med-8k_20200505.htm
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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

FORM 8-K

CURRENT REPORT

 

Pursuant to Section 13 or 15(d) of

The Securities Exchange Act of 1934

 

 

Date of Report (Date of earliest event reported):  May 5, 2020

 

MEDIFAST, INC.

(Exact name of registrant as specified in its charter)

 

Delaware

(State or other

jurisdiction of incorporation)

001-31573

(Commission

File Number)

13-3714405

(I.R.S. Employer

Identification No.)

 

 

 

100 International Drive, Baltimore, Maryland 21202

(Address of Principal Executive Offices) (Zip Code)

 

Registrant's telephone number, including area code: (410) 581-8042

 

N/A

(Former Name or Former Address, if Changed Since Last Report)

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

 

 Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

 Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

 Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

 Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading Symbol

Name of each exchange on which registered

Common Stock, par value $0.001 per share

MED

New York Stock Exchange

Preferred Stock Purchase Rights

 

New York Stock Exchange

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (17 CFR §230.405) or Rule 12b-2 of the Securities Exchange Act of 1934 (17 CFR §240.12b-2).

 

Emerging growth company

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

 


 

 

 

 

 

 

Item 2.02.

Results of Operations and Financial Condition.

 

On May 5, 2020, Medifast, Inc. (the “Company”) issued a press release announcing its earnings for the first quarter ended March 31, 2019.

 

A copy of the Press Release is being furnished as Exhibit 99.1 attached hereto and is incorporated by reference herein. This information is being furnished in this report and shall not be deemed to be “filed” for any purpose, including for the purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liabilities of that section, nor shall it be deemed incorporated by reference into any filing under the Securities Act of 1933, as amended, or the Exchange Act, except as shall be expressly set forth by specific reference in such filing.

 

Item 9.01.Financial Statements and Exhibits.

 

(d)Exhibits.

 

99.1

Press release dated May 5, 2020 titled “Medifast, Inc. Announces First Quarter 2020 Financial Results

104.1

Cover Page Interactive Data File (embedded within the Inline XBRL Document)


2


 

Signature

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 

 

MEDIFAST, INC.

 

 

 

 

Dated: May 5, 2020

By:

/s/ Joseph P. Kelleman

 

 

Joseph P. Kelleman

Interim Chief Financial Officer

 

3

Exhiit 99.1

Medifast, Inc. Announces First Quarter 2020 Financial Results

BALTIMORE, May 5, 2020 /PRNewswire/ -- Medifast (NYSE: MED), the company behind one of the fastest-growing health and wellness communities, OPTAVIA®, today reported results for the first quarter ended March 31, 2020.

First Quarter 2020 Highlights Compared to Prior-Year Period

"We had a strong start to the year, with revenue and EPS exceeding guidance driven by a record number of active earning OPTAVIA coaches. Our performance demonstrates the compelling fundamentals of our business, and the resonance of our products and services with Coaches and Clients in the United States and increasingly around the world. We have a highly attractive financial model and a strong balance sheet that positions the Company for long-term growth, and we are seeing encouraging trends as our community of independent OPTAVIA Coaches adapts to new ways of working and interacting with their clients. Our organization has reacted well to the challenges of the global COVID-19 pandemic and we've made adjustments to our planned programs to reflect the new operating environment. While the full impact of the pandemic is unpredictable and difficult to forecast, we feel highly confident in our ability to drive demand and deliver effectively for our OPTAVIA Coaches and their clients," said Dan Chard, Chief Executive Officer of Medifast.

First Quarter 2020 Results

First quarter revenue increased 7.6% to $178.5 million from revenue of $165.9 million for the first quarter of 2019. OPTAVIA-branded products represented 79% of consumable units sold for the first quarter compared to 73% for the same period a year ago.

The total number of active earning OPTAVIA Coaches increased 19.9% to 32,600, compared to 27,200 for the first quarter of 2019. The average revenue per active earning OPTAVIA Coach decreased 8.3% to $5,333 compared to $5,817 for the first quarter last year.

Gross profit increased 8.1% to $135.2 million from $125.1 million for the first quarter of 2019. The Company's gross profit as a percentage of revenue increased 40 basis points year-over-year to 75.8% from 75.4%, which was the result of our price increase taken mid-year 2019 coupled with a reduction of sales discounts realized during the first quarter of 2020 as compared to a year ago.

