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 June 30, 1999
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 9,650,502 outstanding Shares as of June 30, 1999
<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 June 30, 1999 and Balance Sheet as of
December 31, 1998.
2. Interim Statements of Operations for the three and six month
periods ending June 30, 1999 and June 30, 1998.
3. Interim Statements of Cash Flows for the six month periods ending
June 30, 1999 and June 30, 1998.
The Financial Statements reflect all adjustments which are, in the opinion
of management, necessary to a fair statement of results for the periods
presented.
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operation
1. Financial Condition
-------------------
Current assets of the Company increased during the second quarter of 1999,
to $11,212,000 from $8,358,000 as of December 31, 1998, primarily due to
increases in accounts receivable and inventory. These increases are due to the
increased sales and production of the Company's manufacturing and packaging
business. The increase in inventory is for raw materials for these customers.
Cash and cash equivalents decreased by $758,000 to $2,058,000 as of June 30,
1999 as the result of the increase in accounts receivable and inventory, coupled
with the net loss for the second quarter, as well as equipment acquisitions to
be discussed later.
The Company purchased $886,000 of property, plant and equipment during the
first six months of 1999, bringing its total gross property, plant and equipment
to $15,181,000. The majority of the purchases were for new manufacturing
capabilities for its manufacturing and packaging business. This acquisition was
funded with an additional long-term note with the Company's primary lender of
$300,000.
Current liabilities increased by $3,676,000 from $6,175,000 as of December
31, 1998 to $9,851,000 as of June 30, 1999. The primary components of the
increase were in trade accounts payable and borrowings under the line of credit.
Trade accounts payable increased by $2,293,000 from $3,568,000 as of December
31, 1998 to $5,861,000 as of June 30, 1999. This increase is due to the
increased raw material inventory as discussed previously. Borrowings under the
line of credit
2
<PAGE>
have increased by $843,000 in order to fund the increase in inventory and as the
result of the net loss for the quarter.
Long-term debt increased slightly as the result of the additional debt of
$300,000 that was incurred during the first quarter. The increase in the current
maturities of long-term debt and capital lease obligations is due to the same
note.
Stockholders' equity decreased from $8,340,000 as of December 31, 1998 to
$8,075,000 as of June 30, 1999, partly as a result of the net loss for the first
six months. The Company also paid out cash dividends of $97,000 in the first
quarter of 1999. Equity improved by $136,000 as the result of the improved
foreign currency translation adjustment at June 30, 1999 as compared to December
31, 1998. The Australian, New Zealand and Canadian dollars, as well as the
Mexican peso all strengthened against the US dollar over the course of the first
six months of 1999.
The Company's working capital balance has decreased by $822,000 since
December 31, 1998 to $1,361,000 as of June 30, 1999. The current ratio has also
declined to 1.14 as of June 30, 1999. During the second quarter of 1999, the
Company restructured its line of credit arrangements with its primary lender.
The new line of credit provides a formula-based borrowing arrangement against a
percentage of accounts receivable and inventory up to a maximum borrowing limit.
The Company requested this modification in the line of credit, as the makeup of
the Company's balance sheet has changed due the increased business in the
manufacturing and packaging segment.
2. Results of Operations
---------------------
The Company had a net loss of $367,000, or $.04 per share, for the quarter
ended June 30, 1999, compared to net income of $513,000, or $.05 per share, for
the same period in 1998. The Company experienced a significant setback in the
profitability of its manufacturing and packaging operations, coupled with a
decline in network marketing sales in its core United States market. In
addition, consolidated selling, general and administrative expenses increased by
$437,000 in the second quarter of 1999 as compared to the prior year. For the
six months ended June 30, 1999, the Company incurred a loss of $300,000 compared
to net income of $1,145,000 for the first six months of 1998.
