Form 8-K NATURAL HEALTH TRENDS For: Oct 27

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October 27, 2015 4:04 PM EDT


UNITED STATES
 SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
 
FORM 8-K
 
CURRENT REPORT
Pursuant to Section 13 OR 15(d) of The Securities Exchange Act of 1934
 
 
October 27, 2015
 
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)
 
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):
 
o   Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
 
o    Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
 
o    Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
 
o    Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))




Item 2.02 Results of Operations and Financial Condition.
 
On October 27, 2015, Natural Health Trends Corp. issued an earnings release announcing its results for the quarter ended September 30, 2015. The press release is attached hereto as exhibit 99.1.
 
Item 9.01 Financial Statements and Exhibits.
 
(d)
Exhibits.
99.1       Press Release of Natural Health Trends Corp. dated October 27, 2015
 
SIGNATURES
 
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
 
Date: October 27, 2015
 
NATURAL HEALTH TRENDS CORP.
 
 
 
 
 
 
 
By:
/s/ Timothy S. Davidson                                                     
 
 
Timothy S. Davidson
 
 
Senior Vice President and Chief Financial Officer




Exhibit 99.1

Natural Health Trends Reports Strong Third Quarter 2015 Financial Results

•
Record quarterly revenue increased 154% year-over-year to $80.8 million
•
Record quarterly net income of $14.5 million or $1.18 per diluted share
•
Increased dividend by 25% to $0.05 per share
•
Repurchased $5.0 million of common stock during the quarter

LOS ANGELES – October 27, 2015 – Natural Health Trends Corp. (NASDAQ: NHTC), a leading direct-selling 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 ended September 30, 2015.

Third Quarter 2015 Financial Highlights

•
Total revenue increased 154% to $80.8 million, compared to $31.8 million in the third quarter of 2014.

◦
Revenue from the Company’s Hong Kong operations, which represents 94% of total revenue, increased 168% to $75.9 million, compared to $28.3 million in the third quarter of 2014.

◦
Revenue outside of Hong Kong increased 38% to $4.9 million, compared to $3.5 million in the third quarter of 2014.

•
Operating income increased 171% to $14.8 million, compared to $5.5 million in the third quarter of 2014.

•
Net income available to common stockholders was $14.5 million, or $1.18 per diluted share, compared to $5.4 million, or $0.42 per diluted share, in the third quarter of 2014.

•
The number of Active Members1 increased 24% to 94,700 at September 30, 2015, 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.

Year-to-Date 2015 Financial Highlights

•
Total revenue increased 114% to $191.2 million, compared to $89.2 million in the first nine months of 2014.

•
Operating income increased 130% to $34.0 million, compared to $14.8 million in the first nine months of 2014.

•
Net income available to common stockholders was $33.5 million, or $2.70 per diluted share, compared to $14.6 million, or $1.16 per diluted share, in the first nine months of 2014.


1


Management Commentary

"The third quarter was a record quarter, driven by our successful execution efforts for launching and marketing our products, as well as through supporting our leaders in developing effective sales techniques,” commented Chris Sharng, President of Natural Health Trends Corp. “Our record third quarter revenue and net income both posted significant sequential increases and more than doubled versus the third quarter last year. Strengthened consumer demand for our products in China, coupled with strong growth in our active member base helped contribute to this impressive growth.”

Mr. Sharng continued, “We were very pleased to report that we have initiated the process for submitting a direct-selling license application in the Chinese province of Guangdong. We are hopeful that a license will enable us to drive incremental growth by leveraging our growing brand recognition in China as well as our Hong Kong distribution infrastructure. As we are still very early in this process, timing for obtaining our direct-selling license remains uncertain. In the interim, we will remain highly focused on managing all aspects of our core business that are within our control.”

Balance Sheet and Cash Flow

•
At September 30, 2015, cash and cash equivalents totaled $94.6 million, compared to $74.4 million at June 30, 2015.