Selling, general and administrative expenses ("SG&A") increased $11.3 million to $111.7 million compared to $100.4 million for the first quarter of 2019, primarily due to higher OPTAVIA commission expense, incremental professional service costs in connection with the Schedule 13D filing, increased salaries and benefits and severance. SG&A as a percentage of revenue increased 210 basis points year-over-year to 62.6% of revenue. Non-GAAP adjusted SG&A increased $5.7 million to $106.1 million and Non-GAAP adjusted SG&A as a percentage of revenue decreased 100 basis points year-over-year to 59.5%. Non-GAAP adjusted SG&A excludes expenses in connection with the Schedule 13D filing of $4.6 million and severance costs of $1.0 million resulting from organizational change with the Company's CFO.

Income from operations decreased $1.2 million to $23.5 million from $24.7 million in the prior-year period as increased gross profit was offset by increased SG&A. Income from operations as a percentage of revenue was 13.2% for the quarter, a decrease of 170 basis points from the year-ago period. Non-GAAP adjusted income from operations increased $4.4 million to $29.1 million. Non-GAAP adjusted income from operations as a percentage of revenue was 16.3%, an increase of 140 basis points from the year-ago period.

The effective tax rate was 21.8% for the first quarter of 2020 compared to a 17.1% expense in the year-ago period. The increase in the first quarter effective tax rate primarily reflects the impact of an increase in the state tax rate and a decrease in tax benefit of stock compensation.

First quarter net income was $18.5 million, or $1.56 per diluted share, based on approximately 11.8 million shares outstanding. Non-GAAP adjusted net income was $22.9 million, or $1.93 per diluted share. First quarter 2019 net income was $20.8 million, or $1.70 per diluted share, based on approximately 12.2 million shares outstanding.

Balance Sheet

The Company's balance sheet remains strong with cash, cash equivalents, and investment securities of $105.3 million as of March 31, 2020 compared to $92.7 million at December 31, 2019. The Company remains free of interest-bearing debt.

The Company declared a quarterly cash dividend of $13.4 million, or $1.13 per share that is payable on May 6, 2020. The Company did not repurchase any shares during the first quarter of 2020. There are approximately 2,369,000 shares of common stock remaining under the Company's share repurchase program. Medifast expects to maintain a program of paying dividends on a quarterly basis.

Outlook

The Company cannot reasonably estimate the extent and duration of the business and macroeconomic impacts, and related financial impacts to the Company, from the COVID-19 pandemic. The Company intends to update its guidance for full year 2020 when it can reasonably estimate the impact.

Conference Call Information

The conference call is scheduled for today, Tuesday, May 5, 2020 at 4:30 p.m. ET. The call will be broadcast live over the Internet hosted at the Investor Relations section of Medifast's website at www.MedifastInc.com, and will be archived online through May 19, 2020. In addition, listeners may dial (855) 560-2579.

A telephonic playback will be available from 6:30 p.m. ET, May 5, 2020, through May 12, 2020. Participants can dial (877) 344-7529 to hear the playback and enter passcode 10143084.

About Medifast®:

Medifast (NYSE: MED) is the company behind one of the fastest-growing health and wellness communities, OPTAVIA®, which offers Lifelong Transformation, One Healthy Habit at a Time®. Based on nearly 40 years of experience, Medifast has redefined direct selling by combining the best aspects of the model. Its community of thousands of independent OPTAVIA Coaches teach Clients to develop holistic healthy habits through products and clinically proven plans, the Habits of Health® Transformational System and comprehensive support from a community of like-minded people. In 2019, Medifast expanded the OPTAVIA movement globally, beginning with the Asia-Pacific region. Medifast is traded on the New York Stock Exchange and was named to Fortune's 100 Fastest-Growing Companies list in 2019 and Forbes' 100 Most Trustworthy Companies in America List in 2016 and 2017. For more information, visit www.MedifastInc.com or www.OPTAVIA.com.

MED-F

Financial Disclaimer

OPTAVIA makes no guarantee of financial success. Success with OPTAVIA results from successful sales efforts, which require hard work, diligence, skill, persistence, competence, and leadership. Please see the OPTAVIA Income Disclosure Statement (bit.ly/idsOPTAVIA) for statistics on actual earnings of Coaches.

Forward Looking Statements

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," "anticipate," "expects" or other similar words or the negative of such terminology. Similarly, descriptions of Medifast's objectives, strategies, plans, goals or targets contained herein are also considered forward-looking statements. Medifast 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, the impact of the COVID-19 pandemic on Medifast's results, Medifast's inability to attract and retain independent OPTAVIA Coaches and clients, Medifast's inability to prevent the use of stolen identities and credit cards outside of the Company's systems to transact business on the Company's e-commerce sites, increases in competition, litigation, regulatory changes, the severity, length and ultimate impact of COVID-19 on people and economies, and Medifast's planned growth into new domestic and international markets and new channels of distribution. Although Medifast 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.

