-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, GZoAd+Uz5ZTdaD7FmgmlzejLK4KomendTZ29pSE/gQ8pdkafa3/nLK8L8LfRmRSe iwqgdJc5rYzd3avrH0XEOw== 0001057056-99-000045.txt : 19991115 0001057056-99-000045.hdr.sgml : 19991115 ACCESSION NUMBER: 0001057056-99-000045 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19990930 FILED AS OF DATE: 19991112 FILER: COMPANY DATA: COMPANY CONFORMED NAME: RELIV INTERNATIONAL INC CENTRAL INDEX KEY: 0000768710 STANDARD INDUSTRIAL CLASSIFICATION: PHARMACEUTICAL PREPARATIONS [2834] IRS NUMBER: 371172197 STATE OF INCORPORATION: IL FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-19932 FILM NUMBER: 99748577 BUSINESS ADDRESS: STREET 1: 136 CHESTERFIELD INDUSTRIAL BLVD STREET 2: P O BOX 405 CITY: CHESTERFIELD STATE: MO ZIP: 63006-0405 BUSINESS PHONE: 3145379715 MAIL ADDRESS: STREET 1: 136 CHESTERFIELD INDUSTRIAL BLVD STREET 2: P O BOX 405 CITY: CHESTERFIELD STATE: MO ZIP: 63006-0405 FORMER COMPANY: FORMER CONFORMED NAME: AMERICAN LIFE INVESTORS INC DATE OF NAME CHANGE: 19920315 10-Q 1 FORM 10-Q FOR THE QUARTER ENDED SEPTEMBER 30, 1999 FORM 10-Q SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 1999 Commission File No. 1-11768 RELIV' INTERNATIONAL, INC. (Exact name of registrant as specified in its charter) Illinois 37-1172197 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification Number) 136 Chesterfield Industrial Boulevard, P.O. Box 405, Chesterfield, Missouri 63006 (Address of principal executive offices) (Zip Code) (314) 537-9715 (Registrant's telephone number, including area code) Registrant has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months and has been subject to such filing requirements for the past 90 days. APPLICABLE ONLY TO CORPORATE ISSUERS: COMMON STOCK 9,619,102 outstanding Shares as of September 30, 1999 Part I. FINANCIAL INFORMATION --------------------- Item 1. Financial Statements -------------------- The following consolidated financial statements of the Registrant are attached to this Form 10-Q: 1. Interim Balance Sheet as of September 30, 1999 and Balance Sheet as of December 31, 1998. 2. Interim Statements of Operations for the three and nine month periods ending September 30, 1999 and September 30, 1998. 3. Interim Statements of Cash Flows for the nine month periods ending September 30, 1999 and September 30, 1998. The Financial Statements reflect all adjustments which are, in the opinion of management, necessary to a fair statement of results for the periods presented. Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operation 1. Overview -------- The Company manufactures nutritional and related products which its sells through network marketing. In late 1997, the Company commenced manufacturing and packaging services for outside customers. Revenues from manufacturing and packaging services were $1.5 million in 1997, $6.3 million in 1998 and were $22.6 million for the first nine months of 1999. While revenues from manufacturing and packaging have increased dramatically, the Company has had to make large investments in plant and equipment to support this business segment, and the rapid growth has caused production and warehousing difficulties and labor inefficiencies. As a result, the manufacturing and packaging services business segment has generated losses resulting in losses for the Company as a whole. Despite an increase in net sales to $16,967,000 in the first nine months of 1999, from $12,579,000 for the same period of 1998, the Company had a loss of $650,000 for the first nine months of 1999, compared to income of $1,219,000 for the same period of 1998. Reduced network marketing sales in the core U.S. market has also contributed to the loss. As described further below, the Company has taken steps to make its manufacturing and packaging services business segment profitable, including eliminating jobs that do not provide an adequate margin. The Company is also taking steps to increase network marketing sales in its core U.S. market. 2. Financial Condition -------------------- Current assets of the Company increased during the third quarter of 1999, to $9,460,000 from $8,358,000 as of December 31, 1998, primarily due to increases in accounts receivable and inventory. These increases are due to the increased sales and production of the Company's manufacturing and packaging business. The increase in inventory is for raw materials for these 2 customers. Cash and cash equivalents decreased by $1,206,000 to $1,610,000 as of September 30, 1999 as the result of the increase in accounts receivable and inventory, coupled with the net loss for the year to date, as well as equipment acquisitions. The Company purchased $966,000 of property, plant and equipment during the first nine months of 1999, bringing its total gross