• 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. 

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 sales13,627  16,001  42,966  39,025 
Gross profit57,052  64,778  182,450  152,179 
Operating expenses:       
Commissions expense30,578  40,036  103,547  93,443 
Selling, general and administrative expenses11,170  9,867  34,505  24,571 
Depreciation and amortization96  72  276  181 
Total operating expenses41,844  49,975  138,328  118,195 
Income from operations15,208  14,803  44,122  33,984 
Other income (expense), net48  (135) 40  (112)
Income before income taxes15,256  14,668  44,162  33,872 
Income tax provision2,699  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:       
Basic11,209  12,239  11,437  12,364 
Diluted11,232  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 amortization276  181 
Stock-based compensation94  56 
Cumulative translation adjustment realized in net income132  (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 payable252  2,140 
Income taxes payable278  190 
Accrued commissions(1,045) 11,832 
Other accrued expenses3,459  8,397 
Deferred revenue222  1,844 
Amounts held in eWallets3,098  11,354 
Other current liabilities26  93 
Long-term incentive(825) (229)
Net cash provided by operating activities36,288  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 equivalents9,586  49,749 
CASH AND CASH EQUIVALENTS, beginning of period104,914  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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