Document And Entity Information
Document And Entity Information - shares | 6 Months Ended | |
Jun. 30, 2019 | Aug. 06, 2019 | |
Document And Entity Information | ||
Entity Registrant Name | Lifeway Foods, Inc. | |
Entity Central Index Key | 0000814586 | |
Document Type | 10-Q | |
Document Period End Date | Jun. 30, 2019 | |
Amendment Flag | false | |
Current Fiscal Year End Date | --12-31 | |
Is Entity's Reporting Status Current | Yes | |
Entity Filer Category | Non-accelerated Filer | |
Entity Emerging Growth Company | false | |
Entity Small Business | true | |
Entity Ex Transition Period | false | |
Entity Common Stock, Shares Outstanding | 15,761,440 | |
Document Fiscal Period Focus | Q2 | |
Document Fiscal Year Focus | 2019 | |
Enitity Interactive Data Current | Yes | |
Entity Incorporation State County Code | IL | |
Entity File Number | 000-17363 |
Consolidated Balance Sheets (Un
Consolidated Balance Sheets (Unaudited) - USD ($) $ in Thousands | Jun. 30, 2019 | Dec. 31, 2018 |
Current assets | ||
Cash and cash equivalents | $ 3,022 | $ 2,998 |
Accounts receivable, net of allowance for doubtful accounts and discounts & allowances of $1,220 at June 30, 2019 and December 31, 2018 respectively | 7,570 | 6,276 |
Inventories, net | 6,843 | 5,817 |
Prepaid expenses and other current assets | 1,393 | 1,077 |
Refundable income taxes | 1,278 | 2,748 |
Total current assets | 20,106 | 18,916 |
Property, plant and equipment, net | 23,365 | 24,573 |
Operating lease right-of-use asset | 966 | 0 |
Intangible assets | ||
Goodwill & indefinite-lived intangibles | 12,824 | 12,824 |
Other intangible assets, net | 231 | 344 |
Total intangible assets | 13,055 | 13,168 |
Other Assets | 165 | 150 |
Total assets | 57,657 | 56,807 |
Current liabilities | ||
Accounts payable | 5,459 | 4,570 |
Accrued expenses | 4,141 | 2,777 |
Accrued income taxes | 63 | 106 |
Total current liabilities | 9,663 | 7,453 |
Line of credit | 4,677 | 5,995 |
Operating lease liabilities | 584 | 0 |
Deferred income taxes, net | 390 | 390 |
Other long-term liabilities | 100 | 564 |
Total liabilities | 15,414 | 14,402 |
Stockholders' equity | ||
Preferred stock, no par value; 2,500 shares authorized; no shares issued or outstanding at June 30, 2019 and December 31, 2018, respectively | 0 | 0 |
Common stock, no par value; 40,000 shares authorized; 17,274 shares issued; 15,761 and 15,814 outstanding at June 30, 2019 and December 31, 2018, respectively | 6,509 | 6,509 |
Paid-in-capital | 2,230 | 2,303 |
Treasury stock, at cost | (12,477) | (12,970) |
Retained earnings | 45,981 | 46,563 |
Total stockholders' equity | 42,243 | 42,405 |
Total liabilities and stockholders' equity | $ 57,657 | $ 56,807 |
Consolidated Balance Sheets (_2
Consolidated Balance Sheets (Unaudited) (Parenthetical) - USD ($) shares in Thousands, $ in Thousands | Jun. 30, 2019 | Dec. 31, 2018 |
Current assets | ||
Allowance for doubtful accounts and discounts | $ 1,220 | $ 1,220 |
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 | 15,761 | 15,814 |
Consolidated Statements of Oper
Consolidated Statements of Operations (Unaudited) - USD ($) shares in Thousands, $ in Thousands | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2019 | Jun. 30, 2018 | Jun. 30, 2019 | Jun. 30, 2018 | |
Income Statement [Abstract] | ||||
Net sales | $ 23,153 | $ 27,096 | $ 47,768 | $ 55,838 |
Cost of goods sold | 16,843 | 19,495 | 34,410 | 39,520 |
Depreciation expense | 747 | 725 | 1,492 | 1,405 |
Total cost of goods sold | 17,590 | 20,220 | 35,902 | 40,925 |
Gross profit | 5,563 | 6,876 | 11,866 | 14,913 |
Selling expense | 2,691 | 3,383 | 5,830 | 7,401 |
General and administrative expense | 2,898 | 2,996 | 6,390 | 6,701 |
Amortization expense | 40 | 164 | 113 | 327 |
Total operating expenses | 5,629 | 6,543 | 12,333 | 14,429 |
(Loss) income from operations | (66) | 333 | (467) | 484 |
Other income (expense): | ||||
Interest expense | (68) | (75) | (137) | (138) |
Gain (loss) on sale of property equipment | 4 | (1) | 29 | 14 |
Other income, net | 2 | 3 | 5 | 8 |
Total other income (expense) | (62) | (73) | (103) | (116) |
(Loss) income before provision for income taxes | (128) | 260 | (570) | 368 |
Provision for income taxes (benefit) | 13 | 90 | (41) | 128 |
Net (loss) income | $ (141) | $ 170 | $ (529) | $ 240 |
Earnings (loss) per common share | ||||
Basic | $ (0.01) | $ 0.01 | $ (0.03) | $ 0.02 |
Diluted | $ (0.01) | $ 0.01 | $ (0.03) | $ 0.02 |
Weighted average common shares: | ||||
Basic | 15,775 | 15,879 | 15,771 | 15,893 |
Diluted | 15,775 | 15,992 | 15,771 | 16,026 |
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, 2017 | 17,274 | (1,266) | |||
Beginning balance, value 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, value | $ 203 | (71) | 132 | ||
Treasury stock purchased, shares | (151) | ||||
Treasury stock purchased, value | $ (1,168) | (1,168) | |||
Stock-based compensation | 11 | 11 | |||
Net income (loss) | 240 | 240 | |||
Ending balance, shares at Jun. 30, 2018 | 17,274 | (1,395) | |||
Ending balance, value at Jun. 30, 2018 | $ 6,509 | $ (12,777) | 2,184 | 49,889 | 45,805 |
Beginning balance, shares at Dec. 31, 2018 | 17,274 | (1,460) | |||
Beginning balance, value at Dec. 31, 2018 | $ 6,509 | $ (12,970) | 2,303 | 46,563 | 42,405 |
Cumulative impact of change in accounting principles, net of tax at Dec. 31, 2018 | (53) | (53) | |||
Issuance of common stock in connection with stock-based compensation, shares | 103 | ||||
Issuance of common stock in connection with stock-based compensation, value | $ 878 | (406) | 472 | ||
Treasury stock purchased, shares | (156) | ||||
Treasury stock purchased, value | $ (385) | (385) | |||
Stock-based compensation | 333 | 333 | |||
Net income (loss) | (529) | (529) | |||
Ending balance, shares at Jun. 30, 2019 | 17,274 | (1,513) | |||
Ending balance, value at Jun. 30, 2019 | $ 6,509 | $ (12,477) | $ 2,230 | $ 45,981 | $ 42,243 |
Consolidated Statements of Cash
Consolidated Statements of Cash Flows (Unaudited) - USD ($) $ in Thousands | 6 Months Ended | |
Jun. 30, 2019 | Jun. 30, 2018 | |
Cash flows from operating activities: | ||
Net (loss) income | $ (529) | $ 240 |
Adjustments to reconcile net (loss) income to operating cash flow: | ||
Depreciation and amortization | 1,605 | 1,732 |
Bad debt expense | 3 | 20 |
Reserve for inventory obsolescence | 210 | 271 |
