Document And Entity Information
Document And Entity Information - USD ($) | 12 Months Ended | ||
Dec. 31, 2018 | Mar. 15, 2019 | Jun. 30, 2018 | |
Document And Entity Information | |||
Entity Registrant Name | Lifeway Foods, Inc. | ||
Entity Central Index Key | 0000814586 | ||
Document Type | 10-K | ||
Document Period End Date | Dec. 31, 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 | Non-accelerated Filer | ||
Entity Common Stock, Shares Outstanding | 15,762,801 | ||
Entity Public Float | $ 22,411,889 | ||
Document Fiscal Period Focus | FY | ||
Document Fiscal Year Focus | 2018 | ||
Entity Small Business | true | ||
Entity Emerging Growth | false | ||
Entity Ex Transition Period | false | ||
Entity Shell Company | false |
Consolidated Balance Sheets
Consolidated Balance Sheets - USD ($) $ in Thousands | Dec. 31, 2018 | Dec. 31, 2017 |
Current assets | ||
Cash and cash equivalents | $ 2,998 | $ 4,978 |
Accounts receivable, net of allowance for doubtful accounts and discounts and allowances of $1,220 and $2,010 at December 31, 2018 and 2017, respectively | 6,276 | 8,676 |
Inventories, net | 5,817 | 7,697 |
Prepaid expenses and other current assets | 1,077 | 983 |
Refundable income taxes | 2,748 | 2,347 |
Total current assets | 18,916 | 24,681 |
Property and equipment, net | 24,573 | 24,645 |
Intangible assets | ||
Goodwill & indefinite-lived intangibles | 12,824 | 14,068 |
Other intangible assets, net | 344 | 975 |
Total intangible assets | 13,168 | 15,043 |
Other Assets | 150 | 150 |
Total assets | 56,807 | 64,519 |
Current liabilities | ||
Current maturities of notes payable | 0 | 3,166 |
Accounts payable | 4,570 | 6,848 |
Accrued expenses | 2,777 | 2,984 |
Accrued income taxes | 106 | 203 |
Total current liabilities | 7,453 | 13,201 |
Line of Credit | 5,995 | 0 |
Notes payable | 0 | 3,113 |
Deferred income taxes, net | 390 | 840 |
Other long-term liabilities | 564 | 775 |
Total liabilities | 14,402 | 17,929 |
Stockholders' equity | ||
Preferred stock, no par value; 2,500 shares authorized; no shares issued or outstanding at 2018 and 2017 | 0 | 0 |
Common stock, no par value; 40,000 shares authorized; 17,274 shares issued; 15,814 and 16,008 shares outstanding at 2018 and 2017 | 6,509 | 6,509 |
Paid-in-capital | 2,303 | 2,244 |
Treasury stock, at cost | (12,970) | (11,812) |
Retained earnings | 46,563 | 49,649 |
Total stockholders' equity | 42,405 | 46,590 |
Total liabilities and stockholders' equity | $ 56,807 | $ 64,519 |
Consolidated Balance Sheets (Pa
Consolidated Balance Sheets (Parenthetical) - USD ($) shares in Thousands, $ in Thousands | Dec. 31, 2018 | Dec. 31, 2017 |
Current assets | ||
Allowance for doubtful accounts and discounts | $ 1,220 | $ 2,010 |
Stockholders' equity | ||
Preferred stock, no par value | ||
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 | ||
Common stock, shares authorized | 40,000 | 40,000 |
Common stock, shares outstanding | 15,814 | 16,008 |
Consolidated Statements of Oper
Consolidated Statements of Operations - USD ($) shares in Thousands, $ in Thousands | 12 Months Ended | |
Dec. 31, 2018 | Dec. 31, 2017 | |
Income Statement [Abstract] | ||
Net sales | $ 103,350 | $ 118,893 |
Cost of goods sold | 74,646 | 85,757 |
Depreciation expense | 2,846 | 2,440 |
Total cost of goods sold | 77,492 | 88,197 |
Gross profit | 25,858 | 30,696 |
Selling expenses | 13,477 | 16,595 |
General and administrative | 13,616 | 13,955 |
Goodwill impairment | 1,244 | 0 |
Amortization expense | 631 | 672 |
Total operating expenses | 28,968 | 31,222 |
Income (loss) from operations | (3,110) | (526) |
Other income (expense): | ||
Interest expense | (271) | (242) |
Gain (loss) on sale of property and equipment | 54 | (38) |
Other income | 16 | 2 |
Total other income (expense) | (201) | (278) |
Loss before provision for income taxes | (3,311) | (804) |
Benefit for income taxes | (225) | (458) |
Net loss | $ (3,086) | $ (346) |
Basic loss per common share | $ (0.19) | $ (0.02) |
Diluted loss per common share | $ (0.19) | $ (0.02) |
Weighted average number of shares outstanding - Basic | 15,872 | 16,105 |
Weighted average number of shares outstanding - Diluted | 16,319 | 16,105 |
Consolidated Statements of Stoc
Consolidated Statements of Stockholders' Equity - USD ($) shares in Thousands, $ in Thousands | Common Stock | In treasury | Additional Paid-In Capital | Retained Earnings / Accumulated Deficit | 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 |
Treasury stock purchased, Shares | (148) | ||||
Treasury stock purchased, Amount | $ (1,486) | (1,486) | |||
Issuance of common stock in connection with stock-based compensation, shares | 2 | ||||
Issuance of common stock in connection with stock-based compensation | $ 14 | (14) | |||
Share-based compensation | 60 | 60 | |||
Net loss | (346) | (346) | |||
Ending Balance, Shares at Dec. 31, 2017 | 17,274 | ||||
Ending Balance, Treasury stock shares at Dec. 31, 2017 | (1,266) | ||||
Ending Balance, Amount at Dec. 31, 2017 | $ 6,509 | $ (11,812) | 2,244 | 49,649 | 46,590 |
Treasury stock purchased, Shares | (218) | ||||
Treasury stock purchased, Amount | $ (1,379) | (1,379) | |||
Issuance of common stock in connection with stock-based compensation, shares | 24 | ||||
Issuance of common stock in connection with stock-based compensation | $ 221 | (89) | 132 | ||
Share-based compensation | 148 | 148 | |||
Net loss | (3,086) | (3,086) | |||
Ending Balance, Shares at Dec. 31, 2018 | 17,274 | ||||
Ending Balance, Treasury stock shares at Dec. 31, 2018 | (1,460) | ||||
Ending Balance, Amount at Dec. 31, 2018 | $ 6,509 | $ (12,970) | $ 2,303 | $ 46,563 | $ 42,405 |
Consolidated Statements of Cash
Consolidated Statements of Cash Flows - USD ($) $ in Thousands | 12 Months Ended | |
Dec. 31, 2018 | Dec. 31, 2017 | |
Cash flows from operating activities: | ||
Net loss | $ (3,086) | $ (346) |
Adjustments to reconcile net loss to operating cash flow: | ||
Depreciation and amortization | 3,477 | 3,112 |
Non-cash interest expense | 14 | 0 |
Bad debt expense | 21 | 480 |
Deferred revenue | (97) | 0 |
Reserve for inventory obsolescence | 558 | 374 |
Stock-based compensation | 802 | 596 |
Deferred income taxes | (451) | (352) |
(Gain) loss on sale of property and equipment | (54) | 38 |
Goodwill impairment | 1,244 | 0 |
(Increase) decrease in operating assets: | ||
Accounts receivable | 2,379 | 780 |
Inventories | 1,322 | (29) |
Refundable income taxes | (401) | (2,038) |
Prepaid expenses and other current assets | (78) | (197) |
Increase (decrease) in operating liabilities: | ||
Accounts payable | (2,278) | 1,130 |
Accrued expenses | (858) | 711 |
Accrued income taxes | (97) | (451) |
Net cash provided by operating activities | 2,417 | 3,808 |
Cash flows from investing activities: | ||
Purchases of investments | (500) | (25) |
Proceeds from sale of investments | 500 | 0 |
Purchases of property and equipment | (2,824) | (5,341) |
Proceeds from sale of property and equipment | 104 | 50 |
Net cash used in investing activities | (2,720) | (5,316) |
Cash flows from financing activities: | ||
Borrowings under revolving credit facility | 6,050 | 0 |
Payment of deferred financing costs | (69) | 0 |
Purchase of treasury stock | (1,379) | (1,486) |
Repayment of notes payable | (6,279) | (840) |
Net cash used in financing activities | (1,677) | (2,326) |
Net decrease in cash and cash equivalents | (1,980) | (3,834) |
Cash and cash equivalents at the beginning of the period | 4,978 | 8,812 |
Cash and cash equivalents at the end of the period | 2,998 | 4,978 |
Supplemental cash flow information: | ||
Cash paid for income taxes, net of refunds | 723 | 2,382 |
Cash paid for interest | $ 261 | $ 241 |
1. Basis of presentation
1. Basis of presentation | 12 Months Ended |
Dec. 31, 2018 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Basis of presentation | Note 1 – Basis of presentation The accompanying consolidated financial statements and accompanying notes have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”). Our consolidated financial statements include all of the assets, liabilities and results of operations of Lifeway’s wholly owned subsidiaries (collectively “Lifeway” or the “Company”). All inter-company balances and transactions have been eliminated in the consolidated financial statements. |
2. Summary Of Significant Accou
2. Summary Of Significant Accounting Policies | 12 Months Ended |
Dec. 31, 2018 | |
Accounting Policies [Abstract] | |
