x |
QUARTERLY
REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE
ACT OF 1934
|
For
the quarterly period ended March 31, 2007
|
|
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
|
7
|
|
Item
No. 3
|
Quantitative
and Qualitative Disclosures Regarding Market Risk
|
12
|
Item
No. 4
|
Controls
and Procedures
|
12
|
PART
II - OTHER INFORMATION
|
||
Item
No. 1A
|
Risk
Factors
|
13
|
Item
No. 2
|
Unregistered
Sales of Equity Securities and Use of Proceeds
|
13
|
Item
No. 6
|
Exhibits
|
13
|
Reliv
International, Inc. and Subsidiaries
|
|||||||
Consolidated
Balance Sheets
|
|||||||
March
31
|
December
31
|
||||||
2007
|
2006
|
||||||
(unaudited)
|
|||||||
Assets
|
|||||||
Current
assets:
|
|||||||
Cash
and cash equivalents
|
$
|
10,228,771
|
$
|
9,332,810
|
|||
Short-term
investments
|
8,864,000
|
7,864,000
|
|||||
Accounts
and notes receivable, less allowances of
|
|||||||
$7,000
in 2007 and $6,200 in 2006
|
988,379
|
669,379
|
|||||
Accounts
due from employees and distributors
|
216,319
|
223,246
|
|||||
Inventories
|
|||||||
Finished
goods
|
2,727,581
|
2,752,770
|
|||||
Raw
materials
|
1,616,802
|
1,337,661
|
|||||
Sales
aids and promotional materials
|
789,709
|
687,790
|
|||||
Total
inventories
|
5,134,092
|
4,778,221
|
|||||
Refundable
income taxes
|
-
|
279,096
|
|||||
Prepaid
expenses and other current assets
|
1,601,509
|
1,103,996
|
|||||
Deferred
income taxes
|
489,430
|
594,430
|
|||||
Total
current assets
|
27,522,500
|
24,845,178
|
|||||
Other
assets
|
2,950,835
|
2,639,537
|
|||||
Accounts
due from employees and distributors
|
341,028
|
362,959
|
|||||
Property,
plant and equipment:
|
|||||||
Land
|
829,222
|
829,222
|
|||||
Building
|
9,588,011
|
9,565,221
|
|||||
Machinery
& equipment
|
3,975,958
|
4,199,714
|
|||||
Office
equipment
|
1,528,545
|
1,520,297
|
|||||
Computer
equipment & software
|
2,420,076
|
2,441,264
|
|||||
18,341,812
|
18,555,718
|
||||||
Less:
Accumulated depreciation
|
9,048,814
|
9,121,172
|
|||||
Net
property, plant and equipment
|
9,292,998
|
9,434,546
|
|||||
Total
assets
|
$
|
40,107,361
|
$
|
37,282,220
|
See
notes to financial statements.
