Natural Health Trends Reports Fourth

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

Quarter and Full Year 2019 Financial Results

Fourth quarter 2019 revenue increased 5% from the prior quarter

Fourth quarter 2019 order volume increased 12% from the prior quarter

Generated positive cash flow from operations in the fourth quarter 2019

Repurchased $10.1 million of common stock and paid $7.3 million in dividends in 2019

Declared a quarterly cash dividend of $0.20 per share

Expect to realize $6.5 million in annualized cost savings in 2020

HONG KONG – February 12, 2020 – 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 and full year ended

December 31, 2019

Financial Highlights

Revenue of

$17.8 million

decreased

compared to

$41.6 million

quarter of

. 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

. 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

per diluted share, compared to net income of

$5.6 million

per diluted share, in the

The number of Active Members

decreased 16% to 57,410 at

, compared to 68,150 at September 30, 2019, and

41% compared to 97,840 at

December 31, 2018

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

$77.6 million

decreased 60% compared to

$191.9 million

in 2018.

$7.0 million

$33.7 million

in 2018. Operating loss included a goodwill impairment charge of $1.8 million in 2019.

$31.0 million

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

. 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

, 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

, $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.

Quarter and Full Year 2019 Financial Results Conference Call

Management will host a conference call to discuss the

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:

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.

CONTACTS:

Company Contact:

Scott Davidson

Senior Vice President and Chief Financial Officer

Tel (Hong Kong): +852-3107-0800

Tel (U.S.): 310-541-0888

scott.davidson@nhtglobal.com

Investor Contact:

ADDO Investor Relations

Tel: 310-829-5400

investor.relations@nhtglobal.com

NATURAL HEALTH TRENDS CORP.

CONSOLIDATED BALANCE SHEETS

(In thousands, except share data)

(Unaudited)

ASSETS

Current assets:

Cash and cash equivalents

96,035

132,653

Inventories

12,165

Other current assets

Total current assets

108,375

150,187

Property and equipment, net

Operating lease right-of-use assets

Goodwill

Restricted cash

Deferred tax asset

Other assets

Total assets

118,497

157,921

LIABILITIES AND STOCKHOLDERS’ EQUITY

Current liabilities:

Accounts payable

Accrued commissions

12,502

Other accrued expenses

Deferred revenue

Amounts held in eWallets

12,938

14,611

Operating lease liabilities

Other current liabilities

Total current liabilities

26,302

43,084

Income taxes payable

15,365

16,982

Deferred tax liability

Long-term incentive

Total liabilities

43,433

68,060

Stockholders’ equity:

Preferred stock

Common stock

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

NATURAL HEALTH TRENDS CORP. 

CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share data)

Three Months Ended December 31,

Year Ended

Net sales

17,835

41,590

77,614

191,910

Cost of sales

20,104

39,367

Gross profit

12,733

32,769

57,510

152,543

Operating expenses:

Commissions expense

20,211

35,549

87,502

Selling, general and administrative expenses

27,220

31,309

Goodwill impairment

Total operating expenses

15,979

27,036

64,533

118,811

Income (loss) from operations

(3,246

(7,023

33,732

Other income, net

Income (loss) before income taxes

(2,948

(5,597

34,521

Income tax provision (benefit)

Net income (loss)

(2,842

(5,611

31,035

Net income (loss) per common share:

Diluted

Weighted-average number of common shares outstanding:

10,456

11,321

10,871

11,304

11,329

11,318

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

Year Ended December 31,

CASH FLOWS FROM OPERATING ACTIVITIES:

Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:

Depreciation and amortization

Noncash lease expense

Deferred income taxes

Changes in assets and liabilities:

(3,879

(9,598

(2,797

(2,315

(1,742

(1,807

(1,617

(2,077

Net cash provided by (used in) operating activities

(18,638

29,710

CASH FLOWS FROM INVESTING ACTIVITIES:

Purchases of property and equipment

Net cash used in investing activities

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

Effect of exchange rates on cash, cash equivalents and restricted cash

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

SUPPLEMENTAL DISCLOSURES OF OTHER CASH FLOW INFORMATION:

Issuance of treasury stock for employee awards, net

Right-of-use assets obtained in exchange for operating lease liabilities

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

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