October 30, 2018 | ||
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 |
• | Total revenue increased 17% year-over-year to $47.0 million |
• | Year-to-date cash flow from operations increased 65% year-over-year to $25.3 million |
• | Declared special dividend of $0.18 per share |
• | Increased quarterly dividend 7% to $0.16 per share |
• | Total revenue of $47.0 million increased 17% compared to $40.1 million in the third quarter of 2017, and decreased 8% compared to $50.9 million in the second quarter of 2018. |
◦ | Revenue from the Company’s Hong Kong operations, which represented 88% of total revenue, was $41.4 million, an increase of 18% compared to $35.0 million in the third quarter of 2017. |
◦ | Revenue outside of Hong Kong of $5.6 million increased 10% compared to $5.1 million in the third quarter of 2017. |
• | Gross profit was $37.1 million compared to $31.9 million in the third quarter of 2017, and $40.5 million in the second quarter of 2018. As a percent of total revenue, gross profit was 79% compared to 80% in the third quarter of 2017 and 80% in the second quarter of 2018. |
• | Operating income was $7.8 million compared to $8.5 million in the third quarter of 2017, and $10.1 million in the second quarter of 2018. As a percent of total revenue, operating income was 17% compared to 21% in the third quarter of 2017 and 20% in the second quarter of 2018. |
• | Net income was $7.6 million, or $0.67 per diluted share, compared to net income of $7.3 million, or $0.65 per diluted share, in the third quarter of 2017, and $9.0 million, or $0.80 per diluted share, in the second quarter of 2018. |
• | The number of Active Members1 increased 4% to 97,160 at September 30, 2018, compared to 93,000 at June 30, 2018, and decreased 3% compared to 99,690 at September 30, 2017. |
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 of $150.3 million decreased 1% compared to $151.5 million in the first nine months of 2017. |
• | Gross profit was $119.8 million compared to $122.3 million in the first nine months of 2017. As a percent of total revenue, gross profit was 80% compared to 81% in the first nine months of 2018. |
• | Operating income was $28.0 million compared to $34.4 million in the first nine months of 2017. As a percent of total revenue, operating income was 19% compared to 23% in the first nine months of 2017. |
• | Net income was $25.5 million, or $2.25 per diluted share, compared to net income of $28.1 million, or $2.49 per diluted share, in the first nine months of 2017. |
• | Net cash provided by operating activities was $8.8 million, compared to $5.3 million in net cash used in operating activities in the third quarter of 2017. For the first nine months of 2018, net cash provided by operating activities was $25.3 million, compared to $15.3 million in the first nine months of 2017. |
• | On October 21, 2018, the Company’s Board of Directors declared a quarterly cash dividend of $0.16, which represents a 7% increase over the prior quarter dividend, as well as a special cash dividend of $0.18 per share on outstanding common stock. The dividends will be payable on November 23, 2018 to stockholders of record as of November 13, 2018. |
Date: | Tuesday, October 30, 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: | 13683905 |
Webcast: | http://public.viavid.com/index.php?id=131653 |
September 30, 2018 | December 31, 2017 | ||||||
(Unaudited) | |||||||
ASSETS | |||||||
Current assets: | |||||||
Cash and cash equivalents | $ | 132,206 | $ | 135,311 | |||
Inventories | 11,119 | 8,398 | |||||
Other current assets | 4,918 | 7,534 | |||||
Total current assets | 148,243 | 151,243 | |||||
Property and equipment, net | 988 | 1,149 | |||||
Goodwill | 1,764 | 1,764 | |||||
Restricted cash | 3,003 | 3,167 | |||||
Deferred tax asset | 1,435 | 1,435 | |||||
Other assets | 859 | 796 | |||||
Total assets | $ | 156,292 | $ | 159,554 | |||
LIABILITIES AND STOCKHOLDERS’ EQUITY | |||||||
Current liabilities: | |||||||
Accounts payable | $ | 2,715 | $ | 1,751 | |||
Income taxes payable | 168 | 309 | |||||
Accrued commissions | 13,125 | 11,170 | |||||
Other accrued expenses | 7,341 | 7,605 | |||||
