<PAGE>
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1996
Commission File No. 1-11768
RELIV' INTERNATIONAL, INC.
(Exact name of registrant as specified in its charter)
Illinois 37-1172197
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
136 Chesterfield Industrial Boulevard, P.O. Box 405,
Chesterfield, Missouri 63006
(Address of principal executive offices) (Zip Code)
(314) 537-9715
(Registrant's telephone number, including area code)
Registrant has filed all reports required to be filed by Section 13 or
15(d) of the Securities Exchange Act of 1934 during the preceding 12 months and
has been subject to such filing requirements for the past 90 days.
APPLICABLE ONLY TO CORPORATE ISSUERS:
COMMON STOCK 9,268,020 outstanding Shares as of March 31, 1996
<PAGE>
PART I. FINANCIAL INFORMATION
---------------------
ITEM 1. FINANCIAL STATEMENTS
--------------------
The following consolidated financial statements of the Registrant are attached
to this Form 10-Q:
1. Interim Balance Sheet as of March 31, 1996 and Balance Sheet as of
December 31, 1995.
2. Interim Statements of Operations for the three-month periods ending
March 31, 1996 and March 31, 1995.
3. Interim Statements of Cash Flows for the three month periods ending
March 31, 1996 and March 31, 1995.
The Financial Statements reflect all adjustments which are, in the opinion of
management, necessary to a fair statement of results for the periods
presented.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
-----------------------------------------------------------
AND RESULTS OF OPERATION
------------------------
1. Financial Condition
-------------------
The current assets of the Company increased during the first quarter 1996, to
$6,155,000 from $5,499,000 as of December 31, 1995. Cash and cash equivalents
increased $262,000 as of March 31, 1996, due to the first quarter 1996 financial
results which produced income before taxes of $438,000. Accounts receivable
increased to $897,000 at March 31, 1996, from $659,000 at December 31, 1995 as a
result of an increase in sales of the Company's contract packaging services,
which are generally paid on 30-day terms (see "Results of Operations").
Inventories increased slightly to $2,665,000 from $2,513,000 at December 31,
1995, as increased sales volumes in the United States required greater finished
goods levels. In addition, the Company increased raw material and packaging
inventories as it prepared to manufacture products for its international
subsidiaries. The Company had utilized contract manufacturers for much of its
international production since its facility was flooded in July, 1993.
Property, plant and equipment increased $374,000 during the first quarter
1996, due to acquisition of manufacturing equipment as the Company expanded its
capabilities to meet the needs of its contract packaging customers.
Current liabilities increased to $3,825,000 at March 31, 1996, from $3,352,000
at December 31, 1995. Trade accounts payable decreased $229,000 as the Company
utilized proceeds from a loan agreement entered into in January, 1996, to pay
for the purchase of manufacturing equipment, which was recorded as a payable at
December 31, 1995. Distributor commissions payable increased $366,000 as a
result of increased sales volume in March, 1996, as compared to December, 1995.
As a result of increased net income in the first quarter 1996, income taxes
payable increased to $317,000 as of March 31, 1996, from $138,000 as of December
31, 1995.
2
<PAGE>
Short-term debt and current maturities of long-term debt and capital lease
obligations increased to $363,000 at March 31, 1996, from $210,000 at December
31, 1995, and long-term debt increased to $1,691,000 from $1,417,000. The
increase is primarily a result of a $950,000 term loan, the proceeds of which
were used to retire $423,000 outstanding of a $500,000 term loan, $163,000
outstanding on a line of credit and $364,000 to purchase manufacturing equipment
as stated above. The Company also entered into operating lines of credit
totaling $1,500,000 that replaced a $500,000 line of credit. The Company had
utilized $100,000 of these lines of credit at March 31, 1996.
The Company's working capital balance has improved by $183,000 since December
31, 1995. However, the current ratio has declined slightly from 1.64 as of year
end to 1.61 as of March 31, 1996. The decline is due to the higher commissions
payable (discussed above) and the additional debt incurred by the Company in the
first quarter.
The Company anticipates that its cash, working capital balance and existing
credit will be adequate to meet its operating needs in the future, based on
current and projected revenue levels.
2. Result of Operations
--------------------
The Company had a net profit of $278,000 for the quarter ended March 31, 1996,
compared to a net profit of $510,000 for the same period in 1995. Net sales for
the period increased to $9,304,000 from $8,512,000 in 1995. Net sales in 1996
comprised of $8,535,000 in network marketing sales and $769,000 in contract
packaging services. Net sales in first quarter 1995, consisted solely of
network marketing sales.
