Natural Health Trends' Cuts to Keep Par with Sales Drop

DALLAS—Natural Health Trends Corp. (NASDAQ:BHIP) has been trying to cut costs to stay ahead of previously declining sales, which stabilized during the fourth quarter (4Q) at $13.0 million, less than half the comparable 2006 mark. Sales for the year were also cut in half, settling at $76.5 million. While the operational cost management plan has been catching up, 4Q saw a net loss of $15.3 million, including $12.4 million of goodwill impairment and $0.6 million of severance costs.

"Last year, our revenues decreased faster than we could cut costs," explained Chris Sharng, president. "But, on a monthly basis, our sales appear to have stabilized, particularly in our biggest market of Hong Kong. Revenues were roughly $4 million a month from October through March, with the exception of an expected dip over the Chinese New Year in early February. We believe that we have regained revenue momentum through certain personnel changes, compensation plan changes and dynamic training sessions to which our members seem to be enthusiastically responding. In fact, our estimate is that March was our best month in terms of revenue since October." He added with the cost cutting program began late last year having been almost fully realized, the company (NaturalHealthTrendsCorp.com) is comfortable at this point with our levels of both cash and cash flow. We believe that the stabilized top line and a much lower cost structure will further positively impact our cash flow."

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