Natural Health Trends Reports Fourth Quarter and Full Year 2017 Financial Results
February 14 2018 - 09:00AM
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 fourth quarter and
full year ended December 31, 2017.
Fourth Quarter 2017 Financial
Highlights
- Total revenue of $46.1 million decreased 26% compared to $62.3
million in the fourth quarter of 2016, and increased 15% compared
to $40.1 million in the third quarter of 2017. - Revenue from
the Company’s Hong Kong operations, which represented 86% of total
revenue, was $39.6 million, a decrease of 29% compared to $56.1
million in the fourth quarter of 2016, and an increase of 13%
compared to $35.0 million in the third quarter of 2017.- Revenue
outside of Hong Kong of $6.5 million increased 4% compared to $6.2
million in the fourth quarter of 2016, and increased 27% compared
to $5.1 million in the third quarter of 2017.
- Operating income of $8.7 million decreased 57% compared to
$20.0 million in the fourth quarter of 2016, and increased 2%
compared to $8.5 million in the third quarter of 2017.
- Income tax provision of $13.3 million included a one-time net
charge of $12.5 million, or an impact of $1.11 per diluted share,
as a result of the Tax Cuts and Jobs Act of 2017 (the “Tax Act”).
The one-time net charge is due to the repatriation tax on the
deemed repatriation of foreign income and the re-measurement of net
deferred tax assets.
- Net loss was $4.5 million, or $0.40 per diluted share, compared
to net income of $19.0 million, or $1.70 per diluted share, in the
fourth quarter of 2016, and net income of $7.3 million, or $0.65
per diluted share, in the third quarter of 2017. Excluding the
estimated impact of the Tax Act, Non-GAAP earnings per diluted
share were $0.71 in the fourth quarter of 2017. Non-GAAP earnings
per diluted share is defined below and is reconciled to earnings
per diluted share in the table entitled “Reconciliation from
earnings per diluted share to Non-GAAP earnings per diluted
share.”
- The number of Active Members1 decreased 4% to 95,670 at
December 31, 2017, compared to 99,690 at September 30,
2017, and decreased 20% compared to 118,960 at December 31,
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.
Full Year 2017 Financial Highlights
- Total revenue of $197.6 million decreased 31% compared to
$287.7 million in 2016.
- Operating income of $43.1 million decreased 33% compared to
$64.1 million in 2016. As a percent of total revenue, operating
income was 22%, consistent with 2016.
- Net income was $23.6 million, or $2.09 per diluted share,
compared to $55.1 million, or $4.83 per diluted share, in 2016.
Excluding the estimated impact of the Tax Act, Non-GAAP earnings
per diluted share were $3.20 for the full year of 2017.
Management Commentary
“While 2017 was a challenging year, we regained momentum in the
fourth quarter with the first sequential quarter of sales growth
since mid-2016,” commented Chris Sharng, President of Natural
Health Trends Corp. “The overall sales decline can be traced to
factors beyond our control which hindered our members’ ability to
organize meetings and conduct business, including the G20 Summit in
late 2016, the 20th Anniversary of Hong Kong’s handover and China’s
Communist Party’s 19th National Congress.”
Mr. Sharng further commented, “We believe our ability to
increase sales over the prior quarter was a result of the
improvements we made to our commission plan, combined with a number
of productive incentive trips and training programs held throughout
the year. Additionally, we continued to gain traction in
international markets such as Europe, Southeast Asia and Japan,
which all grew sales over 2016. We have also worked hard to
preserve our strong margin profile despite our top-line decline
through diligent expense management that aligned our cost structure
to current sales levels. As we look ahead to 2018, we believe our
targeted training programs and promotions, opportunities for
international expansion and new product introductions will
translate into improved financial performance in the quarters to
come.”
Balance Sheet and Cash Flow
- Net cash provided by operating activities was $11.3 million,
compared to $16.9 million in the fourth quarter of 2016. For the
full year of 2017, net cash provided by operating activities was
$26.6 million, compared to $53.2 million in 2016.
