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| 8-K - MEDIFAST INC | v176328_8-k.htm |
Medifast
Reports Record Fourth Quarter 2009
Financial
Results Lead By Strong Growth From
All
Three Distribution Channels
Medifast
Bucks Industry Trend to Report Highest Revenues of the Year in the
Seasonally
Slowest Diet Quarter With Strong Revenue Growth From Direct Sales
(+107%),
Clinic (+82%) and Direct Response (+42%) Channels
Record
Quarterly Revenues: $46.2 million vs. $25.5 million -- Increase of
81%
Quarterly
Diluted EPS: $0.21 vs. $0.07 – Increase of 200%
Annual
Diluted EPS: $0.81 vs. $0.38 – Increase of 114%
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Contact:
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Brendan
Connors
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Lytham
Partners, LLC
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Vice
President – Finance
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602-889-9700
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ir@choosemedifast.com
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OWINGS
MILLS, MD., March 4, 2010 -- Medifast, Inc. (NYSE: MED), a provider of leading
clinically proven portion-controlled weight-loss programs, announced today
fourth quarter and year-end financial results for the period ended December 31,
2009.
Fourth
Quarter 2009 highlights included:
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·
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Fourth
quarter revenues increased 81% to $46.2 million, compared to
2008;
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·
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Diluted
EPS for the quarter increased 200% to $0.21 versus $0.07
year-over-year;
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·
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Direct
sales segment, Take Shape for Life, increased sales 107% year-over-year
for the quarter;
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·
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Medifast
Weight Control Centers quarterly revenues increased
82%;
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·
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Direct
response quarterly revenues increased 42% versus a year
ago;
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Fiscal
Year 2009 highlights included:
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·
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Revenues
increased 57% to $165.6 million, compared to
2008;
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·
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Diluted
EPS increased 114% to $0.81 versus $0.38
year-over-year;
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·
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Operating
margins improve to 11.7% versus 7.8% in the comparable
year;
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For the
fourth quarter ended December 31, 2009, Medifast reported revenue of $46.2
million, an 81% increase over the $25.5 million reported in the fourth quarter
of 2008. The Company reported net income of $3.0 million, or $0.21 per fully
diluted share, compared with $949,000, or $0.07 per fully diluted share in the
fourth quarter of 2008, a diluted EPS increase of 200%.
For the
fiscal year ended December 31, 2009, Medifast reported revenue of $165.6
million, an increase of 57% from the $105.4 million reported for the fiscal year
ended December 31, 2008. The Company reported net income of $12.0 million, or
$0.81 per fully diluted share for the fiscal year, versus $5.4 million, or $0.38
per fully diluted share, in 2008.
“As we
indicated in our preliminary results release, we are extremely pleased that our
multi-platform distribution business model continued to operate at a high level
during the fourth quarter of 2009,” commented Michael S. McDevitt, Chief
Executive Officer of Medifast, Inc. “The traditional holiday seasonality that is
inherent to our calendar fourth quarter did not materialize this year and we
benefitted with strong growth from all of our distribution channels. The
credibility of the Medifast line of products and our weight loss program is
enhanced by virtue of the recommendation of more than 20,000 doctors, and is a
key factor to our success. In today’s environment, we believe
that the recommendations of friends and family as well as those in the medical
profession transcend the mass market advertising paradigm as the most effective
way to communicate the message and benefits of a weight loss
program.”
Revenues
in the direct sales segment, Take Shape for Life, increased 107% to $29.6
million in the fourth quarter of 2009 compared with $14.3 million in the same
quarter of 2008. For the fiscal year 2009, Take Shape for Life revenues
increased 101% to $100.4 million compared to $49.8 million a year
ago. Revenue growth was driven by an increase in the number of active
health coaches, which resulted in increased customer product sales as well as
increased revenue generated per health coach. The number of active
health coaches during the fourth quarter increased to approximately 6,000
compared with 3,400 during the period a year ago, an increase of
76%. As a result of improved training, new and improved sales
and educational tools, increase in the number of field leaders and increase in
the number of health professionals as a percentage of total active health
coaches, the average revenue generated per health coach per month increased
approximately 14% in 2009 as compared to the prior year.
Typically
in the Take Shape for Life business, there is a slight slowdown in fourth
quarter health coach recruiting rates, which is offset by the incremental growth
in recruiting in the first quarter of the new year. At the end of
February 2010 and with still one month left to go in the first quarter, the
number of active health coaches has already increased by approximately 10%,
totaling 6,650 active health coaches. This early success allows the
company to anticipate another strong year of heath coach growth in
2010.
