Full Press Release Details
Mannatech Reports Third Quarter 2007
Earnings continue lower; progress in expense reduction
Coppell, TX, November 8, 2007 Mannatech, Incorporated (NASDAQ MTEX) today reported third quarter earnings of $0.07 per diluted
share for the three months ended September 30, 2007, down 80.6% from the 2006 third quarter earnings of $0.36 per diluted share. Net income for the third quarter, 2007, declined to $1.7 million, a decrease of 82.5% compared to $9.7 million in
the third quarter of 2006. Pretax profit was $2.1 million, a decrease of 83.2% compared to $12.7 million in the same period last year. Operating expenses were reduced over $4 million compared to the second quarter of 2007.
Third quarter net sales for 2007 were $96.8 million, a decrease of 2.8%, compared to $99.6 million in the third quarter of 2006. The sales decline resulted from a 15%
decrease in North America sales compared to the third quarter of 2006. This was partially offset by a 30% increase in sales from international markets, primarily in Asia, in the third quarter of 2007 compared to the third quarter of 2006.
Terry Persinger, President and CEO commented, Our top priorities in the third quarter were to reduce operating expenses and to fully integrate our
GlobalView system. We reduced operating expenses $4.1 million, or more than 10% in the third quarter compared to the second quarter of 2007. GlobalView s integration is now largely complete and we are preparing for market expansion in the near
future. Similar to the second quarter, we incurred additional depreciation expense due to the GlobalView utilization.
Total independent Associate
and Member count based on a 12-month trailing period increased to 575,000 for the third quarter of 2007 as compared to 536,000 for the third quarter of 2006. The 7.3% growth resulted from higher retention of continuing independent Associates and
Members which were up 51,000, a 15.5% increase compared to the same period last year. This increase was partially offset by a 5.8% decline in new independent Associates and Members on a 12-month trailing basis.
Mr. Persinger said, We will continue focusing on cost control as we shift considerable attention to driving domestic sales and recruiting. Our recent hiring
of Al Bala as Senior Vice President of Global Business Development is indicative of our commitment to re-energize our domestic market. Al brings over 20 years network marketing experience in implementing key programs to drive sales and
Year-to-date sales through September reached $312.8 million, up 3.1% from 2006. Net income for the nine-month period was $10.2 million,
down 58.3% from last year s net income of $24.2 million. Diluted earnings per share were $0.38, a decrease of 57.3% versus $0.89 for the nine-months ended September 2006.
For geographical purposes, consolidated net sales primarily shipped to customers in these locations were as follows:
Net Sales in Dollars and as a Percentage of Consolidated Net Sales
(In millions, except percentages)
| For the three months ended September 30, | |||||||||||||||||||
| 2006 | 2007 | Dollar change | Percentage change | ||||||||||||||||
| United States | $ | 65.7 | 66.0 | % | $ | 55.3 | 57.1 | % | $ | (10.4 | ) | (15.8 | )% | ||||||
| Canada | 6.7 | 6.7 | % | 6.1 | 6.3 | % | (0.6 | ) | (9.0 | )% | |||||||||
| Australia | 7.5 | 7.5 | % | 7.0 | 7.2 | % | (0.5 | ) | (6.7 | )% | |||||||||
| United Kingdom | 1.8 | 1.9 | % | 1.7 | 1.8 | % | (0.1 | ) | (5.6 | )% | |||||||||
