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Natural Health Trends Reports Strong Second Quarter 2016 Financial Results

  • 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 receivable93 57
Inventories, net12,302 10,455
Other current assets2,893 2,286
Total current assets124,937 117,712
Property and equipment, net1,236 894
Goodwill1,764 1,764
Restricted cash3,097 3,166
Other assets620 616
Total assets$131,654 $124,152
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable$3,525 $2,862
Income taxes payable862 379
Accrued commissions18,651 19,634
Other accrued expenses17,570 16,703
Deferred revenue8,832 4,011
Deferred tax liability60 60
Amounts held in eWallets18,162 16,414
Other current liabilities1,715 1,510
Total current liabilities69,377 61,573
Long-term incentive5,264 5,770
Total liabilities74,641 67,343
Commitments and contingencies
Stockholders’ equity:
Preferred stock
Common stock13 13
Additional paid-in capital86,554 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’ equity57,013 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 sales15,059 14,094 29,339 23,024
Gross profit65,332 55,622 125,398 87,401
Operating expenses:
Commissions expense37,883 35,010 72,969 53,407
Selling, general and administrative expenses12,431 8,281 23,335 14,704
Depreciation and amortization91 68 180 109
Total operating expenses50,405 43,359 96,484 68,220
Income from operations14,927 12,263 28,914 19,181
Other income (expense), net16 132 (8) 23
Income before income taxes14,943 12,395 28,906 19,204
Income tax provision2,742 122 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:
Basic11,333 12,403 11,553 12,428
Diluted11,359 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 amortization180 109
Stock-based compensation84 35
Cumulative translation adjustment realized in net income132 (82)
Changes in assets and liabilities:
Accounts receivable(34) (186)
Inventories, net(1,865) (1,524)
Other current assets(578) (672)
Other assets2 (232)
Accounts payable665 849
Income taxes payable487 56
Accrued commissions(989) 5,471
Other accrued expenses2,597 4,674
Deferred revenue4,816 5,459
Amounts held in eWallets1,759 6,468
Other current liabilities203 186
Long-term incentive(506) (141)
Net cash provided by operating activities30,434 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 equivalents4,735 29,606
CASH AND CASH EQUIVALENTS, beginning of period104,914 44,816
CASH AND CASH EQUIVALENTS, end of period$109,649 $74,422
NON-CASH FINANCING ACTIVITY:
Issuance of treasury stock$1,741 $666


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

Source:Natural Health Trends Corp.