NATURAL HEALTH TRENDS CORP - FORM 8-K - EX-99.1 - EXHIBIT 99.1 - February 8, 2017

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Exhibit 99.1

Natural Health Trends Reports Fourth Quarter and Full Year 2016 Financial Results

•
Record quarterly operating income increased 44% year-over-year to $20.0 million
•
Active Members1 increased 9% year-over-year to 118,960
•
Increased quarterly dividend 13% to $0.09 per share
•
Declared special dividend of $0.35 per share

LOS ANGELES – February 8, 2017 – 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 fourth quarter and full year ended December 31, 2016.

Fourth Quarter 2016 Financial Highlights

•
Total revenue decreased 15% to $62.3 million, compared to $73.7 million in the fourth quarter of 2015.

◦
Revenue from the Company’s Hong Kong operations, which represented 90% of total revenue, decreased 17% to $56.1 million, compared to $67.7 million in the fourth quarter of 2015.

◦
Revenue outside of Hong Kong increased 5% to $6.2 million, compared to $5.9 million in the fourth quarter of 2015.

•
Operating income increased 44% to $20.0 million, compared to $13.9 million in the fourth quarter of 2015.

•
Net income was $19.0 million, or $1.70 per diluted share, compared to $13.7 million, or $1.13 per diluted share, in the fourth quarter of 2015.

•
The number of Active Members1 decreased 3% to 118,960 at December 31, 2016, compared to 122,900 at September 30, 2016, and increased 9% compared to 109,360 at December 31, 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.


1


Full Year 2016 Financial Highlights

•
Total revenue increased 9% to $287.7 million, compared to $264.9 million for the full year of 2015.

•
Operating income increased 34% to $64.1 million, compared to $47.9 million for the full year of 2015.

•
Recognized income tax provision of $9.0 million primarily due to the expected partial repatriation of overseas profits, an increase of $8.4 million compared to the full year of 2015.

•
Net income was $55.1 million, or $4.83 per diluted share, compared to $47.2 million, or $3.82 per diluted share, for the full year of 2015.

Management Commentary

“2016 was a tremendous year for Natural Health Trends and reflected solid progress on our strategic plan despite some external challenges we experienced throughout the year,” commented Chris Sharng, President of Natural Health Trends Corp. “Specifically, the fourth quarter reflected a continuation of some of the challenges we discussed in the prior quarter, including a slowdown in Hangzhou, one of our top three markets, after the G20 summit was held in that city last September. Local members in the affected metropolitan area were unable to organize activities and events for weeks, which are key to their effectiveness. In addition, the Chinese yuan depreciated by 7% against the Hong Kong dollar which effectively increased the price of our products for our members residing in mainland China. We expect the first quarter will also present a difficult year-over-year comparison as we plan to launch various new products at our first-half event, the re-branded Ambassador Academy, in March versus in January last year.”

Mr. Sharng further commented, “We increased our full year 2016 revenue by 9% over 2015. We are working to strengthen growth through increased leader training and motivation while expanding our reach by geography and products. These efforts will be supported by technological advancements to enhance overall member communication and productivity. Further, due to the flexibility we have built into many of our promotions and incentive programs, we were able to generate record operating profit for the fourth quarter of 2016. I’m also very pleased we will once again be declaring a special dividend in the amount of $0.35 per share as well as increasing our regular quarterly dividend to $0.09 per share. Our ability to return capital to our stockholders is due to our robust operating cash flow driven by effective management of our working capital which has kept our balance sheet strong. We look forward to a bright future for Natural Health Trends.”


2


Balance Sheet and Cash Flow

•
Net cash provided by operating activities in the fourth quarter of 2016 was $16.9 million, compared to $16.1 million in the fourth quarter of 2015. For the full year of 2016, net cash provided by operating activities was $53.2 million, compared to $81.3 million for the full year of 2015.

•
On January 24, 2017, the Company's Board of Directors declared a quarterly dividend of $0.09 per share on outstanding common stock, which represents a 13% increase over the prior quarter dividend, and a special cash dividend of $0.35 per share on outstanding common stock. The dividends will be payable on March 3, 2017 to stockholders of record as of February 21, 2017.

•
For the full year of 2016, the Company repurchased $23.7 million of its common stock under its existing $70.0 million stock repurchase program. At December 31, 2016, approximately $32.0 million remained available for repurchases, inclusive of related estimated income tax.

Fourth Quarter and Full Year 2016 Financial Results Conference Call

Management will host a conference call to discuss the fourth quarter and full year 2016 financial results today, Wednesday, February 8, 2017 at 11:30 a.m. Eastern Time. The conference call details are as follows:
Date:
Wednesday, February 8, 2017
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:
13652401
Webcast:
http://public.viavid.com/index.php?id=122399

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 8, 2017 through 11:59 p.m. Eastern Time on February 22, 2017 by dialing 1-844-512-2921 (domestic) and 1-412-317-6671 (international) and referencing the replay pin number: 13652401.

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.


