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 fourth
quarter and year end 2016.
Quarter End Results
Fourth quarter net sales for 2016 were $42.6 million, a decrease
of $2.7 million, or 6.0%, as compared to $45.3 million in the
fourth quarter of 2015. Income (loss) from operations decreased to
($0.2) million for the fourth quarter 2016, from $2.8 million in
the same period in 2015. Net income (loss) was ($1.1) million, or
($0.42) per diluted share, for the fourth quarter 2016, as compared
to $1.5 million, or $0.56 per diluted share, for the fourth quarter
2015.
For the three months ended December 31, 2016, Mannatech’s
operations outside of North America accounted for approximately
62.0% of Mannatech’s consolidated net sales.
For the three months ended December 31, 2016, sales for North
America and South America ("the Americas") decreased by $2.4
million, or 12.9%, to $16.2 million, as compared to $18.6 million
for the same period in 2015. In constant dollars (a non-GAAP
financial measure), fourth quarter 2016 net sales would have been
$0.1 million higher, or $16.3 million.
For the three months ended December 31, 2016, Asia/Pacific net
sales decreased by $0.1 million, or 0.4%, to $23.0 million, as
compared to $23.1 million for the same period in 2015. Net sales
comparisons for the fourth quarter were affected by the impact of
fluctuations in foreign currency exchange rates. In constant
dollars (a non-GAAP financial measure), fourth quarter 2016 net
sales would have been $0.6 million lower, or $22.4 million. The
currency impact was primarily due to the appreciation of the
Japanese Yen.
For the three months ended December 31, 2016, net sales for
Europe, the Middle East and Africa (“EMEA”) decreased by $0.2
million, or 5.6%, to $3.4 million, as compared to $3.6 million for
the same period in 2015. In constant dollars (a non-GAAP financial
measure), net sales for the fourth quarter 2016 would have been the
same at $3.4 million.
As a result of fewer sales, gross profit decreased by $2.0
million to $34.3 million for the three months ended December 31,
2016, as compared to $36.3 million for the same period in 2015.
Commissions as a percentage of net sales were 39.3% for the
three months ending December 31, 2016 compared to 39.9% for the
same period in the prior year. Incentive costs increased for the
three months ended December 31, 2016 by $0.9 million, to $1.5
million, as compared to $0.6 million for the same period in 2015.
These increases are attributed to operations in the United States
and South Korea, where more associates qualified for
incentives.
For the three months ended December 31, 2016, overall selling
and administrative expenses increased by $0.9 million to $9.0
million, as compared to $8.1 million for the same period in 2015.
The increase in selling and administrative expenses consisted
primarily of a $0.2 million increase in contract labor costs, a
$0.3 million increase in marketing costs, and a $0.3 million
increase in payroll related costs. For the three months ended
December 31, 2016, other operating costs increased by $0.6 million
to $6.9 million, as compared to $6.3 million for the same period in
2015. The increase in other operating costs was primarily due to
legal and consulting fees.
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 as
of December 31, 2016 and 2015 were approximately 222,000 and
219,000, respectively. Recruiting increased 21.0% in the fourth
quarter of 2016 as compared to the fourth quarter of 2015. The
number of new independent associate and member positions in the
company’s network for the fourth quarter of 2016 was approximately
25,900 as compared to 21,400 in 2015.
Year End Results
Overall net sales remained the same at $180.3 million for the
years ended December 31, 2016 and December 31, 2015.
During 2016, fluctuations in foreign currency exchange rates had an
overall unfavorable impact on our net sales. In constant dollars (a
non-GAAP financial measure), net sales for the year ending
December 31, 2016 grew by $1.7 million, compared to 2015. Net
income (loss) for 2016 was ($0.6) million, or ($0.22) per diluted
share, as compared to $5.8 million, or $2.14 per diluted share, for
2015.
For the year ended December 31, 2016, Mannatech’s operations
outside of North America accounted for approximately 61.1% of
Mannatech’s consolidated net sales, whereas in the same period in
2015, our operations outside of North America accounted for 59.3%
of our consolidated net sales.
For the year ended December 31, 2016, sales for the Americas
decreased by $3.1 million, or 4.2%, to $70.2 million as compared to
$73.3 million for the same period in 2015. In constant dollars (a
non-GAAP financial measure), net sales for the year would have been
$0.3 million higher, or $70.5 million. The currency impact was
primarily due to the depreciation of the Mexican Peso.
