OWINGS MILLS, Md., Nov. 3,
2016 /PRNewswire/ -- Medifast, Inc. (NYSE: MED), a leading
United States manufacturer and
provider of clinically proven weight-loss and healthy living
products and programs, today reported financial results for the
third quarter ended September 30,
2016.
"Our strong business momentum continued in the third quarter,
resulting in financial performance above expectations," said
Michael C. MacDonald, Medifast's
Executive Chairman. "The financial results were fueled by our
second consecutive quarter of double-digit revenue growth in Take
Shape For Life and strong leverage across our cost structure with
gross margin expansion of 150 basis points year over year."
"It has been an exciting first month with Medifast and I have
experienced the incredible energy and enthusiasm behind the team's
strategic growth initiatives," said Daniel
R. Chard, Medifast's Chief Executive Officer. "The third
quarter operational and financial success reflects the ongoing
efforts to build upon our strong foundation. Looking ahead, we will
continue to accelerate the activities required as we create
sustainable and long-term revenue and profitability growth."
Third Quarter 2016 Results
Results from
Continuing Operations
Income from continuing operations in the third quarter of 2016
was $6.1 million, or $0.51 per diluted share, based on approximately
11.9 million shares outstanding. Third quarter 2015 income from
continuing operations was $5.4
million, or $0.45 per diluted
share based on approximately 12.0 million shares
outstanding.
For the third quarter, Medifast revenue from continuing
operations increased 4.1% to $68.6
million from revenue of $65.9
million in the third quarter of 2015.
Revenue in Take Shape For Life, was up 13% to $56.5 million in the third quarter of 2016,
compared to $49.9 million in the
third quarter of the prior year. This is the seventh straight
quarterly improvement in the year-over-year trend.
The total number of active earning Health Coaches in the third
quarter was 12,800, compared to 12,000 in the third quarter of
2015. The average revenue per active earning Health Coach for the
quarter was $4,421 as compared to
$4,145 in third quarter of 2015.
The Company's Medifast Direct business unit revenue decreased
28% to $8.1 million, compared to
$11.2 million in the third quarter of
2015. Third quarter advertising spending for this
business unit decreased to $1.7
million from $2.3 million in
the third quarter of 2015. While customer acquisition challenges
continued to be addressed, this business unit provided strong
contributions to overall profitability in the third quarter of
2016.
Revenue in the Franchise Medifast Weight Control Centers
business decreased to $3.7 million
from $4.0 million in the third
quarter of last year. The decrease in revenue was primarily driven
by fewer franchise centers in operation during the period. The
Company ended the quarter with 55 franchise centers and 1 reseller
location in operation compared to 62 franchise centers at the end
of the same period last year.
In the third quarter, the Wholesale business unit revenue
decreased to $0.3 million, compared
to $0.8 million in the same period
last year. This decrease, which was expected, was due to the
loss of certain accounts resulting from Medifast enforcement of
business partner compliance requirements in mid-2015.
Gross profit for the third quarter of 2016 increased 6% to
$52.2 million compared to the third
quarter of 2015. The Company's gross profit as a percentage of
revenue increased 150 basis points to 76.1% from 74.6% in the third
quarter of 2015, primarily driven by price increases and
improvements in the Company's supply chain operations.
Selling, general and administrative expenses ("SG&A")
increased $2.0 million to
$43.2 million compared to
$41.2 million in the third quarter of
2015. SG&A as a percentage of net revenue increased 50 basis
points to 63.0%, compared to 62.5% in the third quarter of 2015.
The increase in SG&A was a result of Take Shape For Life
commission expense which was a result of the 13% Take Shape For
Life revenue growth for the quarter.
Sales and marketing expense decreased $0.8 million in the third quarter of 2016
compared to the third quarter of 2015.
The third quarter 2016 effective tax rate was 32.7%, compared to
33.4% in the third quarter of 2015. The decrease in the
effective tax rate was due to an increase in the effective state
tax rate offset by an increase in the research and development
credit.
