U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 for the quarterly period ended June 30, 1996
[ ] Transition Report under Section 13 or 15(d) of the Securities Exchange
Act of 1934 for the transition period from to .
Commission file No. 0-18476
AMRION, INC.
(Exact name of Registrant as specified in its charter)
Colorado 84-1050628
(State or other jurisdiction (IRS Employer ID No.)
of incorporation or organization)
6565 Odell Place, Boulder, CO 80301
(Address of principal executive offices) (Zip Code)
303-530-2525
(Telephone Number)
Indicate by check mark whether the Registrant (1) 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 (or for such shorter period that the Registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
Common stock, par value $.0011 per share: 5,199,324 shares outstanding
as of June 30, 1996.
<PAGE>
PART 1. FINANCIAL
ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS
<PAGE>
AMRION, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
AS OF JUNE 30, 1996 AND DECEMBER 31, 1995
<TABLE>
<CAPTION>
June 30, December 31,
1996 1995
(Unaudited) (Audited)
Assets
<S> <C> <C>
Current:
Cash and cash equivalents $ 127,823 $ 831,544
Accounts receivable, less allowance
of $41,000 and $48,000
for possible losses 815,035 624,006
Inventories 8,241,107 5,035,872
Mail supplies 722,880 1,026,463
Deferred promotional mailing costs, net 1,034,170 1,103,987
Other 317,523 393,273
----------- -----------
Total current assets 11,258,538 9,015,145
----------- -----------
Property and equipment, net 4,764,643 4,368,672
----------- -----------
Other assets:
Marketable securities available for sale 7,378,487 7,934,514
Mailing lists, net 2,463,758 2,111,556
Intangible assets, net 117,445 170,429
----------- -----------
Total other assets 9,959,690 10,216,499
----------- -----------
Total assets $25,982,871 $23,600,316
=========== ===========
See accompanying notes to the consolidated financial statements
</TABLE>
<PAGE>
AMRION, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
AS OF JUNE 30, 1996 AND DECEMBER 31, 1995
<TABLE>
<CAPTION>
June 30, December 31,
1996 1995
(Unaudited) (Audited)
Liabilities and Stockholders' Equity
<S> <C> <C>
Current:
Accounts payable $ 2,091,182 $ 3,094,662
Accrued liabilities 743,306 456,183
Income taxes payable 233,195 193,255
---------- ----------
Total current liabilities 3,067,683 3,744,100
Deferred income taxes 104,000 104,000
---------- ----------
Total liabilities 3,171,683 3,848,100
---------- ----------
Minority interest 9,207 32,865
Stockholders' equity:
Common stock, $.0011 par value - shares
authorized, 10,000,000; issued 5,199,324
and 5,026,813 5,719 5,529
Additional paid-in capital 12,849,805 11,788,856
Retained earnings 10,188,459 8,090,756
Marketable securities valuation
allowance (242,002) (165,790)
---------- ----------
Total stockholders' equity 22,801,981 19,719,351
---------- ----------
$25,982,871 $23,600,316
See accompanying notes to the consolidated financial statements
</TABLE>
<PAGE>
AMRION, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME
FOR THE SIX AND THREE-MONTH PERIODS ENDED JUNE 30, 1996 AND 1995
<TABLE>
<CAPTION>
Six months Three months
ended ended
June 30, June 30,
1996 1995 1996 1995
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
Net sales $25,253,287 $18,941,922 $11,871,331 $8,810,143
----------- ----------- ----------- -----------
Cost of sales:
Cost of products 10,797,795 8,056,959 4,858,266 3,701,337
Cost of mailing 4,776,405 3,860,393 1,893,097 1,826,122
----------- ----------- ------------ -----------
Cost of sales 15,574,200 11,917,352 6,751,363 5,527,459
----------- ----------- ----------- -----------
Gross profit 9,679,087 7,024,570 5,119,968 3,282,684
Operating expenses -
Selling, general and
administration 7,117,079 5,415,754 3,732,661 2,775,351
----------- ----------- ----------- -----------
Income from operations 2,562,008 1,608,816 1,387,307 507,333
----------- ----------- ----------- -----------
Other income, net 326,496 415,845 167,358 241,532
