February 21, 2019 | ||
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.) |
Units 1205-07, 12F, Mira Place Tower A, 132 Nathan Road, Tsimshatsui, Kowloon, Hong Kong | ||
(Address of principal executive offices, including zip code) | ||
+852-3107-0800 | ||
(Registrant’s telephone number, including area code) | ||
609 Deep Valley Drive, Suite 395, Rolling Hills Estates, California 90274 | ||
(Former address) |
(d) | Exhibits. |
NATURAL HEALTH TRENDS CORP. | ||
By: | /s/ Timothy S. Davidson | |
Timothy S. Davidson | ||
Senior Vice President and Chief Financial Officer |
• | Full year net income increased 32% year-over-year to $31.0 million |
• | Full year cash flow from operations increased 12% year-over-year to $29.7 million |
• | Declared special dividend of $0.08 per share for the fourth quarter |
• | Returned $31.5 million to shareholders via dividends in 2018, up 83% year-over-year from $17.2 million |
• | Total revenue of $41.6 million decreased 10% compared to $46.1 million in the fourth quarter of 2017, and decreased 12% compared to $47.0 million in the third quarter of 2018. |
◦ | Revenue from the Company’s Hong Kong operations, which represented 86% of total revenue, was $35.8 million, a decrease of 10% compared to $39.6 million in the fourth quarter of 2017. |
◦ | Revenue outside of Hong Kong of $5.8 million decreased 10% compared to $6.5 million in the fourth quarter of 2017. |
• | Gross profit was $32.8 million compared to $36.7 million in the fourth quarter of 2017, and $37.1 million in the third quarter of 2018. As a percent of total revenue, gross profit was 79% compared to 80% in the fourth quarter of 2017 and 79% in the third quarter of 2018. |
• | Operating income was $5.7 million compared to $8.7 million in the fourth quarter of 2017, and $7.8 million in the third quarter of 2018. As a percent of total revenue, operating income was 14% compared to 19% in the fourth quarter of 2017 and 17% in the third quarter of 2018. |
• | Net income was $5.6 million, or $0.49 per diluted share, compared to a net loss of $4.5 million, or $0.40 per diluted share, in the fourth quarter of 2017, and net income of $7.6 million, or $0.67 per diluted share, in the third quarter of 2018. Net loss for the fourth quarter of 2017 included a one-time net charge of $12.5 million, or $1.11 per diluted share, as a result of the Tax Cuts and Jobs Act of 2017 (the “Tax Act”). The one-time net charge was due to the repatriation tax on the deemed repatriation of foreign income and the re-measurement of net deferred tax assets. Excluding the impact of the Tax Act, Non-GAAP earnings per diluted share were $0.71 in the fourth quarter of 2017. Non-GAAP earnings per diluted share is defined below and is reconciled to earnings per diluted share in the table entitled “Reconciliation from earnings per diluted share to Non-GAAP earnings per diluted share.” |
• | The number of Active Members1 increased 1% to 97,840 at December 31, 2018, compared to 97,160 at September 30, 2018, and increased 2% compared to 95,670 at December 31, 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 $191.9 million decreased 3% compared to $197.6 million in 2017. |
• | Gross profit was $152.5 million compared to $158.9 million in 2017. As a percent of total revenue, gross profit was 80%, consistent with 2017. |
• | Operating income was $33.7 million compared to $43.1 million in 2017. As a percent of total revenue, operating income was 18% compared to 22% in 2017. |
