Sales Drop, Litigation Rattles Mannatech FY07

COPPELL, Texas—Mannatech Inc. (NASDAQ:MTEX) reported a fourth quarter (4Q) loss of $3.6 million or $0.13 per diluted share, which reflected a 6.5-percent decrease and $4.7 million for litigation-related expenses. Earnings for 4Q06 were $8.2 million or $0.30 cents per share.

Net sales for 4Q07 fell to $99.9 million from $106.8 million sold in 4Q06. Mannatech tied the sales decline to poor North America sales, which dipped 20 percent. This decline was only partially offset by a 27-percent increase in sales from international markets, primarily in Asia.

Full fiscal year 2007 net sales reached $412.7 million, relatively flat to 2006 sales. Net income for 2007 was $6.6 million, far below $32.4 million earned in 2006.

Total independent Associate and Member count based on a 12-month trailing period increased to 575,000 for 4Q07 as compared to 544,000 for the prior year. The growth resulted from higher retention of continuing independent Associates and Member. However, this increase was partially offset by a 5.9-percent decline in new independent Associates and Members on a 12-month trailing basis.

Terry Persinger, president and CEO, noted the company's U.S. market continues to experience softer sales, and recruiting was impacted by ongoing litigation, which it just resolved. "We continue to invest in vital areas to restore sales and recruiting momentum," he said. "The higher 4Q expense levels reflected our strategy in the short-term to continue funding for the new research, products, and sales programs that will grow our business." He further stated Mannatech management is looking for renewed momentum and improved profitability in the latter part of this year, resulting from the dual emphasis on global business development and cost management. "A new sales platform and initiatives will kick off at MannaFest, our annual convention at the end of this month," he reported. "At the same time, we look to enter new markets starting with the opening of South Africa in the second quarter."

Regarding the troublesome litigation, Mannatech reached a settlement in its securities class action lawsuit (Jonathan Crowell v. Mannatech Inc., et al., Civil Action No. 3:07-CV-00238-K) in the U.S. District Court for the Northern District of Texas. The litigation combined three securities class action complaints filed against Mannatech and certain of its officers and directors in August and September 2005. The settlement class consists of purchasers of Mannatech stock during the period Aug. 10, 2004 through July 30, 2007.

Without admitting any liability or wrongdoing of any kind, Mannatech agreed to authorize payment to the plaintiff class of $11.25 million. The settlement, which is subject to preliminary and final court approvals, would resolve all the claims in the litigation. The company expects this approval process will be completed within a four to six month period.