| Japan | 10.0 | 10.0 | % | 10.3 | 10.6 | % | 0.3 | 3.0 | % | ||||||||||
| New Zealand | 2.1 | 2.1 | % | 1.6 | 1.7 | % | (0.5 | ) | (23.8 | )% | |||||||||
| Republic of Korea | 3.3 | 3.3 | % | 11.9 | 12.3 | % | 8.6 | 260.6 | % | ||||||||||
| Taiwan | 0.8 | 0.8 | % | 1.5 | 1.5 | % | 0.7 | 87.5 | % | ||||||||||
| Denmark | 1.0 | 1.0 | % | 0.3 | 0.3 | % | (0.7 | ) | (70.0 | )% | |||||||||
| Germany | 0.7 | 0.7 | % | 1.1 | 1.2 | % | 0.4 | 57.1 | % | ||||||||||
| Totals | $ | 99.6 | 100 | % | $ | 96.8 | 100 | % | $ | (2.8 | ) | (2.8 | )% |
| For the nine months ended September 30, | |||||||||||||||||||
| 2006 | 2007 | Dollar change | Percentage change | ||||||||||||||||
| United States | $ | 202.8 | 66.9 | % | $ | 191.1 | 61.1 | % | $ | (11.7 | ) | (5.8 | )% | ||||||
| Canada | 21.6 | 7.1 | % | 20.7 | 6.6 | % | (0.9 | ) | (4.2 | )% | |||||||||
| Australia | 22.8 | 7.5 | % | 22.0 | 7.0 | % | (0.8 | ) | (3.5 | )% | |||||||||
| United Kingdom | 5.7 | 1.9 | % | 5.0 | 1.6 | % | (0.7 | ) | (12.3 | )% | |||||||||
| Japan | 30.1 | 9.9 | % | 31.4 | 10.0 | % | 1.3 | 4.3 | % | ||||||||||
| New Zealand | 6.8 | 2.2 | % | 5.4 | 1.7 | % | (1.4 | ) | (20.6 | )% | |||||||||
| Republic of Korea | 7.2 | 2.4 | % | 28.6 | 9.2 | % | 21.4 | 297.2 | % | ||||||||||
| Taiwan | 2.7 | 0.9 | % | 4.0 | 1.3 | % | 1.3 | 48.1 | % | ||||||||||
| Denmark | 2.4 | 0.8 | % | 1.2 | 0.4 | % | (1.2 | ) | (50.0 | )% | |||||||||
| Germany | 1.2 | 0.4 | % | 3.4 | 1.1 | % | 2.2 | 183.3 | % | ||||||||||
| Totals | $ | 303.3 | 100 | % | $ | 312.8 | 100 | % | $ | 9.5 | 3.1 | % |
The number of new and continuing independent Associates and Members who purchased packs during the 12-months ended
September 30, 2006 and 2007 were as follows:
| September 30, 2006 | September 30, 2007 | Number and percentage change | ||||||||||||||
| New | 208,000 | 38.9 | % | 196,000 | 34.1 | % | (12,000 | ) | (5.8 | )% | ||||||
| Continuing | 328,000 | 61.1 | % | 379,000 | 65.9 | % | 51,000 | 15.5 | % | |||||||
| Total | 536,000 | 100.0 | % | 575,000 | 100.0 | % | 39,000 | 7.3 | % |
Mannatech will hold a quarterly conference call and webcast to discuss this announcement with investors on Friday, November 9, 2007 at 9:00 a.m. Central Standard Time, 10:00 a.m. Eastern Standard Time. 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, and Germany.
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 will
continue 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 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.
Contact Information:
Gary Spinell, Vice President
Corporate website: www.mannatech.com
quarterly report filed on its Form 10-Q, which is expected to be filed with the Securities & Exchange Commission and published on its corporate website www.mannatech.com on or about November 9, 2007. Unaudited Consolidated
Financial Statements to follow)
MANNATECH, INCORPORATED
CONSOLIDATED BALANCE SHEETS
(in thousands, except share and per share
| December 31, 2006 | September 30, 2007 | |||||||
| (unaudited) | ||||||||
| ASSETS | ||||||||
| Cash and cash equivalents | $ | 45,701 | $ | 34,825 | ||||
| Restricted cash | 2,251 | 980 | ||||||
| Accounts receivable, net of allowance of $0.2 million in 2006 and $0.4 million in 2007 | 999 | 623 | ||||||
| Income tax receivable | 2,155 | 934 | ||||||
| Inventories, net | 23,923 | 25,475 | ||||||
| Prepaid expenses and other current assets | 4,323 | 6,898 | ||||||
| Deferred income tax assets | 1,478 | 1,922 | ||||||
| Total current assets | 80,830 | 71,657 | ||||||