•
Net cash provided by operating activities in the third quarter of 2015 was $25.7 million, compared to $8.1 million in the third quarter of 2014. For the first nine months of 2015, net cash provided by operating activities was $65.2 million, compared to $20.9 million in the first nine months of 2014.

•
On October 21, 2015, the Company’s Board of Directors declared a quarterly cash dividend of $0.05 per share on outstanding common stock, a 25% increase over the prior quarter dividend, which will be payable on November 20, 2015 to stockholders of record as of November 10, 2015.

•
During the three months ended September 30, 2015, the Company repurchased a total of $5.0 million of its common stock under its existing $15.0 million stock repurchase program, which remains available for repurchase through December 2016. The Company expects to continue executing against the $15.0 million stock repurchase program and anticipates it will repurchase an additional $5.0 million under this program soon. Since November 2014, the Company has repurchased 800,618 shares of common stock at a cost of $15.6 million.

"Our healthy liquidity position and strong cash flow generation affords us the flexibility and resources to continue investing in the growth of our business while at the same time providing returns to our shareholders through cash dividends and repurchasing shares of our common stock," added Scott Davidson, Senior Vice President and Chief Financial Officer of Natural Health Trends Corp.


2


Third Quarter 2015 Financial Results Conference Call

Management will host a conference call to discuss the third quarter 2015 financial results today, Tuesday, October 27, 2015 at 4:30 p.m. Eastern Time. The conference call details are as follows:
Date:
Tuesday, October 27, 2015
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:
13621699
Webcast:
http://public.viavid.com/index.php?id=116470

For those unable to participate during the live broadcast, a replay of the call will also be available from 7:30 p.m. Eastern Time on October 27, 2015 through 11:59 p.m. Eastern Time on November 10, 2015 by dialing 1-877-870-5176 (domestic) and 1-858-384-5517 (international) and referencing the replay pin number: 13621699.

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 6, 2015 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
Natural Health Trends Corp.
Tel: 310-541-0888
         
Investors:
Addo Communications
Tel: 310-829-5400

3


NATURAL HEALTH TRENDS CORP.
CONSOLIDATED BALANCE SHEETS
(In thousands)
 
September 30, 2015
 
December 31, 2014
 
(Unaudited)
 
 
ASSETS
 
 
 
Current assets:
 
 
 
Cash and cash equivalents
$
94,565

 
$
44,816

Accounts receivable
305

 
107

Inventories, net
6,613

 
3,760

Other current assets
1,706

 
930

Total current assets
103,189

 
49,613

Property and equipment, net
917

 
476

Goodwill
1,764

 
1,764

Restricted cash
3,231

 
315

Other assets
610

 
372

Total assets
$
109,711

 
$
52,540

LIABILITIES AND STOCKHOLDERS’ EQUITY
 
 
 
Current liabilities:
 
 
 
Accounts payable
$
4,371

 
$
2,232

Income taxes payable
458

 
268

Accrued commissions
20,643

 
8,853

Other accrued expenses
14,426

 
6,743

Deferred revenue
4,515

 
2,687

Deferred tax liability
65

 
65

Amounts held in eWallets
13,419

 
2,064

Other current liabilities
1,590

 
1,513

Total current liabilities
59,487

 
24,425

Long-term incentive
1,436

 
1,665

Total liabilities
60,923

 
26,090

Commitments and contingencies
 
 
 
Stockholders’ equity:
 
 
 
Preferred stock
—

 
—

Common stock
13

 
13

Additional paid-in capital
85,940

 
85,750

Accumulated deficit
(22,617
)
 
(54,799
)
Accumulated other comprehensive income
17

 
62

Treasury stock, at cost
(14,565
)
 
(4,576
)
Total stockholders’ equity
48,788

 
26,450

Total liabilities and stockholders’ equity
$
109,711

 
$
52,540



4


NATURAL HEALTH TRENDS CORP.
CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
(In thousands, except per share data)
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
2015
 
2014
 
2015
 
2014
 
 
 
 
 
 
 