Summary Of Significant Accounting Policies | Note 2 – Summary of 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. 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. The Company adopted this standard at the beginning of fiscal year 2018, with no significant impact to its financial position or results of operations, using the modified retrospective method. The amount of revenue recognized reflects the consideration to which the Company expects 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. The Company applies 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 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. Accounts Receivable We provide credit terms to customer in-line with industry standards and maintain allowances for potential credit losses based on historical experience. Customer balances are written off after all collection efforts are exhausted. Estimated product returns, which have not been material, are deducted from sales at the time of revenue recognition. Cash and cash equivalents Lifeway considers cash and all highly liquid investments purchased with an original maturity of three months or less to be cash equivalents. Cash and cash equivalents are stated at cost, which approximates or equals fair value due to their short-term nature. Lifeway from time to time may have bank deposits in excess of insurance limits of the Federal Deposit Insurance Corporation. Lifeway has not experienced any losses in such accounts and believes it is not exposed to any significant credit risk related to its cash and cash equivalents. Fair Value Measurements Fair value is estimated by applying the following hierarchy, which prioritizes the inputs used to measure fair value into three levels and bases the categorization within the hierarchy upon the lowest level of input that is available and significant to the fair value measurement: Level 1 – Level 2 – Level 3. Lifeway’s financial assets and liabilities that are not carried at fair value on a recurring basis include cash and cash equivalents, accounts receivable, other receivables, accounts payable, accrued expenses and revolving line of credit for which carrying value approximates fair value. Inventories Inventories are stated at the lower of cost or net realizable value, valued on a first in, first out basis (“FIFO”). The costs of finished goods inventories include raw materials, direct labor, and overhead costs. Inventories are stated net of reserves for excess or obsolete inventory. Property, plant and equipment Property, plant and equipment are recorded at cost and depreciated using the straight-line method over the estimated useful lives of the related assets. When assets are retired or otherwise disposed of, the cost and related accumulated depreciation are removed from the accounts, and any resulting gain or loss is recognized in income for the period. The cost of maintenance and repairs that do not improve or extend the life of the assets are charged to expense as incurred; significant renewals and betterments are capitalized. Property, plant and equipment is being depreciated over the following useful lives: Category Years Buildings and improvements 31 and 39 Machinery and equipment 5 – 12 Office equipment 3 – 7 Vehicles 5 Leasehold improvements Shorter of expected useful life or lease term Goodwill and other intangible assets Goodwill represents the excess purchase price over the fair value of the net tangible and other identifiable intangible assets acquired. Goodwill and indefinite lived intangible assets are not amortized, but are reviewed for impairment at least annually. Intangible assets acquired in a business combination are recorded at their estimated fair values at the date of acquisition. Lifeway amortizes other intangible assets over their estimated useful lives, as disclosed in the table below. Category Years Recipes 4 Trade names 8-15 Formula 10 Customer lists 8-10 Customer relationships 8-12 Impairment Lifeway reviews intangible assets for impairment at least once per year to determine if any adverse conditions exist that would indicate the carrying value of these assets may not be recoverable. Lifeway conducts more frequent impairment assessments if certain conditions exist, such as a change in the competitive landscape, any internal decisions to pursue new or different strategies, a loss of a significant customer, or a significant change in the market place including changes in the prices paid for our products or changes in the size of the market for our products. If the estimated remaining useful life of an intangible asset is changed, the remaining carrying amount of the intangible asset is amortized prospectively over the revised remaining useful life. Long-lived assets, including property, plant, and equipment, and cost method investments, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable and prior to any goodwill impairment test. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to future net cash flows expected to be generated by the asset. If the carrying amount of an asset exceeds its estimated future cash flows, an impairment charge is recognized by the amount by which the carrying amount of the asset exceeds the fair value of the asset. There were no indicators of tangible asset impairment in 2018 or 2017. Income taxes Deferred income taxes are the result of temporary differences that arise from income and expense items reported for financial accounting and tax purposes in different periods. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the year in which the deferred tax assets or liabilities are expected to be realized or settled. Deferred tax assets and liabilities are classified on a net basis as non-current. The principal sources of temporary differences are different depreciation and amortization methods for financial statement and tax purposes, capitalization of indirect costs for tax purposes, purchase price adjustments, incentive compensation, reserves for excess and obsolete inventory, the allowance for doubtful accounts, and the newly enacted interest expense limitations. Lifeway has analyzed filing positions in all the federal and state jurisdictions where it is required to file income tax returns, as well as all open tax years in these jurisdictions. We recognize the income tax benefit from an uncertain tax position when it is more likely than not that, based on technical merits, the position will be sustained upon examination, including resolutions of any related appeals or litigation processes. We apply a more likely than not threshold to the recognition and derecognition of uncertain tax positions. Accordingly, we recognize the amount of tax benefit that has a greater than 50% likelihood of being ultimately realized upon settlement. Future changes in judgment related to the expected ultimate resolution of uncertain tax positions will affect earnings in the quarter of such change. For those income tax positions where it is not more likely than not that a tax benefit will be sustained, no tax benefit has been recognized in the financial statements. The total amount of unrecognized tax benefits can change due to audit settlements, tax examination activities, statute expirations and the recognition and measurement criteria under accounting for uncertainty in income taxes. Lifeway recognizes penalties and interest related to unrecognized tax benefits in the provision (benefit) for income taxes in the consolidated statements of operations. Share-based compensation Share-based compensation expense is recognized for equity awards over the vesting period based on their grant date fair value. The fair value of restricted stock awards is equal to the closing price of our stock on the date of grant. Treasury stock Treasury stock is recorded using the cost method. Advertising costs Lifeway expenses advertising costs as incurred. For the years ended December 31, 2018 and 2017 total advertising expenses were $4,518 and $7,402, respectively. Earnings (loss) per common share Basic earnings (loss) per common share is computed by dividing net income (loss) available to common stockholders by the weighted average number of common shares issued and outstanding during each period. Diluted earnings (loss) per common share is computed by dividing net income (loss) available to common stockholders by the weighted average number of common shares issued and outstanding and the effect of all dilutive common stock equivalents outstanding during each period. For the years ended December 31, 2018 and 2017, there were 0 common stock equivalents outstanding. 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 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 Company adopted the new standard on a prospective basis through our test for goodwill impairment in the fourth quarter of 2018. See note 5 for further discussion and the results of our test for goodwill impairment. 