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Mannatech Reports Third Quarter 2019 Financial Results

November 8, 2019

FLOWER MOUND, Texas--(BUSINESS WIRE)--Nov 8, 2019--

Mannatech, Incorporated(NASDAQ: MTEX ), a global health and wellness company committed to transforming lives to make a better world, today announced financial results for its third quarter of 2019.

Third Quarter Results

Third quarter net sales for 2019 were $39.7 million, a decrease of $3.4 million, or 7.8%, as compared to $43.0 million in the third quarter of 2018. For the three months ended September 30, 2019, our net sales declined 4.9% on a constant dollar basis (see Non-GAAP Financial Measures, below), as compared to the same period in 2018.

For the nine-month period ending September 30, 2019, net sales were $118.3 million, as compared to $129.5 million for the same period in 2018. For the nine-month period ending September 30, 2019, income from operations was $3.7 million, as compared to $0.4 million for the same period in 2018. For the nine-month period ending September 30, 2019, net income was $1.2 million, as compared to a $2.3 million loss for the same period in 2018.

For the three months ended September 30, 2019, overall selling and administrative expenses increased by $0.8 million to $9.0 million, as compared to $8.1 million for the same period in 2018. The increase in selling and administrative expenses consisted of a $0.8 million increase in payroll costs due to severance costs and a $0.2 million increase in marketing costs, which was partially offset by a $0.1 million decrease in distribution and warehouse costs and contract labor costs.

Other operating costs, decreased by $0.5 million, or 8.0%, for the three months ended September 30, 2019, as compared to the same period in 2018. The decrease in operating costs was primarily due to a $0.6 million decrease in legal and consulting fees and a $0.4 million decrease in other operating expenses, which was partially offset by a $0.7 million increase in travel and entertainment costs.

Income from operations was $0.6 million for the three months ended September 30, 2019, as compared to $1.7 million for the same period in 2018.

For the three months ended September 30, 2019, the Company’s tax provision was $1.6 million, an effective tax rate of 1,311.4%, as compared to $3.3 million, an effective tax rate of 167.8%, for the same period during 2018. The effective tax rate for the three months ended September 30, 2019 was different from the federal statutory rate due primarily to the mix of earnings across jurisdictions, valuation allowance recorded on losses in certain jurisdictions and the one-time impact of the shift in the procurement supply chain from Switzerland to the United States effective July 1, 2019. This shift is to address the impact of global intangible low-tax income (“GILTI”) that resulted from the Tax Cuts and Jobs Act. GILTI was a contributing factor in the effective tax rate being higher than the federal statutory for the three months ended September 30, 2019.

Net loss was $1.5 million, or $0.62 per diluted share, for the three months ended September 30, 2019, as compared to a net loss of $1.7 million, or $0.69 per diluted share, for the same period in 2018.

The approximate number of new and continuing active independent associates and preferred customers who purchased our products or paid associate fees during the twelve months ended September 30, 2019 and 2018 were approximately 176,000 and 202,000, respectively. Recruitment of new independent associates and preferred customers decreased 13.5% during the three months ended September 30, 2019, as compared to the same period in 2018. The number of new independent associate and preferred customer positions held by individuals in our network for the three months ended September 30, 2019 was approximately 22,321, as compared to 25,802 for the same period in 2018.

Non-GAAP Measures

In addition to results presented in accordance with GAAP, this press release and related tables include certain non-GAAP financial measures, which reconcile net income (loss), as reported to net earnings, as adjusted. This presentation isolates the effects of some items that vary from period to period without any correlation to core operating performance and eliminates certain items that management believes do not reflect the Company’s operations and underlying operational performance. Please see Schedule A: Reconciliation of Non-GAAP Financial Measures (Net Earnings, as Adjusted).

Safe Harbor statement

Forward-looking statements generally can be identified by the use of phrases or terminologies such as “may,” “will,” “should,” “could,” “would,” “expects,” “plans,” “intends,” “anticipates,” “believes,” “estimates,” “approximates,” “predicts,” “projects,” “hopes,” “potential,” and “continues” or other similar words or the negative of such terminology.

We caution readers that such forward-looking statements are subject to certain events, risks, uncertainties, and other factors and speak only as of today. We also refer our readers to review our SEC submissions.

Individuals interested in Mannatech’s products or in exploring its business opportunity can learn more at Mannatech.com.

 

MANNATECH, INCORPORATED AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(in thousands, except share and per share amounts)

 

ASSETS

September 30,
2019
(unaudited)

 

December 31,
2018

Cash and cash equivalents

$

25,753

 

 

$

21,845

 

Restricted cash

1,452

 

 

1,514

 

Accounts receivable, net of allowance of $740 and $770 in 2019 and 2018, respectively

176

 

 

106

 

Income tax receivable

119

 

 

291

 

Inventories, net

12,162

 

 

12,821

 

Prepaid expenses and other current assets

1,937

 

 

3,361

 

Deferred commissions

2,356

 

 

2,449

 

Total current assets

43,955

 

 

42,387

 

Property and equipment, net

5,563

 

 

5,860

 

Construction in progress

830

 

 

904

 

Long-term restricted cash

5,096

 

 

7,225

 

Other assets

10,433

 

 

3,894

 

Long-term deferred tax assets, net

929

 

 

1,928

 

Total assets

$

66,806

 

 

$

62,198

 

LIABILITIES AND SHAREHOLDERS’ EQUITY

 

 

 

Current portion of finance leases

$

99

 

 

$

75

 

Accounts payable

4,675

 

 

6,724

 

Accrued expenses

10,193

 

 

5,995

 