Discontinued Operations
As previously disclosed, the Company exited the Medifast Weight
Control Center corporate model with the sale of 41 centers to
existing franchise partners and the closure of the remaining 34
corporate centers. For third quarter of 2016, the Company had no
activity from discontinued operations compared to income from
discontinued operations, net of tax, of $0.1
million for the third quarter of 2015.
Balance Sheet
The Company's balance sheet remains strong with stockholders'
equity of $94.9 million and working
capital of approximately $77.2
million as of September 30,
2016. Cash, cash equivalents, and investment securities
increased $14.9 million to
$82.1 million as of September 30, 2016 compared to $67.1 million at December
31, 2015.
The Company paid a quarterly cash dividend of $3.0 million, or $0.25 per share, during the third quarter of 2016. The Company did not
repurchase any shares during the third quarter of 2016, and has
approximately 850,000 shares remaining on its repurchase
authorization as of September 30,
2016. The Company remains free of interest bearing debt.
Outlook
The Company expects fourth quarter 2016 revenue from continuing
operations to be in the range of approximately $63.0 million to $66.0 million and earnings per
diluted share from continuing operations in the range of
$0.30 to $0.33 per diluted
share.
For fiscal year 2016, the Company narrowed its guidance for
revenue from continuing operations to be in the range of
$275.0 million to $278.0
million. Earnings per diluted share from continuing
operations is now expected to be in the range of $1.45 to $1.48. The Company is raising its
guidance for adjusted earnings per diluted share from continuing
operations to $1.86 to $1.89 per
diluted share from prior guidance of $1.79
to $1.84. The fiscal year 2016 guidance assumes a 33%
effective tax rate.
Non-GAAP Financial Measures
Our Non-GAAP financial measures include adjusted income from
continuing operations and adjusted income per diluted share.
The Company believes these non-GAAP financial measures are useful
to investors because it provides for a more direct comparison of
the results for these periods. The non-GAAP financial information
is provided in addition to, and not as an alternative to, the
Company's reported results prepared in accordance with GAAP. Please
refer to the tables in today's press release for a reconciliation
of all non-GAAP financial measures.
Conference Call Information
The conference call is scheduled to begin at 4:30 p.m. ET on November
3, 2016. The call will be broadcast live over the Internet
hosted at the Investor Relations section of Medifast's website at
www.MedifastNow.com, and will be archived online through
November 17, 2016. In addition,
listeners may dial (855) 560-2579.
A telephonic playback will be available from 6:30 p.m. ET, November 3,
2016, through November 10,
2016. Participants can dial (877) 344-7529 to hear the
playback and enter passcode 10094827.
About Medifast®:
Medifast (NYSE: MED) is the leading easy-to-use, clinically
proven provider of weight-loss and healthy living products and
programs. Medifast aims to help customers lead a healthier
lifestyle through a holistic approach to weight-loss and weight
management, nutrition education and fitness. Medifast's proven
results are based on the use of structured meal plans featuring
Medifast Meals, which are nutritionally designed to assist
customers with successful weight-loss and weight
management. The company sells its products and programs via
four unique distribution channels: 1) the web and national call
centers, 2) the Take Shape For Life personal coaching division, 3)
Medifast Weight Control Centers, and 4) a national network of
physicians. The company also offers sports nutrition products under
the brand Dual Fuelâ„¢ that are formulated to provide athletes and
active individuals with the right balance of carbohydrates and high
quality protein for top performance. Medifast was founded
in 1980 and is located in Owings Mills, Maryland. For more
information, log onto www.MedifastNow.com.
