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 9, 2006
MANNATECH, INCORPORATED
(Exact Name of Registrant as Specified in its Charter)
| Texas | 000-24657 | 75-2508900 | ||
| (State or other Jurisdiction of Incorporation or Organization) |
(Commission File Number) | (I.R.S. Employer Identification No.) |
600 S. Royal Lane, Suite 200
Coppell, Texas 75019
(Address of Principal Executive Offices, including Zip Code)
Registrant’s Telephone Number, including Area Code: (972) 471-7400
(Former name or former address, if change 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:
| ¨ | 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 9, 2006, Mannatech, Incorporated issued a press release announcing its preliminary consolidated net sales for the three months ended September 30, 2006. A copy of this press release is attached hereto as Exhibit 99.1.
The information disclosed under this Item 2.02 (including Exhibit 99.1) shall not be deemed to be “filed” for the purposes of Section 18, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, (“the Exchange Act”), or otherwise subject to the liabilities of that section.
| Item 9.01 | Financial Statements and Exhibits. |
| (d) | Exhibits. |
| Exhibit Number |
Exhibit | |
| 99.1* | Press release dated November 9, 2006 entitled “Mannatech, Inc. Reports Record Third Quarter Earnings.” |
| * | Filed herewith. |
SIGNATURE
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.
| MANNATECH, INCORPORATED | ||||||||
| Dated: November 9, 2006 |
By: |
/s/ Stephen D. Fenstermacher | ||||||
| Name: |
Stephen D. Fenstermacher | |||||||
| Title: |
Senior Vice President and Chief Financial Officer | |||||||
EXHIBIT INDEX
| Exhibit Number |
Exhibit | |
| 99.1* | Press release dated November 9, 2006 entitled “Mannatech, Inc. Reports Record Third Quarter Earnings.” |
| * | Filed herewith. |
Exhibit 99.1
MANNATECH, INC. REPORTS THIRD QUARTER EARNINGS
Coppell, TX November 9, 2006 Mannatech, Inc. (NASDAQ – MTEX) today reported record earnings for its third quarter 2006 of $0.36 cents per diluted share, up 13% from third quarter 2005 earnings of $0.32 per diluted share. Net income for the quarter reached a record of $9.7 million with a net profit ratio of 9.7%. The 1 point net profit rate improvement versus prior year was partially due to a lower effective tax rate in the quarter. Pretax profit was $12.7 million for the quarter compared to $13.0 million, down 0.2% versus prior year.
Total third quarter net sales were $99.6 million, slightly below prior year sales of $100.2 million. Total current Mannatech independent Associates and Members grew to 536,000 as of September 30, 2006, an increase of 14% compared with the same period of the prior year. The record current independent Associate and Member count resulted from a higher retention of continuing Associates, partially offset by a decrease in new Associates for the period.
Sam Caster, Board Chairman and CEO, commented, “Several factors contributed to our sales softness in the quarter. As I indicated in our second quarter call, sales momentum was impacted by a key product reformulation late last year. In addition, the VP of Sales position has remained open since April of this year and that combined with an overhang from negative press may have also impacted recruiting. However, we are pleased with our high retention rate for our Associates, as evidenced by the 36% growth in our continuing associate base and a 4% sales increase in finished product sales for the third quarter versus the prior year quarter.”
Mr. Caster continued, “We believe we have taken the necessary steps to address these issues which included the launch of a reformulated Advanced Ambrotose™ in mid 2006 and the introduction of a new recruiting incentive program. We expect to announce the addition of a highly experienced direct selling professional for our VP of Sales position in the near future. In addition in the Fourth Quarter we are launching PhytoMatrix, a revolutionary new vitamin/mineral supplement, which we believe will help revitalize both revenue and recruiting.”
Net income for the 9 months ending September 30, 2006, grew to $24.2 million, an increase of 26% compared to prior year, and diluted earnings per share grew to $0.89, up 29% through September 2006 versus the prior year. Year-to-date sales through September reached $303.3 million, up 5.3% from 2005. Sales of finished product grew 9% in the same period.
