Natural Health Trends Reports Third Quarter 2016 Financial Results and Declares Special Cash Dividend of $0.35 per Share
October 25 2016 - 9:00AM
Natural Health Trends Corp. (NASDAQ:NHTC), a leading direct-selling
and e-commerce company that markets premium quality personal care,
wellness and “quality of life” products under the NHT Global brand,
today announced its financial results for the quarter ended
September 30, 2016.
Third Quarter 2016 Financial
Highlights
- Total revenue decreased 13% to $70.7 million, compared to $80.8
million in the third quarter of 2015.
- Revenue from the Company’s Hong Kong operations, which
represented 93% of total revenue, decreased 13% to $65.9 million,
compared to $75.9 million in the third quarter of 2015.
- Revenue outside of Hong Kong decreased 2% to $4.8 million,
compared to $4.9 million in the third quarter of 2015.
- Operating income increased 3% to $15.2 million, compared to
$14.8 million in the third quarter of 2015.
- An additional income tax provision of $2.6 million was
recognized in the third quarter of 2016 for the expected partial
repatriation of overseas profits, resulting in an overall effective
tax rate of 18%.
- Net income was $12.6 million, or $1.12 per diluted share,
compared to $14.5 million, or $1.18 per diluted share, in the third
quarter of 2015.
- The number of Active Members1 decreased 3% to 122,900 at
September 30, 2016, compared to 126,440 at June 30, 2016,
and increased 30% compared to 94,700 at September 30,
2015.
1 Natural Health Trends defines Active Members as those
that have placed at least one product order with the Company during
the preceding twelve month period.
Year-to-Date 2016 Financial
Highlights
- Total revenue increased 18% to $225.4 million, compared to
$191.2 million in the first nine months of 2015.
- Operating income increased 30% to $44.1 million, compared to
$34.0 million in the first nine months of 2015.
- An additional income tax provision of $7.3 million was
recognized in the first nine months of 2016 for the expected
partial repatriation of overseas profits, resulting in an overall
effective tax rate of 18%.
- Net income was $36.0 million, or $3.14 per diluted share,
compared to $33.5 million, or $2.70 per diluted share, in the first
nine months of 2015.
Management Commentary
“We had a challenging third quarter characterized by various
adverse factors contributing to a 13% year-over-year decline in our
total revenue,” commented Chris Sharng, President of Natural Health
Trends Corp. “In addition to a tough year-over-year comparison in
the third quarter of 2015 due to a highly successful promotion we
ran last year during an otherwise seasonally slower quarter, we
encountered currency depreciation of the Chinese yuan by 6% against
the Hong Kong dollar. This effectively increases the price of
our products for our members residing in mainland China. That said,
we believe the G20 Summit, which was hosted in Hangzhou, one of our
top performing markets, was the significant driver behind the
quarter’s decline in revenue. To prepare for the high profile
event, the Chinese government implemented special measures such as
temporarily relocating city residents, emptying entire districts,
blocking urban traffic and shutting down businesses from July
through early September. As a result, our local members’ abilities
to organize any activity in the Hangzhou metropolitan area were
hampered.”
Mr. Sharng further commented, “Despite these factors, we were
pleased to have increased our revenues for the first nine months of
2016 by 18% over last year as well as achieve record operating
profit for the quarter of $15.2 million, up 3% over last
year. To reinvigorate growth in our affected markets, we have
developed a strategic plan which includes leader training and
motivation, expansion by both geography and product, and
technological advancements to support enhanced member communication
and productivity. We are working hard to build sustainable,
long-term growth and we will strive to get there through execution
on our strategic initiatives while simultaneously returning excess
cash to our valued stockholders.”
Balance Sheet and Cash Flow
- Net cash provided by operating activities in the third quarter
of 2016 was $5.9 million, compared to $25.7 million in the third
quarter of 2015. For the first nine months of 2016, net cash
provided by operating activities was $36.3 million, compared to
$65.2 million in the first nine months of 2015.
- On October 23, 2016, the Company’s Board of Directors declared
a quarterly cash dividend of $0.08 per share on outstanding common
stock, which represents a 14% increase over the prior quarter
dividend, and a special cash dividend of $0.35 per share on
outstanding common stock. The dividends will be payable on November
25, 2016 to stockholders of record as of November 15, 2016.
- During the nine months ended September 30, 2016, the
Company repurchased $23.7 million of its common stock under its
existing $70.0 million stock repurchase program. At
September 30, 2016, approximately $32.0 million remained
available for repurchases, inclusive of related estimated income
tax.
Third Quarter 2016 Financial Results Conference
Call
Management will host a conference call to discuss the third
quarter 2016 financial results today, Tuesday, October 25, 2016 at
11:30 a.m. Eastern Time. The conference call details are as
follows:
Date: |
Tuesday, October 25,
2016 |
Time: |
11:30 a.m. Eastern Time /
8:30 a.m. Pacific Time |
Dial-in: |
1-877-407-0789
(Domestic)1-201-689-8562 (International) |
Conference
ID: |
13646039 |
Webcast: |
http://public.viavid.com/index.php?id=121213 |
For those unable to participate during the live broadcast, a
replay of the call will also be available from 2:30 p.m. Eastern
Time on October 25, 2016 through 11:59 p.m. Eastern Time on
November 8, 2016 by dialing 1-844-512-2921 (domestic) and
1-412-317-6671 (international) and referencing the replay pin
number: 13646039.
