8-K
Natural Health Trends Corp (NHTC)
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
| August 5, 2020 |
|---|
| 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)
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):
| ☐ | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
|---|---|
| ☐ | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
| --- | --- |
| ☐ | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
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| ☐ | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
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Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
| ☐ | Emerging growth company |
|---|---|
| ☐ | If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. |
| --- | --- |
Securities registered pursuant to Section 12(b) of the Exchange Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered |
|---|---|---|
| Common Stock, par value $0.001 per share | NHTC | The NASDAQ Stock Market LLC |
Item 2.02 Results of Operations and Financial Condition.
On August 5, 2020, Natural Health Trends Corp. issued an earnings release announcing its results for the quarter ended June 30, 2020. 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 August 5, 2020 | |
| 104 | Cover Page Interactive Data File (embedded within the Inline XBRL document). |
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: August 5, 2020
| NATURAL HEALTH TRENDS CORP. | |
|---|---|
| By: | /s/ Timothy S. Davidson |
| Timothy S. Davidson | |
| Senior Vice President and Chief Financial Officer |
ex_191518.htm
Exhibit 99.1
Natural Health Trends Reports Second Quarter 2020 Financial Results
| – | Revenue of $16.4 million increased 10% from the first quarter of 2020 |
|---|---|
| – | Aggressive cost cutting measures facilitated a return to profitability in the second quarter of 2020 |
| --- | --- |
| – | Strong balance sheet with ample liquidity and $93.2 million in cash and cash equivalents |
| --- | --- |
| – | Declared a quarterly cash dividend of $0.20 per share |
HONG KONG – August 5, 2020 – 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 second quarter ended June 30, 2020.
Second Quarter 2020 Financial Highlights
| • | Revenue of $16.4 million increased 10% compared to $14.9 million in the first quarter of 2020 and decreased 30% compared to $23.4 million in the second quarter of 2019. |
|---|---|
| • | Operating income was $183,000 compared to a loss of $1.4 million in the first quarter of 2020 and a loss of $4,000 in the second quarter of 2019. |
| --- | --- |
| • | Net income was $34,000, or break-even per diluted share, compared to a net loss of $573,000, or $0.05 per diluted share, in the first quarter of 2020 and net income of $397,000, or $0.04 per diluted share, in the second quarter of 2019. |
| --- | --- |
| • | The number of Active Members^1^ decreased 4% to 54,370 at June 30, 2020 compared to 56,490 at March 31, 2020, and decreased 31% compared to 78,280 at June 30, 2019. |
| --- | --- |
| ^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 2020 Financial Highlights
| • | Revenue of $31.4 million decreased 27% compared to $42.8 million in the first six months of 2019. |
|---|---|
| • | Operating loss was $1.3 million compared to a loss of $2.7 million in the first six months of 2019. |
| --- | --- |
| • | Net loss was $539,000, or $0.05 per diluted share, compared to a net loss of $1.5 million, or $0.14 per diluted share, in the first six months of 2019. |
| --- | --- |
Management Commentary
“The second quarter marked a continuation of the challenging macroeconomic climate we experienced during the first quarter of 2020 as the COVID-19 pandemic persisted into the summer months,” commented Chris Sharng, President of Natural Health Trends Corp. “We were very pleased with the stability and resilience of our field leadership which helped us generate a 10% sequential increase in our second quarter revenue to $16.4 million. In addition, our aggressive cost reduction measures enabled us to return to profitability during the quarter. As previously announced, we put a program in place in the second half of 2019 to position us for increased operating efficiencies moving forward. Through this program, we made significant progress in reducing our SG&A expenses through reductions of nearly 20% versus the first quarter of 2020 and more than one-third versus the prior year period.”
Mr. Sharng concluded, “I am very pleased with our ability to manage elements within our control throughout this global crisis which led us to achieving positive growth in total revenue, gross profit, operating income and net income for the second quarter of 2020 over the prior quarter. Further, our strong balance sheet, ample liquidity position and conservative capital allocation philosophy, which is designed to help support our members and business, enabled us to continue returning value to our stockholders through our quarterly cash dividend. I’d like to once again thank all of our leaders who have proven themselves time and time again in navigating difficult and complex operating environments such as this one. We remain cautiously optimistic the macroeconomic situation will continue to improve in the second half of 2020.”
