x |
QUARTERLY
REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE
ACT OF
1934
|
For
the quarterly period ended June 30, 2008
|
|
OR
|
|
o |
TRANSITION
REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE
ACT OF
1934
|
Delaware
|
|
371172197
|
(State
or other jurisdiction of
|
|
(I.R.S.
Employer Identification Number)
|
incorporation
or organization)
|
|
|
136
Chesterfield Industrial Boulevard
|
||
Chesterfield,
Missouri
|
63005
|
|
(Address
of principal executive offices)
|
(Zip
Code)
|
Part
I – Financial Information
|
||
Item
No. 1
|
Financial
Statements
|
1
|
Item
No. 2
|
Management’s
Discussion and Analysis of Financial Condition and Results of
Operations
|
8
|
Item
No. 3
|
Quantitative
and Qualitative Disclosures Regarding Market Risk
|
14
|
Item
No. 4
|
Controls
and Procedures
|
15
|
Part
II – Other Information
|
||
Item
No. 1A
|
Risk
Factors
|
15
|
Item
No. 2
|
Unregistered
Sales of Equity Securities and Use of Proceeds
|
15
|
Item
No. 4
|
Submission
of Matters to a Vote of Security Holders
|
16
|
Item
No. 6
|
Exhibits
|
17
|
PART
I — FINANCIAL INFORMATION
|
Item
No. 1 - Financial Statements
|
Consolidated
Balance Sheets
|
June 30
|
|
December 31
|
|
||||
|
|
2008
|
|
2007
|
|||
(unaudited)
|
|||||||
Assets
|
|||||||
Current
assets:
|
|||||||
Cash
and cash equivalents
|
$
|
10,352,319
|
$
|
11,694,699
|
|||
Short-term
investments
|
1,521,111
|
398,592
|
|||||
Accounts
and notes receivable, less allowances of $8,600 in 2008 and $8,300
in
2007
|
443,045
|
811,634
|
|||||
Accounts
due from employees and distributors
|
238,842
|
204,705
|
|||||
Inventories
|
|||||||
Finished
goods
|
3,515,945
|
3,290,114
|
|||||
Raw
materials
|
2,296,110
|
1,630,976
|
|||||
Sales
aids and promotional materials
|
1,075,446
|
1,258,148
|
|||||
Total
inventories
|
6,887,501
|
6,179,238
|
|||||
Refundable
income taxes
|
256,825
|
362,330
|
|||||
Prepaid
expenses and other current assets
|
1,371,602
|
862,172
|
|||||
Deferred
income taxes
|
531,430
|
574,430
|
|||||
Total
current assets
|
21,602,675
|
21,087,800
|
|||||
Other
assets
|
3,032,874
|
2,999,903
|
|||||
Accounts
due from employees and distributors
|
231,544
|
319,883
|
|||||
Property,
plant and equipment:
|
|||||||
Land
|
829,222
|
829,222
|
|||||
Building
|
9,808,973
|
9,817,692
|
|||||
Machinery
& equipment
|
3,332,135
|
3,673,515
|
|||||
Office
equipment
|
1,531,099
|
1,525,905
|
|||||
Computer
equipment & software
|
2,737,763
|
2,665,610
|
|||||
18,239,192
|
18,511,944
|
||||||
Less:
Accumulated depreciation
|
9,110,792
|
9,312,759
|
|||||
Net property, plant and equipment
|
9,128,400
|
9,199,185
|
|||||
Total
assets
|
$
|
33,995,493
|
$
|
33,606,771
|
Reliv
International, Inc. and Subsidiaries
|
Consolidated
Balance Sheets
|
June 30
|
|
December 31
|
|
||||
|
|
2008
|
|
2007
|
|
||
|
|
(unaudited)
|
|
||||
Liabilities and
stockholders' equity
|
|||||||
Current
liabilities:
|
|||||||
Accounts
payable and accrued expenses:
|
|||||||
Trade
accounts payable and other accrued expenses
|
$
|
4,898,012
|
$
|
4,288,481
|
|||
Distributors
commissions payable
|
3,079,599
|
3,285,270
|
|||||
Sales
taxes payable
|
327,118
|
390,585
|
|||||
Payroll
and payroll taxes payable
|
510,704
|
499,921
|
|||||
Total
accounts payable and accrued expenses
|
8,815,433
|
8,464,257
|
|||||
Income
taxes payable
|
10,000
|
110,000
|
|||||
