Natural Health Trends Reports Third Quarter 2016 Financial Results And

The following excerpt is from the company's SEC filing.

Declares Special Cash Dividend of $0.35 per Share

Record operating income increased

year-over-year to

$15.2 million

Active Members

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 – October 25, 2016 – 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 t he quarter ended

September 30, 2016

Third Quarter

Financial Highlights

Total revenue decreased

$70.7 million

, compared to

$80.8 million

in the

quarter of

Revenue from the Company’s Hong Kong operations, which represented

of total revenue, decreased

$65.9 million

$75.9 million

Revenue outside of Hong Kong decreased

$4.8 million

$4.9 million

Operating income increased

$14.8 million

An additional income tax provision of $2.6 million was recognized in the

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

per diluted share, compared to

$14.5 million

per diluted share, in the

The number of Active Members

126,440

June 30, 2016

, and increased 30% compared to

94,700

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

Total revenue increased

$225.4 million

$191.2 million

in the first

months of

$44.1 million

$34.0 million

An additional income tax provision of $7.3 million was recognized in the first

months of 2016 for the expected partial repatriation of overseas profits, resulting in an overall effective tax rate of 18%.

$36.0 million

$33.5 million

per diluted share, in the first

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

$5.9 million

$25.7 million

. For the first

, net cash provided by operating activities was

$36.3 million

$65.2 million

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

months ended

, the Company repurchased $23.7 million of its common stock under its existing $70.0 million stock repurchase program. At

, 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:

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.

CONTACTS:

Company Contact:

Scott Davidson

Senior Vice President and Chief Financial Officer

Tel: 310-541-0888

scott.davidson@nhtglobal.com

Investors:

ADDO Investor Relations

Tel: 310-829-5400

investor.relations@nhtglobal.com

NATURAL HEALTH TRENDS CORP.

CONSOLIDATED BALANCE SHEETS

(In thousands)

December 31, 2015

(Unaudited)

ASSETS

Current assets:

Cash and cash equivalents

114,500

104,914

Accounts receivable

Inventories, net

14,842

10,455

Other current assets

Total current assets

132,980

117,712

Property and equipment, net

Goodwill

Restricted cash

Other assets

Total assets

139,854

124,152

LIABILITIES AND STOCKHOLDERS’ EQUITY

Current liabilities:

Accounts payable

Income taxes payable

Accrued commissions

18,620

19,634

Other accrued expenses

18,443

16,703

Deferred revenue

Deferred tax liability

Amounts held in eWallets

19,510

16,414

Other current liabilities

Total current liabilities

66,181

61,573

Long-term incentive

Total liabilities

71,126

67,343

Commitments and contingencies

Stockholders’ equity:

Preferred stock

Common stock

Additional paid-in capital

86,564

85,963

Retained earnings (accumulated deficit)

24,342

(9,647

Accumulated other comprehensive loss

Treasury stock, at cost

(41,889

(19,419

Total stockholders’ equity

68,728

56,809

Total liabilities and stockholders’ equity

CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)

(In thousands, except per share data)

Three Months Ended September 30,

Nine Months Ended September 30,

Net sales

70,679

80,779

225,416

191,204

Cost of sales

13,627

16,001

42,966

39,025

Gross profit

57,052

64,778

182,450

152,179

Operating expenses:

Commissions expense

30,578

40,036

103,547

93,443

Selling, general and administrative expenses

11,170

34,505

24,571

Depreciation and amortization

Total operating expenses

41,844

49,975

138,328

118,195

Income from operations

15,208

14,803

44,122

33,984

Other income (expense), net

Income before income taxes

15,256

14,668

44,162

33,872

Income tax provision

12,557

14,531

36,038

33,542

Income per common share:

Diluted

Weighted-average number of common shares outstanding:

11,209

12,239

11,437

12,364

11,232

12,284

11,463

12,439

Cash dividends declared per common share

CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

CASH FLOWS FROM OPERATING ACTIVITIES:

Adjustments to reconcile net income to net cash provided by operating activities:

Stock-based compensation

Cumulative translation adjustment realized in net income

Changes in assets and liabilities:

(4,382

(2,904

(1,208

(1,045

11,832

11,354

36,288

65,197

CASH FLOWS FROM INVESTING ACTIVITIES:

Purchases of property and equipment, net

Increase in restricted cash

(3,028

Net cash used in investing activities

(3,673

CASH FLOWS FROM FINANCING ACTIVITIES:

Proceeds from exercise of warrants

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

Net increase in cash and cash equivalents

49,749

CASH AND CASH EQUIVALENTS, beginning of period

44,816

CASH AND CASH EQUIVALENTS, end of period

94,565

SUPPLEMENTAL DISCLOSURES OF OTHER CASH FLOW INFORMATION:

Cash paid for income taxes, net of refunds

Issuance of treasury stock

The above information was disclosed in a filing to the SEC. To see the filing, click here.

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