Full Press Release Details
Mannatech Reports Second Quarter Results
Sales and earnings decline; additional accrual made for litigation expenses
August 8, 2008 Mannatech, Incorporated (NASDAQ MTEX), a leading developer and provider of dietary supplements and skin care solutions, today reported a second quarter 2008 loss of $10.5 million or $0.40 cents per diluted
share, compared to net income of $1.5 million or $0.06 cents earnings per diluted share for the second quarter of 2007. The company reported a pre-tax loss of $16.9 million compared to pre-tax income of $2.6 million for the second quarter of 2007.
Results include accruals for various litigation and operating expenses, and a workforce reduction.
Second quarter net sales for 2008 were $86.8 million, a
decrease of 22.3%, compared to $111.7 million in the second quarter of 2007. The sales decline was largely due to a 31.8% decrease in North American sales compared to the second quarter of 2007. International sales were slightly below prior year,
down 2.2% in the second quarter of 2008 compared to the second quarter of 2007.
Wayne Badovinus, Mannatech s president and CEO commented, Our
U.S. market continues to experience a decline in net sales and recruiting impacted by ongoing litigation and a weaker economy. I have spent my first two months at Mannatech listening to and helping re-energize our independent Associates. Although
previously distracted by business challenges, they are beginning to refocus on the business opportunities in the huge wellness market. At the same time, we are moving toward resolution of the Texas Attorney General s concerns, many of which
have been addressed. We have already made the difficult decision to reduce headcount and have taken steps to control operating expenses.
Mr. Badovinus continued, Our focus is now on delivering superior Associate and customer service, expanding our research and science, and highlighting our proprietary products that enrich quality of lives. We cannot change the
past, but we are committed to creating a new future of opportunity. We believe we have the right products for today s emerging wellness market.
Total independent Associate and Member count based on a 12-month trailing period decreased to 554,000 for the second quarter of 2008 as compared to 569,000 for the second quarter of 2007. This 2.6% year over year decrease reflects a 20.6%
decrease in new Associates and Members compared to prior year. This was partially offset by higher retention of continuing independent Associates and Members which were up 26,000 in the second quarter of 2008, a 7.0% increase.
Year-to-date sales through June were $178.2 million, down 17.7% from 2007. The company reported a net loss for the six-month period of $12.8 million, compared to last
year s net income of $8.4 million. The diluted loss per share was $0.48, compared to income of $0.31 cents per diluted share for the six-months ended June 2007.
Mannatech will hold a conference call and webcast to discuss this announcement with investors on
Friday, August 8, 2008 at 9 a.m. CDT, 10 a.m. EDT. Investors may listen to the call by accessing Mannatech s website at www.mannatech.com.
Mannatech, Incorporated, is a global wellness solutions provider of innovative, high-quality, proprietary nutritional
supplements, topical and skin care products, and weight management products sold through independent Associates and Members located in the United States and the international markets of Canada, Australia, the United Kingdom, Japan, New Zealand, the
Republic of Korea, Taiwan, Denmark, Germany, and South Africa.
Please Note: This release contains forward-looking statements within the meaning of Section 27A of
the Securities Act of 1933, as amended, Section 21E of the Securities Exchange Act of 1934, as amended, and the Private Securities Litigation Reform Act of 1995. These forward-looking statements generally can be identified by use of phrases or
terminology such as intend , may , believes , plan , will continue , expects , potential , should , or other similar words or the negative of such terminology.
Similarly, descriptions of Mannatech s objectives, strategies, plans, goals or targets contained herein are also considered forward-looking statements. Mannatech believes this release should be read in conjunction with all of its filings with
the United States Securities and Exchange Commission and cautions its readers that these forward-looking statements are subject to certain events, risks, uncertainties, and other factors. Some of these factors include, among others, Mannatech s
inability to attract and retain associates and members, increases in competition, litigation, regulatory changes, and its planned growth into new international markets. Although Mannatech believes that the expectations, statements, and assumptions
reflected in these forward-looking statements are reasonable, it cautions readers to always consider all of the risk factors and any other cautionary statements carefully in evaluating each forward-looking statement in this release, as well as those
set forth in its latest Annual Report on Form 10-K and Quarterly Report on Form 10-Q, and other filings filed with the United States Securities and Exchange Commission, including its current reports on Form 8-K. All of the forward-looking statements
contained herein speak only as of the date of this release, and Mannatech has no intentions, and disclaims any obligation, to update or revise any forward-looking statements, whether as a result of new information, future results or otherwise.