Total
current liabilities
|
8,825,433
|
8,574,257
|
|||||
Other
noncurrent liabilities
|
1,156,335
|
1,227,313
|
|||||
Stockholders'
equity:
|
|||||||
Preferred
stock, par value $.001 per share; 3,000,000 shares authorized;
-0- shares
issued and outstanding in 2008 and 2007
|
-
|
-
|
|||||
Common
stock, par value $.001 per share; 30,000,000 authorized; 15,877,179
shares
issued and 15,662,052 shares outstanding as of 6/30/2008; 15,877,179
shares issued and 15,873,754 shares outstanding as of
12/31/2007
|
15,877
|
15,877
|
|||||
Additional
paid-in capital
|
33,221,932
|
33,100,351
|
|||||
Accumulated
deficit
|
(7,567,534
|
)
|
(8,869,332
|
)
|
|||
Accumulated
other comprehensive loss:
|
|||||||
Foreign
currency translation adjustment
|
(407,990
|
)
|
(419,179
|
)
|
|||
Treasury
stock
|
(1,248,560
|
)
|
(22,516
|
)
|
|||
Total
stockholders' equity
|
24,013,725
|
23,805,201
|
|||||
Total
liabilities and stockholders' equity
|
$
|
33,995,493
|
$
|
33,606,771
|
Consolidated
Statements of Income
|
(unaudited)
|
Three months ended June 30
|
|
Six months ended June 30
|
|
||||||||||
|
|
2008
|
|
2007
|
|
2008
|
|
2007
|
|||||
Product
sales
|
$
|
21,295,574
|
$
|
23,550,919
|
$
|
46,492,752
|
$
|
54,948,885
|
|||||
Handling
& freight income
|
2,664,136
|
2,773,618
|
5,738,344
|
6,339,296
|
|||||||||
Net
sales
|
23,959,710
|
26,324,537
|
52,231,096
|
61,288,181
|
|||||||||
Costs
and expenses:
|
|||||||||||||
Cost
of products sold
|
4,110,910
|
4,398,940
|
8,945,436
|
10,460,332
|
|||||||||
Distributor
royalties and commissions
|
9,422,481
|
10,602,827
|
20,544,853
|
24,531,390
|
|||||||||
Selling,
general and administrative
|
9,589,478
|
10,199,831
|
19,521,277
|
21,229,680
|
|||||||||
Total
costs and expenses
|
23,122,869
|
25,201,598
|
49,011,566
|
56,221,402
|
|||||||||
Income
from operations
|
836,841
|
1,122,939
|
3,219,530
|
5,066,779
|
|||||||||
Other
income (expense):
|
|||||||||||||
Interest
income
|
100,691
|
163,514
|
235,564
|
376,116
|
|||||||||
Interest
expense
|
(9,981
|
)
|
(447
|
)
|
(10,394
|
)
|
(573
|
)
|
|||||
Other
income (expense)
|
17,523
|
98,305
|
(17,589
|
)
|
195,238
|
||||||||
Income
before income taxes
|
945,074
|
1,384,311
|
3,427,111
|
5,637,560
|
|||||||||
Provision
for income taxes
|
376,000
|
561,000
|
1,332,000
|
2,194,000
|
|||||||||
Net
income
|
$
|
569,074
|
$
|
823,311
|
$
|
2,095,111
|
$
|
3,443,560
|
|||||
Earnings
per common share - Basic
|
$
|
0.04
|
$
|
0.05
|
$
|
0.13
|
$
|
0.21
|
|||||
Weighted
average shares
|
15,821,000
|
16,135,000
|
15,847,000
|
16,282,000
|
|||||||||
Earnings
per common share - Diluted
|
$
|
0.04
|
$
|
0.05
|
$
|
0.13
|
$
|
0.21
|
|||||
Weighted
average shares
|
15,821,000
|
16,308,000
|
15,847,000
|
16,453,000
|
|||||||||
Cash
dividends declared per common share
|
$
|
0.05
|
$
|
0.05
|
$
|
0.05
|
$
|
0.05
|
Reliv
International, Inc. and Subsidiaries
|
Consolidated
Statements of Cash Flows
|
(unaudited)
|
Six months ended June 30
|
|
||||||
|
|
2008
|
|
2007
|
|||
Operating
activities:
|
|||||||
Net
income
|
$
|
2,095,111
|
$
|
3,443,560
|
|||
Adjustments
to reconcile net income to net cash provided by operating
activities:
|
|||||||
Depreciation
and amortization
|
543,958
|
525,069
|
|||||
Stock-based
compensation
|
119,309
|
40,013
|
|||||
Deferred
income taxes
|
(29,000
|
)
|
110,000
|
||||
Foreign