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 material impact on the consolidated financial statements. The Company has revised its relevant policies and procedures, as applicable, to meet the new accounting, reporting and disclosure requirements of Topic 606 and has updated internal controls accordingly. Refer to the Revenue Recognition section above and Note 11, Segment, Products, and Customers for additional information. Recently Issued 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 an 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 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. Lifeway will elect 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 allows 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 are electing to adopt the hindsight practical expedient to determine the reasonably certain lease term for existing leases. We will make 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. The Company has revised its relevant policies and procedures, as applicable, to meet the new accounting, reporting and disclosure requirements of Topic 842 and has updated internal controls accordingly. The main difference between the guidance in ASU 2016-02 and current GAAP is the recognition of lease assets and lease liabilities by lessees for those leases classified as operating leases under current GAAP. Recognition of the assets and liabilities will have a material impact to our consolidated balance sheets upon adoption. However, since all of our leases are operating leases under ASC 840 and we will carryforward the historical lease classification, the new standard will have no immediate, material impact on our Consolidated Statements of Operations, Consolidated Statements of Stockholders’ Equity, or Consolidated Statements of Cash Flows. We are in the process of finalizing our review of contracts and calculating the impact of the new standard on our balance sheet. We expect the adoption to result in increase of assets of approximately $745 and liabilities of $772 as of January 1, 2019. |
3. Inventories, net
3. Inventories, net | 12 Months Ended |
Dec. 31, 2018 | |
Inventory Disclosure [Abstract] | |
Inventories | Note 3 – Inventories, net Inventories consisted of the following: December 31, 2018 2017 Ingredients $ 1,580 $ 1,717 Packaging 2,072 2,453 Finished goods 2,165 3,527 Total inventories, net $ 5,817 $ 7,697 |
4. Property, Plant and Equipmen
4. Property, Plant and Equipment, net | 12 Months Ended |
Dec. 31, 2018 | |
Property, Plant and Equipment [Abstract] | |
Property, Plant and Equipment | Note 4 – Property, Plant and Equipment, net Property, plant and equipment consisted of the following: December 31, 2018 2017 Land $ 1,747 $ 1,747 Buildings and improvements 17,520 17,260 Machinery and equipment 29,692 27,539 Vehicles 937 901 Office equipment 838 734 Construction in process 546 1,683 51,280 49,864 Less accumulated depreciation (26,707 ) (25,219 ) Total property, plant and equipment, net $ 24,573 $ 24,645 |
5. Goodwill and Intangible Asse
5. Goodwill and Intangible Assets | 12 Months Ended |
Dec. 31, 2018 | |
Goodwill and Intangible Assets Disclosure [Abstract] | |
Goodwill and Intangible Assets | Note 5 – Goodwill and Intangible Assets Goodwill and indefinite-lived intangible assets consisted of the following: December 31, 2018 2017 Goodwill $ 9,124 $ 10,368 Brand names 3,700 3,700 Goodwill and indefinite lived intangible assets $ 12,824 $ 14,068 We conduct impairment tests of goodwill and indefinite-lived intangible assets annually as of the fourth quarter and on an interim basis when circumstances arise that indicate a possible impairment. In the fourth quarter of 2018, we early adopted ASU 2017-04, Intangibles — Goodwill and Other: Simplifying the Test for Goodwill Impairment, which simplifies the subsequent measurement of goodwill by removing the second step of the two-step impairment test. We completed our step one goodwill impairment analysis for our single reporting unit during the fourth quarter of 2018. Considerable management judgment is necessary to evaluate goodwill and indefinite-lived intangible assets for impairment. We estimate fair value using widely accepted valuation techniques including discounted cash flows and market multiples analysis with respect to our single reporting unit, and the relief-from-royalty method with respect to our indefinite-lived brand names. These valuation approaches are dependent upon a number of factors, including estimates of future growth and trends, royalty rates in the category of intellectual property, discount rates and other variables. Assumptions used in our valuations were consistent with our internal projections and operating plans, as well as other factors and assumptions, and significant management judgment. Additionally, under the market approach analysis, we used significant other observable inputs including various guideline company comparisons. We base our fair value estimates on assumptions we believe to be reasonable, but which are unpredictable and inherently uncertain. Changes in these estimates or assumptions could materially affect the determination of fair value and the conclusions of the step one analysis for our one reporting unit. Upon completion of the annual goodwill impairment analysis as of December 31, 2018, the Company recorded impairment losses of $1,244. The goodwill impairment loss is included in Goodwill impairment on the Consolidated Statements of Operations. As of December 31, 2018, the gross carrying value of goodwill was $10,368 and accumulated goodwill impairment was $1,244. The Company performed the annual impairment assessment on the indefinite-lived intangible asset as of December 31, 2018 resulting in no impairment losses. Finite-lived Intangible Assets Other intangible assets, net consisted of the following: December 31, 2018 2017 Recipes $ 44 $ 44 Customer lists and other customer related intangibles 4,529 4,529 Customer relationships 985 985 Trade names 2,248 2,248 Formula 438 438 8,244 8,244 Accumulated amortization (7,900 ) (7,269 ) Intangible assets, net $ 344 $ 975 The estimated annual intangible asset amortization expense related to amortizable intangible assets as of December 31, 2018 is as follows: 2019 $ 214 2020 130 Total $ 344 |
6. Accrued Expenses
6. Accrued Expenses | 12 Months Ended |
Dec. 31, 2018 | |
Payables and Accruals [Abstract] | |
Accrued Expenses | Note 6 – Accrued Expenses Accrued expenses consisted of the following: December 31, 2018 2017 Payroll and incentive compensation $ 1,937 $ 2,208 Real estate taxes 398 371 Other 442 405 Total accrued expenses $ 2,777 $ 2,984 |
7. Debt
7. Debt | 12 Months Ended |
Dec. 31, 2018 | |
Debt Disclosure [Abstract] | |
Debt | Note 7 – Debt Notes payable consisted of the following: December 31, 2018 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 December 31, 2018, we had $5,995, net of $55 of unamortized deferred financing costs, outstanding under the Revolving Credit Facility. We had approximately $3,950 available under the Borrowing Base for future borrowings as of December 31, 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 Revolving Credit Facility for the period May 7, 2018 through December 31, 2018 was 4.79%. The weighted-average interest rate on debt outstanding at December 31, 2018 was 4.98%. 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 December 31, 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 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. We were not in compliance with the minimum EBITDA and fixed charge coverage ratio covenants at December 31, 2018, but we have obtained a waiver of those covenants as of that date. The revolving credit facility was amended on April 10, 2019, effective March 31, 2019. See Note 14 for discussion of this subsequent event. |
8. Commitments And Contingencie
8. Commitments And Contingencies | 12 Months Ended |
Dec. 31, 2018 | |
Commitments and Contingencies Disclosure [Abstract] | |
Commitments And Contingencies | Note 8 – Commitments and contingencies Lease obligations Lifeway leases three retail stores for its Lifeway Kefir Shop subsidiary, certain machinery and equipment, and office space under operating leases. Total lease expense was $769 and $702 for the years ended December 31, 2018 and 2017, respectively. Future annual minimum base rental payments under non-cancelable leases with a lease term in excess of one year as of December 31, 2018 were as follows: Year Operating 2019 $ 473 2020 171 2021 95 2022 55 2023 4 Total minimum lease payments $ 798 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. |
9. Income taxes
9. Income taxes | 12 Months Ended |
Dec. 31, 2018 | |
Income Tax Disclosure [Abstract] | |
