================================================================================
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 January 31, 2000
TRANSITION REPORT PURSUANT TO SECTION 13 OR 13(d) OF THE
- ----------- SECURITIES EXCHANGE ACT OF 1934.
FOR THE TRANSITION PERIOD FROM _____________ TO ________________
COMMISSION FILE NUMBER 0-23624
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IVC INDUSTRIES, INC.
--------------------
(exact name of Registrant as specified in its charter)
DELAWARE 22-1567481
- ------------------------------- ----------------
(state or other jurisdiction of (I.R.S. Employer
incorporation or organization) identification no.)
500 HALLS MILL ROAD, FREEHOLD, NEW JERSEY 07728
- ----------------------------------------- -----------
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE (732) 308-3000
--------------
NOT APPLICABLE
--------------
(former name, address and fiscal year, if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15 (d) of the Exchange Act during the past 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
----- -----
Registrant had 2,088,092 shares of common stock outstanding as of March 3, 2000
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<PAGE>
IVC INDUSTRIES, INC.
Table of Contents
-----------------
Part I. Financial Information Page No.
--------
Item 1. Financial Statements
Consolidated Balance Sheets as at
January 31, 2000 and July 31, 1999.................................3
Consolidated Statements of Income
For The Three and Six Months Ended January 31, 2000 and 1999.......4
Consolidated Statements of Cash Flows
For the Six Months Ended January 31, 2000 and 1999.................5
Notes to Consolidated Financial Statements.........................6
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations......................9
Item 3. Quantitative and Qualitative Disclosure about
Market Risk.......................................................14
Part II. Other Information, Reports on Form 8-K and Exhibits...............15
Signature Page................................................................18
<PAGE>
Item 1. Financial Statements.
IVC INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Dollars in Thousands, Except Per Share Information)
--------------------------
<TABLE>
<CAPTION>
January 31, July 31,
2000 1999
----------- -----------
ASSETS (unaudited)
<S> <C> <C>
Current Assets:
Cash and cash equivalents $ 880 $ 287
Accounts receivable 9,985 7,296
Inventories 32,422 27,374
Deferred taxes 3,944 4,673
Prepaid expenses 887 671
Refundable income taxes -- 2,117
Other current assets 343 483
-------- --------
Total Current Assets 48,461 42,901
Property, Plant and Equipment - Net 20,819 19,839
Due from related parties 477 1,339
Other Assets 1,040 1,162
-------- --------
Total Assets $ 70,797 $ 65,241
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Current portion of long-term debt $ 2,313 $ 2,697
Current portion of capital lease payable 204 180
Current portion of deferred gain on building 108 104
Accounts payable 13,233 14,785
Income taxes payable 768 --
Advance on settlement 2,700 --
Accrued expenses 4,246 4,896
-------- --------
Total Current Liabilities 23,572 22,662
Long-term debt - Less current portion 27,247 27,898
Capital lease obligation 3,024 3,136
Deferred gain on building sale 949 1,005
-------- --------
Total Liabilities 54,792 54,701
-------- --------
Shareholders' Equity:
Preferred stock, no par value, 2,000,000 shares authorized:
none issued -- --
Common stock, $.08 par value, 25,000,000 shares authorized;
2,088,092 shares issued 167 167
Additional paid-in capital 11,563 11,499
Foreign currency translation adjustment (235) (202)
Retained earnings 4,510 (924)
-------- --------
Total Shareholders' Equity 16,005 10,540
-------- --------
Total Liabilities and Shareholders' Equity $ 70,797 $ 65,241
======== ========
</TABLE>
3
<PAGE>
IVC INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(Dollars in Thousands, Except Per Share Information)
(unaudited)
--------------------------
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
January 31, January 31,
----------- -----------
2000 1999 2000 1999
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Net sales $ 29,625 $ 30,661 $ 51,037 $ 59,901
Cost of sales 20,242 22,169 36,597 44,402
---------- ---------- ---------- ----------
Gross profit 9,383 8,492 14,440 15,499
Selling, general and administrative expenses 7,864 6,945 14,257 13,000
---------- ---------- ---------- ----------
Income from operations 1,519 1,547 183 2,499
Recovery, price fixing settlement -- -- 10,000 --
Other expenses - net 713 599 1,058 1,249
---------- ---------- ---------- ----------
Income before income taxes 806 948 9,125 1,250
Income tax provision 348 379 3,691 502
---------- ---------- ---------- ----------
Net income $ 458 $ 569 $ 5,434 $ 748
========== ========== ========== ==========
