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): May 12, 2020
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))
Securities Registered Pursuant to Section 12(b) of the Act:
Title of each class | Trading Symbol(s) | Name of each exchange on which registered |
Common Stock, par value $0.0001 per share | MTEX | The Nasdaq Stock Market LLC |
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging Growth Company ¨ |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o
Item 2.02 Results of Operations and Financial Condition.
On May 12, 2020, Mannatech, Incorporated issued a press release announcing financial and operating results for the first quarter ended March 31, 2020. A copy of the press release is attached as Exhibit 99.1 to this Current Report on Form 8-K.
Item 9.01 Financial Statements and Exhibits
(d) Exhibits.
Exhibit Number | Description |
99.1* | Press Release, dated May 12, 2020, titled "Mannatech Reports First Quarter 2020 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: May 12, 2020
MANNATECH, INCORPORATED | |
By: | /s/ David Johnson |
David Johnson | |
Chief Financial Officer | |
Mannatech Reports First Quarter 2020 Financial Results
(FLOWER MOUND, Texas) May 12, 2020 - 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 first quarter of 2020.
Quarter End Results
First quarter net sales for 2020 were $36.6 million, a decrease of $1.4 million, or 3.6%, as compared to $38.0 million in the first quarter of 2019. Income from operations increased to $2.0 million for the first quarter 2020, from $1.1 million in the same period in 2019.
Net income was $2.8 million, or $1.15 per diluted share, for the first quarter 2020, as compared to a net income of $0.7 million, or $0.28 per diluted share, for the first quarter 2019.
Gross profit as a percentage of sales improved to 80.9% for the three months ended March 31, 2020, as compared to 80.4% for the same period in 2019.
Commission and incentives as a percentage of net sales was 40.7% for the three months ended March 31, 2020, as compared to 40.0% for the same period in the prior year.
For the three months ended March 31, 2020, overall selling and administrative expenses decreased by $0.7 million to $6.9 million, as compared to $7.6 million for the same period in 2019. The decrease in selling and administrative expenses were due to a $0.7 million decrease in payroll costs.
For the three months ended March 31, 2020, other operating costs decreased by $0.8 million to $5.3 million, as compared to $6.1 million for the same period in 2019 primarily due to a $0.3 million decrease in office expenses, a $0.3 million decrease in legal and consulting fees and a $0.2 million decrease in travel and entertainment.
For the three months ended March 31, 2020, taxes were a $0.9 million benefit, compared to the same period in the prior year, which had a $0.3 million provision. The effective tax rate for the three months ended March 31, 2020 was different from the federal statutory rate due primarily to the $1.2 million benefit recorded in connection with the carryback of U.S. net operating losses as allowed by the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”), enacted March 27, 2020. The effective tax rate for the three months ended March 31, 2019 was different from the federal statutory rate due primarily to the associated valuation allowance recorded on losses in certain jurisdictions.
The approximate number of new and continuing independent associate and preferred customer positions held by individuals in Mannatech’s network and associated with purchases of products as of March 31, 2020 and 2019 were approximately 166,000 and 203,000, respectively. As the novel coronavirus ("COVID-19") spread into our markets, recruiting decreased 8.2% in the first quarter of 2020 as compared to the first quarter of 2019. The number of new independent associate and preferred customer positions in the company’s network for the first quarter of 2020 was approximately 18,687 as compared to 20,363 in 2019.
Non-GAAP Measures
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 dollar 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. Please see the accompanying table entitled "Non-GAAP Financial Measures" for a reconciliation of these non-GAAP financial measures.
Safe Harbor statement
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,” "hope," “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, the impact of COVID-19 on Mannatech’s business, Mannatech's inability to attract and retain associates and preferred customers, 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.
