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Non-Tech : LIFEWAY FOODS (LWAY) -- Ignore unavailable to you. Want to Upgrade?

To: Ed Pettee who wrote (117)	11/11/1997 10:33:00 PM
From: mark cox	Respond to of 352

Hi Ed I am happy with the numbers released today. Back in post # 89, I estimated that earnings would be flat and that the net profit margin would be its lowest. So I hope that no one was surprised by these numbers. Their net margin was 10.4% verses 11.6% last year. I believe this to be caused by the added overhead of the new facility with no sales from it yet, and more interest expense from the mortgage on the facility. As more and more product is produced in the new facility I expect the net margin to move back up. Gross margins for the 3rd quarter actually rose a bit. The 9.5% increase in revenues was nice to see as well. That shows demand for their products continues to be stronger each quarter. With pretax income now over $1 million for 1997, LWAY will meet all criteria for the Nasdaq National Market when they earn $1 million in pretax earnings next year. I think that will be met sometime in the 2nd quarter of 1998 but don't hold me to it. In answer to your question about the distribution to the new Health chains and Dierbergs. There were no sales to Dierbergs in the 3rd quarter. As to the health chains, Whole Foods Market and Wild Oats, it said in the press release dated Oct 21 that " In recent months Lifeway gained two new significant national accounts ..... So it sounds as though they were being supplied in the 3rd quarter. I emailed Wild Oats about Lifeway's kefir and they told me that it wasn't available from all of their distributors. So it appears there is more growth there. Maybe LWAY couldn't supply all of their stores with their limited production capabilities. Both Wild Oats and Whole Foods are fast growing chains adding several new stores per year so as they grow LWAY grows with them. I usually don't post estimates of earnings unless I am pretty sure of them. I'll make a minimum estimate for 4th quarter: In the press release Oct 21 it said that they expect to exceed earnings estimates of $0.20 per share for the year. I will use the minimum for my estimate because I would rather be wrong to the low side. We will have $0.21eps for 1997. So as I do some complex calculus computations, $0.21 - $0.17 = $.04eps for the 4th quarter, a 100% gain over last year's $0.02. The new antibody kefir for the functional foods market is supposed to be released this quarter which is now half over so I don't expect too much in revenues from them for the 4th. Their impact should start in the 1st quarter. I believe that will be the quarter that starts the real growth numbers and hopefully pick up steam as the year progresses. LWAY still has the "Elita" product coming out this quarter as well. I don't know when the fat-free cheesecake is suppose to get launched but if it tastes as good as a regular cheesecake I will be buying more of that than kefir. I count a minimum of 8 products being produced by LWAY at the start of 1998. I eagerly await the 10Q to come out so I can take a closer look at what is happening. We are about to enter the long 4 months before the 10K comes out. I had hoped for more information in today's press release but LWAY isn't known for lengthy press releases. Maybe in a while someone such as you Ed will call the company for some more details. I can't wait to get more info on the antibody products. Some one can call Galagen when they are released also. How about them Jags? Mark