About Natural Health Trends Corp.
Natural Health Trends Corp. (NASDAQ:NHTC) is an international
direct-selling and e-commerce company operating through its
subsidiaries throughout Asia, North America, and Europe. The
Company markets premium quality personal care products under the
NHT Global brand. Additional information can be found on the
Company’s website at www.naturalhealthtrendscorp.com.
Forward-Looking Statements
Safe Harbor Statement under the Private Securities Litigation
Reform Act of 1995 -- Forward-looking statements in this press
release do not constitute guarantees of future performance.
Such forward-looking statements are subject to risks and
uncertainties that could cause the Company’s actual results to
differ materially from those anticipated. Such risks and
uncertainties include the risks and uncertainties detailed under
the caption “Risk Factors” in Natural Health Trends Corp.’s Annual
Report on Form 10-K filed on March 4, 2016 with the Securities and
Exchange Commission. The Company assumes no obligation to
update any forward-looking information contained in this press
release or with respect to the announcements described herein.
|
NATURAL HEALTH TRENDS CORP. |
CONSOLIDATED BALANCE SHEETS |
(In thousands) |
|
|
|
September 30, 2016 |
|
December 31, 2015 |
|
|
(Unaudited) |
|
|
ASSETS |
|
|
|
|
Current assets: |
|
|
|
|
Cash and
cash equivalents |
|
$ |
114,500 |
|
|
$ |
104,914 |
|
Accounts
receivable |
|
98 |
|
|
57 |
|
Inventories,
net |
|
14,842 |
|
|
10,455 |
|
Other
current assets |
|
3,540 |
|
|
2,286 |
|
Total current assets |
|
132,980 |
|
|
117,712 |
|
Property and equipment,
net |
|
1,297 |
|
|
894 |
|
Goodwill |
|
1,764 |
|
|
1,764 |
|
Restricted cash |
|
3,090 |
|
|
3,166 |
|
Other assets |
|
723 |
|
|
616 |
|
Total assets |
|
$ |
139,854 |
|
|
$ |
124,152 |
|
LIABILITIES AND STOCKHOLDERS’ EQUITY |
|
|
|
|
Current liabilities: |
|
|
|
|
Accounts payable |
|
$ |
3,114 |
|
|
$ |
2,862 |
|
Income taxes
payable |
|
655 |
|
|
379 |
|
Accrued
commissions |
|
18,620 |
|
|
19,634 |
|
Other
accrued expenses |
|
18,443 |
|
|
16,703 |
|
Deferred
revenue |
|
4,236 |
|
|
4,011 |
|
Deferred tax
liability |
|
60 |
|
|
60 |
|
Amounts held
in eWallets |
|
19,510 |
|
|
16,414 |
|
Other
current liabilities |
|
1,543 |
|
|
1,510 |
|
Total current
liabilities |
|
66,181 |
|
|
61,573 |
|
Long-term incentive |
|
4,945 |
|
|
5,770 |
|
Total liabilities |
|
71,126 |
|
|
67,343 |
|
Commitments and
contingencies |
|
|
|
|
Stockholders’ equity: |
|
|
|
|
Preferred
stock |
|
— |
|
|
— |
|
Common
stock |
|
13 |
|
|
13 |
|
Additional
paid-in capital |
|
86,564 |
|
|
85,963 |
|
Retained
earnings (accumulated deficit) |
|
24,342 |
|
|
(9,647 |
) |
Accumulated
other comprehensive loss |
|
(302 |
) |
|
(101 |
) |
Treasury
stock, at cost |
|
(41,889 |
) |
|
(19,419 |
) |
Total stockholders’
equity |
|
68,728 |
|
|
56,809 |
|
Total liabilities and
stockholders’ equity |
|
$ |
139,854 |
|
|
$ |
124,152 |
|
NATURAL HEALTH TRENDS CORP. |
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED) |
(In thousands, except per share data) |
|
|
Three Months Ended September 30, |
|
Nine Months Ended September 30, |
|
2016 |
|
2015 |
|
2016 |
|
2015 |
Net sales |
$ |
70,679 |
|
|
$ |
80,779 |
|
|
$ |
225,416 |
|
|
$ |
191,204 |
|
Cost of sales |
13,627 |
|
|
16,001 |
|
|
42,966 |
|
|
39,025 |
|
Gross profit |
57,052 |
|
|
64,778 |
|
|
182,450 |
|
|
152,179 |
|
Operating expenses: |
|
|
|
|
|
|
|
Commissions
expense |
30,578 |
|
|
40,036 |
|
|
103,547 |
|
|
93,443 |
|
Selling,