For the year ended December 31, 2016, Asia/Pacific sales
increased by $4.8 million, or 5.3%, to $96.2 million as compared to
$91.4 million for the same period in 2015. In constant dollars (a
non-GAAP financial measure), net sales for the year would have been
$0.1 million lower, or $96.1 million.
For the year ended December 31, 2016, EMEA sales decreased by
$1.7 million, or 10.9%, to $13.9 million as compared to $15.6
million for the same period in 2015. In constant dollars (a
non-GAAP financial measure), net sales for the year would have been
$1.5 million higher, or $15.4 million. The currency impact was
primarily due to the depreciation of the South African Rand and
British Pound.
For the year ended December 31, 2016, gross profit decreased by
$2.4 million, or 1.7%, to $143.7 million, as compared to $146.2
million for the same period in 2015. The decline in gross profit
percentage was primarily due to promotional discounting, increases
in transportation costs, and negative effects of foreign
exchange.
Commissions as a percentage of net sales were 39.1% for the year
ending December 31, 2016 compared to 39.0% for the same period in
the prior year. Incentive costs increased for the year ended
December 31, 2016 by 37%, or $1 million, to $3.7 million, as
compared to $2.7 million for the same period in 2015. These
increases are attributed to operations in the United States and
South Korea, where more associates qualified for incentives.
For the year ended December 31, 2016, overall selling and
administrative expenses increased by $2.7 million to $37.2 million,
as compared to $34.5 million for the same period in 2015. The
increase in selling and administrative expenses consisted primarily
of a $0.5 million increase in warehouse costs, a $0.5 million
increase in contract labor costs, a $0.4 million increase in
marketing costs, and a $1.2 million increase in payroll related
costs as some non-recurring reductions in payroll costs were offset
by the cost of additional employees.
For the year ended December 31, 2016, other operating costs
increased by $4.9 million to $29.7 million, as compared to $24.8
million for the same period in 2015. The increase in other
operating costs was primarily due to a $2.5 million increase in
legal and consulting fees as we continue to explore expansion in
new markets, transform our supply chain and defend our patents, a
$1.2 million increase in travel and entertainment costs attributed
to events for our independent associates and travel to Columbia and
China for new market launches, a $1.0 million increase in
miscellaneous administrative costs such as research and
development, accounting fees and bad debt, and a $0.4 million
abandonment charge of internally developed back office software,
partially offset by a $0.2 million decrease in office expenses.
As of December 31, 2016, our cash and cash equivalents
decreased by 10.3%, or $3.3 million, to $28.7 million from $32.0
million as of December 31, 2015. Cash provided by operating
activities decreased by $4.4 million for the year ended
December 31, 2016 compared to the same period in 2015 as a
result of increases in operating expenditures such as our new brand
introduction, exploring expansion into new markets, support for new
market launches, and inventory purchases. For the year ended
December 31, 2016, we invested approximately $1.6 million in
back-office software projects, approximately $0.6 million in
leasehold improvements in various international offices and
training centers, and approximately $0.1 million in office
furniture and equipment. For the year ended December 31, 2016, we
repaid $1.6 million in capital lease obligations, we paid $0.7
million in dividends to shareholders, and we repurchased $0.3
million in common stock.
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.
Conference Call
Mannatech will host a conference call to discuss the quarter’s
results with investors on Wednesday, March 15, 2017 at 9 a.m.
CDT, 10 a.m. EDT. 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 79265685.
Individuals interested in Mannatech’s products or in exploring
its business opportunity can learn more at Mannatech.com.