|
Reliv
International, Inc. and Subsidiaries
|
|||
Consolidated
Balance Sheets
|
March
31
|
December
31
|
||||||
2007
|
2006
|
||||||
(unaudited)
|
|||||||
Liabilities
and stockholders' equity
|
|||||||
Current
liabilities:
|
|||||||
Accounts
payable and accrued expenses:
|
|||||||
Trade
accounts payable and other accrued expenses
|
$
|
4,830,191
|
$
|
3,824,951
|
|||
Distributors
commissions payable
|
4,492,138
|
3,449,687
|
|||||
Sales
taxes payable
|
464,961
|
421,923
|
|||||
Payroll
and payroll taxes payable
|
1,064,097
|
918,695
|
|||||
Total
accounts payable and accrued expenses
|
10,851,387
|
8,615,256
|
|||||
Income
taxes payable
|
1,063,087
|
-
|
|||||
Total
current liabilities
|
11,914,474
|
8,615,256
|
|||||
Noncurrent
liabilities:
|
|||||||
Deferred
income taxes
|
34,000
|
42,000
|
|||||
Other
non-current liabilities
|
1,083,265
|
891,113
|
|||||
Total
noncurrent liabilities
|
1,117,265
|
933,113
|
|||||
Stockholders'
equity:
|
|||||||
Preferred
stock, par value $.001 per share; 3,000,000
|
|||||||
shares
authorized; -0- shares issued and outstanding
|
|||||||
in
2007 and 2006
|
-
|
-
|
|||||
Common
stock, par value $.001 per share; 30,000,000
|
|||||||
authorized;
16,736,238 shares issued and 16,273,788
|
|||||||
shares
outstanding as of 3/31/2007; 16,730,465 shares
|
|||||||
issued
and 16,605,523 shares outstanding as of 12/31/2006
|
16,737
|
16,731
|
|||||
Additional
paid-in capital
|
34,798,886
|
34,732,421
|
|||||
Accumulated
deficit
|
(2,716,617
|
)
|
(5,336,866
|
)
|
|||
Accumulated
other comprehensive loss:
|
|||||||
Foreign
currency translation adjustment
|
(534,616
|
)
|
(540,653
|
)
|
|||
Treasury
stock
|
(4,488,768
|
)
|
(1,137,782
|
)
|
|||
Total
stockholders' equity
|
27,075,622
|
27,733,851
|
|||||
Total
liabilities and stockholders' equity
|
$
|
40,107,361
|
$
|
37,282,220
|
See
notes to financial statements.
|
Reliv
International, Inc. and Subsidiaries
|
|||
|
|||
Consolidated
Statements of Income
|
|||
(unaudited)
|
|
Three
months ended March 31
|
||||||
2007
|
|
2006
|
|||||
Product
sales
|
$
|
31,397,966
|
$
|
28,041,335
|
|||
Handling
& freight income
|
3,565,679
|
3,154,017
|
|||||
Net
sales
|
34,963,645
|
31,195,352
|
|||||
Costs
and expenses:
|
|||||||
Cost
of products sold
|
6,061,392
|
5,082,181
|
|||||
Distributor
royalties and commissions
|
13,928,563
|
12,627,032
|
|||||
Selling,
general and administrative
|
11,029,850
|
9,466,741
|
|||||
Total
costs and expenses
|
31,019,805
|
27,175,954
|
|||||
Income
from operations
|
3,943,840
|
4,019,398
|
|||||
Other
income (expense):
|
|||||||
Interest
income
|
212,602
|
84,676
|
|||||
Interest
expense
|
(126
|
)
|
(34,441
|
)
|
|||
Other
income
|
96,933
|
60,636
|
|||||
Income
before income taxes
|
4,253,249
|
4,130,269
|
|||||
Provision
for income taxes
|
1,633,000
|
1,680,000
|
|||||
Net
income
|
$
|
2,620,249
|
$
|
2,450,269
|
|||
Earnings
per common share - Basic
|
$
|
0.16
|
$
|
0.16
|
|||
Weighted
average shares
|
16,431,000
|
15,569,000
|
|||||
Earnings
per common share - Diluted
|
$
|
0.16
|
$
|
0.15
|
|||
Weighted
average shares
|
16,580,000
|
15,981,000
|
|||||
Cash
dividends declared per common share
|
$
|
-
|
$
|
-
|
See
notes to financial statements.