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 information)
ASSETS | March 31, 2020 (unaudited) | December 31, 2019 | |||||
Cash and cash equivalents | $ | 24,489 | $ | 24,762 | |||
Restricted cash | 943 | 943 | |||||
Accounts receivable, net of allowance of $717 and $708 in 2020 and 2019, respectively | 271 | 955 | |||||
Income tax receivable | 1,243 | 220 | |||||
Inventories, net | 11,545 | 10,152 | |||||
Prepaid expenses and other current assets | 2,947 | 2,239 | |||||
Deferred commissions | 1,789 | 1,758 | |||||
Total current assets | 43,227 | 41,029 | |||||
Property and equipment, net | 4,871 | 5,261 | |||||
Construction in progress | 973 | 865 | |||||
Long-term restricted cash | 4,993 | 5,295 | |||||
Other assets | 9,634 | 9,592 | |||||
Long-term deferred tax assets, net | 1,013 | 881 | |||||
Total assets | $ | 64,711 | $ | 62,923 | |||
LIABILITIES AND SHAREHOLDERS’ EQUITY | |||||||
Current portion of finance leases | $ | 80 | $ | 87 | |||
Accounts payable | 4,929 | 3,526 | |||||
Accrued expenses | 6,573 | 8,209 | |||||
Commissions and incentives payable | 10,233 | 9,728 | |||||
Taxes payable | 1,944 | 2,187 | |||||
Current notes payable | 1,039 | 739 | |||||
Deferred revenue | 5,223 | 4,416 | |||||
Total current liabilities | 30,021 | 28,892 | |||||
Finance leases, excluding current portion | 187 | 176 | |||||
Deferred tax liabilities | 3 | 3 | |||||
Long-term notes payable | 228 | 363 | |||||
Other long-term liabilities | 5,937 | 6,214 | |||||
Total liabilities | 36,376 | 35,648 | |||||
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 2,389,206 shares outstanding as of March 31, 2020 and 2,742,857 shares issued and 2,381,131 shares outstanding as of December 31, 2019 | — | — | |||||
Additional paid-in capital | 34,063 | 34,143 | |||||
Retained earnings (accumulated deficit) | 1,797 | (690 | ) | ||||
Accumulated other comprehensive income | 2,123 | 3,757 | |||||
Treasury stock, at average cost, 353,651 shares as of March 31, 2020 and 361,726 shares as of December 31, 2019 | (9,648 | ) | (9,935 | ) | |||
Total shareholders’ equity | 28,335 | 27,275 | |||||
Total liabilities and shareholders’ equity | $ | 64,711 | $ | 62,923 | |||
MANNATECH, INCORPORATED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share information)
For the three months ended March 31, | |||||||
2020 | 2019 | ||||||
Net sales | $ | 36,605 | $ | 37,973 | |||
Cost of sales | 7,008 | 7,427 | |||||
Gross profit | 29,597 | 30,546 | |||||
Operating expenses: | |||||||
Commissions and incentives | 14,889 | 15,199 | |||||
Selling and administrative expenses | 6,855 | 7,576 | |||||
Depreciation and amortization expense | 520 | 528 | |||||
Other operating costs | 5,322 | 6,123 | |||||
Total operating expenses | 27,586 | 29,426 | |||||
Income from operations | 2,011 | 1,120 | |||||
Interest income (expense), net | 50 | (95 | ) | ||||
Other (expense) income, net | (208 | ) | 4 | ||||
Income before income taxes | 1,853 | 1,029 | |||||
Income tax (provision) benefit | 934 | (341 | ) | ||||
Net income | $ | 2,787 | $ | 688 | |||
Earnings per common share: | |||||||
Basic | $ | 1.17 | $ | 0.29 | |||
Diluted | $ | 1.15 | $ | 0.28 | |||
Weighted-average common shares outstanding: | |||||||
Basic | 2,391 | 2,396 | |||||
Diluted | 2,415 | 2,462 | |||||
Non-GAAP Financial Measures (Sales, Gross Profit and Income From Operations in Constant Dollars)
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.
The table below reconciles first quarter 2020 constant dollar sales to GAAP sales.
Sales - Q1 2020 | ||||||||||||
GAAP Measure: Total $ | Non-GAAP Measure: Constant $ | Constant $ Change | ||||||||||
Americas | $ | 11.7 | $ | 11.9 | $ | 0.2 | ||||||
Asia Pacific | 21.4 | 22.8 | 1.4 | |||||||||
EMEA | 3.5 | 3.3 | (0.2 | ) | ||||||||
Total | $ | 36.6 | $ | 38.0 | $ | 1.4 | ||||||
The table below reconciles first quarter 2020 constant dollar net sales, gross profit and income from operations to GAAP net sales, gross profit and income from operations.
March 31, 2020 | March 31, 2019 | Constant $ Change | ||||||||||||||||
GAAP Measure: Total $ | Non-GAAP Measure: Constant $ | GAAP Measure: Total $ | Dollar | Percent | ||||||||||||||
Net Sales | $ | 36.6 | $ | 37.8 | $ | 38.0 | $ | (0.2 | ) | (0.5 | )% | |||||||
Product | 35.9 | 37.0 | 37.2 | (0.2 | ) | (0.5 | )% | |||||||||||
Pack and associate fees | 0.5 | 0.5 | 0.6 | (0.1 | ) | (16.7 | )% | |||||||||||
Other | 0.2 | 0.2 | 0.2 | — | — | % | ||||||||||||
Gross profit | 29.6 | 30.5 | 30.5 | — | — | % | ||||||||||||
Income from operations | 2.0 | 2.3 | 1.1 | 1.2 | 109.1 | % | ||||||||||||