SOURCE: Mannatech, Inc.

May 04, 2007 16:53 ET

Mannatech, Inc. Reports First Quarter 2007 EPS Increase of 18.2%, Net Sales up 5.9%

COPPELL, TX -- (MARKET WIRE) -- May 4, 2007 -- Mannatech, Inc. (NASDAQ: MTEX) today reported record first quarter earnings of $0.26 cents per diluted share for the three months ended March 31, 2007, up 18.2% from the first quarter, 2006, earnings per diluted share of $0.22. Net income for the first quarter, 2007, reached $6.9 million, an increase of 16.6% compared to $5.9 million in the first quarter of 2006. Pretax profit was $10.4 million, an increase of 12.0% compared to $9.3 million in the same period last year.

First quarter net sales for 2007 were $104.8 million, an increase of 5.9% compared to $99.0 million in the first quarter of 2006. Sales growth for the quarter was slightly impacted by the transition to the new ERP system at the end of March.

Total independent Associate and Member count based on a 12 month trailing period increased to 553,000 for the first quarter 2007 as compared to 510,000 for the first quarter of 2006. The 8.4% growth resulted from higher retention of continuing independent Associates and Members which were up 73,000, a 25.9% increase compared to the same period last year. This increase was partially offset by a 13.2% decline in new independent Associates and Members on a 12 month trailing basis.

Sam Caster, Chairman of the Board and CEO, said, "We are highly encouraged with our progress at the start of the year. The sales momentum that began in late 2006 continued in the first quarter and we were able to deliver solid sales and earnings while transitioning to our new ERP system."

Mr. Caster continued, "A number of important initiatives continued to energize our independent Associates in the first quarter of 2007, among them: the launch of our Optimal Skin Care System in the U.S. and Canada; increasing Associate awareness of the benefits of Phytomatrix's all natural vitamin formula; the kick off of our annual travel incentive in January; and record attendance at MannaFest, our annual international corporate-sponsored convention for our independent Associates."

Net sales by location for the three months ended March 31, in millions, are as follows:

                                       March 31, 2007      March 31, 2006
                                       ----------------    ----------------
United States                          $  68.5    65.4%    $  67.1    67.8%
Canada                                     6.7     6.4%        7.3     7.4%
Australia                                  7.3     7.0%        7.9     8.0%
United Kingdom                             1.7     1.6%        2.0     2.0%
Japan                                      9.7     9.3%        9.2     9.3%
New Zealand                                1.9     1.8%        2.5     2.5%
Republic of Korea                          6.3     6.0%        1.6     1.6%
Taiwan                                     1.1     1.0%        0.8     0.8%
Denmark                                    0.5     0.5%        0.6     0.6%
Germany*                                   1.1     1.0%         --      --%
                                       -------  ------     -------  ------
Total                                  $ 104.8     100%    $  99.0     100%
                                       =======  ======     =======  ======

*United Kingdom began selling products in Germany in March 2006.

The number of independent associates and members who purchased our products and packs within the last 12 months is as follows:

                            For the twelve months ended March 31,
                  --------------------------------------------------------
Current Independent
 Associates and                                            Number and
 Members                2007              2006          percentage change
                  ----------------  ----------------  --------------------
New               198,000     35.8% 228,000     45.0% (30,000)      (13.2%)
Continuing        355,000     64.2% 282,000     55.0%  73,000        25.9%
                  ----------------  ----------------  --------------------
Total             553,000    100.0% 510,000    100.0%  43,000         8.4%
                  ================  ================  ====================

Conference Call

Mannatech will hold a quarterly conference call and webcast to discuss this announcement with investors on Monday, May 7, 2007 at 9:00 a.m. Central Daylight Time, 10:00 a.m. Eastern Daylight Time. Investors may listen to the call by accessing Mannatech's website at www.mannatech.com.

About Mannatech

Mannatech, Incorporated is a global wellness solutions provider of innovative, high-quality, proprietary nutritional supplements, topical and skin care products, and weight management products sold through 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 "highly encouraged" 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.