Income taxes | Note 9 – Income taxes On December 22, 2017, the Tax Cuts and Jobs Act (the “Act”) was signed into law. The Act significantly changed U.S. income tax law by, among other things, reducing the U.S. federal income tax rate from 35% to 21%, transitioning from a global tax system to a modified territorial tax system, eliminating the domestic manufacturing deduction, reduction in the dividend received deduction, and limiting the tax deductions for interest expense and certain executive compensation. The SEC issued Staff Accounting Bulletin No. 118 ("SAB 118") to address the application of US GAAP in situations where a registrant does not have the necessary information available, prepared, or analyzed (including computations) in reasonable detail to complete the accounting for certain income tax effects of the Tax Act. To the extent that a company’s accounting for the Tax Act is incomplete but it is able to provide a reasonable estimate, it must record a provisional amount in the financial statements. SAB 118 provides a measurement period that should not extend beyond one year from the Tax Act enactment date for companies to complete the accounting under ASC 740. For the year-ended December 31, 2017, the Company recorded an estimate of the provisions of the Act and recognized a $378 discrete net tax benefit in our 2017 financial statements arising from revaluing our net deferred tax liabilities to reflect the new tax rate. As of December 31, 2018, there have been no changes to the provisional estimate. The provision (benefit) for income taxes consists of the following: For the Years Ended December 31, 2018 2017 Current: Federal $ (13 ) $ (359 ) State and local 249 193 Total current 236 (166 ) Deferred (461 ) (292 ) Benefit for income taxes $ (225 ) $ (458 ) A reconciliation of the U.S. federal statutory rate to the effective tax rate used in the provision for income taxes is as follows: 2018 2017 Amount Percentage Amount Percentage Federal income tax computed at the statutory rate $ (695 ) 21.0% $ (274 ) 34.0% State and local tax, net (47 ) 1.4% 1 (0.1)% Goodwill impairment 324 (9.8)% – 0.0% U.S. domestic manufacturers’ deduction & other permanent differences 147 (4.4)% 111 (13.8)% Changes for tax positions of prior years – 0.0% 118 (14.6)% Change in tax rates (a) (37 ) 1.1% (378 ) 47.0% Change in tax estimate 83 (2.5)% (36 ) 4.5% Benefit for income taxes $ (225 ) 6.8% $ (458 ) 57.0% (a) Includes the estimated impact of the Act in 2017. The tax effects of temporary differences giving rise to deferred income tax assets and liabilities are as follows: December 31, 2018 2017 Deferred tax liabilities attributable to: Accumulated depreciation and amortization $ (2,062 ) $ (1,784 ) Total net deferred tax liabilities (2,062 ) (1,784 ) Deferred tax assets attributable to: Net operating losses 595 14 Capital loss carry-forward & investment impairment 115 122 Incentive compensation 448 255 Inventory 355 335 Allowances for doubtful accounts and discounts 109 161 Other 50 57 Total net deferred tax assets 1,673 944 Net deferred tax liabilities $ (390 ) $ (840 ) A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows: 2018 2017 Balance at January 1 $ 181 $ 63 Additions for tax positions of prior years – 118 Release for tax positions of prior years (118 ) – Balance at December 31 $ 63 $ 181 Lifeway is subject to U.S. federal income tax as well as income tax in multiple state and city jurisdictions. With limited exceptions, our calendar year 2015 and subsequent federal and state tax years remain open by statute. The amount of unrecognized tax benefits that, if recognized, would impact the annual effective tax rate was not significant as of December 31, 2018 and 2017. The amount of interest and penalties recognized in the consolidated statements of operations was $0 and $152 during 2018 and 2017, respectively. The amount of accrued interest and penalties recognized in the consolidated balance sheets was $19 and $171 at December 31, 2018 and 2017, respectively. |
10. Stock-based and Other Compe
10. Stock-based and Other Compensation | 12 Months Ended |
Dec. 31, 2018 | |
Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | |
Stock-based Compensation | Note 10 – 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 December 31, 2018, 3.467 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 Pursuant to the Omnibus Incentive Plan, Lifeway granted 26 stock options to certain key employees effective January 1, 2016 and 24 stock options on July 1, 2016 (the “2016 options”). The 2016 options generally vest over a three-year period, on a relatively accelerated basis. The accelerated vesting reflects the landmark nature of the awards and the relative tenure of individual participants. The following table summarizes stock option activity during the year ended December 31, 2018: Options Weighted Weighted Aggregate Outstanding at December 31, 2017 45 $ 10.45 – – Granted – $ – – Exercised – $ – – – Forfeited (4 ) $ 10.73 – – Outstanding at December 31, 2018 41 $ 10.42 7.22 $ – Exercisable at December 31, 2018 36 $ 10.42 7.23 $ – For the years ended December 31, 2018 and 2017 total pre-tax stock-based compensation expense recognized in the consolidated statements of operations was $9 and $41, respectively. For the years ended December 31, 2018 and 2017 tax-related benefits of $3 and $17 were also recognized. As of December 31, 2018, the total remaining unearned compensation related to non-vested stock options was $1, which is expected to be amortized over the weighted-average remaining service period of 0.50 years. We measure the fair value of stock options using the Black-Scholes option pricing model. The expected term of options granted was based on the weighted average time of vesting and the end of the contractual term. We utilized this simplified method as we do not have sufficient historical exercise data to provide a reasonable basis upon which to estimate the expected term. The following assumptions were used for the 2016 stock option grants: Risk free interest rate 1.00 - 1.11% Expected dividend yield 0.27% Expected volatility 38.96 - 39.94% Expected term (years) 5.03 - 5.88 Restricted Stock Awards Lifeway’s Board granted 20 Restricted Stock Awards (“RSAs”) to certain non-employee directors in June 2018 vesting over a three-year service period. We also approved awards of 16 RSA’s to employees during 2018. An RSA represents the right to receive one share of common stock in the future. RSAs have no exercise price. The following table summarizes RSA activity during the year ended December 31, 2018: RSA’s Outstanding at December 31, 2017 – Granted 36 Shares issued upon vesting (2 ) Forfeited (9 ) Outstanding at December 31, 2018 25 Weighted average grant date fair value per share outstanding $ 4.77 We expense RSA’s over the service period. For the years ended December 31, 2018 and 2017 total pre-tax stock-based compensation expense recognized in the consolidated statements of operations was $47 and $18, respectively. For the years ended December 31, 2018 and 2017 tax-related benefits of $13 and $7, respectively, were also recognized. As of December 31, 2018, the total remaining unearned compensation related to non-vested RSA’s was $81, which is expected to be amortized over the weighted-average remaining service period of 1.32 years. Long-Term Incentive Compensation Lifeway established a long-term 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, 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 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 year ended December 31, 2018, $636 was expensed under the 2017 Plan as stock-based compensation expense in the consolidated statements of operations. For the year ended December 31, 2017, incentive compensation earned by participants and expensed under the plan was $3,589 of which $1,610 will be settled through the issuance of stock, subject to vesting, and $1,979 will be settled in cash. For the year ended December 31, 2017, incentive compensation recognized in the consolidated statement of operations under the 2017 Plan was $2,516. As of December 31, 2018, the total remaining unearned compensation related to the 2017 Plan was $336, of which $287 and $49 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 year ended December 31, 2018, $76 was expensed under the 2018 Plan as cash bonus expense in the consolidated statements of operations. There were no equity-based incentive earnings under the 2018 plan during the year ended December 31, 2018. 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 years ended December 31, 2018 and 2017 total contribution expense recognized in the consolidated statements of operations was $417 and $376, respectively. |
11. Segments, Products and Cust
11. Segments, Products and Customers | 12 Months Ended |
Dec. 31, 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 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. As of December 31, 2018, Lifeway offered 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 years ended December 31: 2018 2017 In thousands $ % $ % Drinkable Kefir other than ProBugs $ 78,523 76% $ 90,514 76% Cheese 11,486 11% 11,516 10% Cream and other 5,276 5% 6,527 5% Cupped Kefir and Skyr 3,836 4% 4,138 4% ProBugs Kefir 2,795 3% 4,537 4% Frozen Kefir (a) 1,434 1% 1,661 1% Net Sales $ 103,350 100% $ 118,893 100% (a) Includes Lifeway Kefir Shop sales Significant Customers |