- On February 6, 2018, the Company’s Board of Directors declared
a quarterly cash dividend of $0.13, which represents an 8% increase
over the prior quarter dividend. The dividend will be payable on
March 9, 2018 to stockholders of record as of February 27,
2018.
The Company expects to issue its 2017 audited financial results
in March with its Annual Report on Form 10-K to be filed with the
Securities and Exchange Commission. The financial results are
preliminary and the accompanying financial statements have not been
audited or have not yet been reviewed by the Company’s independent
accountants. Significant updates and revisions may be required
before the release of the Company’s 2017 audited financial
results.
Use of Non-GAAP Financial Measure
The Company included in this release a non-GAAP financial
measure, “Non-GAAP earnings per diluted share,” which is derived by
excluding the one-time net charge resulting from the Tax Act from
the most directly comparable GAAP financial measure of “earnings
per diluted share” for both the quarter and year ended December 31,
2017.
Management’s exclusion of the one-time net charge in calculating
Non-GAAP earnings per diluted share is intended to facilitate a
more useful period-to-period comparison of the Company’s financial
results and to provide additional information about the incremental
impact of the Tax Act, namely the repatriation tax on the deemed
repatriation of foreign income and the re-measurement of net
deferred tax assets to which the Company was subject in the fourth
quarter and year ended December 31, 2017. This non-GAAP
financial measure is supplemental and should not be considered in
isolation or as a substitute for the corresponding financial
measure prepared in accordance with GAAP.
The Company’s financial statements provided with this release
include a reconciliation of Non-GAAP earnings per diluted share to
earnings per diluted share.
Fourth Quarter and Full Year 2017 Financial Results
Conference Call
Management will host a conference call to discuss the fourth
quarter and full year 2017 financial results today, Wednesday,
February 14, 2018 at 11:30 a.m. Eastern Time. The conference call
details are as follows:
|
|
Date: |
Wednesday, February 14,
2018 |
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: |
13675025 |
Webcast: |
http://public.viavid.com/index.php?id=127769 |
|
|
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 February 14, 2018 through 11:59 p.m. Eastern Time on
February 28, 2018 by dialing 1-844-512-2921 (domestic) and
1-412-317-6671 (international) and referencing the replay pin
number: 13675025.
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) |
|
|
December 31, 2017 |
|
December 31, 2016 |
|
(Unaudited) |
|
|
ASSETS |
|
|
|
Current assets: |
|
|
|
Cash and
cash equivalents |
$ |
135,311 |
|
|
$ |
125,921 |
|
Inventories |
8,398 |
|
|
11,257 |
|
Other
current assets |
7,534 |
|
|
4,066 |
|
Total current
assets |