 
Net sales
$
80,779

 
$
31,833

 
$
191,204

 
$
89,184

Cost of sales
16,001

 
6,756

 
39,025

 
19,517

Gross profit
64,778

 
25,077

 
152,179

 
69,667

Operating expenses:
 
 
 
 
 
 
 
Commissions expense
40,036

 
14,509

 
93,443

 
40,390

Selling, general and administrative expenses
9,867

 
5,076

 
24,571

 
14,454

Depreciation and amortization
72

 
28

 
181

 
72

Total operating expenses
49,975

 
19,613

 
118,195

 
54,916

Income from operations
14,803

 
5,464

 
33,984

 
14,751

Other expense, net
(135
)
 
(31
)
 
(112
)
 
(39
)
Income before income taxes
14,668

 
5,433

 
33,872

 
14,712

Income tax provision
137

 
46

 
330

 
144

Net income
14,531

 
5,387

 
33,542

 
14,568

Preferred stock dividends
—

 
(2
)
 
—

 
(9
)
Net income available to common stockholders
$
14,531

 
$
5,385

 
$
33,542

 
$
14,559

Income per common share:
 
 
 
 
 
 
 
Basic
$
1.19

 
$
0.43

 
$
2.71

 
$
1.22

Diluted
$
1.18

 
$
0.42

 
$
2.70

 
$
1.16

Weighted-average number of common shares outstanding:
 
 
 
 
 
 
 
Basic
12,239

 
12,455

 
12,364

 
11,883

Diluted
12,284

 
12,774

 
12,439

 
12,424

Cash dividends declared per share:
 
 
 
 
 
 
 
Common
$
0.040

 
$
0.010

 
$
0.090

 
$
0.020

Series A preferred stock
$
—

 
$
0.027

 
$
—

 
$
0.862




5


NATURAL HEALTH TRENDS CORP.
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(In thousands)
 
Nine Months Ended September 30,
 
2015
 
2014
CASH FLOWS FROM OPERATING ACTIVITIES:
 
 
 
Net income
$
33,542

 
$
14,568

Adjustments to reconcile net income to net cash provided by operating activities:
 
 
 
Depreciation and amortization
181

 
72

Stock-based compensation
56

 
42

Cumulative translation adjustment realized in net income
(82
)
 
—

Changes in assets and liabilities:
 
 
 
Accounts receivable
(217
)
 
25

Inventories, net
(2,904
)
 
(2,547
)
Other current assets
(736
)
 
(205
)
Other assets
(264
)
 
(16
)
Accounts payable
2,140

 
1,359

Income taxes payable
190

 
140

Accrued commissions
11,832

 
3,218

Other accrued expenses
8,397

 
3,479

Deferred revenue
1,844

 
346

Amounts held in eWallets
11,354

 
—

Other current liabilities
93

 
442

Long-term incentive
(229
)
 
—

Net cash provided by operating activities
65,197

 
20,923

CASH FLOWS FROM INVESTING ACTIVITIES:
 
 
 
Purchases of property and equipment, net
(645
)
 
(199
)
Increase in restricted cash
(3,028
)
 
—

Net cash used in investing activities
(3,673
)
 
(199
)
CASH FLOWS FROM FINANCING ACTIVITIES:
 
 
 
Proceeds from exercise of warrants
309

 
4,948

Repurchase of common stock
(11,079
)
 
(97
)
Dividends paid
(1,111
)
 
(348
)
Net cash (used in) provided by financing activities
(11,881
)
 
4,503

Effect of exchange rates on cash and cash equivalents
106

 
(29
)
Net increase in cash and cash equivalents
49,749

 
25,198

CASH AND CASH EQUIVALENTS, beginning of period
44,816

 
14,550

CASH AND CASH EQUIVALENTS, end of period
$
94,565

 
$
39,748

NON-CASH FINANCING ACTIVITY:
 
 
 
Conversion of preferred stock
$
—

 
$
56

Issuance of treasury stock
666

 
—



6


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