12. Share repurchase program
12. Share repurchase program | 12 Months Ended |
Dec. 31, 2018 | |
Equity [Abstract] | |
Share repurchase program | Note 12 – Share repurchase program On September 24, 2015, Lifeway’s Board of Directors authorized a stock repurchase program (the “2015 stock repurchase program”) under which we may, from time to time, repurchase shares of our common stock for an aggregate purchase price not to exceed the lesser of $3,500 or 250 shares. On November 1, 2017, the Board amended the 2015 stock repurchase program (the “2017 amendment”), by adding to (i.e., exclusive of the shares previously authorized under the 2015 stock repurchase program) the authorization the lesser of $5,185 or 625 shares. Under the amended authorization, share repurchases may be executed through various means, including without limitation in the open market or in privately negotiated transactions, in accordance with all applicable securities laws and regulations, including without limitation Rule 10b-18 of the Securities Exchange Act of 1934, as amended. The extent to which Lifeway repurchases its shares and the timing of such repurchases will depend upon a variety of factors, including market conditions, regulatory requirements and other corporate considerations. The repurchase program does not obligate us to purchase any shares, and the program may be terminated, suspended, increased, or decreased by our Board in its discretion at any time. Pursuant to the share repurchase program, during the year ended December 31, 2018, the Company repurchased 218 shares at a cost of $1,379 or approximately $6.33 per share. During the year ended December 31, 2017, the Company repurchased 148 shares at a cost of $1,486 or approximately $10.07 per share. Approximately $4,503 remained available under this program as of December 31, 2018. |
13. Related party transactions
13. Related party transactions | 12 Months Ended |
Dec. 31, 2018 | |
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 $1,000 during the years ended December 31, 2018 and 2017, respectively. Lifeway is also a party to a royalty agreement with the Chairperson 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 $587 and $600 during the years ended December 31, 2018 and 2017, respectively. |
14. Subsequent Events
14. Subsequent Events | 12 Months Ended |
Dec. 31, 2018 | |
Subsequent Events [Abstract] | |
Subsequent Events | Note 14 – Subsequent Events 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 1.0 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. The Company had outstanding borrowings of $4,720 at the time of the modification. |
2. Summary Of Significant Acc_2
2. Summary Of Significant Accounting Policies (Policies) | 12 Months Ended |
Dec. 31, 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. 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. The Company adopted this standard at the beginning of fiscal year 2018, with no significant impact to its financial position or results of operations, using the modified retrospective method. The amount of revenue recognized reflects the consideration to which the Company expects 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. The Company applies 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 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. |
Accounts Receivable | Accounts Receivable We provide credit terms to customer in-line with industry standards and maintain allowances for potential credit losses based on historical experience. Customer balances are written off after all collection efforts are exhausted. Estimated product returns, which have not been material, are deducted from sales at the time of revenue recognition. |
Cash And Cash Equivalents | Cash and cash equivalents Lifeway considers cash and all highly liquid investments purchased with an original maturity of three months or less to be cash equivalents. Cash and cash equivalents are stated at cost, which approximates or equals fair value due to their short-term nature. Lifeway from time to time may have bank deposits in excess of insurance limits of the Federal Deposit Insurance Corporation. Lifeway has not experienced any losses in such accounts and believes it is not exposed to any significant credit risk related to its cash and cash equivalents. |
Fair Value Measurements | Fair Value Measurements Fair value is estimated by applying the following hierarchy, which prioritizes the inputs used to measure fair value into three levels and bases the categorization within the hierarchy upon the lowest level of input that is available and significant to the fair value measurement: Level 1 – Level 2 – Level 3. Lifeway’s financial assets and liabilities that are not carried at fair value on a recurring basis include cash and cash equivalents, accounts receivable, other receivables, accounts payable, accrued expenses and revolving line of credit for which carrying value approximates fair value. |
Inventories | Inventories Inventories are stated at the lower of cost or net realizable value, valued on a first in, first out basis (“FIFO”). The costs of finished goods inventories include raw materials, direct labor, and overhead costs. Inventories are stated net of reserves for excess or obsolete inventory. |
Property, Plant and Equipment | Property, plant and equipment Property, plant and equipment are recorded at cost and depreciated using the straight-line method over the estimated useful lives of the related assets. When assets are retired or otherwise disposed of, the cost and related accumulated depreciation are removed from the accounts, and any resulting gain or loss is recognized in income for the period. The cost of maintenance and repairs that do not improve or extend the life of the assets are charged to expense as incurred; significant renewals and betterments are capitalized. Property, plant and equipment is being depreciated over the following useful lives: Category Years Buildings and improvements 31 and 39 Machinery and equipment 5 – 12 Office equipment 3 – 7 Vehicles 5 Leasehold improvements Shorter of expected useful life or lease term |
Goodwill and other intangible assets | Goodwill and other intangible assets Goodwill represents the excess purchase price over the fair value of the net tangible and other identifiable intangible assets acquired. Goodwill and indefinite lived intangible assets are not amortized, but are reviewed for impairment at least annually. Intangible assets acquired in a business combination are recorded at their estimated fair values at the date of acquisition. Lifeway amortizes other intangible assets over their estimated useful lives, as disclosed in the table below. Category Years Recipes 4 Trade names 8-15 Formula 10 Customer lists 8-10 Customer relationships 8-12 |
Impairment | Impairment Lifeway reviews intangible assets for impairment at least once per year to determine if any adverse conditions exist that would indicate the carrying value of these assets may not be recoverable. Lifeway conducts more frequent impairment assessments if certain conditions exist, such as a change in the competitive landscape, any internal decisions to pursue new or different strategies, a loss of a significant customer, or a significant change in the market place including changes in the prices paid for our products or changes in the size of the market for our products. If the estimated remaining useful life of an intangible asset is changed, the remaining carrying amount of the intangible asset is amortized prospectively over the revised remaining useful life. Long-lived assets, including property, plant, and equipment, and cost method investments, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable and prior to any goodwill impairment test. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to future net cash flows expected to be generated by the asset. If the carrying amount of an asset exceeds its estimated future cash flows, an impairment charge is recognized by the amount by which the carrying amount of the asset exceeds the fair value of the asset. There were no indicators of tangible asset impairment in 2018 or 2017. |
