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Medifast, Inc.
For the third quarter, the Company generated Income from Operations of $701,000, versus $774,000 for the year earlier period. Medifast reported Net Income Before Taxes of $687,000, or $0.07 per share ($0.06 per diluted share) versus Net Income Before Taxes of $734,000, or $0.11 per basic share ($0.08 per diluted share) in the year-earlier period. The Company had net income of $520,000 or $0.04 per diluted share, versus net income of $1,543,000, or $0.18 per diluted share. The fiscal 2003 results were affected by a change in the Provision for Income Taxes. During the third quarter, the GAAP effect for taxes reduced the Company's earnings by $167,000, while in the year-earlier period the Company realized a benefit of $809,000. Medifast is not currently a tax payer for Federal tax purposes, so there is no cash flow effect from the change.
The third quarter results were impacted by the Company's investment in a National Television Test Ad Campaign, which reduced net income by approximately $200,000. The company spent approximately $550,000 in print advertising, which was $400,000 greater than last year because of the value of testing the proper mix and results of each type of media in connection with the direct response TV commercial. Medifast also spent heavily to develop infrastructure, including increasing inventory and acquiring a new distribution center to support a significant increase in 2004 revenues. The results were also impacted by the reduction in inventory at its Consumer's Choice Division, as the Company elected to liquidate some of the older merchandise in preparation to launch a new Urinary Tract Infection Test product.
For the nine months ended September 30, 2003, Medifast reported revenues of $19,539,000, a 148% increase from $7,858,000 during the year earlier period. The Company had income from operations of $3,116,000, or $0.28 per diluted share, a 77% increase from $1,753,000, or $0.21 per diluted share during the same nine months in 2002. The company had net income of $1,975,000, or $0.18 per diluted share, a 20% decrease versus $2,479,000, or $0.29 per diluted share in the 2002 period, because of the tax asset benefits. Income before taxes was $3,047,000 or $0.27 per share fully diluted versus $1,522,000 $0.17 per fully diluted share. The 2003 per share calculations were based upon 11.9 million fully-diluted shares outstanding, versus 8.7 million fully- diluted shares outstanding for the previous year. The 36% increase in the share count is a result of conversions of preferred stock, employee and consultant stock options, a 550,000 share private placement and acquisitions.
"We continue to invest heavily in preparation for the launch of our 2004 advertising campaign," said Brad MacDonald, Medifast's Chairman and CEO. "The results from the test of our television advertising far exceeded our expectations. As a result, we decided that it would be prudent to now build inventory, systems and the infrastructure necessary to support the increased demand for our products. While we prepare for 2004, our current revenues continue to increase rapidly, as the strong growth in new associates for our Take Shape for Life division is now beginning to generate increased revenues. As a result of recent changes we made at our Consumer's Choice Division, we expect that this business will play an important role in our 2004 growth objectives. We now believe that we have the facilities, inventory, product and personnel to support the next stage of our growth, which should set the stage for a strong 2004."
Some of the highlights of the third quarter include:
-- Medifast conducted a two-week test campaign nationally on satellite and
cable networks. The purpose of the test was to assist the company in
developing a national rollout of the direct response program starting
in January. The company's advertising agency said that the response
was the strongest it had ever seen.
-- Seven Crondall, LLC, a wholly owned subsidiary of Medifast, completed
the purchase of a 119,000-square-foot distribution facility in
Ridgley, Maryland. The distribution facility is expected to help the
Company, through its increased capacity, to produce up to $200 million
per year in Medifast products.
-- Growth in the Take Shape for Life Network. The Company continues to
sign new members for the program, which had approximately 5,251
members at the end of the quarter, an increase of 30% since the
beginning of the year. The Take Shape for Life health advisor network
posted record revenues in September and increased the number of health
advisor network distributors by over 15% during the month.
Subsequent to the end of the third quarter, Jason Properties, LLC, a wholly owned subsidiary of Medifast, acquired the assets of Hi-Energy Control Centers, a national company with weight loss centers in over 50 locations. The Company anticipates that the acquisition will generate $3 million in additional revenues in 2004 and be additive to earnings.
Outlook
The Company expects to generate revenues of $25.2 to $25.5 million for the 2003 fiscal year ending December 31, 2003. It expects full year income from operations of approximately $3,700,000 to $3,800,000, or approximately $0.31 to $0.32 per diluted share. The Company expects to hire forty additional customer service people to handle the expected increase in new orders in the first quarter. This updated guidance includes the dilution from the recent capital raising activities, acquisitions and share conversions. The Company does not expect to be a Federal taxpayer until 2004, but expects to pay taxes at an effective rate of 38.3% for GAAP calculations. The Company's focus in the last quarter will be to build inventory and infrastructure to capture the significant sales increase expected during the first quarter of 2004. As a result, we will delay some of our year-end programs until January, at which time we expect to recognize the revenues. The Company announced that it would disclose its 2004 annual and quarterly forecast on December 11, 2003 at 4:30PM at the New York Athletic Club. The Company previously said that it expected to report 2004 revenues of $36 million next year. It expects to increase this guidance at the December meeting.