In the fourth quarter 1995, the Company began providing contract packaging
services, including blending, processing and packaging food products in
accordance with specifications provided by its customers. The net sales in the
first quarter 1996, of $769,000 from this business segment was a substantial
increase as compared to $204,000 in the fourth quarter 1995, and $279,000 as a
total for 1995. Due to start-up expenses and inefficiencies caused by the rapid
increase in contract packing services, net profit was substantially hindered.
Direct cost of contract packaging services sold was 108% of revenue. The
Company also experienced related increases in general and administrative
expenses. The Company increased efficiency during the quarter and anticipates
improved margins.
Net sales from network marketing activities increased slightly to $8,535,000
in the first quarter of 1996, from $8,511,000 in the same period of 1995. In
the first quarter 1996, net sales in the United States were $6,980,000 compared
to $6,170,000 in 1995, but reductions in net sales in Australia and New Zealand
offset the United States increase. Australia and New Zealand sales have been
affected by decreased momentum due to delays in new product introductions caused
by regulatory policies and increased competition. The Company expects to be
able to introduce several new products in these markets in 1996, and has
introduced a new marketing effort to develop sales and momentum. Net sales in
Canada continue to show improvement with a 5% increase over 1995.
Cost of network marketing products sold as a percentage of net sales, improved
to 20.4% for the first quarter of 1996, from 22.8% in the same period in 1995.
The improvement is due to the return of its manufacturing facility in mid-1995
and improved manufacturing controls.
3
<PAGE>
Distributor royalties and commissions remained stable at 35.2% of network
marketing sales in the first quarter 1996, compared to 35.5% for the same period
in 1995. These expenses are governed by the distributor agreements and are
directly related to the level of sales. The Company pays as a percent of sales
up to 18% in royalties and as much as 45% in commissions.
Selling, general and administrative expenses, as a percentage of net sales,
increased to 34.9% for the first quarter of 1996, from 32.9% in the same period
in 1995. The increase is primarily due to the Company's decision to allocate
additional resources to its marketing and sales efforts, which included a sales
bonus program. These expenses increased by $295,000, or 3.2% of net sales, over
first quarter 1995. The Company believes the increase in sales in the United
States is partially a result of these efforts. As stated above, the Company's
selling, general and administrative expense were affected by the addition of the
contract packaging services capabilities, primarily in distribution and
warehouse, which increased by .9% of net sales. Selling, general and
administrative expenses, net of the above expense categories, showed continued
improvement in cost containment during the first quarter, as these expenses
decreased to 25.2% of net sales from 26.7% in the same period of 1995.
PART II. OTHER INFORMATION
-----------------
ITEM 1. LEGAL PROCEEDINGS
-----------------
Not applicable.
ITEM 2. CHANGES IN SECURITIES
---------------------
Not applicable.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
-------------------------------
Not applicable.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
---------------------------------------------------
Not applicable.
ITEM 5. OTHER INFORMATION
-----------------
Not applicable.
4
<PAGE>
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
--------------------------------
(a) Exhibits*
(b) The Company has not filed a Current Report during the quarter
covered by this report.
*Incorporate by reference the Exhibits filed as part of the S-18
Registration Statement of the Registrant, effective November 5, 1985,
and subsequent periodic filings.
5
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Dated: May 10, 1996 RELIV' INTERNATIONAL, INC.
By: /s/ Robert L. Montgomery
-------------------------------
Robert L. Montgomery, President,
Chief Executive Officer and
Principal Financial Officer
6
<PAGE>
Reliv' International, Inc. and Subsidiaries
Consolidated Balance Sheets
<TABLE>
<CAPTION>
March 31, 1996 December 31, 1995
(Unaudited) (Note)
-------------- -----------------
<S> <C> <C>
Assets
Current Assets:
Cash and cash equivalents $ 1,769,395 $ 1,507,176
Accounts and notes receivable, less allowances of
$9,000 in 1996 and $29,000 in 1995 897,188 658,607
Inventories
Finished goods 1,154,038 1,012,987
Raw materials 1,073,490 1,014,385
Sales aids and promotional materials 437,059 485,795
----------- -----------
Total inventories 2,664,587 2,513,167
Refundable income taxes 230,782 229,438
Prepaid expenses and other current assets 530,811 529,364
Deferred income taxes 62,447 61,000
----------- -----------
Total current assets 6,155,210 5,498,752
Deferred costs 139,059 158,734
Property, plant and equipment:
Land 780,346 780,346
Building 2,851,643 2,851,407
Machinery & equipment 1,517,741 1,181,260
Office equipment 306,854 280,978
Computer equipment & software 1,128,674 1,145,944
Construction in progress 63,821 35,500
----------- -----------
6,649,079 6,275,435
Less: Accumulated depreciation (1,753,781) (1,656,687)
----------- -----------
Net Property, plant and equipment 4,895,298 4,618,748
----------- -----------
Total Assets $11,189,567 $10,276,234
=========== ===========
</TABLE>
Note: The balance sheet at December 31, 1995 has been derived from the audited
consolidated financial statements at that date, but does not include all of the
information and footnotes required by generally accepted accounting principles
for complete statements.