property, plant and equipment to $15,259,000. The majority of the purchases were for new manufacturing capabilities for its manufacturing and packaging business. This acquisition was funded with an additional long-term note with the Company's primary lender of $300,000. Current liabilities increased by $2,344,000 from $6,175,000 as of December 31, 1998 to $8,519,000 as of September 30, 1999. The primary components of the increase were in trade accounts payable and borrowings under the line of credit. Trade accounts payable increased by $579,000 from $3,568,000 as of December 31, 1998 to $4,147,000 as of September 30, 1999. This increase is due to the increased raw material inventory as discussed previously. Borrowings under the line of credit have increased by $1,398,000 in order to fund the increase in inventory and as the result of the net loss for the year to date. Long-term debt has decreased by $101,000 to $5,115,000 as of September 30, 1999. The net decrease is primarily a combination of debt principal payments of $431,000, net of the additional debt of $300,000 that was incurred during the first quarter. The increase in the current maturities of long-term debt and capital lease obligations is due to the same note. Stockholders' equity decreased from $8,340,000 as of December 31, 1998 to $7,628,000 as of September 30, 1999, as the result of the net losses of the second and third quarters. The Company paid out cash dividends of $97,000 in the first quarter of 1999, and it has used approximately $59,000 to purchase treasury stock over the course of 1999, most of which occurred in the third quarter. Equity improved by $89,000 as the result of the improved foreign currency translation adjustment at September 30, 1999 as compared to December 31, 1998. The Australian, New Zealand and Canadian dollars, as well as the Mexican peso all strengthened against the US dollar over the course of the first nine months of 1999. The Company's working capital balance has decreased by $1,242,000 since December 31, 1998 to $941,000 as of September 30, 1999. The current ratio has also declined to 1.11 as of September 30, 1999. During the second quarter of 1999, the Company restructured its line of credit arrangements with its primary lender. The new line of credit provides a formula-based borrowing arrangement against a percentage of accounts receivable and inventory up to a maximum borrowing limit. The Company requested this modification in the line of credit, as the makeup of the Company's balance sheet has changed due the increased business in the manufacturing and packaging segment. 3. Results of Operations --------------------- The Company had a net loss of $350,000, or $.04 per share, for the quarter ended September 30, 1999, compared to net income of $73,000, or $.01 per share, for the same period in 1998. The Company continues to experience significant setbacks in the profitability of its manufacturing and 3 packaging operations, coupled with a sales decline in network marketing sales in its core United States market. In addition, consolidated selling, general and administrative expenses increased by $336,000 in the third quarter of 1999 as compared to the prior year. For the nine months ended September 30, 1999, the Company incurred a loss of $650,000 compared to net income of $1,219,000 for the first nine months of 1998. Net sales improved to $16,967,000 in the third quarter of 1999 as compared to $12,579,000 in the prior year. The increase in sales was solely due to the increase in sales by the Company's manufacturing and packaging services segment. Sales in this portion of the business increased to $7,237,000 in the third quarter of 1999, as compared to $1,643,000 in the prior year. Sales in the manufacturing and packaging services segment were $22,568,000 for the first nine months of 1999 as compared to $1,973,000 for the prior year. Net sales in the network marketing segment declined from $10,936,000 in the third quarter of 1998 to $9,730,000 in the third quarter of 1999. Network marketing sales in the United States declined by 15% from $10,056,000 in the third quarter of 1998 to $8,558,000 in the third quarter of 1999. Sales in the foreign subsidiaries of Australia, New Zealand, Canada, Mexico and the United Kingdom overall increased by 33% to $1,171,000 in the third quarter of 1999 as compared to $880,000 in the third quarter of 1998. This increase is due to improved sales in the Company's Mexican subsidiary, which experienced an increase of over 130% in its third quarter 1999 sales, versus third quarter 1998. This increase is due to the efforts of the sales manager in that market, combined with the implementation of distribution centers across Mexico in order to facilitate sales and other distributor activities