Press Releases

OWINGS MILLS, Md., Nov. 5, 2012 /PRNewswire/ -- Medifast, Inc. (NYSE: MED), a leading United States manufacturer and provider of clinically proven, portion-controlled weight-loss products and programs, today reported financial results for the third quarter ended September 30, 2012.

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"Increased sales momentum across our Take Shape for Life, Medifast Direct, and the Medifast Weight Control Center and Wholesale Physicians sales channels, combined with improved operating efficiencies enabled us to report strong earnings growth ahead of our expectations in the third quarter," commented Michael C. MacDonald, Medifast's Executive Chairman and Chief Executive Officer. "In Take Shape for Life, we reported higher health coach counts while increasing our revenue-per-health coach and in our direct response sales channel we generated the highest revenue-to-spend ratio in the Company's history.  We are pleased the Medifast Weight Control Centers and Wholesale Physicians sales channel continues to be profitable and we plan to drive future efficiencies. Looking ahead, we believe Medifast is positioned better than ever to increase sales and profitability long-term."

Third Quarter 2012 Results
For the third quarter ended September 30, 2012, Medifast net revenue increased 20% to $91.0 million from net revenue of $76.1 million in the third quarter of the prior year.  Each of the Company's three primary distribution channels, Take Shape for Life, Direct Response Marketing, Medifast Weight Control Centers and Wholesale Physicians, contributed to this year-over-year revenue increase.

Revenue in the direct sales channel, Take Shape for Life, increased 20% to $55.6 million in the third quarter of 2012 compared to $46.4 million in the same period last year. Growth in revenue for Take Shape for Life was driven by increased customer product sales as a result of an increase in the number of active health coaches and an increase in the monthly revenue per health coach. The Company ended the third quarter with approximately 10,800 active health coaches and the average revenue per health coach per month for the quarter increased 3% to $1,634 compared to $1,585 in the third quarter of 2011.

The Company's Direct Response marketing channel revenue increased 10% to $21.2 million, compared to $19.2 million in third quarter of 2011. Marketing and advertising expenses decreased 2% to $6.6 million in the third quarter of 2012.  The Company reported a 3.2-to-1 revenue to spend ratio during the third quarter of 2012 compared to 2.8-to-1 in the same period last year. The Company continues to achieve a more effective advertising message.  Revenues in this channel were driven primarily by targeted customer advertising on-line and in local radio spots, and by highlighting customer successes in large national publications and on television.

In the third quarter, the Medifast Weight Control Centers and Wholesale Physicians channel revenue increased 37% to $14.2 million, primarily due to strong organic growth from the opening of new corporate and franchise locations and a year-over-year improvement in comparable store sales of 9% for centers open greater than one year. The Company had 60 Medifast Weight Control Centers in the comparable store base at September 30, 2012. The Company ended the third quarter with a total of 88 corporate and 32 franchise centers.  Going forward, the Company expects to expand the number of franchise clinics and continue to enhance the customer experience and profitability at corporate clinics.

Gross profit for the third quarter of 2012 increased 21% to $68.3 million, compared to $56.4 million in the third quarter of the prior year. The Company's gross profit margin increased 90 basis points to 75.1% in the third quarter versus 74.2% in the third quarter of 2011. Margin improvement during the quarter was a result of the Company reducing discounts at all of the Company's sales channels and a slight improvement in overhead costs as a percentage of sales.

Selling, general and administrative expenses increased $9.7 million to $59.4 million in the third quarter of 2012 versus $49.7 million last year. As a percent of net revenue, selling, general and administrative expenses decreased to 65.3% from 65.4% in the third quarter of 2011.

Operating income for the third quarter of 2012 was $8.9 million compared to $6.7 million in the same period a year ago. The operating margin increased 100 basis points to 9.8% compared to 8.8% last year.

The Company had an effective tax rate of 19.7% compared to 25.5% in the third quarter of 2011.  The decrease in the effective tax rate was the result of state tax restructuring to more fully utilize various state apportionment factors. The Company anticipates a tax rate of approximately 33% in fiscal 2012. 

Net income for the third quarter of 2012 was $7.2 million, or $0.52 per diluted share, compared to net income of $5.1 million, or $0.36 per diluted share, for the comparable period last year. Excluding the favorable tax rate in the third quarter and assuming a 36% effective tax rate, net income would have been $5.8 million, or $0.42 per diluted share.  

Balance Sheet
The Company's balance sheet remains strong with stockholders' equity of $87.2 million and working capital of $57.6 million as of September 30, 2012.  Cash, cash equivalents, and investment securities for the third quarter of 2012 increased $29.1 million to $62.9 million compared to $33.8 million at December 31, 2011.

Outlook
The Company expects fourth quarter 2012 net revenue to increase in the range of 18% to 21% or $82 to $84 million.

Earnings per diluted share are expected to be in the range of $0.23 to $0.25 based on an average weighted diluted share count of 13.8 to 13.9 million shares. 

Conference Call Information
The Company will host a conference call to discuss these results with additional comments and details. The conference call is scheduled to begin today, at 4:30 p.m. ET. The call will be broadcast live over the Internet hosted at the Investor Relations section of Medifast's website at www.choosemedifast.com, and will be archived online through November 19, 2012. In addition, listeners may dial (877) 705-6003.

A telephonic playback will be available from 7:30 p.m. ET, November 5, 2012, through November 19, 2012. Participants can dial (877) 870-5176 to hear the playback and enter passcode 401787.

About Medifast

Medifast (NYSE: MED) is the leading easy-to-use, clinically proven, portion-controlled weight-loss program. 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. Medifast was founded in 1980 and is located in Owings Mills, Maryland. For more information, log onto www.MedifastNow.com.

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 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 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.                                                                              

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SOURCE Medifast, Inc.