x |
QUARTERLY
REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE
ACT OF
1934
|
For
the quarterly period ended September 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
incorporation
or organization)
|
(I.R.S.
Employer Identification
Number)
|
136
Chesterfield Industrial Boulevard
Chesterfield,
Missouri
|
63005
|
(Address
of principal executive
offices)
|
(Zip
Code)
|
PART
I - FINANCIAL INFORMATION
|
||
Item
No. 1
|
Financial
Statements (Unaudited)
|
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
|
15
|
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
|
16
|
Item
No. 6
|
Exhibits
|
16
|
Reliv
International, Inc. and Subsidiaries
|
|||||||
Consolidated
Balance Sheets
|
|||||||
September
30
|
December
31
|
||||||
2008
|
2007
|
||||||
(unaudited)
|
|
||||||
Assets
|
|||||||
Current
assets:
|
|||||||
Cash
and cash equivalents
|
$
|
5,761,294
|
$
|
11,694,699
|
|||
Short-term
investments
|
-
|
398,592
|
|||||
Accounts
and notes receivable, less allowances of
|
|||||||
$8,400
in 2008 and $8,300 in 2007
|
517,051
|
811,634
|
|||||
Accounts
due from employees and distributors
|
241,945
|
204,705
|
|||||
Inventories
|
|||||||
Finished
goods
|
3,235,902
|
3,290,114
|
|||||
Raw
materials
|
2,578,123
|
1,630,976
|
|||||
Sales
aids and promotional materials
|
968,893
|
1,258,148
|
|||||
Total
inventories
|
6,782,918
|
6,179,238
|
|||||
Refundable
income taxes
|
227,697
|
362,330
|
|||||
Prepaid
expenses and other current assets
|
1,064,849
|
862,172
|
|||||
Deferred
income taxes
|
524,430
|
574,430
|
|||||
Total
current assets
|
15,120,184
|
21,087,800
|
|||||
Other
assets
|
2,804,587
|
2,999,903
|
|||||
Accounts
due from employees and distributors
|
178,391
|
319,883
|
|||||
Property,
plant and equipment:
|
|||||||
Land
|
829,222
|
829,222
|
|||||
Building
|
9,822,310
|
9,817,692
|
|||||
Machinery
& equipment
|
3,293,185
|
3,673,515
|
|||||
Office
equipment
|
1,478,080
|
1,525,905
|
|||||
Computer
equipment & software
|
2,853,289
|
2,665,610
|
|||||
18,276,086
|
18,511,944
|
||||||
Less:
Accumulated depreciation
|
9,160,580
|
9,312,759
|
|||||
Net
property, plant and equipment
|
9,115,506
|
9,199,185
|
|||||
Total
assets
|
$
|
27,218,668
|
$
|
33,606,771
|
|||
See
notes to financial statements.
|
September
30
|
December
31
|
||||||
2008
|
2007
|
||||||
(unaudited)
|
|||||||
Liabilities
and stockholders' equity
|
|||||||
Current
liabilities:
|
|||||||
Accounts
payable and accrued expenses:
|
|||||||
Trade
accounts payable and other accrued expenses
|
$
|
4,509,008
|
$
|
4,288,481
|
|||
Distributors
commissions payable
|
3,024,403
|
3,285,270
|
|||||
Sales
taxes payable
|
392,013
|
390,585
|
|||||
Payroll
and payroll taxes payable
|
585,384
|
499,921
|
|||||
Total
accounts payable and accrued expenses
|
8,510,808
|
8,464,257
|
|||||
Income
taxes payable
|
10,000
|
110,000
|
|||||
Total
current liabilities
|
8,520,808
|
8,574,257
|
|||||
Other
noncurrent liabilities
|
956,990
|
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;
15,474,379 shares issued and 14,520,672
|
|||||||
shares
outstanding as of 9/30/2008; 15,877,179 shares
|
|||||||
issued
and 15,873,754 shares outstanding as of 12/31/2007
|
15,475
|
15,877
|
|||||
Additional
paid-in capital
|
32,437,301
|
33,100,351
|
|||||
Accumulated
deficit
|
(8,605,191
|
)
|
(8,869,332
|
)
|
|||
Accumulated
other comprehensive loss:
|
|||||||
Foreign
currency translation adjustment
|
(492,737
|
)
|
(419,179
|
)
|
|||
Treasury
stock
|
(5,613,978
|
)
|
(22,516
|
)
|
|||
Total
stockholders' equity
|
17,740,870
|
23,805,201
|
|||||
Total
liabilities and stockholders' equity
|
$
|
27,218,668
|
$
|
33,606,771
|
|||
See
notes to financial statements.