general and administrative expenses |
11,170 |
|
|
9,867 |
|
|
34,505 |
|
|
24,571 |
|
Depreciation
and amortization |
96 |
|
|
72 |
|
|
276 |
|
|
181 |
|
Total operating
expenses |
41,844 |
|
|
49,975 |
|
|
138,328 |
|
|
118,195 |
|
Income from
operations |
15,208 |
|
|
14,803 |
|
|
44,122 |
|
|
33,984 |
|
Other income (expense),
net |
48 |
|
|
(135 |
) |
|
40 |
|
|
(112 |
) |
Income before income
taxes |
15,256 |
|
|
14,668 |
|
|
44,162 |
|
|
33,872 |
|
Income tax provision |
2,699 |
|
|
137 |
|
|
8,124 |
|
|
330 |
|
Net income |
$ |
12,557 |
|
|
$ |
14,531 |
|
|
$ |
36,038 |
|
|
$ |
33,542 |
|
Income per common
share: |
|
|
|
|
|
|
|
Basic |
$ |
1.12 |
|
|
$ |
1.19 |
|
|
$ |
3.15 |
|
|
$ |
2.71 |
|
Diluted |
$ |
1.12 |
|
|
$ |
1.18 |
|
|
$ |
3.14 |
|
|
$ |
2.70 |
|
Weighted-average number of
common shares outstanding: |
|
|
|
|
|
|
|
Basic |
11,209 |
|
|
12,239 |
|
|
11,437 |
|
|
12,364 |
|
Diluted |
11,232 |
|
|
12,284 |
|
|
11,463 |
|
|
12,439 |
|
Cash dividends declared
per common share |
$ |
0.07 |
|
|
$ |
0.04 |
|
|
$ |
0.18 |
|
|
$ |
0.09 |
|
NATURAL HEALTH TRENDS CORP. |
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED) |
(In thousands) |
|
|
Nine Months Ended September 30, |
|
2016 |
|
2015 |
CASH FLOWS FROM OPERATING
ACTIVITIES: |
|
|
|
Net income |
$ |
36,038 |
|
|
$ |
33,542 |
|
Adjustments to reconcile
net income to net cash provided by operating activities: |
|
|
|
Depreciation
and amortization |
276 |
|
|
181 |
|
Stock-based
compensation |
94 |
|
|
56 |
|
Cumulative
translation adjustment realized in net income |
132 |
|
|
(82 |
) |
Changes in assets and
liabilities: |
|
|
|
Accounts
receivable |
(36 |
) |
|
(217 |
) |
Inventories,
net |
(4,382 |
) |
|
(2,904 |
) |
Other
current assets |
(1,208 |
) |
|
(736 |
) |
Other
assets |
(91 |
) |
|
(264 |
) |
Accounts
payable |
252 |
|
|
2,140 |
|
Income taxes
payable |
278 |
|
|
190 |
|
Accrued
commissions |
(1,045 |
) |
|
11,832 |
|
Other
accrued expenses |
3,459 |
|
|
8,397 |
|
Deferred
revenue |
222 |
|
|
1,844 |
|
Amounts held
in eWallets |
3,098 |
|
|
11,354 |
|
Other
current liabilities |
26 |
|
|
93 |
|
Long-term
incentive |
(825 |
) |
|
(229 |
) |
Net cash provided by
operating activities |
36,288 |
|
|
65,197 |
|
CASH FLOWS FROM INVESTING
ACTIVITIES: |
|
|
|
Purchases of
property and equipment, net |
(679 |
) |
|
(645 |
) |
Increase in
restricted cash |
— |
|
|
(3,028 |
) |
Net cash used in investing
activities |
(679 |
) |
|
(3,673 |
) |
CASH FLOWS FROM FINANCING
ACTIVITIES: |
|
|
|
Proceeds
from exercise of warrants |
— |
|
|
309 |
|
Repurchase
of common stock |
(23,704 |
) |
|
(11,079 |
) |
Dividends
paid |
(2,049 |
) |
|
(1,111 |
) |
Net cash used in financing
activities |
(25,753 |
) |
|
(11,881 |
) |
Effect of exchange rates
on cash and cash equivalents |
(270 |
) |
|
106 |
|
Net increase in cash and
cash equivalents |
9,586 |
|
|
49,749 |
|
CASH AND CASH EQUIVALENTS,
beginning of period |
104,914 |
|
|
44,816 |
|
CASH AND CASH EQUIVALENTS,
end of period |
$ |
114,500 |
|
|
$ |
94,565 |
|
SUPPLEMENTAL DISCLOSURES
OF OTHER CASH FLOW INFORMATION: |
|
|
|
Cash paid
for income taxes, net of refunds |
$ |
7,994 |
|
|
$ |
152 |
|
Issuance of
treasury stock |
$ |
1,741 |
|
|
$ |
666 |
|
CONTACTS:
Company Contact:
Scott Davidson
Senior Vice President and Chief Financial Officer
Natural Health Trends Corp.
Tel: 310-541-0888
scott.davidson@nhtglobal.com
Investors:
ADDO Investor Relations
Tel: 310-829-5400
investor.relations@nhtglobal.com
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