151,243 |
|
|
141,244 |
|
Property and equipment,
net |
1,149 |
|
|
1,388 |
|
Goodwill |
1,764 |
|
|
1,764 |
|
Restricted cash |
3,167 |
|
|
2,963 |
|
Deferred tax asset |
1,435 |
|
|
— |
|
Other assets |
796 |
|
|
692 |
|
Total assets |
$ |
159,554 |
|
|
$ |
148,051 |
|
LIABILITIES AND STOCKHOLDERS’ EQUITY |
|
|
|
Current
liabilities: |
|
|
|
Accounts
payable |
$ |
1,751 |
|
|
$ |
2,145 |
|
Income
taxes payable |
309 |
|
|
663 |
|
Accrued
commissions |
11,170 |
|
|
13,611 |
|
Other
accrued expenses |
7,605 |
|
|
14,989 |
|
Deferred
revenue |
4,455 |
|
|
4,948 |
|
Amounts
held in eWallets |
15,152 |
|
|
19,165 |
|
Other
current liabilities |
1,479 |
|
|
1,633 |
|
Total current
liabilities |
41,921 |
|
|
57,154 |
|
Income taxes
payable |
19,052 |
|
|
— |
|
Deferred tax
liability |
56 |
|
|
268 |
|
Long-term
incentive |
7,904 |
|
|
8,190 |
|
Total liabilities |
68,933 |
|
|
65,612 |
|
Commitments and
contingencies |
|
|
|
Stockholders’
equity: |
|
|
|
Preferred
stock |
— |
|
|
— |
|
Common
stock |
13 |
|
|
13 |
|
Additional paid-in capital |
86,683 |
|
|
86,574 |
|
Retained
earnings |
44,908 |
|
|
38,548 |
|
Accumulated other comprehensive loss |
(413 |
) |
|
(807 |
) |
Treasury
stock, at cost |
(40,570 |
) |
|
(41,889 |
) |
Total stockholders’
equity |
90,621 |
|
|
82,439 |
|
Total liabilities and
stockholders’ equity |
$ |
159,554 |
|
|
$ |
148,051 |
|
|
|
NATURAL HEALTH TRENDS CORP. |
CONSOLIDATED STATEMENTS OF
OPERATIONS |
(In thousands, except per share
data) |
|
|
Three Months EndedDecember 31, |
|
Year EndedDecember 31, |
|
2017 |
|
2016 |
|
2017 |
|
2016 |
|
(Unaudited) |
|
(Unaudited) |
|
|
Net sales |
$ |
46,092 |
|
|
$ |
62,312 |
|
|
$ |
197,563 |
|
|
$ |
287,728 |
|
Cost of sales |
9,424 |
|
|
11,937 |
|
|
38,645 |
|
|
54,903 |
|
Gross profit |
36,668 |
|
|
50,375 |
|
|
158,918 |
|
|
232,825 |
|
Operating
expenses: |
|
|
|
|
|
|
|
Commissions expense |
19,796 |
|
|
21,503 |
|
|
83,638 |
|
|
125,050 |
|
Selling,
general and administrative expenses |
8,064 |
|
|
8,740 |
|
|
31,685 |
|
|
43,245 |
|
Depreciation and amortization |
122 |
|
|
118 |
|
|
536 |
|
|
394 |
|
Total operating
expenses |
27,982 |
|
|
30,361 |
|
|
115,859 |
|
|
168,689 |
|
Income from
operations |
8,686 |
|
|
20,014 |
|
|
43,059 |
|
|
64,136 |
|
Other income (expense),
net |
143 |
|
|
(99 |
) |
|
367 |
|
|
(59 |
) |
Income before income
taxes |
8,829 |
|
|
19,915 |
|
|
43,426 |
|
|
64,077 |
|
Income tax
provision |
13,317 |
|
|
867 |
|
|
19,848 |
|
|
8,991 |
|
Net income (loss) |
$ |
(4,488 |
) |
|
$ |
19,048 |
|
|
$ |
23,578 |
|
|
$ |
55,086 |
|
Net income (loss) per
common share: |
|
|
|
|
|
|
|
Basic |
$ |
(0.40 |
) |
|
$ |
1.70 |
|
|
$ |
2.10 |
|
|
$ |
4.84 |
|
Diluted |
$ |
(0.40 |
) |
|
$ |
1.70 |
|
|
$ |
2.09 |
|
|
$ |
4.83 |
|
Weighted-average number
of common shares outstanding: |
|
|
|
|
|
|
|
Basic |
11,272 |
|
|
11,219 |
|
|
11,251 |
|
|
11,382 |
|
Diluted |
11,272 |
|
|
11,234 |
|
|
11,267 |
|
|
11,407 |