Stock-based compensation | 535 | 495 |
Non-cash interest expense | 12 | 3 |
Deferred revenue | (48) | (48) |
(Gain) on sale of property and equipment | (29) | (14) |
(Increase) decrease in operating assets: | ||
Accounts receivable | (1,297) | 66 |
Inventories | (1,235) | 243 |
Refundable income taxes | 1,470 | (463) |
Prepaid expenses and other current assets | (308) | (584) |
Increase (decrease) in operating liabilities: | ||
Accounts payable | 888 | 423 |
Accrued expenses | 774 | (153) |
Accrued income taxes | (43) | (121) |
Net cash provided by operating activities | 2,008 | 2,109 |
Cash flows from investing activities: | ||
Purchases of property and equipment | (290) | (2,024) |
Proceeds from sale of property and equipment | 36 | 35 |
Purchase of investments | (15) | 0 |
Net cash used in investing activities | (269) | (1,989) |
Cash flows from financing activities: | ||
Purchase of treasury stock | (385) | (1,168) |
Borrowings under revolving credit facility | 0 | 6,050 |
Repayment of line of credit | (1,330) | 0 |
Payment of deferred financing costs | 0 | (69) |
Repayment of notes payable | 0 | (6,279) |
Net cash used in financing activities | (1,715) | (1,466) |
Net decrease in cash and cash equivalents | 24 | (1,346) |
Cash and cash equivalents at the beginning of the period | 2,998 | 4,978 |
Cash and cash equivalents at the end of the period | 3,022 | 3,632 |
Supplemental cash flow information: | ||
Cash paid for income taxes, net of (refunds) | (1,469) | 712 |
Cash paid for interest | 149 | 108 |
Non-cash investing activities: | ||
Right-of-use assets recognized at ASU 2016-02 transition | 944 | 0 |
Operating lease liability recognized at ASU 2016-02 transition | 997 | 0 |
Right-of-use assets and operating lease liabiliites recognized after ASU 2016-02 transition | $ 280 | $ 0 |
1. Basis of presentation
1. Basis of presentation | 6 Months Ended |
Jun. 30, 2019 | |
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, these statements include all adjustments necessary for a fair presentation of the results of all interim periods reported herein. The consolidated financial statements and related notes should be read in conjunction with the consolidated financial statements and related notes included in our Annual Report on Form 10-K as of and for the year ended December 31, 2018. Results of operations for interim periods are not necessarily indicative of the results to be expected for other interim periods or the full year. A detailed description of our significant accounting policies can be found in our Annual Report on Form 10-K for the fiscal year ended December 31, 2018. 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, 2019 | |
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 12, Segments, Products and Customers). We also sell bulk cream, a byproduct of our fluid milk manufacturing process. In accordance with Accounting Standards Codification (“ASC”) 606, Revenue from Contracts with Customers, 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 adopted this standard at the beginning of fiscal year 2018, with no significant impact to our financial position or results of operations, using the modified retrospective method. The amount of revenue recognized reflects the consideration to which we expect to be entitled to receive in exchange for these goods or services, using the five-step method required by ASC 606. For the Company, the contract is the approved sales order, which may also be supplemented by other agreements that formalize various terms and conditions with customers. We apply judgment in determining the customer’s ability and intention to pay, which is based on a variety of factors including the customer’s historical payment experience or, in the case of a new customer, published credit and financial information pertaining to the customer. Performance obligations promised in a contract are identified based on the goods or services that will be transferred to the customer, which is the delivery of food products which provide immediate benefit to the customer. 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. Variable consideration, which typically includes volume-based rebates, known or expected pricing or revenue adjustments, such as trade discounts, allowances for non-saleable products, product returns, trade incentives and coupon redemption, is estimated utilizing the most likely amount method. 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. 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. Advertising and promotional costs Lifeway expenses advertising costs as incurred. For the six months ended June 30, 2019 and 2018 total advertising expenses were $1,864 and $2,585 respectively. For the three months ended June 30, 2019 and 2018 total advertising expenses were $776 and $1,196 respectively. Recently Adopted Accounting Pronouncements In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842), which affects any entity that enters into a lease (as that term is defined in ASU 2016-02), with some specified scope exceptions. Under ASU 2016-02, companies can adopt the amended guidance using a modified retrospective transition approach, using an application date of either the beginning of the earliest comparative period presented or the beginning of the reporting period in which the companies first apply the new standard. We adopted this standard on January 1, 2019 using the application date of January 1, 2019, and elected certain practical expedients allowed under the standard. In July 2018, the FASB issued ASU No. 2018-11, Leases (842), Targeted Improvements, which provides an additional transition election to not restate comparative periods for the effects of applying the new standard. The guidance requires lessees to recognize right-of-use 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. Lifeway elected certain of the practical expedients that are permitted under the transition guidance within ASU 2016-02 and related standards. Among other things, this practical expedient allowed us to carryforward the historical lease classification, and not reassess initial direct costs for any existing leases as of January 1, 2019 or reassess whether any expired or existing contracts are or contain leases. In addition, we elected to adopt the