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UNITED STATES

Texas	000-24657	75-2508900
(State or other Jurisdiction of Incorporation or Organization)	(Commission File Number)	(I.R.S. Employer Identification No.)

Exhibit Number		Exhibit
99.1*		Press release, dated November 8, 2016, titled “Mannatech Reports Third Quarter 2016 Financial Results.”

			MANNATECH, INCORPORATED
	Dated: November 8, 2016		By:	/s/ David A. Johnson
				David A. Johnson
				Chief Financial Officer

Exhibit Number		Exhibit
99.1*		Press release, dated November 8, 2016, titled “Mannatech Reports Third Quarter 2016 Financial Results.”

 

 

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Exhibit 99.1

 

 

Mannatech Reports Third Quarter 2016 Financial Results

Third quarter net sales for 2016 were $48.1 million, an increase of $4.2 million or 9.8% as compared to $43.9 million in the third quarter of 2015. Our net sales increased 6.8% on a constant dollar basis (see Non-GAAP Financial Measure disclosures below). Income from operations was $0.5 million for the third quarter 2016, as compared to $2.2 million income in the same period in 2015. Net income was $1.3 million, or $0.46 per diluted share, for the third quarter of 2016, as compared to $0.1 million net income, or $0.03 per diluted share, for the third quarter of 2015. During the third quarter, our operations outside of the Americas accounted for approximately 60.5% of our consolidated net sales.

Third quarter 2016 Asia/Pacific net sales increased by $3.5 million, or 15.9%, to $25.5 million. During this period, the launch of new products and promotions in Asia/Pacific increased net sales by $2.9 million and the loyalty program increased net sales by $0.4 million, as compared to the same period in 2015. Foreign currency exchange had a $1.6 million positive impact on revenue during the period, as compared to the same period in 2015. The currency impact is primarily due to the strengthening of the Korean Won, Australian Dollar, New Zealand Dollar, Singapore Dollar, Taiwanese Dollar, and Japanese Yen partially offset by the weakening of the Hong Kong Dollar. Revenue per active independent associate and member increased by 11.4% during the third quarter, as compared to the same period in 2015.

Third quarter 2016 net sales for Europe, the Middle East and Africa, or EMEA, decreased by $0.5 million to $3.6 million, as compared to the same period in 2015; foreign currency exchange had the effect of decreasing our EMEA revenue by $0.3 million during this period. The currency impact is primarily due to the weakening of the South Africa Rand and British Pound. Active associates and members increased 7.2% as compared to the same period in 2015. The launch of new products and promotions in EMEA increased net sales by $0.2 million, as compared to the same period in 2015.

For the three months ended September 30, 2016, net sales in the Americas increased by $1.2 million, or 6.7%, to $19.0 million, as compared to the same period in 2015. During the third quarter 2016, the launch of new products and promotions increased net sales by $1.0 million and the loyalty program increased net sales by $0.1 million, as compared to the same period in 2015.

The approximate number of new and continuing independent associate and member positions held by individuals in Mannatech’s network and associated with purchases of our packs or products during the 12-month period ended September 30, 2016 and 2015 were approximately 221,000.

Selling and administrative expenses for the third quarter of 2016 increased by $0.9 million, as compared to the same period in 2015. The increase is attributed to payroll costs, warehousing, and marketing costs. Human resource (HR) costs increased $0.1 million due to hiring for our potential entry into the China market. Also impacting HR costs in the third quarter 2016 is $0.4 million of severance costs, as compared to a $0.7 million of severance costs in the third quarter of 2015. Selling and administrative expenses were also impacted by a $0.4 million increase in marketing related costs, and a $0.2 million increase in warehouse charges.

Other operating costs, which include professional fees, travel and entertainment, bad debt, credit card processing fees, and other miscellaneous operating expenses, increased by $1.4 million for the three months ended September 30, 2016, as compared to the same period in 2015. The increase in other operating costs was due to a $0.7 million increase in legal and consulting fees as we continue to explore expansion into new markets, transform our supply chain and defend our patents, a $0.1 million increase in research and development costs, a $0.1 million increase in credit card fees, a $0.1 million increase in travel and entertainment costs, and a $0.4 million charge from a partial write-down of the value of internally developed back office software.