| Long-term investments | 25,375 | 25,375 | ||||||
| Property and equipment, net | 16,523 | 43,768 | ||||||
| Construction in progress | 24,725 | 1,154 | ||||||
| Long-term restricted cash | 3,132 | 7,091 | ||||||
| Other assets | 1,372 | 1,381 | ||||||
| Long-term deferred income tax assets | 278 | 68 | ||||||
| Total assets | $ | 152,235 | $ | 150,494 | ||||
| LIABILITIES AND SHAREHOLDERS EQUITY | ||||||||
| Current portion of capital leases | $ | 92 | $ | 96 | ||||
| Accounts payable | 3,339 | 2,782 | ||||||
| Accrued expenses | 26,841 | 24,428 | ||||||
| Commissions and incentives payable | 15,511 | 11,081 | ||||||
| Taxes payable | 3,556 | 3,741 | ||||||
| Deferred revenue | 2,697 | 3,520 | ||||||
| Total current liabilities | 52,036 | 45,648 | ||||||
| Capital leases, excluding current portion | 349 | 266 | ||||||
| Long-term royalties due to an affiliate | 2,879 | 2,546 | ||||||
| Long-term deferred income tax liabilities | 7,444 | 8,427 | ||||||
| Other long-term liabilities | 730 | 1,320 | ||||||
| Total liabilities | 63,438 | 58,207 | ||||||
| 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, 27,617,081 shares issued and 26,409,987 shares outstanding in 2006 and 27,667,882 shares issued and 26,460,788 shares outstanding in 2007 | 3 | 3 | ||||||
| Additional paid-in capital | 38,941 | 39,886 | ||||||
| Retained earnings | 66,393 | 68,570 | ||||||
| Accumulated other comprehensive loss | (1,749 | ) | (1,381 | ) | ||||
| 103,588 | 107,078 | |||||||
| Less treasury stock, at cost, 1,207,094 shares in 2006 and 2007 | (14,791 | ) | (14,791 | ) | ||||
| Total shareholders equity | 88,797 | 92,287 | ||||||
| Total liabilities and shareholders equity | $ | 152,235 | $ | 150,494 |
MANNATECH, INCORPORATED
CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
(in thousands, except per share information)
| Three months ended September 30, | Nine months ended September 30, | |||||||||||||||
| 2006 | 2007 | 2006 | 2007 | |||||||||||||
| Net sales | $ | 99,558 | $ | 96,776 | $ | 303,300 | $ | 312,768 | ||||||||
| Cost of sales | 13,497 | 14,868 | 42,777 | 45,564 | ||||||||||||
| Commissions and incentives | 43,977 | 43,230 | 135,349 | 142,456 | ||||||||||||
| 57,474 | 58,098 | 178,126 | 188,020 | |||||||||||||
| Gross profit | 42,084 | 38,678 | 125,174 | 124,748 | ||||||||||||
| Operating expenses: | ||||||||||||||||
| Selling and administrative expenses | 16,562 | 21,342 | 52,569 | 63,331 | ||||||||||||
| Depreciation and amortization | 1,292 | 2,953 | 3,542 | 7,283 | ||||||||||||
| Other operating costs | 12,759 | 12,661 | 36,182 | 40,747 | ||||||||||||
| Total operating expenses | 30,613 | 36,956 | 92,293 | 111,361 | ||||||||||||
| Income from operations | 11,471 | 1,722 | 32,881 | 13,387 | ||||||||||||
| Interest income | 599 | 614 | 1,763 | 1,902 | ||||||||||||
| Other income, net | 670 | (194 | ) | 805 | (91 | ) | ||||||||||
| Income before income taxes | 12,740 | 2,142 | 35,449 | 15,198 | ||||||||||||
| Provision for income taxes | (3,052 | ) | (396 | ) | (11,241 | ) | (5,036 | ) | ||||||||
| Net income | $ | 9,688 | $ | 1,746 | $ | 24,208 | $ | 10,162 | ||||||||
| Earnings per share : | ||||||||||||||||
| Basic | $ | 0.37 | $ | 0.07 | $ | 0.91 | $ | 0.38 | ||||||||
| Diluted | $ | 0.36 | $ | 0.07 | $ | 0.89 | $ | 0.38 | ||||||||
| Weighted-average common shares outstanding : | ||||||||||||||||
| Basic | 26,446 | 26,460 | 26,663 | 26,437 | ||||||||||||
| Diluted | 27,044 | 26,843 | 27,280 | 26,940 |