hindsight practical expedient to determine the reasonably certain lease term for existing leases. We made an accounting policy election to continue recording leases with an initial term of 12 months or less consistent with our prior financial reporting and elect the practical expedient to combine lease and non-lease components. We have revised our relevant policies and procedures, as applicable, to meet the new accounting, reporting and disclosure requirements of Topic 842 and have updated internal controls accordingly. The main difference between the guidance in ASU 2016-02 and prior GAAP is the recognition of right-of-use assets and lease liabilities by lessees for those leases classified as operating leases under current GAAP. Recognition of the right-of-use assets and liabilities had a material impact to our consolidated balance sheets upon adoption. However, since all our leases are operating leases under ASC 840 and we will carryforward the historical lease classification, the new standard did not have a material impact on our Consolidated Statements of Operations, Consolidated Statements of Stockholders’ Equity, or Consolidated Statements of Cash Flows. The adoption resulted in an increase of the right-of-use assets of approximately $944 and lease liabilities of $997, and an adjustment to beginning retained earnings of $53 as of January 1, 2019. Recently Issued Accounting Pronouncements We do not anticipate a material impact upon adoption from any accounting standards issued but not yet adopted. |
3. Inventories, net
3. Inventories, net | 6 Months Ended |
Jun. 30, 2019 | |
Inventory Disclosure [Abstract] | |
Inventories | Note 3 – Inventories, net Inventories consisted of the following: June 30, December 31, Ingredients $ 1,915 $ 1,580 Packaging 2,240 2,072 Finished goods 2,688 2,165 Total inventories $ 6,843 $ 5,817 |
4. Property, Plant and Equipmen
4. Property, Plant and Equipment, net | 6 Months Ended |
Jun. 30, 2019 | |
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, December 31, Land $ 1,747 $ 1,747 Buildings and improvements 17,566 17,520 Machinery and equipment 29,830 29,692 Vehicles 806 937 Office equipment 850 838 Construction in process 583 546 51,382 51,280 Less accumulated depreciation (28,017 ) (26,707 ) Total property, plant and equipment, net $ 23,365 $ 24,573 |
5. Goodwill and Intangible Asse
5. Goodwill and Intangible Assets | 6 Months Ended |
Jun. 30, 2019 | |
Goodwill and Intangible Assets Disclosure [Abstract] | |
Goodwill and Intangible Assets | Note 5 – Goodwill and Intangible Assets Goodwill & indefinite-lived intangible assets consisted of the following: June 30, December 31, Gross goodwill $ 10,368 $ 10,368 Accumulated impairment losses (1,244 ) (1,244 ) Goodwill 9,124 9,124 Brand names 3,700 3,700 Goodwill and indefinite-lived intangible assets $ 12,824 $ 12,824 Finite-lived Intangible Assets Other intangible assets, net consisted of the following: June 30, December 31, 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 (8,013 ) (7,900 ) Other intangible assets, net $ 231 $ 344 |
6. Accrued Expenses
6. Accrued Expenses | 6 Months Ended |
Jun. 30, 2019 | |
Payables and Accruals [Abstract] | |
Accrued Expenses | Note 6 – Accrued Expenses Accrued expenses consisted of the following: June 30, December 31, 2018 Payroll and incentive compensation $ 2,830 $ 1,937 Operating leases 429 – Real estate taxes 365 398 Other 517 442 Total accrued expenses $ 4,141 $ 2,777 |
7. Debt
7. Debt | 6 Months Ended |
Jun. 30, 2019 | |
Debt Disclosure [Abstract] | |
Debt | Note 7 – Debt Notes Payable We had two variable rate term loans with an aggregate outstanding balance of $6,069 as of March 31, 2018. The 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, 2019, we had $4,677, net of $43 of unamortized deferred financing costs, outstanding under the Revolving Credit Facility. We had approximately $4,280 available under the Borrowing Base for future borrowings as of June 30, 2019. 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 Revolving Credit Facility for the quarter ended June 30, 2019 was 5.04%. The commitment under the Revolving Credit Facility matures May 7, 2021. The Revolving Credit Facility is presented as a long-term debt obligation as of June 30, 2019. 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 Revolving Credit Facility 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. On April 10, 2019, effective March 31, 2019, Lifeway entered into the First Modification to the Amended and Restated Loan and Security Agreement (the “Modified Revolving Credit Facility”) with its existing lender. Under the amendment, the Modified Revolving Credit Facility provides for a revolving line of credit up to a maximum of $9 million (the “Revolving Loan”) with an incremental facility not to exceed $5 million (the “Incremental Facility” and together with the Revolving Loan, the “Loans”). All outstanding amounts under the Loans bear interest, based on a level of the Senior Debt to EBITDA ratio, at Lifeway’s election, at either the lender Base Rate (the greater of either the Federal Funds Rate plus 0.0% to 0.5%, or the Prime Rate) or the LIBOR plus 2.25% to 3.00%, 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. As amended, the Modified 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, 2019, and maintain a fixed charge coverage ratio of no less than 1.25 to 1.00 for each of the fiscal quarters ending through the expiration date. The Modified 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 Modified Revolving Credit Facility may be accelerated. We were in compliance with the minimum EBITDA and fixed charge coverage ratio covenants at June 30, 2019. |
8. Leases
8. Leases | 6 Months Ended |
Jun. 30, 2019 | |
Leases [Abstract] | |