----------- ----------- ----------- -----------
Income before taxes
on income 2,888,504 2,024,661 1,554,665 748,865
Taxes on income 790,801 738,550 380,052 255,883
----------- ----------- ----------- -----------
Net income $2,097,703 $1,286,111 $1,174,613 $ 492,982
=========== =========== =========== ===========
Net income per common
and equivalent share
$ .40 $ .25 $ .22 $ .10
=========== =========== =========== ===========
Weighted average number
of common shares and
equivalents
outstanding 5,204,476 5,064,138 5,257,962 5,086,123
=========== =========== =========== ===========
See accompanying notes to the consolidated financial statements
</TABLE>
<PAGE>
AMRION, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIX AND THREE-MONTH PERIODS ENDED JUNE 30, 1996 AND 1995
<TABLE>
<CAPTION>
ended ended
June 30, June 30,
1996 1995 1996 1995
Unaudited) (Unaudited) (Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
Cash flows from operating activities:
Net income $2,097,703 $1,286,111 $1,174,613 $ 492,982
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 682,650 360,180 382,857 168,360
Changes in operating assets and liabilities:
Accounts receivable (191,029) 80,027 (119,565) 110,765
Inventories (3,205,235) (317,175) (282,795) (529,538)
Mailing supplies 303,583 (533,422) 136,241 (297,090)
Deferred promotional mailing costs 69,817 80,638 (386,997) (31,821)
Other assets 75,750 158,145 106,889 27,389
Accounts payable (1,003,480) (870,498) (2,367,655) (522,353)
Accrued liabilities 287,123 185,879 269,733 24,054
Income taxes payable 39,940 78,485 (197,917) (404,179)
---------- --------- --------- ----------
Cash provided by (used in)
operating activities (843,178) 508,370 (1,284,596) (961,431)
----------- --------- ----------- ----------
Cash flows from investing activities:
Sales of marketable securities
available for sale 479,815 506,645 288,502 309,501
Purchase of property and equipment (732,192) (275,074) (514,603) (84,574)
Purchase of mailing lists and intangible
assets (669,305) (850,719) (327,329) (463,158)
---------- --------- ----------- ----------
Cash used in investing activities (921,682) (619,148) (553,430) (238,231)
---------- --------- ----------- ----------
Cash flows from financing activities:
Proceeds from issuance of common
stock - net 1,061,139 49,514 1,008,114 16,000
---------- ---------- ----------- ---------
Net decrease in cash and cash equivalents (703,721) (61,264) (829,912) (1,183,662)
Cash and cash equivalents,
at beginning of period 831,544 120,931 957,735 1,243,329
---------- --------- ---------- ----------
Cash and cash equivalents,
at end of period $ 127,823 $59,667 $ 127,823 $ 59,667
========= ========= ========== ==========
See accompanying notes to the consolidated financial statements
</TABLE>
<PAGE>
AMRION, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1
The unaudited consolidated financial statements and related notes have been
prepared pursuant to the rules and regulations of the Securities and Exchange
Commission. Accordingly, certain information and footnote disclosures normally
included in financial statements prepared in accordance with generally accepted
accounting principles have been omitted pursuant to such rules and regulations.
The accompanying financial statements and related notes should be read in
conjunction with the audited financial statements of the Company, and notes
thereto, for the year ended December 31, 1995.
The consolidated financial statements include the accounts of Amrion, Inc.
("Amrion") and those of its 90%-owned subsidiary, Natrix International, LLC
("Natrix"), a Colorado Limited Liability Company (collectively the Company).
Amrion markets nutritional supplements principally throughout the United States,
with the balance to customers in the Far East, Europe and Mexico, using a
combination of direct mail, telemarketing and print advertising. Natrix is
engaged in the marketing and distribution domestically of the Advanced Botanics
product line.