currency transaction (gain)/loss
|
(24,200
|
)
|
(126,570
|
)
|
|||
(Increase)
decrease in accounts and notes receivable
|
433,486
|
(246,060
|
)
|
||||
(Increase)
decrease in inventories
|
(665,730
|
)
|
(904,016
|
)
|
|||
(Increase)
decrease in refundable income taxes
|
106,931
|
(946,952
|
)
|
||||
(Increase)
decrease in prepaid expenses and other current
assets
|
(512,058
|
)
|
(200,604
|
)
|
|||
(Increase)
decrease in other assets
|
20,830
|
(382,155
|
)
|
||||
Increase
(decrease) in accounts payable and accrued expenses
|
249,481
|
1,543,712
|
|||||
Increase
(decrease) in income taxes payable
|
(100,000
|
)
|
-
|
||||
Net
cash provided by operating activities
|
2,238,118
|
2,855,997
|
|||||
Investing
activities:
|
|||||||
Proceeds
from the sale of property, plant and equipment
|
8,716
|
4,532
|
|||||
Purchase
of property, plant and equipment
|
(457,074
|
)
|
(620,689
|
)
|
|||
Purchase
of investments
|
(1,521,111
|
)
|
(1,398,592
|
)
|
|||
Proceeds
from sales or maturities of investments, at cost
|
398,592
|
2,328,000
|
|||||
Net
cash provided by (used in) investing activities
|
(1,570,877
|
)
|
313,251
|
||||
Financing
activities:
|
|||||||
Common
stock dividends paid
|
(793,313
|
)
|
(806,763
|
)
|
|||
Proceeds
from options and warrants exercised
|
-
|
49,626
|
|||||
Purchase
of stock for treasury
|
(1,226,044
|
)
|
(6,432,527
|
)
|
|||
Other
|
2,272
|
-
|
|||||
Net
cash used in financing activities
|
(2,017,085
|
)
|
(7,189,664
|
)
|
|||
Effect
of exchange rate changes on cash and cash equivalents
|
7,464
|
170,305
|
|||||
Increase
(decrease) in cash and cash equivalents
|
(1,342,380
|
)
|
(3,850,111
|
)
|
|||
Cash
and cash equivalents at beginning of period
|
11,694,699
|
9,332,810
|
|||||
Cash
and cash equivalents at end of period
|
$
|
10,352,319
|
$
|
5,482,699
|
Note 1— |
Accounting
Policies
|
Note 2— |
Comprehensive
Income
|
Note 3— |
Basic
and Diluted Earnings per
Share
|
Three months ended June 30
|
Six months ended June 30
|
||||||||||||
2008
|
2007
|
2008
|
2007
|
||||||||||
Numerator:
|
|||||||||||||
Net
income
|
$
|
569,074
|
$
|
823,311
|
$
|
2,095,111
|
$
|
3,443,560
|
|||||
Denominator:
|
|||||||||||||
Denominator
for basic earnings per share—weighted average shares
|
15,821,000
|
16,135,000
|
15,847,000
|
16,282,000
|
|||||||||
Dilutive
effect of employee stock options and other warrants
|
-
|
173,000
|
-
|
171,000
|
|||||||||
|
|||||||||||||
Denominator
for diluted earnings per share—adjusted weighted average
shares
|
15,821,000
|
16,308,000
|
15,847,000
|
16,453,000
|
|||||||||
|
|||||||||||||
Basic
earnings per share
|
$
|
0.04
|
$
|
0.05
|
$
|
0.13
|
$
|
0.21
|
|||||
Diluted
earnings per share
|
$
|
0.04
|
$
|
0.05
|
$
|
0.13
|
$
|
0.21
|
Note 4— |
Adoption
of New Accounting Standards — Fair Value
|
|
|
Using Quoted
|
|
Using Significant
|
|
|||||
|
|
Total
|
|
Prices in
|
|
Other Observable
|
|
|||
|
|
Carrying
|
|
Active Markets
|
|
Inputs
|
|
|||
Description
|
|
Value
|
(Level
1)
|
|
(Level
2)
|
|
||||
Certificates
of deposits (1)
|
$
|
4,507,183
|
$
|
4,507,183
|
$
|
-
|
||||
Marketable
securities (2)
|
924,658
|
924,658
|
-
|
|||||||
Derivatives
(3)
|
13,622
|
-
|
13,622
|
|||||||
$
|
5,445,463
|
$
|
5,431,841
|
$
|
13,622
|
(1) |
Representing
certificates of deposits recorded in cash, cash equivalents, and
short
term investments.
