x
|
QUARTERLY
REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF
1934
|
For
the quarterly period ended September 30, 2010
|
|
OR
|
|
¨
|
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 (Unaudited)
|
F-1
|
Item
No. 2
|
Management’s
Discussion and Analysis of Financial Condition and Results of
Operations
|
4
|
Item
No. 4
|
Controls
and Procedures
|
9
|
PART
II – OTHER INFORMATION
|
||
Item
No. 2
|
Unregistered
Sales of Equity Securities and Use of Proceeds
|
10
|
Item
No. 6
|
Exhibits
|
10
|
September 30
|
December 31
|
|||||||
2010
|
2009
|
|||||||
(unaudited)
|
||||||||
Assets
|
||||||||
Current
assets:
|
||||||||
Cash
and cash equivalents
|
$ | 6,404,688 | $ | 5,760,913 | ||||
Accounts
and notes receivable, less allowances of $66,400 in 2010 and $59,700 in
2009
|
234,889 | 326,022 | ||||||
Accounts
due from employees and distributors
|
68,407 | 78,500 | ||||||
Inventories
|
||||||||
Finished
goods
|
3,920,065 | 3,073,570 | ||||||
Raw
materials
|
1,425,154 | 1,388,140 | ||||||
Sales
aids and promotional materials
|
625,365 | 622,694 | ||||||
Total
inventories
|
5,970,584 | 5,084,404 | ||||||
Refundable
income taxes
|
26,785 | 23,789 | ||||||
Prepaid
expenses and other current assets
|
801,898 | 652,544 | ||||||
Deferred
income taxes
|
371,000 | 303,000 | ||||||
Total
current assets
|
13,878,251 | 12,229,172 | ||||||
Other
assets
|
1,886,906 | 1,569,079 | ||||||
Intangible
assets, net
|
1,837,365 | 1,991,497 | ||||||
Property,
plant and equipment:
|
||||||||
Land
and land improvements
|
868,870 | 852,147 | ||||||
Building
|
9,928,707 | 9,851,829 | ||||||
Machinery
& equipment
|
3,485,285 | 3,426,720 | ||||||
Office
equipment
|
1,496,927 | 1,494,915 | ||||||
Computer
equipment & software
|
2,988,992 | 3,003,766 | ||||||
18,768,781 | 18,629,377 | |||||||
Less:
Accumulated depreciation
|
10,783,016 | 10,264,692 | ||||||
Net
property, plant and equipment
|
7,985,765 | 8,364,685 | ||||||
Total
assets
|
$ | 25,588,287 | $ | 24,154,433 |
September 30
|
December 31
|
|||||||
2010
|
2009
|
|||||||
(unaudited)
|
||||||||
Liabilities
and stockholders' equity
|
||||||||
Current
liabilities:
|
||||||||
Accounts
payable and accrued expenses:
|
||||||||
Trade
accounts payable and other accrued expenses
|
$ | 3,505,887 | $ | 2,627,674 | ||||
Distributors
commissions payable
|
2,595,719 | 2,674,247 | ||||||
Sales
taxes payable
|
375,230 | 362,612 | ||||||
Payroll
and payroll taxes payable
|
397,383 | 577,756 | ||||||
Total
accounts payable and accrued expenses
|
6,874,219 | 6,242,289 | ||||||
Current
maturities of long-term debt
|
3,859,758 | 519,192 | ||||||
Total
current liabilities
|
10,733,977 | 6,761,481 | ||||||
Noncurrent
liabilities:
|
||||||||
Long-term
debt, less current maturities
|
991,721 | 4,719,542 | ||||||
Other
noncurrent liabilities
|
401,618 | 406,544 | ||||||
Total
noncurrent liabilities
|
1,393,339 | 5,126,086 | ||||||
Stockholders'
equity:
|
||||||||
Preferred
stock, par value $.001 per share; 3,000,000 shares authorized; -0- shares
issued and outstanding in 2010 and 2009
|
- | - | ||||||
Common
stock, par value $.001 per share; 30,000,000 authorized; 14,425,185 shares
issued and 12,380,187 shares outstanding as of 9/30/2010; 14,425,185
shares issued and 12,380,187 shares outstanding as of
12/31/2009
|
14,425 | 14,425 | ||||||
Additional
paid-in capital
|
30,379,805 | 30,228,573 | ||||||
Accumulated
deficit
|
(10,402,495 | ) | (11,279,526 | ) | ||||
Accumulated
other comprehensive loss:
|