MANNATECH, INCORPORATED AND
SUBSIDIARIESCONSOLIDATED BALANCE SHEETS(in thousands,
except share information)
December 31,2016
December 31,2015
ASSETS Cash and cash equivalents $ 28,687 $ 31,994
Restricted cash 1,510 1,511 Accounts receivable, net of allowance
of $463 and $261 in 2016 and 2015, respectively 298 369 Income tax
receivable 1,587 4 Inventories, net 11,961 9,199 Prepaid expenses
and other current assets 3,483 2,905 Deferred commissions 3,229
3,443 Deferred tax assets, net 7 460
Total current assets 50,762 49,885 Property
and equipment, net 3,611 3,848 Construction in progress 1,012 839
Long-term restricted cash 6,429 6,586 Other assets 4,013 3,759
Long-term deferred tax assets, net 5,361 3,725
Total assets $ 71,188 $
68,642 LIABILITIES AND SHAREHOLDERS’ EQUITY
Current portion of capital leases $ 357 $ 447 Accounts payable
5,223 2,683 Accrued expenses 5,605 6,221 Commissions and incentives
payable 8,799 6,818 Taxes payable 1,040 736 Current deferred tax
liability — 84 Current notes payable 801 713 Deferred revenue
8,156 8,677
Total current
liabilities 29,981 26,379 Capital leases,
excluding current portion 261 612 Long-term deferred tax
liabilities 29 24 Long-term notes payable 567 1,069 Other long-term
liabilities 1,465 1,994
Total
liabilities 32,303 30,078 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, 2,758,275 shares issued and 2,688,790 shares
outstanding as of December 31, 2016 and 2,773,972 shares issued and
2,682,078 shares outstanding as of December 31, 2015 — — Additional
paid-in capital 38,190 40,494 Retained earnings 7,331 8,589
Accumulated other comprehensive income 1,834 686 Treasury stock, at
average cost, 69,485 shares as of December 31, 2016 and 91,894
shares as of December 31, 2015, respectively (8,470 )
(11,205 )
Total shareholders’ equity 38,885
38,564 Total liabilities and
shareholders’ equity $ 71,188 $
68,642
MANNATECH, INCORPORATED AND
SUBSIDIARIESCONSOLIDATED STATEMENTS OF OPERATIONS(in
thousands, except per share information)
For the years endedDecember
31,
2016 2015 Net sales $
180,304 $ 180,267 Cost of sales 36,564
34,102
Gross profit 143,740
146,165 Operating expenses: Commissions and incentives
74,215 72,956 Selling and administrative expenses 37,180 34,458
Depreciation and amortization 1,898 1,793 Other operating costs
29,749 24,814 Total operating expenses
143,042 134,021
Income from
operations 698 12,144 Interest income 174 210
Other expense, net (1,827 ) (4,155 )
Income (Loss)
before income taxes (955 ) 8,199 Income
tax benefit (provision) 369 (2,360 )
Net
income (loss) $ (586 ) $
5,839
Earnings per
common share:
Basic $ (0.22 ) $ 2.18 Diluted $ (0.22 ) $ 2.14
Weighted-average
common shares outstanding:
Basic 2,688 2,680 Diluted 2,688
2,728
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: 12/31/2016
12/31/2015 Constant $ Change
GAAPMeasure:Total
$
Non-GAAPMeasure:Constant
$
GAAPMeasure:Total
$
Dollar Percent Net sales $ 42.6 $ 42.2
$ 45.3 $ (3.1 ) (6.8 )% Product 35.0 34.6 37.2 (2.6 ) (7.0 )% Pack
6.5 6.4 6.8 (0.4 ) (5.9 )% Other 1.1 1.2 1.3 (0.1 ) (7.7 )% Gross
profit 34.3 33.9 36.3 (2.4 ) (6.6 )% Income from operations $ (0.2
) $ (0.4 ) $ 2.8 $ (3.2 ) (114.3 )%
Twelve Month Period: 12/31/2016
12/31/2015 Constant $ Change
GAAPMeasure:Total
$
Non-GAAPMeasure:Constant
$
GAAPMeasure:Total
$
Dollar Percent Net sales $ 180.3 $
182.0 $ 180.3 $ 1.7 0.9 % Product 148.6 149.9 143.1 6.8 4.8 % Pack
26.7 27.1 31.7 (4.6 ) (14.5 )% Other 5.0 5.1 5.5 (0.4 ) (7.3 )%
Gross profit 143.7 144.8 146.2 (1.4 ) (1.0 )% Income from
operations $ 0.7 $ 0.6 $ 12.1 $ (11.5 ) (95.0 )%
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 December 31 was as
follows:
2016 2015 New
103,000 46.4 % 96,000 43.8 % Continuing
119,000 53.6 % 123,000 56.2 %
Total 222,000
100.0 % 219,000 100.0 %
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
26 markets, 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. This release should be read
in conjunction with all of its filings with the United States
Securities and Exchange Commission and Mannatech 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.
View source
version on businesswire.com: http://www.businesswire.com/news/home/20170314005505/en/
Mannatech, IncorporatedDonna Giordano, 972-471-6512Manager,
Executive Office
Administrationir@mannatech.comwww.mannatech.com
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