|
(2) |
Representing
assets of the Company's Supplemental Executive Retirement Plan
(trading
securities). Presented within
Other Assets in the consolidated balance
sheets.
|
(3) |
Representing
recorded asset of forward currency contracts and is presented within
Prepaid Expenses and Other Current Assets in the consolidated balance
sheets. The fair values of derivatives are determined either through
quoted market prices in active markets for exchange traded derivatives
or
through pricing from brokers who develop values based on inputs
observable
in active markets such as interest rates and currency
volatilities.
|
Note 5— |
Recent
Accounting Standards Pending
Adoption
|
Note 6— |
Restructuring
of European Operations
|
Employee
|
Lease
|
|||||||||
Severance
|
Exit
|
Total
|
||||||||
Original
charges and reserve balance
|
$
|
107,000
|
$
|
108,000
|
$
|
215,000
|
||||
Amounts
settled in second quarter 2008
|
22,000
|
-
|
22,000
|
|||||||
Reserve
balance at June 30, 2008
|
$
|
85,000
|
$
|
108,000
|
$
|
193,000
|
Note 7— |
Subsequent
Event
|
Three
months ended
June
30,
|
Six
months ended
June
30,
|
||||||||||||
2008
|
|
2007
|
|
2008
|
|
2007
|
|||||||
Net
sales
|
100.0
|
%
|
100.0
|
%
|
100.0
|
%
|
100.0
|
%
|
|||||
Costs
and expenses:
|
|||||||||||||
Cost
of products sold
|
17.2
|
16.7
|
17.1
|
17.1
|
|||||||||
Distributor
royalties and commissions
|
39.3
|
40.3
|
39.3
|
40.0
|
|||||||||
Selling,
general and administrative
|
40.0
|
38.8
|
37.4
|
34.6
|
|||||||||
Income
from operations
|
3.5
|
4.2
|
6.2
|
8.3
|
|||||||||
Interest
expense
|
(0.0
|
)
|
(0.0
|
)
|
(0.0
|
)
|
(0.0
|
)
|
|||||
Interest
and other income
|
0.5
|
1.0
|
0.4
|
0.9
|
|||||||||
Income
before income taxes
|
4.0
|
5.2
|
6.6
|
9.2
|
|||||||||
Provision
for income taxes
|
1.6
|
2.1
|
2.6
|
3.6
|
|||||||||
Net
income
|
2.4
|
%
|
3.1
|
%
|
4.0
|
%
|
5.6
|
%
|
Three
months ended June 30,
|
|||||||||||||||||||
2008
|
2007
|
Change from prior year
|
|||||||||||||||||
Amount
|
%
of Net
Sales
|
Amount
|
%
of Net
Sales
|
Amount
|
%
|
||||||||||||||
(dollars
in thousands)
|
|||||||||||||||||||
United
States
|
$
|
20,435
|
85.3
|
%
|
$
|
23,303
|
88.5
|
%
|
$
|
(2,868
|
)
|
(12.3
|
)%
|
||||||
Australia/New
Zealand
|
682
|
2.8
|
722
|
2.7
|
(40
|
)
|
(5.5
|
)
|
|||||||||||
Canada
|
436
|
1.8
|
378
|
1.4
|
58
|
15.3
|
|||||||||||||
Mexico
|
481
|
2.0
|
393
|
1.5
|
88
|
22.4
|
|||||||||||||
United
Kingdom/Ireland
|
270
|
1.1
|
252
|
1.0
|
18
|
7.1
|
|||||||||||||
Philippines
|
695
|
2.9
|
671
|
2.6
|
24
|
3.6
|
|||||||||||||
Malaysia/Singapore
|
850
|
3.6
|
424
|
1.6
|
426
|
100.5
|
|||||||||||||
