Natural Health Trends Corp. Announces Third Quarter and Nine Months 2007 Results
DALLAS, TX -- (MARKET WIRE) -- 11/14/07 -- Natural Health Trends Corp. (NASDAQ: BHIP) today announced its financial results for the quarter ended September 30, 2007.
Sales in the third quarter of 2007 were $16.8 million, compared to $29.9 million and $25.2 million for the third quarter a year ago and the second quarter of 2007, respectively. Changes in the Hong Kong-based sales accounted for most of the decrease year-on-year and quarter-over-quarter.
As of September 30, 2007, the Company had 67,000 active distributors, compared to 103,000 and 75,000 active distributors at the end of the third quarter of 2006 and at the end of the second quarter of 2007, respectively. The Company considers a distributor "active" if they have placed at least one product order during the preceding year.
For the third quarter of 2007, the Company incurred a net loss of $3.5 million, compared to a net loss of $2.5 million a year ago in the comparable quarter, and a net loss of $1.5 million in the prior quarter. Loss applicable to common stockholders for the third quarter of 2007 was $0.43 per share, compared to a loss of $0.30 per share a year ago in the comparable quarter, and a loss of $0.37 per share in the prior quarter.
As of September 30, 2007, the Company's cash and cash equivalents totaled $6.2 million, including $1.1 million in China that may not be freely transferable to other countries because the Company's Chinese subsidiary is subject to a business license capitalization requirement.
Chris Sharng, the Company's President, said, "The sales decrease was attributable to several factors. First of all, our Chinese members, in coordination with the Company, self-imposed a quiet period during July and August, which then continued into September, as Chinese regulatory authorities were said to have begun a period of more aggressive enforcement against illegitimate sales operations. Our members did not want to be inadvertently confused for or associated with companies operating illegitimately. Therefore, we had minimal marketing activities during the third quarter. In addition, we had to manage certain changes that we initiated just prior to and during the third quarter. These changes included a commission enhancement program that allows new distributors to receive commissions more quickly, while providing overall margin improvement to the Company. We also began an aggressive restructuring that continued through November to reduce operating costs."
Mr. Sharng continued, "As a result of all these factors occurring simultaneously, sales initially decreased and currently are leveling out as we enter in the fourth quarter. We are working with our leaders in Greater China to develop an active marketing calendar in the fourth quarter, with a grand opening of the Chinese e-commerce business in the works. Our Greater Chinese leaders are fully committed to the business, and we are optimistic about the future of this key market. In addition, the October 27th European grand opening event was a great success and generated good momentum in that market. Also, we are continuing the significant restructuring of our world-wide organization, targeting to reduce our total headcount by about 30% from 233 employees to approximately 160 employees by year end, expecting an estimated annualized personnel cost savings of roughly $4.0 million. Furthermore, the full anticipated benefits from our commission plan enhancement are expected to be attained in the first quarter of 2008."
The Company plans to host a conference call in the next few days and will issue a separate notice for the call.
About Natural Health Trends Corp.
Natural Health Trends Corp. is an international direct-selling and e-commerce company operating through its subsidiaries in Asia, North America, Europe and Latin America. The Company markets premium quality personal care products under the NHT Global brand. Additional information can be found on the Company's website, and management encourages interested parties to register for updated corporate information via email on the Company's home page, www.naturalhealthtrendscorp.com.