|
Reliv
International, Inc. and Subsidiaries
|
|||
|
|||
Consolidated
Statements of Cash Flows
|
|||
(unaudited)
|
Three
months ended March 31
|
|||||||
|
2007
|
2006
|
|||||
Operating
activities:
|
|||||||
Net
income
|
$
|
2,620,249
|
$
|
2,450,269
|
|||
Adjustments
to reconcile net income to
|
|||||||
net
cash provided by operating activities:
|
|||||||
Depreciation
and amortization
|
248,760
|
315,325
|
|||||
Stock-based
compensation
|
20,006
|
29,060
|
|||||
Deferred
income taxes
|
97,000
|
11,000
|
|||||
Foreign
currency transaction (gain)/loss
|
(35,525
|
)
|
(10,304
|
)
|
|||
(Increase)
decrease in accounts and notes receivable
|
(288,514
|
)
|
45,105
|
||||
(Increase)
decrease in inventories
|
(338,981
|
)
|
415,004
|
||||
(Increase)
decrease in refundable income taxes
|
279,096
|
-
|
|||||
(Increase)
decrease in prepaid expenses
|
|||||||
and
other current assets
|
(493,676
|
)
|
(764,700
|
)
|
|||
(Increase)
decrease in other assets
|
(320,424
|
)
|
(298,705
|
)
|
|||
Increase
(decrease) in accounts payable and accrued expenses
|
2,415,931
|
1,285,994
|
|||||
Increase
(decrease) in income taxes payable
|
1,062,405
|
889,022
|
|||||
Net
cash provided by operating activities
|
5,266,327
|
4,367,070
|
|||||
Investing
activities:
|
|||||||
Proceeds
from the sale of property, plant and equipment
|
1,192
|
5,835
|
|||||
Purchase
of property, plant and equipment
|
(97,087
|
)
|
(121,764
|
)
|
|||
Purchase
of investments, net
|
(1,000,000
|
)
|
-
|
||||
Net
cash used in investing activities
|
(1,095,895
|
)
|
(115,929
|
)
|
|||
Financing
activities:
|
|||||||
Principal
payments on long-term borrowings
|
-
|
(904,339
|
)
|
||||
Proceeds
from options and warrants exercised
|
46,465
|
14,510
|
|||||
Purchase
of stock for treasury
|
(3,350,986
|
)
|
-
|
||||
Net
cash used in financing activities
|
(3,304,521
|
)
|
(889,829
|
)
|
|||
Effect
of exchange rate changes on cash and cash equivalents
|
30,050
|
(16,042
|
)
|
||||
Increase
in cash and cash equivalents
|
895,961
|
3,345,270
|
|||||
Cash
and cash equivalents at beginning of period
|
9,332,810
|
5,653,594
|
|||||
Cash
and cash equivalents at end of period
|
$
|
10,228,771
|
$
|
8,998,864
|
See
notes to financial statements
|
Note
1--
|
Accounting
Policies
|
Basis
of Presentation
|
|
The
accompanying unaudited consolidated financial statements and notes
thereto
have been prepared in accordance with the instructions to Form
10-Q and
reflect all adjustments which management believes necessary (which
primarily include normal recurring accruals) to present fairly
the
financial position, results of operations and cash flows. These
statements, however, do not include all information and footnotes
necessary for a complete presentation of financial position, results
of
operations and cash flows in conformity with accounting principles
generally accepted in the United States. Interim results may not
necessarily be indicative of results that may be expected for any
other
interim period or for the year as a whole. These financial statements
should be read in conjunction with the audited consolidated financial
statements and footnotes included in the annual report on Form
10-K for
the year ended December 31, 2006, filed March 15, 2007 with the
Securities
and Exchange Commission. The accounting policies used in preparing
these
financial statements are the same as those applied in the prior
year,
except that the Company adopted a new financial accounting standard
at the
beginning of its 2007 fiscal year concerning its income tax accounting
which is discussed in Note 5. This new standard was adopted prospectively
and comparative periods were not restated.
|
|
Note
2--
|
Recent
Accounting Standards Pending Adoption
|
In
February 2007, the Financial Accounting Standards Board ("FASB")
issued
Statement of Financial Accounting Standards (SFAS) No. 159, "The
Fair
Value Option for Financial Assets and Financial Liabilities, Including
an
Amendment of FASB Statement No. 115," which will become effective
in 2008.
SFAS No. 159 permits entities to measure eligible financial assets,
financial liabilities, and firm commitments at fair value, on an
instrument-by-instrument basis, that are otherwise not permitted
to be
accounted for at fair value under other generally accepted accounting
principles. The fair value measurement election is irrevocable
and
subsequent changes in fair value must be recorded in earnings.
