Lifeway Foods(LWAY) - 2022 Q2 - Quarterly Report

PART I – FINANCIAL INFORMATION This section presents Lifeway Foods, Inc.'s unaudited consolidated financial statements, management's analysis, market risk, and controls ITEM 1. FINANCIAL STATEMENTS. This section presents Lifeway Foods, Inc.'s unaudited consolidated financial statements and comprehensive notes Consolidated Balance Sheets This section presents the company's financial position, detailing assets, liabilities, and equity at specific dates | Metric | June 30, 2022 (Unaudited, in thousands) | December 31, 2021 (in thousands) | | :-------------------------------- | :------------------------------------- | :------------------------------- | | Cash and cash equivalents | $6,494 | $9,233 | | Total current assets | $27,168 | $29,046 | | Total assets | $69,154 | $70,874 | | Total current liabilities | $11,025 | $12,063 | | Total liabilities | $20,062 | $21,743 | | Total stockholders' equity | $49,092 | $49,131 | - Total assets decreased from $70,874 thousand at December 31, 2021, to $69,154 thousand at June 30, 2022, while total liabilities also decreased from $21,743 thousand to $20,062 thousand over the same period[11] Consolidated Statements of Operations This section details the company's financial performance over specific periods, including net sales, gross profit, and net income Three Months Ended June 30 | Metric | 2022 (in thousands) | 2021 (in thousands) | Change ($) | Change (%) | | :-------------------------- | :------------------ | :------------------ | :--------- | :--------- | | Net sales | $33,491 | $29,162 | $4,329 | 14.8% | | Gross profit | $5,697 | $7,677 | $(1,980) | -25.8% | | Income from operations | $241 | $2,494 | $(2,253) | -90.3% | | Net income | $120 | $1,618 | $(1,498) | -92.6% | | Basic EPS | $0.01 | $0.10 | $(0.09) | -90.0% | | Diluted EPS | $0.01 | $0.10 | $(0.09) | -90.0% | Six Months Ended June 30 | Metric | 2022 (in thousands) | 2021 (in thousands) | Change ($) | Change (%) | | :-------------------------- | :------------------ | :------------------ | :--------- | :--------- | | Net sales | $67,590 | $58,538 | $9,052 | 15.5% | | Gross profit | $11,277 | $15,726 | $(4,449) | -28.3% | | Income from operations | $(808) | $4,430 | $(5,238) | -118.2% | | Net (loss) income | $(775) | $2,924 | $(3,699) | -126.5% | | Basic EPS | $(0.05) | $0.19 | $(0.24) | -126.3% | | Diluted EPS | $(0.05) | $0.19 | $(0.24) | -126.3% | Consolidated Statements of Stockholders' Equity This section outlines changes in the company's equity components over time, reflecting net income, stock transactions, and other comprehensive income | Equity Component | Balance, January 1, 2022 (in thousands) | Balance, June 30, 2022 (in thousands) | | :----------------------- | :-------------------------------------- | :------------------------------------ | | Common Stock | $6,509 | $6,509 | | Treasury stock | $(13,436) | $(13,156) | | Paid-in capital | $2,552 | $3,008 | | Retained earnings | $53,506 | $52,731 | | Total Stockholders' Equity | $49,131 | $49,092 | - Total stockholders' equity slightly decreased from $49,131 thousand at January 1, 2022, to $49,092 thousand at June 30, 2022, primarily due to a net loss of $775 thousand for the six months ended June 30, 2022, partially offset by stock-based compensation[15] Consolidated Statements of Cash Flows This section summarizes the cash inflows and outflows from operating, investing, and financing activities over specific periods Six Months Ended June 30 | Cash Flow Activity | 2022 (in thousands) | 2021 (in thousands) | | :------------------------------------ | :------------------ | :------------------ | | Net cash (used in) provided by operating activities | $(529) | $3,647 | | Net cash used in investing activities | $(1,710) | $(1,161) | | Net cash used in financing activities | $(500) | $0 | | Net (decrease) increase in cash and cash equivalents | $(2,739) | $2,486 | | Cash and cash equivalents at end of period | $6,494 | $10,412 | - The company experienced a net decrease in cash and cash equivalents of $2,739 thousand for the six months ended June 30, 2022, compared to a net increase of $2,486 thousand in the prior year, driven by cash used in operating, investing, and financing activities[18] Notes to Consolidated Financial Statements This section provides detailed explanations and disclosures supporting the consolidated financial statements Note 1 – Basis of Presentation The unaudited consolidated financial statements are prepared in accordance with U.S. GAAP for interim financial information and include all necessary adjustments for fair presentation - The consolidated financial statements for the three and six months ended June 30, 2021, have been restated to correct errors in accounting for deferred income tax liabilities and goodwill from a 2009 acquisition[22] Note 2 – Summary of Significant Accounting Policies This note outlines key accounting policies, including the use of estimates for promotional allowances, goodwill and intangible asset valuation, stock-based compensation, and deferred income taxes - Lifeway operates as a single reportable segment, with substantially all revenues from cultured dairy products sold in the United States[27] - Management does not currently expect the adoption of recent ASUs (2021-08, 2020-04, 2016-13) to have a material impact on its consolidated financial statements[28][29][30] Advertising Expense | Period | 2022 (in thousands) | 2021 (in thousands) | | :-------------------------- | :------------------ | :------------------ | | Six months ended June 30 | $1,738 | $2,166 | | Three months ended June 30 | $533 | $773 | Note 3 – Inventories, net Inventories primarily consist of ingredients, packaging, and finished goods, showing a slight increase from December 31, 2021, to June 30, 2022 | Inventory Category | June 30, 2022 (in thousands) | December 31, 2021 (in thousands) | | :----------------- | :--------------------------- | :------------------------------- | | Ingredients | $2,220 | $2,279 | | Packaging | $2,707 | $2,723 | | Finished goods | $3,509 | $3,283 | | Total inventories | $8,436 | $8,285 | Note 4 – Property, Plant and Equipment, net Net property, plant, and equipment increased to $20,595 thousand at June 30, 2022, from $20,130 thousand at December 31, 2021, primarily due to an increase in construction in process | Asset Category | June 30, 2022 (in thousands) | December 31, 2021 (in thousands) | | :----------------------- | :--------------------------- | :------------------------------- | | Land | $1,565 | $1,565 | | Buildings and improvements | $18,079 | $17,920 | | Machinery and equipment | $32,620 | $32,073 |