Commissions and incentives payable

10,335

 

 

12,189

 

Taxes payable

3,099

 

 

2,655

 

Current notes payable

715

 

 

702

 

Deferred revenue

5,702

 

 

5,274

 

Total current liabilities

34,818

 

 

33,614

 

Finance leases, excluding current portion

201

 

 

72

 

Long-term deferred tax liabilities

3

 

 

3

 

Long-term notes payable

495

 

 

883

 

Other long-term liabilities

6,644

 

 

2,302

 

Total liabilities

42,161

 

 

36,874

 

 

 

 

 

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, 2,742,857 shares issued and 2,385,787 shares outstanding as of September 30, 2019 and 2,742,857 shares issued and 2,381,149 shares outstanding as of December 31, 2018

 

 

 

Additional paid-in capital

34,061

 

 

33,939

 

Retained earnings (deficit)

(2,499

)

 

(2,782

)

Accumulated other comprehensive income

2,944

 

 

4,337

 

Treasury stock, at average cost, 357,070 shares as of September 30, 2019 and 361,708 shares as of December 31, 2018

(9,861

)

 

(10,170

)

Total shareholders’ equity

24,645

 

 

25,324

 

Total liabilities and shareholders’ equity

$

66,806

 

 

$

62,198

 

 

MANNATECH, INCORPORATED AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS – (UNAUDITED)

(in thousands, except per share information)

 

 

Three Months Ended
September 30,

 

Nine Months Ended
September 30,

 

2019

 

2018

 

2019

 

2018

Net sales

$

39,656

 

 

$

43,014

 

 

$

118,340

 

 

$

129,534

 

Cost of sales

7,711

 

 

9,037

 

 

23,253

 

 

25,426

 

Gross profit

31,945

 

 

33,977

 

 

95,087

 

 

104,108

 

 

 

 

 

 

 

 

 

Operating expenses:

 

 

 

 

 

 

 

Commissions and incentives

16,696

 

 

18,054

 

 

48,190

 

 

54,361

 

Selling and administrative expenses

8,951

 

 

8,111

 

 

24,908

 

 

25,706

 

Depreciation and amortization expense

519

 

 

475

 

 

1,564

 

 

1,521

 

Other operating costs

5,214

 

 

5,667

 

 

16,721

 

 

22,086

 

Total operating expenses

31,380

 

 

32,307

 

 

91,383

 

 

103,674

 

Income from operations

565

 

 

1,670

 

 

3,704

 

 

434

 

Interest income (expense), net

(12

)

 

50

 

 

(83

)

 

212

 

Other income (expense), net

(430

)

 

(83

)

 

554

 

 

681

 

Income before income taxes

123

 

 

1,637

 

 

4,175

 

 

1,327

 

Income tax provision

(1,613

)

 

(3,300

)

 

(2,991

)

 

(3,637

)

Net income (loss)

$

(1,490

)

 

$

(1,663

)

 

$

1,184

 

 

$

(2,310

)

 

 

 

 

 

 

 

 

Earnings (loss) per common share:

 

 

 

 

 

 

 

Basic

$

(0.62

)

 

$

(0.69

)

 

$

0.50

 

 

$

(0.89

)

Diluted

$

(0.62

)

 

$

(0.69

)

 

$

0.47

 

 

$

(0.89

)

 

 

 

 

 

 

 

 

Weighted-average common shares outstanding:

 

 

 

 

 

 

 

Basic

2,391

 

 

2,396

 

 

2,393

 

 

2,595

 

Diluted

2,391

 

 

2,396

 

 

2,450

 

 

2,595

 

 

Schedule A: Reconciliation of Non-GAAP Financial Measures (Net Earnings, as Adjusted)

(Unaudited and unreviewed), (Table provides Dollars in thousands)

In addition to its reported results and guidance calculated in accordance with GAAP, the Company has included adjusted net earnings, a performance measure that the Securities and Exchange Commission defines as a “non-GAAP financial measure”, in this release. Management believes that such non-GAAP financial measures, when read in conjunction with the Company’s reported results, in each case calculated in accordance with GAAP, can provide useful supplemental information for investors because they facilitate a period to period comparative assessment of the Company’s operating performance relative to its performance based on reported results under GAAP, while isolating the effects of some items that vary from period to period without any correlation to core operating performance and eliminating certain items that management believes do not reflect the Company’s operations and underlying operational performance.

The following is a reconciliation of net income or loss, presented and reported in accordance with GAAP, to net earnings, as adjusted for certain items:

 

Three Months Ended
September 30,

 

Nine Months Ended
September 30,

 

2019

 

2018

 

2019

 

2018

Net Income (loss), as reported

$

(1,490

)

 

$

(1,663

)

 

$

1,184

 

 

$

(2,310

)

Expenses related to moving the corporate headquarters

 

 

 

 

 

 

1,305

 

Net earnings (loss), as adjusted

$

(1,490

)

 

$

(1,663

)

 

$

1,184

 

 

$

(1,005

)

 

View source version on businesswire.com:https://www.businesswire.com/news/home/20191108005136/en/

CONTACT: Donna Giordano

Manager, Executive Office Administration

972-471-6512

ir@mannatech.com

www.mannatech.com

KEYWORD: TEXAS UNITED STATES NORTH AMERICA

INDUSTRY KEYWORD: COSMETICS RETAIL FITNESS & NUTRITION HEALTH

SOURCE: Mannatech, Incorporated

Copyright Business Wire 2019.

PUB: 11/08/2019 07:00 AM/DISC: 11/08/2019 07:01 AM

http://www.businesswire.com/news/home/20191108005136/en