The financial statements reflect all adjustments which are, in the opinion of
management, necessary for a fair statement of the results for the periods
presented. All significant intercompany accounts and transactions have been
eliminated in consolidation.
NOTE 2
The Company's financial instruments exposed to concentrations of credit risk
consist primarily of trade accounts receivable, cash equivalents and marketable
securities.
Concentrations of credit risk with respect to such accounts receivable are
limited due to the large number of customers dispersed across geographic areas
and generally short payment terms.
The Company's cash equivalents are high quality money market accounts held with
major financial institutions. Marketable securities consist primarily of
preferred stock and AAA rated tax-exempt municipal bonds. The Company considers
cash and all highly liquid investments purchased with an original maturity of
three months or less to be cash equivalents. The investment policy limits the
Company's exposure to concentrations of credit risk.
The Company accounts for marketable securities in accordance with Statement of
Financial Accounting Standards No. 115, "Accounting for Certain Investments in
Debt and Equity Securities." All marketable equity and debt securities have been
categorized as available for sale as the Company does not have the positive
intent to hold to maturity or does not intend to trade actively. These
securities are stated at fair value with unrealized gains and losses included as
a component of stockholders' equity until realized.
NOTE 3
Inventories are valued at the lower of cost (Standard which approximates
First-in, First-out) or market.
Property and equipment is stated at cost. Depreciation is computed using the
straight-line method based on the estimated useful lives of related assets,
generally 3 to 31.5 years. Maintenance and repair costs are expensed as
incurred.
Purchased mailing lists, trademarks and copyrights are amortized by the
straight-line method over their estimated useful lives, which range from five to
ten years. On an ongoing basis, the Company reviews the recoverability and
amortization periods of intangible assets, taking into consideration any events
or circumstances which could impair the assets' carrying value, and records
adjustments when necessary.
NOTE 4
Direct-response advertising consists primarily of direct-mail advertising,
including deferred promotional mailing costs, of the Company's products. The
capitalized costs of mailed promotional materials and print advertising in the
Direct Marketing Division are amortized over the expected promotional benefit
period of three months. Other advertising and promotional costs are expensed at
the time the advertising takes place.
Income per common and common equivalent share is based on the weighted-average
number of common shares outstanding during each of the periods presented.
Options to purchase stock are included as common stock equivalents when
dilutive.
Certain items included in prior years' financial statements have been
reclassified to conform to the current year presentation.
PART I FINANCIAL
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations for the Period from January 1, 1996,
to June 30, 1996.
The following review concerns the three and six-month periods ended June 30,
1996, and June 30, 1995, which should be read in conjunction with the financial
statements and notes thereto presented in this Form 10-Q.
The information set forth in "Management's Discussion and Analysis of Financial
Condition and Results of Operations" below includes "forward looking statements"
within the meaning of Section 27A of the Securities Act, and is subject to the
safe harbor created by that section. Factors that could cause actual results to
differ materially from those contained in the forward looking statements are set
forth in "Management's Discussion and Analysis of Financial Condition and
Results of Operations."
Results of Operations
For the three and six-month periods ended June 30, 1996 and June 30, 1995.
Net sales for the three months ended June 30, 1996 were $11,871,000, an increase
of $3,061,000 (35%) over the same period in 1995. Net sales for the six months
ended June 30, 1996 were $25,253,000, an increase of $6,311,000 (33%) over the
same period in 1995. The continued growth in net sales for the quarter and six
months ended June 30, 1996 was a result of the Company's continued improvements
in customer segmentation mailing programs within the existing customer base. The
Company has continued to generate excellent sales responses on smaller and more
targeted mailings to specific customers within the existing customer base.
Additionally, the Company has been able to increase sales as a result of the
nationwide trend towards preventative health care as a viable alternative to
traditional medical treatment.