Basic earnings per share $ .22 $ .24 $ 2.60 $ .32
========== ========== ========== ==========
Diluted earnings per share $ .22 $ .24 $ 2.60 $ .32
========== ========== ========== ==========
Weighted average shares outstanding:
Basic 2,088,092 2,151,443 2,088,092 2,151,443
========== ========== ========== ==========
Diluted 2,093,929 2,151,455 2,091,890 2,151,500
========== ========== ========== ==========
</TABLE>
4
<PAGE>
IVC INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in Thousands)
(unaudited)
--------------------------
<TABLE>
<CAPTION>
Six Months Ended
January 31,
-----------------------------------
2000 1999
------- -------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 5,434 $ 748
------- -------
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization 1,263 1,538
Deferred income taxes 729 --
Stock options issued to non-employee directors 64 30
Changes in assets - (increase) decrease:
Accounts receivable (2,689) (2,935)
Inventories (5,048) 9,542
Prepaid expenses and other current assets 2,041 1,059
Other assets 936 (2,593)
Changes in liabilities - increase (decrease):
Accounts payable and accrued expenses (1,434) (9,128)
Other 2,700 (48)
------- -------
Total adjustments (1,438) (2,535)
------- -------
Net Cash Provided By (Used In) Operating Activities 3,996 (1,787)
------- -------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to property and equipment (2,247) (846)
------- -------
Net Cash Used In Investment Activities (2,247) (846)
------- -------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from borrowings 5,154 5,365
Payments on borrowings (6,189) (3,132)
Payments on capital lease obligations (88) (66)
------- -------
Net Cash Provided By (Used In) Financing Activities (1,123) 2,167
------- -------
Foreign currency translation adjustment (33) 2
------- -------
NET INCREASE (DECREASE) IN CASH 593 (464)
CASH AND CASH EQUIVALENTS - BEGINNING 287 1,604
------- -------
CASH AND CASH EQUIVALENTS - ENDING $ 880 $ 1,140
======= =======
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid during the period for:
Interest $ 1,104 $ 1,390
======= =======
Taxes $ -- $ 676
======= =======
</TABLE>
5
<PAGE>
IVC INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Dollars in Thousands
(unaudited)
Note 1 - Basis of Presentation and Other Matters:
The accompanying unaudited consolidated financial statements, which are
for interim periods, do not include all disclosures provided in the annual
consolidated financial statements. These unaudited consolidated financial
statements should be read in conjunction with the consolidated financial
statements and the footnotes thereto contained in the IVC Industries, Inc. (the
"Company") Annual Report on Form 10-K for the year ended July 31, 1999, as filed
with the Securities and Exchange Commission.
In the opinion of the Company, the accompanying unaudited consolidated
financial statements contain all adjustments (which are of a normal recurring
nature) necessary for a fair presentation of the financial statements. The
results of operations for the interim periods are not necessarily indicative of
the results to be expected for the full year.
Certain amounts have been reclassified to conform with the current period
presentation.
Note 2 - Inventories:
Inventories consist of the following:
January 31, July 31,
2000 1999
---------- -----------
Finished Goods $ 8,786 $ 9,427
Bulk and Work in Process 12,174 9,789
Raw Materials and Packaging Components 11,462 8,158
---------- -----------
Total Inventory $ 32,422 $ 27,374
========== ===========
6
<PAGE>
Note 3 - Long-Term Debt:
Effective September 24, 1999, the Company entered into an amended and
restated credit agreement with its current bank, Chase Manhattan Bank, and
Citizens Business Credit Company, a subsidiary of the Royal Bank of Scotland to
replace the previously existing credit agreement. The agreement matures on July
31, 2002. The Company can borrow up to $22 million under a revolving credit
commitment (as of January 31, 2000, the amount borrowed was $17.7 million)
subject to borrowing base limitations, and $5.2 million under a term loan
commitment (as of January 31, 2000 $4.9 million was outstanding). Borrowings
under the revolving credit commitment bear interest at the bank's Alternative
Base Rate (which is the greater of the Prime Rate, the Federal Funds Rate plus
.05% and the Base CD Rate plus 1%) plus a spread ranging from 0% to .50%, based
on the Company's consolidated leverage ratio (the ratio of consolidated funded
debt to consolidated EBITDA or "CLR"), or, alternatively, at LIBOR plus a spread
ranging from 2.0% to 2.75%, based on the Company's CLR. Borrowings under the
term loan commitment bear interest at the bank's Alternative Base Rate plus a
spread ranging from .25% to .75%, based on the Company's CLR, or, alternatively,
at LIBOR plus a spread ranging from 2.25% to 3.0%, based on the Company's CLR.