MED-F
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" 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,
Medifast's inability to attract and retain independent Health
Coaches and Members, stability in the pricing of print, TV and
Direct Mail marketing initiatives affecting the cost to acquire
customers, increases in competition, litigation, regulatory
changes, and its 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 BALANCE SHEETS
|
(In thousands,
except par value)
|
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30,
2016
|
|
December 31,
2015
|
|
|
|
|
|
|
|
|
|
ASSETS
|
|
|
|
|
|
|
|
|
Current
assets:
|
|
|
|
|
|
|
|
Cash and cash
equivalents
|
|
$
|
57,120
|
|
$
|
42,037
|
Accounts
receivable-net of allowance for sales returns and doubtful
accounts
|
|
|
|
|
|
of $458 and
$417
|
|
|
|
1,131
|
|
|
1,633
|
Inventory
|
|
|
|
|
15,015
|
|
|
13,335
|
Investment
securities
|
|
|
|
24,936
|
|
|
25,072
|
Income taxes,
prepaid
|
|
|
|
-
|
|
|
1,549
|
Prepaid expenses and
other current assets
|
|
3,027
|
|
|
2,886
|
Deferred tax
assets
|
|
|
|
1,941
|
|
|
1,208
|
Current assets of
discontinued operations
|
|
-
|
|
|
353
|
Total current
assets
|
|
|
|
103,170
|
|
|
88,073
|
|
|
|
|
|
|
|
|
|
Property, plant and
equipment - net
|
|
|
20,111
|
|
|
29,029
|
Other
assets
|
|
|
|
162
|
|
|
205
|
Long-term assets of
discontinued operations
|
|
15
|
|
|
19
|
|
|
|
|
|
|
|
|
|
TOTAL
ASSETS
|
|
|
$
|
123,458
|
|
$
|
117,326
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND
STOCKHOLDERS' EQUITY
|
|
|
|
|
|
Current
liabilities:
|
|
|
|
|
|
|
|
Accounts payable and
accrued expenses
|
$
|
24,418
|
|
$
|
22,504
|
Income taxes
payable
|
|
|
|
1,244
|
|
|
-
|
Current maturities of
capital leases
|
|
|
56
|
|
|
219
|
Current liabilities
of discontinued operations
|
|
294
|
|
|
841
|
Total current
liabilities
|
|
|
26,012
|
|
|
23,564
|
|
|
|
|
|
|
|
|
|
Other
liabilities:
|
|
|
|
|
|
|
|
Deferred tax
liabilities
|
|
|
|
2,510
|
|
|
4,890
|
Long-term liabilities
of discontinued operations
|
|
7
|
|
|
288
|
Total
liabilities
|
|
|
|
28,529
|
|
|
28,742
|
|
|
|
|
|
|
|
|
|
Stockholders'
Equity:
|
|
|
|
|
|
|
|
Common stock; par
value $.001 per share; 20,000 shares authorized;
|
|
|
|
|
|
12,025 and 12,014
issued at September 30, 2016 and December 31, 2015,
respectively
|
|
|
|
|
|
11,848 and 11,797
outstanding at September 30, 2016 and December 31, 2015,
respectively
|
|
12
|
|
|
12
|
Additional paid-in
capital
|
|
|
|
1,588
|
|
|
-
|
Accumulated other
comprehensive income/(loss)
|
|
69
|
|
|
(62)
|
Retained
earnings
|
|
|
|
93,260
|
|
|
88,634
|
Total
stockholders' equity
|
|
|
94,929
|
|
|
88,584
|
|
|
|
|
|
|
|
|
|
TOTAL LIABILITIES
AND STOCKHOLDERS' EQUITY
|
$
|
123,458
|
|
$
|
117,326
|
|
MEDIFAST, INC. AND
SUBSIDIARIES
|
CONDENSED
CONSOLIDATED STATEMENTS OF INCOME
|
(In thousands,
except per share & dividend data)
|
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
September 30,
|
|
Nine Months Ended
September 30,
|
|
|
2016
|
|
2015
|
|
2016
|
|
2015
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue
|
|
$
|
68,578
|
|
$
|
65,936
|
|
$
|
212,067
|
|
$
|
211,461
|
Cost of
sales
|
|
|
16,415
|
|
|
16,776
|
|
|
53,485