Deferred revenue | 4,462 | 4,455 | |||||
Amounts held in eWallets | 14,196 | 15,152 | |||||
Other current liabilities | 1,906 | 1,479 | |||||
Total current liabilities | 43,913 | 41,921 | |||||
Income taxes payable | 16,982 | 19,052 | |||||
Deferred tax liability | 75 | 56 | |||||
Long-term incentive | 7,104 | 7,904 | |||||
Total liabilities | 68,074 | 68,933 | |||||
Commitments and contingencies | |||||||
Stockholders’ equity: | |||||||
Preferred stock | — | — | |||||
Common stock | 13 | 13 | |||||
Additional paid-in capital | 86,415 | 86,683 | |||||
Retained earnings | 42,740 | 44,908 | |||||
Accumulated other comprehensive loss | (1,202 | ) | (413 | ) | |||
Treasury stock, at cost | (39,748 | ) | (40,570 | ) | |||
Total stockholders’ equity | 88,218 | 90,621 | |||||
Total liabilities and stockholders’ equity | $ | 156,292 | $ | 159,554 |
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||
2018 | 2017 | 2018 | 2017 | ||||||||||||
(Unaudited) | |||||||||||||||
Net sales | $ | 47,043 | $ | 40,132 | $ | 150,320 | $ | 151,471 | |||||||
Cost of sales | 9,926 | 8,183 | 30,546 | 29,221 | |||||||||||
Gross profit | 37,117 | 31,949 | 119,774 | 122,250 | |||||||||||
Operating expenses: | |||||||||||||||
Commissions expense | 22,001 | 15,802 | 67,291 | 63,842 | |||||||||||
Selling, general and administrative expenses | 7,269 | 7,633 | 24,484 | 24,035 | |||||||||||
Total operating expenses | 29,270 | 23,435 | 91,775 | 87,877 | |||||||||||
Income from operations | 7,847 | 8,514 | 27,999 | 34,373 | |||||||||||
Other income (expense), net | 249 | (12 | ) | 465 | 224 | ||||||||||
Income before income taxes | 8,096 | 8,502 | 28,464 | 34,597 | |||||||||||
Income tax provision | 467 | 1,164 | 2,988 | 6,531 | |||||||||||
Net income | $ | 7,629 | $ | 7,338 | $ | 25,476 | $ | 28,066 | |||||||
Net income per common share: | |||||||||||||||
Basic | $ | 0.67 | $ | 0.65 | $ | 2.25 | $ | 2.50 | |||||||
Diluted | $ | 0.67 | $ | 0.65 | $ | 2.25 | $ | 2.49 | |||||||
Weighted-average number of common shares outstanding: | |||||||||||||||
Basic | 11,309 | 11,258 | 11,298 | 11,244 | |||||||||||
Diluted | 11,322 | 11,276 | 11,307 | 11,269 | |||||||||||
Cash dividends declared per common share | $ | 0.40 | $ | 0.36 | $ | 2.43 | $ | 1.25 |
Nine Months Ended September 30, | |||||||
2018 | 2017 | ||||||
(Unaudited) | |||||||
CASH FLOWS FROM OPERATING ACTIVITIES: | |||||||
Net income | $ | 25,476 | $ | 28,066 | |||
Adjustments to reconcile net income to net cash provided by operating activities: | |||||||
Depreciation and amortization | 332 | 414 | |||||
Stock-based compensation | — | 26 | |||||
Cumulative translation adjustment realized in net income | — | (258 | ) | ||||
Changes in assets and liabilities: | |||||||
Inventories | (2,828 | ) | 590 | ||||
Other current assets | 2,548 | 1,164 | |||||
Other assets | (83 | ) | (61 | ) | |||
Accounts payable | 967 | (1,121 | ) | ||||
Income taxes payable | (2,201 | ) | 392 | ||||
Accrued commissions | 2,003 | (3,143 | ) | ||||
Other accrued expenses | 314 | (5,064 | ) | ||||
Deferred revenue | 26 | (1,364 | ) | ||||
Amounts held in eWallets | (930 | ) | (2,856 | ) | |||
Other current liabilities | 438 | 51 | |||||
Long-term incentive | (800 | ) | (1,498 | ) | |||
Net cash provided by operating activities | 25,262 | 15,338 | |||||
CASH FLOWS FROM INVESTING ACTIVITIES: | |||||||
Purchases of property and equipment | (176 | ) | (238 | ) | |||
Net cash used in investing activities | (176 | ) | (238 | ) | |||
CASH FLOWS FROM FINANCING ACTIVITIES: | |||||||
Dividends paid | (27,644 | ) | (14,157 | ) | |||
Net cash used in financing activities | (27,644 | ) | (14,157 | ) | |||
Effect of exchange rates on cash, cash equivalents and restricted cash | (711 | ) | 218 | ||||
Net (decrease) increase in cash, cash equivalents and restricted cash | (3,269 | ) | 1,161 | ||||
CASH, CASH EQUIVALENTS AND RESTRICTED CASH, beginning of period | 138,478 | 128,884 | |||||
CASH, CASH EQUIVALENTS AND RESTRICTED CASH, end of period | $ | 135,209 | $ | 130,045 | |||
SUPPLEMENTAL DISCLOSURES OF OTHER CASH FLOW INFORMATION: | |||||||
Issuance of treasury stock for employee awards, net | 554 | 1,393 |