Mannatech Reports Third Quarter Results

Mannatech, Incorporated (NASDAQ: MTEX), a global pioneer in the development of high-quality health, weight and fitness, and skin care solutions based on nutritional science, today reported a net loss of $9.2 million or $0.35 per diluted share for the third quarter ending September 30, 2009, compared to a net loss of $0.4 million or $0.02 per diluted share for the third quarter of 2008. The net loss was increased by the change in a valuation of deferred tax assets in the tax provision. A slightly higher level of commission costs as a percentage of sales continued to negatively impact net income. Commission costs as a percentage of sales decreased in the third quarter, as compared to the second quarter, but were higher than historical levels.

Third quarter net sales for 2009 were $71.3 million, a decrease of 8.6%, compared to $78.0 million in the third quarter of 2008. North American sales declined 12.9% compared to the third quarter of 2008. International sales decreased 2.5% for the third quarter of 2009 compared to the third quarter of 2008. International sales showed some improvement as Canada, Germany, Taiwan and South Africa were up compared to the third quarter of 2008.

Year-to-date sales for the nine months ended September 30, 2009 were $219.6 million, down 14.3% from $256.2 million for the same period in 2008. The company reported a net loss for the nine month period of $19.5 million, compared to last year’s nine month net loss of $13.2 million. The loss per share was $0.74, compared to a loss per share of $0.50 for the nine months ended September 2008.

Wayne Badovinus, Mannatech’s president and CEO, commented, “The increase in recruiting evidenced in the first half of this year continued in the recent quarter. In addition to driving recruiting and pack sales, our focus is turning to retaining these Associates. We are encouraged that more new Associates are choosing to continue experiencing the value and quality of Mannatech products, demonstrated by our ongoing finished product orders. Many new Associates have reached the designation of regional, national and executive director in the last few months.”

Mr. Badovinus continued, “Each quarter we are making significant strides in the ongoing evolution of our business. In the third quarter we opened four new markets – Austria, the Netherlands, Norway and Sweden. In addition, we launched our Essential Source™ Omega-3 product with more product introductions scheduled for the fourth quarter. And we introduced the most complete package of marketing and business tools for Associates in our history, including DVDs and business building techniques.”

New Associates and Members added in the third quarter of 2009 increased 27.2% compared to the third quarter of 2008. New independent Associates and Members totaled 36,689 in the third quarter of 2009, compared to 36,462 added in the first quarter of 2009, and 28,838 added in the third quarter of 2008. Total independent Associate and Member count based on a 12-month trailing period was approximately 534,000 as of September 30, 2009 as compared to 540,000 as of September 30, 2008.

Conference Call

Mannatech will hold a conference call and webcast to discuss this announcement with investors on Wednesday, November 4, 2009 at 9:00 a.m. Central Standard Time, 10:00 a.m. Eastern Standard Time. Investors may listen to the call by accessing Mannatech’s website at www.mannatech.com.

About Mannatech

Mannatech, Incorporated develops high-quality health, weight and fitness, and skin care products that are based on the solid foundation of nutritional science and development standards. These proprietary products are available through independent sales Associates around the globe including the United States, Canada, South Africa, Australia, New Zealand, Austria, Denmark, Germany, Norway, Sweden, the Netherlands, the United Kingdom, Japan, Taiwan, Singapore and the Republic of Korea.

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 “intend,” “believe,” “expect” 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 ability 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 Quarterly Report on Form 10-Q, 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.

Net Sales in Dollars and as a Percentage of Consolidated Net Sales – (Unaudited)
		Three months													Nine months
Country		2009						2008							2009						2008
United States		$	34.0		47.7	%		$	40.0		51.3	%			$	109.7		49.9	%		$	137.3		53.6	%
Japan			9.9		13.9	%			10.8		13.8	%				31.4		14.3	%			33.9		13.3	%
Republic of Korea			6.9		9.7	%			8.4		10.8	%				19.2		8.8	%			27.4		10.7	%
Canada			5.8		8.1	%			5.7		7.3	%				17.5		8.0	%			17.8		6.9	%
Australia			5.7		8.0	%			6.4		8.2	%				16.7		7.6	%			20.8		8.1	%
South Africa(1)			3.9		5.5	%			2.0		2.6	%				9.4		4.2	%			3.4		1.3	%
Taiwan			1.4		2.0	%			1.2		1.5	%				4.8		2.2	%			3.7		1.4	%
New Zealand			1.1		1.5	%			1.2		1.5	%				3.3		1.5	%			4.2		1.6	%
Germany			0.9		1.3	%			0.8		1.0	%				2.6		1.2	%			3.0		1.2	%
United Kingdom(2)			0.8		1.0	%			1.2		1.6	%				2.5		1.1	%			3.8		1.5	%
Denmark			0.5		0.7	%			0.3		0.4	%				1.5		0.7	%			0.9		0.4	%
Singapore(3)			0.4		0.6	%			—		—					1.0		0.5	%			—		—
Totals		$	71.3		100	%		$	78.0		100	%			$	219.6		100	%		$	256.2		100	%

⁽¹⁾ South Africa began operations in May 2008.

