EX-99.1 2 dex991.htm PRESS RELEASE, DATED NOVEMBER 8, 2007 Press release, dated November 8, 2007

Exhibit 99.1

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 recruiting.”

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 %
                              

Conference Call

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.

About Mannatech

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

Investor Relations

972-471-6512

ir@mannatech.com

Corporate website: www.mannatech.com

(Complete 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 amounts)

 

    

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