<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, 1997
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 9,816,835 outstanding Shares as of March 31, 1997
<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, 1997 and Balance Sheet as of
December 31, 1996.
2. Interim Statements of Operations for the three-month periods ending
March 31, 1997 and March 31, 1996.
3. Interim Statements of Cash Flows for the three month periods ending
March 31, 1997 and March 31, 1996.
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 1997, to
$7,680,000 from $6,553,000 as of December 31, 1996. Cash and cash equivalents
increased $1,107,000 to $3,216,000 as of March 31, 1997, due to first quarter
1997 income before taxes of $1,350,000. Accounts receivable decreased to
$896,000 at March 31, 1997, from $1,056,000 at December 31, 1996 as a result of
a decrease in sales of the Company's contract packaging services, which are
generally paid on 30-day terms. Contract manufacturing sales declined to
$751,000 for the quarter as compared to $1,147,000 in the fourth quarter 1996.
Inventories increased to $3,074,000 from $2,762,000 at December 31, 1996, as
increased sales volumes in the United States required greater finished goods
levels.
Net property, plant and equipment remained relatively level during the first
quarter 1997 at $4,852,000. Investment in property, plant and equipment will
increase during 1997 as the Company plans to expand its facility on land the
Company owns adjacent to its existing building in Chesterfield, Missouri. Plans
include expanding office, warehousing and manufacturing areas by adding
approximately 90,000 square feet of space to its facility. Construction is
anticipated to begin during the second quarter 1997.
Current liabilities increased to $4,645,000 at March 31, 1997, from $3,866,000
at December 31, 1996. Trade accounts payable decreased slightly to $1,612,000
from $1,689,000 at December 31, 1996. Distributor commissions payable increased
$543,000 as a result of increased sales volume in March, 1997, as compared to
December, 1996. As a result of increased net income in the first quarter 1997,
income taxes payable increased to $323,000 as of March 31, 1997, from $65,000 as
of December 31, 1996.
2
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The Company's working capital balance has improved by $348,000 since December
31, 1996, with a current ratio of 1.65 due to the net profits generated 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. Results of Operations
---------------------
The Company had a net profit of $819,000, or $.08 per share, for the quarter
ended March 31, 1997, compared to a net profit of $278,000, or $.03 per share,
for the same period of 1996. Net sales for the period increased to $12,670,000
from $9,304,000 in 1996. Net sales in 1997 were comprised of $11,919,000 in
network marketing sales and $751,000 in contract packaging services, as compared
to $8,535,000 in network marketing sales and $769,000 in contract packaging
services in 1996.
The Company provides contract packaging services, including blending,
processing and packaging food products in accordance with specifications
provided by its customers. Net sales in the first quarter 1997 were $751,000,
with direct costs of contract services of 75.7%, compared to $769,000 and direct
costs of 108% in the first quarter 1996. The Company has lowered direct costs
as a percentage of net sales through efficiencies in the manufacturing process
and anticipates continued improved margins.
The increase in net sales from network marketing activities to $11,919,000 in
the first quarter of 1997, was primarily due to growth in net sales in the
United States to $10,540,000 as compared to $6,980,000 in 1996. The distributor
sales force in the United States grew due to an increase of 6% in new sign-ups
and a 84% increase in distributor renewals when compared to the quarter ending
March 31, 1996. The number of product orders increased by 49% over 1996 levels.
Net sales in Canada increased 61% over 1996 to $275,000. Net sales in Australia
and New Zealand decreased 29% to $909,000. The Company plans to introduce
several new products in these markets in 1997, and has introduced a new
marketing effort to develop sales and momentum.
Cost of network marketing products sold as a percentage of net sales, improved
to 16.5% for the first quarter of 1997, from 20.4% in the same period in 1996.
The improvement in gross margins is a result of improved manufacturing controls
and increased utilization of the manufacturing facility by providing contract
packaging services.
Distributor royalties and commissions increased to 37.0% of network marketing
sales in the first quarter 1997, compared to 35.2% for the same period in 1996.
These expenses are governed by the distributor agreements and are directly
related to the level of sales. The Company pays a percent of sales up to 18% in
royalties and as much as 45% in commissions. In addition, the Company paid
royalties of $180,000 through the Ambassador Program, an incentive program that
rewards distributors who have reached, and personally assisted qualified
distributors to reach, a specified level of compensation. The Ambassador
Program paid $94,000 in the first quarter 1996.
Selling, general and administrative expenses, as a percentage of net sales,
decreased slightly to 34.6% for the first quarter of 1997, from 34.9% in the
same period in 1996. Expenses in the first quarter 1997 were affected by
several expenses that do not reoccur on a quarterly basis. These expenses
included the costs of a national conference in the United States and a sales
incentive trip
3
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which increased selling, general and administrative expenses by 1.7% of net
sales as compared to 1996.
Forward looking statements made in this filing involve material risks and
uncertainties that could cause actual results and events to differ materially
from those set forth, or implied, including the Company's ability to continue to
attract, maintain and motivate its distributors, changes in the regulatory
environment affecting network marketing sales and sales of food and dietary
supplements and other risks and uncertainties in the Company's other SEC
filings.