The Company intends to continue to implement new customer acquisition programs
through mailings, print advertising, television, telemarketing and expanded
retail distribution programs. The Company anticipates it will add approximately
15 new products through these scheduled marketing programs for the remaining six
months in 1996.
Cost of products increased to $4,858,000 and $10,798,000 for the three and
six-month periods ended June 30, 1996, compared to $3,701,000 and $8,057,000,
respectively, for the same periods in 1995. As a percentage of net sales, cost
of products remained the same over the three and six-month periods in the prior
year, due to continued reductions in product costs (approximately 1% of net
sales) from in-house manufacturing. However, this reduction was offset by a 1%
increase as a percentage of net sales in the cost of products from the continued
use of product promotionals as part of the Company's marketing strategies.
Cost of mailings increased to $1,893,000 and $4,776,000 for the three and
six-month periods ended June 30, 1996, compared to $1,826,000 and $3,860,000,
respectively, for the same periods in 1995. As a percentage of net sales, cost
of mailings decreased to 19% for the six-month period ended June 30, 1996, from
20% for the same six-month period one year ago. The decrease as a percentage of
net sales was due to the Company's use of smaller and targeted customer and
acquisition mailings. Additionally, the Company anticipated increases in postage
rates and paper costs in 1996, and implemented new design guidelines for the
Company's marketing materials that offset increases in mailing costs. The
Company is estimating the cost of mailings to be 19% of sales for the twelve
months ended December 31, 1996. However, cost of mailings may be higher due to
further increases in postage rates and paper costs during the remaining six
months of 1996.
During the three months ended June 30, 1996, selling, general and administrative
expenses ("SG&A") increased by $958,000 (35%) to $3,733,000 from the same period
in the prior year. SG&A for the six months ended June 30, 1996 increased by
$1,701,000 (31%) to $7,117,000, compared to $5,416,000 for the six months ended
June 30, 1995. This increase of SG&A was due primarily to additional general and
administrative expenses of approximately $1,040,000 and substantial increases in
product marketing and development expenses of approximately $661,000, both of
which were necessary to support the 33% growth in sales for the six-month period
ended June 30, 1996. However, SG&A as a percentage of net sales decreased to 28%
for the six-month period ended June 30, 1996, from 29% for the same six-month
period one year ago.
During the three months ended June 30, 1996, net income increased by $682,000
(138%) to $1,175,000 compared to net income of $493,000 for the three months
ended June 30, 1995. In the six months ended June 30, 1996, net income increased
by $812,000 (63%) to $2,098,000 compared to net income of $1,286,000 for the six
months ended June 30, 1995. As a percentage of net sales, net income increased
to 8% for the six-month period ended June 30, 1996, from 7% for the same
six-month period one year ago. Overall, the growth in net income for the quarter
and six-month periods ended June 30, 1996, was due to the Company's increased
sales and effective cost control efforts.
Liquidity and Capital Resources
The Company used $843,000 in cash from operating activities during the six
months ended June 30, 1996, compared to cash generated of $508,000 for the same
period in 1995. The decrease in cash from operating activities of $1,351,000
during the six months ended June 30, 1996, versus the same period in 1995, was
due to the increase in product inventories by $3,205,000 compared to increases
of $317,000 during 1995. The significant increase in product inventories
was necessary to allow the Company to respond to future demand for its products
and continued sales growth during the next quarter. Additionally, the decline
in cash from operations activities resulted from a decrease in accounts
payable of $1,003,000 compared to a decrease of $870,000 for the same period
one year ago. These cash outflows were offset by net income of
$2,098,000, an increase of $812,000 from $1,286,000 in 1995 and a decrease of
$304,000 in mailing supplies from December 31, 1995.