Contact Information:
Corporate Communications
Net Sales in Dollars and as a Percentage of Consolidated Net Sales
Consolidated net sales shipped to customers by location for the three months ended June 30, 2008 and 2007 were as follows:
| 2008 | 2007 | |||||||||||
| (In millions, except percentages) | ||||||||||||
| United States | $ | 45.4 | 52.3 | % | $ | 67.7 | 60.6 | % | ||||
| Canada | 6.2 | 7.1 | % | 8.0 | 7.2 | % | ||||||
| Australia | 7.0 | 8.1 | % | 7.7 | 6.9 | % | ||||||
| United Kingdom | 1.2 | 1.4 | % | 1.6 | 1.4 | % | ||||||
| Japan | 11.7 | 13.5 | % | 11.4 | 10.1 | % | ||||||
| New Zealand | 1.4 | 1.6 | % | 1.9 | 1.7 | % | ||||||
| Republic of Korea | 9.8 | 11.3 | % | 10.4 | 9.3 | % | ||||||
| Taiwan | 1.4 | 1.6 | % | 1.4 | 1.3 | % | ||||||
| Denmark | 0.3 | 0.3 | % | 0.4 | 0.4 | % | ||||||
| Germany | 1.0 | 1.2 | % | 1.2 | 1.1 | % | ||||||
| South Africa | 1.4 | 1.6 | % | |||||||||
| Totals | $ | 86.8 | 100 | % | $ | 111.7 | 100 | % |
Consolidated net sales shipped to customers by location for the six months ended June 30, 2008 and 2007 were
| 2008 | 2007 | |||||||||||
| (In millions, except percentages) | ||||||||||||
| United States | $ | 97.3 | 54.6 | % | $ | 136.3 | 63.0 | % | ||||
| Canada | 12.2 | 6.8 | % | 14.6 | 6.8 | % | ||||||
| Australia | 14.4 | 8.1 | % | 15.0 | 6.9 | % | ||||||
| United Kingdom | 2.6 | 1.5 | % | 3.3 | 1.5 | % | ||||||
| Japan | 23.1 | 13.0 | % | 21.1 | 9.7 | % | ||||||
| New Zealand | 2.9 | 1.6 | % | 3.8 | 1.7 | % | ||||||
| Republic of Korea | 19.1 | 10.7 | % | 16.7 | 7.7 | % | ||||||
| Taiwan | 2.5 | 1.4 | % | 2.5 | 1.2 | % | ||||||
| Denmark | 0.6 | 0.3 | % | 0.9 | 0.4 | % | ||||||
| Germany | 2.1 | 1.2 | % | 2.3 | 1.1 | % | ||||||
| South Africa | 1.4 | 0.8 | % | |||||||||
| Totals | $ | 178.2 | 100 | % | $ | 216.5 | 100 | % |
The number of new and continuing independent Associates and Members who purchased our packs and products during
the 12-months ended June 30, 2008 and 2007 were as follows:
| 2008 | 2007 | Change | ||||||||||||||
| Number | Percentage | |||||||||||||||
| New | 158,000 | 28.5 | % | 199,000 | 34.9 | % | (41,000 | ) | (20.6 | %) | ||||||
| Continuing | 396,000 | 71.5 | % | 370,000 | 65.1 | % | 26,000 | 7.0 | % | |||||||
| Total | 554,000 | 100 | % | 569,000 | 100 | % | (15,000 | ) | (2.6 | %) |
MANNATECH, INCORPORATED AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands, except share and per share
| June 30, 2008 | December 31, 2007 | |||||||
| ASSETS | ||||||||
| Cash and cash equivalents | $ | 41,180 | $ | 47,103 | ||||
| Restricted cash | 468 | 340 | ||||||
| Accounts receivable, net of allowance of $669 and $877 in 2008 and 2007, respectively | 571 | 618 | ||||||
| Income tax receivable | 6,942 | 2,136 | ||||||
| Inventories, net | 27,719 | 23,706 | ||||||
| Prepaid expenses and other current assets | 5,860 | 6,053 | ||||||
| Deferred income tax assets | 5,953 | 1,789 | ||||||
| Total current assets | 88,693 | 81,745 | ||||||
| Long-term investments | 12,950 | |||||||
| Property and equipment, net | 38,696 | 42,818 | ||||||
| Construction in progress | 2,650 | 1,594 | ||||||
| Long-term restricted cash | 9,001 | 11,726 | ||||||
| Other assets | 1,526 | 1,470 | ||||||
| Long-term deferred income tax assets | 400 | 151 | ||||||