in cities outside of the Mexican headquarters in Mexico City. In its Australian and New Zealand markets, sales improved by 14% in the third quarter of 1999 as compared to the third quarter 1998. During the third quarter, the Company successfully launched its enhanced Internet site, with e-commerce capabilities. The web site allows a number of features for distributors, including online ordering, online sponsoring of new distributors, distributor account information and information on a distributors' sales organization, or downline group. The Company has been pleased with the response to the web site to this point and expects that more distributors will take full advantage of its capabilities as more features and enhancements are introduced. In conjunction with the Internet site launch, distributors are also able to establish their own personal web sites utilizing a variety of templates. These sites are linked to the corporate web site and enable distributors to engage in retail sales, linked to Reliv order entry and shipping, e-mail communication and other interactive functions. Over 500 distributors have signed up for personal web sites to date. The Company provides manufacturing and packaging services, including blending, processing and packaging food products in accordance with specifications provided by its customers. Net sales increased to $7,237,000 in the third quarter of 1999 from $1,643,000 in the prior year. The increase in sales is due to the work provided by two major customers. The Company's sales to third party customers primarily consist of the Company purchasing raw materials, using customer- provided packaging materials and selling a finished product to the customer. For the third quarter of 1999, cost of goods sold for these sales were 99% of net sales. Even under optimal operating efficiencies, the gross margin for these customers is substantially less than margins obtained in the sales of the network marketing products. The Company's growth in this area has led to production 4 capacity and warehousing problems and related labor inefficiencies. The Company has taken steps to better manage its growth in this area, including some plant staffing cuts and the consolidation of an unprofitable second shift into its first shift operations. It has also begun reviewing profit margins by customer and project and has either discontinued or is restructuring those projects that are not yielding the needed profit margins. Cost of products sold for the network marketing segment as a percentage of net sales increased slightly from 18.4% in the third quarter of 1998 to 18.7% in the third quarter of 1999. The increase is due in part to the Company's decision to discontinue a portion of its skin care line of products. Distributor royalties and commissions as percentage of network marketing sales remained steady at 37% of network marketing sales in the third quarter of both 1999 and 1998. These expenses are governed by the distributor agreements and are directly related to the level of sales. The Company pays a percent of sales up to 18% in royalties and as much as 45% in commissions. Interest expense increased from $132,000 in the third quarter of 1998 to $154,000 in the third quarter of 1999. This is the result of the increase in the Company's long-term debt to finance equipment acquisitions and the increased borrowings against the line of credit. 4. Year 2000 Issues ---------------- Most computer databases, as well as embedded microprocessors in computer systems and industrial equipment, have been programmed to use a two-digit number to represent the year. Computer programs that recognize a date using "00" as the year 1900 rather than the year 2000 could result in errors or system failures. Accordingly, all companies must analyze their systems and make the necessary changes to ensure that automated processes will correctly distinguish between years before and after the year 2000. Based upon a recent assessment of its business, the Company does not believe the Year 2000 issue will have a material adverse effect on its operations. Based on testing of the Company's current computer hardware and software systems the Company has determined that the vast majority of such systems are Year 2000 compliant, and this result has been achieved without material cost to the Company. The Company has identified some of its telecommunication hardware and software that is not Year 2000 compliant and is in the process of installing the necessary upgrades. The cost of these upgrades will not be material. The Company has initiated communications with the manufacturers of its manufacturing and warehouse equipment to ensure that this equipment will be Year 2000 ready. Based on conversations with and evaluations by these