|
|
|
55,364
|
Gross
Profit
|
|
|
52,163
|
|
|
49,160
|
|
|
158,582
|
|
|
156,097
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Selling, general, and
administrative
|
|
|
43,210
|
|
|
41,185
|
|
|
138,337
|
|
|
132,947
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from
operations
|
|
|
8,953
|
|
|
7,975
|
|
|
20,245
|
|
|
23,150
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other income
(expense)
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest and dividend
income, net
|
|
|
60
|
|
|
154
|
|
|
240
|
|
|
450
|
Other income
(expense)
|
|
|
(2)
|
|
|
(20)
|
|
|
(23)
|
|
|
129
|
|
|
|
58
|
|
|
134
|
|
|
217
|
|
|
579
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from
continuing operations before income taxes
|
|
9,011
|
|
|
8,109
|
|
|
20,462
|
|
|
23,729
|
Provision for income
taxes
|
|
|
2,946
|
|
|
2,707
|
|
|
6,740
|
|
|
8,064
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from
continuing operations
|
|
|
6,065
|
|
|
5,402
|
|
|
13,722
|
|
|
15,665
|
Income from
discontinued operations, net of tax
|
|
|
-
|
|
|
104
|
|
|
-
|
|
|
533
|
Net
income
|
|
$
|
6,065
|
|
$
|
5,506
|
|
$
|
13,722
|
|
$
|
16,198
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic earnings per
share
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings per share
from continuing operations
|
|
$
|
0.51
|
|
$
|
0.45
|
|
$
|
1.16
|
|
$
|
1.30
|
Earnings per share
from discontinued operations
|
|
$
|
-
|
|
$
|
0.01
|
|
$
|
-
|
|
$
|
0.05
|
Earnings per
share
|
|
$
|
0.51
|
|
$
|
0.46
|
|
$
|
1.16
|
|
$
|
1.35
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted earnings per
share
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings per share
from continuing operations
|
|
$
|
0.51
|
|
$
|
0.45
|
|
$
|
1.15
|
|
$
|
1.29
|
Earnings per share
from discontinued operations
|
|
$
|
-
|
|
$
|
0.01
|
|
$
|
-
|
|
$
|
0.05
|
Earnings per
share
|
|
$
|
0.51
|
|
$
|
0.46
|
|
$
|
1.15
|
|
$
|
1.34
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average
shares outstanding -
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
11,848
|
|
|
11,923
|
|
|
11,839
|
|
|
12,028
|
Diluted
|
|
|
11,948
|
|
|
12,020
|
|
|
11,925
|
|
|
12,122
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash dividends
declared per share
|
|
$
|
0.25
|
|
$
|
-
|
|
$
|
0.75
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
MEDIFAST, INC. AND
SUBSIDIARIES
|
NON-GAAP FINANCIAL
MEASURES(1)
|
(In thousands,
except per share data)
|
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
September 30,
|
|
Nine Months Ended
September 30,
|
|
|
2016
|
|
2015
|
|
2016
|
|
2015
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Selling, general, and
administrative
|
|
$
|
43,210
|
|
$
|
41,185
|
|
$
|
138,337
|
|
$
|
132,947
|
Adjustments
|
|
|
|
|
|
|
|
|
|
|
|
|
Impairment of
assets
|
|
|
-
|
|
|
-
|
|
|
6,083
|
|
|
-
|
Restructuring
charges
|
|
|
-
|
|
|
-
|
|
|
1,166
|
|
|
-
|
Legal expenses-
13D
|
|
|
-
|
|
|
(27)
|
|
|
-
|
|
|
2,083
|
Adjusted selling,
general, and administrative
|
|
$
|
43,210
|
|
$
|
41,212
|
|
$
|
131,088
|
|
$
|
130,864
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
June 30,
|
|
Six Months Ended
June 30,