Mannatech also expended $3.0 million to repurchase 213,701 shares of its common stock in the third quarter
The number of new and continuing independent Associates and Members during the last 12-months ended September 30, 2005 and 2006 were as follows:
| For the twelve months ended September 30, | ||||||||||||||||
| Current Independent Associates and Members | (revised*) 2005 |
2006 | Number and percentage change |
|||||||||||||
| New |
228,000 | 48.5 | % | 208,000 | 38.9 | % | (20,000 | ) | (8.8 | %) | ||||||
| Continuing |
242,000 | 51.5 | % | 328,000 | 61.1 | % | 86,000 | 35.5 | % | |||||||
| Total |
470,000 | 100 | % | 536,000 | 100 | % | 66,000 | 14.0 | % | |||||||
| * | In the third quarter 2005, we originally reported on our Form 10-Q, the split between new and continuing independent Associates and members to be 219,000, 46.6%, and 251,000, 53.4%, respectively. The original calculation included a miscalculation in the allocation between new and continuing Associates. However, the total number of independent associates was correctly reported at 470,000. |
Net sales primarily shipped to customers in these locations, in dollars, and as a percentage of consolidated net sales, were as follows:
| Three months ended September 30, | Nine months ended September 30, | |||||||||||||||||||||||
| 2005 | 2006 | 2005 | 2006 | |||||||||||||||||||||
| (in millions) | (in millions) | |||||||||||||||||||||||
| United States |
$ | 66.5 | 66.3 | % | $ | 65.7 | 66.0 | % | $ | 192.3 | 66.8 | % | $ | 202.8 | 66.9 | % | ||||||||
| Canada |
7.0 | 7.0 | % | 6.7 | 6.7 | % | 20.9 | 7.3 | % | 21.6 | 7.1 | % | ||||||||||||
| Australia |
9.3 | 9.3 | % | 7.5 | 7.5 | % | 26.3 | 9.1 | % | 22.8 | 7.5 | % | ||||||||||||
| United Kingdom |
2.1 | 2.1 | % | 1.8 | 1.9 | % | 6.9 | 2.4 | % | 5.7 | 1.9 | % | ||||||||||||
| Japan |
9.1 | 9.1 | % | 10.0 | 10.0 | % | 25.9 | 9.0 | % | 30.1 | 9.9 | % | ||||||||||||
| New Zealand |
3.7 | 3.7 | % | 2.1 | 2.1 | % | 11.3 | 3.9 | % | 6.8 | 2.2 | % | ||||||||||||
| Republic of Korea |
1.5 | 1.5 | % | 3.3 | 3.3 | % | 2.9 | 1.0 | % | 7.2 | 2.4 | % | ||||||||||||
| Taiwan* |
0.9 | 0.9 | % | 0.8 | 0.8 | % | 1.3 | 0.5 | % | 2.7 | 0.9 | % | ||||||||||||
| Denmark** |
0.1 | 0.1 | % | 1.0 | 1.0 | % | 0.1 | 0.0 | % | 2.4 | 0.8 | % | ||||||||||||
| Germany*** |
— | — | % | 0.7 | 0.7 | % | — | — | % | 1.2 | 0.4 | % | ||||||||||||
| Totals |
$ | 100.2 | 100 | % | $ | 99.6 | 100 | % | $ | 287.9 | 100 | % | $ | 303.3 | 100 | % | ||||||||
| * | Taiwan began operations in June 2005. |
| ** | United Kingdom began shipping products to Denmark in August 2005. |
| *** | United Kingdom began shipping products to Germany in March 2006. |
Conference Call
Mannatech will hold a conference call and webcast to discuss this announcement with investors on Friday, November 10, 2006 at 10:00 AM ET. Investors may listen to the call by accessing Mannatech’s website at http://www.mannatech.com.
About Mannatech
Mannatech, Incorporated is a global wellness solutions provider that develops innovative, high-quality, proprietary nutritional supplements, topical and skin care products, and weight management products that are sold through approximately 536,0000 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 “may,” “believes,” “enthusiastic,” “demonstrates,” “ intends,” “optimistic,” and “plans” 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 its expectations, statements, and assumptions reflected in these forward-looking statements are reasonable, it cautions its 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, VP Treasury & Investor Relations
Investor Relations
(972) 471-6512
ir@mannatech.com
Corporate web site: www.mannatech.com
MANNATECH, INCORPORATED
CONSOLIDATED BALANCE SHEETS
(in thousands, except share and per share amounts)
| December 31, 2005 |
September 30, 2006 |
|||||||
| (unaudited) | ||||||||
| ASSETS | ||||||||
| Cash and cash equivalents |
