UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of report (Date of earliest event reported): November 8, 2019
MANNATECH, INCORPORATED
(Exact Name of Registrant as Specified in its Charter)
Texas | 000-24657 | 75-2508900 | |||
(State or other jurisdiction of incorporation) | (Commission File Number) | (IRS Employer Identification No.) | |||
1410 Lakeside Parkway, Suite 200 | |||||
Flower Mound, Texas 75028 | |||||
(Address of Principal Executive Offices, including Zip Code) | |||||
Registrant’s Telephone Number, including Area Code: (972) 471-7400 | |||||
(Former name or former address, if changed since last report.)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):
[ ] Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
[ ] Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
[ ] Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
[ ] Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
Item 2.02 Results of Operations and Financial Condition.
On November 8, 2019, Mannatech, Incorporated issued a press release announcing financial and operating results for the third quarter 2019. A copy of the press release is attached as Exhibit 99.1 to the Current Report on Form 8-K.
Item 9.01 Financial Statements and Exhibits.
(d) Exhibits.
Exhibit Number | Description |
99.1* | Press Release, dated November 8, 2019, titled "Mannatech Reports Third Quarter 2019 Financial Results." |
*Furnished herewith.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
Date: November 8, 2019
MANNATECH, INCORPORATED | |
By: | /s/ David Johnson |
David Johnson | |
Chief Financial Officer | |
Exhibit 99.1
Mannatech Reports Third Quarter 2019 Financial Results
(FLOWER MOUND, Texas) November 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.
Contact Information:
Donna Giordano
Manager, Executive Office Administration
972-471-6512
ir@mannatech.com
www.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 | ) | ||||