Exhibit 99.1
NATURAL HEALTH TRENDS CORP. ANNOUNCES FISCAL 2004 RESULTS
NET SALES UP 113%
ACTIVE DISTRIBUTORS UP 75%
DALLAS, TX, March 23, 2005 -- Natural Health Trends Corp. (NASDAQ NMS: BHIP), an
international direct-selling company, today announced its financial results for
the fourth quarter and year ended December 31, 2004.
Fourth quarter net sales in 2004 were approximately $36.3 million, up 61% from
$22.6 million for the comparable period a year ago. The growth in sales was
attributable to an increase in the number of distributors. As of December 31,
2004, the operating subsidiaries of Natural Health Trends Corp. had
approximately 133,000 active distributors, up from 76,000 at the end of 2003.
Gross profit margin for the fourth quarter was $29.0 million, or 79.8%, versus
$17.1 million, or 75.5% a year ago. The improvement can be mainly attributed to
the elimination of commissions paid to Marketvision Communications Corp., the
Company's Internet-based distributor system service provider, which was acquired
by the Company on March 31, 2004.
For the fourth quarter, the Company recorded a net loss of approximately
$802,000, or a loss of $0.12 per fully diluted share. In the fourth quarter of
2003, the Company had a net income of $1.1 million, or $0.19 per fully diluted
share. The decrease in net income was due to higher commissions paid to
distributors and selling, general and administrative expenses, or SG&A, partly
offset by the margin flow-through of the higher volume.
Mark Woodburn, President of Natural Health Trends Corp., said, "The fourth
quarter of 2004 capped off a very respectable year for Natural Health Trends
Corp. We are very pleased with our top-line growth for both the quarter and the
year. We made significant investment in building our markets and the pay-off is
not immediate. We are obviously less than satisfied with the bottom line results
and are working to ensure that 2005 shows improvement in this area. Still we
finished 2004 with over $22 million in cash and working capital of $17.5
million. This gives us liquidity to rapidly develop newly entered markets. We
also had $9.6 million in deferred revenue as of December 31, 2004. Approximately
$4.7 million of the deferred revenue was related to membership enrollment, which
when recognized as revenue has no cost of sales or commission expenses
associated with it. The $4.9 million was for product orders taken but unshipped
as of year end. When we do ship these orders and recognize them as revenue,
related product costs and applicable commissions will be expensed."
For the twelve months ended December 31, 2004, net sales rose 113% to
approximately $133.2 million compared to $62.6 million for fiscal year 2003.
Two-thirds of this rise was attributable to the increased number of active
Lexxus distributors while the balance represented higher sales generated per
distributor.
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Gross profit was approximately $103.9 million or 78.0% of net sales for the
twelve months ended December 31, 2004, compared with approximately $48.9 million
or 78.1% of net sales for the twelve months ended December 31, 2003.
Net income was approximately $1.2 million, or $0.18 per fully diluted share, for
the twelve months ended December 31, 2004 compared to net income of
approximately $4.7 million, or $0.83 per fully diluted share, for the preceding
year. The decrease in net income for the full year is due to higher distributor
commissions as a percentage of sales as well as increased SG&A spending, partly
offset by the margin flow-through on greater sales.
As disclosed in a Form 8-K filed on March 23, 2005, the financial statements of
the fourth quarter of 2003 and the first quarter of 2004 have been revised to
address certain 2003 revenue and expense cut-off issues. With the revisions, the
revenue in the fourth quarter of 2003 was reduced by approximately $310,000, and
the net income was reduced by approximately $650,000. The revenue and net income
of the first quarter of 2004 were increased by $310,000 and $650,000
respectively.
Chris Sharng, CFO of Natural Health Trends Corp., said, "The increase in SG&A
expenses for the fourth quarter as well as the full year was driven by our
increased marketing and promotional activities world-wide, higher credit card
fees, increased audit and legal costs, higher personnel costs, special expenses
the Company incurred as a result of the negative television program aired in
China in April 2004 and the costs associated with building new markets in China,
Mexico and Japan. We also had more depreciation and amortization due to the
Marketvision acquisition."
Woodburn concluded, "During 2004, we began to devote more of our resources to
building a solid infrastructure upon which we can continue to drive our business
forward. With an experienced management team now in place, combined with strong
distributor growth in 2004, we are optimistic about our performance in the
coming year. We expect to start generating revenue from the Japanese and Mexican
markets, the world's 2nd and 4th largest direct-selling markets, in the next few
months. We also foresee continuing to increase our reach inside our established
markets. New products are in the pipeline which we hope will have a significant
positive impact on our revenues before the end of the year."