||||||||
Foreign
currency translation adjustment
|
(461,862 | ) | (627,704 | ) | ||||
Treasury
stock
|
(6,068,902 | ) | (6,068,902 | ) | ||||
Total
stockholders' equity
|
13,460,971 | 12,266,866 | ||||||
Total
liabilities and stockholders' equity
|
$ | 25,588,287 | $ | 24,154,433 |
Three months ended September 30
|
Nine months ended September 30
|
|||||||||||||||
2010
|
2009
|
2010
|
2009
|
|||||||||||||
Product
sales
|
$ | 16,612,215 | $ | 18,578,895 | $ | 53,559,074 | $ | 57,517,213 | ||||||||
Handling
& freight income
|
2,060,849 | 2,306,633 | 6,661,873 | 7,212,434 | ||||||||||||
Net
sales
|
18,673,064 | 20,885,528 | 60,220,947 | 64,729,647 | ||||||||||||
Costs
and expenses:
|
||||||||||||||||
Cost
of products sold
|
3,820,490 | 4,451,156 | 12,093,367 | 12,800,809 | ||||||||||||
Distributor
royalties and commissions
|
7,011,217 | 7,907,856 | 22,560,625 | 24,480,422 | ||||||||||||
Selling,
general and administrative
|
7,402,210 | 8,056,928 | 23,486,389 | 24,725,653 | ||||||||||||
Total
costs and expenses
|
18,233,917 | 20,415,940 | 58,140,381 | 62,006,884 | ||||||||||||
Income
from operations
|
439,147 | 469,588 | 2,080,566 | 2,722,763 | ||||||||||||
Other
income (expense):
|
||||||||||||||||
Interest
income
|
12,961 | 10,119 | 35,334 | 45,538 | ||||||||||||
Interest
expense
|
(52,885 | ) | (62,195 | ) | (159,336 | ) | (113,129 | ) | ||||||||
Other
income
|
437 | 76,657 | 21,592 | 202,747 | ||||||||||||
Income
before income taxes
|
399,660 | 494,169 | 1,978,156 | 2,857,919 | ||||||||||||
Provision
for income taxes
|
228,000 | 170,000 | 854,000 | 1,112,000 | ||||||||||||
Net
income
|
$ | 171,660 | $ | 324,169 | $ | 1,124,156 | $ | 1,745,919 | ||||||||
Earnings
per common share - Basic
|
$ | 0.01 | $ | 0.03 | $ | 0.09 | $ | 0.13 | ||||||||
Weighted
average shares
|
12,380,000 | 12,230,000 | 12,380,000 | 13,109,000 | ||||||||||||
Earnings
per common share - Diluted
|
$ | 0.01 | $ | 0.03 | $ | 0.09 | $ | 0.13 | ||||||||
Weighted
average shares
|
12,380,000 | 12,230,000 | 12,380,000 | 13,109,000 | ||||||||||||
Cash
dividends declared per common share
|
$ | - | $ | - | $ | 0.02 | $ | 0.05 |
Nine months ended September 30
|
||||||||
2010
|
2009
|
|||||||
Operating
activities:
|
||||||||
Net
income
|
$ | 1,124,156 | $ | 1,745,919 | ||||
Adjustments
to reconcile net income to net cash provided by operating
activities:
|
||||||||
Depreciation
and amortization
|
910,338 | 855,365 | ||||||
Stock-based
compensation
|
151,232 | 142,492 | ||||||
Deferred
income taxes
|
(142,000 | ) | (31,000 | ) | ||||
Foreign
currency transaction (gain)/loss
|
(48,919 | ) | (120,114 | ) | ||||
(Increase)
decrease in accounts and notes receivable
|
115,265 | 454,382 | ||||||
(Increase)
decrease in inventories
|
(815,305 | ) | 1,255,790 | |||||
(Increase)
decrease in refundable income taxes
|
(3,251 | ) | 128,782 | |||||
(Increase)
decrease in prepaid expenses and other current assets
|
(136,790 | ) | 158,501 | |||||
(Increase)
decrease in other assets
|
(271,169 | ) | (290,471 | ) | ||||
Increase
(decrease) in accounts payable & accrued expenses and other noncurrent
liabilities
|
553,321 | 480,532 | ||||||
Net
cash provided by operating activities
|
1,436,878 | 4,780,178 | ||||||
Investing
activities:
|
||||||||
Proceeds
from the sale of property, plant and equipment
|
2,925 | - | ||||||
Purchase
of property, plant and equipment
|
(348,252 | ) | (472,544 | ) | ||||
Purchase
of distributorship
|
- | (716,119 | ) | |||||
Proceeds