Leases | Note 8 – Leases Lifeway has operating leases for three retail stores for its Lifeway Kefir Shop subsidiary, certain machinery and equipment, and office space. All lease payments are fixed, not variable. Remaining lease terms for these leases range from less than 1 year to 5 years. Some of our leases include options to extend the leases for up to 5 years and have been included in our calculation of the right-of-use asset and lease liabilities. There are no residual value guarantees. We do not currently have leases which meet the finance lease classification as defined under ASC 842. We do not record leases with an initial term of 12 months or less on the balance sheet. Expense for these short-term leases is recorded on a straight-line basis over the lease term. Total lease expense was $365 and $375 (including short term leases) for the six months ended June 30, 2019 and 2018, respectively. Total lease expense was $194 and $195 (including short term leases) for the three months ended June 30, 2019 and 2018, respectively. Lifeway treats contracts as a lease when the contract conveys the right to use a physically distinct asset for a period of time in exchange for consideration, we direct the use of the asset and obtain substantially all the economic benefits of the asset. Right-of-use assets and lease liabilities are measured and recognized based on the present value of the future minimum lease payments over the lease term at the commencement date. We have elected the practical expedient to combine lease and non-lease components into a single component for all of its leases. For many of our leases such as real estate leases, we are unable to determine an implicit rate; therefore, we use our incremental borrowing rate based on the information available at the commencement date in determining the present value of future payments for those leases. We include options to extend or terminate the lease in the measurement of the right-of-use asset and lease liability when it is reasonably certain that we will exercise such options. Lease expense for minimum lease payments is recognized on a straight-line basis over the lease term. Future maturities of lease liabilities were as follows Year Operating Leases Six months ended December 31, 2019 $ 289 2020 303 2021 227 2022 190 2023 71 Thereafter 7 Total lease payments 1,087 Less: Interest (74 ) Present value of lease liabilities $ 1,013 The weighted-average remaining lease term for our operating leases was 2.9 years as of June 30, 2019. The weighted average discount rate of our operating leases was 5.33% as of June 30, 2019. Cash paid for amounts included in the measurement of lease liabilities was $292 for the six months ended June 30, 2019. Cash paid for amounts included in the measurement of lease liabilities was $145 for the three months ended June 30, 2019. |
9. Commitments And Contingencie
9. Commitments And Contingencies | 6 Months Ended |
Jun. 30, 2019 | |
Commitments and Contingencies Disclosure [Abstract] | |
Commitments And Contingencies | Note 9 – Commitments and contingencies 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. |
10. Income taxes
10. Income taxes | 6 Months Ended |
Jun. 30, 2019 | |
Income Tax Disclosure [Abstract] | |
Income taxes | Note 10 – 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. The effective tax rate for the six months ended June 30, 2019 was (7.2%) compared to 34.8% for the six months ended June 30, 2018. The effective tax rate for the three months ended June 30, 2019 was 9.9% compared to 34.6% for the three months ended June 30, 2018. Our effective tax rate may change from period to period based on recurring and non-recurring factors including the relative mix of pre-tax earnings (or losses), the underlying income tax rates applicable to various state and local taxing jurisdictions, settlement of tax audits, the impact of non-deductible items, changes in valuation allowances, and the expiration of the statute of limitations in relation to unrecognized tax benefits. We record discrete income tax items such as enacted tax rate changes and completed tax audits in the period in which they occur. |
11. Stock-based and Other Compe
11. Stock-based and Other Compensation | 6 Months Ended |
Jun. 30, 2019 | |
Share-based Payment Arrangement [Abstract] | |
Stock-based and Other Compensation | Note 11 – Stock-based and Other Compensation In December 2015, Lifeway stockholders 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 to qualifying employees. Under the Plan, the Board or its Audit and Corporate Governance Committee approves stock awards to executive officers and certain senior executives, generally in the form of restricted stock or performance shares. The number of performance shares that participants may earn depends on the extent to which the corresponding performance goals have been achieved. Stock awards generally vest over a three-year performance or service period. At June 30, 2019, 3.381 million shares remain available under the Omnibus Incentive Plan. While we plan to continue to issue awards pursuant to the Plan at least annually, we 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. Stock Options The following table summarizes stock option activity during the six months ended June 30, 2019: Options Weighted average exercise price Weighted average remaining contractual life Aggregate intrinsic value Outstanding at December 31, 2018 41 $ 10.42 7.22 – Granted – $ – Exercised – $ – Forfeited – $ – Outstanding at June 30, 2019 41 $ 10.42 6.72 $ – Exercisable at June 30, 2019 39 $ 10.46 6.72 $ – For the six months ended June 30, 2019 and 2018 total pre-tax stock-based compensation expense recognized in the consolidated statements of operations was $1 and $7, respectively. For the six months ended June 30, 2019 and 2018 tax-related benefits of $0 and $2 were also recognized. For the three months ended June 30, 2019 and 2018 total pre-tax stock-based compensation expense recognized in the consolidated statements of operations was $0 and $3, respectively. For the three months ended June 30, 2019 and 2018 tax-related benefits of $0 were also recognized. As of June 30, 2019, there is no remaining unearned compensation expense related to non-vested stock options. Restricted Stock Awards A Restricted Stock Award (“RSA”) represents the right to receive one share of common stock in the future. RSAs have no exercise price. The grant date fair value of the awards is equal to our closing stock price on the grant date. The following table summarizes RSA activity during the six months ended June 30, 2019. RSA’s Outstanding at December 31, 2018 25 Granted 7 Shares issued upon vesting – Forfeited – Outstanding at June 30, 2019 32 Weighted average grant date fair value per share outstanding $ 4.19 We expense RSA’s over the service period. For the six months