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Safe Harbor Statement under the Private Securities Litigation Reform Act
of 1995 -- Forward-looking statements in this release do not constitute
guarantees of future performance. Such forward-looking statements are
subject to risks and uncertainties that could cause our actual results to
differ materially from those anticipated. Such statements may relate,
among other things, to our relationship with our distributors; our need to
continually recruit new distributors; our internal controls and accounting
methods that may require further modification; regulatory matters
governing our products and network marketing system; our ability to
recruit and maintain key management; adverse publicity associated with our
products or direct selling organizations; product liability claims; our
reliance on outside manufacturers; risks associated with operating
internationally, including foreign exchange risks; product concentration;
dependence on increased penetration of existing markets; the competitive
nature of our business; and our ability to generate sufficient cash to
operate and expand our business. For a more detailed discussion of the
risks and uncertainties of our business, please refer to our Annual Report
on Form 10-KSB for the fiscal year ended December 31, 2003 filed with the
Securities and Exchange Commission. We assume no obligation to update any
forward-looking information contained in this press release or with
respect to the announcements described herein.
NATURAL HEALTH TRENDS CORP. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In Thousands, Except Share Data)
December 31,
----------------------------
2003 2004
------------ ------------
As Restated
ASSETS
Current assets:
Cash and cash equivalents $ 11,133 $ 22,324
Restricted cash 1,363 2,395
Accounts receivable 239 209
Inventories, net 3,580 13,991
Other current assets 1,646 2,096
------------ ------------
Total current assets 17,961 41,015
Property and equipment, net 883 579
Goodwill 208 14,145
Intangible assets, net 509 5,474
Deferred tax assets -- 434
Other assets 779 458
------------ ------------
Total assets $ 20,340 $ 62,105
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LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 3,820 $ 2,248
Income taxes payable 1,443 1,797
Accrued distributor commissions 1,027 4,259
Other accrued expenses 1,012 3,250
Deferred revenue 6,943 9,551
Current portion of debt 168 796
Other current liabilities 659 1,595
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Total current liabilities 15,072 23,496
Debt 31 22
------------ ------------
Total liabilities 15,103 23,518
Commitments and contingencies
Minority interest 413 598
Mezzanine common stock -- 960
Stockholders' equity:
Preferred stock, $1,000 par value; 1,500,000 shares authorized; none issued
and outstanding -- --
Common stock, $0.001 par value; 500,000,000 shares authorized, 4,656,463
and 6,819,667 shares issued and outstanding at December 31, 2003 and
2004, respectively 4 7
Additional paid-in capital 34,007 64,933
Accumulated deficit (29,040) (27,799)
Accumulated other comprehensive loss:
Foreign currency translation adjustment (147) (112)
------------ ------------
Total stockholders' equity 4,824 37,029
------------ ------------
Total liabilities and stockholders' equity $ 20,340 $ 62,105
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NATURAL HEALTH TRENDS CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(In Thousands, Except Per Share Data)
Quarter Ended December 31,
---------------------------
2003 2004
------------ ------------
As Restated
Net sales $ 22,612 $ 36,312
Cost of sales 5,550 7,334
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Gross profit 17,062 28,978
Operating expenses:
Distributor commissions 11,057 18,834
Selling, general and administrative expenses 5,464 10,652
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Total operating expenses 16,521 29,486
------------ ------------
Income (loss) from operations 541 (508)
Other income, net 191 258
------------ ------------
Income (loss) before income taxes and minority interest 732 (250)
Income tax (provision) benefit 340 (553)
Minority interest 60 1
------------ ------------
Net income (loss) $ 1,132 $ (802)
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Income (loss) per common share:
Basic $ 0.24 $ (0.12)
============ ============
Diluted $ 0.19 $ (0.12)
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Weighted-average number of shares outstanding:
Basic 4,656 6,745
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Diluted 5,812 6,745
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NATURAL HEALTH TRENDS CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(In Thousands, Except Per Share Data)
Year Ended December 31,
----------------------------
2003 2004
------------ ------------
As Restated
Net sales $ 62,576 $ 133,225
Cost of sales 13,676 29,321
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Gross profit 48,900 103,904
Operating expenses:
Distributor commissions 27,555 68,579
Selling, general and administrative expenses 15,770 33,102
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Total operating expenses 43,325 101,681
------------ ------------
Income from operations 5,575 2,223
Other income (expense), net (1) 137
------------ ------------
Income before income taxes and minority interest 5,574 2,360
Income tax provision (860) (663)
Minority interest 14 (456)
------------ ------------
Net income 4,728 1,241
Preferred stock dividends 1 --
------------ ------------
Net income available to common stockholders $ 4,727 $ 1,241
============ ============
Income per common share:
Basic $ 1.03 $ 0.22
============ ============
Diluted $ 0.83 $ 0.18
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Weighted-average number of shares outstanding:
Basic 4,609 5,580
============ ============
Diluted 5,688 6,822
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