from final withdrawal from limited partnership investment
|
- | 488,633 | ||||||
Net
cash used in investing activities
|
(345,327 | ) | (700,030 | ) | ||||
Financing
activities:
|
||||||||
Proceeds
from line of credit borrowings
|
- | 6,000,000 | ||||||
Repayment
of line of credit borrowings
|
- | (5,000,000 | ) | |||||
Proceeds
from term loan borrowings
|
- | 4,120,000 | ||||||
Principal
payments on short and long-term borrowings
|
(387,255 | ) | (1,774,901 | ) | ||||
Common
stock dividends paid
|
(247,672 | ) | (611,681 | ) | ||||
Purchase
of stock for treasury
|
- | (5,014,115 | ) | |||||
Other
|
547 | - | ||||||
Net
cash used in financing activities
|
(634,380 | ) | (2,280,697 | ) | ||||
Effect
of exchange rate changes on cash and cash equivalents
|
186,604 | 162,363 | ||||||
Increase
in cash and cash equivalents
|
643,775 | 1,961,814 | ||||||
Cash
and cash equivalents at beginning of period
|
5,760,913 | 4,460,637 | ||||||
Cash
and cash equivalents at end of period
|
$ | 6,404,688 | $ | 6,422,451 | ||||
Supplementary
disclosure of cash flow information:
|
||||||||
Noncash
investing and financing transactions:
|
||||||||
Issuance
of promissory note for purchase of stock for treasury
|
$ | - | $ | 1,106,919 | ||||
Obligation
for purchase of distributorship
|
$ | - | $ | 1,343,881 |
Note
1—
|
Accounting
Policies
|
Note
2—
|
Comprehensive
Income
|
Note
3—
|
Basic
and Diluted Earnings per Share
|
Three months ended September 30
|
Nine months ended September 30
|
|||||||||||||||
2010
|
2009
|
2010
|
2009
|
|||||||||||||
Numerator:
|
||||||||||||||||
Net
income
|
$ | 171,660 | $ | 324,169 | $ | 1,124,156 | $ | 1,745,919 | ||||||||
Denominator:
|
||||||||||||||||
Denominator
for basic earnings per share—weighted average shares
|
12,380,000 | 12,230,000 | 12,380,000 | 13,109,000 | ||||||||||||
Dilutive
effect of employee stock options and other warrants
|
- | - | - | - | ||||||||||||
Denominator
for diluted earnings per share—adjusted weighted average
shares
|
12,380,000 | 12,230,000 | 12,380,000 | 13,109,000 | ||||||||||||
Basic
earnings per share
|
$ | 0.01 | $ | 0.03 | $ | 0.09 | $ | 0.13 | ||||||||
Diluted
earnings per share
|
$ | 0.01 | $ | 0.03 | $ | 0.09 | $ | 0.13 |
Note
4—
|
Fair
Value Measurements
|
Fair Value
|
||||||||||||||||
Using Quoted
|
Using Significant
|
|||||||||||||||
Total
|
Prices in
|
Other Observable
|
||||||||||||||
Carrying
|
Fair
|
Active Markets
|
Inputs
|
|||||||||||||
Description
|
Amount
|
Value
|
(Level 1)
|
(Level 2)
|
||||||||||||
September 30, 2010
|
||||||||||||||||
Long-term
debt (1)
|
$ | 4,851,000 | $ | 4,809,000 | $ | - | $ | 4,809,000 | ||||||||
Marketable
securities (2)
|
213,000 | 213,000 | 213,000 | - | ||||||||||||
December 31, 2009
|
||||||||||||||||
Long-term
debt (1)
|
$ | 5,238,734 | $ | 5,184,000 | $ | - | $ | 5,184,000 | ||||||||
Marketable
securities (2)
|
200,000 | 200,000 | 200,000 | - |
(1)
|
The
fair value of the Company's variable interest rate debt approximates
carrying value due to the short-term duration of the debt and the frequent
re-setting of its variable interest rate. The fair value of the of the
Company's fixed interest rate long-term obligation was estimated by
management based upon the rate available at the balance sheet date for the
additional unused credit available to the
Company.
|
(2)
|
Representing
assets of the Company's Supplemental Executive Retirement Plan (trading
securities). Presented within Other Assets in the consolidated balance
sheets.
