Natural Health Trends Reports Fourth Quarter and Full Year 2019 Financial Results
February 12 2020 - 9:00AM
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, 2019.
Fourth Quarter 2019 Financial
Highlights
- Revenue of $17.8 million decreased 57% compared to $41.6
million in the fourth quarter of 2018. Revenue increased 5%
compared to $17.0 million in the third quarter of 2019.
- Operating loss was $3.2 million compared to operating income of
$5.7 million in the fourth quarter of 2018. Operating loss for the
fourth quarter of 2019 included an impairment charge of $1.8
million upon the early adoption of a new accounting standard
pertaining to goodwill that arose from a merger transaction in
March 2004.
- Net loss was $2.8 million, or $0.27 per diluted share, compared
to net income of $5.6 million, or $0.49 per diluted share, in the
fourth quarter of 2018.
- The number of Active Members¹ decreased 16% to 57,410 at
December 31, 2019, compared to 68,150 at September 30, 2019,
and decreased 41% compared to 97,840 at December 31, 2018.¹
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.
Full Year 2019 Financial
Highlights
- Revenue of $77.6 million decreased 60% compared to $191.9
million in 2018.
- Operating loss was $7.0 million compared to operating income of
$33.7 million in 2018. Operating loss included a goodwill
impairment charge of $1.8 million in 2019.
- Net loss was $5.6 million, or $0.52 per diluted share, compared
to net income of $31.0 million, or $2.74 per diluted share, in
2018.
Management Commentary
“2019 was a challenging year for our business amid a host of
macroeconomic and industry-specific factors that created a highly
difficult operating environment,” commented Chris Sharng, President
of Natural Health Trends Corp. “In addition to China’s 100 day
campaign announced last January and negative sentiment stemming
from social media as it relates to health products companies in
China, additional developments such as ongoing global trade
tensions, China’s slowing economy and civil unrest in Hong Kong
further contributed to the decline in revenue for 2019. That said,
order volume in the fourth quarter of 2019 increased 12% over the
prior quarter as a result of our successful event in Macau, along
with a positive response to our various product promotions and
incentives.”
Mr. Sharng further commented, “While our first quarter results
are typically affected by the Chinese New Year, the coronavirus
outbreak and the unprecedented measures to control it are posing
further challenges to the market. Following the extended Chinese
New Year holidays, we plan to rely on product promotions and
webcast training to overcome physical restrictions. We are
continuing to monitor the evolving situation closely and will adapt
our marketing programs accordingly. Looking ahead, we have
implemented a strategy to more effectively manage elements within
our control including: ensuring our incentives remain attractive to
our leaders and member base; continuing to expand our operations
into new geographies; and reducing our cost structure. To that end,
we expect to achieve annualized cost savings of approximately $6.5
million in 2020.”
Balance Sheet and Cash Flow
- Net cash provided by operating activities was $110,000 in the
fourth quarter of 2019, compared to $4.4 million in the fourth
quarter of 2018. For the full year of 2019, net cash used in
operating activities was $18.6 million, compared to net
cash provided by operating activities of $29.7
million in 2018.
- Total cash and cash equivalents were $96.0 million as of
December 31, 2019, down from $132.7 million as of December 31,
2018. The decrease in the cash balance was mainly due to a $16.1
million decrease in working capital, $10.1 million in stock
repurchases and $7.3 million in dividend payments.
- During the three months ended December 31, 2019, the Company
purchased a total of 97,785 shares of its common stock for an
aggregate purchase price of $552,000, plus transaction costs. As of
December 31, 2019, $21.9 million of the stock repurchase
program remained available for future purchases, inclusive of
related estimated income tax.
- On February 10, 2020, the Company’s Board of Directors declared
a quarterly cash dividend of $0.20 on each share of common stock
outstanding. The dividend will be payable on March 6, 2020 to
stockholders of record as of February 25, 2020. Further, the
Company expects to pay a comparable quarterly cash dividend in 2020
and 2021; however, future quarterly cash dividends will be at the
sole discretion of the Board of Directors, and will depend on the
Company's results of operations, financial condition, capital
requirements and other factors considered relevant by the Board of
Directors.
The Company expects to issue its 2019 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 2019 audited financial
results.
Fourth Quarter and Full Year 2019 Financial Results
Conference Call
Management will host a conference call to discuss the fourth
quarter and full year 2019 financial results today, Wednesday,
February 12, 2020 at 11:30 a.m. Eastern Time. The conference call
details are as follows:
Date: |
Wednesday, February 12, 2020 |
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: |
13698060 |
Webcast: |
http://public.viavid.com/index.php?id=137649 |
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 12, 2020 through 11:59 p.m. Eastern Time on
February 26, 2020 by dialing 1-844-512-2921 (domestic) and
1-412-317-6671 (international) and referencing the replay pin
number: 13698060.
