Full Press Release Details
Natural Health Trends Reports Fourth Quarter and Full Year 2017 Financial Results
LOS ANGELES - February 14, 2018 - 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 fourth quarter and full year ended December 31, 2017.
Fourth Quarter 2017 Financial Highlights
Full Year 2017 Financial Highlights
Management Commentary
"While 2017 was a challenging year, we regained momentum in the fourth quarter with the first sequential quarter of sales growth since mid-2016," commented Chris Sharng, President of Natural Health Trends Corp. "The overall sales decline can be traced to factors beyond our control which hindered our members' ability to organize meetings and conduct business, including the G20 Summit in late 2016, the 20th Anniversary of Hong Kong's handover and China's Communist Party's 19th National Congress."
Mr. Sharng further commented, "We believe our ability to increase sales over the prior quarter was a result of the improvements we made to our commission plan, combined with a number of productive incentive trips and training programs held throughout the year. Additionally, we continued to gain traction in international markets such as Europe, Southeast Asia and Japan, which all grew sales over 2016. We have also worked hard to preserve our strong margin profile despite our top-line decline through diligent expense management that aligned our cost structure to current sales levels. As we look ahead to 2018, we believe our targeted training programs and promotions, opportunities for international expansion and new product introductions will translate into improved financial performance in the quarters to come."
Balance Sheet and Cash Flow
The Company expects to issue its 2017 audited financial results in March with its Annual Report on Form 10-K to be filed with the Securities and Exchange Commission. The financial results are preliminary and the accompanying financial statements have not been audited or have not yet been reviewed by the Company's independent accountants. Significant updates and revisions may be required before the release of the Company's 2017 audited financial results.
Use of Non-GAAP Financial Measure
The Company included in this release a non-GAAP financial measure, "Non-GAAP earnings per diluted share," which is derived by excluding the one-time net charge resulting from the Tax Act from the most directly comparable GAAP financial measure of "earnings per diluted share" for both the quarter and year ended December 31, 2017.
Management's exclusion of the one-time net charge in calculating Non-GAAP earnings per diluted share is intended to facilitate a more useful period-to-period comparison of the Company's financial results and to provide additional information about the incremental impact of the Tax Act, namely the repatriation tax on the deemed repatriation of foreign income and the re-measurement of net deferred tax assets to which the Company was subject in the fourth quarter and year ended December 31, 2017. This non-GAAP financial measure is supplemental and should not be considered in isolation or as a substitute for the corresponding financial measure prepared in accordance with GAAP.
The Company's financial statements provided with this release include a reconciliation of Non-GAAP earnings per diluted share to earnings per diluted share.
Fourth Quarter and Full Year 2017 Financial Results Conference Call
Management will host a conference call to discuss the fourth quarter and full year 2017 financial results today, Wednesday, February 14, 2018 at 11:30 a.m. Eastern Time. The conference call details are as follows:
| Date: | Wednesday, February 14, 2018 |
| 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: | 13675025 |
| Webcast: | http://public.viavid.com/index.php?id=127769 |
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 February 14, 2018 through 11:59 p.m. Eastern Time on February 28, 2018 by dialing 1-844-512-2921 (domestic) and 1-412-317-6671 (international) and referencing the replay pin number: 13675025.
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, the Americas, 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 10, 2017 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.
Senior Vice President and Chief Financial Officer
Natural Health Trends Corp.
ADDO Investor Relations
NATURAL HEALTH TRENDS CORP.
CONSOLIDATED BALANCE SHEETS
| December 31, 2017 | December 31, 2016 | ||||||
| (Unaudited) | |||||||
| ASSETS | |||||||
| Current assets: | |||||||
| Cash and cash equivalents | $ | 135,311 | $ | 125,921 | |||
| Inventories | 8,398 | 11,257 | |||||
| Other current assets | 7,534 | 4,066 | |||||
| Total current assets | 151,243 | 141,244 | |||||
| Property and equipment, net | 1,149 | 1,388 | |||||
| Goodwill | 1,764 | 1,764 | |||||
| Restricted cash | 3,167 | 2,963 | |||||
| Deferred tax asset | 1,435 | - | |||||
| Other assets | 796 | 692 | |||||
| Total assets | $ | 159,554 | $ | 148,051 | |||
| LIABILITIES AND STOCKHOLDERS' EQUITY | |||||||
| Current liabilities: | |||||||
| Accounts payable | $ | 1,751 | $ | 2,145 | |||
| Income taxes payable | 309 | 663 | |||||
| Accrued commissions | 11,170 | 13,611 | |||||
| Other accrued expenses | 7,605 | 14,989 | |||||
| Deferred revenue | 4,455 | 4,948 | |||||
| Amounts held in eWallets | 15,152 | 19,165 | |||||
| Other current liabilities | 1,479 | 1,633 | |||||
| Total current liabilities | 41,921 | 57,154 | |||||
| Income taxes payable | 19,052 | - | |||||
| Deferred tax liability | 56 | 268 | |||||
| Long-term incentive | 7,904 | 8,190 | |||||
| Total liabilities | 68,933 | 65,612 | |||||
| Commitments and contingencies | |||||||
| Stockholders' equity: | |||||||
| Preferred stock | - | - | |||||
| Common stock | 13 | 13 | |||||
| Additional paid-in capital | 86,683 | 86,574 | |||||
| Retained earnings | 44,908 | 38,548 | |||||
| Accumulated other comprehensive loss | (413 | ) | (807 | ) | |||
| Treasury stock, at cost | (40,570 | ) | (41,889 | ) | |||
| Total stockholders' equity | 90,621 | 82,439 | |||||
| Total liabilities and stockholders' equity | $ | 159,554 | $ | 148,051 |
NATURAL HEALTH TRENDS CORP.