|
Three
months ended September 30
|
Nine
months ended September 30
|
||||||||||||
2008
|
2007
|
2008
|
2007
|
||||||||||
Product
sales
|
$
|
21,226,975
|
$
|
22,501,899
|
$
|
67,719,727
|
$
|
77,450,784
|
|||||
Handling
& freight income
|
2,633,832
|
2,619,260
|
8,372,176
|
8,958,556
|
|||||||||
Net
sales
|
23,860,807
|
25,121,159
|
76,091,903
|
86,409,340
|
|||||||||
Costs
and expenses:
|
|||||||||||||
Cost
of products sold
|
4,464,874
|
4,320,557
|
13,410,310
|
14,780,889
|
|||||||||
Distributor
royalties and commissions
|
9,320,880
|
9,926,735
|
29,865,734
|
34,458,125
|
|||||||||
Selling,
general and administrative
|
8,950,900
|
9,740,241
|
28,472,176
|
30,969,921
|
|||||||||
Total
costs and expenses
|
22,736,654
|
23,987,533
|
71,748,220
|
80,208,935
|
|||||||||
Income
from operations
|
1,124,153
|
1,133,626
|
4,343,683
|
6,200,405
|
|||||||||
Other
income (expense):
|
|||||||||||||
Interest
income
|
64,329
|
122,788
|
299,893
|
498,904
|
|||||||||
Interest
expense
|
(21,011
|
)
|
(159
|
)
|
(31,405
|
)
|
(732
|
)
|
|||||
Other
income (expense)
|
(211,550
|
)
|
73,302
|
(229,139
|
)
|
268,540
|
|||||||
Income
before income taxes
|
955,921
|
1,329,557
|
4,383,032
|
6,967,117
|
|||||||||
Provision
for income taxes
|
420,000
|
429,000
|
1,752,000
|
2,623,000
|
|||||||||
Net
income
|
$
|
535,921
|
$
|
900,557
|
$
|
2,631,032
|
$
|
4,344,117
|
|||||
Earnings
per common share - Basic
|
$
|
0.04
|
$
|
0.06
|
$
|
0.17
|
$
|
0.27
|
|||||
Weighted
average shares
|
14,806,000
|
15,938,000
|
15,498,000
|
16,166,000
|
|||||||||
Earnings
per common share - Diluted
|
$
|
0.04
|
$
|
0.06
|
$
|
0.17
|
$
|
0.27
|
|||||
Weighted
average shares
|
14,810,000
|
16,171,000
|
15,502,000
|
16,374,000
|
|||||||||
Cash
dividends declared per common share
|
$
|
-
|
$
|
-
|
$
|
0.05
|
$
|
0.05
|
|||||
See
notes to financial statements.