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
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Not applicable.
Item 5 Other Information
-----------------
Not applicable.
Item 6. Exhibits and Reports on Form 8-K
--------------------------------
(a) Exhibits*
Description Exhibit No.
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Statement re: Computation of Per Share Earnings 11
(b) The Company has not filed a Current Report during the quarter
covered by this report.
* Also incorporated by reference the Exhibits filed as part of the S-18
Registration Statement of the Registrant, effective November 5, 1985,
and subsequent periodic filings.
4
<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 2, 1997 RELIV' INTERNATIONAL, INC.
By: /s/ Robert L. Montgomery
---------------------------------
Robert L. Montgomery, President,
Chief Executive Officer and
Principal Financial Officer
5
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Reliv' International, Inc. and Subsidiaries
Consolidated Balance Sheets
<TABLE>
<CAPTION>
March 31, 1997 December 31, 1996
(Unaudited) (Note)
-------------- -----------------
<S> <C> <C>
Assets
Current Assets:
Cash and cash equivalents $ 3,215,655 $ 2,108,770
Accounts and notes receivable, less allowances of
$13,000 in 1997 and $13,000 in 1996 896,173 1,056,360
Inventories
Finished goods 1,590,890 1,219,295
Raw materials 1,117,125 1,136,897
Sales aids and promotional materials 366,096 405,768
----------- -----------
Total inventories 3,074,111 2,761,960
Refundable income taxes 48,145 48,949
Prepaid expenses and other current assets 380,772 512,031
Deferred income taxes 64,657 65,000
----------- -----------
Total current assets 7,679,513 6,553,070
Deferred costs 59,332 79,223
Property, plant and equipment:
Land 790,677 790,677
Building 2,863,320 2,863,457
Machinery & equipment 1,751,668 1,693,849
Office equipment 335,774 328,780
Computer equipment & software 1,362,726 1,245,137
Construction in progress 117,814 74,423
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7,221,979 6,996,323
Less: Accumulated depreciation (2,370,411) (2,226,951)
----------- -----------
Net Property, plant and equipment 4,851,568 4,769,372
----------- -----------
Total Assets $12,590,413 $11,401,665
=========== ===========
</TABLE>
Note: The balance sheet at December 31, 1996 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, 1997 December 31, 1996
(Unaudited) (Note)
-------------- -----------------
<S> <C> <C>
Liabilities and Stockholders' Equity
Current Liabilities:
Accounts payable and accrued expenses
Trade accounts payable $ 1,611,499 $ 1,688,777
Distributors commissions payable 1,607,340 1,064,023
Sales taxes payable 290,828 225,509
Interest expense payable 14,758 13,625
Payroll and payroll taxes payable 371,543 391,905
Other accrued expenses 114,447 112,219
----------- -----------
Total accounts payable and accrued expenses 4,010,415 3,496,058
Income taxes payable 322,550 65,102
Current maturities of long-term debt and
capital lease obligations 306,702 282,502
Unearned income 5,003 22,602
----------- -----------
Total current liabilities 4,644,670 3,866,264
Capital lease obligations, less current maturities 69,718 13,211
Long-term debt, less current maturities 1,406,244 1,464,868
Stockholders' Equity:
Common stock, no par value; 20,000,000 shares
authorized; 9,816,835 shares outstanding as of 3/31/97
and 9,900,529 shares outstanding as of 12/31/96 9,211,826 9,211,826
Notes receivable-officers and directors (4,633) (4,633)
Retained earnings (Note 2) (1,796,807) (2,516,181)
Foreign currency translation adjustment (6,942) 10,970
Less cost of treasury stock-252,780 shares as of 3/31/97
and 250,580 shares as of 12/31/96 (933,663) (644,660)
----------- -----------
Total Stockholders' Equity 6,469,781 6,057,322
----------- -----------
Total Liabilities and Stockholders' Equity $12,590,413 $11,401,665
=========== ===========
See notes to consolidated financial statements.
