July 27, 2016 | ||
Date of Report (Date of earliest event reported) | ||
NATURAL HEALTH TRENDS CORP. | ||
(Exact name of registrant as specified in its charter) |
Delaware | 001-36849 | 59-2705336 |
(State or other jurisdiction of incorporation) | (Commission File Number) | (IRS Employer Identification No.) |
609 Deep Valley Drive, Suite 395, Rolling Hills Estates, California 90274 | ||
(Address of principal executive offices, including zip code) | ||
(310) 541-0888 | ||
(Registrant’s telephone number, including area code) |
(d) | Exhibits. |
NATURAL HEALTH TRENDS CORP. | ||
By: | /s/ Timothy S. Davidson | |
Timothy S. Davidson | ||
Senior Vice President and Chief Financial Officer |
• | 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 |
• | 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. |
• | 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. |
• | 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. |
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 |
June 30, 2016 | December 31, 2015 | ||||||
(Unaudited) | |||||||
ASSETS | |||||||
Current assets: | |||||||
Cash and cash equivalents | $ | 109,649 | $ | 104,914 | |||
Accounts receivable | 93 | 57 | |||||
Inventories, net | 12,302 | 10,455 | |||||
Other current assets | 2,893 | 2,286 | |||||
Total current assets | 124,937 | 117,712 | |||||
Property and equipment, net | 1,236 | 894 | |||||
Goodwill | 1,764 | 1,764 | |||||
Restricted cash | 3,097 | 3,166 | |||||
Other assets | 620 | 616 | |||||
Total assets | $ | 131,654 | $ | 124,152 | |||
LIABILITIES AND STOCKHOLDERS’ EQUITY | |||||||
Current liabilities: | |||||||
Accounts payable | $ | 3,525 | $ | 2,862 | |||
Income taxes payable | 862 | 379 | |||||
Accrued commissions | 18,651 | 19,634 | |||||
Other accrued expenses | 17,570 | 16,703 | |||||
Deferred revenue | 8,832 | 4,011 | |||||
Deferred tax liability | 60 | 60 | |||||
Amounts held in eWallets | 18,162 | 16,414 | |||||
Other current liabilities | 1,715 | 1,510 | |||||
Total current liabilities | 69,377 | 61,573 | |||||
Long-term incentive | 5,264 | 5,770 | |||||
Total liabilities | 74,641 | 67,343 | |||||
Commitments and contingencies | |||||||
Stockholders’ equity: | |||||||
Preferred stock | — | — | |||||
Common stock | 13 | 13 | |||||
Additional paid-in capital | 86,554 | 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’ equity | 57,013 | 56,809 | |||||
Total liabilities and stockholders’ equity | $ | 131,654 | $ | 124,152 |
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 sales | 15,059 | 14,094 | 29,339 | 23,024 | |||||||||||
Gross profit | 65,332 | 55,622 | 125,398 | 87,401 | |||||||||||
Operating expenses: | |||||||||||||||
Commissions expense | 37,883 | 35,010 | 72,969 | 53,407 | |||||||||||
Selling, general and administrative expenses | 12,431 | 8,281 | 23,335 | 14,704 | |||||||||||
Depreciation and amortization | 91 | 68 | 180 | 109 | |||||||||||
Total operating expenses | 50,405 | 43,359 | 96,484 | 68,220 | |||||||||||
Income from operations | 14,927 | 12,263 | 28,914 | 19,181 | |||||||||||
Other income (expense), net | 16 | 132 | (8 | ) | 23 | ||||||||||
Income before income taxes | 14,943 | 12,395 | 28,906 | 19,204 | |||||||||||
Income tax provision | 2,742 | 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: | |||||||||||||||
Basic | 11,333 | 12,403 | 11,553 | 12,428 | |||||||||||
Diluted | 11,359 | 12,461 | 11,579 | 12,513 | |||||||||||
Cash dividends declared per common share | $ | 0.06 | $ | 0.03 | $ | 0.11 | $ | 0.05 |
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 amortization | 180 | 109 | |||||
Stock-based compensation | 84 | 35 | |||||
Cumulative translation adjustment realized in net income | 132 | (82 | ) | ||||
Changes in assets and liabilities: | |||||||
Accounts receivable | (34 | ) | (186 | ) | |||
Inventories, net | (1,865 | ) | (1,524 | ) | |||
Other current assets | (578 | ) | (672 | ) | |||
Other assets | 2 | (232 | ) | ||||
Accounts payable | 665 | 849 | |||||
Income taxes payable | 487 | 56 | |||||
Accrued commissions | (989 | ) | 5,471 | ||||
Other accrued expenses | 2,597 | 4,674 | |||||
Deferred revenue | 4,816 | 5,459 | |||||
Amounts held in eWallets | 1,759 | 6,468 | |||||
Other current liabilities | 203 | 186 | |||||
Long-term incentive | (506 | ) | (141 | ) | |||
Net cash provided by operating activities | 30,434 | 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 equivalents | 4,735 | 29,606 | |||||
CASH AND CASH EQUIVALENTS, beginning of period | 104,914 | 44,816 | |||||
CASH AND CASH EQUIVALENTS, end of period | $ | 109,649 | $ | 74,422 | |||
NON-CASH FINANCING ACTIVITY: | |||||||
Issuance of treasury stock | $ | 1,741 | $ | 666 |