| Total assets | $ | 140,966 | $ | 152,454 | ||||
| LIABILITIES AND SHAREHOLDERS EQUITY | ||||||||
| Current portion of capital leases | $ | 112 | $ | 110 | ||||
| Accounts payable | 4,224 | 3,637 | ||||||
| Accrued expenses | 38,463 | 30,315 | ||||||
| Commissions and incentives payable | 11,657 | 11,139 | ||||||
| Taxes payable | 2,237 | 6,198 | ||||||
| Deferred revenue | 3,911 | 4,769 | ||||||
| Total current liabilities | 60,604 | 56,168 | ||||||
| Capital leases, excluding current portion | 204 | 261 | ||||||
| Long-term royalty liability | 2,229 | 2,440 | ||||||
| Long-term deferred income tax liabilities | 6,538 | 5,165 | ||||||
| Other long-term liabilities | 1,789 | 1,565 | ||||||
| Total liabilities | 71,364 | 65,599 | ||||||
| Commitments and contingencies | ||||||||
| Shareholders equity: | ||||||||
| Preferred stock, $0.01 par value, 1,000,000 shares authorized, no shares issued or outstanding | ||||||||
| Common stock, $0.0001 par value, 99,000,000 shares authorized, 27,667,882 shares issued and 26,460,788 shares outstanding in 2008 and 2007 | 3 | 3 | ||||||
| Additional paid-in capital | 40,580 | 40,146 | ||||||
| Retained earnings | 45,038 | 62,620 | ||||||
| Accumulated other comprehensive loss | (1,228 | ) | (1,123 | ) | ||||
| 84,393 | 101,646 | |||||||
| Less treasury stock, at cost, 1,207,094 shares in 2008 and 2007 | (14,791 | ) | (14,791 | ) | ||||
| Total shareholders equity | 69,602 | 86,855 | ||||||
| Total liabilities and shareholders equity | $ | 140,966 | $ | 152,454 |
MANNATECH, INCORPORATED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share
| Three months ended June 30, | Six months ended June 30, | |||||||||||||||
| 2008 | 2007 | 2008 | 2007 | |||||||||||||
| Net sales | $ | 86,781 | $ | 111,710 | $ | 178,232 | $ | 216,542 | ||||||||
| Cost of sales | 13,046 | 16,003 | 25,909 | 30,696 | ||||||||||||
| Commissions and incentives | 41,368 | 52,273 | 83,860 | 99,226 | ||||||||||||
| 54,414 | 68,276 | 109,769 | 129,922 | |||||||||||||
| Gross profit | 32,367 | 43,434 | 68,463 | 86,620 | ||||||||||||
| Operating expenses: | ||||||||||||||||
| Selling and administrative | 21,850 | 22,270 | 44,596 | 41,989 | ||||||||||||
| Depreciation and amortization | 2,991 | 2,866 | 6,053 | 4,331 | ||||||||||||
| Other operating | 24,010 | 16,454 | 38,037 | 28,635 | ||||||||||||
| Total operating expenses | 48,851 | 41,590 | 88,686 | 74,955 | ||||||||||||
| Income (loss) from operations | (16,484 | ) | 1,844 | (20,223 | ) | 11,665 | ||||||||||
| Interest income | 393 | 642 | 953 | 1,288 | ||||||||||||
| Other income (expense), net | (775 | ) | 139 | (403 | ) | 103 | ||||||||||
| Income (loss) before income taxes | (16,866 | ) | 2,625 | (19,673 | ) | 13,056 | ||||||||||
| (Provision) benefit for income taxes | 6,339 | (1,098 | ) | 6,854 | (4,640 | ) | ||||||||||
| Net income (loss) | ($ | 10,527 | ) | $ | 1,527 | ($ | 12,819 | ) | $ | 8,416 | ||||||
| Earnings (loss) per share : | ||||||||||||||||
| Basic | ($ | 0.40 | ) | $ | 0.06 | ($ | 0.48 | ) | $ | 0.32 | ||||||
| Diluted | ($ | 0.40 | ) | $ | 0.06 | ($ | 0.48 | ) | $ | 0.31 | ||||||
| Weighted-average common shares outstanding : | ||||||||||||||||
| Basic | 26,461 | 26,433 | 26,461 | 26,425 | ||||||||||||
| Diluted | 26,461 | 26,983 | 26,461 | 26,985 |