med-20220630

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 June 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 July 25, 2022 was 11,017,899.

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 Six Months Ended June 30, 2022 and 2021			2

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

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

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

Condensed Consolidated Statements of Changes in Stockholders’ Equity (unaudited) for the Three and Six Months Ended June 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			14

Item 3 – Quantitative and Qualitative Disclosures about Market Risk			22

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 June 30,				Six months ended June 30,
	2022		2021		2022		2021

Revenue	$	453,333	$	394,189	$	870,933	$	734,858
Cost of sales	131,651		100,482		246,965		192,604
Gross profit	321,682		293,707		623,968		542,254

Selling, general, and administrative	272,718		232,273		519,917		428,021

Income from operations	48,964		61,434		104,051		114,233

Other expense
Interest expense	(164)		(67)		(259)		(44)
Other expense	(4)		(22)		(20)		(3)
	(168)		(89)		(279)		(47)

Income from operations before income taxes	48,796		61,345		103,772		114,186

Provision for income taxes	9,683		14,382		22,878		26,160

Net income	$	39,113	$	46,963	$	80,894	$	88,026

Earnings per share - basic	$	3.44	$	4.00	$	7.06	$	7.48

Earnings per share - diluted	$	3.42	$	3.96	$	7.01	$	7.42

Weighted average shares outstanding
Basic	11,354		11,753		11,455		11,762
Diluted	11,435		11,858		11,534		11,869

Cash dividends declared per share	$	1.64	$	1.42	$	3.28	$	2.84

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 June 30,				Six months ended June 30,
	2022		2021		2022		2021

Net income	$	39,113	$	46,963	$	80,894	$	88,026

Other comprehensive income (loss), net of tax:
Foreign currency translation	148		(11)		$	177	$	67
Unrealized losses on investment securities	(7)		(17)		$	(21)	$	(33)
	141		(28)		$	156	$	34

Comprehensive income	$	39,254	$	46,935	$	81,050	$	88,060

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)


	June 30, 2022		December 31, 2021

ASSETS
Current Assets
Cash and cash equivalents	$	61,069	$	104,183
Inventories	156,974		180,043
Investment securities	—		5,361
Income taxes, prepaid	8,547		945
Prepaid expenses and other current assets	16,710		16,334
Total current assets	243,300		306,866

Property, plant and equipment - net of accumulated depreciation	58,544		56,131
Right-of-use assets	21,347		24,457
Other assets	12,955		6,468
Deferred tax assets	4,404		4,404


TOTAL ASSETS	$	340,550	$	398,326

LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Accounts payable and accrued expenses	$	154,782	$	163,309
Revolving credit facility	27,000		—
Current lease obligations	6,378		6,523
Total current liabilities	188,160		169,832

Lease obligations, net of current lease obligations	22,914		26,020


Total liabilities	211,074		195,852

Stockholders' Equity
Common stock, par value $0.001 per share: 20,000 shares authorized;
11,019 and 11,594 issued and 11,018 and 11,593 outstanding
at June 30, 2022 and December 31, 2021, respectively	11		12
Additional paid-in capital	—		12,018
Accumulated other comprehensive income	268		111
Retained earnings	129,197		190,333

Total stockholders' equity	129,476		202,474

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY	$	340,550	$	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)


	Six months ended June 30,
	2022		2021

Operating Activities
Net income	$	80,894	$	88,026
Adjustments to reconcile net income to cash provided by operating activities
Depreciation and amortization	5,176		2,453
Non-cash lease expense	3,211		2,187
Share-based compensation	5,140		4,344

Amortization of premium on investment securities	14		49


Change in operating assets and liabilities:
Inventories	23,069		(42,398)
Income taxes, prepaid	(7,602)		—
Prepaid expenses and other current assets	(376)		(4,657)
Other assets	(8,169)		(762)
Accounts payable and accrued expenses	(13,922)		36,962
Net cash flow provided by operating activities	87,435		86,204

Investing Activities
Sale and maturities of investment securities	5,267		5,145
Purchase of property and equipment	(5,849)		(12,196)
Net cash flow used in investing activities	(582)		(7,051)

Financing Activities
Borrowing under revolving credit facility	27,000		—
Options exercised by executives and directors	—		702
Net shares repurchased for taxes	(1,479)		(1,833)
Cash dividends paid to stockholders	(35,617)		(30,095)
Stock repurchases, settled	(100,038)		(19,730)
Stock repurchases, not yet settled	(20,010)		—
Net cash flow used in financing activities	(130,144)		(50,956)

Foreign currency impact	177		67

(Decrease) Increase in cash and cash equivalents	(43,114)		28,264
Cash and cash equivalents - beginning of the period	104,183		163,723
Cash and cash equivalents - end of period	$	61,069	$	191,987

Supplemental disclosure of cash flow information:
Income taxes paid	$	30,283	$	26,751
Dividends declared included in accounts payable	$	19,305	$	17,531

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

Table of Contents

MEDIFAST, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY (UNAUDITED)

(U.S. dollars in thousands)


	Six months ended June 30, 2022
	Number of Shares Issued	Common Stock		Additional Paid-In Capital		Accumulated Other Comprehensive Income		Retained Earnings		Treasury Stock		Total

Balance, December 31, 2021	11,594	$	12	$	12,018	$	111	$	190,333	$	—	$	202,474
Net income	—	—		—		—		41,781		—		41,781
Share-based compensation	18	—		2,275		—		—		—		2,275
Net shares repurchased for taxes	(8)	—		(1,459)		—		—		—		(1,459)
Treasury stock from stock repurchases	—	—		—		—		—		(10,000)		(10,000)
Treasury stock retired from stock repurchases	(51)	—		—		—		(10,000)		10,000		—
Other comprehensive income	—	—		—		16		—		—		16
Cash dividends declared to stockholders	—	—		—		—		(19,063)		—		(19,063)

Balance, March 31, 2022	11,553	$	12	$	12,834	$	127	$	203,051	$	—	$	216,024
Net income	—	—		—		—		39,113		—		39,113
Share-based compensation	1	—		2,865		—		—		—		2,865
Net shares repurchased for taxes	—	—		(20)		—		—		—		(20)
Treasury stock from stock repurchases	—	—		—		—		—		(90,038)		(90,038)
Treasury stock retired from stock repurchases	(535)	(1)		—		—		(90,038)		90,038		(1)
Stock repurchases, not yet settled	—	—		(15,679)

SEC Form 10-Q filed by MEDIFAST INC