Income Taxes | Income taxes Deferred income taxes are the result of temporary differences that arise from income and expense items reported for financial accounting and tax purposes in different periods. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the year in which the deferred tax assets or liabilities are expected to be realized or settled. Deferred tax assets and liabilities are classified on a net basis as non-current. The principal sources of temporary differences are different depreciation and amortization methods for financial statement and tax purposes, capitalization of indirect costs for tax purposes, purchase price adjustments, incentive compensation, reserves for excess and obsolete inventory, the allowance for doubtful accounts, and the newly enacted interest expense limitations. Lifeway has analyzed filing positions in all the federal and state jurisdictions where it is required to file income tax returns, as well as all open tax years in these jurisdictions. We recognize the income tax benefit from an uncertain tax position when it is more likely than not that, based on technical merits, the position will be sustained upon examination, including resolutions of any related appeals or litigation processes. We apply a more likely than not threshold to the recognition and derecognition of uncertain tax positions. Accordingly, we recognize the amount of tax benefit that has a greater than 50% likelihood of being ultimately realized upon settlement. Future changes in judgment related to the expected ultimate resolution of uncertain tax positions will affect earnings in the quarter of such change. For those income tax positions where it is not more likely than not that a tax benefit will be sustained, no tax benefit has been recognized in the financial statements. The total amount of unrecognized tax benefits can change due to audit settlements, tax examination activities, statute expirations and the recognition and measurement criteria under accounting for uncertainty in income taxes. Lifeway recognizes penalties and interest related to unrecognized tax benefits in the provision (benefit) for income taxes in the consolidated statements of operations. |
Share-based compensation | Share-based compensation Share-based compensation expense is recognized for equity awards over the vesting period based on their grant date fair value. The fair value of restricted stock awards is equal to the closing price of our stock on the date of grant. |
Treasury Stock | Treasury stock Treasury stock is recorded using the cost method. |
Advertising costs | Advertising costs Lifeway expenses advertising costs as incurred. For the years ended December 31, 2018 and 2017 total advertising expenses were $4,518 and $7,402, respectively. |
Earnings (Loss) Per Common Share | Earnings (loss) per common share Basic earnings (loss) per common share is computed by dividing net income (loss) available to common stockholders by the weighted average number of common shares issued and outstanding during each period. Diluted earnings (loss) per common share is computed by dividing net income (loss) available to common stockholders by the weighted average number of common shares issued and outstanding and the effect of all dilutive common stock equivalents outstanding during each period. For the years ended December 31, 2018 and 2017, there were 0 common stock equivalents outstanding. |
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 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 Company adopted the new standard on a prospective basis through our test for goodwill impairment in the fourth quarter of 2018. See note 5 for further discussion and the results of our test for goodwill impairment. 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 material impact on the consolidated financial statements. The Company has revised its relevant policies and procedures, as applicable, to meet the new accounting, reporting and disclosure requirements of Topic 606 and has updated internal controls accordingly. 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 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 an 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 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. Lifeway will elect 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 allows 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 are electing to adopt the hindsight practical expedient to determine the reasonably certain lease term for existing leases. We will make 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. The Company has revised its relevant policies and procedures, as applicable, to meet the new accounting, reporting and disclosure requirements of Topic 842 and has updated internal controls accordingly. The main difference between the guidance in ASU 2016-02 and current GAAP is the recognition of lease assets and lease liabilities by lessees for those leases classified as operating leases under current GAAP. Recognition of the assets and liabilities will have a material impact to our consolidated balance sheets upon adoption. However, since all of our leases are operating leases under ASC 840 and we will carryforward the historical lease classification, the new standard will have no immediate, material impact on our Consolidated Statements of Operations, Consolidated Statements of Stockholders’ Equity, or Consolidated Statements of Cash Flows. We are in the process of finalizing our review of contracts and calculating the impact of the new standard on our balance sheet. We expect the adoption to result in increase of assets of approximately $745 and liabilities of $772 as of January 1, 2019. |
2. Summary Of Significant Acc_3
2. Summary Of Significant Accounting Policies (Tables) | 12 Months Ended |
Dec. 31, 2018 | |
Accounting Policies [Abstract] | |
Schedule Of Property And Equipment, Estimated Useful Lives | Category Years Buildings and improvements 31 and 39 Machinery and equipment 5 – 12 Office equipment 3 – 7 Vehicles 5 Leasehold improvements Shorter of expected useful life or lease term |
Schedule Of Intangible Assets Useful Lives | Category Years Recipes 4 Trade names 8-15 Formula 10 Customer lists 8-10 Customer relationships 8-12 |
3. Inventories (Tables)
3. Inventories (Tables) | 12 Months Ended |
Dec. 31, 2018 | |
Inventory Disclosure [Abstract] | |
Schedule Of Inventories | December 31, 2018 2017 Ingredients $ 1,580 $ 1,717 Packaging 2,072 2,453 Finished goods 2,165 3,527 Total inventories, net $ 5,817 $ 7,697 |
4. Property, Plant and Equipm_2
4. Property, Plant and Equipment, net (Tables) | 12 Months Ended |
Dec. 31, 2018 | |
Property, Plant and Equipment [Abstract] | |
Schedule of property, plant and equipment | December 31, 2018 2017 Land $ 1,747 $ 1,747 Buildings and improvements 17,520 17,260 Machinery and equipment 29,692 27,539 Vehicles 937 901 Office equipment 838 734 Construction in process 546 1,683 51,280 49,864 Less accumulated depreciation (26,707 ) (25,219 ) Total property, plant and equipment, net $ 24,573 $ 24,645 |
5. Intangible Assets (Tables)
5. Intangible Assets (Tables) | 12 Months Ended |
Dec. 31, 2018 | |
Goodwill and Intangible Assets Disclosure [Abstract] | |
Goodwill & indefinite-lived intangible assets | December 31, 2018 2017 Goodwill $ 9,124 $ 10,368 Brand names 3,700 3,700 Goodwill and indefinite lived intangible assets $ 12,824 $ 14,068 |
Schedule of other intangible assets | December 31, 2018 2017 Recipes $ 44 $ 44 Customer lists and other customer related intangibles 4,529 4,529 Customer relationships 985 985 Trade names 2,248 2,248 Formula 438 438 8,244 8,244 Accumulated amortization (7,900 ) (7,269 ) Intangible assets, net $ 344 $ 975 |
Amortization Expense On Future Intangible Assets | 2019 $ 214 2020 130 Total $ 344 |
6. Accrued Expenses (Tables)
6. Accrued Expenses (Tables) | 12 Months Ended |
Dec. 31, 2018 | |
Payables and Accruals [Abstract] | |
Schedule Of Accrued Expenses | December 31, 2018 2017 Payroll and incentive compensation $ 1,937 $ 2,208 Real estate taxes 398 371 Other 442 405 Total accrued expenses $ 2,777 $ 2,984 |
7. Debt (Tables)
7. Debt (Tables) | 12 Months Ended |
Dec. 31, 2018 | |
Debt Disclosure [Abstract] | |
Schedule Of Notes Payable | December 31, 2018 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 |
8. Commitments And Contingenc_2
8. Commitments And Contingencies (Tables) | 12 Months Ended |
Dec. 31, 2018 | |
Commitments and Contingencies Disclosure [Abstract] | |
Future minimum operating lease schedule | Year Operating 2019 $ 473 2020 171 2021 95 2022 55 2023 4 Total minimum lease payments $ 798 |
9. Income taxes (Tables)
9. Income taxes (Tables) | 12 Months Ended |
Dec. 31, 2018 | |
Income Tax Disclosure [Abstract] | |
Provision for income taxes | For the Years Ended December 31, 2018 2017 Current: Federal $ (13 ) $ (359 ) State and local 249 193 Total current 236 (166 ) Deferred (461 ) (292 ) Benefit for income taxes $ (225 ) $ (458 ) |
Reconciliation to effective rate for income taxes | 2018 2017 Amount Percentage Amount Percentage Federal income tax computed at the statutory rate $ (695 ) 21.0% $ (274 ) 34.0% State and local tax, net (47 ) 1.4% 1 (0.1)% Goodwill impairment 324 (9.8)% – 0.0% U.S. domestic manufacturers’ deduction & other permanent differences 147 (4.4)% 111 (13.8)% Changes for tax positions of prior years – 0.0% 118 (14.6)% Change in tax rates (a) (37 ) 1.1% (378 ) 47.0% Change in tax estimate 83 (2.5)% (36 ) 4.5% Benefit for income taxes $ (225 ) 6.8% $ (458 ) 57.0% |