</TABLE>
<PAGE>
Reliv' International, Inc. and Subsidiaries
Consolidated Statements of Operations
<TABLE>
<CAPTION>
Three Months Ended March 31,
1997 1996
(Unaudited) (Unaudited)
------------ ------------
<S> <C> <C>
Sales at suggested retail $19,072,350 $14,069,321
Less Distributor allowances on product purchases 6,402,199 4,765,772
----------- -----------
Net Sales 12,670,151 9,303,549
Costs and expenses:
Cost of products sold 2,532,245 2,567,511
Distributor royalties and commissions 4,409,149 3,008,115
Selling, general and administrative 4,380,443 3,251,762
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Total Costs and Expenses 11,321,837 8,827,388
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Income from operations 1,348,314 476,161
Other income (expense):
Interest income 28,435 28,441
Interest expense (38,016) (71,106)
Other income/expense 11,473 4,020
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Income before income taxes 1,350,206 437,516
Provision for income taxes 531,359 159,916
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Net Income 818,847 277,600
=========== ===========
Earnings per share:
Primary 0.08 0.03
=========== ===========
Weighted average shares of common stock
and common stock equivalents outstanding
Primary 10,380,676 10,318,839
=========== ===========
</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,
1997 1996
(Unaudited) (Unaudited)
----------- ------------
<S> <C> <C>
Operating activities:
Net Income $ 818,847 $ 277,600
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Depreciation and amortization 147,844 146,857
Provision for losses on accounts receivable 0 2,000
Foreign currency translation (gain) loss 7,411 (6,302)
(Increase) decrease in accounts and notes receivable 160,145 (240,153)
(Increase) decrease in inventories (320,107) (123,518)
(Increase) decrease in prepaid expenses and other
current assets 130,845 1,064
(Increase) decrease in deferred costs 17,419 17,444
Increase (decrease) in accounts payable and
accrued expenses 520,952 82,654
Increase (decrease) in income taxes payable 258,271 175,221
Increase (decrease) in unearned income (17,600) 39,079
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Net cash provided by (used in) operating
actitivies 1,724,027 371,946
Investing Activities:
Purchase of property, plant and equipment (136,784) (415,649)
---------- ----------
Net cash provided by (used in) investing activities (136,784) (415,649)
Financing activities:
Increase in short-term borrowings 0 100,000
Proceeds from long-term debt 0 363,887
Principal payments on long-term borrowings and line of credit (53,608) (18,297)
Principal payments under capital lease obligations (16,829) (18,554)
Dividends paid (96,471) 0
Purchase of treasury stock (289,003) (183,579)
---------- ----------
Net cash provided by (used in) financing activities (455,911) 243,457
Effect of exchange rate changes on cash and
cash equivalents (24,447) 62,465
---------- ----------
Increase (decrease) in cash and cash equivalents 1,106,885 262,219
Cash and cash equivalents at beginning of period 2,108,770 1,507,176
---------- ----------
Cash and cash equivalents at end of year $3,215,655 $1,769,395
========== ==========
See notes to consolidated financial statements.
</TABLE>
<PAGE>
Reliv' International, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
(Unaudited)
March 31, 1997
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,
1997 are not necessarily indicative of the results that may be expected for the
year ended December 31, 1997. 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, 1996.
Note 2 -- Stock Dividend
On January 31, 1997, the Company declared a 10 percent stock dividend on
the Company's common stock which was distributed on February 28, 1997 to
shareholders of record on February 14, 1997. The dividend was transferred from
retained earnings to common stock in the amount of $5,848,000, which was based
on the closing price of $6.50 per share on the declaration date and was
reflected in the balance sheet as of December 31, 1996. Average shares
outstanding and all per share amounts included in the accompanying consolidated
financial statements and notes are based on the increased number of shares
giving retroactive recognition to the stock dividend.
<PAGE>
EXHIBIT II
Reliv' International, Inc. and Subsidiaries
EXHIBIT 11
STATEMENT RE: COMPUTATION OF PER SHARE EARNINGS
-----------------------------------------------
<TABLE>
<CAPTION>
Three Months Ended March 31
------------------------------------
1997 1996
(in thousands, except per share data)
<S> <C> <C>
Primary:
Average shares outstanding 9,621 10,186
Net effect of warrants and options 760 133
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Totals 10,381 10,319
======= =======
Net Income $ 819 $ 278
======= =======
Per share amount $ 0.08 $ 0.03
======= =======
Fully Diluted:
Average shares outstanding 9,621 10,186
Net effect of warrants and options 780 133
------- -------
Totals 10,401 10,319
======= =======
Net Income $ 819 $ 278
======= =======
Per share amount $ 0.08 $ 0.03
======= =======
</TABLE>
Note: Per share data reflects the effect of the Company's 10 percent stock
dividend declared on January 31, 1997 and distributed on February 28, 1997. The
1996 data reflects the pro forma effect of the dividend.
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND> This schedule contains summary financial information extracted from
the balance sheet as of March 31, 1997 and the statement of operations for the
three months ended March 31, 1997 and is qualified in its entirety by reference
to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> MAR-31-1997
<CASH> 3,215,655
<SECURITIES> 0
<RECEIVABLES> 909,173
<ALLOWANCES> 13,000
<INVENTORY> 3,074,111
<CURRENT-ASSETS> 7,679,513
<PP&E> 7,221,979
<DEPRECIATION> 2,370,411
<TOTAL-ASSETS> 12,590,413
<CURRENT-LIABILITIES> 4,644,670
<BONDS> 1,475,962
0
0
<COMMON> 9,211,826
<OTHER-SE> (2,742,045)
<TOTAL-LIABILITY-AND-EQUITY> 12,590,413
<SALES> 12,670,151
<TOTAL-REVENUES> 12,670,151
<CGS> 2,532,245
<TOTAL-COSTS> 2,532,245
<OTHER-EXPENSES> 8,789,592
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 38,016
<INCOME-PRETAX> 1,350,206
<INCOME-TAX> 531,359
<INCOME-CONTINUING> 818,847
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 818,847
<EPS-PRIMARY> .08
<EPS-DILUTED> .08
</TABLE>
