MEDIFAST, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)

(in thousands, except per share amounts & dividend data)

Three months ended March 31,

2019

2018

Revenue

$
165,876

$
98,596

Cost of sales

40,729

23,788

Gross profit

125,147

74,808

Selling, general, and administrative

100,432

60,125

Income from operations

24,715

14,683

Other income (expense)

Interest income, net

312

249

Other income (expense)

(6)

(1)

306

248

Income from operations before income taxes

25,021

14,931

Provision for income taxes

4,271

2,709

Net income

$
20,750

$
12,222

Earnings per share - basic

$
1.75

$
1.02

Earnings per share - diluted

$
1.70

$
1.01

Weighted average shares outstanding -

Basic

11,880

12,030

Diluted

12,240

12,139

Cash dividends declared per share

$
0.75

$
0.48


	Three months ended March 31,
	2020		2019

Revenue	$	178,461	$	165,876
Cost of sales		43,221		40,729
Gross profit		135,240		125,147

Selling, general, and administrative		111,707		100,432

Income from operations		23,533		24,715

Other income (expense)
Interest income, net		110		312
Other expense		(19)		(6)
		91		306

Income from operations before income taxes		23,624		25,021

Provision for income taxes		5,147		4,271

Net income	$	18,477	$	20,750

Earnings per share - basic	$	1.57	$	1.75

Earnings per share - diluted	$	1.56	$	1.70

Weighted average shares outstanding
Basic		11,772		11,880
Diluted		11,824		12,240

Cash dividends declared per share	$	1.13	$	0.75

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

MEDIFAST, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)

(in thousands, except par value)

March 31,

December 31,

2019

2018

ASSETS
Current Assets

Cash and cash equivalents

$
101,842

$
81,364
Accounts receivable-net of doubtful accounts of $270 and $394 at

March 31, 2019 and December 31, 2018, respectively

631

1,011
Inventory

43,257

38,888
Investment securities

18,585

19,670
Prepaid expenses and other current assets

4,995

4,586
Total current assets

169,310

145,519

Property, plant and equipment - net

23,343

19,747
Right-of-use asset

12,864

-
Other assets

941

1,183
Deferred tax assets

3,612

2,980

TOTAL ASSETS

$
210,070

$
169,429

LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities

Accounts payable and accrued expenses

$
74,452

$
60,323
Current lease obligation

2,443

-
Total current liabilities

76,895

60,323

Lease obligation, less current lease obligation

11,107

-
Total liabilities

88,002

60,323

Stockholders' Equity

Common stock, par value $.001 per share: 20,000 shares authorized;

12,126 and 12,117 issued and 11,898 and 11,868 outstanding

at March 31, 2019 and December 31, 2018, respectively

12

12
Additional paid-in capital

9,805

8,802
Accumulated other comprehensive loss

(46)

(173)
Retained earnings

143,176

131,344
Less: Treasury stock at cost, 193 shares at March 31, 2019 and December 31, 2018, respectively

(30,879)

(30,879)
Total stockholders' equity

122,068

109,106

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY

$
210,070

$
169,429


		March 31,		December 31,
		2020		2019

ASSETS
Current Assets
Cash and cash equivalents	$	90,670	$	76,974
Accounts receivable - net of doubtful accounts of $112 and $235 at
March 31, 2020 and December 31, 2019, respectively		390		1,437
Inventories		47,883		48,771
Investment securities		14,593		15,704
Income taxes, prepaid		193		5,169
Prepaid expenses and other current assets		7,493		6,096
Total current assets		161,222		154,151

Property, plant and equipment - net of accumulated depreciation		25,324		26,039
Right-of-use assets		12,146		12,803
Other assets		2,181		353
Deferred tax assets		1,270		1,307

TOTAL ASSETS	$	202,143	$	194,653

LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Accounts payable and accrued expenses	$	78,586	$	76,220
Current lease obligations		3,233		3,168
Total current liabilities		81,819		79,388

Lease obligations, less current lease obligations		9,575		10,433
Total liabilities		91,394		89,821