3


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 4, 2016 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
scott.davidson@nhtglobal.com
         
Investors:
ADDO Investor Relations
Tel: 310-829-5400
investor.relations@nhtglobal.com

4


NATURAL HEALTH TRENDS CORP.
CONSOLIDATED BALANCE SHEETS
(In thousands)
 
December 31, 2016
 
December 31, 2015
 
(Unaudited)
 
 
ASSETS
 
 
 
Current assets:
 
 
 
Cash and cash equivalents
$
125,921

 
$
104,914

Inventories, net
11,257

 
10,455

Other current assets
4,066

 
2,343

Total current assets
141,244

 
117,712

Property and equipment, net
1,388

 
894

Goodwill
1,764

 
1,764

Restricted cash
2,963

 
3,166

Other assets
692

 
616

Total assets
$
148,051

 
$
124,152

LIABILITIES AND STOCKHOLDERS’ EQUITY
 
 
 
Current liabilities:
 
 
 
Accounts payable
$
2,145

 
$
2,862

Income taxes payable
663

 
379

Accrued commissions
13,611

 
19,634

Other accrued expenses
14,989

 
16,703

Deferred revenue
4,948

 
4,011

Amounts held in eWallets
19,165

 
16,414

Other current liabilities
1,633

 
1,510

Total current liabilities
57,154

 
61,513

Deferred tax liability
268

 
60

Long-term incentive
8,190

 
5,770

Total liabilities
65,612

 
67,343

Commitments and contingencies
 
 
 
Stockholders’ equity:
 
 
 
Preferred stock
—

 
—

Common stock
13

 
13

Additional paid-in capital
86,574

 
85,963

Retained earnings (accumulated deficit)
38,548

 
(9,647
)
Accumulated other comprehensive loss
(807
)
 
(101
)
Treasury stock, at cost
(41,889
)
 
(19,419
)
Total stockholders’ equity
82,439

 
56,809

Total liabilities and stockholders’ equity
$
148,051

 
$
124,152



5


NATURAL HEALTH TRENDS CORP.
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
 
Three Months Ended December 31,
 
Year Ended
December 31,
 
2016
 
2015
 
2016
 
2015
 
(Unaudited)
 
(Unaudited)


 
 
Net sales
$
62,312

 
$
73,656

 
$
287,728

 
$
264,860

Cost of sales
11,937

 
15,073

 
54,903

 
54,098

Gross profit
50,375

 
58,583

 
232,825

 
210,762

Operating expenses:
 
 
 
 
 
 
 
Commissions expense
21,503

 
33,155

 
125,050

 
126,598

Selling, general and administrative expenses
8,740

 
11,453

 
43,245

 
36,024

Depreciation and amortization
118

 
82

 
394

 
263

Total operating expenses
30,361

 
44,690

 
168,689

 
162,885

Income from operations
20,014

 
13,893

 
64,136

 
47,877

Other income (expense), net
(99
)
 
28

 
(59
)
 
(84
)
Income before income taxes
19,915

 
13,921

 
64,077

 
47,793

Income tax provision
867

 
222

 
8,991

 
552

Net income
$
19,048

 
$
13,699

 
$
55,086

 
$
47,241

Income per common share:
 
 
 
 
 
 
 
Basic
$
1.70

 
$
1.13

 
$
4.84

 
$
3.84

Diluted
$
1.70

 
$
1.13

 
$
4.83

 
$
3.82

Weighted-average number of common shares outstanding:
 
 
 
 
 
 
 
Basic
11,219

 
12,118

 
11,382

 
12,302

Diluted
11,234

 
12,159

 
11,407

 
12,372

Cash dividends declared per common share
$
0.43

 
$
0.05

 
$
0.61

 
$
0.14



6


NATURAL HEALTH TRENDS CORP.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
 
Year Ended December 31,
 
2016
 
2015
 
(Unaudited)
 
 
CASH FLOWS FROM OPERATING ACTIVITIES:
 
 
 
Net income
$
55,086

 
$
47,241

Adjustments to reconcile net income to net cash provided by operating activities:
 
 
 
Depreciation and amortization
394

 
263

Stock-based compensation
104

 
86

Cumulative translation adjustment realized in net income
132

 
(82
)
Deferred income taxes
217

 
(15
)
Changes in assets and liabilities:
 
 
 
Inventories, net
(851
)
 
(6,762
)
Other current assets
(1,681
)
 
(1,025
)
Other assets
(90
)
 
(267
)
Accounts payable
(714
)
 
637

Income taxes payable
303

 
(115
)
Accrued commissions
(6,031
)
 
10,840

Other accrued expenses
51

 
10,714

Deferred revenue
947

 
1,331

Amounts held in eWallets
2,752

 
14,350

Other current liabilities
135

 
25

Long-term incentive
2,420

 
4,105

Net cash provided by operating activities
53,174

 
81,326

CASH FLOWS FROM INVESTING ACTIVITIES:
 
 
 
Purchases of property and equipment, net
(905
)
 
(710
)
Increase in restricted cash
—

 
(3,028
)
Net cash used in investing activities
(905
)
 
(3,738
)
CASH FLOWS FROM FINANCING ACTIVITIES:
 
 
 
Proceeds from exercise of warrants
—

 
309

Repurchase of common stock
(23,704
)
 
(16,071
)
Dividends paid
(6,891
)
 
(1,709
)
Net cash used in financing activities
(30,595
)
 
(17,471
)
Effect of exchange rates on cash and cash equivalents
(667
)
 
(19
)
Net increase in cash and cash equivalents
21,007

 
60,098

CASH AND CASH EQUIVALENTS, beginning of period
104,914

 
44,816

CASH AND CASH EQUIVALENTS, end of period
$
125,921

 
$
104,914

SUPPLEMENTAL DISCLOSURES OF OTHER CASH FLOW INFORMATION:
 
 
 
Cash paid for income taxes, net of refunds
$
8,791

 
$
707

Issuance of treasury stock
1,741

 
666


7

NATURAL HEALTH TRENDS CORP Reports