ended June 30, 2019 and 2018 total pre-tax stock-based compensation expense recognized in the consolidated statements of operations was $52 and $4, respectively. For the six months ended June 30, 2019 and 2018 tax-related benefits of $14 and $1, respectively, were also recognized. For the three months ended June 30, 2019 and 2018 total pre-tax stock-based compensation expense recognized in the consolidated statements of operations was $27 and $3, respectively. For the three months ended June 30, 2019 and 2018 tax-related benefits of $7 and $1, respectively, were also recognized. As of June, 2019, the total remaining unearned compensation related to non-vested RSA’s was $164, which is expected to be amortized over the weighted-average remaining service period of 1.40 years. Long-Term Incentive Plan Compensation Lifeway established long-term incentive-based compensation programs for fiscal year 2017 (the “2017 Plan”), fiscal year 2018 (the “2018 Plan”), and for fiscal year 2019 (the “2019 Plan”) for certain senior executives and key employees (the “participants”). Under both the 2017 Plan and the 2018 Plan, long-term incentive compensation is based on Lifeway’s achievement of certain sales and adjusted EBITDA performance levels versus respective targets established by the Board for each fiscal year. Under the 2019 Plan, long-term equity incentive compensation is based on Lifeway’s achievement of four strategic milestones over a three-year period from Fiscal 2019 through Fiscal 2021. 2017 Plan 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 participants 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, 2019 and 2018, $180 and $412 was expensed under the 2017 Plan as stock-based compensation expense in the consolidated statements of operations, respectively. For the three months ended June 30, 2019 and 2018, $53 and $126 was expensed under the 2017 Plan as stock-based compensation expense in the consolidated statements of operations, respectively. As of June 30, 2019, the total remaining unearned compensation related to the 2017 Plan was $156, of which $107 and $49 is expected to be recognized in 2019 and 2020, respectively, subject to vesting. 2018 Plan Under the 2018 Plan, collectively the participants had 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 participants performance compared to their individual objectives. The equity portion of the incentive compensation was 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. Due to the final fiscal 2018 financial results, there were no equity-based incentives awarded under the 2018 Plan. 2019 Plan During Q1 2019, we awarded a special retention grant (the “2019 Retention Award”) of restricted stock to senior executives and key employees (the “participants”). The equity-based incentive compensation is payable in restricted stock that vests one-third in March 2019, one-third in March 2020 and 2021. For the six months ended June 30, 2019, $211 was expensed under the 2019 Retention Award as stock-based compensation expense in the consolidated statements of operations. For the three months ended June 30, 2019, $54 was expensed under the 2019 Retention Award as stock-based compensation expense in the consolidated statements of operations. 2019 Retention Award During Q1 2019, we awarded a special retention grant (the “2019 Retention Award”) of restricted stock to senior executives and key employees (the “participants”). The equity-based incentive compensation is payable in restricted stock that vests one-third in March 2019, one-third in March 2020 and 2021. For the six months ended June 30, 2019, $211 was expensed under the 2019 Retention Award as stock-based compensation expense in the consolidated statements of operations. For the three months ended June 30, 2019, $54 was expensed under the 2019 Retention Award 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, 2019 and 2018 total contribution expense recognized in the consolidated statements of operations was $181 and $229, respectively. For the three months ended June 30, 2019 and 2018 total contribution expense recognized in the consolidated statements of operations was $85 and $97, respectively. |
12. Segments, Products and Cust
12. Segments, Products and Customers | 6 Months Ended |
Jun. 30, 2019 | |
Segment Reporting [Abstract] | |
Segments, Products and Customers | Note 12 – Segments, Products and Customers Lifeway’s primary product is drinkable kefir, a cultured dairy product. Lifeway Kefir is tart and tangy, 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 approximately 20 varieties of our kefir products including more than 60 flavors. In addition to our core drinkable kefir products, we offer several lines of products developed through our innovation and development efforts. These include 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. We also offer Skyr, a strained cupped Icelandic yogurt; Plantiful, a plant-based probiotic beverage made from organic and non-GMO pea protein with 10 vegan kefir cultures; a line of probiotic supplements for adults and children; and a soft serve kefir mix. 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. · European-style soft cheeses, including farmer cheese in resealable cups. · Cream and other, which consists primarily of cream, a byproduct of making our kefir. · ProBugs, a line of kefir products in drinkable and frozen formats, designed for children. · Other Dairy, which includes 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: 2019 2018 $ % $ % Drinkable Kefir other than ProBugs $ 36,613 77% $ 42,378 76% Cheese 5,557 11% 5,787 10% Cream and other 2,446 5% 2,698 5% ProBugs Kefir 1,460 3% 1,695 3% Other dairy 902 2% 2,455 4% Frozen Kefir (a) 790 2% 825 2% Net Sales $ 47,768 100% $ 55,838 100% (a) Includes Lifeway Kefir Shop sales Net sales of products by category were as follows for the three months ended June 30: 2019 2018 $ % $ % Drinkable Kefir other than ProBugs $ 17,727 76% $ 20,715 76% Cheese 2,706 12% 2,853 11% Cream and other 1,145 5% 1,206 4% ProBugs Kefir 697 3% 743 3% Other dairy 423 2% 1,118 4% Frozen Kefir (a) 455 2% 461 2% Net Sales $ 23,153 100% $ 27,096 100% (a) Includes Lifeway Kefir Shop sales Significant Customers |
13. Related party transactions
13. Related party transactions | 6 Months Ended |
Jun. 30, 2019 | |
