Natural Health Trends Reports Third Quarter 2016 Financial Results and Declares Special Cash Dividend of $0.35 per Share

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  • Record operating income increased 3% year-over-year to $15.2 million
  • Active Members1 increased 30% year-over-year to 122,900
  • Increased quarterly dividend 14% to $0.08 per share
  • Declared special dividend of $0.35 per share

LOS ANGELES, Oct. 25, 2016 (GLOBE NEWSWIRE) -- 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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Source: Natural Health Trends Corp.

Released October 25, 2016