|
Cash dividends declared
per common share |
$ |
0.27 |
|
|
$ |
0.43 |
|
|
$ |
1.52 |
|
|
$ |
0.61 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NATURAL HEALTH TRENDS CORP. |
CONSOLIDATED STATEMENTS OF CASH
FLOWS |
(In thousands) |
|
|
|
|
Year Ended December 31, |
|
2017 |
|
2016 |
|
(Unaudited) |
|
|
CASH FLOWS FROM
OPERATING ACTIVITIES: |
|
|
|
Net income |
$ |
23,578 |
|
|
$ |
55,086 |
|
Adjustments to
reconcile net income to net cash provided by operating
activities: |
|
|
|
Depreciation and amortization |
536 |
|
|
394 |
|
Stock-based compensation |
35 |
|
|
104 |
|
Cumulative translation adjustment realized in net income |
(258 |
) |
|
132 |
|
Deferred
income taxes |
(1,644 |
) |
|
217 |
|
Changes in assets and
liabilities: |
|
|
|
Inventories |
2,843 |
|
|
(851 |
) |
Other
current assets |
(3,399 |
) |
|
(1,681 |
) |
Other
assets |
(61 |
) |
|
(90 |
) |
Accounts
payable |
(392 |
) |
|
(714 |
) |
Income
taxes payable |
18,676 |
|
|
303 |
|
Accrued
commissions |
(2,417 |
) |
|
(6,031 |
) |
Other
accrued expenses |
(6,033 |
) |
|
51 |
|
Deferred
revenue |
(481 |
) |
|
947 |
|
Amounts
held in eWallets |
(3,875 |
) |
|
2,752 |
|
Other
current liabilities |
(179 |
) |
|
135 |
|
Long-term
incentive |
(324 |
) |
|
2,420 |
|
Net cash provided by
operating activities |
26,605 |
|
|
53,174 |
|
CASH FLOWS FROM
INVESTING ACTIVITIES: |
|
|
|
Purchases
of property and equipment |
(278 |
) |
|
(905 |
) |
Net cash used in
investing activities |
(278 |
) |
|
(905 |
) |
CASH FLOWS FROM
FINANCING ACTIVITIES: |
|
|
|
Repurchase of common stock |
— |
|
|
(23,704 |
) |
Dividends
paid |
(17,218 |
) |
|
(6,891 |
) |
Net cash used in
financing activities |
(17,218 |
) |
|
(30,595 |
) |
Effect of exchange
rates on cash and cash equivalents |
281 |
|
|
(667 |
) |
Net increase in cash
and cash equivalents |
9,390 |
|
|
21,007 |
|
CASH AND CASH
EQUIVALENTS, beginning of period |
125,921 |
|
|
104,914 |
|
CASH AND CASH
EQUIVALENTS, end of period |
$ |
135,311 |
|
|
$ |
125,921 |
|
SUPPLEMENTAL
DISCLOSURES OF OTHER CASH FLOW INFORMATION: |
|
|
|
Cash paid
for income taxes, net of refunds |
$ |
6,772 |
|
|
$ |
8,791 |
|
Issuance
of treasury stock for employee awards, net |
1,393 |
|
|
1,741 |
|
|
|
|
|
|
|
|
NATURAL HEALTH TRENDS CORP. |
RECONCILIATION FROM EARNINGS PER DILUTED SHARE
TO NON-GAAP EARNINGS |
PER DILUTED SHARE |
|
|
Three Months Ended December 31, 2017 |
|
Year EndedDecember 31, 2017 |
|
(Unaudited) |
Net income (loss) per
diluted share |
$ |
(0.40 |
) |
|
$ |
2.09 |
|
Exclude
Tax Act one-time net charge per share |
1.11 |
|
|
1.11 |
|
Non-GAAP earnings per
diluted share |
$ |
0.71 |
|
|
$ |
3.20 |
|
|
CONTACTS:
Company Contact:Scott DavidsonSenior Vice
President and Chief Financial OfficerNatural Health Trends
Corp.Tel: 310-541-0888scott.davidson@nhtglobal.com
Investor Contact:ADDO Investor RelationsTel:
310-829-5400investor.relations@nhtglobal.com
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