|
|
|
2016
|
|
2015
|
|
2016
|
|
2015
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from
operations
|
|
$
|
8,953
|
|
$
|
7,975
|
|
$
|
20,245
|
|
$
|
23,150
|
Adjustments
|
|
|
|
|
|
|
|
|
|
|
|
|
Impairment of
assets
|
|
|
-
|
|
|
-
|
|
|
6,083
|
|
|
-
|
Restructuring
charges
|
|
|
-
|
|
|
-
|
|
|
1,166
|
|
|
-
|
Legal expenses-
13D
|
|
|
-
|
|
|
(27)
|
|
|
-
|
|
|
2,083
|
Adjusted income from
operations
|
|
$
|
8,953
|
|
$
|
7,948
|
|
$
|
27,494
|
|
$
|
25,233
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
June 30,
|
|
Six Months Ended
June 30,
|
|
|
2016
|
|
2015
|
|
2016
|
|
2015
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from
continuing operations
|
|
$
|
6,065
|
|
$
|
5,402
|
|
$
|
13,722
|
|
$
|
15,665
|
Adjustments
(2)
|
|
|
|
|
|
|
|
|
|
|
|
|
Impairment of
assets
|
|
|
-
|
|
|
-
|
|
|
4,078
|
|
|
-
|
Restructuring
charges
|
|
|
-
|
|
|
-
|
|
|
782
|
|
|
-
|
Legal expenses-
13D
|
|
|
-
|
|
|
(18)
|
|
|
-
|
|
|
1,375
|
Adjusted income from
continuing operations
|
|
$
|
6,065
|
|
$
|
5,384
|
|
$
|
18,582
|
|
$
|
17,040
|
Loss on discontinued
operations, net of tax
|
|
|
-
|
|
|
104
|
|
|
-
|
|
|
533
|
Adjusted net
income
|
|
$
|
6,065
|
|
$
|
5,488
|
|
$
|
18,582
|
|
$
|
17,573
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted earnings per
share from continuing operations (3)
|
$
|
0.51
|
|
$
|
0.45
|
|
$
|
1.15
|
|
$
|
1.29
|
Impact for
adjustments (3)
|
|
|
-
|
|
|
-
|
|
|
0.41
|
|
|
0.12
|
Adjusted diluted
earnings per share from continuing operations (3)
|
$
|
0.51
|
|
$
|
0.45
|
|
$
|
1.56
|
|
$
|
1.41
|
Diluted loss per
share from discontinued operations (3)
|
$
|
-
|
|
$
|
0.01
|
|
$
|
-
|
|
$
|
0.05
|
Adjusted diluted
earnings per share (3)
|
|
$
|
0.51
|
|
$
|
0.46
|
|
$
|
1.56
|
|
$
|
1.46
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal 2016
Guidance
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted earnings per
share from continuing operations
|
|
|
$1.45 -
$1.48
|
|
|
|
|
|
|
|
|
|
Adjustments
(4)
|
|
|
|
|
|
|
|
|
|
|
|
|
Impairment of
assets
|
|
|
0.34
|
|
|
|
|
|
|
|
|
|
Restructuring
charges
|
|
|
0.07
|
|
|
|
|
|
|
|
|
|
Adjusted diluted
earnings per share from continuing operations
|
|
$1.86 -
$1.89
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) In regards to the
restructuring charges, these non-GAAP measures are being provided
as pro-forma statements to provide information regarding expected
future performance. The departed executives included in the
restructuring were employed in 2015; and therefore, the 2016
results excluding these charges are not comparative to the 2015
results.
|
(2) The tax effected
impact of adjustments is calculated utilizing the effective tax
rate for the period presented, which may differ for quarterly and
year-to-date periods.
|
(3) 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.
|
(4) The tax effected
impact of adjustments is calculated utilizing a 33% effective tax
rate.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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visit:http://www.prnewswire.com/news-releases/medifast-inc-announces-third-quarter-2016-financial-results-300356882.html
SOURCE Medifast, Inc.