Net sales improved to $18,962,000 in the second quarter of 1999 as compared
to $11,994,000 in the prior year. Net sales for the first six months of 1998,
increased to $36,657,000 from $24,271,000 for the same period in 1998. The
increase in sales was solely due to the increase in sales by the Company's
manufacturing and packaging services segment. Sales in this portion of the
business increased to $9,122,000 in the second quarter of 1999, as compared to
$171,000 in the prior year. Sales in the manufacturing and packaging services
segment were $15,331,000 for the first six months of 1999 as compared to
$330,000 for the prior year.
Net sales in the network marketing segment declined from $11,823,000 in the
second quarter of 1998 to $9,840,000 in the second quarter of 1999 and declined
from $23,941,000 for the first six
3
<PAGE>
months of 1998 to $21,327,000 in the first six months of 1999. Network marketing
sales in the United States declined by 19% from $10,663,000 in the second
quarter of 1998 to $8,671,000 in the second quarter of 1999 and declined from
$21,428,000 for the first six months of 1998 to $19,108,000 for the first six
months of 1999. The Company has adopted a number of programs designed to
increase sales in the network marketing area including the introduction of a
fully- interactive website where distributors can order product, communicate
with the Company and other distributors, monitor their business and maintain
their own websites. The Company also introduced new distributor manuals and
other distributor materials. These measures have been taken in an effort to
increase the distributor network and increase sales. The Company is also
focusing on reducing administrative and operational costs to enhance
profitability.
Sales in the foreign subsidiaries of Australia, New Zealand, Canada, Mexico
and the United Kingdom overall increased by less than 1% to $1,169,000 in the
second quarter of 1999 as compared to $1,160,000 in the second quarter of 1998.
This increase is due to improved sales in the Company's Mexican subsidiary,
which experienced an increase of 165% in its second quarter 1999 sales, versus
second quarter 1998. This increase is due to the efforts of the sales manager in
that market, combined with the implementation of distribution centers across
Mexico in order to facilitate sales and other distributor activities in cities
outside of the Mexican headquarters in Mexico City. In its Australian and New
Zealand markets, the Company is still experiencing a decline in sales; however,
a new sales manager with significant network marketing experience has been
recently installed in the region.
The Company provides manufacturing and packaging services, including
blending, processing and packaging food products in accordance with
specifications provided by its customers. Net sales of these services increased
to $9,122,000 in the second quarter of 1999 from $171,000 in the prior year. The
increase in sales is due to the work provided by two major customers. The
Company's sales to third party customers primarily consist of the Company
purchasing raw materials, using customer-provided packaging materials and
selling a finished product to the customer. For the second quarter of 1999, cost
of goods sold for these sales were 101% of net sales. Even under optimal
operating efficiencies, the gross margin for third-party customers is
substantially less than margins obtained in the sales of the network marketing
products. The Company's growth in this area has led to production capacity and
warehousing problems and related labor inefficiencies. The Company has taken
steps to better manage its growth in this area, including some plant staffing
cuts and the consolidation of an unprofitable second shift into its first shift
operations. It has also begun reviewing profit margins by customer and project
and has either discontinued or is restructuring those projects that are not
yielding the needed profit margins.
Cost of products sold for the network marketing segment as a percentage of
net sales increased slightly from 16.9% in the second quarter of 1998 to 17.1%
in the second quarter of 1999. The increase is due in part to the Company's
decision to discontinue its single serve versions of its nutritional supplements
and Healthy Pantry products.
4
<PAGE>
Distributor royalties and commissions as percentage of network marketing
sales remained steady at 37% of network marketing sales in the second quarter of
both 1999 and 1998. 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.
Interest expense increased from $121,000 in the second quarter of 1998 to
$140,000 in the second quarter of 1999. This is the result of the increase in
the Company's long-term debt to finance equipment acquisitions and the increased
borrowings against the line of credit.
3. Year 2000 Issues
----------------
Most computer databases, as well as embedded microprocessors in computer
systems and industrial equipment, have been programmed to use a two-digit number
to represent the year. Computer programs that recognize a date using "00" as the
year 1900 rather than the year 2000 could result in errors or system failures.