 

Mannatech’s cash and cash equivalents increased by approximately $6.3 million to a balance of $38.3 million at September 30, 2016 as compared to $32.0 million at December 31, 2015. Our inventory balance at September 30, 2016 was $10.4 million, compared to $9.2 million at December 31, 2015. Our accounts payable balance at September 30, 2016 increased to $5.2 million, compared to $2.7 million at December 31, 2015, due to the purchase of inventory. At September 30, 2015, our commission payable increased to $11.3 million from $6.8 million at December 31, 2015 due to the timing of our commission payments. During the third quarter of 2016, we paid a $0.3 million dividend and repurchased 9,009 shares of our common stock.

In addition to results presented in accordance with GAAP, this press release and related tables include certain non-GAAP financial measures, including a presentation of constant currency measures.  We disclose operating results that have been adjusted to exclude the impact of changes due to the translation of foreign currencies into U.S. dollars, including changes in: Net Sales, Gross Profit, and Income from Operations.

We believe that these non-GAAP financial measures provide useful information to investors because they are an indicator of the strength and performance of ongoing business operations.  The constant currency figures are financial measures used by management to provide investors an additional perspective on trends.  Although we believe the non-GAAP financial measures enhance investors’ understanding of our business and performance, these non-GAAP financial measures should not be considered an exclusive alternative to accompanying GAAP financial measures.

Mannatech will host a conference call to discuss the quarter’s results with investors on Wednesday, November 9, 2016 at 9 a.m. CST, 10 a.m. EST. The live call will be webcast and can be accessed on Mannatech’s website at http://ir.mannatech.com.

For those unable to listen to the live broadcast, a replay will be available shortly after the call. The toll-free replay number is (855) 859-2056 (International (404) 537-3406); the Conference ID to access the call is 98996316.

 

CONSOLIDATED BALANCE SHEETS

(in thousands, except share amounts)

 

ASSETS		September 30, 2016 (unaudited)				December 31, 2015
Cash and cash equivalents		$	38,311			$	31,994
Restricted cash			1,513				1,511
Accounts receivable, net			72				369
Income tax receivable			16				4
Inventories, net			10,394				9,199
Prepaid expenses and other current assets			2,919				2,905
Deferred commissions			3,742				3,443
Deferred tax assets, net			27				460
Total current assets			56,994				49,885
Property and equipment, net			3,670				3,848
Construction in progress			926				839
Long-term restricted cash			7,040				6,586
Other assets			4,451				3,759
Long-term deferred tax assets, net			4,708				3,725
Total assets		$	77,789			$	68,642
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current portion of capital leases		$	379			$	447
Accounts payable			5,188				2,683
Accrued expenses			5,112				6,221
Commissions and incentives payable			11,277				6,818
Taxes payable			538				736
Current deferred tax liability			85				84
Current notes payable			805				713
Deferred revenue			9,640				8,677
Total current liabilities			33,024				26,379
Capital leases, excluding current portion			346				612
Long-term deferred tax liabilities			26				24
Long-term notes payable			706				1,069
Other long-term liabilities			1,648				1,994
Total liabilities			35,750				30,078
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, 2,764,963 shares issued and 2,686,868 shares outstanding as of September 30, 2016 and 2,773,972 shares issued and 2,682,078 shares outstanding as of December 31, 2015			—				—
Additional paid-in capital			39,164				40,494
Retained earnings			8,798				8,589
Accumulated other comprehensive income			3,597				686
Treasury stock, at average cost, 78,095 shares as of September 30, 2016 and 91,894 shares as of December 31, 2015, respectively			(9,520	)			(11,205	)
Total shareholders’ equity			42,039				38,564
Total liabilities and shareholders’ equity		$	77,789			$	68,642

 

CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except per share information)