|
Nine
months ended September 30
|
|||||||
2008
|
2007
|
||||||
Operating
activities:
|
|||||||
Net
income
|
$
|
2,631,032
|
$
|
4,344,117
|
|||
Adjustments
to reconcile net income to
|
|||||||
net
cash provided by operating activities:
|
|||||||
Depreciation
and amortization
|
830,870
|
807,606
|
|||||
Stock-based
compensation
|
177,497
|
90,865
|
|||||
Deferred
income taxes
|
(107,000
|
)
|
7,000
|
||||
Foreign
currency transaction (gain)/loss
|
310,408
|
(235,225
|
)
|
||||
(Increase)
decrease in accounts and notes receivable
|
386,886
|
112,585
|
|||||
(Increase)
decrease in inventories
|
(677,754
|
)
|
(853,100
|
)
|
|||
(Increase)
decrease in refundable income taxes
|
137,274
|
(548,172
|
)
|
||||
(Increase)
decrease in prepaid expenses
|
|||||||
and
other current assets
|
(223,023
|
)
|
3,474
|
||||
(Increase)
decrease in other assets
|
31,707
|
(287,459
|
)
|
||||
Increase
(decrease) in accounts payable and accrued expenses
|
170,442
|
382,199
|
|||||
Increase
(decrease) in income taxes payable
|
(100,000
|
)
|
-
|
||||
Net
cash provided by operating activities
|
3,568,339
|
3,823,890
|
|||||
Investing
activities:
|
|||||||
Proceeds
from the sale of property, plant and equipment
|
27,790
|
4,904
|
|||||
Purchase
of property, plant and equipment
|
(756,960
|
)
|
(761,310
|
)
|
|||
Purchase
of investments
|
(1,521,111
|
)
|
(1,398,592
|
)
|
|||
Proceeds
from sales or maturities of investments, at cost
|
1,919,703
|
4,864,000
|
|||||
Net
cash provided by (used in) investing activities
|
(330,578
|
)
|
2,709,002
|
||||
Financing
activities:
|
|||||||
Proceeds
from line of credit borrowings
|
4,000,000
|
-
|
|||||
Repayment
of line of credit borrowings
|
(4,000,000
|
)
|
-
|
||||
Common
stock dividends paid
|
(793,313
|
)
|
(806,763
|
)
|
|||
Proceeds
from options and warrants exercised
|
- | 83,498 | |||||
Purchase
of stock for treasury
|
(8,008,261
|
)
|
(7,677,124
|
)
|
|||
Other
|
2,272
|
-
|
|||||
Net
cash used in financing activities
|
(8,799,302
|
)
|
(8,400,389
|
)
|
|||
Effect
of exchange rate changes on cash and cash equivalents
|
(371,864
|
)
|
258,237
|
||||
Increase
(decrease) in cash and cash equivalents
|
(5,933,405
|
)
|
(1,609,260
|
)
|
|||
Cash
and cash equivalents at beginning of period
|
11,694,699
|
9,332,810
|
|||||
Cash
and cash equivalents at end of period
|
$
|
5,761,294
|
$
|
7,723,550
|
|||
See
notes to financial statements.
|
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
|
||||||||||||
|
2008
|
2007
|
2008
|
2007
|
|||||||||
Numerator:
|
|||||||||||||
Net
income
|
$
|
535,921
|
$
|
900,557
|
$
|
2,631,032
|
$
|
4,344,117
|
|||||
Denominator:
|
|||||||||||||
Denominator
for basic earnings per share--weighted average
shares
|
14,806,000
|
15,938,000
|
15,498,000
|
16,166,000
|
|||||||||
Dilutive
effect of employee stock options and other
warrants
|
4,000
|
233,000
|
4,000
|
208,000
|
|||||||||
Denominator
for diluted earnings per share--adjusted weighted average
shares
|
14,810,000
|
16,171,000
|
15,502,000
|
16,374,000
|
|||||||||
Basic
earnings per share
|
$
|
0.04
|
$
|
0.06
|
$
|
0.17
|
$
|
0.27
|
|||||
Diluted
earnings per share
|
$
|
0.04
|
$
|
0.06
|
$
|
0.17
|
$
|
0.27
|
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)
|
|||||||
Marketable
securities (1)
|
$
|
726,750
|
$
|
726,750
|
$
|
-
|
||||
Derivatives
(2)
|
16,522
|
-
|
16,522
|
|||||||
$
|
743,272
|
$
|
726,750
|
$
|
16,522
|
(1)
|
Representing
assets of the Company's Supplemental Executive Retirement Plan (trading
securities). Presented within Other Assets in the consolidated
balance sheets.