Germany
|
111
|
0.5
|
182
|
0.7
|
(71
|
)
|
(39.0
|
)
|
|||||||||||
Consolidated
total
|
$
|
23,960
|
100.0
|
%
|
$
|
26,325
|
100.0
|
%
|
$
|
(2,365
|
)
|
(9.0
|
)%
|
Six
months ended June 30,
|
|||||||||||||||||||
2008
|
2007
|
Change from prior year
|
|||||||||||||||||
Amount
|
%
of Net
Sales
|
Amount
|
%
of Net
Sales
|
Amount
|
%
|
||||||||||||||
(dollars
in thousands)
|
|||||||||||||||||||
United
States
|
$
|
45,120
|
86.4
|
%
|
$
|
55,206
|
90.1
|
%
|
$
|
(10,086
|
)
|
(18.3
|
)%
|
||||||
Australia/New
Zealand
|
1,428
|
2.7
|
1,375
|
2.3
|
53
|
3.9
|
|||||||||||||
Canada
|
897
|
1.7
|
818
|
1.3
|
79
|
9.7
|
|||||||||||||
Mexico
|
880
|
1.7
|
804
|
1.3
|
76
|
9.5
|
|||||||||||||
United
Kingdom/Ireland
|
557
|
1.1
|
539
|
0.9
|
18
|
3.3
|
|||||||||||||
Philippines
|
1,509
|
2.9
|
1,299
|
2.1
|
210
|
16.2
|
|||||||||||||
Malaysia/Singapore
|
1,492
|
2.8
|
754
|
1.2
|
738
|
97.9
|
|||||||||||||
Germany
|
348
|
0.7
|
493
|
0.8
|
(145
|
)
|
(29.4
|
)
|
|||||||||||
Consolidated
total
|
$
|
52,231
|
100.0
|
%
|
$
|
61,288
|
100.0
|
%
|
$
|
(9,057
|
)
|
(14.8
|
)%
|
June 30, 2008
|
June 30, 2007
|
% Change
|
|||||||||||||||||
Active
Distributors
|
Master
Affiliates and
Above
|
Active
Distributors
|
Master
Affiliates and
Above
|
Active
Distributors
|
Master
Affiliates and
Above
|
||||||||||||||
United
States
|
55,070
|
10,080
|
56,930
|
13,200
|
(3.3
|
)%
|
(23.6
|
)%
|
|||||||||||
Australia/New
Zealand
|
2,420
|
220
|
2,510
|
280
|
(3.6
|
)
|
(21.4
|
)
|
|||||||||||
Canada
|
1,230
|
150
|
1,130
|
150
|
8.8
|
0.0
|
|||||||||||||
Mexico
|
1,540
|
220
|
1,300
|
190
|
18.5
|
15.8
|
|||||||||||||
United
Kingdom/Ireland
|
750
|
90
|
830
|
130
|
(9.6
|
)
|
(30.8
|
)
|
|||||||||||
Philippines
|
4,900
|
430
|
3,990
|
300
|
22.8
|
43.3
|
|||||||||||||
Malaysia/Singapore
|
3,040
|
490
|
2,260
|
290
|
34.5
|
69.0
|
|||||||||||||
Germany
|
500
|
80
|
520
|
150
|
(3.8
|
)
|
(46.7
|
)
|
|||||||||||
Consolidated
total
|
69,450
|
11,760
|
69,470
|
14,690
|
0.0
|
%
|
(19.9
|
)%
|
Period
|
Total Number
of Shares
Purchased
|
Average Price
Paid per Share
|
Total Number of Shares
Purchased as Part of
Publicly Announced
Programs
|
Approximate Dollar
Value of Shares that
May Yet Be Purchased
Under the Plans or
Programs(1)
|
|||||||||
April
1-30, 2008
|
—
|
—
|
—
|
$
|
14,440,000
|
||||||||
May
1-31, 2008
|
61,580
|
$
|
5.75
|
61,580
|
$
|
14,086,000
|
|||||||
June
1-30, 2008
|
150,122
|
$
|
5.81
|
150,122
|
$
|
13,214,000
|
|||||||
Total
|
211,702
|
211,702
|
(1)
|
In
May 2007, the Company’s Board of Directors approved a share repurchase
plan of up to $15 million through April
2010.
