Incentive Compensation Plans

12 Months Ended

Dec. 31, 2013

13. Incentive Compensation Plans

In May 2007, the Board of Directors approved the adoption of a new incentive compensation plan. This new plan was effective for fiscal year 2007 and replaced a previous plan. Under the plan, bonuses are payable quarterly in an amount not to exceed 18% of the Company’s Income from Operations for any period, subject to the Company achieving a minimum quarterly Income from Operations of at least $500,000. For fiscal years 2013 and 2012, the Board determined that the aggregate amount of incentive compensation available under the Plan shall be equal to 16% of the Company’s Income from Operations. The bonus pool is allocated to executives according to a specified formula, with a portion allocated to a middle management group determined by the Executive Committee of the Board of Directors.

The Company expensed a total of $286,000 and $305,000 to the participants of the bonus pool for 2013 and 2012, respectively.

In July 2010, the Company’s Reliv Europe subsidiary entered into a long-term performance-based incentive compensation agreement with the subsidiary’s senior managers. The valuation of the compensation agreement is an EBITDA-based formula derived from the subsidiary’s financial performance and vests in 20% annual increments which began in April 2011. The amount of the incentive, if any, varies in accordance with a 24-month look-back of the subsidiary’s financial performance and the vesting provisions. Upon initial vesting, a manager may elect to exercise his/her put option to receive in cash some or all of his/her respective share of the incentive. Beginning April 2015, the Company may exercise a call option on one or more of the manager’s incentive amount; redeeming such amount in cash or a combination of cash and the Company’s common stock, depending upon the amount of the vested incentive. In the fourth quarter of 2012, the subsidiary’s 24-month financial performance became positive, and remained positive throughout 2013, resulting in the recognition of compensation expense of $440,500 and $88,500 for 2013 and 2012, respectively, as presented within Selling, General, and Administrative in the accompanying consolidated statements of net income and comprehensive income. At December 31, 2013 and 2012, accrued compensation was $529,000 and $88,500, respectively, and was included in “Other Non-Current Liabilities” in the accompanying consolidated balance sheets.

The Company sponsors a Supplemental Executive Retirement Plan (SERP) to allow certain executives to defer a portion of their annual salary and bonus into a grantor trust. A grantor trust was established to hold the assets of the SERP. The Company funds the grantor trust by paying the amount deferred by the participant into the trust at the time of deferral. Investment earnings and losses accrue to the benefit or detriment of the participants. The SERP also provides for a discretionary matching contribution by the Company not to exceed 100% of the participant’s annual contribution. In 2013 and 2012, the Company did not provide a match. The participants fully vest in the deferred compensation three years from the date they enter the SERP. The participants are not eligible to receive distribution under the SERP until retirement, death, or disability of the participant. At December 31, 2013 and 2012, SERP assets were $278,000 and $206,000, respectively, and are included in “Other Assets” in the accompanying consolidated balance sheets. At December 31, 2013 and 2012, SERP liabilities were $287,000 and $211,000, respectively, and are included in “Other Non-Current Liabilities” in the accompanying consolidated balance sheets. The changes in the balances of SERP assets and SERP liabilities during 2013 and 2012 were due to net realized and unrealized investment gains/losses incurred by the plan.

- Definition

The entire disclosure for compensation costs, including compensated absences accruals, compensated absences liability, deferred compensation arrangements and income statement compensation items. Deferred compensation arrangements may include a description of an arrangement with an individual employee, which is generally an employment contract between the entity and a selected officer or key employee containing a promise by the employer to pay certain amounts at designated future dates, usually including a period after retirement, upon compliance with stipulated requirements. This type of arrangement is distinguished from broader based employee benefit plans as it is usually tailored to the employee. Disclosure also typically includes the amount of related compensation expense recognized during the reporting period, the number of shares (units) issued during the period under such arrangements, and the carrying amount as of the balance sheet date of the related liability.

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