manufacturers, it is anticipated that no warehouse or manufacturing equipment will need to be replaced. Consequently, no material costs will be incurred to make any of the Company's manufacturing and warehouse equipment Year 2000 ready. The Company incurred no cost for the testing performed by the manufacturers of this equipment. Formal communications have commenced and are ongoing with all significant suppliers and large customers of the Company, and will continue during the balance of 1999 to determine the extent to which the Company may be vulnerable to those third parties' failure to remediate their own 5 potential Year 2000 problems. The Company has several suppliers of its raw materials and should be able to obtain alternative sources of supply if these suppliers experience Year 2000 problems. The Company has two major customers for its manufacturing and packaging services and has received confirmation from these customers that they have addressed their Year 2000 issues. The Company's customers for its network marketing segment are typically individuals who will have no Year 2000 exposure. The Company ships the majority of its products through common carrier (primarily United Parcel Services) and has received confirmation that these carriers have addressed their Year 2000 issues. If the Company's most significant customers, or the suppliers of the Company's necessary energy, telecommunications and transportation needs, fail to provide the Company with the materials and services which are necessary to produce, distribute and sell its products, such failure could have a material adverse effect on the results of operations, liquidity and financial condition of the Company. There can be no guarantee that the systems of these suppliers, vendors and customers of the Company will be timely converted to Year 2000 compliance. Nor is there any guarantee that the Company would experience no material adverse effects should any of the significant vendors, suppliers or customers of the Company fail to remediate their potential Year 2000 problems. It is impossible to provide accurate estimates of the material costs to the Company should any of the significant vendors, suppliers or customers of the Company fail to remediate their potential Year 2000 problems. It is anticipated that such costs, if any, would be paid from the general revenues of the Company. Given that, as a result of the Company's communications with the aforementioned vendors, suppliers, and major customers, said parties have indicated that they have addressed or are addressing their own Year 2000 issues, the Company believes that the risk of increased costs due to these parties failure to remediate their potential Year 2000 issues, is relatively low. The Company has not budgeted for these potential costs. No Company projects have been deferred or abandoned due to any expenditure related to obtaining Year 2000 compliance. The Company has determined it has no exposure to contingencies related to the Year 2000 for the products it sells. The Company has no contingency plans in effect for the failure of any of Company's significant suppliers, customers or vendors of energy, telecommunications or transportation needs to become Year 2000 ready, nor does the Company believe that such a plan is necessary. The Company has not obtained and does not plan to obtain insurance to cover any of its potential Year 2000 exposure. The cost of attaining Year 2000 compliance has not and will not be material for the Company. It is anticipated that no warehouse or manufacturing equipment will need to be replaced. The Company is currently assessing its other office equipment for any Year 2000 issues. The Company will primarily utilize internal resources to manage the Year 2000 issue. The Company believes that its computer hardware and software will meet its administrative needs in the United States and in its foreign subsidiaries in the foreseeable future. 6 Item 3. Quantitative and Qualitative Disclosure of Market Risk ------------------------------------------------------ The Company's earnings and cash flow are subject to fluctuations due to changes in foreign currency rates as it has several foreign subsidiaries and continues to explore expansion into other foreign countries. As a result, exchange rate fluctuations may have an effect on its sales and the Company's gross margins. Accounting practices require that the Company's results from operations be converted to U.S. dollars for reporting purposes. Consequently, the reported earnings of the Company in future periods may be significantly affected by fluctuations in currency exchange rates, generally increasing with a weaker U.S. dollar and decreasing with a strengthening U.S. dollar. Products manufactured by the Company