3rd Quarter 10Q Analysis
REVENUES: +16.2%
COST OF GOODS SOLD: +9.5%
OPERATING EXPENSES: +21.9% This large increase was caused by the increase in expenses to operate the new production facility.
GROSS PROFIT MARGIN: 47.7% This is up from last year's 44.5%
NET PROFIT MARGIN: 10.5% This is up +0.1% from last year's 10.4% which is impressive considering that this year they have the added expenses of the new facility.
INTEREST EXPENSE: +35.6% This is an increase of $8,621.00
OTHER INCOME: $0.00 Last year they had $15,750.00
NET INCOME: +17.8%
EPS: +17%
However, omitting last year's 'Other Income' would show a different and more accurate picture of what LWAY's true earnings growth is this year.
NET INCOME (omit other income): +25.5%
EPS: (omit other income): +24.5%
CASH FLOW FROM OPERATIONS: Positive $222,626.00 This is one of my most important facts to look at in a company and LWAY is producing $cash$.
CASH SPENT ON NEW EQUIPMENT: $109,613.00 The expansion is still underway but finally slowing down. Last year they spent $526,891.00 in the 3rd quarter.
CASH and EQUIVALENTS: Cash increased by $111,748 over last quarter,(2Q 98) to $695,799.00
CURRENT RATIO: 2.8 : 1 This is up from 1.87 : 1 last quarter,(2Q 98)
BOOK VALUE: $1.19 This is up from $1.00 a year ago.
DEBT TO EQUITY: .25 This is up from .18 last quarter because of the refinacing of some current maturities. This year's .25 is down from last year's .37 Debt is decreasing.
LONG TERM DEBT: $1,128,087 This is down from last year's $1,399,520
ACCOUNTS RECEIVABLE: +12.9% vs: Revenue growth of +16.2% which is very good and shows that LWAY is doing a good job of collecting money from their customers.
INVENTORIES: +7.3% vs: Revenue growth of +16.2% This shows that LWAY may be done having to build their inventories to gear up for production in the new plant. This will free up more of their cash for items such as equipment purchases and advertising.
WORKING CAPITAL: $1,682,952 This is up from last quarter's $1,130,620 which was mostly caused by the refiancing of some current maturities.
FOR THE 9 MONTHS:
REVENUES: +15.5%
EPS (omit other income): +25.8%
In my opinion, LWAY is in very good financial shape and quite a bit stronger than even last quarter. Just about every ratio improved. It shows that over the past year, they have bought enough inventory to run the new facility, increased their cash, been getting paid on time by their customers, decreased debt, increased the value of the company by 19%, added more equipment, increased their margins and sold more product than they ever have. They have managed to make the company financially stronger while undergoing a major expansion. They did this by taking more time and paying for the majority of it with cash flows generated from operations. Management is doing a great job with our company.
COMPANY ACCOMPLISHMENTS IN THE 3RD QUARTER:
Besides improving the financial strength of the company and setting record earnings and revenues, they launched the new kefir starter culture product which has the highest margins of any of their products and picked up several new distributors for kefir, kefir starter culture and Basics Plus.
Mark |