See notes to consolidated financial statements.
<PAGE>
Reliv' International, Inc. and Subsidiaries
Consolidated Balance Sheets
<TABLE>
<CAPTION>
March 31, 1996 December 31, 1995
(Unaudited) (Note)
-------------- -----------------
<S> <C> <C>
Liabilities and Stockholders' Equity
Current Liabilities:
Accounts payable and accrued expenses
Trade accounts payable $ 1,573,227 $ 1,801,965
Distributors commissions payable 1,146,305 780,070
Sales taxes payable 155,533 153,893
Interest expense payable 9,906 8,746
Payroll and payroll taxes payable 113,445 156,347
Other accrued expenses 93,394 87,475
----------- -----------
Total accounts payable and accrued expenses 3,091,810 2,988,496
Income taxes payable 316,750 138,336
Notes payable - short term 100,000 0
Current maturities of long-term debt and
capital lease obligations 262,833 210,256
Unearned income 53,845 14,766
----------- -----------
Total current liabilities 3,825,238 3,351,854
Capital lease obligations, less current maturities 60,295 75,573
Long-term debt, less current maturities 1,630,928 1,341,191
Stockholders' equity:
Common stock, no par value; 20,000,000 shares
authorized; 9,268,020 shares outstanding as of 3/31/96
and 9,311,301 shares outstanding as of 12/31/95 3,404,330 3,412,986
Notes receivable-officers and directors (4,633) (4,633)
Retained earnings 2,899,045 2,714,723
Foreign currency translation adjustment (8,166) (79,634)
Less cost of treasury stock-253,866 shares as of 3/31/96
and 214,366 shares as of 12/31/95 (617,470) (535,826)
----------- -----------
Total Stockholders' Equity 5,673,106 5,507,616
----------- -----------
Total Liabilities and Stockholders' Equity $11,189,567 $10,276,234
=========== ===========
</TABLE>
See notes to consolidated financial statements.
<PAGE>
Reliv' International, Inc. and Subsidiaries
Consolidated Statements of Operations
<TABLE>
<CAPTION>
Quarter Ended March 31,
1996 1995
(Unaudited) (Unaudited)
------------ -------------
<S> <C> <C>
Sales at suggested retail $14,069,321 $13,968,759
Less Distributor allowances on product purchases 4,765,772 5,457,033
----------- -----------
Net Sales 9,303,549 8,511,726
Costs and expenses:
Cost of products sold 2,567,511 1,939,283
Distributor royalties and discounts 3,008,115 3,024,020
Selling, general and administrative 3,251,762 2,797,715
----------- -----------
Total Costs and Expenses 8,827,388 7,761,018
----------- -----------
Income (loss) from operations 476,161 750,708
Other income (expense):
Interest income 28,441 31,193
Interest expense (71,106) (28,267)
Other income/expense 4,020 32,415
----------- -----------
Income (loss) before income taxes 437,516 786,049
Provision for income taxes 159,916 275,708
----------- -----------
Net Income 277,600 510,341
=========== ===========
Earnings (loss) per common and common
equivalent shares 0.03 0.05
=========== ===========
Weighted average shares of common stock
and common stock equivalents outstanding 9,380,763 9,477,973
=========== ===========
</TABLE>
See notes to consolidated financial statements.