The term loan requires quarterly payments of $258 at the end of each quarter
with the balance due on the maturity date. The agreement includes a facility fee
ranging from .25% to .50%, based on the Company's CLR, of the average daily
unused portion of the overall borrowing commitment. The notes are collateralized
by substantially all of the Company's assets. The credit agreement requires the
Company to maintain certain financial ratios, a minimum net worth and contains
various restrictions customary in such a financial arrangement, including
limitations on capital expenditures and payment of cash dividends.
Note 4 - Earnings Per Share (EPS):
Basic EPS is calculated based on income available to common shareholders
and the weighted average number of shares outstanding during the reported
period. Diluted EPS includes additional dilution from potential common stock
issuable pursuant to the exercise of stock options outstanding.
7
<PAGE>
Note 5 - Comprehensive Income:
As of August 1, 1998, the Company adopted SFAS No. 130, "Reporting
Comprehensive Income". SFAS No. 130 establishes standards for the reporting and
displaying of comprehensive income. The following table presents the Company's
comprehensive income for the three and six month periods ended January 31, 2000
and 1999.
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
January 31, January 31,
2000 1999 2000 1999
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Net income $ 458 $ 569 $ 5,434 $ 748
Other comprehensive income (loss) , net of tax:
Foreign exchange translation adjustments (76) 15 (33) 2
------------ ------------ ------------ ------------
Comprehensive income $ 382 $ 584 $ 5,401 $ 750
============ ============ ============ ============
</TABLE>
Note 6 - Recovery, price fixing settlement:
On September 24, 1999, the Company received $12,700 as part of a
price-fixing settlement with a supplier. Of this amount, $10,000 has been
included in the Company's statement of income during the quarter ended October
31, 1999 as an uncontested portion of the settlement. The remaining $2,700
received has not been included in operations and is contingent upon the final
outcome of the pending class action suit against this supplier, which the
Company has opted out of.
8
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations. ( Dollars in Thousands, Except Per Share Information)
Three Months Ended January 31, 2000 Compared to the Three Months Ended January
31, 1999
Results of Operations.
For the quarter ended January 31, 2000, net income was $458, equivalent to basic
and diluted earnings of $.22 per share, versus $569 or $.24 per share, in the
prior year's quarter. The prior year included an after-tax charge of $276 for
anticipated expenses for the shutdown of the Portland manufacturing facility.
Net sales for the quarter ended January 31, 2000 were $29,625 as compared to
$30,661 in the prior year, a decrease of $1,036 or 3.4%. This reduction was
primarily related to sales contracts with a number of customers which were
cancelled because they did not meet the Company's gross margin targets,
resulting in lower branded and private brand sales, and the prior year included
sales of the Vitamin Specialties business, which was sold in July 1999. These
reductions were partially offset by stronger private label sales at existing
customers, sales to new accounts and sales of new products which were introduced
at the end of the first quarter.
Cost of sales for the three months ended January 31, 2000 was $20,242, 68.3% of
sales, compared to $22,169 or 72.3% of sales for three months ended January 31,
1999, a decrease of 4.0%. During fiscal 1999 the Company implemented a strategic
restructuring strategy which intended to control expenses and assets, invest in
processes and systems, and focus on the Company's core business. As part of this
program the Company implemented a new Enterprise Resource Planning System (ERP)
which included cost and inventory control. During the current quarter the
Company began to experience some of the benefits that were anticipated by this
structuring program. Costs decreased as a result of the increased efficiency and
reduced raw material costs at the Freehold, New Jersey manufacturing facility,
and also because the prior year included a charge for anticipated expenses for
the shutdown of the Portland manufacturing facility. In addition, during the
current year there was a reduction in amortization of long-term contracts. These
were offset by increased costs incurred at the Portland facility as packaging at
the plant was being phased out. All operations at Portland ceased as of February
29, 2000.
Selling, general and administrative expenses for the three months ended January
31, 2000 were $7,864, 26.5% of sales, as compared to the prior year's quarter of
$6,945, or 22.7% of sales. This 3.8% increase is attributable to: (i) shifting
to higher promotional costs, simultaneously with a decrease in amortization of
contract costs, as a result of renegotiating long-term contracts, (ii) increased
sales and marketing staff along with increased travel expenses, and (iii) higher
distribution costs. These were offset in part by the absence of selling, general
and administrative costs in the current year for Vitamin Specialties Corp. which
was sold at the end of the last fiscal year, and lower bad debt expense.
