Natural Health Trends Reports Second Quarter 2017 Financial Results
August 02 2017 - 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
June 30, 2017.
Second Quarter 2017 Financial
Highlights
- Total revenue decreased 36% to $51.5 million, compared to $80.4
million in the second quarter of 2016.
- Revenue from the Company’s Hong Kong operations, which
represented 89% of total revenue, decreased 38% to $45.7 million,
compared to $73.3 million in the second quarter of 2016.
- Revenue outside of Hong Kong decreased 18% to $5.8 million,
compared to $7.1 million in the second quarter of 2016, and was
partly mitigated by an increase in Europe of 256%
year-over-year.
- Operating income decreased 14% to $12.9 million, compared to
$14.9 million in the second quarter of 2016. As a percent of total
revenue, operating income was 25%, compared to 19% in the second
quarter of 2016.
- Net income was $10.3 million, or $0.91 per diluted share,
compared to $12.2 million, or $1.07 per diluted share, in the
second quarter of 2016.
- The number of Active Members1 decreased 6% to 107,290 at
June 30, 2017, compared to 113,710 at March 31, 2017, and
decreased 15% compared to 126,440 at June 30, 2016.
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 2017 Financial Highlights
- Total revenue decreased 28% to $111.3 million, compared to
$154.7 million in the first six months of 2016.
- Operating income decreased 11% to $25.9 million, compared to
$28.9 million in the first six months of 2016. As a percent of
total revenue, operating income was 23%, compared to 19% in the
first six months of 2016.
- Net income was $20.7 million, or $1.84 per diluted share,
compared to $23.5 million, or $2.03 per diluted share, in the first
six months of 2016.
Management Commentary
“Our revenue for the second quarter declined by 14% from the
prior quarter primarily due to the slowdown we have been
experiencing in our Asian markets since the third quarter of 2016,”
commented Chris Sharng, President of Natural Health Trends Corp.
“Further, the second quarter of 2016 presented a challenging
year-over-year comparison due to record product orders in
anticipation of a significant product price increase effective last
June. Partially offsetting the year-over-year decrease in net sales
was strength in Europe, our market opening in Peru and a positive
response to our most recent product introductions.”
Mr. Sharng further commented, “We are pleased to announce we
received preliminary approval for a direct selling license in
Malaysia, which correlates perfectly with our summer Ambassador
Academy event we have been actively preparing for in Kuala Lumpur.
We also recently celebrated our grand opening in Peru and received
registration approval for key products, enabling us to generate
nearly $500 thousand in product orders during the quarter. In
addition, we are working to reinvigorate momentum in Asia by
enhancing our incentive programs and adjusting our bonus and reward
programs to provide more resources to the most productive and
up-and-coming members. While it will take time to restore our Asian
markets to growth and to train our leaders to navigate the
challenges involved with operating through a slowdown, we believe
the measures we have taken to enhance our matching bonus and ease
rank advancement will help attract, motivate and retain a strong
member base.”
Balance Sheet and Cash Flow
- Net cash provided by operating activities in the second quarter
of 2017 was $6.8 million, compared to $16.6 million in the second
quarter of 2016. For the first six months of 2017, net cash
provided by operating activities was $20.6 million, compared to
$30.4 million in the first six months of 2016.
- On July 31, 2017, the Company's Board of Directors
declared a quarterly dividend of $0.11 per share on outstanding
common stock, which represents a 10% increase over the prior
quarter dividend, as well as a special cash dividend of $0.25 per
share on outstanding common stock. The dividends will be payable on
August 31, 2017 to stockholders of record as of
August 21, 2017.
Second Quarter 2017 Financial Results Conference
Call
Management will host a conference call to discuss the second
quarter 2017 financial results today, Wednesday, August 2, 2017 at
11:30 a.m. Eastern Time. The conference call details are as
follows:
Date: |
Wednesday, August 2,
2017 |
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: |
13664982 |
Webcast: |
http://public.viavid.com/index.php?id=125041 |
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 August 2, 2017 through 11:59 p.m. Eastern Time on August
16, 2017 by dialing 1-844-512-2921 (domestic) and 1-412-317-6671
(international) and referencing the replay pin number:
13664982.