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
| Three Months Ended December 31, | Year Ended December 31, | ||||||||||||||
| 2017 | 2016 | 2017 | 2016 | ||||||||||||
| (Unaudited) | (Unaudited) | ||||||||||||||
| Net sales | $ | 46,092 | $ | 62,312 | $ | 197,563 | $ | 287,728 | |||||||
| Cost of sales | 9,424 | 11,937 | 38,645 | 54,903 | |||||||||||
| Gross profit | 36,668 | 50,375 | 158,918 | 232,825 | |||||||||||
| Operating expenses: | |||||||||||||||
| Commissions expense | 19,796 | 21,503 | 83,638 | 125,050 | |||||||||||
| Selling, general and administrative expenses | 8,064 | 8,740 | 31,685 | 43,245 | |||||||||||
| Depreciation and amortization | 122 | 118 | 536 | 394 | |||||||||||
| Total operating expenses | 27,982 | 30,361 | 115,859 | 168,689 | |||||||||||
| Income from operations | 8,686 | 20,014 | 43,059 | 64,136 | |||||||||||
| Other income (expense), net | 143 | (99 | ) | 367 | (59 | ) | |||||||||
| Income before income taxes | 8,829 | 19,915 | 43,426 | 64,077 | |||||||||||
| Income tax provision | 13,317 | 867 | 19,848 | 8,991 | |||||||||||
| Net income (loss) | $ | (4,488 | ) | $ | 19,048 | $ | 23,578 | $ | 55,086 | ||||||
| Net income (loss) per common share: | |||||||||||||||
| Basic | $ | (0.40 | ) | $ | 1.70 | $ | 2.10 | $ | 4.84 | ||||||
| Diluted | $ | (0.40 | ) | $ | 1.70 | $ | 2.09 | $ | 4.83 | ||||||
| Weighted-average number of common shares outstanding: | |||||||||||||||
| Basic | 11,272 | 11,219 | 11,251 | 11,382 | |||||||||||
| Diluted | 11,272 | 11,234 | 11,267 | 11,407 | |||||||||||
| Cash dividends declared per common share | $ | 0.27 | $ | 0.43 | $ | 1.52 | $ | 0.61 |
NATURAL HEALTH TRENDS CORP.
CONSOLIDATED STATEMENTS OF CASH FLOWS
| Year Ended December 31, | |||||||
| 2017 | 2016 | ||||||
| (Unaudited) | |||||||
| CASH FLOWS FROM OPERATING ACTIVITIES: | |||||||
| Net income | $ | 23,578 | $ | 55,086 | |||
| Adjustments to reconcile net income to net cash provided by operating activities: | |||||||
| Depreciation and amortization | 536 | 394 | |||||
| Stock-based compensation | 35 | 104 | |||||
| Cumulative translation adjustment realized in net income | (258 | ) | 132 | ||||
| Deferred income taxes | (1,644 | ) | 217 | ||||
| Changes in assets and liabilities: | |||||||
| Inventories | 2,843 | (851 | ) | ||||
| Other current assets | (3,399 | ) | (1,681 | ) | |||
| Other assets | (61 | ) | (90 | ) | |||
| Accounts payable | (392 | ) | (714 | ) | |||
| Income taxes payable | 18,676 | 303 | |||||
| Accrued commissions | (2,417 | ) | (6,031 | ) | |||
| Other accrued expenses | (6,033 | ) | 51 | ||||
| Deferred revenue | (481 | ) | 947 | ||||
| Amounts held in eWallets | (3,875 | ) | 2,752 | ||||
| Other current liabilities | (179 | ) | 135 | ||||
| Long-term incentive | (324 | ) | 2,420 | ||||
| Net cash provided by operating activities | 26,605 | 53,174 | |||||
| CASH FLOWS FROM INVESTING ACTIVITIES: | |||||||
| Purchases of property and equipment | (278 | ) | (905 | ) | |||
| Net cash used in investing activities | (278 | ) | (905 | ) | |||
| CASH FLOWS FROM FINANCING ACTIVITIES: | |||||||
| Repurchase of common stock | - | (23,704 | ) | ||||
| Dividends paid | (17,218 | ) | (6,891 | ) | |||
| Net cash used in financing activities | (17,218 | ) | (30,595 | ) | |||
| Effect of exchange rates on cash and cash equivalents | 281 | (667 | ) | ||||
| Net increase in cash and cash equivalents | 9,390 | 21,007 | |||||
| CASH AND CASH EQUIVALENTS, beginning of period | 125,921 | 104,914 | |||||
| CASH AND CASH EQUIVALENTS, end of period | $ | 135,311 | $ | 125,921 | |||
| SUPPLEMENTAL DISCLOSURES OF OTHER CASH FLOW INFORMATION: | |||||||
| Cash paid for income taxes, net of refunds | $ | 6,772 | $ | 8,791 | |||
| Issuance of treasury stock for employee awards, net | 1,393 | 1,741 |
NATURAL HEALTH TRENDS CORP.
RECONCILIATION FROM EARNINGS PER DILUTED SHARE TO NON-GAAP EARNINGS PER DILUTED SHARE
| Three Months Ended December 31, 2017 | Year Ended December 31, 2017 | ||||||
| (Unaudited) | |||||||
| Net income (loss) per diluted share | $ | (0.40 | ) | $ | 2.09 | ||
| Exclude Tax Act one-time net charge per share | 1.11 | 1.11 | |||||
| Non-GAAP earnings per diluted share | $ | 0.71 | $ | 3.20 |