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

To: Robert Graber who wrote (325)	4/8/1999 10:41:00 AM
From: mark cox	Read Replies (1) \| Respond to of 352

The following is my analysis of Lifeway's 10K for 1998. It is always possible for me to make errors so do your own analysis. Items that have asteriks () were computed without 'Other Income' from 1997. The 'Other Income' from 1997 was earned on rental income from leasing the new faciltiy before Lifeway actually moved into the building to begin the expansion. So this income was not attained from Lifeway's normal business and was a one time gain. Therefore to get a better comparison for Lifeway's main business in 1998 compared to 1997, I omitted it. REVENUE GROWTH: for the year was +14% (see Exports below) NET INCOME GROWTH : for the year was +33% EPS GROWTH : for the year was +32.9% REVENUE GROWTH: for the 4th quarter was +9.8% I was very disappointed with this figure. But advertising is now underway. NET INCOME GROWTH: for the 4th quarter was +85% EPS GROWTH: for the 4th quarter was +84% INTEREST EXPENSE: decreased -14.5% to $106,222 TAX RATE: for the year was 41.6% compared to 40.5% last year. GROSS MARGINS: increased +3.2% to +45.6% NET MARGIN : for the year increased +1.6% to +11.2% NET MARGIN: for the 4th quarter increased +3.2% to +7.8% SHARES OUTSTANDING: increased 5,253 to 3,781,355 RETURN ON EQUITY : increased +1.6% to +16.4% RETURN ON ASSETS : increased +1.8% to +11% CURRENT RATIO: is 3.57 which is up from 1.5 last year. LT. DEBT/EQUITY RATIO: is .28 WORKING CAPITAL: increases by over $1.1 million to $1.9 million BOOK VALUE: increased to $1.22 per share from $1.02 last year. CASH FLOWS from OPERATIONS : increased by $35,064 to $850,399 FINANCIAL LEVERAGE GAIN : was 8.3% compared to 3.8% last year. This means that for every dollar LWAY has in debt, they generated 8.3 cents of net profit. EXPORTS: Export sales in 1998 were approx. $298,000, down from approx. $381,000 in 1997. This decrease was primarily due to the poor economic conditions in Russia. INVENTORIES: increased +38.6% This is because of the increased capacity to store bulk purchases at the new larger facility which allows them to incur savings in the purchase of milk and other raw materials. ACCOUNTS RECEIVABLE: increased only +3.5% This compared to LWAY's revenue growth rate of +14% is outstanding. It shows that LWAY is having no trouble in collecting their payments from customers. ACCOUNTS RECEIVABLE WEEKS: is 6.48 which means that it takes an average of 45 days for LWAY to get paid by their customers vs: 50 days last year. This increases working capital. ACCOUNTS PAYALBE WEEKS: is 7.2 weeks which is longer than last years 6 weeks which means LWAY delays payments longer which again increases working capital. NEW EQUIPMENT: they spent $592,877 on new equipment compared with last year's spending of $1,272,760 Of course all of this was again paid for from cash flows generated from the business. COMPARISON TO THEIR INDUSTRY: if you go to the following link you will see that LWAY beats their industry in almost every ratio, growth rate, profitablity, financial strength and margin. marketguide.com The only item that I am not happy with is revenue growth. But I know that the advertisement campaign has just started and will hopefully take care of that problem. Almost every other item has improved. LWAY is stronger than ever and poised hopefully for higher growth. I don't know how long it will take for revenues to be affected by all the new advertising but I would venture a guess that it will take a few months. Mark