Schedule of deferred tax assets and liabilities | December 31, 2018 2017 Deferred tax liabilities attributable to: Accumulated depreciation and amortization $ (2,062 ) $ (1,784 ) Total net deferred tax liabilities (2,062 ) (1,784 ) Deferred tax assets attributable to: Net operating losses 595 14 Capital loss carry-forward & investment impairment 115 122 Incentive compensation 448 255 Inventory 355 335 Allowances for doubtful accounts and discounts 109 161 Other 50 57 Total net deferred tax assets 1,673 944 Net deferred tax liabilities $ (390 ) $ (840 ) |
Reconciliation of amount of unrecognized tax benefits | 2018 2017 Balance at January 1 $ 181 $ 63 Additions for tax positions of prior years – 118 Release for tax positions of prior years (118 ) – Balance at December 31 $ 63 $ 181 |
10. Stock-basedand Other Compen
10. Stock-basedand Other Compensation (Tables) | 12 Months Ended |
Dec. 31, 2018 | |
Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | |
Stock option activity table | Options Weighted Weighted Aggregate Outstanding at December 31, 2017 45 $ 10.45 – – Granted – $ – – Exercised – $ – – – Forfeited (4 ) $ 10.73 – – Outstanding at December 31, 2018 41 $ 10.42 7.22 $ – Exercisable at December 31, 2018 36 $ 10.42 7.23 $ – |
Assumptions used | Risk free interest rate 1.00 - 1.11% Expected dividend yield 0.27% Expected volatility 38.96 - 39.94% Expected term (years) 5.03 - 5.88 |
RSA activity table | RSA’s Outstanding at December 31, 2017 – Granted 36 Shares issued upon vesting (2 ) Forfeited (9 ) Outstanding at December 31, 2018 25 Weighted average grant date fair value per share outstanding $ 4.77 |
11. Segments, Products and Cu_2
11. Segments, Products and Customers (Tables) | 12 Months Ended |
Dec. 31, 2018 | |
Segment Reporting [Abstract] | |
Schedule of sales of products by category | 2018 2017 In thousands $ % $ % Drinkable Kefir other than ProBugs $ 78,523 76% $ 90,514 76% Cheese 11,486 11% 11,516 10% Cream and other 5,276 5% 6,527 5% Cupped Kefir and Skyr 3,836 4% 4,138 4% ProBugs Kefir 2,795 3% 4,537 4% Frozen Kefir (a) 1,434 1% 1,661 1% Net Sales $ 103,350 100% $ 118,893 100% |
2. Summary Of Significant Acc_4
2. Summary Of Significant Accounting Policies (Details - Property useful lives) | 12 Months Ended |
Dec. 31, 2018 | |
Buildings And improvements [Member] | |
Property and equipment, useful life | 31 and 39 years |
Machinery And Equipment [Member] | |
Property and equipment, useful life | 5-12 years |
Office Equipment [Member] | |
Property and equipment, useful life | 3-7 years |
Vehicles [Member] | |
Property and equipment, useful life | 5 years |
Leasehold improvements [Member] | |
Property and equipment, useful life | Shorter of expected useful life or lease term |
2. Summary Of Significant Acc_5
2. Summary Of Significant Accounting Policies (Details - Intangible Useful lives) | 12 Months Ended |
Dec. 31, 2018 | |
Recipes [Member] | |
Intangible assets, useful lives | 4 years |
Trade Names [Member] | Minimum [Member] | |
Intangible assets, useful lives | 8 years |
Trade Names [Member] | Maximum [Member] | |
Intangible assets, useful lives | 15 years |
Formula [Member] | |
Intangible assets, useful lives | 10 years |
Customer lists [Member] | Minimum [Member] | |
Intangible assets, useful lives | 8 years |
Customer lists [Member] | Maximum [Member] | |
Intangible assets, useful lives | 10 years |
Customer Relationships [Member] | Minimum [Member] | |
Intangible assets, useful lives | 8 years |
Customer Relationships [Member] | Maximum [Member] | |
Intangible assets, useful lives | 12 years |
2. Summary Of Significant Acc_6
2. Summary Of Significant Accounting Policies (Details Narrative) - USD ($) shares in Thousands, $ in Thousands | 12 Months Ended | |
Dec. 31, 2018 | Dec. 31, 2017 | |
Accounting Policies [Abstract] | ||
Impairment of assets | $ 0 | $ 0 |
Advertising expenses | $ 4,518 | $ 7,402 |
Antidilutive shares excluded from EPS computation | 0 | 0 |
3. Inventories (Details)
3. Inventories (Details) - USD ($) $ in Thousands | Dec. 31, 2018 | Dec. 31, 2017 |
Inventory Disclosure [Abstract] | ||
Ingredients | $ 1,580 | $ 1,717 |
Packaging | 2,072 | 2,453 |
Finished goods | 2,165 | 3,527 |
Total inventories, net | $ 5,817 | $ 7,697 |
4. Property And Equipment (Deta
4. Property And Equipment (Details) - USD ($) $ in Thousands | Dec. 31, 2018 | Dec. 31, 2017 |
Property and equipment, gross | $ 51,280 | $ 49,864 |
Less accumulated depreciation | (26,707) | (25,219) |
Total property and equipment | 24,573 | 24,645 |
Land [Member] | ||
Property and equipment, gross | 1,747 | 1,747 |
Buildings And improvements [Member] | ||
Property and equipment, gross | 17,520 | 17,260 |
Machinery And Equipment [Member] | ||
Property and equipment, gross | 29,692 | 27,539 |
Vehicles [Member] | ||
Property and equipment, gross | 937 | 901 |
Office Equipment [Member] | ||
Property and equipment, gross | 838 | 734 |
Construction In Progress [Member] | ||
Property and equipment, gross | $ 546 | $ 1,683 |
5. Intangible Assets (Details -
5. Intangible Assets (Details - Indefinite assets) - USD ($) $ in Thousands | Dec. 31, 2018 | Dec. 31, 2017 |
Goodwill and Intangible Assets Disclosure [Abstract] | ||
Goodwill | $ 9,124 | $ 10,368 |
Brand names | 3,700 | 3,700 |
Goodwill & indefinite lived intangible assets | $ 12,824 | $ 14,068 |
5. Intangible Assets (Details_2
5. Intangible Assets (Details - Finite lived) - USD ($) $ in Thousands | Dec. 31, 2018 | Dec. 31, 2017 |
Cost | $ 8,244 | $ 8,244 |
Accumulated Amortization | (7,900) | (7,269) |
Intangible assets, net | 344 | 975 |
Recipes [Member] | ||
Cost | 44 | 44 |
Customer Lists And Other Customer Related Intangibles [Member] | ||
Cost | 4,529 | 4,529 |
Customer Relationships [Member] | ||
Cost | 985 | 985 |
Trade Names [Member] | ||
Cost | 2,248 | 2,248 |
Formula [Member] | ||
Cost | $ 438 | $ 438 |
5. Intangible Assets (Details_3
5. Intangible Assets (Details - Amortization schedule) - USD ($) $ in Thousands | Dec. 31, 2018 | Dec. 31, 2017 |
Goodwill and Intangible Assets Disclosure [Abstract] | ||
2019 | $ 214 | |
2020 | 130 | |
Total | $ 344 | $ 975 |
5. Goodwill and Intangible As_2
5. Goodwill and Intangible Assets (Details Narrative) - USD ($) $ in Thousands | 12 Months Ended | |
Dec. 31, 2018 | Dec. 31, 2017 | |
Goodwill and Intangible Assets Disclosure [Abstract] | ||
Goodwill impairment | $ 1,244 | $ 0 |
Goodwill carrying amount | 10,368 | |
Goodwill accumulated impairment | $ 1,244 |
6. Accrued Expenses (Details)
6. Accrued Expenses (Details) - USD ($) $ in Thousands | Dec. 31, 2018 | Dec. 31, 2017 |
Payables and Accruals [Abstract] | ||
Payroll and incentive compensation | $ 1,937 | $ 2,208 |
Real estate tax | 398 | 371 |
Other | 442 | 405 |
Total accrued expenses | $ 2,777 | $ 2,984 |
7. Debt (Details - Notes payabl
7. Debt (Details - Notes payable) - USD ($) $ in Thousands | 12 Months Ended | |
Dec. 31, 2018 | Dec. 31, 2017 | |
Total notes payable | $ 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 |
Debt maturity date | May 31, 2018 | |
Debt interest rate | 4.07% | |
Term Loan 2 [Member] | ||
Total notes payable | $ 0 | $ 3,447 |
Debt maturity date | May 31, 2019 | |
Debt interest rate | 3.86% |
7. Debt (Details Narrative)
7. Debt (Details Narrative) - USD ($) $ in Thousands | 12 Months Ended | |
Dec. 31, 2018 | Dec. 31, 2017 | |
Line of credit balance | $ 5,995 | $ 0 |
Unamortized financing costs | 55 | |
Line of credit available | $ 3,950 | |
Weighted average interest rate | 4.98% | |
Revolving Credit Facility [Member] | ||
Revolving credit facility maximum borrowing capacity | $ 10,000 | |
Credit facility interest rate | LIBOR plus 2.5% | |
Line of credit balance | $ 0 | $ 0 |
Effective interest rate | 4.79% |
8. Commitments And Contingenc_3
8. Commitments And Contingencies (Details - Operating lease) $ in Thousands | Dec. 31, 2018USD ($) |
Commitments and Contingencies Disclosure [Abstract] | |
Future minimum lease payment, 2019 | $ 473 |
Future minimum lease payment, 2020 | 171 |
Future minimum lease payment, 2021 | 95 |
Future minimum lease payment, 2022 | 55 |
Future minimum lease payment, 2023 | 4 |
Total minimum lease payments | $ 798 |
8. Commitments And Contingenc_4
8. Commitments And Contingencies (Details Narrative) - USD ($) $ in Thousands | 12 Months Ended | |
Dec. 31, 2018 | Dec. 31, 2017 | |
Commitments and Contingencies Disclosure [Abstract] | ||
Total rent expense | $ 769 | $ 702 |
9. Income taxes (Details - Prov
9. Income taxes (Details - Provision) - USD ($) $ in Thousands | 12 Months Ended | |
Dec. 31, 2018 | Dec. 31, 2017 | |
Current: | ||
Federal | $ (13) | $ (359) |