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 April 26, 2019 with the Securities and Exchange Commission
(SEC), as well as in subsequent reports filed this year with the
SEC. 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, except share data) |
|
|
December 31, 2019 |
|
December 31, 2018 |
|
(Unaudited) |
|
|
ASSETS |
|
|
|
Current assets: |
|
|
|
Cash and cash equivalents |
$ |
96,035 |
|
|
$ |
132,653 |
|
Inventories |
6,404 |
|
|
12,165 |
|
Other current assets |
5,936 |
|
|
5,369 |
|
Total current assets |
108,375 |
|
|
150,187 |
|
Property and equipment,
net |
735 |
|
|
934 |
|
Operating lease right-of-use
assets |
3,135 |
|
|
— |
|
Goodwill |
— |
|
|
1,764 |
|
Restricted cash |
3,390 |
|
|
2,998 |
|
Deferred tax asset |
2,039 |
|
|
1,207 |
|
Other assets |
823 |
|
|
831 |
|
Total assets |
$ |
118,497 |
|
|
$ |
157,921 |
|
LIABILITIES AND STOCKHOLDERS’ EQUITY |
|
|
|
Current liabilities: |
|
|
|
Accounts payable |
$ |
680 |
|
|
$ |
1,631 |
|
Accrued commissions |
2,931 |
|
|
12,502 |
|
Other accrued expenses |
2,387 |
|
|
6,121 |
|
Deferred revenue |
4,506 |
|
|
6,795 |
|
Amounts held in eWallets |
12,938 |
|
|
14,611 |
|
Operating lease liabilities |
1,655 |
|
|
— |
|
Other current liabilities |
1,205 |
|
|
1,424 |
|
Total current liabilities |
26,302 |
|
|
43,084 |
|
Income taxes payable |
15,365 |
|
|
16,982 |
|
Deferred tax liability |
202 |
|
|
186 |
|
Long-term incentive |
— |
|
|
7,808 |
|
Operating lease
liabilities |
1,564 |
|
|
— |
|
Total liabilities |
43,433 |
|
|
68,060 |
|
Stockholders’ equity: |
|
|
|
Preferred stock |
— |
|
|
— |
|
Common stock |
13 |
|
|
13 |
|
Additional paid-in capital |
86,102 |
|
|
86,415 |
|
Retained earnings |
16,117 |
|
|
44,431 |
|
Accumulated other comprehensive loss |
(1,264 |
) |
|
(1,250 |
) |
Treasury stock, at cost |
(25,904 |
) |
|
(39,748 |
) |
Total stockholders’
equity |
75,064 |
|
|
89,861 |
|
Total liabilities and
stockholders’ equity |
$ |
118,497 |
|
|
$ |
157,921 |
|
NATURAL HEALTH TRENDS CORP. |
CONSOLIDATED STATEMENTS OF OPERATIONS |
(In thousands, except per share data) |
|
|
Three Months EndedDecember 31, |
|
Year EndedDecember 31, |
|
2019 |
|
2018 |
|
2019 |
|
2018 |
|
|
|
|
|
|
|
|
|
(Unaudited) |
|
(Unaudited) |
|
|
Net sales |
$ |
17,835 |
|
|
$ |
41,590 |
|
|
$ |
77,614 |
|
|
$ |
191,910 |
|
Cost of sales |
5,102 |
|
|
8,821 |
|
|
20,104 |
|
|
39,367 |
|
Gross profit |
12,733 |
|
|
32,769 |
|
|
57,510 |
|
|
152,543 |
|
Operating expenses: |
|
|
|
|
|
|
|
Commissions expense |
7,291 |
|
|
20,211 |
|
|
35,549 |
|
|
87,502 |
|
Selling, general and administrative expenses |
6,924 |
|
|
6,825 |
|
|
27,220 |
|
|
31,309 |
|
Goodwill impairment |
1,764 |
|
|
— |
|
|
1,764 |
|
|
— |
|
Total operating expenses |
15,979 |
|
|
27,036 |
|
|
64,533 |
|
|
118,811 |
|
Income (loss) from
operations |
(3,246 |
) |
|
5,733 |
|
|
(7,023 |
) |
|
33,732 |
|
Other income, net |
298 |
|
|
324 |
|
|
1,426 |
|
|
789 |
|
Income (loss) before income
taxes |
(2,948 |
) |
|
6,057 |
|
|
(5,597 |
) |
|
34,521 |
|
Income tax provision
(benefit) |
(106 |
) |
|
498 |
|
|
14 |
|
|
3,486 |
|
Net income (loss) |
$ |
(2,842 |