Accordingly, all companies must analyze their systems and make the necessary
changes to ensure that automated processes will correctly distinguish between
years before and after the year 2000.
Based upon a recent assessment of its business, the Company does not
believe the Year 2000 issue will have a material adverse effect on its
operations. Based on testing of the Company's current computer hardware and
software systems the Company has determined that the vast majority of such
systems are Year 2000 compliant, and this result has been achieved without
material cost to the Company. The Company has identified some of its
telecommunication hardware and software that is not Year 2000 compliant and is
in the process of installing the necessary upgrades. The cost of these upgrades
will not be material. The Company has initiated communications with the
manufacturers of its manufacturing and warehouse equipment to ensure that this
equipment will be Year 2000 ready. Based on conversations with and evaluations
by these manufacturers, it is anticipated that no warehouse or manufacturing
equipment will need to be replaced. Consequently, no material costs will be
incurred to make any of the Company's manufacturing and warehouse equipment Year
2000 ready. The Company incurred no cost for the testing performed by the
manufacturers of this equipment.
Formal communications have commenced and are ongoing with all significant
suppliers and large customers of the Company, and will continue during the
balance of 1999 to determine the extent to which the Company may be vulnerable
to those third parties' failure to remediate their own potential Year 2000
problems. The Company has several suppliers of its raw materials and should be
able to obtain alternative sources of supply if these suppliers experience Year
2000 problems. The Company has two major customers for its manufacturing and
packaging services and has received confirmation from these customers that they
have addressed their Year 2000 issues. The Company's customers for its network
marketing segment are typically individuals who will have no Year 2000 exposure.
The Company ships the majority of its products through common carrier (primarily
United Parcel Services) and has received confirmation that these carriers have
addressed their Year 2000 issues.
5
<PAGE>
If the Company's most significant customers, or the suppliers of the
Company's necessary energy, telecommunications and transportation needs, fail to
provide the Company with the materials and services which are necessary to
produce, distribute and sell its products, such failure could have a material
adverse effect on the results of operations, liquidity and financial condition
of the Company. There can be no guarantee that the systems of these suppliers,
vendors and customers of the Company will be timely converted to Year 2000
compliance. Nor is there any guarantee that the Company would experience no
material adverse effects should any of the significant vendors, suppliers or
customers of the Company fail to remediate their potential Year 2000 problems.
It is impossible to provide accurate estimates of the material costs to the
Company should any of the significant vendors, suppliers or customers of the
Company fail to remediate their potential Year 2000 problems. It is anticipated
that such costs, if any, would be paid from the general revenues of the Company.
Given that, as a result of the Company's communications with the aforementioned
vendors, suppliers, and major customers, said parties have indicated that they
have addressed or are addressing their own Year 2000 issues, the Company
believes that the risk of increased costs due to these parties failure to
remediate their potential Year 2000 issues, is relatively low. The Company has
not budgeted for these potential costs. No Company projects have been deferred
or abandoned due to any expenditure related to obtaining Year 2000 compliance.
The Company has determined it has no exposure to contingencies related to
the Year 2000 for the products it sells.
The Company has no contingency plans in effect for the failure of any of
Company's significant suppliers, customers or vendors of energy,
telecommunications or transportation needs to become Year 2000 ready, nor does
the Company believe that such a plan is necessary. The Company has not obtained
and does not plan to obtain insurance to cover any of its potential Year 2000
exposure.
The cost of attaining Year 2000 compliance has not and will not be material
for the Company. It is anticipated that no warehouse or manufacturing equipment
will need to be replaced. The Company is currently assessing its other office
equipment for any Year 2000 issues. The Company will primarily utilize internal
resources to manage the Year 2000 issue.
The Company believes that its computer hardware and software will meet its
administrative needs in the United States and in its foreign subsidiaries in the
foreseeable future.