Safe Harbor Statement under the Private Securities Litigation Reform Act of 1995 -- Forward-looking statements in this release do not constitute guarantees of future performance. Such forward-looking statements are subject to risks and uncertainties that could cause our actual results to differ materially from those anticipated. Such risks and uncertainties include the risks and uncertainties detailed under the caption "Risk Factors" in our Amendment No. 2 to Registration Statement on Form S-3 filed on August 24, 2007 with the Securities and Exchange Commission and our Quarterly Report on Form 10-Q filed on November 14, 2007, with the Securities and Exchange Commission. We assume 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, Except Share Data)
December September
31, 2006 30, 2007
----------- -----------
(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents $ 11,936 $ 6,199
Restricted cash 455 395
Certificates of deposit 1,277 -
Accounts receivable 462 522
Inventories, net 5,857 5,048
Other current assets 2,639 1,606
----------- -----------
Total current assets 22,626 13,770
Property and equipment, net 2,944 1,973
Goodwill 14,145 14,145
Intangible assets, net 3,400 2,800
Restricted cash 4,142 4,911
Deferred tax assets 208 213
Other assets 1,120 952
----------- -----------
Total assets $ 48,585 $ 38,764
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LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 3,424 $ 3,389
Income taxes payable 281 458
Accrued distributor commissions 3,852 2,121
Other accrued expenses 5,255 4,806
Deferred revenue 5,641 4,272
Other current liabilities 3,135 3,115
----------- -----------
Total current liabilities 21,588 18,161
Commitments and contingencies
Minority interest 22 31
Stockholders' equity:
Preferred stock, $0.001 par value, 5,000,000
shares authorized; 1,761,900 shares
designated Series A convertible preferred
stock, 1,431,075 shares issued and
outstanding at September 30, 2007, aggregate
liquidation value of $2,503 at September 30,
2007 - 1,280
Common stock, $0.001 par value, 50,000,000
shares authorized, 8,199,933 and 8,802,674
shares issued and outstanding at December
31, 2006 and September 30, 2007 8 9
Additional paid-in capital 70,042 73,656
Accumulated deficit (44,128) (55,696)
Accumulated other comprehensive income:
Foreign currency translation adjustment 1,053 1,323
----------- -----------
Total stockholders' equity 26,975 20,572
----------- -----------
Total liabilities and stockholders' equity $ 48,585 $ 38,764
=========== ===========
NATURAL HEALTH TRENDS CORP.
CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
(In Thousands, Except Per Share Data)
Three Months Ended Nine Months Ended
September 30, September 30,
---------------------- ----------------------
2006 2007 2006 2007
---------- ---------- ---------- ----------
Net sales $ 29,945 $ 16,828 $ 105,740 $ 63,524
Cost of sales 6,646 4,892 23,419 16,559
---------- ---------- ---------- ----------
Gross profit 23,299 11,936 82,321 46,965
% of net sales 77.8% 70.9% 77.8% 73.9%
Operating expenses:
Distributor commissions 15,456 7,267 54,902 30,187
% of net sales 51.6% 43.2% 51.9% 47.5%
Selling, general and
administrative expenses 10,630 8,343 34,368 27,172
Recovery of KGC
receivable (338) (146) (652) (565)
---------- ---------- ---------- ----------
Total operating expenses 25,748 15,464 88,618 56,794
---------- ---------- ---------- ----------
Loss from operations (2,449) (3,528) (6,297) (9,829)
Other income, net 309 135 696 302
---------- ---------- ---------- ----------
Loss before income taxes
and minority interest (2,140) (3,393) (5,601) (9,527)
Income tax provision (344) (97) (788) (460)
Minority interest 9 (6) (35) (7)
---------- ---------- ---------- ----------
Net loss (2,475) (3,496) (6,424) (9,994)
Beneficial conversion
feature on preferred stock - - - (1,574)
Preferred stock dividends - (37) - (70)
---------- ---------- ---------- ----------
Net loss attributable to
common stockholders $ (2,475) $ (3,533) $ (6,424) $ (11,638)
========== ========== ========== ==========
Loss per share - basic and
diluted $ (0.30) $ (0.43) $ (0.80) $ (1.41)
========== ========== ========== ==========
Weighted-average number of
shares outstanding 8,200 8,278 8,039 8,254
========== ========== ========== ==========
Contact: Chris Sharng President Natural Health Trends Corp. (972) 241-4080
Released November 14, 2007