9
<PAGE>
Other expenses, net for the three months ended January 31, 2000 were $713. This
principally represents interest expense of $772, which was offset in part by
other miscellaneous income of $59. Other expenses, net for the three months
ended January 31, 1999, were $599. This included interest of $632, offset in
part by other miscellaneous income of $33.
Income taxes generally reflect the effect of statutory federal, state and
Canadian income taxes and certain non-deductible expenses. During the quarter of
the current year the effective tax rate was 43.2% as compared to 40.0% in the
prior year.
Six Months Ended January 31, 2000 Compared to the Six Months Ended January 31,
1999
Results of Operations.
For the six months ended January 31, 2000, net income was $5,434, equivalent to
basic and diluted earnings of $2.60 per share, versus $748, or $.32 per share,
in the same period last year. The results for the current year include an
after-tax gain of $6,000 or $2.87 per share from a price-fixing settlement with
a supplier. Excluding this one-time gain, the Company would have incurred a net
loss of $566, or ($.27) per diluted share. The prior year included an after-tax
charge of $276 for anticipated expenses for the shutdown of the Portland
manufacturing facility. Excluding this charge the Company would have earned
$1,024.
Net sales for the six months ended January 31, 2000 were $51,037 as compared to
$59,901 in the prior year, a decrease of $8,864 or 14.8%. This reduction was
related to sales contracts with a number of customers which were cancelled
because they did not meet the Company's gross margin targets, resulting in lower
branded and private brand sales, and to weaker private label sales at some major
accounts during the first quarter of the current year. Sales during current year
were also lower because the prior year included sales of the Vitamin Specialties
business, which was sold in July. These were partially offset by sales to new
accounts and sales of new products which were introduced at the end of the first
quarter.
Cost of sales for the six months ended January 31, 2000 was $36,597, or 71.7% of
sales, compared to $44,402, or 74.1% of sales, for six months ended January 31,
1999. Cost of sales decreased 2.4% as a percentage of sales versus the prior
year's period as a result of increased operational efficiencies and reduced raw
material costs at the Freehold, New Jersey manufacturing facility and also
because the prior year included a charge for anticipated expenses for the
shutdown of the Portland manufacturing facility. In addition, during the current
year there was a reduction in amortization of long-term contracts. These were
offset in part by increased costs incurred at the Portland packaging facility
during the second quarter as packaging at the plant was phased out.
Selling, general and administrative expenses for the six months ended January
31, 2000 were $14,257, 27.9% of sales as compared to $13,000, or 21.7% of sales,
in the same
10
<PAGE>
period of the prior year. This is attributable to: (i) shifting to higher
promotional costs, simultaneously with a decrease in amortization of contract
costs, as a result of renegotiating long-term contracts, (ii) increased sales
and marketing staff along with increased travel expenses, and (iii) higher
distribution costs. These were offset by the absence of selling, general and
administrative costs in the current year for Vitamin Specialties Corp. which was
sold at the end of the last fiscal year, and lower bad debt expense.
Other expenses, net for the six months ended January 31, 2000 were $1,058. This
represents interest expense of $1,199, which was offset in part by other
miscellaneous income of $141. Other expenses, net for the six months ended
January 31, 1999, were $1,249. This included interest of $1,310, offset in part
by other miscellaneous income of $61. Interest expense for the period was lower
during the current year because of reduced borrowings required in the first
quarter as a result of the cash received from the price fixing settlement,
offset in part by higher interest rates during the second quarter.
Income taxes generally reflect the effect of statutory federal, state and
Canadian income taxes and certain non-deductible expenses. The effective tax
rate was 40.4% for the six months ended January 31, 2000 as compared to 40.2% in
the same period of 1999.
Liquidity and Capital Resources
Operating activities provided $3,996 in cash for the six months ended January
31, 2000, versus $1,787 used in operating activities for the comparable period
in 1999. Approximately $7,490 was generated from net income, which included
proceeds from the price fixing settlement agreement, plus non cash depreciation
and amortization and deferred taxes. In addition, $2,700 was received as a
further advance on the settlement agreement, resulting in an increase in other
liabilities. Cash of $2,041 was also generated by a decrease in prepaid expenses
and other current assets, primarily income taxes and a decrease in other assets
of $936, primarily related to the receipt of cash reducing a related party
receivable. Cash was utilized for increased accounts receivable of $2,689, to
increase inventories by $5,048 million in advance of the Portland packaging
plant shutdown, and to reduce accounts payable and accruals by $1,434.