4. Quantitative and Qualitative Disclosure of Market Risk
------------------------------------------------------
The Company's earnings and cash flow are subject to fluctuations due to
changes in foreign currency rates as it has several foreign subsidiaries and
continues to explore expansion into other foreign countries. As a result,
exchange rate fluctuations may have an effect on its sales and the Company's
gross margins. Accounting practices require that the Company's results from
operations be converted to U.S. dollars for reporting purposes. Consequently,
the reported earnings of the Company in future periods may be significantly
affected by fluctuations in currency exchange rates,
6
<PAGE>
generally increasing with a weaker U.S. dollar and decreasing with a
strengthening U.S. dollar. Products manufactured by the Company for sale to the
Company's foreign subsidiaries are transacted in U.S. dollars. As the Company's
foreign operations expand, its operating results will be subject to the risks of
exchange rate fluctuations and the Company may not be able to accurately
estimate the impact of such changes on its future business, product pricing,
results of operations or financial condition.
The Company also is exposed to market risk in changes in interest rates on
its long-term debt arrangements and commodity prices in some of the raw
materials it purchases for its manufacturing needs. However, neither presents a
risk that would have a material effect on the Company's results of operations or
financial condition.
Part II. OTHER INFORMATION
-----------------
Item 1. Legal Proceedings
-----------------
In May, 1998, former sales/general manager of the Company's Canadian
subsidiary filed a lawsuit claiming unlawful termination and breach of contract.
The individual had been terminated by the Company in March, 1998. The Company
believes the claim is without merit and intends to vigorously defend itself.
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
---------------------------------------------------
The Company's annual meeting was held on May 27, 1999. At such meeting the
Company's Board of Directors was re-elected. A proposal to approve a change in
the state of incorporation of the Company from Illinois to Delaware was approved
by a vote of 5,451,843 shares for, 183,627 shares against, 22,201 shares
abstaining and 2,774,994 broker non-votes. A proposal to approve the Company's
1999 Stock Option Plan was approved by 4,855,903 shares for, 629,735 shares
against, 34,919 shares abstaining and 2,912,108 broker non-votes.
Item 5. Other Information
-----------------
Not applicable.
7
<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.
* 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.
8
<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: August 13, 1999 RELIV' INTERNATIONAL, INC.
By: /s/ Robert L. Montgomery
-------------------------------
Robert L. Montgomery, President,
Chief Executive Officer and
Principal Financial Officer
9
<PAGE>
Reliv International, Inc. and Subsidiaries
Consolidated Balance Sheets
<TABLE>
<CAPTION>
June 30 December 31
1999 1998
------------ ------------
(unaudited) (see notes)
Assets
<S> <C> <C>
Current assets:
Cash and cash equivalents $2,058,494 $2,816,804
Accounts and notes receivable, less allowances of
$3,600 in 1999 and $5,000 in 1998 2,103,952 777,443
Inventories
Finished goods 2,079,930 1,702,359
Raw materials 3,618,579 1,865,649
Sales aids and promotional materials 367,656 361,322
------------ ------------
Total inventories 6,066,165 3,929,330
Refundable income taxes 399,245 314,284
Prepaid expenses and other current assets 503,975 440,597
Deferred income taxes 80,554 79,269
------------ ------------
Total current assets 11,212,385 8,357,727
Other assets:
Goodwill, net of accumulated amortization of $39,415
in 1999 and $13,000 in 1998 486,122 512,399
Other assets 929,038 703,623
------------ ------------
Total other assets 1,415,160 1,216,022
Property, plant and equipment:
Land 829,222 829,222
Building 8,328,928 8,201,744
Machinery & equipment 3,773,052 2,783,923
Office equipment 457,729 446,205
Computer equipment & software 1,791,993 1,676,372
Construction in progress -- 235,511
------------ ------------
15,180,924 14,172,977
Less: Accumulated depreciation (4,005,904) (3,493,754)
------------ ------------
Net property, plant and equipment 11,175,020 10,679,223
------------ ------------
Total assets $23,802,565 $20,252,972
============ ============
</TABLE>
See notes to financial statements.