		Three months ended September 30,								Nine months ended September 30,
		2016				2015				2016				2015
Net sales		$	48,146			$	43,860			$	137,664			$	134,956
Cost of sales			9,736				8,253				28,225				25,076
Gross profit			38,410				35,607				109,439				109,880
Operating expenses:
Commissions and incentives			19,985				17,867				56,019				54,296
Selling and administrative expenses			9,877				9,001				28,199				26,412
Depreciation and amortization			507				433				1,427				1,324
Other operating costs			7,534				6,072				22,863				18,493
Total operating expenses			37,903				33,373				108,508				100,525
Income from operations			507				2,234				931				9,355
Interest income			(16	)			93				(5	)			154
Other expense, net			232				(2,418	)			(471	)			(3,802	)
Income (loss) before income taxes			723				(91	)			455				5,707
Provision for income taxes			562				159				90				(1,397	)
Net income (loss)		$	1,285			$	68			$	545			$	4,310
Earnings (loss) per common share:
Basic		$	0.47			$	0.03			$	0.20			$	1.61
Diluted		$	0.46			$	0.03			$	0.19			$	1.58
Weighted-average common shares outstanding:
Basic			2,706				2,681				2,703				2,679
Diluted			2,818				2,721				2,812				2,727

 

Non-GAAP Financial Measures

To supplement our financial results presented in accordance with generally accepted accounting principles in the United States (“GAAP”), we disclose operating results that have been adjusted to exclude the impact of changes due to the translation of foreign currencies into U.S. dollars, including changes in: Net Sales, Gross Profit, and Income from Operations.  We refer to these adjusted financial measures as constant dollar items, which are non-GAAP financial measures.  We believe these measures provide investors an additional perspective on trends.  To exclude the impact of changes due to the translation of foreign currencies into U.S. dollars, we calculate current year results and prior year results at a constant exchange rate, which is the prior year’s rate.  Currency impact is determined as the difference between actual growth rates and constant currency growth rates.

 

Three-month period ended (in millions, except percentages)		September 30, 2016								September 30, 2015				Change
		GAAP Measure: Total $				Non-GAAP Measure: Constant $				GAAP Measure: Total $				Dollar				Percent
Net Sales		$	48.1			$	46.9			$	43.9			$	3.0				6.8	%
Product			39.8				38.8				35.3				3.5				9.9	%
Pack			6.9				6.7				7.1				(0.4	)			(5.6	)%
Other			1.4				1.4				1.5				(0.1	)			(6.7	)%
Gross Profit			38.4				37.4				35.6				1.8				5.1	%
Income from Operations			0.5				0.2				2.2				(2.0	)			(90.9	)%

 

Nine-month period ended (in millions, except percentages)		September 30, 2016								September 30, 2015				Change
		GAAP Measure: Total $				Non-GAAP Measure: Constant $				GAAP Measure: Total $				Dollar				Percent
Net Sales		$	137.7			$	139.9			$	135.0			$	4.9				3.6	%
Product			113.6				115.3				105.8				9.5				9.0	%
Pack			20.2				20.7				24.9				(4.2	)			(16.9	)%
Other			3.9				3.9				4.3				(0.4	)			(9.3	)%
Gross Profit			109.4				110.9				109.9				1.0				0.9	%
Income from Operations			0.9				1.0				9.4				(8.4	)			(89.4	)%

 

The approximate number of new and continuing positions held by independent associates and members who purchased our packs or products during the twelve months ended September 30, 2016 and 2015 were as follows:

		2016								2015
New			99,000				44.8	%			97,000				43.9	%
Continuing			122,000				55.2	%			124,000				56.1	%
Total			221,000				100.0	%			221,000				100.0	%

 

About Mannatech

Mannatech, Incorporated offers a full body wellness experience through its global network of independent associates and members. With more than 20 years of experience and operations in more than 25 countries, Mannatech is committed to transforming lives. For more information, visit Mannatech.com.

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 ““may,” “will,” “should,” “could,” “would,” “expects,” “plans,” “intends,” “anticipates,” “believes,” “estimates,” “approximates,” “predicts,” “projects,” “potential,” and “continues” 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.

 

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Contact Information:

Donna Giordano

Manager, Executive Office Administration

972-471-6512

ir@mannatech.com

 

 

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