for sale to the Company's foreign subsidiaries are transacted in U.S. dollars. As the Company's foreign operations expand, its operating results will be subject to the risks of exchange rate fluctuations and the Company may not be able to accurately estimate the impact of such changes on its future business, product pricing, results of operations or financial condition. The Company also is exposed to market risk in changes in interest rates on its long-term debt arrangements and commodity prices in some of the raw materials it purchases for its manufacturing needs. However, neither presents a risk that would have a material effect on the Company's results of operations or financial condition. Part II. OTHER INFORMATION ----------------- Item 1. Legal Proceedings ----------------- In May, 1998, former sales/general manager of the Company's Canadian subsidiary filed a lawsuit claiming unlawful termination and breach of contract. The individual had been terminated by the Company in March, 1998. The Company believes the claim is without merit and intends to vigorously defend itself. Item 2. Changes in Securities --------------------- Not applicable. Item 3. Defaults Upon Senior Securities ------------------------------- Not applicable. Item 4. Submission of Matters to a Vote of Security Holders --------------------------------------------------- Not applicable. Item 5. Other Information ----------------- Not applicable. Item 6. Exhibits and Reports on Form 8-K -------------------------------- (a) Exhibits* (b) The Company has not filed a Current Report during the quarter covered by this report. * Also incorporated by reference the Exhibits filed as part of the S-18 Registration Statement of the Registrant, effective November 5, 1985, and subsequent periodic filings. 7 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: November 12, 1999 RELIV' INTERNATIONAL, INC. By: /s/ Robert L. Montgomery ----------------------------------- Robert L. Montgomery, President, Chief Executive Officer and Principal Financial Officer 8 Reliv International, Inc. and Subsidiaries Consolidated Balance Sheets September 30 December 31 1999 1998 ------------ ------------ (unaudited) (see notes) Assets Current assets: Cash and cash equivalents $ 1,610,358 $ 2,816,804 Accounts and notes receivable, less allowances of $3,100 in 1999 and $5,000 in 1998 1,260,324 777,443 Inventories Finished goods 1,931,028 1,702,359 Raw materials 3,006,304 1,865,649 Sales aids and promotional materials 410,174 361,322 ------------ ------------ Total inventories 5,347,506 3,929,330 Refundable income taxes 607,208 314,284 Prepaid expenses and other current assets 554,497 440,597 Deferred income taxes 79,960 79,269 ------------ ------------ Total current assets 9,459,853 8,357,727 Other assets: Goodwill, net of accumulated amortization of $52,553 in 1999 and $13,000 in 1998 472,984 512,399 Other assets 1,001,017 703,623 ------------ ------------ Total other assets 1,474,001 1,216,022 Property, plant and equipment: Land 829,222 829,222 Building 8,338,821 8,201,744 Machinery & equipment 3,826,702 2,783,923 Office equipment 462,265 446,205 Computer equipment & software 1,801,791 1,676,372 Construction in progress -- 235,511 ------------ ------------ 15,258,801 14,172,977 Less: Accumulated depreciation (4,282,755) (3,493,754) ------------ ------------ Net property, plant and equipment 10,976,046 10,679,223 ------------ ------------ Total assets $ 21,909,900 $ 20,252,972 ============ ============ See notes to financial statements. 9 Reliv International, Inc. and Subsidiaries Consolidated Balance Sheets September 30 December 31 1999 1998 ------------ ------------ (unaudited) (see notes) Liabilities and stockholders' equity Current liabilities: Accounts payable and accrued expenses: Trade accounts payable $ 4,147,329 $ 3,568,334 Distributors commissions payable 1,426,755 1,172,164 Sales taxes payable 186,419 221,377 Interest expense payable 29,894 27,851 Payroll and payroll taxes payable 194,332 114,906 Other accrued expenses 201,799 85,123 ------------ ------------ Total accounts payable and accrued expenses 6,186,528 5,189,755 Income taxes payable 1,805 55,258 Borrowings under line of credit 1,711,948 313,825 Current maturities of long-term debt and capital lease obligations 613,267 508,362 Unearned income 5,706 107,695 ------------ ------------ Total current liabilities 8,519,254 6,174,895 Capital lease obligations, less current maturities 343,449 373,455 Long-term debt, less current maturities 5,114,846 5,216,107 Other non-current liabilities 304,106 148,349 Stockholders' equity: Common stock, no par value; 20,000,000 shares authorized; 9,619,102 shares outstanding as of 9/30/99 and 9,653,502 shares outstanding as of 12/31/98 9,178,645 9,179,764 Notes receivable-officers and directors (39,886) (44,746) Retained deficit (1,158,574) (354,195) Foreign currency translation adjustment (351,940) (440,657) ------------ ------------ Total stockholders' equity 7,628,245 8,340,166 ------------ ------------ Total liabilities and stockholders' equity $ 21,909,900 $ 20,252,972 ============ ============ See notes to financial statements. 10 Reliv International, Inc. and Subsidiaries Consolidated Statements of Operations
