DALLAS, Apr 29, 2005 (BUSINESS WIRE) -- Natural Health Trends Corp. (NASDAQ NMS: BHIP), an international direct-selling company, today announced its financial results for the quarter ended March 31, 2005.
First quarter net sales in 2005 were approximately $42.8 million, up 10% over the $38.7 million for the comparable period a year ago. Increases in sales were largely due to additional revenues recorded by the Company's operations in Eastern Europe, South Korea and North America. The growth in sales was also attributable to a 5% product price increase in January 2005 as well as an increase in the number of active independent distributors. As of March 31, 2005, the operating subsidiaries of Natural Health Trends Corp. had approximately 135,000 active distributors, compared to 92,500 at the end of the first quarter of 2004.
Gross profit margin as a percent of net sales for the first quarter was 80.9%, versus 78.7% a year ago. The improvement can be 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 as well as the January 2005 price increase, which also lowered distributor commissions as a percent of revenue to 49.8%, versus 51.0% a year ago.
Selling, general and administrative expenses ("SG&A") for the quarter ended March 31, 2005 were $9.2 million, compared to $6.0 million a year ago. The increase in SG&A was due to additional marketing-related expenses primarily in Eastern Europe and Hong Kong, greater professional fees in the U.S., increased spending for our new operations in Mexico, Japan and China, additional personnel costs as well as depreciation expenses associated with assets acquired in the Marketvision acquisition.
Income from operations in the first quarter of 2005 was $4.1 million, compared to $4.8 million a year ago. Net income was $2.8 million or $0.34 earnings per fully diluted share for the quarter ended March 31, 2005, versus $3.8 million or $0.64 earnings per fully diluted share in the comparable quarter of 2004.
Chris Sharng, CFO of Natural Health Trends Corp., said, "We are conscious about growing our business in a more disciplined fashion and we are pleased with our progress this quarter. However, in light of the fact that the Company did not have any major marketing events during the first quarter, we will continue to focus on cost containment and measured growth. Nevertheless, we are very excited that significant marketing activities currently scheduled to occur during the second quarter will substantially increase market awareness, and hopefully, our net sales."
Mark Woodburn, President and CEO of the Company said, "We are extremely pleased with our strong start in the new year. Our top line continues to grow significantly. Our KGC subsidiary just hosted an event in Moscow with 10,000 people in attendance. We are looking forward to our North American convention in Dallas on April 29th and 30th, where we are expecting up to 1,500 attendants. These events have proven to be highly effective in increasing the number of distributors. We are also very enthusiastic about our new products currently in the pipeline which we hope will have a significant positive impact on our future revenues. Furthermore, we expect to start generating revenue from our Mexican subsidiary toward the end of the second quarter. Also planned for in the second quarter, we intend to begin opening as many as four "experience centers" in China, where prospective consumers can sample our products. In order to fully and effectively serve our Chinese consumers, we plan on opening a manufacturing facility in China during the second half of this year. Finally, our Japanese subsidiary is expected to start producing sales in the third quarter. As you can see, we have a very ambitious schedule for this year. Fortunately, we hired experienced executives and professionals to expand our senior management team in the last several months to help execute this very aggressive slate of projects."
Due to its distributor convention on April 29th and 30th in Dallas, the Company will hold its investor conference call at 11 a.m. EDT on Monday, May 2nd. Those who wish to participate in the conference call may telephone 888-335-6674 approximately 15 minutes before 11 a.m. EDT. If you cannot participate in the call, but wish to hear it, you may log in to Natural Health Trends Corp.'s homepage at www.naturalhealthtrendscorp.com and click on either Windows Media or Real Player approximately 1 1/2 hours after the completion of the call.
Natural Health Trends Corp. is an international direct-selling company operating in more than 30 markets throughout Asia, North America, Eastern Europe and Latin America. The Company markets premium quality personal care products under the Lexxus brand and markets its nutritional supplement products under the Kaire brand. Additional information can be found on the Company's website, and management encourages interested parties to register for updated corporate information via e-mail on the Company's homepage, www.naturalhealthtrendscorp.com.
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-K for the fiscal year ended December 31, 2004 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.