Related Party Transactions [Abstract] | |
Related party transactions | Note 13 – 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, 2019 and 2018. 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, 2019 and 2018. 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 $298 and $300 during each of the six months ended June 30, 2019 and 2018, respectively. Royalties earned by the Chairperson are included in selling expenses in the accompanying consolidated statements of operations and were $148 and $150 during each of the three months ended June 30, 2019 and 2018, respectively. |
2. Summary Of Significant Accou
2. Summary Of Significant Accounting Policies (Policies) | 6 Months Ended |
Jun. 30, 2019 | |
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 12, Segments, Products and Customers). We also sell bulk cream, a byproduct of our fluid milk manufacturing process. In accordance with Accounting Standards Codification (“ASC”) 606, Revenue from Contracts with Customers, 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 adopted this standard at the beginning of fiscal year 2018, with no significant impact to our financial position or results of operations, using the modified retrospective method. The amount of revenue recognized reflects the consideration to which we expect to be entitled to receive in exchange for these goods or services, using the five-step method required by ASC 606. For the Company, the contract is the approved sales order, which may also be supplemented by other agreements that formalize various terms and conditions with customers. We apply judgment in determining the customer’s ability and intention to pay, which is based on a variety of factors including the customer’s historical payment experience or, in the case of a new customer, published credit and financial information pertaining to the customer. Performance obligations promised in a contract are identified based on the goods or services that will be transferred to the customer, which is the delivery of food products which provide immediate benefit to the customer. 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. Variable consideration, which typically includes volume-based rebates, known or expected pricing or revenue adjustments, such as trade discounts, allowances for non-saleable products, product returns, trade incentives and coupon redemption, is estimated utilizing the most likely amount method. 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. 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. |
Advertising and promotional costs | Advertising and promotional costs Lifeway expenses advertising costs as incurred. For the six months ended June 30, 2019 and 2018 total advertising expenses were $1,854 and $2,585 respectively. For the three months ended June 30, 2019 and 2018 total advertising expenses were $766 and $1,196 respectively. |
Recently Adopted Accounting Pronouncements | Recently Adopted Accounting Pronouncements In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842), which affects any entity that enters into a lease (as that term is defined in ASU 2016-02), with some specified scope exceptions. Under ASU 2016-02, companies can adopt the amended guidance using a modified retrospective transition approach, using an application date of either the beginning of the earliest comparative period presented or the beginning of the reporting period in which the companies first apply the new standard. We adopted this standard on January 1, 2019 using the application date of January 1, 2019, and elected certain practical expedients allowed under the standard. In July 2018, the FASB issued ASU No. 2018-11, Leases (842), Targeted Improvements, which provides an additional transition election to not restate comparative periods for the effects of applying the new standard. The guidance requires lessees to recognize right-of-use 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. Lifeway elected certain of the practical expedients that are permitted under the transition guidance within ASU 2016-02 and related standards. Among other things, this practical expedient allowed us to carryforward the historical lease classification, and not reassess initial direct costs for any existing leases as of January 1, 2019 or reassess whether any expired or existing contracts are or contain leases. In addition, we elected to adopt the hindsight practical expedient to determine the reasonably certain lease term for existing leases. We made an accounting policy election to continue recording leases with an initial term of 12 months or less consistent with our prior financial reporting and elect the practical expedient to combine lease and non-lease components. We have revised our relevant policies and procedures, as applicable, to meet the new accounting, reporting and disclosure requirements of Topic 842 and have updated internal controls accordingly. The main difference between the guidance in ASU 2016-02 and prior GAAP is the recognition of right-of-use assets and lease liabilities by lessees for those leases classified as operating leases under current GAAP. Recognition of the right-of-use assets and liabilities had a material impact to our consolidated balance sheets upon adoption. However, since all our leases are operating leases under ASC 840 and we will carryforward the historical lease classification, the new standard did not have a material impact on our Consolidated Statements of Operations, Consolidated Statements of Stockholders’ Equity, or Consolidated Statements of Cash Flows. The adoption resulted in an increase of the right-of-use assets of approximately $944 and lease liabilities of $997, and an adjustment to beginning retained earnings of $53 as of January 1, 2019. |
Recently Issued Accounting Pronouncements | Recently Issued Accounting Pronouncements We do not anticipate a material impact upon adoption from any accounting standards issued but not yet adopted. |
3. Inventories (Tables)
3. Inventories (Tables) | 6 Months Ended |
Jun. 30, 2019 | |
Inventory Disclosure [Abstract] | |
Schedule Of Inventories | June 30, December 31, Ingredients $ 1,915 $ 1,580 Packaging 2,240 2,072 Finished goods 2,688 2,165 Total inventories $ 6,843 $ 5,817 |
4. Property, Plant and Equipm_2