Three months ended September 30 Nine months ended September 30 1999 1998 1999 1998 ------------ ------------ ------------ ------------ (unaudited) (unaudited) (unaudited) (unaudited) Sales at suggested retail $ 21,949,007 $ 18,308,241 $ 69,437,840 $ 55,327,659 Less: distributor allowances on product purchases 4,982,390 5,729,439 15,813,749 18,477,538 ------------ ------------ ------------ ------------ Net sales 16,966,617 12,578,802 53,624,091 36,850,121 Costs and expenses: Cost of products sold 8,981,652 3,727,590 27,969,050 8,151,181 Distributor royalties and commissions 3,551,871 4,066,766 11,742,671 12,956,205 Selling, general and administrative 4,883,658 4,547,989 14,683,105 13,417,909 ------------ ------------ ------------ ------------ Total costs and expenses 17,417,181 12,342,345 54,394,826 34,525,295 ------------ ------------ ------------ ------------ Income/(loss) from operations (450,564) 236,457 (770,735) 2,324,826 Other income (expense): Interest income 19,472 32,842 81,172 99,605 Interest expense (154,410) (132,380) (425,103) (372,628) Other income/(expense) 21,399 (14,728) 65,779 (54,198) ------------ ------------ ------------ ------------ Income/(loss) before income taxes (564,103) 122,191 (1,048,887) 1,997,605 Provision/(benefit) for income taxes (213,910) 48,904 (398,577) 779,066 ------------ ------------ ------------ ------------ Net income/(loss) ($ 350,193) $ 73,287 ($ 650,310) $ 1,218,539 ============ ============ ============ ============ Earnings/(loss) per common share ($ 0.04) $ 0.01 ($ 0.07) $ 0.13 ============ ============ ============ ============ Earnings/(loss) per common share - assuming dilution ($ 0.04) $ 0.01 ($ 0.07) $ 0.12 ============ ============ ============ ============
See notes to financial statements. 11 Reliv International, Inc. and Subsidiaries Consolidated Statements of Cash Flows (unaudited)
Nine months ended September 30 1999 1998 ----------- ----------- Operating activities: Net income/(loss) ($ 650,310) $ 1,218,539 Adjustments to reconcile net income/(loss) to net cash provided by (used in) operating activities: Depreciation and amortization 819,877 557,173 Provision for losses on accounts receivable -- 7,000 Foreign currency translation (gain) loss (24,108) 106,705 (Increase) decrease in accounts and notes receivable (430,084) (12,220) (Increase) decrease in inventories (1,385,238) (2,225,590) (Increase) decrease in refundable income taxes (397,969) (394,068) (Increase) decrease in prepaid expenses and other current assets (102,723) (152,204) (Increase) decrease in other assets (306,232) 958 Increase in accounts payable and accrued expenses 1,092,281 2,542,523 Increase (decrease) in income taxes payable 49,607 10,338 Increase (decrease) in unearned income (102,018) 78,655 ----------- ----------- Net cash provided by (used in) operating activities (1,436,917) 1,737,809 Investing activities: Purchase of property, plant and equipment (966,258) (1,370,165) ----------- ----------- Net cash used in investing activities (966,258) (1,370,165) Financing activities: Net borrowings under line of credit 1,398,123 -- Proceeds from long-term borrowings 300,000 471,486 Principal payments on long-term borrowings (311,094) (239,257) Principal payments under capital lease obligations (119,555) (39,152) Dividends paid (96,505) (240,963) Proceeds from notes receivable assumed from issuance of common stock from exercise of options 4,860 2,315 Purchase of treasury stock (58,682) -- ----------- ----------- Net cash provided by financing activities 1,117,147 (45,571) Effect of exchange rate changes on cash and cash equivalents 79,582 (213,734) ----------- ----------- Increase (decrease) in cash and cash equivalents (1,206,446) 108,339 Cash and cash equivalents at beginning of period 2,816,804 2,426,426 ----------- ----------- Cash and cash equivalents at end of period $ 1,610,358 $ 2,534,765 =========== ===========