MEDIFAST, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)

(in thousands, except per share amounts & dividend data)




Three months ended March 31,



2020


2019








Revenue


$

178,461


$

165,876

Cost of sales



43,221



40,729

Gross profit



135,240



125,147








Selling, general, and administrative



111,707



100,432








Income from operations



23,533



24,715








Other income (expense)







Interest income, net



110



312

Other expense



(19)



(6)




91



306








Income from operations before income taxes



23,624



25,021








Provision for income taxes



5,147



4,271








Net income


$

18,477


$

20,750








Earnings per share - basic


$

1.57


$

1.75








Earnings per share - diluted


$

1.56


$

1.70








Weighted average shares outstanding -







Basic



11,772



11,880

Diluted



11,824



12,240








Cash dividends declared per share


$

1.13


$

0.75

MEDIFAST, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)

(in thousands, except par value)












March 31,



December 31,




2020



2019









ASSETS

Current Assets








Cash and cash equivalents



$

90,670


$

76,974

Accounts receivable-net of doubtful accounts of $112 and $235 at 








March 31, 2020 and December 31, 2019, respectively




390



1,437

Inventories




47,883



48,771

Investment securities




14,593



15,704

Income taxes, prepaid




193



5,169

Prepaid expenses and other current assets




7,493



6,096

Total current assets




161,222



154,151









Property, plant and equipment - net of accumulated depreciation




25,324



26,039

Right-of-use assets




12,146



12,803

Other assets




2,181



353

Deferred tax assets




1,270



1,307

















TOTAL ASSETS



$

202,143


$

194,653









LIABILITIES AND STOCKHOLDERS' EQUITY

Current Liabilities








Accounts payable and accrued expenses



$

78,586


$

76,220

Current lease obligations




3,233



3,168

Total current liabilities




81,819



79,388









Lease obligations, less current lease obligations




9,575



10,433

Total liabilities




91,394



89,821









Stockholders' Equity








Common stock, par value $.001 per share: 20,000 shares authorized;








11,785 and 12,272 issued and 11,781 and 11,764 outstanding








at March 31, 2020 and December 31, 2019, respectively




12



12

Additional paid-in capital




494



-

Accumulated other comprehensive income




70



25

Retained earnings 




110,173



168,788

Less: Treasury stock at cost, 0 and 489 shares at March 31, 2020
and December 31, 2019, respectively




-



(63,993)

Total stockholders' equity




110,749



104,832









TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY



$

202,143


$

194,653

Non-GAAP Financial Measures

In an effort to provide investors with additional information regarding our results as determined by US GAAP ("GAAP"), we disclose various non-GAAP financial measures in our quarterly earnings press release and other public disclosures. The following GAAP financial measures have been presented on an as adjusted basis: SG&A, income from operations, net income and diluted earnings per share. Each of these as adjusted financial measures excludes the impact of certain amounts as further identified below and have not been calculated in accordance with GAAP. A reconciliation of each of these non-GAAP financial measures to its most comparable GAAP financial measure is included below. These non-GAAP financial measures are not intended to replace GAAP financial measures.

We use these non-GAAP financial measures internally to evaluate and manage the Company's operations because we believe they provide useful supplemental information regarding the Company's on-going economic performance. We have chosen to provide this information to investors to enable them to perform more meaningful comparisons of operating results and as a means to emphasize the results of on-going operations.

The following tables reconcile the non-GAAP financial measures included in this report (in thousands):

MEDIFAST, INC. AND SUBSIDIARIES

NON-GAAP FINANCIAL MEASURES (UNAUDITED)

(in thousands, except per share amounts)










Three months ended March 31,



2020


2019








Selling, general, and administrative


$

111,707


$

100,432

Adjustments







Professional services for 13D Filing



4,608



-

Incremental severance costs



998



-

Adjusted selling, general, and administrative


$

106,101


$

100,432








Income from operations


$

23,533


$

24,715

Adjustments







Professional services for 13D Filing



4,608



-

Incremental severance costs



998



-

Adjusted income from operations 


$

29,139


$

24,715








Net income


$

18,477


$

20,750

Adjustments, net of tax







Professional services for 13D Filing



3,604



-

Incremental severance costs



781



-

Adjusted net income


$

22,862


$

20,750








Diluted earnings per share(1)


$

1.56


$

1.70

Impact for adjustments(1)



0.37



-

Adjusted diluted earnings per share(1)


$

1.93


$

1.70








(1) The weighted-average diluted shares outstanding used in the calculation of these non-GAAP financial measures are the same as the weighted-average shares outstanding used in the calculation of the reported per share amounts.



CONTACT: Investor Contact: ICR, Inc., Scott Van Winkle, scott.vanwinkle@icrinc.com, (617) 956-6736

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May 05, 2020
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