Third quarter 2011 gross sales increased 22% to $19.4 million compared to $15.9 million for the third quarter of 2010. This increase is primarily attributable to increased sales and growing awareness of the benefits of Lifeway's flagship line, Kefir, as well as ProBugs Organic Kefir for kids, and the successful introduction of new product lines such as Bio Kefir. In addition, Lifeway Frozen Kefir contributed approximately $0.3 million in sales during the third quarter of 2011. The frozen kefir line was launched in April 2011.
Third quarter total consolidated net sales increased $3.1 million, or approximately 21%, to $17.7 million from $14.6 million in the third quarter of 2010. Net sales are recorded as gross sales less promotional activities such as slotting fees paid, couponing, spoilage and promotional allowances as well as early payment terms given to customers.
Gross profit for the third quarter of 2011 increased 19% to $6.2 million, compared to $5.3 million in the third quarter of the prior year. The Company's gross profit margin decreased to 35% in the third quarter versus 36% in the third quarter of 2010. Gross profit was impacted primarily by increased transportation and other petroleum based production supply costs, as well as the increased price of conventional milk, the company's largest raw material. The cost of milk was approximately 35 to 45% higher in the third quarter of 2011 compared to the same period in 2010.
Operating expenses as a percentage of net sales were approximately 26% during the third quarter of 2011 compared to approximately 23% during the same period in 2010. This increase was primarily attributable to increased selling expenses as compared to the same period in 2010. Selling related expenses increased by $0.9 million (approximately 49%) to $2.7 million during the third quarter of 2011, from $1.8 million during the same period in 2010.
Operating income decreased to $1.6 million in the third quarter of 2011 compared to $1.9 million in the same period last year. The decrease in operating income is due to increased operating expenses in the third quarter of 2010 as compared to the third quarter of 2011.
The company reported net income of $1.0 million or earnings of $0.06 per diluted share compared to net income of $0.9 million or earnings of $0.05 per diluted share in the third quarter of 2010.
Julie Smolyansky, CEO of Lifeway Foods, Inc. commented, "We are very pleased with our ability to continue to grow our sales and profits despite facing record high input costs. In the quarter, we further increased our retail distribution and we believe we have the right Kefir product assortment to further expand our customer reach and increase market share long-term."
Smolyansky continued, "We will continue to intently manage the controllable aspects of our business as we realize increased production efficiencies and economies of sales to achieve record annual sales and profits in 2011. Going forward, we intend to take advantage of the opportunity to expand distribution in the U.S. and internationally with Lifeway's market leading position."
From the November 16, 2011, Prepared Foods' Daily News.