med-20220930

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2022

o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from________ to ________.

Commission File Number: 001-31573

Medifast, Inc.

(Exact name of registrant as specified in its charter)


Delaware						13-3714405
(State or other jurisdiction of incorporation or organization)						(I.R.S. Employer Identification No.)

100 International Drive

Baltimore, Maryland 21202

Telephone Number: (410) 581-8042

(Address of Principal Executive Offices, Zip Code and Telephone Number, Including Area Code)

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

Indicate by checkmark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes x No o

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).

Yes x No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.


Large accelerated filer	☒	Accelerated filer	☐
Non-accelerated filer	☐	Smaller reporting company	☐
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. o

Indicate by checkmark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes o No x

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

The number of shares of the registrant’s common stock outstanding at October 26, 2022 was 10,926,989.

Table of Contents

Medifast, Inc. and Subsidiaries

Index


Part 1 – Financial Information



Item 1 – Financial Statements


Condensed Consolidated Statements of Income (unaudited) for the Three and Nine Months Ended September 30, 2022 and 2021			2

Condensed Consolidated Statements of Comprehensive Income (unaudited) for the Three and Nine Months Ended September 30, 2022 and 2021			3

Condensed Consolidated Balance Sheets (unaudited) as of September 30, 2022 and December 31, 2021			4

Condensed Consolidated Statements of Cash Flows (unaudited) for the Nine Months Ended September 30, 2022 and 2021			5

Condensed Consolidated Statements of Changes in Stockholders’ Equity (unaudited) for the Nine Months Ended September 30, 2022 and 2021			6

Notes to Condensed Consolidated Financial Statements (unaudited)			8

Item 2 – Management’s Discussion and Analysis of Financial Condition and Results of Operations			15

Item 3 – Quantitative and Qualitative Disclosures about Market Risk			23

Item 4 – Controls and Procedures			23

Part II – Other Information

Item 1 – Legal Proceedings			24

Item 1A – Risk Factors			24

Item 2 – Unregistered Sales of Equity Securities and Use of Proceeds			24

Item 6 – Exhibits			25

Table of Contents

MEDIFAST, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)

(U.S. dollars in thousands, except per share amounts & dividend data)


	Three months ended September 30,				Nine months ended September 30,
	2022		2021		2022		2021

Revenue	$	390,398	$	413,395	$	1,261,332	$	1,148,253
Cost of sales	107,549		106,338		354,515		298,942
Gross profit	282,849		307,057		906,817		849,311

Selling, general, and administrative	234,693		251,886		754,610		679,907

Income from operations	48,156		55,171		152,207		169,404

Other income (expense)
Interest expense	(261)		(94)		(519)		(138)
Other income (expense)	(17)		115		(37)		112
	(278)		21		(556)		(26)

Income from operations before income taxes	47,878		55,192		151,651		169,378

Provision for income taxes	11,723		13,210		34,601		39,370

Net income	$	36,155	$	41,982	$	117,050	$	130,008

Earnings per share - basic	$	3.30	$	3.59	$	10.37	$	11.07

Earnings per share - diluted	$	3.27	$	3.56	$	10.30	$	10.98

Weighted average shares outstanding
Basic	10,964		11,692		11,290		11,739
Diluted	11,042		11,785		11,369		11,840

Cash dividends declared per share	$	1.64	$	1.42	$	4.92	$	4.26

The accompanying notes are an integral part of these condensed consolidated financial statements.

Table of Contents

MEDIFAST, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED)

(U.S. dollars in thousands)


	Three months ended September 30,				Nine months ended September 30,
	2022		2021		2022		2021

Net income	$	36,155	$	41,982	$	117,050	$	130,008

Other comprehensive income (loss), net of tax:
Foreign currency translation	123		63		$	300	$	130
Unrealized losses on investment securities	—		(16)		$	(21)	$	(49)
	123		47		$	279	$	81

Comprehensive income	$	36,278	$	42,029	$	117,329	$	130,089

The accompanying notes are an integral part of these condensed consolidated financial statements.

Table of Contents

MEDIFAST, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)

(U.S. dollars in thousands, except par value)


	September 30, 2022		December 31, 2021

ASSETS
Current Assets
Cash and cash equivalents	$	69,710	$	104,183
Inventories	145,279		180,043
Investment securities	—		5,361
Income taxes, prepaid	150		945
Prepaid expenses and other current assets	14,445		16,334
Total current assets	229,584		306,866

Property, plant and equipment - net of accumulated depreciation	58,107		56,131
Right-of-use assets	19,819		24,457
Other assets	12,691		6,468
Deferred tax assets	6,150		4,404


TOTAL ASSETS	$	326,351	$	398,326

LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Accounts payable and accrued expenses	$	148,129	$	163,309
Revolving credit facility	—		—
Current lease obligations	6,126		6,523
Total current liabilities	154,255		169,832

Lease obligations, net of current lease obligations	21,574		26,020


Total liabilities	175,829		195,852

Stockholders' Equity
Common stock, par value $0.001 per share: 20,000 shares authorized;
10,929 and 11,594 issued and 10,928 and 11,593 outstanding
at September 30, 2022 and December 31, 2021, respectively	11		12
Additional paid-in capital	18,617		12,018
Accumulated other comprehensive income	391		111
Retained earnings	131,503		190,333

Total stockholders' equity	150,522		202,474

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY	$	326,351	$	398,326

The accompanying notes are an integral part of these condensed consolidated financial statements.

Table of Contents

MEDIFAST, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

(U.S. dollar in thousands)


	Nine months ended September 30,
	2022		2021

Operating Activities
Net income	$	117,050	$	130,008
Adjustments to reconcile net income to cash provided by operating activities
Depreciation and amortization	8,026		3,767
Non-cash lease expense	4,740		3,508
Share-based compensation	8,103		6,613

Amortization of premium on investment securities	14		70
Deferred income taxes	(1,746)		—

Change in operating assets and liabilities:
Inventories	34,764		(76,222)
Income taxes, prepaid	795		—
Prepaid expenses and other current assets	1,889		(5,094)
Other assets	(8,545)		(3,393)
Accounts payable and accrued expenses	(22,259)		42,747
Net cash flow provided by operating activities	142,831		102,004

Investing Activities
Sale and maturities of investment securities	5,267		5,145
Purchase of property and equipment	(7,617)		(22,585)
Net cash flow used in investing activities	(2,350)		(17,440)

Financing Activities

Options exercised by executives and directors	—		811
Net shares repurchased for taxes	(1,504)		(1,867)
Cash dividends paid to stockholders	(53,698)		(46,845)
Stock repurchases	(120,048)		(46,000)

Net cash flow used in financing activities	(175,250)		(93,901)

Foreign currency impact	296		130

Decrease in cash and cash equivalents	(

SEC Form 10-Q filed by MEDIFAST INC