. 30, 2018 | Dec. 31, 2017 |
Payables and Accruals [Abstract] | ||
Payroll and incentive compensation | $ 2,474 | $ 2,208 |
Real estate taxes | 374 | 371 |
Other accrued expenses | 540 | 405 |
Total accrued expenses | $ 3,388 | $ 2,984 |
7. Debt (Details - Notes payabl
7. Debt (Details - Notes payable) - USD ($) $ in Thousands | Jun. 30, 2018 | Dec. 31, 2017 |
Total notes payable | $ 0 | $ 6,279 |
Less current maturities | 0 | (3,166) |
Total long-term portion | 0 | 3,113 |
Term Loan 1 [Member] | ||
Total notes payable | 0 | 2,832 |
Term Loan 2 [Member] | ||
Total notes payable | $ 0 | $ 3,447 |
7. Debt (Details Narrative)
7. Debt (Details Narrative) - USD ($) $ in Thousands | 6 Months Ended | |
Jun. 30, 2018 | Dec. 31, 2017 | |
Line of credit balance | $ 5,984 | $ 0 |
Revolving Credit Facility [Member] | ||
Revolving credit facility maximum borrowing capacity | $ 10,000 | |
Credit facility interest rate | LIBOR plus 2.5% | |
Credit facility expiration date | May 7, 2021 | |
Line of credit balance | $ 5,984 | |
Unamortized deferred financing costs | 66 | |
Line of credit available | $ 3,950 |
8. Commitments And Contingenc35
8. Commitments And Contingencies (Details Narrative) - USD ($) $ in Thousands | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2018 | Jun. 30, 2017 | Jun. 30, 2018 | Jun. 30, 2017 | |
Commitments and Contingencies Disclosure [Abstract] | ||||
Total lease expense | $ 195 | $ 165 | $ 375 | $ 322 |
9. Income taxes (Details Narrat
9. Income taxes (Details Narrative) | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2018 | Jun. 30, 2017 | Jun. 30, 2018 | Jun. 30, 2017 | |
Income Tax Disclosure [Abstract] | ||||
Effective tax rate | 34.46% | 43.60% | 34.80% | 43.10% |
10. Stock-based and Other Com37
10. Stock-based and Other Compensation (Details - Option Activity) - Options [Member] $ / shares in Units, shares in Thousands, $ in Thousands | 6 Months Ended |
Jun. 30, 2018USD ($)$ / sharesshares | |
Options outstanding, beginning balance | shares | 45 |
Options granted | shares | 0 |
Options exercised | shares | 0 |
Options forfeited | shares | (3) |
Options outstanding, ending balance | shares | 42 |
Options exercisable | shares | 33 |
Weighted average exercise price, options outstanding, beginning balance | $ / shares | $ 10.45 |
Weighted average exercise price, options granted | $ / shares | 0 |
Weighted average exercise price, options exercised | $ / shares | .00 |
Weighted average exercise price, options forfeited | $ / shares | 11.10 |
Weighted average exercise price, options outstanding, ending balance | $ / shares | 10.40 |
Weighted average exercise price, options exercisable | $ / shares | $ 10.50 |
Weighted average remaining contractural life, outstanding | 7 years 8 months 12 days |
Weighted average remaining contractural life, exercisable | 7 years 8 months 12 days |
Aggregate intrinsic value, options outstanding | $ | $ 0 |
Aggregate intrinsic value, options exercisable | $ | $ 0 |
10. Stock-based Compensation (D
10. Stock-based Compensation (Details - RSU Activity) - Restricted Stock Units (RSUs) [Member] shares in Thousands | 6 Months Ended |
Jun. 30, 2018$ / sharesshares | |
RSU's outstanding, beginning balance | 0 |
RSU's granted | 20 |
Shares issued upon vesting | 0 |
RSU's forfeited | 0 |
RSU's outstanding, ending balance | 20 |
Weighted average grant date fair value per share | $ / shares | $ 6.18 |
10. Stock-based and Other Com39
10. Stock-based and Other Compensation (Details Narrative) - USD ($) shares in Thousands, $ in Thousands | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2018 | Jun. 30, 2017 | Jun. 30, 2018 | Jun. 30, 2017 | |