The
Company reported record revenues in its Medifast Weight Control Centers segment
of $4.6 million, an 82% increase compared to the fourth quarter of the previous
year, driven by strong same-store sales and new clinics opened during the
year. For fiscal year 2009, revenues increased 93% to $16.2
million compared to $8.4 million a year ago. Same-store sales
increased 25% for the quarter compared to the fourth quarter of 2008 for clinics
open greater than one year, primarily attributable to more effective advertising
and increased program dollars per customer. The company opened
seven new corporate and 15 new franchise clinics throughout
2009. With the proven model of providing one on one support
through a personal counselor and personalized program, the company is in the
process of building out the internal infrastructure to support robust expansion
in the years to come and estimates 13 to 15 new corporate clinics opening
throughout 2010.
During
the fourth quarter, sales in the Company’s direct response segment experienced
growth of 42% to $11.6 million compared with $8.1 million in the period a year
ago. For fiscal year 2009, revenues increased 7% to $47.0 million
compared to $44.0 million a year ago. The segment experienced a 2.8
to 1 revenue-to-spend ratio during the fourth quarter and 2.7 to 1 for the
year. As a result of the diligent controls in advertising mix
along with increases in call center closing rates maintained over the first
three quarters of 2009, the company made the decision to increase advertising
dollars spent in the fourth quarter by 32% compared to the same quarter last
year.
The
Company is pleased to announce that trending in the first two months of 2010
shows a 2.8 to 1 revenue to spend ratio, as compared to 2.6 to 1 in the first
quarter of 2009. Due to this early success, the company
anticipates its full year advertising spend to increase by 15-20%.
As a
result of manufacturing efficiencies realized from machinery in terms of labor
and scrap reduction and decreased manufacturing overhead, the company’s
inventory value was reduced at year end. Due to this one time
year-end event, the company’s gross margins during the fourth quarter of 2009
decreased to 74.6% compared to 76.3% a year ago. Going forward, the
company will experience gross margin improvement due to a decrease in the cost
of each unit sold and anticipates a total gross margin benefit of 50 to 100
basis points in 2010 as compared to the prior year.
Operating
margins improved during the fourth quarter to 10.8% compared to 5.2% in the
fourth quarter of last year as the company continues to experience the benefits
of supporting its revenue growth with a vertically integrated business model,
increases in same-store clinics sales, and improvements in direct response
advertising effectiveness ratios.
The
Company's balance sheet remains strong with stockholders' equity of $52.9
million and working capital of $29.2 million as of December 31,
2009. Cash, cash equivalents, and investment securities increased for
the year by $13.4 million to $16.3 million as a result of operating cash flows,
reduction in inventory on hand due to improved functionality and forecasting in
the company’s ERP system, and a decrease in capital expenditures.
Colonel
Brad MacDonald, (Ret.), chairman of the Board of Directors of Medifast, Inc.
commented, "The Board of Directors of Medifast appreciates the dedication of the
employees, independent health coaches, and franchise partners that has lead to
the tremendous results achieved in 2009. With a strong plan in place
for continued success going forward, we are energized to an even greater extent
to fulfill our important purpose in improving the health and quality of life for
every American dedicated to doing so.”
Mr.
McDevitt concluded, “2009 was a remarkable year for
Medifast. Our platform provides consumers the level of support
they require along with safe and effective products and programs with an
established track record of results that exceeds 30 years. Our
goal is to now expand on this platform by putting in place the infrastructure
and continued strong messaging to reach even more consumers in the coming
years.”
Fourth Quarter 2009
Conference Call
The
Company will hold a conference call and web cast to discuss the results on
Thursday, March 4, 2010 at 11:00 a.m. ET.
Interested
parties can access the call by dialing (877) 407-0782 or (201) 689-8567, or can
listen via a live Internet web cast, which can be found at
www.choosemedifast.com in the section marked "Investor Relations." A replay of
the call is available via web cast at www.choosemedifast.com until June 5, 2010
or by playback at (877) 660-6853 or (201) 612-7415 through March 18, 2010.
Please use account #286 and conference #345625 for the replay.
About
Medifast:
Medifast
(NYSE: MED) is the leading easy-to-use, clinically proven, portion-controlled
weight-loss program. Medifast has been recommended by over 20,000 doctors and
used by over one million customers since 1980. It is committed to enriching
lives by providing innovative choices for lasting health. Medifast programs have
been proven effective through studies by major university teaching hospitals.
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) medically supervised Medifast Weight Control
Centers, and 4) a national network of physicians. Medifast was founded in 1980
and is located in Owings Mills, Maryland. For more information, log onto
http://www.choosemedifast.com. MED-F
Safe Harbor
Statement
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 Associates 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's 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.