|
1.
|
Election
of nine directors; and
|
2.
|
Ratification
of the Board’s selection of Ernst & Young LLP as our independent
certified public accountants.
|
Total Votes
|
|||||||
Name
|
Total Votes For
|
Against or Withheld
|
|||||
Robert
L. Montgomery
|
12,507,403
|
146,043
|
|||||
|
|||||||
Carl
W. Hastings
|
12,509,193
|
144,253
|
|||||
Donald
L. McCain
|
12,508,699
|
144,747
|
|||||
Stephen
M. Merrick
|
12,547,610
|
105,836
|
|||||
John
B. Akin
|
12,541,905
|
111,541
|
|||||
Denis
St. John
|
12,544,748
|
108,698
|
|||||
Robert
M. Henry
|
12,545,148
|
108,398
|
|||||
|
|||||||
Michael
D. Smith
|
12,544,148
|
109,298
|
|||||
|
|||||||
Patrick
G. Doherty
|
12,544,548
|
108,898
|
2.
|
Ratification
of the Board of Directors selection of Ernst & Young LLP as our
certified public accountants.
|
Total Broker Non-Votes
|
|||||||
Total Votes For
|
Total Votes Against
|
and Total Votes Abstain
|
|||||
12,593,359
|
45,611
|
14,475
|
Exhibit
|
||
Number
|
Document
|
|
10.1
|
Rule
10b5-1 Stock Repurchase Plan dated June 12, 2008 between the Registrant
and Canaccord Adams, Inc. (incorporated by reference to Exhibit 10.1
to
the Form 8-K of the Registrant filed June 13, 2008).
|
|
31.1
|
Certification
of Chief Executive Officer pursuant to Rule 13a-14(a) and Rule 15d-14(a)
of the Securities Exchange Act, as amended (filed
herewith).
|
|
31.2
|
Certification
of Chief Financial Officer pursuant to Rule 13a-14(a) and Rule 15d-14(a)
of the Securities Exchange Act, as amended (filed
herewith).
|
|
32
|
Certification
of Chief Executive Officer and Chief Financial Officer pursuant to
18
U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley
Act
of 2002 (filed herewith).
|
RELIV’
INTERNATIONAL, INC.
|
|
By:
|
/s/
Robert L. Montgomery
|
Robert
L. Montgomery, Chairman of the Board of Directors, President and
Chief
Executive Officer
|
|
Date:
August 8, 2008
|
|
By:
|
/s/
Steven D. Albright
|
Steven
D. Albright, Chief Financial Officer (and accounting
officer)
|
|
Date:
August 8, 2008
|
Exhibit
|
||
Number
|
Document
|
|
10.1
|
Rule
10b5-1 Stock Repurchase Plan dated June 12, 2008 between the Registrant
and Canaccord Adams, Inc. (incorporated by reference to Exhibit 10.1
to
the Form 8-K of the Registrant filed June 13, 2008).
|
|
31.1
|
Certification
of Chief Executive Officer pursuant to Rule 13a-14(a) and Rule 15d-14(a)
of the Securities Exchange Act, as amended (filed
herewith).
|
|
31.2
|
Certification
of Chief Financial Officer pursuant to Rule 13a-14(a) and Rule 15d-14(a)
of the Securities Exchange Act, as amended (filed
herewith).
|
|
32
|
Certification
of Chief Executive Officer and Chief Financial Officer pursuant to
18
U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley
Act
of 2002 (filed herewith).
|