|
Three months ended
|
Nine months ended
|
|||||||||||||||
September 30,
|
September 30,
|
|||||||||||||||
2010
|
2009
|
2010
|
2009
|
|||||||||||||
Net
sales
|
100.0 | % | 100.0 | % | 100.0 | % | 100.0 | % | ||||||||
Costs
and expenses:
|
||||||||||||||||
Cost
of products sold
|
20.5 | 21.3 | 20.1 | 19.8 | ||||||||||||
Distributor
royalties and commissions
|
37.6 | 37.9 | 37.4 | 37.8 | ||||||||||||
Selling,
general and administrative
|
39.6 | 38.6 | 39.0 | 38.2 | ||||||||||||
Income
from operations
|
2.3 | 2.2 | 3.5 | 4.2 | ||||||||||||
Interest
expense
|
(0.3 | ) | (0.3 | ) | (0.3 | ) | (0.2 | ) | ||||||||
Interest
and other income
|
0.1 | 0.5 | 0.1 | 0.4 | ||||||||||||
Income
before income taxes
|
2.1 | 2.4 | 3.3 | 4.4 | ||||||||||||
Provision
for income taxes
|
1.2 | 0.8 | 1.4 | 1.7 | ||||||||||||
Net
income
|
0.9 | % | 1.6 | % | 1.9 | % | 2.7 | % |
Three months ended September 30,
|
||||||||||||||||||||||||
2010
|
2009
|
Change from prior year
|
||||||||||||||||||||||
Amount
|
% of Net
Sales
|
Amount
|
% of Net
Sales
|
Amount
|
%
|
|||||||||||||||||||
(dollars in thousands)
|
||||||||||||||||||||||||
United
States
|
$ | 15,975 | 85.5 | % | $ | 18,262 | 87.4 | % | $ | (2,287 | ) | (12.5 | )% | |||||||||||
Australia/New
Zealand
|
656 | 3.5 | 620 | 3.0 | 36 | 5.8 | ||||||||||||||||||
Canada
|
505 | 2.7 | 428 | 2.0 | 77 | 18.0 | ||||||||||||||||||
Mexico
|
320 | 1.7 | 392 | 1.9 | (72 | ) | (18.4 | ) | ||||||||||||||||
Europe
|
439 | 2.4 | 314 | 1.5 | 125 | 39.8 | ||||||||||||||||||
Asia
|
778 | 4.2 | 870 | 4.2 | (92 | ) | (10.6 | ) | ||||||||||||||||
Consolidated
total
|
$ | 18,673 | 100.0 | % | $ | 20,886 | 100.0 | % | $ | (2,213 | ) | (10.6 | )% |
Nine months ended September 30,
|
||||||||||||||||||||||||
2010
|
2009
|
Change from prior year
|
||||||||||||||||||||||
Amount
|
% of Net
Sales
|
Amount
|
% of Net
Sales
|
Amount
|
%
|
|||||||||||||||||||
(dollars in thousands)
|
||||||||||||||||||||||||
United
States
|
$ | 51,378 | 85.3 | % | $ | 57,281 | 88.5 | % | $ | (5,903 | ) | (10.3 | )% | |||||||||||
Australia/New
Zealand
|
1,924 | 3.2 | 1,672 | 2.6 | 252 | 15.1 | ||||||||||||||||||
Canada
|
1,634 | 2.7 | 1,076 | 1.7 | 558 | 51.9 | ||||||||||||||||||
Mexico
|
1,107 | 1.9 | 1,018 | 1.6 | 89 | 8.7 | ||||||||||||||||||
Europe
|
1,440 | 2.4 | 927 | 1.4 | 513 | 55.3 | ||||||||||||||||||
Asia
|
2,738 | 4.5 | 2,756 | 4.2 | (18 | ) | (0.7 | ) | ||||||||||||||||
Consolidated
total
|
$ | 60,221 | 100.0 | % | $ | 64,730 | 100.0 | % | $ | (4,509 | ) | (7.0 | )% |
September 30, 2010
|
September 30, 2009
|
% Change
|
||||||||||||||||||||||
Total
Active
Distributors
|
Master
Affiliates and
Above
|
Total
Active
Distributors
|
Master
Affiliates and
Above
|
Total
Active
Distributors
|
Master
Affiliates and
Above
|
|||||||||||||||||||
United
States
|
48,520 | 6,730 | 54,460 | 8,390 | (10.9 | )% | (19.8 | )% | ||||||||||||||||
Australia/New
Zealand
|
2,410 | 200 | 2,490 | 190 | (3.2 | ) | 5.3 | |||||||||||||||||
Canada
|
1,390 | 180 | 1,190 | 120 | 16.8 | 50.0 | ||||||||||||||||||
Mexico
|
2,100 | 300 | 1,960 | 240 | 7.1 | 25.0 | ||||||||||||||||||
Europe
|
1,860 | 260 | 1,110 | 160 | 67.6 | 62.5 | ||||||||||||||||||
Asia
|
5,950 | 620 | 7,100 | 780 | (16.2 | ) | (20.5 | ) | ||||||||||||||||
Consolidated
total
|
62,230 | 8,290 | 68,310 | 9,880 | (8.9 | )% | (16.1 | )% |
Exhibit
|
||
Number
|
Document
|
|
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: November
15, 2010
|
||
By:
|
/s/ Steven D. Albright
|
|
Steven
D. Albright, Chief Financial Officer (and accounting
officer)
|
||
Date: November
15, 2010
|
Exhibit
|
||
Number
|
Document
|
|
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).
|