State and local | 249 | 193 |
Total current | 236 | (166) |
Deferred | (461) | (292) |
Provision (benefit) for income taxes | $ (225) | $ (458) |
9. Inccome taxes (Details - Rec
9. Inccome taxes (Details - Reconciliation) - USD ($) $ in Thousands | 12 Months Ended | |
Dec. 31, 2018 | Dec. 31, 2017 | |
Income Tax Disclosure [Abstract] | ||
Federal income tax expense computed at the statutory rate | $ (695) | $ (274) |
State and local tax expense, net | (47) | 1 |
Goodwill impairment | 324 | 0 |
U.S. domestic manufacturers' deduction & other permanent differences | 147 | 111 |
Additions for tax positions of prior years | 0 | 118 |
Change in tax rates | (37) | (378) |
Change in tax estimate | 83 | (36) |
Provision for income taxes | $ (225) | $ (458) |
Federal income tax expense computed at the statutory rate, percentage | 21.00% | 34.00% |
State and local tax expense, net, percentage | 1.40% | (0.10%) |
Goodwill impairment | (9.80%) | 0.00% |
U.S. domestic manufacturers' deduction & other permanent differences, percentage | (4.40%) | (13.80%) |
Additions for tax positions of prior years, percentage | 0.00% | (14.60%) |
Change in tax rates, percentage | 1.10% | 47.00% |
Change in tax estimate, percentage | (2.50%) | 4.50% |
Provision for income taxes, percentage | 6.80% | 57.00% |
9. Income taxes (Details - Defe
9. Income taxes (Details - Deferred tax assets) - USD ($) $ in Thousands | Dec. 31, 2018 | Dec. 31, 2017 |
Deferred tax liabilities attributable to: | ||
Accumulated depreciation and amortization | $ (2,062) | $ (1,784) |
Total net deferred tax liabilities | (2,062) | (1,784) |
Deferred tax assets attributable to: | ||
Net operating losses | 595 | 14 |
Capital loss carry-forward & investment impairment | 115 | 122 |
Incentive compensation | 448 | 255 |
Inventory | 355 | 335 |
Allowances for doubtful accounts and discounts | 109 | 161 |
Other | 50 | 57 |
Total net deferred tax assets | 1,673 | 944 |
Net deferred tax liabilities | $ (390) | $ (840) |
9. Income taxes (Details - Unre
9. Income taxes (Details - Unrecognized tax benefits) - USD ($) $ in Thousands | 12 Months Ended | |
Dec. 31, 2018 | Dec. 31, 2017 | |
Income Tax Disclosure [Abstract] | ||
Unrecognized tax benefits, beginning balance | $ 181 | $ 63 |
Additions for tax positions of prior years | 0 | 118 |
Release for tax positions of prior years | (118) | 0 |
Unrecognized tax benefits, ending balance | $ 63 | $ 181 |
9. Income taxes (Details Narrat
9. Income taxes (Details Narrative) - USD ($) $ in Thousands | 12 Months Ended | |
Dec. 31, 2018 | Dec. 31, 2017 | |
Income Tax Disclosure [Abstract] | ||
Interest and penalty expense | $ 0 | $ 152 |
Accrued Interest and penalties | $ 19 | 171 |
Discrete net tax benefit | $ 378 |
10. Stock-based Compensation (D
10. Stock-based Compensation (Details - Option Activity) - Options [Member] $ / shares in Units, shares in Thousands, $ in Thousands | 12 Months Ended |
Dec. 31, 2018USD ($)$ / sharesshares | |
Options outstanding, beginning balance | shares | 45 |
Options granted | shares | 0 |
Options exercised | shares | 0 |
Options forfeited | shares | (4) |
Options outstanding, ending balance | shares | 41 |
Options exercisable | shares | 36 |
Weighted average exercise price, options outstanding, beginning balance | $ / shares | $ 10.45 |
Weighted average exercise price, options granted | $ / shares | |
Weighted average exercise price, options exercised | $ / shares | |
Weighted average exercise price, options forfeited | $ / shares | 10.73 |
Weighted average exercise price, options outstanding, ending balance | $ / shares | 10.42 |
Weighted average exercise price, options exercisable | $ / shares | $ 10.42 |
Weighted average remaining contractural life, outstanding | 7 years 2 months 19 days |
Weighted average remaining contractural life, exercisable | 7 years 2 months 23 days |
Aggregate intrinsic value, options outstanding | $ | $ 0 |
Aggregate intrinsic value, options exercisable | $ | $ 0 |
10. Stock-based Compensation _2
10. Stock-based Compensation (Details - Assumptions) - Options [Member] | 12 Months Ended |
Dec. 31, 2016 | |
Risk-free interest rate, minimum | 1.00% |
Risk-free interest rate, maximum | 1.11% |
Expected dividend yield | 0.27% |
Expected volatility, minimum | 38.96% |
Expected volatility, maximum | 39.94% |
Expected term (years) | 5.03-5.88 years |
10. Stock-based Compensation _3
10. Stock-based Compensation (Details - RSA Activity) - Restricted Stock Awards [Member] shares in Thousands | 12 Months Ended |
Dec. 31, 2018$ / sharesshares | |
RSU's outstanding, beginning balance | 0 |
RSU's granted | 36 |
Shares issued upon vesting | (2) |
RSU's forfeited | (9) |
RSU's outstanding, ending balance | 25 |
Weighted average grant date fair value per share | $ / shares | $ 4.77 |
10. Stock-based Compensation _4
10. Stock-based Compensation (Details Narrative) - USD ($) shares in Thousands, $ in Thousands | 12 Months Ended | ||
Dec. 31, 2018 | Dec. 31, 2017 | Dec. 31, 2016 | |
Contribution expense | $ 417 | $ 376 | |
Options [Member] | |||
Options granted | 0 | ||
Share-based compensation | $ 9 | 41 | |
Tax-related benefits | 3 | 17 | |
Unearned compensation related to non-vested stock options | $ 1 | ||
Weighted average period for unrecognized compensation | 6 months | ||
Restricted Stock Awards [Member] | |||
RSA's granted | 36 | ||
Share-based compensation | $ 47 | 18 | |
Tax-related benefits | 13 | 7 | |
Unearned compensation related to non-vested RSA's | $ 81 | ||
Weighted average period for unrecognized compensation | 1 year 3 months 26 days | ||
Non-Employee Directors [Member] | Restricted Stock Awards [Member] | |||
RSA's granted | 20 | ||
Employees [Member] | Restricted Stock Awards [Member] | |||
RSA's granted | 16 | ||
2015 Omnibus Incentive Plan [Member] | |||
Stock authorized for issuance | 3,500 | ||
Shares available for issuance | 3,467 | ||
2015 Omnibus Incentive Plan [Member] | Key Employees [Member] | |||
Options granted | 50 | ||
2017 Plan [Member] | |||
Share-based compensation | $ 636 | 3,589 | |
Unearned compensation related to non-vested RSA's | 336 | ||
2017 Plan [Member] | Incentive Compensation - Stock [Member] | |||
Share-based compensation | 1,610 | ||
2017 Plan [Member] | Incentive Compensation - Cash [Member] | |||
Share-based compensation | 1,979 | ||
2017 Plan [Member] | Incentive Compensation [Member] | |||
Share-based compensation | $ 2,516 | ||
2018 Plan [Member] | |||
Share-based compensation | $ 76 |
11. Segments, Products and Cu_3
11. Segments, Products and Customers (Details) - USD ($) $ in Thousands | 12 Months Ended | |
Dec. 31, 2018 | Dec. 31, 2017 | |
Total sales | $ 103,350 | $ 118,893 |
Total sales percentage | 100.00% | 100.00% |
Drinkable Kefir Other Than ProBugs [Member] | ||
Total sales | $ 78,523 | $ 90,514 |
Total sales percentage | 76.00% | 76.00% |
Lifeway Cheese Products [Member] | ||
Total sales | $ 11,486 | $ 11,516 |
Total sales percentage | 11.00% | 10.00% |
Cream and other [Member] | ||
Total sales | $ 5,276 | $ 6,527 |
Total sales percentage | 5.00% | 5.00% |
Cupped Kefir And Skyr [Member] | ||
Total sales | $ 3,836 | $ 4,138 |
Total sales percentage | 4.00% | 4.00% |
ProBugs Kefir [Member] | ||
Total sales | $ 2,795 | $ 4,537 |
Total sales percentage | 3.00% | 4.00% |
Frozen Kefir [Member] | ||
Total sales | $ 1,434 | $ 1,661 |
Total sales percentage | 1.00% | 1.00% |
11. Segments, Products and Cu_4
11. Segments, Products and Customers (Details Narrative) | 12 Months Ended | |
Dec. 31, 2018 | Dec. 31, 2017 | |
Concentration percentage | 100.00% | 100.00% |
Sales Revenue, Net [Member] | Two Customers [Member] | ||
Concentration percentage | 21.00% | 22.00% |
Sales Revenue, Net [Member] | Ten Customers [Member] | ||
Concentration percentage | 59.00% | 59.00% |
Accounts Receivable [Member] | Two Customers [Member] | ||
Concentration percentage | 17.00% | 19.00% |
12. Share RepurchaseProgram (De
12. Share RepurchaseProgram (Detail Narrative) - USD ($) shares in Thousands, $ in Thousands | 12 Months Ended | |
Dec. 31, 2018 | Dec. 31, 2017 | |
Number of shares authorized to be repurchased | 625 | |
Amount of shares authorized to be repurchased | $ 5,185 | |
Amount remaining available under the repurchase plan | 4,503 | |
Stock repurchased during period, amount | $ 1,379 | $ 1,486 |
Treasury Stock, Common [Member] | ||
Stock repurchased during period, shares | 218 | 148 |
Stock repurchased during period, amount | $ 1,379 | $ 1,486 |
13. Related party transactions
13. Related party transactions (Details Narrative) - USD ($) $ in Thousands | 12 Months Ended | |
Dec. 31, 2018 | Dec. 31, 2017 | |
General and administrative expenses | $ 13,616 | $ 13,955 |
Consulting Fees [Member] | ||
General and administrative expenses | 1,000 | 1,000 |
Royalty Expense [Member] | ||
General and administrative expenses | $ 587 | $ 600 |