4. Property, Plant and Equipment, net (Tables) | 6 Months Ended |
Jun. 30, 2019 | |
Property, Plant and Equipment [Abstract] | |
Schedule of property, plant and equipment | June 30, December 31, Land $ 1,747 $ 1,747 Buildings and improvements 17,566 17,520 Machinery and equipment 29,830 29,692 Vehicles 806 937 Office equipment 850 838 Construction in process 583 546 51,382 51,280 Less accumulated depreciation (28,017 ) (26,707 ) Total property, plant and equipment, net $ 23,365 $ 24,573 |
5. Goodwill and Intangible As_2
5. Goodwill and Intangible Assets (Tables) | 6 Months Ended |
Jun. 30, 2019 | |
Goodwill and Intangible Assets Disclosure [Abstract] | |
Goodwill & indefinite-lived intangible assets | June 30, December 31, Gross goodwill $ 10,368 $ 10,368 Accumulated impairment losses (1,244 ) (1,244 ) Goodwill 9,124 9,124 Brand names 3,700 3,700 Goodwill and indefinite-lived intangible assets $ 12,824 $ 12,824 |
Schedule of other intangible assets | June 30, December 31, 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 (8,013 ) (7,900 ) Other intangible assets, net $ 231 $ 344 |
6. Accrued Expenses (Tables)
6. Accrued Expenses (Tables) | 6 Months Ended |
Jun. 30, 2019 | |
Payables and Accruals [Abstract] | |
Schedule Of Accrued Expenses | June 30, December 31, 2018 Payroll and incentive compensation $ 2,830 $ 1,937 Operating leases 429 – Real estate taxes 365 398 Other 517 442 Total accrued expenses $ 4,141 $ 2,777 |
8. Leases (Tables)
8. Leases (Tables) | 6 Months Ended |
Jun. 30, 2019 | |
Leases [Abstract] | |
Future maturities of lease liabilities | Year Operating Leases Six months ended December 31, 2019 $ 289 2020 303 2021 227 2022 190 2023 71 Thereafter 7 Total lease payments 1,087 Less: Interest (74 ) Present value of lease liabilities $ 1,013 |
11. Stock-based and Other Com_2
11. Stock-based and Other Compensation (Tables) | 6 Months Ended |
Jun. 30, 2019 | |
Share-based Payment Arrangement [Abstract] | |
Stock option activity | Options Weighted average exercise price Weighted average remaining contractual life Aggregate intrinsic value Outstanding at December 31, 2018 41 $ 10.42 7.22 – Granted – $ – Exercised – $ – Forfeited – $ – Outstanding at June 30, 2019 41 $ 10.42 6.72 $ – Exercisable at June 30, 2019 39 $ 10.46 6.72 $ – |
RSA activity | RSA’s Outstanding at December 31, 2018 25 Granted 7 Shares issued upon vesting – Forfeited – Outstanding at June 30, 2019 32 Weighted average grant date fair value per share outstanding $ 4.19 |
12. Segments, Products and Cu_2
12. Segments, Products and Customers (Tables) | 6 Months Ended |
Jun. 30, 2019 | |
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: 2019 2018 $ % $ % Drinkable Kefir other than ProBugs $ 36,613 77% $ 42,378 76% Cheese 5,557 11% 5,787 10% Cream and other 2,446 5% 2,698 5% ProBugs Kefir 1,460 3% 1,695 3% Other dairy 902 2% 2,455 4% Frozen Kefir (a) 790 2% 825 2% Net Sales $ 47,768 100% $ 55,838 100% (a) Includes Lifeway Kefir Shop sales Net sales of products by category were as follows for the three months ended June 30: 2019 2018 $ % $ % Drinkable Kefir other than ProBugs $ 17,727 76% $ 20,715 76% Cheese 2,706 12% 2,853 11% Cream and other 1,145 5% 1,206 4% ProBugs Kefir 697 3% 743 3% Other dairy 423 2% 1,118 4% Frozen Kefir (a) 455 2% 461 2% Net Sales $ 23,153 100% $ 27,096 100% (a) Includes Lifeway Kefir Shop sales |
2. Summary Of Significant Acc_2
2. Summary Of Significant Accounting Policies (Details Narrative) - USD ($) $ in Thousands | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2019 | Jun. 30, 2018 | Jun. 30, 2019 | Jun. 30, 2018 | |
Accounting Policies [Abstract] | ||||
Advertising expenses | $ 766 | $ 1,196 | $ 1,854 | $ 2,585 |
Increase in right-of-use asset | 944 | |||
Increase in lease liability | $ 997 |
3. Inventories (Details)
3. Inventories (Details) - USD ($) $ in Thousands | Jun. 30, 2019 | Dec. 31, 2018 |
Inventory Disclosure [Abstract] | ||
Ingredients | $ 1,915 | $ 1,580 |
Packaging | 2,240 | 2,072 |
Finished goods | 2,688 | 2,165 |
Total inventories | $ 6,843 | $ 5,817 |
4. Property And Equipment (Deta
4. Property And Equipment (Details) - USD ($) $ in Thousands | Jun. 30, 2019 | Dec. 31, 2018 |
Property, plant and equipment, gross | $ 51,382 | $ 51,280 |
Less accumulated depreciation | (28,017) | (26,707) |
Property, plant and equipment, net | 23,365 | 24,573 |
Land [Member] | ||
Property, plant and equipment, gross | 1,747 | 1,747 |
Buildings And improvements [Member] | ||
Property, plant and equipment, gross | 17,566 | 17,520 |
Machinery And Equipment [Member] | ||
Property, plant and equipment, gross | 29,830 | 29,692 |
Vehicles [Member] | ||
Property, plant and equipment, gross | 806 | 937 |
Office Equipment [Member] | ||
Property, plant and equipment, gross | 850 | 838 |
Construction In Progress [Member] | ||
Property, plant and equipment, gross | $ 583 | $ 546 |
5. Goodwill and Intangible As_3
5. Goodwill and Intangible Assets (Details - Indefinite assets) - USD ($) $ in Thousands | Jun. 30, 2019 | Dec. 31, 2018 |
Goodwill and Intangible Assets Disclosure [Abstract] | ||
Gross goodwill | $ 10,368 | $ 10,368 |
Accumulated impairment loss | (1,244) | (1,244) |
Goodwill | 9,124 | 9,124 |
Brand names | 3,700 | 3,700 |
Goodwill & indefinite lived intangible assets | $ 12,824 | $ 12,824 |
5. Goodwill and Intangible As_4
5. Goodwill and Intangible Assets (Details - Finite lived) - USD ($) $ in Thousands | Jun. 30, 2019 | Dec. 31, 2018 |
Intangible assets, gross | $ 8,244 | $ 8,244 |
Accumulated Amortization | (8,013) | (7,900) |
Intangible assets, net | 231 | 344 |
Recipes [Member] | ||
Intangible assets, gross | 44 | 44 |
Customer lists and other customer related intangibles [Member] | ||
Intangible assets, gross | 4,529 | 4,529 |
Customer relationship [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, 2019 | Dec. 31, 2018 |
Payables and Accruals [Abstract] | ||
Payroll and incentive compensation | $ 2,830 | $ 1,937 |
Operating leases | 429 | 0 |
Real estate taxes | 365 | 398 |
Other | 517 | 442 |
Total accrued expenses | $ 4,141 | $ 2,777 |
7. Debt (Details Narrative)
7. Debt (Details Narrative) - USD ($) $ in Thousands | 6 Months Ended | |
Jun. 30, 2019 | Dec. 31, 2018 | |
Line of credit balance | $ 4,677 | $ 5,995 |
Revolving Credit Facility [Member] | ||
Credit facility expiration date | May 7, 2021 | |
