Reliv Reports $10.8 million Net Sales in Third Quarter Financial Results for 2016

Reliv International, Inc. (NASDAQ: RELV), a maker of nutritional supplements that promote optimal health, today reported its financial results for the third quarter of 2016.
Reliv reported net sales of $10.8 million for the third quarter of 2016 compared with net sales of $12.2 million in the third quarter of 2015. U.S. net sales decreased to $8.6 million from $9.8 million, a decline of 12.1 percent. Net sales in Reliv’s foreign markets for the third quarter of 2016 decreased 9.5 percent compared with net sales in the prior-year third quarter. Absent the impact of foreign currency fluctuation as the result of a stronger U.S. dollar, net sales in Reliv’s foreign markets were flat during the third quarter of 2016 compared to the prior-year quarter.
Reliv reported net income for the third quarter of 2016 of $134,000 (income per diluted share of $0.07) compared to a net loss of $289,000 (loss per diluted share of $0.16) in the third quarter of 2015. All earnings/loss per share amounts are based on the number of shares outstanding subsequent to the one-for-seven reverse stock split that took effect on October 4, 2016. Income from operations for the third quarter of 2016 was $34,000 compared to a loss from operations of $377,000 in the same period in 2015. The impact to operations from the decrease in net sales was offset by a reduction in selling, general and administrative expenses (“SGA”). SGA expenses were $4.7 million in the third quarter of 2016, compared to $5.7 million in the third quarter of 2015. The decrease in SGA expenses is the result of a cost reduction program implemented in May 2016 and completed in the third quarter of 2016.
Net sales for the first nine months of 2016 were $34.9 million, which represents an 11.7 percent decrease from the same period in 2015. Net sales in the United States and in Reliv’s foreign markets decreased by 11.8 percent and 11.1 percent, respectively, in the first nine months of 2016 compared with the same period last year. Foreign currency fluctuation contributed 7.3 percent of the decline in net sales in Reliv’s foreign markets during the first nine months of 2016.
Reliv reported a net loss of $897,000, or $0.49 per diluted share in the first nine months of 2016, compared to a net loss of $1.0 million, or $0.55 per diluted share in the same period of 2015.
As previously reported, Reliv executed a one-for-seven (1:7) reverse stock split and Reliv’s common stock began trading on a split-adjusted basis when the market opened on October 4, 2016. As a result of the reverse stock split, each seven pre-split shares of common stock automatically combined into one new share of common stock, and the number of outstanding common shares decreased from approximately 12.9 million shares to 1.85 million shares. This reverse stock split, and the resulting increase in Reliv’s per share price, allowed Reliv to satisfy the NASDAQ minimum share price requirement for continued listing on the NASDAQ Capital Market.
“We are pleased that our cost reduction program is fully implemented and we have returned to profitability; however, there is still much work to be done,” said Robert L. Montgomery, Chairman and Chief Executive Officer. “We continue to work on promoting the business opportunity with focus on training the distributor force to succeed in this business.”
“Along with that work, we are planning ahead to 2017 with the introduction of a new product line and program called Fit3™,” Montgomery commented. “We expect Fit3 will combine a new line of products with an exercise and nutrition plan for maximum results. This program is already being tested by a group of distributors, with a launch planned for early 2017.”
Reliv had cash and cash equivalents of $3.2 million as of September 30, 2016, compared to $3.3 million as of December 31, 2015 and $3.2 million as of September 30, 2015. Net cash generated from operating activities was $763,000 in the nine-month period ended September 30, 2016 compared to $1.1 million of cash used in operations in the prior-year nine-month period.
As of September 30, 2016, Reliv had 40,450 distributors and preferred customers — a decrease of 14.2 percent from September 30, 2015 — of which 5,320 are Master Affiliate level and above. The number of Master Affiliates decreased by 9.7 percent compared to the year-ago total. Master Affiliate is the level at which distributors are eligible to earn generation royalties. With the formal introduction of the Preferred Customer program in the United States and Canada in February 2016, Reliv now includes preferred customers as part of Active Distributor statistics.
About Reliv International, Inc.
Reliv International, based in Chesterfield, MO, produces nutritional supplements that promote optimal nutrition. Reliv supplements address essential nutrition, weight loss, athletic performance, digestive health, women’s health, anti-aging and healthy energy. Reliv is the exclusive provider of LunaRich® products, which optimize levels of lunasin, a soy peptide that works at the epigenetic level to promote optimal health. The company sells its products through an international network marketing system of independent distributors in 15 countries. Learn more about Reliv at reliv.com, or on Facebook, Twitter or YouTube.
Statements made in this news release that are not historical facts are “forward-looking” statements (as defined in the Private Securities Litigation Reform Act of 1995) that involve risks and uncertainties and are subject to change at any time. These forward-looking statements may include, but are not limited to, statements containing words such as “may,” “should,” “could,” “would,” “expect,” “plan,” “anticipate,” “believe,” “estimate,” “predict,” “potential,” “continue” or similar expressions. Factors that could cause actual results to differ are identified in the public filings made by Reliv with the Securities and Exchange Commission. More information on factors that could affect Reliv’s business and financial results are included in its public filings made with the Securities and Exchange Commission, including its Annual Report on Form 10-K and Quarterly Reports on Form 10-Q, copies of which are available on the Company’s web site, reliv.com.