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Balance Sheet and Cash Flow
| • | Net cash used in operating activities was $1.0 million in the first six months of 2020, compared to $15.1 million in the first six months of 2019. |
|---|---|
| • | Total cash and cash equivalents were $93.2 million at June 30, 2020, down slightly from $95.4 million at March 31, 2020. |
| --- | --- |
| • | On August 3, 2020, the Company’s Board of Directors declared a quarterly cash dividend of $0.20 on each share of common stock outstanding. The dividend will be payable on August 28, 2020 to stockholders of record as of August 18, 2020. |
| --- | --- |
Second Quarter 2020 Financial Results Conference Call
Management will host a conference call to discuss the second quarter 2020 financial results today, Wednesday, August 5, 2020 at 11:30 a.m. Eastern Time. The conference call details are as follows:
| Date: | Wednesday, August 5, 2020 |
|---|---|
| Time: | 11:30 a.m. Eastern Time / 8:30 a.m. Pacific Time |
| Dial-in: | 1-877-407-0789 (Domestic)<br><br> <br>1-201-689-8562 (International) |
| Conference ID: | 13706115 |
| Webcast: | http://public.viavid.com/index.php?id=140483 |
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 August 5, 2020 through 11:59 p.m. Eastern Time on August 19, 2020 by dialing 1-844-512-2921 (domestic) and 1-412-317-6671 (international) and referencing the replay pin number: 13706115.
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, the Americas, 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 9, 2020 with the Securities and Exchange Commission (SEC), as well as in subsequent reports filed this year with the SEC. The Company assumes no obligation to update any forward-looking information contained in this press release or with respect to the announcements described herein.
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CONTACTS:
Company Contact:
Scott Davidson
Senior Vice President and Chief Financial Officer
Natural Health Trends Corp.
Tel (Hong Kong): +852-3107-0800
Tel (U.S.): 310-541-0888
scott.davidson@nhtglobal.com
Investor Contact:
ADDO Investor Relations
Tel: 310-829-5400
investor.relations@nhtglobal.com
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NATURAL HEALTH TRENDS CORP.
CONSOLIDATED BALANCE SHEETS
(In thousands, except share data)
| June 30, 2020 | December 31, 2019 | |||||
|---|---|---|---|---|---|---|
| (Unaudited) | ||||||
| ASSETS | ||||||
| Current assets: | ||||||
| Cash and cash equivalents | $ | 93,206 | $ | 96,035 | ||
| Inventories | 4,114 | 6,404 | ||||
| Other current assets | 5,057 | 5,936 | ||||
| Total current assets | 102,377 | 108,375 | ||||
| Property and equipment, net | 599 | 735 | ||||
| Operating lease right-of-use assets | 3,096 | 3,135 | ||||
| Restricted cash | 513 | 3,390 | ||||
| Deferred tax asset | 1,163 | 2,039 | ||||
| Other assets | 729 | 823 | ||||
| Total assets | $ | 108,477 | $ | 118,497 | ||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||
| Current liabilities: | ||||||
| Accounts payable | $ | 1,084 | $ | 680 | ||
| Accrued commissions | 3,113 | 2,931 | ||||
| Other accrued expenses | 1,763 | 2,387 | ||||
| Deferred revenue | 2,645 | 4,506 | ||||
| Amounts held in eWallets | 11,438 | 12,938 | ||||
| Operating lease liabilities | 1,247 | 1,655 | ||||
| Other current liabilities | 1,438 | 1,205 | ||||
| Total current liabilities | 22,728 | 26,302 | ||||
| Income taxes payable | 13,748 | 15,365 | ||||
| Deferred tax liability | 203 | 202 | ||||
| Operating lease liabilities | 1,963 | 1,564 | ||||
| Total liabilities | 38,642 | 43,433 | ||||
| Stockholders’ equity: | ||||||
| Preferred stock | — | — | ||||
| Common stock | 13 | 13 | ||||
| Additional paid-in capital | 86,102 | 86,102 | ||||
| Retained earnings | 11,008 | 16,117 | ||||
| Accumulated other comprehensive loss | (1,384 | ) | (1,264 | ) | ||
| Treasury stock, at cost | (25,904 | ) | (25,904 | ) | ||
| Total stockholders’ equity | 69,835 | 75,064 | ||||
| Total liabilities and stockholders’ equity | $ | 108,477 | $ | 118,497 |
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NATURAL HEALTH TRENDS CORP.
CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
(In thousands, except per share data)
| Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|
| 2020 | 2019 | 2020 | 2019 | ||||||||
| Net sales | $ | 16,404 | $ | 23,428 | $ | 31,352 | $ | 42,756 | |||
| Cost of sales | 4,817 | 5,407 | 9,331 | 10,631 | |||||||
| Gross profit | 11,587 | 18,021 | 22,021 | 32,125 | |||||||
| Operating expenses: | |||||||||||
| Commissions expense | 7,113 | 11,398 | 13,716 | 20,896 | |||||||
| Selling, general and administrative expenses | 4,291 | 6,627 | 9,570 | 13,942 | |||||||
| Total operating expenses | 11,404 | 18,025 | 23,286 | 34,838 | |||||||
| Income (loss) from operations | 183 | (4 | ) | (1,265 | ) | (2,713 | ) | ||||
| Other income, net | 125 | 373 | 218 | 805 | |||||||
| Income (loss) before income taxes | 308 | 369 | (1,047 | ) | (1,908 | ) | |||||
| Income tax provision (benefit) | 274 | (28 | ) | (508 | ) | (382 | ) | ||||
| Net income (loss) | $ | 34 | $ | 397 | $ | (539 | ) | $ | (1,526 | ) | |
| Net income (loss) per common share: | |||||||||||
| Basic | $ | 0.00 | $ | 0.04 | $ | (0.05 | ) | $ | (0.14 | ) | |
| Diluted | $ | 0.00 | $ | 0.04 | $ | (0.05 | ) | $ | (0.14 | ) | |
| Weighted-average common shares outstanding: | |||||||||||
| Basic | 10,580 | 11,082 | 10,532 | 11,207 | |||||||
| Diluted | 11,424 | 11,135 | 10,532 | 11,207 |
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NATURAL HEALTH TRENDS CORP.
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(In thousands)
| Six Months Ended June 30, | ||||||
|---|---|---|---|---|---|---|
| 2020 | 2019 | |||||
| CASH FLOWS FROM OPERATING ACTIVITIES: | ||||||
| Net loss | $ | (539 | ) | $ | (1,526 | ) |
| Adjustments to reconcile net loss to net cash used in operating activities: | ||||||
| Depreciation and amortization | 202 | 189 | ||||
| Noncash lease expense | 834 | 914 | ||||
| Deferred income taxes | 870 | (3 | ) | |||
| Changes in assets and liabilities: | ||||||
| Inventories | 2,314 | 1,881 | ||||
| Other current assets | 845 | (752 | ) | |||
| Other assets | 82 | (35 | ) | |||
| Accounts payable | 402 | (956 | ) | |||
| Accrued commissions | 212 | (5,475 | ) | |||
| Other accrued expenses | (617 | ) | (1,946 | ) | ||
| Deferred revenue | (1,872 | ) | (3,409 | ) | ||
| Amounts held in eWallets | (1,560 | ) | (765 | ) | ||
| Operating lease liabilities | (811 | ) | (964 | ) | ||
| Income taxes payable | (1,617 | ) | (1,617 | ) | ||
| Other current liabilities | 237 | (318 | ) | |||
| Long-term incentive | — | (277 | ) | |||
| Net cash used in operating activities | (1,018 | ) | (15,059 | ) | ||
| CASH FLOWS FROM INVESTING ACTIVITIES: | ||||||
| Purchases of property and equipment | (68 | ) | (141 | ) | ||
| Net cash used in investing activities | (68 | ) | (141 | ) | ||
| CASH FLOWS FROM FINANCING ACTIVITIES: | ||||||
| Repurchase of common stock | — | (6,682 | ) | |||
| Dividends paid | (4,570 | ) | (2,736 | ) | ||
| Net cash used in financing activities | (4,570 | ) | (9,418 | ) | ||
| Effect of exchange rates on cash, cash equivalents and restricted cash | (50 | ) | 73 | |||
| Net decrease in cash, cash equivalents and restricted cash | (5,706 | ) | (24,545 | ) | ||
| CASH, CASH EQUIVALENTS AND RESTRICTED CASH, beginning of period | 99,425 | 135,651 | ||||
| CASH, CASH EQUIVALENTS AND RESTRICTED CASH, end of period | $ | 93,719 | $ | 111,106 | ||
| SUPPLEMENTAL DISCLOSURES OF OTHER CASH FLOW INFORMATION: | ||||||
| Issuance of treasury stock for employee awards, net | $ | — | $ | 377 | ||
| Right-of-use assets obtained in exchange for operating lease liabilities | $ | 1,081 | $ | 4,697 |
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