10
<PAGE>
Reliv International, Inc. and Subsidiaries
Consolidated Balance Sheets
<TABLE>
<CAPTION>
June 30 December 31
1999 1998
------------ ------------
(unaudited) (see notes)
Liabilities and stockholders' equity
<S> <C> <C>
Current liabilities:
Accounts payable and accrued expenses:
Trade accounts payable $5,861,187 $3,568,334
Distributors commissions payable 1,394,058 1,172,164
Sales taxes payable 179,589 221,377
Interest expense payable 29,158 27,851
Payroll and payroll taxes payable 260,546 114,906
Other accrued expenses 208,709 85,123
------------ ------------
Total accounts payable and accrued expenses 7,933,247 5,189,755
Income taxes payable 39,581 55,258
Borrowings under line of credit 1,156,387 313,825
Current maturities of long-term debt and
capital lease obligations 614,434 508,362
Unearned income 107,722 107,695
------------ ------------
Total current liabilities 9,851,371 6,174,895
Capital lease obligations, less current maturities 382,980 373,455
Long-term debt, less current maturities 5,225,648 5,216,107
Other non-current liabilities 267,404 148,349
Stockholders' equity:
Common stock, no par value; 20,000,000 shares
authorized; 9,650,502 shares outstanding as of 6/30/99
and 9,653,502 shares outstanding as of 12/31/98 9,178,645 9,179,764
Notes receivable-officers and directors (41,530) (44,746)
Retained deficit (757,379) (354,195)
Foreign currency translation adjustment (304,574) (440,657)
------------ ------------
Total stockholders' equity 8,075,162 8,340,166
------------ ------------
Total liabilities and stockholders' equity $23,802,565 $20,252,972
============ ============
</TABLE>
See notes to financial statements.
11
<PAGE>
Reliv International, Inc. and Subsidiaries
Consolidated Statements of Operations
<TABLE>
<CAPTION>
Three months ended June 30 Six months ended June 30
1999 1998 1999 1998
------------ ------------ ------------ ------------
(unaudited) (unaudited) (unaudited) (unaudited)
<S> <C> <C> <C> <C>
Sales at suggested retail $23,714,422 $18,295,012 $47,488,833 $37,019,418
Less: distributor allowances on product purchases 4,752,259 6,300,550 10,831,359 12,748,099
------------ ------------ ------------ ------------
Net sales 18,962,163 11,994,462 36,657,474 24,271,319
Costs and expenses:
Cost of products sold 10,912,666 2,169,183 18,987,398 4,423,591
Distributor royalties and commissions 3,680,025 4,426,699 8,190,800 8,889,439
Selling, general and administrative 4,875,618 4,438,141 9,799,447 8,869,920
------------ ------------ ------------ ------------
Total costs and expenses 19,468,309 11,034,023 36,977,645 22,182,950
------------ ------------ ------------ ------------
Income/(loss) from operations (506,146) 960,439 (320,171) 2,088,369
Other income (expense):
Interest income 42,900 36,556 61,700 66,763
Interest expense (140,295) (120,707) (270,693) (240,248)
Other income/(expense) 10,147 (36,205) 44,380 (39,470)
------------ ------------ ------------ ------------
Income/(loss) before income taxes (593,394) 840,083 (484,784) 1,875,414
Provision/(benefit) for income taxes (226,289) 327,555 (184,667) 730,162
------------ ------------ ------------ ------------
Net income/(loss) ($367,105) $512,528 ($300,117) $1,145,252
============ ============ ============ ============
Earnings/(loss) per common share ($0.04) $0.05 ($0.03) $0.12
============ ============ ============ ============
Earnings/(loss) per common share - assuming dilution ($0.04) $0.05 ($0.03) $0.11
============ ============ ============ ============
</TABLE>
See notes to financial statements.