–FINANCIAL HIGHLIGHTS FOLLOW –

Reliv International, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets
			September 30			December 31
			2016			2015
			(Unaudited)
Assets
Current Assets:
	Cash and cash equivalents		$3,170,008			$3,262,263
	Accounts receivable, less allowances of $29,300 in 2016 and $30,200 in 2015		6,562			89,376
	Accounts and note due from employees and distributors		139,671			134,668
	Inventories		4,221,381			5,172,722
	Other current assets		1,140,885			1,140,680
Total current assets			8,678,507			9,799,709
Other assets			7,731,396			8,042,196
Net property, plant and equipment			5,895,664			6,419,127
Total Assets			$22,305,567			$24,261,032
Liabilities and Stockholders’ Equity
Accounts payable and accrued expenses			$4,156,496			$3,937,752
Current portion of long-term debt			426,035			781,505
Long-term debt – noncurrent			2,599,581			3,159,575
Other noncurrent liabilities			382,340			499,705
Stockholders’ equity			14,741,115			15,882,495
Total Liabilities and Stockholders’ Equity			$22,305,567			$24,261,032
Consolidated Statements of Operations
			Three months ended September 30						Nine months ended September 30
			2016			2015			2016			2015
			(Unaudited)			(Unaudited)			(Unaudited)			(Unaudited)
Product sales			$9,972,547			$11,250,271			$32,181,585			$36,401,384
Handling & freight income			812,868			944,182			2,693,602			3,072,783
Net Sales			10,785,415			12,194,453			34,875,187			39,474,167
Costs and expenses:
	Cost of products sold		2,214,633			2,603,167			7,729,508			8,245,871
	Distributor royalties and commissions		3,799,791			4,308,647			12,345,171			14,048,971
	Selling, general and administrative		4,737,305			5,659,989			15,887,901			18,244,930
Total Costs and Expenses			10,751,729			12,571,803			35,962,580			40,539,772
Income (loss) from operations			33,686			(377,350	)		(1,087,393	)		(1,065,605	)
Other income (expense):
Interest income			26,199			28,536			80,689			88,991
Interest expense			(28,982	)		(36,814	)		(82,161	)		(87,502	)
Other income (expense)			41,575			(72,373	)		226,519			(227,434	)
Income (loss) before income taxes			72,478			(458,001	)		(862,346	)		(1,291,550	)
Provision (benefit) for income taxes			(62,000	)		(169,000	)		35,000			(273,000	)
Net income (loss)			$134,478			($289,001	)		($897,346	)		($1,018,550	)
Earnings (loss) per common share – Basic			$0.07			($0.16	)		($0.49	)		($0.55	)
Weighted average shares			1,846,000			1,846,000			1,846,000			1,836,000
Earnings (loss) per common share – Diluted			$0.07			($0.16	)		($0.49	)		($0.55	)
Weighted average shares			1,846,000			1,846,000			1,846,000			1,836,000