Cash flows used by investing activities totaled $922,000 during the six months
ended June 30, 1996, versus $619,000 for the same period in 1995. The increase
of $303,000 during 1996 compared to 1995 resulted from the purchase of machinery
and equipment for the Company's manufacturing facility and computer equipment
and software for a total of $732,000. Additionally, the Company used $670,000 to
purchase mailing lists and other intangible assets. Finally, the Company
generated $480,000 from sales of marketable securities. The Company believes the
cash invested in marketable securities with its current working capital position
will be adequate to meet future operating needs.
Cash flows generated by financing activities totaled $1,061,000 during the six
months ended June 30, 1996 as a result of stock options being exercised that
were granted to employees and directors during 1994, 1993 and 1992.
The Company has a $650,000 revolving line of credit agreement with a bank which
bears interest at 1% over the bank's prime lending rate and expires on June 21,
1997. No amounts were outstanding at December 31, 1995 or June 30, 1996.
PART II OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders.
On July 19, 1996, the Company held its 1995 Annual Meeting of Shareholders. The
following matters, and the shareholder vote on each matter, were considered by
the Company's shareholders:
1. To elect five (5) Directors to serve until the next Annual Meeting of
Shareholders and until their successors shall have been elected and qualified.
<TABLE>
<CAPTION>
FOR AGAINST
<S> <C> <C>
Mark S. Crossen 3,361,026 7,110
Jeffrey S. Williams 3,361,503 572
Theodore W. Brin 3,361,503 572
David E. Houseman 3,361,503 572
Leslie G. Taylor 3,361,503 572
</TABLE>
2. To ratify the appointment of BDO Seidman as the Company's independent public
accountants.
3,336,474 shares voted for the proposal
18,403 shares voted against the proposal; and
12,987 shares abstained (including broker non-votes).
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
Exhibit Number: Description:
27 Financial Data Schedule
(b) No reports on Form 8-K were filed during the quarter
endingJune 30, 1996.
No other information is required to be included in response to Items 1-6 under
Part II of this form 10-Q.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has caused this report to be signed on its behalf by the undersigned
thereunto duly authorized.
AMRION, INC.
Date: August 13, 1996
by:
Jeffrey S. Williams,
Chief Financial Officer
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has caused this report to be signed on its behalf by the undersigned
thereunto duly authorized.
AMRION, INC.
Date: August 13, 1996
by: /s/ Jeffrey S. Williams
Jeffrey S. Williams,
Chief Financial Officer
<PAGE>
August 13, 1995
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, DC 20549
RE: Amrion, Inc.
Quarterly Report Form 10-Q
Commission File # 0-18476
Ladies and Gentlemen:
Enclosed for filing on behalf of the above referenced company please find the
following:
1. One manually executed Form 10-Q for the quarter ended June 30, 1995.
2. Eight conformed copies of the Form 10-Q for the quarter ended June 30, 1995
Also enclosed is a copy of this letter and a self addressed stamped envelope for
verification of filing.
If you have any questions regarding this filing, please do not hesitate to
contact the undersigned.
Sincerely,
Jeffrey S. Williams
Chief Financial Officer
JSW/cl
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000812788
<NAME> Jeffrey S. Williams
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> APR-01-1996
<PERIOD-END> JUN-30-1996
<CASH> 127,823
<SECURITIES> 7,378,487
<RECEIVABLES> 815,035
<ALLOWANCES> 41,000
<INVENTORY> 8,241,107
<CURRENT-ASSETS> 11,258,538
<PP&E> 4,764,643
<DEPRECIATION> 1,446,157
<TOTAL-ASSETS> 25,982,871
<CURRENT-LIABILITIES> 3,067,683
<BONDS> 0
0
0
<COMMON> 12,849,805
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 25,982,871
<SALES> 11,871,331
<TOTAL-REVENUES> 12,038,689
<CGS> 4,858,266
<TOTAL-COSTS> 6,751,363
<OTHER-EXPENSES> 3,732,661
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 1,554,665
<INCOME-TAX> 380,052
<INCOME-CONTINUING> 1,174,613
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,174,613
<EPS-PRIMARY> .22
<EPS-DILUTED> .22
</TABLE>