Offsetting the cash provided from operating activities, cash was utilized for
additions to property, plant and equipment of $2,247 for building improvements
and high speed machinery for the consolidation of manufacturing facilities, and
also to reduce outstanding long-term debt.
On September 17, 1999, the Company entered into a settlement agreement with a
key supplier in connection with the supplier's alleged participation in an
unlawful conspiracy related to pricing of vitamins in the United States and
elsewhere in violation of Section 1 of the Sherman Antitrust Act and other
wrongful anti-competitive conduct in violation of various federal and state
laws.
11
<PAGE>
Pursuant to the terms of the settlement agreement, the Company agreed to release
all claims it may have against the supplier based on the Company's purchases of
various vitamins from the supplier since 1990 and to opt out of any settlement
in connection with a pending class action suit.
In exchange for the Company's release and agreement to opt out of any settlement
in the pending class action suit, the Company received a settlement compensation
package comprised of the following: (i) a $10 million cash payment; (ii) a price
discount of 5% on future purchases up to $1 million per year over three years;
and (iii) an advance, refundable in cash or stock, of $2.7 million on any
payments that may be due to the Company under a most favored nations clause
contained in the settlement agreement. Under this clause, in the event that the
pending class action suit is settled and the settlement amount that would have
been received thereunder exceeds $12.7 million, the supplier agrees to make
additional payments to the Company based on, and subject to certain adjustments
to, the amounts recovered by the plaintiffs in the pending class action suit.
The Company received a cash payment of $12.7 million on September 24, 1999.
Effective September 24, 1999, the Company entered into an amended and restated
credit agreement with its current bank, Chase Manhattan Bank, and Citizens
Business Credit Company, a subsidiary of the Royal Bank of Scotland to replace
the previously existing credit agreement. The agreement matures on July 31,
2002. The Company can borrow up to $22 million under a revolving credit
commitment (as of January 31, 2000, the amount borrowed was $17.7 million)
subject to borrowing base limitations, as defined and $5.2 million under a term
loan commitment (as of January 31, 2000, $4.9 million was outstanding).
Borrowings under the revolving credit commitment bear interest at the bank's
Alternative Base Rate (which is the greater of the Prime Rate, the Federal Funds
Rate plus .05% and the Base CD Rate plus 1%) plus a spread ranging from 0% to
.50%, based on the Company's consolidated leverage ratio (the ratio of
consolidated funded debt to consolidated EBITDA or "CLR"), or, alternatively, at
LIBOR plus a spread ranging from 2.0% to 2.75%, based on the Company's CLR.
Borrowings under the term loan commitment bear interest at the bank's
Alternative Base Rate plus a spread ranging from .25% to .75%, based on the
Company's CLR, or, alternatively, at LIBOR plus a spread ranging from 2.25% to
3.0%, based on the Company's CLR. The term loan requires quarterly payments of
$258 at the end of each quarter with the balance due on the maturity date. The
agreement includes a facility fee ranging from .25% to .50%, based on the
Company's CLR, of the average daily unused portion of the overall borrowing
commitment. The notes are collateralized by substantially all of the Company's
assets. The credit agreement requires the Company to maintain certain financial
ratios, a minimum net worth and contains various restrictions customary in such
a financial arrangement, including limitations on capital expenditures and
payment of cash dividends.
The Company believes that its existing cash balance, internally generated funds
from operations and available financing will provide the liquidity required to
satisfy the Company's working capital needs and anticipated capital expenditures
for the next twelve months.
12
<PAGE>
Year 2000 ("Y2K")
The Company did not experience any disruptions to its normal operations or any
interruptions from its suppliers as a result of the transition into calendar
year 2000. The Company continued to monitor its business processes and third
parties for potential problems that could arise in the first few months of
calendar 2000. Based on the absence of any problems to date, no significant
disruptions are anticipated.