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, the Americas, 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 10, 2017 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) |
|
|
June 30, 2017 |
|
December 31, 2016 |
|
(Unaudited) |
|
|
ASSETS |
|
|
|
Current assets: |
|
|
|
Cash and
cash equivalents |
$ |
136,261 |
|
|
$ |
125,921 |
|
Inventories |
9,804 |
|
|
11,257 |
|
Other
current assets |
3,638 |
|
|
4,066 |
|
Total current
assets |
149,703 |
|
|
141,244 |
|
Property and equipment,
net |
1,292 |
|
|
1,388 |
|
Goodwill |
1,764 |
|
|
1,764 |
|
Restricted cash |
3,039 |
|
|
2,963 |
|
Other assets |
768 |
|
|
692 |
|
Total assets |
$ |
156,566 |
|
|
$ |
148,051 |
|
LIABILITIES AND STOCKHOLDERS’ EQUITY |
|
|
|
Current
liabilities: |
|
|
|
Accounts
payable |
$ |
2,371 |
|
|
$ |
2,145 |
|
Income
taxes payable |
4,971 |
|
|
663 |
|
Accrued
commissions |
12,666 |
|
|
13,611 |
|
Other
accrued expenses |
10,366 |
|
|
14,989 |
|
Deferred
revenue |
3,994 |
|
|
4,948 |
|
Amounts
held in eWallets |
18,713 |
|
|
19,165 |
|
Other
current liabilities |
1,622 |
|
|
1,633 |
|
Total current
liabilities |
54,703 |
|
|
57,154 |
|
Deferred tax
liability |
285 |
|
|
268 |
|
Long-term
incentive |
7,179 |
|
|
8,190 |
|
Total liabilities |
62,167 |
|
|
65,612 |
|
Commitments and
contingencies |
|
|
|
Stockholders’
equity: |
|
|
|
Preferred
stock |
— |
|
|
— |
|
Common
stock |
13 |
|
|
13 |
|
Additional paid-in capital |
86,665 |
|
|
86,574 |
|
Retained
earnings |
49,198 |
|
|
38,548 |
|
Accumulated other comprehensive loss |
(907 |
) |
|
(807 |
) |
Treasury
stock, at cost |
(40,570 |
) |
|
(41,889 |
) |
Total stockholders’
equity |
94,399 |
|
|
82,439 |
|
Total liabilities and
stockholders’ equity |
$ |
156,566 |
|
|
$ |
148,051 |
|
|
|
|
|
|
|
|
|
NATURAL HEALTH TRENDS CORP. |
CONSOLIDATED STATEMENTS OF
OPERATIONS |
(In thousands, except per share
data) |
|
|
Three Months Ended June 30, |
|
Six Months Ended June 30, |
|
2017 |
|
2016 |
|
2017 |
|
2016 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Unaudited) |
Net sales |
$ |
51,465 |
|
|
$ |
80,391 |
|
|
$ |
111,339 |
|
|
$ |
154,737 |
|
Cost of sales |
9,793 |
|
|
15,059 |
|
|
21,038 |
|
|
29,339 |
|
Gross profit |
41,672 |
|
|
65,332 |
|
|
90,301 |
|
|
125,398 |
|
Operating
expenses: |
|
|
|
|
|
|
|
Commissions expense |
22,075 |
|
|
37,883 |
|
|
48,040 |
|
|
72,969 |
|
Selling,
general and administrative expenses |
6,590 |
|
|
12,431 |
|
|
16,126 |
|
|
23,335 |
|
Depreciation and amortization |
140 |
|
|
91 |
|
|
276 |
|
|
180 |
|
Total operating
expenses |
28,805 |
|
|
50,405 |
|
|
64,442 |
|
|
96,484 |
|
Income from
operations |
12,867 |
|
|
14,927 |
|
|
25,859 |
|
|
28,914 |
|
Other income (expense),
net |
80 |
|
|
16 |
|
|
236 |
|
|
(8 |
) |
Income before income