12
<PAGE>
Reliv International, Inc. and Subsidiaries
Consolidated Statements of Cash Flows
(unaudited)
<TABLE>
<CAPTION>
Six months ended June 30
1999 1998
----------- -----------
<S> <C> <C>
Operating activities:
Net income/(loss) ($300,117) $1,145,252
Adjustments to reconcile net income/(loss) to
net cash provided by (used in) operating
activities:
Depreciation and amortization 528,848 347,848
Provision for losses on accounts receivable -- 4,000
Foreign currency translation (gain) loss (6,789) 65,219
(Increase) decrease in accounts and notes receivable (1,274,279) (43,139)
(Increase) decrease in inventories (2,099,327) (371,083)
(Increase) decrease in refundable income taxes (189,587) (145,243)
(Increase) decrease in prepaid expenses
and other current assets (60,842) 146,220
(Increase) decrease in other assets (225,254) 993
Increase in accounts payable and accrued expenses 2,795,327 716,322
Increase (decrease) in income taxes payable 86,383 9,751
Increase (decrease) in unearned income -- 37,279
----------- -----------
Net cash provided by (used in) operating activities (745,637) 1,913,419
Investing activities:
Purchase of property, plant and equipment (885,685) (1,156,875)
----------- -----------
Net cash used in investing activities (885,685) (1,156,875)
Financing activities:
Net borrowings under line of credit 842,562 --
Proceeds from long-term borrowings 300,000 471,486
Principal payments on long-term borrowings (204,714) (157,464)
Principal payments under capital lease obligations (74,434) (24,921)
Dividends paid (96,505) (240,963)
Proceeds from notes receivable assumed from issuance
of common stock from exercise of options 3,216 766
Purchase of treasury stock (7,682) --
----------- -----------
Net cash provided by financing
activities 762,443 48,904
Effect of exchange rate changes on cash
and cash equivalents 110,569 (128,627)
----------- -----------
Increase (decrease) in cash and cash
equivalents (758,310) 676,821
Cash and cash equivalents at beginning
of period 2,816,804 2,426,426
----------- -----------
Cash and cash equivalents at end of period $2,058,494 $3,103,247
=========== ===========
</TABLE>
See notes to financial statements
13
<PAGE>
Reliv' International, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
(Unaudited)
June 30, 1999
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 six-month period ended June 30, 1999
are not necessarily indicative of the results that may be expected for the year
ended December 31, 1999.
The balance sheet at December 31, 1998 has been derived from the audited
financial statements at that date but does not include all of the information
and footnotes required by generally accepted accounting priciples for complete
financial statements.
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, 1998.
Note 2-- Earnings per Share
The following table sets forth the computation of basic and diluted earnings per
share:
<TABLE>
<CAPTION>
Three months ended June 30 Six months ended June 30
1999 1998 1999 1998
-------------------------- --------------------------
<S> <C> <C> <C> <C>
Numerator:
Numerator for basic and diluted
earnings per share--net income/(loss) ($367,105) $512,528 ($300,117) $1,145,252
Denominator:
Denominator per basic earnings per
share--weighted average shares 9,651,000 9,638,000 9,651,000 9,638,000
Effect of dilutive securities:
Employee stock options and other warrants 135,000 639,000 135,000 639,000
-------------------------- --------------------------
Denominator for diluted earnings per
share--adjusted weighted average shares 9,786,000 10,277,000 9,786,000 10,277,000
========================== ==========================
Basic earnings/(loss) per share ($0.04) $0.05 ($0.03) $0.12
========================== ==========================
Diluted earnings/(loss) per share ($0.04) $0.05 ($0.03) $0.11
========================== ==========================
</TABLE>
Note 3-- Comprehensive Income
Total comprehensive loss was $292,647 and $164,034 for the three months and six
months ended June 30, 1999, respectively. For the three and six months ended
June 30, 1998, comprehensive income was $405,883 and $1,036,709, respectively.