Financial
tables to follow:
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MEDIFAST,
INC. AND SUBSIDIARIES
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CONSOLIDATED
BALANCE SHEETS
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As
of December 31, 2009 and 2008
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(Unaudited)
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2009
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2008
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|||||||
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Current
assets:
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||||||||
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Cash
and cash equivalents
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$ | 12,708,000 | $ | 1,841,000 | ||||
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Accounts
receivable-net of allowance for doubtful accounts
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||||||||
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of
$100,000
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676,000 | 448,000 | ||||||
| 11,232,000 | 13,856,000 | |||||||
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Investment
securities
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3,594,000 | 1,099,000 | ||||||
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Deferred
compensation
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641,000 | 531,000 | ||||||
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Prepaid
expenses and other current assets
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5,741,000 | 3,165,000 | ||||||
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Note
receivable - current
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46,000 | 180,000 | ||||||
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Current
portion of deferred tax asset
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329,000 | 100,000 | ||||||
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Total
current assets
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34,967,000 | 21,220,000 | ||||||
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Property,
plant and equipment - net
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23,237,000 | 21,709,000 | ||||||
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Trademarks
and intangibles - net
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4,104,000 | 5,547,000 | ||||||
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Deferred
tax asset, net of current portion
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1,341,000 | 1,131,000 | ||||||
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Note
receivable, net of current assets
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112,000 | 1,080,000 | ||||||
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Other
assets
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379,000 | 350,000 | ||||||
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TOTAL
ASSETS
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$ | 64,140,000 | $ | 51,037,000 | ||||
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LIABILITIES
AND STOCKHOLDERS' EQUITY
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Current
liabilities:
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Accounts
payable and accrued expenses
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$ | 4,968,000 | $ | 5,130,000 | ||||
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Line
of credit
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- | 3,164,000 | ||||||
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Current
maturities of long-term debt
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796,000 | 257,000 | ||||||
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Total
current liabilities
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5,764,000 | 8,551,000 | ||||||
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Other
liabilities
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Long-term
debt, net of current portion
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5,444,000 | 4,313,000 | ||||||
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Total
liabilities
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11,208,000 | 12,864,000 | ||||||
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Stockholders'
Equity:
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||||||||
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Common
stock; par value $.001 per share; 20,000,000 shares
authorized;
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||||||||
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15,398,941
and 14,585,960 shares issued and outstanding
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15,000 | 15,000 | ||||||
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Additional
paid-in capital
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35,959,000 | 30,787,000 | ||||||
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Accumulated
other comprehensive income (loss)
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159,000 | (389,000 | ) | |||||
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Retained
earnings
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27,216,000 | 15,253,000 | ||||||
| 63,349,000 | 45,666,000 | |||||||
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Less:
cost of 367,838 and 272,192 shares of common stock in
treasury
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(3,320,000 | ) | (1,956,000 | ) | ||||
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Less: Unearned
compensation
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(7,097,000 | ) | (5,537,000 | ) | ||||
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Total
stockholders' equity
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52,932,000 | 38,173,000 | ||||||
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TOTAL
LIABILITIES AND STOCKHOLDERS' EQUITY
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$ | 64,140,000 | $ | 51,037,000 | ||||
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MEDIFAST,
INC. AND SUBSIDIARIES
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CONDENSED
CONSOLIDATED STATEMENTS OF INCOME
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(Unaudited)
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Three
Months Ended December 31,
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Twelve
Months Ended December 31,
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|||||||||||||||
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2009
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2008
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2009
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2008
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Revenue
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$ | 46,220,000 | $ | 25,458,000 | $ | 165,618,000 | $ | 105,445,000 | ||||||||
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Cost
of sales
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11,717,000 | 6,033,000 | 40,293,000 | 25,332,000 | ||||||||||||
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Gross
Profit
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34,503,000 | 19,425,000 | 125,325,000 | 80,113,000 | ||||||||||||
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Selling,
general, and administration
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29,503,000 | 18,094,000 | 105,959,000 | 71,914,000 | ||||||||||||
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Income
from operations
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5,000,000 | 1,331,000 | 19,366,000 | 8,199,000 | ||||||||||||
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Other
income/(expense)
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Interest
income (expense)
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13,000 | (58,000 | ) | 10,000 | (217,000 | ) | ||||||||||
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Other
income/(expense)
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(1,000 | ) | (129,000 | ) | (83,000 | ) | (132,000 | ) | ||||||||
| 12,000 | (187,000 | ) | (73,000 | ) | (349,000 | ) | ||||||||||
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Income
before provision for income taxes
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5,012,000 | 1,144,000 | 19,293,000 | 7,850,000 | ||||||||||||
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Provision
for income tax (expense)
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(1,967,000 | ) | (195,000 | ) | (7,330,000 | ) | (2,415,000 | ) | ||||||||
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Net
income
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$ | 3,045,000 | $ | 949,000 | $ | 11,963,000 | $ | 5,435,000 | ||||||||
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Basic
earnings per share
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$ | 0.22 | $ | 0.07 | $ | 0.89 | $ | 0.41 | ||||||||
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Diluted
earnings per share
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$ | 0.21 | $ | 0.07 | $ | 0.81 | $ | 0.38 | ||||||||
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Weighted
average shares outstanding -
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||||||||||||||||
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Basic
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13,772,415 | 13,086,752 | 13,515,318 | 13,126,534 | ||||||||||||
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Diluted
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14,736,639 | 14,289,923 | 14,729,698 | 14,329,525 | ||||||||||||