• | Net income was $31.0 million, or $2.74 per diluted share, compared to net income of $23.6 million, or $2.09 per diluted share, in 2017. Excluding the impact of the Tax Act, Non-GAAP earnings per diluted share were $3.20 in 2017. |
• | Net cash provided by operating activities was $4.4 million, compared to $11.3 million in the fourth quarter of 2017. For the full year of 2018, net cash provided by operating activities was $29.7 million, compared to $26.6 million in 2017. |
• | Total cash and cash equivalents were $132.7 million at the end of the fourth quarter of 2018, up from $132.2 million as of the third quarter of 2018, and down slightly from $135.3 million as of the fourth quarter 2017. |
• | On January 27, 2019, the Company’s Board of Directors declared a quarterly cash dividend of $0.16, as well as a special cash dividend of $0.08 per share on outstanding common stock. The dividends will be payable on March 15, 2019 to stockholders of record as of March 5, 2019. |
• | As of December 31, 2018, $32.0 million of the stock repurchase program previously approved on July 28, 2015 and increased on January 13, 2016 remained available for future purchases, inclusive of related estimated income tax. |
Date: | Thursday, February 21, 2019 |
Time: | 4:30 p.m. Eastern Time / 1:30 p.m. Pacific Time |
Dial-in: | 1-877-407-0789 (Domestic) 1-201-689-8562 (International) |
Conference ID: | 13687705 |
Webcast: | http://public.viavid.com/index.php?id=133312 |
December 31, 2018 | December 31, 2017 | ||||||
(Unaudited) | |||||||
ASSETS | |||||||
Current assets: | |||||||
Cash and cash equivalents | $ | 132,653 | $ | 135,311 | |||
Inventories | 12,165 | 8,398 | |||||
Other current assets | 5,369 | 7,534 | |||||
Total current assets | 150,187 | 151,243 | |||||
Property and equipment, net | 934 | 1,149 | |||||
Goodwill | 1,764 | 1,764 | |||||
Restricted cash | 2,998 | 3,167 | |||||
Deferred tax asset | 1,207 | 1,435 | |||||
Other assets | 831 | 796 | |||||
Total assets | $ | 157,921 | $ | 159,554 | |||
LIABILITIES AND STOCKHOLDERS’ EQUITY | |||||||
Current liabilities: | |||||||
Accounts payable | $ | 1,631 | $ | 1,751 | |||
Income taxes payable | 287 | 309 | |||||
Accrued commissions | 12,502 | 11,170 | |||||
Other accrued expenses | 6,121 | 7,605 | |||||
Deferred revenue | 6,795 | 4,455 | |||||
Amounts held in eWallets | 14,611 | 15,152 | |||||
Other current liabilities | 1,137 | 1,479 | |||||
Total current liabilities | 43,084 | 41,921 | |||||
Income taxes payable | 16,982 | 19,052 | |||||
Deferred tax liability | 186 | 56 | |||||
Long-term incentive | 7,808 | 7,904 | |||||
Total liabilities | 68,060 | 68,933 | |||||
Commitments and contingencies | |||||||
Stockholders’ equity: | |||||||
Preferred stock | — | — | |||||
Common stock | 13 | 13 | |||||
Additional paid-in capital | 86,415 | 86,683 | |||||
Retained earnings | 44,431 | 44,908 | |||||
Accumulated other comprehensive loss | (1,250 | ) | (413 | ) | |||
Treasury stock, at cost | (39,748 | ) | (40,570 | ) | |||
Total stockholders’ equity | 89,861 | 90,621 | |||||
Total liabilities and stockholders’ equity | $ | 157,921 | $ | 159,554 |
Three Months Ended December 31, | Year Ended December 31, | ||||||||||||||
2018 | 2017 | 2018 | 2017 | ||||||||||||
(Unaudited) | (Unaudited) | ||||||||||||||
Net sales | $ | 41,590 | $ | 46,092 | $ | 191,910 | $ | 197,563 | |||||||
Cost of sales | 8,821 | 9,424 | 39,367 | 38,645 | |||||||||||