Forward Looking Statements
This report, including Management's Discussion and Analysis, contains
certain "forward-looking statements", within the meaning of Section 27A of the
Securities Act of 1933, which represent the Company's expectations or beliefs,
including, but not limited to, statements concerning industry performance, the
Company's operations, performance, financial condition, growth and acquisition
strategies, margins and growth in sales of the Company's products. For this
purpose, any statements contained in this Report that are not statements of
historical fact may be deemed to be forward-looking statements. Without limiting
the generality of the foregoing, words such as "may", "will", "expect",
"believe", "anticipate", "intend", "could", "estimate" or "continue" or the
negative or other variations thereof or comparable terminology are intended to
identify forward-looking statements. These statements by their nature involve
substantial risks and uncertainties, certain of which are beyond the Company's
control, and actual results may differ materially depending on a variety of
important factors, including beneficial or adverse trends in the domestic market
for vitamins and nutritional supplements, the gain or loss of significant
customers for the Company's products, the competitive environment in the vitamin
and nutritional supplement industry, and the enactment or promulgation of new
government legislation or regulation, as well as other risks and uncertainties
that may be detailed from time to time in the Company's reports filed with the
Securities and Exchange Commission.
13
<PAGE>
Item 3 Quantitative and Qualitative Disclosure about Market Risk
The Company has no market risk sensitive instruments that subject the
Company to material market risk exposures.
14
<PAGE>
Part II. Other Information
Item 4 Submission of Matters to a Vote of Security Holders
The Company's Annual Meeting of Stockholders was held on January 7, 2000.
The eight nominees were elected to the Company's Board of Directors for a term
of one year. The votes were cast as follows:
Nominee For Withheld Broker Non-Votes
------- --- -------- ----------------
Arthur S. Edell 1,701,123 0 0
E. Joseph Edell 1,701,123 0 0
Marc Z. Edell 1,701,123 0 0
Dr. Mark S. Gold 1,701,123 0 0
Dennis E. Groat 1,701,123 0 0
Erwin Lehr 1,701,123 0 0
Andrew M. Pinkowski 1,701,123 0 0
David Popofsky 1,701,123 0 0
Four proposals were also approved at the meeting with the following votes:
An amendment to the Company's Certificate of Incorporation to provide for
limitation of liability for the company's directors.
For Against Abstained Broker Non-Votes
--- ------- --------- ----------------
1,676,892 31,482 4,635 0
Amendments to the Company's 1995 Stock Option Plan to (a) increase the
number of shares of the Company's common stock available under the Plan to
500,000 shares, (b) provide the Compensation Committee with greater discretion
with respect to the exercisability of options granted under the Plan and (c)
provide that options granted under the Plan will become immediately exercisable
in full upon a change in control of the Company.
For Against Abstained Broker Non-Votes
--- ------- --------- ----------------
1,268,262 82,271 2,797 359,679
The grant during 1999 of stock options to non-employee directors of the
Company and amendments to the Company's Non-Employee Directors Stock Option Plan
to (a) increase the number of shares of the Company's common stock available
under the Plan to 125,000 shares, (b) increase the number of options granted
annually to each non-employee director of the Company and (c) provide that upon
the death or retirement of a non-employee director, options granted under the
Plan shall remain exercisable for the remaining term of the options.
For Against Abstained Broker Non-Votes
--- ------- --------- ----------------
1,304,697 45,961 2,672 359,679
The appointment of Amper, Politziner & Mattia, P.A. as independent
auditors for the fiscal year ended July 31, 2000.
For Against Abstained Broker Non-Votes
--- ------- --------- ----------------
1,681,312 28,175 3,522 0
15
<PAGE>
Item 6. - Exhibits and Reports on Form 8-K
(a) Exhibits:
Exhibit Description of
Number Exhibit
------ -------
3 Amended and Restated Certificate of Incorporation
11 Computation of earnings per share
27 Financial Data Schedule
(b) No reports on Form 8-K were filed for the three months ended
January 31, 2000.