Reliv International, Inc. and Subsidiaries
Net sales by Market
(in thousands)		Three months ended September 30,												Change from
		2016						2015						prior year
		Amount			% of Net Sales			Amount			% of Net Sales			Amount				%
United States		$	8,581		79.6	%		$	9,759		80.0	%		$	(1,178	)		-12.1	%
Australia/New Zealand			242		2.2	%			283		2.3	%			(41	)		-14.5	%
Canada			250		2.3	%			260		2.2	%			(10	)		-3.8	%
Mexico			119		1.1	%			136		1.1	%			(17	)		-12.5	%
Europe			1,166		10.8	%			1,304		10.7	%			(138	)		-10.6	%
Asia			427		4.0	%			452		3.7	%			(25	)		-5.5	%
Consolidated Total		$	10,785		100.0	%		$	12,194		100.0	%		$	(1,409	)		-11.6	%
Net sales by Market
(in thousands)		Nine months ended September 30,												Change from
		2016						2015						prior year
		Amount			% of Net Sales			Amount			% of Net Sales			Amount				%
United States		$	27,191		78.0	%		$	30,831		78.1	%		$	(3,640	)		-11.8	%
Australia/New Zealand			825		2.4	%			984		2.5	%			(159	)		-16.2	%
Canada			799		2.3	%			1,028		2.6	%			(229	)		-22.3	%
Mexico			419		1.2	%			567		1.4	%			(148	)		-26.1	%
Europe			4,344		12.4	%			4,651		11.8	%			(307	)		-6.6	%
Asia			1,297		3.7	%			1,413		3.6	%			(116	)		-8.2	%
Consolidated Total		$	34,875		100.0	%		$	39,474		100.0	%		$	(4,599	)		-11.7	%

The following table sets forth, as of September 30, 2016 and 2015, the number of our Active Distributors/Preferred Customers and Master Affiliates and above. The total number of active distributors includes Master Affiliates and above. We define an active distributor as one that enrolls as a distributor or renews his or her distributorship during the prior twelve months. Master Affiliates and above are distributors that have attained the highest level of discount and are eligible for royalties generated by Master Affiliate groups in their downline organization. In February 2016, we introduced a formal Preferred Customer program in the United States and Canada. As a result, we are including Preferred Customers as part of our Active Distributor count. Preferred Customer programs were previously in place in Europe and other foreign markets. Preferred Customers represent approximately 4,720 and 4,390 of the Active Distributor count as of September 30, 2016 and 2015, respectively. The significant majority of these Preferred Customers are in Europe.

Active Distributors/Preferred Customers and Master Affiliates and Above by Market
		As of 9/30/2016				As of 9/30/2015				Change in%
		Active Distributors and Preferred Customers		Master Affiliates and Above		Active Distributors and Preferred Customers		Master Affiliates and Above		Active Distributors and Preferred Customers			Master Affiliates and Above
United States		28,700		4,110		33,400		4,500		-14.1	%		-8.7	%
Australia/New Zealand		1,580		130		1,790		130		-11.7	%		0.0	%
Canada		890		140		1,250		230		-28.8	%		-39.1	%
Mexico		1,010		90		1,240		100		-18.5	%		-10.0	%
Europe		5,230		520		6,390		630		-18.2	%		-17.5	%
Asia		3,040		330		3,100		300		-1.9	%		10.0	%
Consolidated Total		40,450		5,320		47,170		5,890		-14.2	%		-9.7	%