⁽²⁾ Net Sales for Austria, the Netherlands, Norway, and Sweden are included in the United Kingdom net sales total. We began operations in these four countries in September 2009.

⁽³⁾ Singapore began operations in November 2008.

The number of new and continuing independent associates and members who purchased our packs or products during the twelve months ended September 30, 2009 and 2008 were as follows:

		2009					2008
New		151,000		28.3	%		140,000		25.9	%
Continuing		383,000		71.7	%		400,000		74.1	%
Total		534,000		100	%		540,000		100	%

MANNATECH, INCORPORATED AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (in thousands, except share and per share amounts)
		September 30, 2009			December 31, 2008
ASSETS		(unaudited)
Cash and cash equivalents		$	22,577		$	30,945
Restricted cash			2,350			1,864
Accounts receivable, net of allowance of $16 and $23 in 2009 and 2008, respectively			287			291
Income tax receivable			3,025			3,531
Inventories, net			29,427			31,313
Prepaid expenses and other current assets			3,724			3,946
Deferred income tax assets			4,866			5,632
Total current assets			66,256			77,522
Property and equipment, net			29,547			36,202
Construction in progress			630			840
Long-term restricted cash			7,075			7,579
Other assets			2,516			1,456
Long-term deferred income tax assets			516			459
Total assets		$	106,540		$	124,058
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current portion of capital leases		$	843		$	131
Accounts payable			6,695			5,067
Accrued expenses			21,904			24,324
Commissions and incentives payable			14,030			11,453
Taxes payable			1,699			873
Current deferred tax liability			225			192
Deferred revenue			3,892			3,476
Total current liabilities			49,288			45,516
Capital leases, excluding current portion			1,272			155
Long-term deferred income tax liabilities			3.616			6,075
Other long-term liabilities			3,446			3,583
Total liabilities			57,622			55,329
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, 27,687,882 shares issued and 26,480,788 shares outstanding in 2009, and 27,667,882 shares issued and 26,460,788 shares outstanding in 2008.			3			3
Additional paid-in capital			41,243			40,753
Retained earnings			23,593			44,170
Accumulated other comprehensive loss			(1,130	)		(1,406	)
Less treasury stock, at cost, 1,207,094 shares in 2009 and 2008			(14,791	)		(14,791	)
Total shareholders’ equity			48,918			68,729
Total liabilities and shareholders’ equity		$	106,540		$	124,058

MANNATECH, INCORPORATED AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS – (UNAUDITED) (in thousands, except per share information)
		Three months ended September 30,								Nine months ended September 30,
		2009				2008				2009				2008
Net sales		$	71,295			$	77,991			$	219,640			$	256,223
Cost of sales			11,923				11,105				35,944				37,014
Commissions and incentives			35,268				32,396				115,413				116,256
			47,191				43,501				151,357				153,270
Gross profit			24,104				34,490				68,283				102,953
Operating expenses:
Selling and administrative			17,748				18,753				53,403				63,349
Depreciation and amortization			3,085				3,172				9,357				9,225
Other operating			11,842				11,493				30,831				49,530
Total operating expenses			32,675				33,418				93,591				122,104
Income (loss) from operations			(8,571	)			1,072				(25,308	)			(19,151	)
Interest income			39				266				182				1,219
Other income (expense), net			859				(2,047	)			822				(2,450	)
Loss before income taxes			(7,673	)			(709	)			(24,304	)			(20,382	)
(Provision) benefit for income taxes			(1,534	)			280				4,785				7,134
Net loss		$	(9,207	)		$	(429	)		$	(19,519	)		$	(13,248	)
Loss per share:
Basic		$	(0.35	)		$	(0.02	)		$	(0.74	)		$	(0.50	)
Diluted		$	(0.35	)		$	(0.02	)		$	(0.74	)		$	(0.50	)
Weighted-average common shares outstanding:
Basic			26,464				26,461				26,462				26,461
Diluted			26,464				26,461				26,462				26,461