Contribution expense | $ 97 | $ 134 | $ 229 | $ 237 |
Options [Member] | ||||
Share-based compensation | 3 | 14 | 7 | 29 |
Tax benefits | 0 | 5 | 2 | 11 |
Unearned compensation related to non-vested stock options | 6 | $ 6 | ||
Weighted average period for unrecognized compensation | 9 months 25 days | |||
Restricted Stock Units (RSUs) [Member] | ||||
RSU's granted | 20 | |||
Share-based compensation | 3 | 4 | $ 4 | 9 |
Tax benefits | 1 | 2 | 1 | 4 |
Unearned compensation related to non-vested RSU's | $ 118 | $ 118 | ||
Weighted average period for unrecognized compensation | 2 years 10 months 25 days | |||
2015 Omnibus Incentive Plan [Member] | ||||
Stock authorized for issuance | 3,500 | 3,500 | ||
Shares available for issuance | 3,469 | 3,469 | ||
2017 Plan [Member] | ||||
Share-based compensation | $ 126 | 1,167 | $ 412 | 1,985 |
Unearned compensation related to non-vested stock options | 633 | 633 | ||
2017 Plan [Member] | Cash Bonus [Member] | ||||
Share-based compensation | 859 | 1,248 | ||
2017 Plan [Member] | Stock-Based Compensation [Member] | ||||
Share-based compensation | $ 308 | $ 737 | ||
2018 Plan [Member] | ||||
Share-based compensation | $ (25) | 146 | ||
2018 Plan [Member] | Cash Bonus [Member] | ||||
Share-based compensation | 76 | |||
2018 Plan [Member] | Stock-Based Compensation [Member] | ||||
Share-based compensation | $ 70 |
11. Segments, Products and Cu40
11. Segments, Products and Customers (Details) - USD ($) $ in Thousands | 3 Months Ended | 6 Months Ended | |||
Jun. 30, 2018 | Jun. 30, 2017 | Jun. 30, 2018 | Jun. 30, 2017 | ||
Total sales | $ 27,096 | $ 31,733 | $ 55,838 | $ 63,850 | |
Percentage of sales | 100.00% | 100.00% | 100.00% | 100.00% | |
Drinkable Kefir other than ProBugs[Member] | |||||
Total sales | $ 20,715 | $ 24,354 | $ 42,378 | $ 49,405 | |
Percentage of sales | 76.00% | 77.00% | 76.00% | 77.00% | |
Cheese [Member] | |||||
Total sales | $ 2,853 | $ 2,864 | $ 5,787 | $ 5,698 | |
Percentage of sales | 11.00% | 9.00% | 10.00% | 9.00% | |
Cream and other [Member] | |||||
Total sales | $ 1,206 | $ 1,714 | $ 2,698 | $ 3,438 | |
Percentage of sales | 4.00% | 5.00% | 5.00% | 5.00% | |
Cupped Kefir and Skyr [Member] | |||||
Total sales | $ 1,118 | $ 897 | $ 2,455 | $ 1,490 | |
Percentage of sales | 4.00% | 3.00% | 4.00% | 2.00% | |
ProBugs Kefer [Member] | |||||
Total sales | $ 743 | $ 1,378 | $ 1,695 | $ 2,857 | |
Percentage of sales | 3.00% | 4.00% | 3.00% | 5.00% | |
Frozen Kefir [Member] | |||||
Total sales | [1] | $ 461 | $ 526 | $ 825 | $ 962 |
Percentage of sales | [1] | 2.00% | 2.00% | 2.00% | 2.00% |
[1] | Includes Lifeway Kefir Shop sales |
11. Segments, Products and Cu41
11. Segments, Products and Customers (Details Narrative) | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2018 | Jun. 30, 2017 | Jun. 30, 2018 | Jun. 30, 2017 | |
Sales Revenue, Net [Member] | Two Customers [Member] | ||||
Concentration percentage | 23.00% | 22.00% | 22.00% | 23.00% |
12. Related party transactions
12. Related party transactions (Details Narrative) - USD ($) $ in Thousands | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2018 | Jun. 30, 2017 | Jun. 30, 2018 | Jun. 30, 2017 | |
General and administrative expenses | $ 2,996 | $ 3,813 | $ 6,701 | $ 7,598 |
Selling expenses | 3,383 | 3,400 | 7,401 | 7,638 |
Consulting Fees [Member] | ||||
General and administrative expenses | 250 | 250 | 500 | 500 |
Royalty Expense [Member] | ||||
Selling expenses | $ 150 | $ 150 | $ 300 | $ 300 |