|
(2) |
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
|
||||
Amounts
settled in third quarter 2008
|
(85,000
|
)
|
(30,000
|
)
|
(115,000
|
)
|
||||
Reserve
balance at September 30, 2008
|
$
|
0
|
$
|
78,000
|
$
|
78,000
|
Note 7-- |
Stock-Based
Compensation
|
Note 8-- |
Purchase
of Stock for Treasury and related
Borrowing
|
Note 9-- |
Other
Investment
|
Three
months ended
September
30,
|
Nine
months ended
September
30,
|
||||||||||||
2008
|
2007
|
2008
|
2007
|
||||||||||
Net
sales
|
100.0
|
%
|
100.0
|
%
|
100.0
|
%
|
100.0
|
%
|
|||||
Costs
and expenses:
|
|||||||||||||
Cost
of products sold
|
18.7
|
17.2
|
17.6
|
17.1
|
|||||||||
Distributor
royalties and commissions
|
39.1
|
39.5
|
39.3
|
39.9
|
|||||||||
Selling,
general and administrative
|
37.5
|
38.8
|
37.4
|
35.8
|
|||||||||
Income
from operations
|
4.7
|
4.5
|
5.7
|
7.2
|
|||||||||
Interest
expense
|
(0.1
|
)
|
(0.0
|
)
|
(0.0
|
)
|
(0.0
|
)
|
|||||
Interest
and other income/(expense)
|
(0.6
|
)
|
0.8
|
0.1
|
0.9
|
||||||||
Income
before income taxes
|
4.0
|
5.3
|
5.8
|
8.1
|
|||||||||
Provision
for income taxes
|
1.8
|
1.7
|
2.3
|
3.1
|
|||||||||
Net
income
|
2.2
|
%
|
3.6
|
%
|
3.5
|
%
|
5.0
|
%
|
Three
months ended September 30,
|
|||||||||||||||||||
2008
|
2007
|
Change
from prior year
|
|||||||||||||||||
Amount
|
%
of Net
Sales
|
Amount
|
%
of Net
Sales
|
Amount
|
%
|
||||||||||||||
(dollars
in thousands)
|
|||||||||||||||||||
United
States
|
$
|
20,814
|
87.2
|
%
|
$
|
22,009
|
87.6
|
%
|
$
|
(1,195
|
)
|
(5.4
|
)%
|
||||||
Australia/New
Zealand
|
667
|
2.8
|
715
|
2.8
|
(48
|
)
|
(6.7
|
)
|
|||||||||||
Canada
|
404
|
1.7
|
378
|
1.5
|
26
|
6.9
|
|||||||||||||
Mexico
|
389
|
1.6
|
351
|
1.4
|
38
|
10.8
|
|||||||||||||
United
Kingdom/Ireland
|
234
|
1.0
|
242
|
1.0
|
(8
|
)
|
(3.3
|
)
|
|||||||||||
Philippines
|
583
|
2.4
|
809
|
3.2
|
(226
|
)
|
(27.9
|
)
|
|||||||||||
Malaysia/Singapore
|
682
|
2.9
|
419
|
1.7
|
263
|
62.8
|
|||||||||||||
Germany
|
88
|
0.4
|
198
|
0.8
|
(110
|
)
|
(55.6
|
)
|
|||||||||||
Consolidated
total
|
$
|
23,861
|
100.0
|
%
|
$
|
25,121
|
100.0
|
%
|
$
|
(1,260
|
)
|
(5.0
|
)%
|
Nine
months ended September 30,
|
|||||||||||||||||||
2008
|
2007
|
Change
from prior year
|
|||||||||||||||||
Amount
|
%
of Net
Sales
|
Amount
|
%
of Net
Sales
|
Amount
|
%
|
||||||||||||||
(dollars
in thousands)
|
|||||||||||||||||||
United
States
|
$
|
65,934
|
86.7
|
%
|
$
|
77,215
|
89.4
|
%
|
$
|
(11,281
|
)
|
(14.6
|
)%
|
||||||
Australia/New
Zealand
|
2,096
|
2.8
|
2,090
|
2.4
|
6
|
0.3
|
|||||||||||||
Canada
|
1,301
|
1.7
|
1,196
|
1.4
|
105
|
8.8
|
|||||||||||||
Mexico
|
1,269
|
1.7
|
1,155
|
1.3
|
114
|
9.9
|
|||||||||||||
United
Kingdom/Ireland
|
791
|
1.0
|
781
|
0.9
|
10
|
1.3
|
|||||||||||||
Philippines
|
2,092
|
2.7
|
2,108
|
2.4
|
(16
|
)
|
(0.8
|
)
|
|||||||||||
Malaysia/Singapore
|
2,174
|
2.8
|
1,173
|
1.4
|
1,001
|
85.3
|
|||||||||||||
Germany
|
435
|
0.6
|
691
|
0.8
|
(256
|
)
|
(37.0
|
)
|
|||||||||||
Consolidated
total
|
$
|
76,092
|
100.0
|
%
|
$
|
86,409
|
100.0
|
%
|
$
|
(10,317
|
)
|
(11.9
|
)%
|
September
30, 2008
|
September
30, 2007
|
%
Change
|
|||||||||||||||||
Active
Distributors
