Mannatech, Inc. (Nasdaq:MTEX) interim CEO Terry Persinger said the embattled multi-level marketer of nutritional supplements has been hurt by ongoing litigation and a weak domestic consumer environment. Persinger, who made the comments during a morning conference call, also laid out the firm’s plans for the remainder of 2008.
“Our domestic business was impacted by the overhang of negative publicity and ongoing litigation, as well as the weakening domestic economy and the changeover to a new business development system,” Persinger said.
Last June, the Texas attorney general sued the company for allegedly illegal sales and marketing practices. Attorney General Greg Abbott said the company falsely claims that its products cure, treat, mitigate or prevent diseases like cancer, autism and Down’s syndrome.
“We continue to be actively engaged with representatives of the Texas attorney general’s office, which we believe have been productive,” Persinger said. “We expect these discussions to continue and ultimately to provide the framework for resolution of this matter.”
The interim CEO cautioned that “there are no assurances in litigation.” The effect of the actions by the Texas attorney general has been hard to quantify, he said, but it has been “very, very large.”
Persinger said the firm has also taken steps to halt controversial business practices. Mannatech also has instituted a new policy where it no longer allows third-party testimonials of its products and also now offers a 180-day satisfaction guarantee on its products. Kind of odd considering that is how companies grow is through third-party testimonials. That is the essence of viral marketing and yet Mannatech has opted to allow such a thing. I’m not quite sure how this helps the company other than to preserve what people say about its products but that is going to be impossible to do with the web.
For the remainder of 2008 and with the launch of a new computer sales system, Persinger said Mannatech has four priorities. First, the company plans to regain sales and increase momentum in the domestic market. Second, Mannatech aims to restore profitability by cutting costs. Third, the firm wants to integrate its new business development system throughout its associate network. Fourth, the company plans to expand internationally.
Internationally, Mannatech began offering its products in South Africa which we covered last month.
“This market has a rich tradition of using nature’s biodiversity to help address quality of life and optimal healthy,” Persinger said. “We are in the midst of staging launch activities that will continue for a couple more weeks. The response last week has been great, with several thousand having attended meetings throughout the country.”
Persinger also has the daunting task of finding someone to take his job. The company’s search for a new CEO is continuing and the company has interviewed several “well-qualified” candidates.
Along with the Texas attorney general litigation, other matters are keeping Mannatech’s lawyers busy. Just this week, we reported that a Texas court ruled that Glycoproducts International Inc. infringed upon Mannatech’s patent and trademarks.
“We will continue to vigorously defend our technology and cutting-edge research and development,” Persinger said. “We have 45 registered patents around the world — five in the U.S. and 40 internationally. We have an additional 85 patents pending worldwide.”
In other legal news for the company, a class-action lawsuit by shareholders was filed against the firm in 2005 after a news story questioned some of Mannatech’s business practices. The firm said it agreed to settle the lawsuit in March but the settlement is pending court approval.
At the end of the first quarter, Mannatech had 570,000 associates, up 3% from a year ago. However, new recruits slipped 9.6% with most of the declines coming in the United States and Canada.
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