taxes |
12,947 |
|
|
14,943 |
|
|
26,095 |
|
|
28,906 |
|
Income tax
provision |
2,644 |
|
|
2,742 |
|
|
5,367 |
|
|
5,425 |
|
Net income |
$ |
10,303 |
|
|
$ |
12,201 |
|
|
$ |
20,728 |
|
|
$ |
23,481 |
|
Net income per common
share: |
|
|
|
|
|
|
|
Basic |
$ |
0.92 |
|
|
$ |
1.08 |
|
|
$ |
1.84 |
|
|
$ |
2.03 |
|
Diluted |
$ |
0.91 |
|
|
$ |
1.07 |
|
|
$ |
1.84 |
|
|
$ |
2.03 |
|
Weighted-average number
of common shares outstanding: |
|
|
|
|
|
|
|
Basic |
11,243 |
|
|
11,333 |
|
|
11,236 |
|
|
11,553 |
|
Diluted |
11,274 |
|
|
11,359 |
|
|
11,264 |
|
|
11,579 |
|
Cash dividends declared
per common share |
$ |
0.45 |
|
|
$ |
0.06 |
|
|
$ |
0.89 |
|
|
$ |
0.11 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NATURAL HEALTH TRENDS CORP. |
CONSOLIDATED STATEMENTS OF CASH
FLOWS |
(In thousands) |
|
|
Six Months Ended June 30, |
|
2017 |
|
2016 |
|
|
|
|
|
|
|
|
|
(Unaudited) |
CASH FLOWS FROM
OPERATING ACTIVITIES: |
|
|
|
Net income |
$ |
20,728 |
|
|
$ |
23,481 |
|
Adjustments to
reconcile net income to net cash provided by operating
activities: |
|
|
|
Depreciation and amortization |
276 |
|
|
180 |
|
Stock-based compensation |
17 |
|
|
84 |
|
Cumulative translation adjustment realized in net income |
(258 |
) |
|
132 |
|
Changes in assets and
liabilities: |
|
|
|
Inventories |
1,388 |
|
|
(1,865 |
) |
Other
current assets |
489 |
|
|
(612 |
) |
Other
assets |
(58 |
) |
|
2 |
|
Accounts
payable |
226 |
|
|
665 |
|
Income
taxes payable |
4,304 |
|
|
487 |
|
Accrued
commissions |
(915 |
) |
|
(989 |
) |
Other
accrued expenses |
(3,229 |
) |
|
2,597 |
|
Deferred
revenue |
(939 |
) |
|
4,816 |
|
Amounts
held in eWallets |
(327 |
) |
|
1,759 |
|
Other
current liabilities |
(24 |
) |
|
203 |
|
Long-term
incentive |
(1,049 |
) |
|
(506 |
) |
Net cash provided by
operating activities |
20,629 |
|
|
30,434 |
|
CASH FLOWS FROM
INVESTING ACTIVITIES: |
|
|
|
Purchases
of property and equipment |
(170 |
) |
|
(524 |
) |
Net cash used in
investing activities |
(170 |
) |
|
(524 |
) |
CASH FLOWS FROM
FINANCING ACTIVITIES: |
|
|
|
Repurchase of common stock |
— |
|
|
(23,704 |
) |
Dividends
paid |
(10,078 |
) |
|
(1,262 |
) |
Net cash used in
financing activities |
(10,078 |
) |
|
(24,966 |
) |
Effect of exchange
rates on cash and cash equivalents |
(41 |
) |
|
(209 |
) |
Net increase in cash
and cash equivalents |
10,340 |
|
|
4,735 |
|
CASH AND CASH
EQUIVALENTS, beginning of period |
125,921 |
|
|
104,914 |
|
CASH AND CASH
EQUIVALENTS, end of period |
$ |
136,261 |
|
|
$ |
109,649 |
|
SUPPLEMENTAL
DISCLOSURES OF OTHER CASH FLOW INFORMATION: |
|
|
|
Issuance
of treasury stock for employee awards, net |
1,393 |
|
|
1,741 |
|
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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