) |
|
$ |
5,559 |
|
|
$ |
(5,611 |
) |
|
$ |
31,035 |
|
Net income (loss) per common
share: |
|
|
|
|
|
|
|
Basic |
$ |
(0.27 |
) |
|
$ |
0.49 |
|
|
$ |
(0.52 |
) |
|
$ |
2.75 |
|
Diluted |
$ |
(0.27 |
) |
|
$ |
0.49 |
|
|
$ |
(0.52 |
) |
|
$ |
2.74 |
|
Weighted-average number of
common shares outstanding: |
|
|
|
|
|
|
|
Basic |
10,456 |
|
|
11,321 |
|
|
10,871 |
|
|
11,304 |
|
Diluted |
10,456 |
|
|
11,329 |
|
|
10,871 |
|
|
11,318 |
|
NATURAL HEALTH TRENDS CORP. |
CONSOLIDATED STATEMENTS OF CASH FLOWS |
(In thousands) |
|
|
Year Ended December 31, |
|
2019 |
|
2018 |
CASH FLOWS FROM OPERATING
ACTIVITIES: |
(Unaudited) |
|
|
Net income (loss) |
$ |
(5,611 |
) |
|
$ |
31,035 |
|
Adjustments to reconcile net
income (loss) to net cash provided by (used in) operating
activities: |
|
|
|
Depreciation and amortization |
387 |
|
|
424 |
|
Noncash lease expense |
1,760 |
|
|
— |
|
Deferred income taxes |
(820 |
) |
|
358 |
|
Goodwill impairment |
1,764 |
|
|
— |
|
Changes in assets and
liabilities: |
|
|
|
Inventories |
5,820 |
|
|
(3,879 |
) |
Other current assets |
(554 |
) |
|
2,065 |
|
Other assets |
— |
|
|
(55 |
) |
Accounts payable |
(953 |
) |
|
(116 |
) |
Accrued commissions |
(9,598 |
) |
|
1,410 |
|
Other accrued expenses |
(2,797 |
) |
|
(883 |
) |
Deferred revenue |
(2,315 |
) |
|
2,359 |
|
Amounts held in eWallets |
(1,742 |
) |
|
(509 |
) |
Operating lease liabilities |
(1,807 |
) |
|
— |
|
Income taxes payable |
(1,617 |
) |
|
(2,077 |
) |
Other current liabilities |
(222 |
) |
|
(326 |
) |
Long-term incentive |
(333 |
) |
|
(96 |
) |
Net cash provided by (used in)
operating activities |
(18,638 |
) |
|
29,710 |
|
CASH FLOWS FROM INVESTING
ACTIVITIES: |
|
|
|
Purchases of property and equipment |
(189 |
) |
|
(214 |
) |
Net cash used in investing
activities |
(189 |
) |
|
(214 |
) |
CASH FLOWS FROM FINANCING
ACTIVITIES: |
|
|
|
Repurchase of common stock |
(10,117 |
) |
|
— |
|
Dividends paid |
(7,344 |
) |
|
(31,512 |
) |
Net cash used in financing
activities |
(17,461 |
) |
|
(31,512 |
) |
Effect of exchange rates on
cash, cash equivalents and restricted cash |
62 |
|
|
(811 |
) |
Net decrease in cash, cash
equivalents and restricted cash |
(36,226 |
) |
|
(2,827 |
) |
CASH, CASH EQUIVALENTS AND
RESTRICTED CASH, beginning of period |
135,651 |
|
|
138,478 |
|
CASH, CASH EQUIVALENTS AND
RESTRICTED CASH, end of period |
$ |
99,425 |
|
|
$ |
135,651 |
|
SUPPLEMENTAL DISCLOSURES OF
OTHER CASH FLOW INFORMATION: |
|
|
|
Issuance of treasury stock for employee awards, net |
$ |
8,289 |
|
|
$ |
554 |
|
Right-of-use assets obtained in exchange for operating lease
liabilities |
$ |
5,082 |
|
|
$ |
— |
|
|
|
|
|
|
|
|
|
CONTACTS:
Company Contact:Scott DavidsonSenior Vice
President and Chief Financial OfficerNatural Health Trends Corp.Tel
(Hong Kong): +852-3107-0800Tel (U.S.):
310-541-0888scott.davidson@nhtglobal.com
Investor Contact:ADDO Investor RelationsTel:
310-829-5400investor.relations@nhtglobal.com
Natural Health Trends (NASDAQ:NHTC)
Historical Stock Chart
From Aug 2024 to Sep 2024
Natural Health Trends (NASDAQ:NHTC)
Historical Stock Chart
From Sep 2023 to Sep 2024