Gross profit | 32,769 | 36,668 | 152,543 | 158,918 | |||||||||||
Operating expenses: | |||||||||||||||
Commissions expense | 20,211 | 19,796 | 87,502 | 83,638 | |||||||||||
Selling, general and administrative expenses | 6,825 | 8,186 | 31,309 | 32,221 | |||||||||||
Total operating expenses | 27,036 | 27,982 | 118,811 | 115,859 | |||||||||||
Income from operations | 5,733 | 8,686 | 33,732 | 43,059 | |||||||||||
Other income, net | 324 | 143 | 789 | 367 | |||||||||||
Income before income taxes | 6,057 | 8,829 | 34,521 | 43,426 | |||||||||||
Income tax provision | 498 | 13,317 | 3,486 | 19,848 | |||||||||||
Net income (loss) | $ | 5,559 | $ | (4,488 | ) | $ | 31,035 | $ | 23,578 | ||||||
Net income (loss) per common share: | |||||||||||||||
Basic | $ | 0.49 | $ | (0.40 | ) | $ | 2.75 | $ | 2.10 | ||||||
Diluted | $ | 0.49 | $ | (0.40 | ) | $ | 2.74 | $ | 2.09 | ||||||
Weighted-average number of common shares outstanding: | |||||||||||||||
Basic | 11,321 | 11,272 | 11,304 | 11,251 | |||||||||||
Diluted | 11,329 | 11,272 | 11,318 | 11,267 | |||||||||||
Cash dividends declared per common share | $ | 0.34 | $ | 0.27 | $ | 2.77 | $ | 1.52 |
Year Ended December 31, | |||||||
2018 | 2017 | ||||||
(Unaudited) | |||||||
CASH FLOWS FROM OPERATING ACTIVITIES: | |||||||
Net income | $ | 31,035 | $ | 23,578 | |||
Adjustments to reconcile net income to net cash provided by operating activities: | |||||||
Depreciation and amortization | 424 | 536 | |||||
Stock-based compensation | — | 35 | |||||
Cumulative translation adjustment realized in net income | — | (258 | ) | ||||
Deferred income taxes | 358 | (1,644 | ) | ||||
Changes in assets and liabilities: | |||||||
Inventories | (3,879 | ) | 2,843 | ||||
Other current assets | 2,065 | (3,399 | ) | ||||
Other assets | (55 | ) | (61 | ) | |||
Accounts payable | (116 | ) | (392 | ) | |||
Income taxes payable | (2,077 | ) | 18,676 | ||||
Accrued commissions | 1,410 | (2,417 | ) | ||||
Other accrued expenses | (883 | ) | (6,033 | ) | |||
Deferred revenue | 2,359 | (481 | ) | ||||
Amounts held in eWallets | (509 | ) | (3,875 | ) | |||
Other current liabilities | (326 | ) | (179 | ) | |||
Long-term incentive | (96 | ) | (324 | ) | |||
Net cash provided by operating activities | 29,710 | 26,605 | |||||
CASH FLOWS FROM INVESTING ACTIVITIES: | |||||||
Purchases of property and equipment | (214 | ) | (278 | ) | |||
Net cash used in investing activities | (214 | ) | (278 | ) | |||
CASH FLOWS FROM FINANCING ACTIVITIES: | |||||||
Dividends paid | (31,512 | ) | (17,218 | ) | |||
Net cash used in financing activities | (31,512 | ) | (17,218 | ) | |||
Effect of exchange rates on cash, cash equivalents and restricted cash | (811 | ) | 485 | ||||
Net (decrease) increase in cash, cash equivalents and restricted cash | (2,827 | ) | 9,594 | ||||
CASH, CASH EQUIVALENTS AND RESTRICTED CASH, beginning of period | 138,478 | 128,884 | |||||
CASH, CASH EQUIVALENTS AND RESTRICTED CASH, end of period | $ | 135,651 | $ | 138,478 | |||
SUPPLEMENTAL DISCLOSURES OF OTHER CASH FLOW INFORMATION: | |||||||
Issuance of treasury stock for employee awards, net | $ | 554 | $ | 1,393 |
Three Months Ended December 31, 2017 | Year Ended December 31, 2017 | ||||||
(Unaudited) | |||||||
Net income (loss) per diluted share | $ | (0.40 | ) | $ | 2.09 | ||
Exclude Tax Act one-time net charge per share | 1.11 | 1.11 | |||||
Non-GAAP earnings per diluted share | $ | 0.71 | $ | 3.20 |