The Company will hold a conference call today at 4:30 p.m. EST. Interested participants should call (800) 861-5314 and use access code 27127#. There will be a playback available as well. The playback will be available for up to one week after it is completed by calling (800) 695-0507.
This call is also being webcast. Investors may go to http://w.on24.com/r.htm?e=3811&s=1&k=EF7EAEB0F9959B803BDAAAAC7F0102AE to listen to the call.
This release contains forward-looking statements, which may involve known, and unknown risks, uncertainties and other factors that may cause Medifast's actual results and performance in future periods to be materially different from any future results or performance suggested by these statements. Medifast cautions investors not to place undue reliance on forward-looking statements, which speak only to management's expectation on this date.
Medifast, Inc.
Condensed Consolidated Balance Sheets
September 30, December 31,
2003 2002
(Unaudited)
ASSETS
Current assets:
Cash $4,163,000 $837,000
Certificates of Deposit 421,000 418,000
Accounts receivable, net of allowance 568,000 284,000
Merchandise inventory 2,029,000 1,259,000
Investment Securities Available for Sale -
Cost of $3,750,000 ... 3,802,000 -
Prepaid expenses and other current assets 868,000 249,000
Deferred tax asset 683,000 1,079,000
Total Current Assets 12,534,000 4,126,000
Property, plant and equipment - net 7,056,000 4,498,000
Trademarks and Intangibles 1,463,000 608,000
Other assets 73,000 1,000
Goodwill 1,439,000 -
Deferred tax asset - 655,000
TOTAL ASSETS $22,565,000 $9,888,000
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Dividends Payable 52,000 25,000
Line of Credit 257,000 91,000
Current maturities of long-term obligations 411,000 304,000
Accounts payable and accrued expenses 2,400,000 1,189,000
Total Current Liabilities 3,120,000 1,609,000
Deferred Compensation 79,000 0
Long-term obligations less current maturities 4,259,000 2,701,000
Total Liabilities 7,458,000 4,310,000
Commitments and contingencies:
Stockholders' Equity:
Series B Redeemable Convertible Preferred Stock;
stated value $1.00; 600,000 shares authorized;
453,734 and 521,290 shares issued and
outstanding, respectively 454,000 521,000
Series C Convertible Preferred Stock; stated
value $1.00; 1,015,000 shares authorized; 317,000
and 985,000 shares issued and outstanding,
respectively 317,000 985,000
Common stock; par value $.001 per share;
15,000,000 authorized; 10,064,995 and 7,204,693
shares issued and outstanding, respectively 10,000 7,000
Additional paid-in capital 18,169,000 9,613,000
Accumulated deficit (3,445,000) (5,381,000)
Accumulated Comprehensive Income 31,000 -
15,536,000 5,745,000
Less Cost of Shares of Common Stock in
Treasury of 66,195 and 30,178, respectively (429,000) (167,000)
Total Stockholders' Equity 15,107,000 5,578,000
TOTAL LIABILITIES & STOCKHOLDERS' EQUITY $22,565,000 $9,888,000
Medifast, Inc.
Condensed Consolidated Statement of Operations
Three Months Ended Nine Months Ended
Sept. 30, Sept. 30,
2003 2002 2003 2002
(Unaudited) (Unaudited)
Revenue $6,775,000 $3,058,000 $19,539,000 $7,858,000
Cost of sales 1,925,000 961,000 5,236,000 2,593,000
Gross Profit 4,850,000 2,097,000 14,303,000 5,265,000
Selling, general, and
administration 4,149,000 1,323,000 11,187,000 3,512,000
Income from operations 701,000 774,000 3,116,000 1,753,000
Other income/(expenses)
Interest expense (31,000) (26,000) (95,000) (80,000)
Other income (expense) 17,000 (14,000) 26,000 (151,000)
Income before provision
for income taxes 687,000 734,000 3,047,000 1,522,000
Provision for income tax
(expense) benefit (167,000) 809,000 (1,072,000) 957,000
Net income 520,000 1,543,000 1,975,000 2,479,000
Less: Stock dividend on
preferred stock 9,000 26,000 39,000 71,000
Net income attributable
to common shareholders $511,000 $1,517,000 $1,936,000 $2,408,000
Net Income 520,000 1,543,000 1,975,000 2,479,000
Other comprehensive income
Unrealized gains on
investment securities 51,000 - 51,000 -
Less: Income tax effect (20,000) - (20,000) -
Comprehensive Income $551,000 $1,543,000 $2,006,000 $2,479,000
Basic earnings per share $.05 $.22 $.22 $.36
Diluted earnings per share $.04 $.18 $.18 $.29
Weighted average shares
outstanding -
Basic 9,872,120 6,765,849 8,953,569 6,650,571
Diluted 11,863,185 8,713,582 11,076,550 8,506,814
SOURCE: Medifast, Inc.
CONTACT: Jeremy Hunt, Investor Relations Specialist, +1-410-504-8196 or
Casey Seward, Public Relations Manager, +1-410-504-8154, both of Medifast; or
Ken Sgro, CEOcast, Inc. for Medifast, +1-212-732-4300
Web site: http://www.medifast.net/