Natural Health Trends Reports Strong Second Quarter 2016 Financial Results

by | Jul 27, 2016 | Globe Newswire

  • Revenue increased 15% year-over-year to $80.4 million
  • Record operating income increased 22% year-over-year to $14.9 million
  • Increased quarterly dividend by 17% to $0.07 per share
  • Repurchased $5.4 million of common stock during the quarter

LOS ANGELES, July 27, 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 June 30, 2016.

Second Quarter 2016 Financial Highlights 

  • Total revenue increased 15% to $80.4 million, compared to $69.7 million in the second quarter of 2015.
    • Revenue from the Company’s Hong Kong operations, which represented 91% of total revenue, increased 13% to $73.3 million, compared to $64.8 million in the second quarter of 2015.
    • Revenue outside of Hong Kong increased 43% to $7.0 million, compared to $4.9 million in the second quarter of 2015.
  • Operating income increased 22% to $14.9 million, compared to $12.3 million in the second quarter of 2015.
  • Additional income tax provision of $2.4 million was recognized in the second quarter of 2016 for the expected partial repatriation of overseas profits, resulting in an overall effective tax rate of 18%.
  • Net income was $12.2 million, or $1.07 per diluted share, compared to $12.3 million, or $0.98 per diluted share, in the second quarter of 2015. Net income, excluding the impact of the additional tax provision, would have increased 19% to $14.6 million, or $1.29 per diluted share.
  • The number of Active Members1 increased 6% to 126,440 at June 30, 2016, compared to 119,800 at March 31, 2016, and increased 65% compared to 76,400 at June 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 40% to $154.7 million, compared to $110.4 million in the first six months of 2015.
     
  • Operating income increased 51% to $28.9 million, compared to $19.2 million in the first six months of 2015.
     
  • Additional income tax provision of $4.8 million was recognized in the first six months of 2016 for the expected partial repatriation of overseas profits, resulting in an overall effective tax rate of 19%.
     
  • Net income was $23.5 million, or $2.03 per diluted share, compared to $19.0 million, or $1.52 per diluted share, in the first six months of 2015. Net income, excluding the impact of the additional tax provision, would have increased 49% to $28.2 million, or $2.44 per diluted share.

Management Commentary

“We had an excellent second quarter characterized by record product orders and operating profit,” commented Chris Sharng, President of Natural Health Trends Corp. “We once again achieved a double-digit, year-over-year increase in revenue growth driven by our emphasis on products, training, services and marketing.”

Mr. Sharng further commented, “Going forward, we will remain focused on expanding our global footprint, continuing to acquire members in new and existing markets, as well as our product development initiatives to drive sustainable, long-term growth. Through our strong cash generation, we are very well positioned to grow our business organically while simultaneously returning value to our stockholders through quarterly cash dividends and execution on our $70 million stock repurchase program.”

Balance Sheet and Cash Flow

  • At June 30, 2016, cash and cash equivalents totaled $109.6 million, compared to $99.6 million at March 31, 2016.
     
  • Net cash provided by operating activities in the second quarter of 2016 was $16.6 million, compared to $22.9 million in the second quarter of 2015. For the first six months of 2016, net cash provided by operating activities was $30.4 million, compared to $39.5 million in the first six months of 2015.
     
  • On July 19, 2016, the Company’s Board of Directors declared a quarterly cash dividend of $0.07 per share on outstanding common stock, which represents a 17% increase over the prior quarter dividend. The dividend will be payable on August 26, 2016 to stockholders of record as of August 16, 2016.
     
  • During the six months ended June 30, 2016, the Company repurchased $23.7 million of its common stock under its existing $70.0 million stock repurchase program. At June 30, 2016, approximately $32.0 million remained available for repurchases, inclusive of related estimated income tax.

Second Quarter 2016 Financial Results Conference Call

Management will host a conference call to discuss the second quarter 2016 financial results today, Wednesday, July 27, 2016 at 11:30 a.m. Eastern Time. The conference call details are as follows:

Date: Wednesday, July 27, 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: 13639821
Webcast: http://public.viavid.com/index.php?id=120028

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 July 27, 2016 through 11:59 p.m. Eastern Time on August 10, 2016 by dialing 1-877-870-5176 (domestic) and 1-858-384-5517 (international) and referencing the replay pin number: 13639821.