|
Master
Affiliates and Above
|
Active
Distributors
|
Master
Affiliates and Above
|
Active
Distributors
|
Master
Affiliates and Above
|
||||||||||||||
United
States
|
54,210
|
10,630
|
57,420
|
13,600
|
(5.6
|
)%
|
(21.8
|
)%
|
|||||||||||
Australia/New
Zealand
|
2,480
|
230
|
2,510
|
280
|
(1.2
|
)
|
(17.9
|
)
|
|||||||||||
Canada
|
1,250
|
160
|
1,150
|
160
|
8.7
|
0.0
|
|||||||||||||
Mexico
|
1,550
|
240
|
1,380
|
220
|
12.3
|
9.1
|
|||||||||||||
United
Kingdom/Ireland
|
750
|
110
|
790
|
120
|
(5.1
|
)
|
(8.3
|
)
|
|||||||||||
Philippines
|
4,590
|
420
|
4,460
|
370
|
2.9
|
13.5
|
|||||||||||||
Malaysia/Singapore
|
3,270
|
580
|
2,230
|
310
|
46.6
|
87.1
|
|||||||||||||
Germany
|
440
|
80
|
560
|
140
|
(21.4
|
)
|
(42.9
|
)
|
|||||||||||
Consolidated
total
|
68,540
|
12,450
|
70,500
|
15,200
|
(2.8
|
)%
|
(18.1
|
)%
|
Period
|
Total
Number of Shares
Purchased(1)
|
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(2)
|
|||||||||
July
1-31, 2008
|
1,130,180
|
$
|
5.94
|
131,180
|
$
|
12,500,000
|
|||||||
August
1-31, 2008
|
11,200
|
$
|
6.59
|
11,200
|
$
|
12,426,000
|
|||||||
September
1-30, 2008
|
--
|
--
|
--
|
$
|
12,426,000
|
||||||||
Total
|
1,141,380
|
142,380
|
|||||||||||
(1) Includes
999,000 shares purchased from two significant shareholders at $6.00
per
share in July 2008.
(2) In
May 2007, the Company’s Board of Directors approved a share repurchase
plan of up to $15 million through April
2010.
|
Exhibit
Number
|
Document |
10.1 |
Stock
Purchase Agreement dated July 24, 2008 by and between the Paul and
Jane
Meyer Family Foundation and Reliv International, Inc. (incorporated
by
reference to Exhibit 10.1 to the Form 8-K of the Registrant filed
July 30,
2008).
|
10.2 |
Stock
Purchase Agreement dated July 24, 2008 by and between Centre Island
Properties, Ltd. and Reliv International, Inc. (incorporated by reference
to Exhibit 10.2 to the Form 8-K of the Registrant filed July 30,
2008).
|
10.3 |
Standstill
Letter from Paul J. Meyer to Robert L. Montgomery dated July 25,
2008.
(incorporated by reference to Exhibit 10.3 to the Form 8-K of the
Registrant filed July 30, 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).
|
By: | /s/ Robert L. Montgomery |
Robert L. Montgomery, Chairman of the Board of Directors, President and Chief Executive Officer | |
By: | /s/ Steven D. Albright |
Steven D. Albright, Chief Financial Officer (and accounting officer) | |
Exhibit
Number
|
Document |
10.1 |
Stock
Purchase Agreement dated July 24, 2008 by and between the Paul
and Jane
Meyer Family Foundation and Reliv International, Inc. (incorporated
by
reference to Exhibit 10.1 to the Form 8-K of the Registrant filed
July 30,
2008).
|
10.2 |
Stock
Purchase Agreement dated July 24, 2008 by and between Centre Island
Properties, Ltd. and Reliv International, Inc. (incorporated by
reference
to Exhibit 10.2 to the Form 8-K of the Registrant filed July 30,
2008).
|
10.3 |
Standstill
Letter from Paul J. Meyer to Robert L. Montgomery dated July 25,
2008.
(incorporated by reference to Exhibit 10.3 to the Form 8-K of the
Registrant filed July 30, 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).
|