Line of credit balance | $ 4,677 | |
Unamortized deferred financing costs | 43 | |
Line of credit remaining borrowing capacity | $ 4,280 | |
Credit line effective interest rate | 5.04% |
8. Leases (Details)
8. Leases (Details) $ in Thousands | Jun. 30, 2019USD ($) |
Leases [Abstract] | |
Six months ended December 31, 2019 | $ 289 |
2020 | 303 |
2021 | 227 |
2022 | 190 |
2023 | 71 |
Thereafter | 7 |
Total Lease payments | 1,087 |
Less: Interest | (74) |
Present value of lease liabilities | $ 1,013 |
8. Leases (Details Narrative)
8. Leases (Details Narrative) - USD ($) $ in Thousands | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2019 | Jun. 30, 2018 | Jun. 30, 2019 | Jun. 30, 2018 | |
Leases [Abstract] | ||||
Lease expense | $ 194 | $ 195 | $ 365 | $ 375 |
Weighted average remaining lease term | 2 years 10 months 25 days | 2 years 10 months 25 days | ||
Weighted average discount rate | 5.33% | 5.33% | ||
Operating lease cost | $ 145 | $ 292 |
10. Income taxes (Details Narra
10. Income taxes (Details Narrative) | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2019 | Jun. 30, 2018 | Jun. 30, 2019 | Jun. 30, 2018 | |
Income Tax Disclosure [Abstract] | ||||
Effective tax rate | 9.90% | 34.60% | 7.20% | 34.80% |
11. Stock-based and Other Com_3
11. Stock-based and Other Compensation (Details - Option Activity) - Options [Member] $ / shares in Units, shares in Thousands, $ in Thousands | 6 Months Ended |
Jun. 30, 2019USD ($)$ / sharesshares | |
Options outstanding, beginning balance | 41 |
Options granted | 0 |
Options exercised | 0 |
Options forfeited | 0 |
Options outstanding, ending balance | 41 |
Options exercisable | 39 |
Weighted average exercise price, options outstanding, beginning balance | $ / shares | $ 10.42 |
Weighted average exercise price, options outstanding, ending balance | $ / shares | 10.42 |
Weighted average exercise price, options exercisable | $ / shares | $ 10.46 |
Weighted average remaining contractural life, outstanding, beginning balance | 7 years 2 months 19 days |
Weighted average remaining contractural life, outstanding, ending balance | 6 years 11 months 19 days |
Weighted average remaining contractural life, exercisable | 6 years 11 months 16 days |
Aggregate intrinsic value, options outstanding | $ | $ 0 |
Aggregate intrinsic value, options exercisable | $ | $ 0 |
11. Stock-based Compensation (D
11. Stock-based Compensation (Details - RSA Activity) - Restricted Stock Awards [Member] shares in Thousands | 6 Months Ended |
Jun. 30, 2019$ / sharesshares | |
RSA's outstanding, beginning balance | 25 |
RSA's granted | 7 |
Shares issued upon vesting | 0 |
RSA's forfeited | 0 |
RSA's outstanding, ending balance | 32 |
Weighted average grant date fair value per share | $ / shares | $ 4.19 |
11. Stock-based and Other Com_4
11. Stock-based and Other Compensation (Details Narrative) - USD ($) shares in Thousands, $ in Thousands | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2019 | Jun. 30, 2018 | Jun. 30, 2019 | Jun. 30, 2018 | |
Contribution expense | $ 85 | $ 97 | $ 181 | $ 229 |
Options [Member] | ||||
Share-based compensation | 0 | 3 | 1 | 7 |
Tax benefits | 0 | 0 | 0 | 2 |
Unearned compensation related to non-vested stock options | 0 | 0 | ||
Restricted Stock Awards [Member] | ||||
Share-based compensation | 27 | 3 | 52 | 4 |
Tax benefits | 7 | 1 | 14 | 1 |
Unearned compensation related to non-vested stock options | 164 | $ 164 | ||
Weighted average period for unrecognized compensation | 1 year 4 months 24 days | |||
2019 Retention Award [Member] | ||||
Share-based compensation | $ 54 | $ 211 | ||
2015 Omnibus Incentive Plan [Member] | ||||
Stock authorized for issuance | 3,500 | 3,500 | ||
Shares available for issuance | 3,381 | 3,381 | ||
2017 Plan [Member] | ||||
Share-based compensation | $ 53 | 126 | $ 180 | 412 |
Unearned compensation related to non-vested stock options | 156 | 156 | ||
Unearned compensation expense expected to be recognized 2019 | 107 | 107 | ||
Unearned compensation expense expected to be recognized 2020 | 49 | 49 | ||
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 | $ 2 | $ 70 | ||
2019 Plan [Member] | ||||
Share-based compensation | $ 33 | $ 68 |
12. Segments, Products and Cu_3
12. Segments, Products and Customers (Details) - USD ($) $ in Thousands | 3 Months Ended | 6 Months Ended | ||||
Jun. 30, 2019 | Jun. 30, 2018 | Jun. 30, 2019 | Jun. 30, 2018 | |||
Total sales | $ 23,153 | $ 27,096 | $ 47,768 | $ 55,838 | ||
Percentage of sales | 100.00% | 100.00% | 100.00% | 100.00% | ||
Drinkable Kefir other than ProBugs[Member] | ||||||
Total sales | $ 17,727 | $ 20,714 | $ 36,613 | $ 42,378 | ||
Percentage of sales | 76.00% | 76.00% | 77.00% | 76.00% | ||
Cheese [Member] | ||||||
Total sales | $ 2,706 | $ 2,853 | $ 5,557 | $ 5,787 | ||
Percentage of sales | 12.00% | 11.00% | 11.00% | 10.00% | ||
Cream and other [Member] | ||||||
Total sales | $ 1,145 | $ 1,206 | $ 2,446 | $ 2,698 | ||
Percentage of sales | 5.00% | 4.00% | 5.00% | 5.00% | ||
ProBugs Kefir [Member] | ||||||
Total sales | $ 697 | $ 743 | $ 1,460 | $ 1,695 | ||
Percentage of sales | 3.00% | 3.00% | 3.00% | 3.00% | ||
Other Dairy [Member] | ||||||
Total sales | $ 423 | $ 1,118 | $ 902 | $ 2,455 | ||
Percentage of sales | 2.00% | 4.00% | 2.00% | 4.00% | ||
Frozen Kefir [Member] | ||||||
Total sales | $ 455 | $ 461 | $ 790 | [1] | $ 825 | [1] |
Percentage of sales | 2.00% | 2.00% | 2.00% | [1] | 2.00% | [1] |
[1] | Includes Lifeway Kefir Shop sales |
12. Segments, Products and Cu_4
12. Segments, Products and Customers (Details Narrative) | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2019 | Jun. 30, 2018 | Jun. 30, 2019 | Jun. 30, 2018 | |
Sales Revenue, Net [Member] | Two Customers [Member] | ||||
Concentration percentage | 22.00% | 23.00% | 22.00% | 22.00% |
13. Related party transactions
13. Related party transactions (Details Narrative) - USD ($) $ in Thousands | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2019 | Jun. 30, 2018 | Jun. 30, 2019 | Jun. 30, 2018 | |
General and administrative expenses | $ 2,898 | $ 2,996 | $ 6,390 | $ 6,701 |
Selling expenses | 2,691 | 3,383 | 5,830 | 7,401 |
Consulting Fees [Member] | ||||
General and administrative expenses | 250 | 250 | 500 | 500 |
Royalty Expense [Member] | ||||
Selling expenses | $ 148 | $ 150 | $ 298 | $ 300 |