The Company
will adopt this Statement as of January 1, 2008 and is currently
evaluating if it will elect the fair value option for any of its
eligible
financial instruments and other items.
|
|
In
September 2006, the FASB issued SFAS No. 157, "Fair Value Measurements"
which defines fair value, establishes a framework for measuring
fair
value, and expands disclosures about fair value measurements. This
Statement clarifies how to measure fair value as permitted under
other
accounting pronouncements but does not require any new fair value
measurements. The Company will be required to adopt SFAS No. 157
as of
January 1, 2008. The Company is currently evaluating the impact
of SFAS
No. 157 and has not yet determined the impact on its financial
statements.
|
|
Note
3--
|
Comprehensive
Income
|
Total
comprehensive income was $2,626,286 and $2,448,041 for the three
months
ended March 31, 2007 and 2006, respectively. The Company's only
component
of other comprehensive income is the foreign currency translation
adjustment.
|
Note
4--
|
Basic
and Diluted Earnings per Share
|
Basic
earnings per common share are computed using the weighted average
number
of common shares outstanding during the period. Diluted earnings
per share
are computed using the weighted average number of common shares
and
potential dilutive common shares that were outstanding during the
period.
Potential dilutive common shares consist of outstanding stock options,
outstanding stock warrants, and convertible preferred
stock.
|
|
The following table sets forth the computation of basic and diluted earnings per share: |
Three
months ended March 31
|
|||||||
2007
|
2006
|
||||||
Numerator:
|
|||||||
Net
income
|
$
|
2,620,249
|
$
|
2,450,269
|
|||
Denominator:
|
|||||||
Denominator
for basic earnings per
|
|||||||
share--weighted
average shares
|
16,431,000
|
15,569,000
|
|||||
Dilutive
effect of employee stock options
|
|||||||
and
other warrants
|
149,000
|
412,000
|
|||||
Denominator
for diluted earnings per
|
|||||||
share--adjusted
weighted average shares
|
16,580,000
|
15,981,000
|
|||||
Basic
earnings per share
|
$
|
0.16
|
$
|
0.16
|
|||
Diluted
earnings per share
|
$
|
0.16
|
$
|
0.15
|
Note
5--
|
Income
Taxes
|
The
Company adopted the provisions of FASB Interpretation No. 48, “Accounting
for Uncertainty in Income Taxes” (“FIN No. 48”) on January 1, 2007. As a
result of the implementation of FIN No. 48, the Company recognized
no
material adjustment in its estimated liability for unrecognized
income tax
benefits. At March 31, 2007, the Company had unrecognized tax benefits,
including estimated interest and penalties thereon, totaling $140,000.
This amount is included in “Other non-current liabilities” in the
consolidated balance sheet. There has been no material change in
this
amount during the three months ended March 31, 2007. In 2007, the
Company
is continuing its practice to recognize interest and/or penalties
related
to income tax matters in income tax expense.
|
|
The
Company, including its domestic and foreign subsidiaries, is subject
to
U.S federal income tax as well as income tax of multiple state
and foreign
jurisdictions. The Company has concluded all U.S. federal income
tax
matters for years through 2002 and substantially concluded years
through
2005 with its primary state
jurisdiction.