The Company's only component of other comprehensive income is the foreign
currency translation adjustment.
14
<PAGE>
Reliv' International, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
(Unaudited)
June 30, 1999
Note 4-- Segment Information
<TABLE>
<CAPTION>
Three months ended Three months ended
June 30, 1999 June 30, 1998
------------- -------------
Network Manufacturing Network Manufacturing
marketing and packaging marketing and packaging
-------------------------------- --------------------------------
<S> <C> <C> <C> <C>
Net sales to external customers 9,839,828 9,122,335 11,823,463 170,999
Intersegment net sales -- 1,599,654 -- 1,975,034
Segment profit/(loss) 309,620 (448,291) 1,483,999 (149,021)
</TABLE>
<TABLE>
<CAPTION>
Six months ended Six months ended
June 30, 1999 June 30, 1998
------------- -------------
Network Manufacturing Network Manufacturing
marketing and packaging marketing and packaging
-------------------------------- --------------------------------
<S> <C> <C> <C> <C>
Net sales to external customers 21,326,943 15,330,531 23,941,216 330,103
Intersegment net sales -- 3,284,913 -- 3,918,898
Segment profit/(loss) 958,626 (545,036) 3,068,834 (183,365)
Segment assets 13,799,595 7,944,478 12,268,013 2,415,348
</TABLE>
A reconciliation of combined operating profit for the reportable
segments to consolidated income before income taxes is as follows:
<TABLE>
<CAPTION>
Three months ended June 30 Six months ended June 30
1999 1998 1999 1998
--------------------------- ---------------------------
<S> <C> <C> <C> <C>
Total profit for reportable segments (138,671) 1,334,978 413,590 2,885,469
Corporate expenses (367,476) (374,540) (733,762) (797,100)
Non operating - net 53,048 352 106,081 27,293
Interest expense (140,295) (120,707) (270,693) (240,248)
-------------------------- ---------------------------
Income before income taxes (593,394) 840,083 (484,784) 1,875,414
========================== ===========================
</TABLE>
Note 5-- Legal Proceedings
In May 1998, the former sales/general manager of the Company's Canadian
subsidiary filed lawsuit claiming unlawful termination and breach of contract.
The individual had been terminated by the Company in March 1998. The Company
believes the claim is without merit and intends to vigorously defend itself. At
this time, the outcome of this matter is uncertain and a range of loss cannot be
reasonably estimated; however, management believes that the final outcome will
not have a material adverse effect on the financial position or results of
operations of the Company.
15
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM FORM 10-Q
FOR THE QUARTER ENDING JUNE 30, 1999 AND IS QUALIFIED IN ITS ENTIRETY BY
REFRENCE TO SUCH FORM 10-Q.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-mos
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> JUN-30-1999
<CASH> 2,058,494
<SECURITIES> 0
<RECEIVABLES> 2,107,552
<ALLOWANCES> 3,600
<INVENTORY> 6,066,165
<CURRENT-ASSETS> 11,212,385
<PP&E> 15,180,924
<DEPRECIATION> 4,005,904
<TOTAL-ASSETS> 23,802,565
<CURRENT-LIABILITIES> 7,933,247
<BONDS> 5,225,648
0
0
<COMMON> 9,178,645
<OTHER-SE> (1,103,483)
<TOTAL-LIABILITY-AND-EQUITY> 23,802,565
<SALES> 36,657,474
<TOTAL-REVENUES> 36,657,474
<CGS> 18,987,398
<TOTAL-COSTS> 27,178,198
<OTHER-EXPENSES> 9,693,367
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 270,693
<INCOME-PRETAX> (484,784)
<INCOME-TAX> (184,667)
<INCOME-CONTINUING> (300,117)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (300,117)
<EPS-BASIC> (.03)
<EPS-DILUTED> (.03)
</TABLE>