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)
       
  June 30, 2016   December 31, 2015
  (Unaudited)    
ASSETS      
Current assets:      
Cash and cash equivalents $ 109,649     $ 104,914  
Accounts receivable 93     57  
Inventories, net 12,302     10,455  
Other current assets 2,893     2,286  
Total current assets 124,937     117,712  
Property and equipment, net 1,236     894  
Goodwill 1,764     1,764  
Restricted cash 3,097     3,166  
Other assets 620     616  
Total assets $ 131,654     $ 124,152  
LIABILITIES AND STOCKHOLDERS’ EQUITY      
Current liabilities:      
Accounts payable $ 3,525     $ 2,862  
Income taxes payable 862     379  
Accrued commissions 18,651     19,634  
Other accrued expenses 17,570     16,703  
Deferred revenue 8,832     4,011  
Deferred tax liability 60     60  
Amounts held in eWallets 18,162     16,414  
Other current liabilities 1,715     1,510  
Total current liabilities 69,377     61,573  
Long-term incentive 5,264     5,770  
Total liabilities 74,641     67,343  
Commitments and contingencies      
Stockholders’ equity:      
Preferred stock —     —  
Common stock 13     13  
Additional paid-in capital 86,554     85,963  
Retained earnings (accumulated deficit) 12,572     (9,647 )
Accumulated other comprehensive loss (237 )   (101 )
Treasury stock, at cost (41,889 )   (19,419 )
Total stockholders’ equity 57,013     56,809  
Total liabilities and stockholders’ equity $ 131,654     $ 124,152  
               


NATURAL HEALTH TRENDS CORP.
CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
(In thousands, except per share data)
       
  Three Months Ended June 30,   Six Months Ended June 30,
  2016   2015   2016   2015
Net sales $ 80,391     $ 69,716     $ 154,737     $ 110,425  
Cost of sales 15,059     14,094     29,339     23,024  
Gross profit 65,332     55,622     125,398     87,401  
Operating expenses:              
Commissions expense 37,883     35,010     72,969     53,407  
Selling, general and administrative expenses 12,431     8,281     23,335     14,704  
Depreciation and amortization 91     68     180     109  
Total operating expenses 50,405     43,359     96,484     68,220  
Income from operations 14,927     12,263     28,914     19,181  
Other income (expense), net 16     132     (8 )   23  
Income before income taxes 14,943     12,395     28,906     19,204  
Income tax provision 2,742     122     5,425     193  
Net income $ 12,201     $ 12,273     $ 23,481     $ 19,011  
Income per common share:              
Basic $ 1.08     $ 0.99     $ 2.03     $ 1.53  
Diluted $ 1.07     $ 0.98     $ 2.03     $ 1.52  
Weighted-average number of common shares outstanding:              
Basic 11,333     12,403     11,553     12,428  
Diluted 11,359     12,461     11,579     12,513  
Cash dividends declared per common share $ 0.06     $ 0.03     $ 0.11     $ 0.05  
                               


NATURAL HEALTH TRENDS CORP.
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(In thousands)
 
  Six Months Ended June 30,
  2016   2015
CASH FLOWS FROM OPERATING ACTIVITIES:      
Net income $ 23,481     $ 19,011  
Adjustments to reconcile net income to net cash provided by operating activities:      
Depreciation and amortization 180     109  
Stock-based compensation 84     35  
Cumulative translation adjustment realized in net income 132     (82 )
Changes in assets and liabilities:      
Accounts receivable (34 )   (186 )
Inventories, net (1,865 )   (1,524 )
Other current assets (578 )   (672 )
Other assets 2     (232 )
Accounts payable 665     849  
Income taxes payable 487     56  
Accrued commissions (989 )   5,471  
Other accrued expenses 2,597     4,674  
Deferred revenue 4,816     5,459  
Amounts held in eWallets 1,759     6,468  
Other current liabilities 203     186  
Long-term incentive (506 )   (141 )
Net cash provided by operating activities 30,434     39,481  
CASH FLOWS FROM INVESTING ACTIVITIES:      
Purchases of property and equipment, net (524 )   (333 )
Increase in restricted cash —     (3,272 )
Net cash used in investing activities (524 )   (3,605 )
CASH FLOWS FROM FINANCING ACTIVITIES:      
Proceeds from exercise of warrants —     309  
Repurchase of common stock (23,704 )   (6,082 )
Dividends paid (1,262 )   (621 )
Net cash used in financing activities (24,966 )   (6,394 )
Effect of exchange rates on cash and cash equivalents (209 )   124  
Net increase in cash and cash equivalents 4,735     29,606  
CASH AND CASH EQUIVALENTS, beginning of period 104,914     44,816  
CASH AND CASH EQUIVALENTS, end of period $ 109,649     $ 74,422  
NON-CASH FINANCING ACTIVITY:      
Issuance of treasury stock $ 1,741     $ 666  
               

 

CONTACT: CONTACTS:

Company Contact:
Scott Davidson
Senior Vice President and Chief Financial Officer
Natural Health Trends Corp.
Tel: 310-541-0888
[email protected]

Investors:
ADDO Investor Relations
Tel: 310-829-5400
[email protected]