|
Three
months ended
March
31,
|
|||||||
2007
|
2006
|
||||||
Net
sales
|
100.0
|
%
|
100.0
|
%
|
|||
Costs
and expenses:
|
|||||||
Cost
of products sold
|
17.3
|
16.3
|
|||||
Distributor
royalties and commissions
|
39.8
|
40.5
|
|||||
Selling,
general and administrative
|
31.6
|
30.3
|
|||||
Income
from operations
|
11.3
|
12.9
|
|||||
Interest
expense
|
(0.0
|
)
|
(0.1
|
)
|
|||
Interest
and other income
|
0.9
|
0.5
|
|||||
Income
before income taxes
|
12.2
|
13.3
|
|||||
Provision
for income taxes
|
4.7
|
5.4
|
|||||
Net
income
|
7.5
|
%
|
7.9
|
%
|
Three
months ended March 31,
|
|||||||||||||||||||
2007
|
2006
|
Change
from prior year
|
|||||||||||||||||
Amount
|
%
of Net
Sales |
Amount
|
%
of Net
Sales
|
Amount
|
%
|
||||||||||||||
(dollars
in thousands)
|
|||||||||||||||||||
United
States
|
$
|
31,904
|
91.2
|
%
|
$
|
28,530
|
91.5
|
%
|
$
|
3,374
|
11.8
|
%
|
|||||||
Australia/New
Zealand
|
653
|
1.9
|
579
|
1.9
|
74
|
12.8
|
|||||||||||||
Canada
|
441
|
1.3
|
409
|
1.3
|
32
|
7.8
|
|||||||||||||
Mexico
|
410
|
1.2
|
329
|
1.0
|
81
|
24.6
|
|||||||||||||
United
Kingdom/Ireland
|
287
|
0.8
|
273
|
0.9
|
14
|
5.1
|
|||||||||||||
Philippines
|
628
|
1.8
|
493
|
1.5
|
135
|
27.4
|
|||||||||||||
Malaysia/Singapore
|
330
|
0.9
|
458
|
1.5
|
(128
|
)
|
(27.9
|
)
|
|||||||||||
Germany
|
311
|
0.9
|
124
|
0.4
|
187
|
150.8
|
|||||||||||||
Consolidated
total
|
$
|
34,964
|
100.0
|
%
|
$
|
31,195
|
100.0
|
%
|
$
|
3,769
|
12.1
|
%
|
March
31, 2007
|
March
31, 2006
|
%
Change
|
|||||||||||||||||
Active
Distributors
|
Master
Affiliates and Above
|
Active
Distributors
|
Master
Affiliates and Above
|
Active
Distributors
|
Master
Affiliates and Above
|
||||||||||||||
United
States
|
56,320
|
12,660
|
52,360
|
12,930
|
7.6
|
%
|
(2.1
|
)%
|
|||||||||||
Australia/New
Zealand
|
2,520
|
270
|
2,370
|
180
|
6.3
|
50.0
|
|||||||||||||
Canada
|
1,170
|
150
|
1,160
|
140
|
0.9
|
7.1
|
|||||||||||||
Mexico
|
1,170
|
170
|
1,230
|
200
|
(4.9
|
)
|
(15.0
|
)
|
|||||||||||
United
Kingdom/Ireland
|
940
|
130
|
800
|
110
|
17.5
|
18.2
|
|||||||||||||
Philippines
|
3,750
|
270
|
3,500
|
270
|
7.1
|
0.0
|
|||||||||||||
Malaysia/Singapore
|
2,310
|
260
|
3,100
|
380
|
(25.5
|
)
|
(31.6
|
)
|
|||||||||||
Germany
|
510
|
150
|
180
|
70
|
183.3
|
114.3
|
|||||||||||||
Consolidated
total
|
68,690
|
14,060
|
64,700
|
14,280
|
6.2
|
%
|
(1.5
|
)%
|
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)
|
|||||||||
January
1-31, 2007
|
136,420
|
$
|
9.04
|
136,420
|
$
|
5,884,000
|
|||||||
February
1-28, 2007
|
82,635
|
$
|
10.33
|
82,635
|
$
|
5,031,000
|
|||||||
March
1-31, 2007
|
118,453
|
$
|
10.67
|
118,453
|
$
|
3,766,000
|
|||||||
Total
|
337,508
|
337,508
|
(1)
In March 2005, the Company’s Board of Directors approved a share
repurchase plan of up to $15 million over the next 36
months.
|
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).
|
By:
|
|
/s/
Robert L. Montgomery
|
Robert
L. Montgomery, Chairman of the Board of Directors, President and
Chief
Executive Officer
|
||
Date:
May 7, 2007
|
||
By:
|
|
/s/
Steven D. Albright
|
Steven
D. Albright, Chief Financial Officer (and accounting
officer)
|
||
Date: May 7, 2007 |
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).
|