16
<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: March 15, 2000 By: /s/ E. Joseph Edell
-------------- ------------------------------------
Chairman and
Chief Executive Officer
Dated: March 15, 2000 By: /s/ Domenic N. Golato
-------------- ------------------------------------
Vice President and
Chief Financial Officer
17
IVC INDUSTRIES, INC. AND SUBSIDIARIES
EXHIBIT 11
COMPUTATION OF EARNINGS PER SHARE
(Dollars in Thousand, Except Per Share Information)
(unaudited)
--------------------------
<TABLE>
<CAPTION>
Three Months ended Six Months ended
January 31, January 31,
2000 1999 2000 1999
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Basic:
Net income $ 458 $ 569 $ 5,434 $ 748
Weighted average shares outstanding 2,088,092 2,151,443 2,088,092 2,151,443
========== ========== ========== ==========
Basic earnings per share $ .22 $ .24 $ 2.60 $ .32
========== ========== ========== ==========
Diluted:
Net income $ 458 $ 569 $ 5,434 $ 748
Weighted average shares outstanding 2,088,092 2,151,443 2,088,092 2,151,443
Incremental shares under Stock Option Plan 5,837 12 3,798 57
---------- ---------- ---------- ----------
Adjusted weighted average shares outstanding 2,093,929 2,151,455 2,091,890 2,151,500
========== ========== ========== ==========
Diluted earnings per share $ .22 $ .24 $ 2.60 $ .32
========== ========== ========== ==========
</TABLE>
Exhibit 3
RESTATED CERTIFICATE OF INCORPORATION
OF
IVC INDUSTRIES, INC.
IVC Industries, Inc. (the "Corporation") hereby certifies that:
A. The Corporation was originally incorporated under International Vitamin
Corporation on September 15, 1971.
B. The Restated Certificate of Incorporation set forth herein was duly
adopted in accordance with the provisions of Section 242 and 245 of the General
Corporation Law of the State of Delaware by a resolution of the Board of
Directors setting forth the Restated Certificate of Incorporation and declaring
its advisability and by adoption by a majority of the holders of all outstanding
stock.
C. The Certificate of Incorporation of the Corporation as now in full
force and effect is hereby restated, integrated and amended to read in full as
follows:
FIRST. The name of the Corporation is IVC Industries, Inc.
SECOND. The address of the Corporation's registered office in the State of
Delaware is 1013 Centre Road, in the City of Wilmington, County of New Castle.
The name of its registered agent at such address is The Prentice-Hall
Corporation System, Inc.
THIRD. The purpose of the Corporation is to engage in any lawful act or
activity for which corporations may be organized under the General Corporation
Law.
FOURTH. The Corporation shall have authority to issue 25,000,000 shares of
Common Stock of the par value of $0.08 per share and 2,000,000 shares of
Preferred Stock of the par value of $0.01 per share. The Board of Directors is
hereby expressly authorized to provide for the issuance of the preferred stock
in one or more series, and to fix for each such series such voting powers, full
or limited, or no voting powers, and such designations, preferences and
relative, participating, optional or other special rights and such
qualifications, limitations or restrictions thereof, as shall be stated and
expressed in the resolution or resolutions adopted by the Board of Directors
providing for the issuance of such series.
FIFTH. In furtherance and not in limitation of the powers conferred by the
laws of the State of Delaware, the following provisions are inserted in this
Restated Certificate of Incorporation for the regulation and conduct of the
business and affairs of the Corporation:
1. The election of directors of the Corporation need not be by
written ballot unless the By-Laws so require.
2. The business and affairs of the Corporation shall be managed by,
or under the direction of, a Board of Directors consisting of not less than
seven nor more than fifteen persons.
<PAGE>
The exact number of directors within the minimum and maximum limitations
specified herein shall be fixed from time to time by resolution of a majority of
the whole Board.
3. The directors of the Corporation, by the affirmative vote of a
majority of the whole Board, at any regular or special meeting, shall have the
power to adopt, amend or repeal By-Laws of the Corporation, provided, however,
that such power of the Board shall not divest the stockholders of the
Corporation of their power to adopt, amend or repeal By-Laws of the Corporation.
4. In addition to the powers and authorities conferred upon the
Board of Directors of the Corporation by this Restated Certificate of
Incorporation, the Board of Directors of the Corporation may exercise all such
powers and take all such actions as may be exercised or taken by the
Corporation, subject, however, to the provisions of the laws of the State of
Delaware, this Restated Certificate of Incorporation and the By-Laws of the
Corporation.
5. Any vote or votes authorizing liquidation of the Corporation or
proceedings for its dissolution may provide, subject to the rights of creditors
and preferred stockholders, if any, for the distribution pro rata among the
stockholders of the Corporation of the assets of the Corporation, wholly or in
part, in cash or in kind, whether such assets be in cash or other property, and
any such vote or votes may authorize the Board of Directors of the Corporation
to determine the valuation of the different assets of the Corporation for the
purpose of such liquidation and may divide or authorize the Board of Directors
to divide such assets or any part thereof among the stockholders of the
Corporation, in such manner that every stockholder will receive a proportionate
amount in value (determined as aforesaid) of cash and/or property of the
Corporation upon such agreement, vote of stockholders or disinterested directors
or otherwise, both as to action in his official capacity and as to action in
another capacity while holding such office, and shall continue as to a person
who has ceased to be a director, officer, employee, or agent and shall inure to
the benefit of the heirs, executors, and administrators of such a person.