(Complete quarterly report filed on its Form 10-Q, which is expected to be filed with the United States Securities & Exchange Commission and published on its corporate website www.mannatech.com on or about May 10, 2007. Unaudited Consolidated Financial Statements to follow)

                          MANNATECH, INCORPORATED
                        CONSOLIDATED BALANCE SHEETS
            (in thousands, except share and per share amounts)


                                                  December 31,   March 31,
                                                      2006         2007
                                                  -----------  -----------
                    ASSETS                                     (unaudited)
Cash and cash equivalents                         $    45,701  $    39,718
Short-term investments                                     --           --
Restricted cash                                         2,251        2,267
Accounts receivable, net of allowance of $0.2
 million in 2006 and 2007                                 999          119
Income tax receivable                                   2,155        1,759
Inventories, net                                       23,923       25,057
Prepaid expenses and other current assets               4,323        5,654
Deferred tax assets                                     1,478          951
                                                  -----------  -----------
   Total current assets                                80,830       75,525
Long-term investments                                  25,375       25,375
Property and equipment, net                            16,523       16,839
Construction in progress                               24,725       29,469
Long-term restricted cash                               3,132        3,771
Other assets                                            1,372        1,511
Long-term deferred tax assets                             278          304
                                                  -----------  -----------
   Total assets                                   $   152,235  $   152,794
                                                  ===========  ===========

       LIABILITIES AND SHAREHOLDERS’ EQUITY
Current portion of capital lease                  $        92  $        94
Accounts payable                                        3,339        7,956
Accrued expenses                                       26,841       17,306
Commissions and incentives payable                     15,511       18,298
Taxes payable                                           3,556        2,435
Deferred revenue                                        2,697          275
                                                  -----------  -----------
   Total current liabilities                           52,036       46,364
Capital lease, excluding current portion                  349          314
Long-term royalties due to an affiliate                 2,879        2,768
Long-term deferred tax liabilities                      7,444        7,986
Other long-term liabilities                               730        2,413
                                                  -----------  -----------
   Total liabilities                                   63,438       59,845

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, 27,507,048 shares issued and
 26,840,899 shares outstanding in 2006 and
 27,628,581 shares issued and 26,421,487 shares
 outstanding in 2007                                        3            3
Additional paid-in capital                             38,941       39,292
Retained earnings                                      66,393       70,059
Accumulated other comprehensive loss                   (1,749)      (1,614)
                                                  -----------  -----------
                                                      103,588      107,740
Less treasury stock, at cost, 1,207,094 shares in
 2006 and 2007                                        (14,791)     (14,791)
                                                  -----------  -----------
   Total shareholders’ equity                          88,797       92,949
                                                  -----------  -----------
   Total liabilities and shareholders’ equity     $   152,235  $   152,794
                                                  ===========  ===========





                          MANNATECH, INCORPORATED
            CONSOLIDATED STATEMENTS OF OPERATIONS - (UNAUDITED)
               (in thousands, except per share information)


                                                      Three months ended
                                                          March 31,
                                                    ----------------------
                                                       2006        2007
                                                    ----------  ----------
Net sales                                           $   98,971  $  104,799
   Cost of sales                                        14,561      14,693
   Commissions and incentives                           45,374      46,953
                                                    ----------  ----------
                                                        59,935      61,646
                                                    ----------  ----------

Gross profit                                            39,036      43,153

Operating expenses:
   Selling and administrative expenses                  17,777      19,719
   Depreciation and amortization                           998       1,465
   Other operating costs                                11,006      12,148
                                                    ----------  ----------
      Total operating expenses                          29,781      33,332

                                                    ----------  ----------
Income from operations                                   9,255       9,821
   Interest income                                         572         647
   Other expense, net                                     (514)        (36)
                                                    ----------  ----------
Income before income taxes                               9,313      10,432
   Provision for income taxes                           (3,405)     (3,543)
                                                    ----------  ----------
Net income                                          $    5,908  $    6,889
                                                    ==========  ==========

Earnings per share:
   Basic                                            $     0.22  $     0.26
                                                    ==========  ==========
   Diluted                                          $     0.22  $     0.26
                                                    ==========  ==========

Weighted-average common shares outstanding:
   Basic                                                26,764      26,418
                                                    ==========  ==========
   Diluted                                              27,392      27,979
                                                    ==========  ==========

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