See notes to financial statements 12 Reliv' International, Inc. and Subsidiaries Notes to Consolidated Financial Statements (Unaudited) September 30, 1999 Note 1-- Basis of Presentation The accompanying unaudited consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the nine-month period ended September 30, 1999 are not necessarily indicative of the results that may be expected for the year ended December 31, 1999. The balance sheet at December 31, 1998 has been derived from the audited financial statements at that date but does not include all of the information and footnotes required by generally accepted accounting priciples for complete financial statements. For further information, refer to the consolidated financial statements and footnotes thereto included in the Registrant Company and Subsidiaries' annual report on Form 10-K for the year ended December 31, 1998. Note 2-- Earnings per Share The following table sets forth the computation of basic and diluted earnings per share:
Three months ended September 30 Nine months ended September 30 1999 1998 1999 1998 ------------------------------ ---------------------------- Numerator: Numerator for basic and diluted earnings per share--net income/(loss) ($350,193) $73,287 ($650,310) $1,218,539 Denominator: Denominator per basic earnings per share--weighted average shares 9,649,000 9,643,000 9,649,000 9,643,000 Effect of dilutive securities: Employee stock options and other warrants 117,000 568,000 117,000 568,000 ------------------------------ ---------------------------- Denominator for diluted earnings per share--adjusted weighted average shares 9,766,000 10,211,000 9,766,000 10,211,000 ============================== ============================ Basic earnings/(loss) per share ($0.04) $0.01 ($0.07) $0.13 ============================== ============================ Diluted earnings/(loss) per share ($0.04) $0.01 ($0.07) $0.12 ============================== ============================
Note 3-- Comprehensive Income Total comprehensive income/(loss) was ($397,559) and ($561,593) for the three months and nine months ended September 30, 1999, respectively. For the three and nine months ended September 30, 1998, comprehensive income/(loss) was ($9,025) and $1,027,684, respectively. The Company's only component of other comprehensive income is the foreign currency translation adjustment. 13 Note 4-- Segment Information
Three months ended Three months ended September 30, 1999 September 30, 1998 ------------------ ------------------ Network Manufacturing Network Manufacturing marketing and packaging marketing and packaging ------------------------------- ------------------------------- Net sales to external customers 9,729,566 7,237,051 10,936,232 1,642,570 Intersegment net sales -- 1,392,638 -- 1,626,509 Segment profit/(loss) 361,553 (432,945) 882,826 (227,402)
Nine months ended Nine months ended September 30, 1999 September 30, 1998 ------------------ ------------------ Network Manufacturing Network Manufacturing marketing and packaging marketing and packaging ------------------------------- ------------------------------- Net sales to external customers 31,056,509 22,567,582 34,877,448 1,972,673 Intersegment net sales -- 4,677,551 -- 5,445,162 Segment profit/(loss) 1,320,182 (977,980) 3,895,245 (410,767) Segment assets 13,370,696 5,790,273 12,738,487 4,551,303
A reconciliation of combined operating profit for the reportable segments to consolidated income before income taxes is as follows:
Three months ended Nine months ended September 30 September 30 1999 1998 1999 1998 ----------------------------- ------------------------------- Total profit for reportable segments (71,392) 655,424 342,202 3,484,478 Corporate expenses (379,172) (418,967) (1,112,937) (1,159,652) Non operating - net 40,871 18,114 146,951 45,407 Interest expense (154,410) (132,380) (425,103) (372,628) ----------------------------- ------------------------------- Income before income taxes (564,103) 122,191 (1,048,887) 1,997,605 ============================= ===============================
Note 5-- Legal Proceedings In May 1998, the former sales/general manager of the Company's Canadian subsidiary filed lawsuit claiming unlawful termination and breach of contract. The individual had been terminated by the Company in March 1998. The Company believes the claim is without merit and intends to vigorously defend itself. At this time, the outcome of this matter is uncertain and a range of loss cannot be reasonably estimated; however, management believes that the final outcome will not have a material adverse effect on the financial position or results of operations of the Company. 14 EX-27 2 FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM FORM 10-Q FOR THE QUARTER ENDING SEPTEMBER 30, 1999 AND IS QUALIFIED IN ITS ENTIRETY BY REFRENCE TO SUCH FORM 10-Q. 9-mos DEC-31-1999 JAN-01-1999 SEP-30-1999 1,610,358 0 1,263,324 3,100 5,347,506 9,459,853 15,258,801 4,282,755 21,909,900 6,186,528 5,114,846 0 0 9,178,645 (1,550,400) 21,909,900 53,624,091 53,624,091 27,969,050 39,711,721 14,617,326 0 343,931 (1,048,887) (398,577) (650,310) 0 0 0 (650,310) (.07) (.07)
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