$ | 56,207 | $ | 39,943 | ||||
| Short-term investments |
1,974 | — | ||||||
| Restricted cash |
2,777 | 3,129 | ||||||
| Accounts receivable |
548 | 1,442 | ||||||
| Income tax receivable |
— | 809 | ||||||
| Inventories, net |
19,811 | 20,145 | ||||||
| Prepaid expenses and other current assets |
3,471 | 4,052 | ||||||
| Deferred tax assets |
671 | 628 | ||||||
| Note receivable from affiliate |
153 | 160 | ||||||
| Total current assets |
85,612 | 70,308 | ||||||
| Long-term investments |
15,375 | 25,375 | ||||||
| Property and equipment, net |
10,951 | 14,961 | ||||||
| Construction in progress |
8,157 | 21,175 | ||||||
| Long-term restricted cash |
1,476 | 2,191 | ||||||
| Other assets |
1,121 | 1,450 | ||||||
| Long-term deferred tax assets |
103 | 144 | ||||||
| Total assets |
$ | 122,795 | $ | 135,604 | ||||
| LIABILITIES AND SHAREHOLDERS’ EQUITY | ||||||||
| Current portion of capital lease |
$ | 23 | $ | 76 | ||||
| Accounts payable |
5,476 | 4,742 | ||||||
| Accrued expenses |
16,941 | 16,584 | ||||||
| Commissions and incentives payable |
15,588 | 13,414 | ||||||
| Taxes payable |
5,773 | 1,865 | ||||||
| Deferred revenue |
3,712 | 3,954 | ||||||
| Current deferred tax liabilities |
— | 184 | ||||||
| Total current liabilities |
47,513 | 40,819 | ||||||
| Capital lease, excluding current portion |
— | 302 | ||||||
| Long-term royalties due to an affiliate |
3,341 | 2,990 | ||||||
| Long-term deferred tax liabilities |
1,086 | 6,155 | ||||||
| Long-term liabilities |
537 | 630 | ||||||
| Total liabilities |
52,477 | 50,896 | ||||||
| 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, 27,404,513 shares issued and 26,738,364 shares outstanding in 2005 and 27,607,081 shares issued and 26,399,987 shares outstanding in 2006 |
3 | 3 | ||||||
| Additional paid-in capital |
36,699 | 38,650 | ||||||
| Retained earnings |
42,505 | 62,459 | ||||||
| Accumulated other comprehensive loss |
(1,098 | ) | (1,613 | ) | ||||
| 78,109 | 99,499 | |||||||
| Less treasury stock, at cost, 666,149 shares in 2005 and 1,207,094 in 2006 |
(7,791 | ) | (14,791 | ) | ||||
| Total shareholders’ equity |
70,318 | 84,708 | ||||||
| Total liabilities and shareholders’ equity |
$ | 122,795 | $ | 135,604 | ||||
MANNATECH, INCORPORATED
CONSOLIDATED STATEMENTS OF OPERATIONS – (UNAUDITED)
(in thousands, except per share information)
| Three months ended September 30, |
Nine months ended September 30, |
|||||||||||||||
| 2005 | 2006 | 2005 | 2006 | |||||||||||||
| Net sales |
$ | 100,216 | $ | 99,558 | $ | 287,960 | $ | 303,300 | ||||||||
| Cost of sales |
14,478 | 13,497 | 43,186 | 42,777 | ||||||||||||
| Commissions and incentives |
44,403 | 43,977 | 129,326 | 135,349 | ||||||||||||
| 58,881 | 57,474 | 172,512 | 178,126 | |||||||||||||
| Gross profit |
41,335 | 42,084 | 115,448 | 125,174 | ||||||||||||
| Operating expenses: |
||||||||||||||||
| Selling and administrative expenses |
16,136 | 16,562 | 48,595 | 52,569 | ||||||||||||
| Other operating costs |
12,415 | 14,051 | 36,587 | 39,724 | ||||||||||||
| Total operating expenses |
28,551 | 30,613 | 85,182 | 92,293 | ||||||||||||
| Income from operations |
12,784 | 11,471 | 30,266 | 32,881 | ||||||||||||
| Interest income |
469 | 599 | 1,254 | 1,763 | ||||||||||||
| Other income (expense), net |
(288 | ) | 670 | (1,188 | ) | 805 | ||||||||||
| Income before income taxes |
12,965 | 12,740 | 30,332 | 35,449 | ||||||||||||
| Provision for income taxes |
(4,232 | ) | (3,052 | ) | (11,120 | ) | (11,241 | ) | ||||||||
| Net income |
$ | 8,733 | $ | 9,688 | $ | 19,212 | $ | 24,208 | ||||||||
| Earnings per share: |
||||||||||||||||
| Basic |
$ | 0.32 | $ | 0.37 | $ | 0.71 | $ | 0.91 | ||||||||
| Diluted |
$ | 0.32 | $ | 0.36 | $ | 0.69 | $ | 0.89 | ||||||||
| Weighted-average common shares outstanding: |
||||||||||||||||
| Basic |
27,015 | 26,446 | 27,065 | 26,663 | ||||||||||||
| Diluted |
27,738 | 27,044 | 27,899 | 27,280 | ||||||||||||