SIXTH. The Corporation shall, to the fullest extent permitted by Section
145 of the General Corporation law of the State of Delaware, as the same may be
amended and supplemented, indemnify any and all persons whom its shall have
power to indemnify under said section from and against any and all of the
expenses, liabilities or other matters referred to in or covered by said section
and the indemnification provided for herein shall not be deemed exclusive of any
other rights to which those indemnified may be entitled under any By-Law,
agreement, vote of stockholders or disinterested Directors of otherwise, both as
to action in his official capacity and as to action in another capacity while
holding such office, and shall continue as to a person who has ceased to be
director, officer, employee or agent and shall inure to the benefit of the
heirs, executors and administrators of such a person.
SEVENTH. Whenever a compromise or arrangement is proposed between this
Corporation and its creditors or any class of them and/or between this
Corporation and its stockholders or any class of them, any court of equitable
jurisdiction within the State of Delaware may, on the application in a summary
way of this Corporation, or of any creditor or stockholder thereof or on the
application of any receiver or receivers appointed for the Corporation under the
provisions of Section 291 of Title 8 of the Delaware Code or on the application
of trustees in dissolution or of any receiver or receivers appointed for the
Corporation
-2-
<PAGE>
under the provisions of Section 279 of Title 8 of the Delaware Code order a
meeting of the creditors or class of creditors, and/or of the stockholders or
class of stockholders of this Corporation, as the case may be, to be summoned in
such manner as the said court directs. If a majority in number representing
three-fourths in value of the creditors or class of creditors, and/or of the
stockholders or class of stockholder of this Corporation, as the case may be,
agree to any compromise or arrangement and to any reorganization of this
Corporation as consequence of such compromise and arrangement, the said
compromise or arrangement and the said reorganization shall, if sanctioned by
the court to which the said application has been made, be binding on all
creditors or class of creditors, and/or of the stockholders or class of
stockholders of this Corporation, as the case may be, and also on this
Corporation.
EIGHTH. If any Article of this Certificate of Incorporation or any portion
thereof is found to be void or unenforceable by a court of competent
jurisdiction, the remaining Articles or portions of said Article, as the case
may be, shall nevertheless remain in full force and effect as though the
unenforceable part had been severed and deleted.
NINTH. A director of the corporation shall not be personally liable to the
corporation or its stockholders for monetary damages for breach of fiduciary
duty as a director except for liability (i) for any breach of the director's
duty of loyalty to the corporation or its stockholders, (ii) for acts or
omissions not in good faith or which involve intentional misconduct or a knowing
violation of law, (iii) under Section 174 of the Delaware General Corporation
Law, or (iv) for any transaction from which the director derived any improper
personal benefit.
IN WITNESS WHEREOF, IVC has caused this Restated Certificate of
Incorporation to be executed by E. Joseph Edell, Chief Executive Officer, and
attested by its Secretary Domenic Golato, this 31st day of January, 2000.
IVC Industries, Inc.
By: /s/ E. Joseph Edell
------------------------------------
E. Joseph Edell
Chief Executive Officer
Attest:
/s/ Domenic Golato
- -------------------------
Domenic Golato
Secretary
-3-
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from 10Q and is
qualified in it's entirety by reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JUL-31-2000
<PERIOD-START> AUG-1-1999
<PERIOD-END> JAN-31-2000
<CASH> 880
<SECURITIES> 0
<RECEIVABLES> 9,985
<ALLOWANCES> 0
<INVENTORY> 32,422
<CURRENT-ASSETS> 48,461
<PP&E> 20,819
<DEPRECIATION> 0
<TOTAL-ASSETS> 70,797
<CURRENT-LIABILITIES> 23,572
<BONDS> 0
0
0
<COMMON> 167
<OTHER-SE> 15,838
<TOTAL-LIABILITY-AND-EQUITY> 70,797
<SALES> 51,037
<TOTAL-REVENUES> 0
<CGS> 36,597
<TOTAL-COSTS> 14,257
<OTHER-EXPENSES> (10,141)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,199
<INCOME-PRETAX> 9,125
<INCOME-TAX> 3,691
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 5,434
<EPS-BASIC> 2.60
<EPS-DILUTED> 2.60
</TABLE>