<PAGE>
Reliv' International, Inc. and Subsidiaries
Consolidated Statements of Cash Flows
<TABLE>
<CAPTION>
Three Months Ended March 31
1996 1995
(Unaudited) (Unaudited)
----------- ------------
<S> <C> <C>
Operating activities:
Net Income $ 277,600 $ 510,341
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Depreciation and amortization 146,857 96,047
Provision for losses on accounts receivable 2,000 0
Foreign currency translation (gain) loss (6,302) 34,620
(Increase) decrease in accounts and notes receivable (240,153) (89,491)
(Increase) decrease in inventories (123,518) (332,452)
(Increase) decrease in refundable income taxes 0 42,433
(Increase) decrease in prepaid expenses and other
current assets 1,064 (85,128)
(Increase) decrease in deferred costs 17,444 5,527
Increase (decrease) in accounts payable and
accrued expenses 82,654 133,840
Increase (decrease) in income taxes payable 175,221 (23,833)
Increase (decrease) in unearned income 39,079 (8,053)
---------- ----------
Net cash provided by (used in) operating
actitivies 371,946 283,851
Investing Activities:
Purchase of property, plant and equipment (415,649) (550,239)
---------- ----------
Net cash provided by (used in) investing activities (415,649) (550,239)
Financing activities:
Increase in short-term borrowings 100,000 101,855
Proceeds from long-term debt 363,887 500,000
Principal payments on long-term borrowings and notes (18,297) (17,882)
Prinipal payments under capital lease obligations (18,554) (13,210)
Dividends paid 0 (47,060)
Purchase of treasury stock (183,579) (89,166)
---------- ----------
Net cash provided by (used in) financing activities 243,457 434,537
Effect of exchange rate changes on cash and 62,465 (94,214)
cash equivalents ---------- -----------
Increase (decrease) in cash and cash equivalents 262,219 73,935
Cash and cash equivalents at beginning of period 1,507,176 2,168,757
---------- ----------
Cash and cash equivalents at end of period $1,769,395 $2,242,692
========== ==========
</TABLE>
See notes to consolidated financial statements.
<PAGE>
Reliv' International, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
March 31, 1996
NOTE 1 -- BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-Q and Article 10 of
Regulation S-X. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments (consisting
of normal recurring accruals) considered necessary for a fair presentation have
been included. Operating results for the three-month period ended March 31,
1996 are not necessarily indicative of the results that may be expected for the
year ended December 31, 1996. For further information, refer to the
consolidated financial statements and footnotes thereto included in the
Registrant Company and Subsidiaries' annual report on Form 10-K for the year
ended December 31, 1995.
NOTE 2 -- SHORT-TERM BORROWINGS
In January 1996, the Company secured a $500,000 line of credit with a bank.
Borrowings under the line of credit are due Janaury 1997 and bear interest,
payable monthly, at the prime rate. A portion of the Company's inventory and
property, plant and equipment are pledged as security under the terms of the
agreement. The agreement includes restrictive covenants, including a
requirement that the Company maintain a current ratio of 1.5 to 1.0 and a
minimum net worth of $5,500,000. As of March 31, 1996, the Company has borrowed
$100,000 against this line of credit.
NOTE 3 -- LONG-TERM DEBT
As part of the credit facility discussed in Note 2, the Company entered
into a $950,000 term loan. The credit facility also provides for an additional
$1,000,000 line of credit. The term loan is payable in monthly installments of
$19,547, including interest at 8.5 percent, through April 2001. The proceeds of
the term loan were used to pay a previous term loan and line of credit.
Borrowings under the $1,000,000 line of credit are due February 2001 and bear
interest, payable monthly, at the prime rate. The term loan and additional line
of credit are part of a credit facility with the bank and is subject to the same
security pledges and restrictive covenants as the $500,000 line of credit
described in Note 2.
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND> This schedule contains summary financial information extracted from
the balance sheet as of March 31, 1996 and the statement of operations for the
three months ended March 31, 1996 and is qualified in its entirety by reference
to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> MAR-31-1996
<CASH> 1,769,395
<SECURITIES> 0
<RECEIVABLES> 906,188
<ALLOWANCES> 9,000
<INVENTORY> 2,664,587
<CURRENT-ASSETS> 6,155,210
<PP&E> 6,649,079
<DEPRECIATION> 1,753,781
<TOTAL-ASSETS> 11,189,567
<CURRENT-LIABILITIES> 3,825,238
<BONDS> 1,691,223
<COMMON> 3,404,330
0
0
<OTHER-SE> 2,268,776
<TOTAL-LIABILITY-AND-EQUITY> 11,189,567
<SALES> 9,303,549
<TOTAL-REVENUES> 9,303,549
<CGS> 2,567,511
<TOTAL-COSTS> 2,567,511
<OTHER-EXPENSES> 6,259,877
<LOSS-PROVISION> 2,000
<INTEREST-EXPENSE> 71,106
<INCOME-PRETAX> 437,516
<INCOME-TAX> 159,916
<INCOME-CONTINUING> 277,600
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 277,600
<EPS-PRIMARY> .03
<EPS-DILUTED> .03
</TABLE>