Stockholders' Equity
Common stock, par value $.001 per share: 20,000 shares authorized;
11,785 and 12,272 issued and 11,781 and 11,764 outstanding
at March 31, 2020 and December 31, 2019, respectively		12		12
Additional paid-in capital		494		-
Accumulated other comprehensive income		70		25
Retained earnings		110,173		168,788
Less: Treasury stock at cost, 0 and 489 shares at March 31, 2020 and
December 31, 2019, respectively		-		(63,993)
Total stockholders' equity		110,749		104,832

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY	$	202,143	$	194,653

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

MEDIFAST, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

(in thousands)

Three months ended March 31,

2019

2018

Operating Activities

Net income

$
20,750

$
12,222

Adjustments to reconcile net income to cash provided by operating activities

Depreciation and amortization

1,067

1,544

Share-based compensation

990

805

Loss on sale of disposal of property, plant and equipment

-

214

Realized loss on investment securities, net

82

57

Amortization of premium on investment securities

129

153

Deferred income taxes

(632)

(105)

Change in operating assets and liabilities:

Accounts receivable

380

108

Inventory

(4,369)

2,942

Income taxes, prepaid

-

2,738

Prepaid expenses and other current assets

(409)

727

Other assets

23

(1)

Accounts payable and accrued expenses

14,723

(3,396)

Net cash flow provided by operating activities

32,734

18,008

Investing Activities

Sale and maturities of investment securities

1,000

1,200

Purchase of property and equipment

(4,444)

(1,286)

Net cash flow used in investing activities

(3,444)

(86)

Financing Activities

Options exercised by executives and directors

269

62

Net shares repurchased for employee taxes

(256)

(215)

Cash dividends paid to stockholders

(8,826)

(5,883)

Net cash flow used in financing activities

(8,813)

(6,036)

Foreign currency impact

1

-

Increase in cash and cash equivalents

20,478

11,886

Cash and cash equivalents - beginning of the period

81,364

75,077

Cash and cash equivalents - end of period

$
101,842

$
86,963

Supplemental disclosure of cash flow information:

Income taxes received

$
24

$
-

Dividends declared included in accounts payable

$
9,229

$
5,943


	Three months ended March 31,
	2020		2019

Operating Activities
Net income	$	18,477	$	20,750
Adjustments to reconcile net income to cash provided by operating activities
Depreciation and amortization		1,659		1,604
Share-based compensation		981		990
Amortization of premium on investment securities		95		129
Deferred income taxes		37		(632)
Change in operating assets and liabilities:
Accounts receivable		1,047		380
Inventories		888		(4,369)
Income taxes, prepaid		4,976		-
Prepaid expenses and other current assets		(1,397)		(409)
Other assets		(1,764)		105
Accounts payable and accrued expenses		1,736		14,186
Net cash flow provided by operating activities		26,735		32,734

Investing Activities
Sale and maturities of investment securities		1,000		1,000
Purchase of property and equipment		(294)		(4,444)
Net cash flow provided by (used in) investing activities		706		(3,444)

Financing Activities
Options exercised by executives and directors		-		269
Net shares repurchased for employee taxes		(487)		(256)
Cash dividends paid to stockholders		(13,254)		(8,826)
Net cash flow used in financing activities		(13,741)		(8,813)

Foreign currency impact		(4)		1

Increase in cash and cash equivalents		13,696		20,478
Cash and cash equivalents - beginning of the period		76,974		81,364
Cash and cash equivalents - end of the period	$	90,670	$	101,842

Supplemental disclosure of cash flow information:
Income taxes paid (received)	$	80	$	(24)
Dividends declared included in accounts payable	$	13,566	$	9,229

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

MEDIFAST, INC. AND SUBSIDIARIES

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

(in thousands)

Three months ended March 31, 2019

Number of Shares Issued

Common Stock

Additional Paid-In Capital

Accumulated Other Comprehensive Loss

Retained Earnings

Treasury Stock

Total

Balance, December 31, 2018

12,117

$
12

$
8,802

$
(173)

$
131,344

$
(30,879)

$
109,106
Net income

-

-

-

-

20,750

-

20,750
Share-based compensation

-

-

990

-

-

-

990
Options exercised by executives and directors

10

-

269

-

-

-

269
Net shares repurchased for employee taxes

(1)

-

(256)

-

-

-

(256)
Other comprehensive income

-

-

-

127

-

-

127
Cash dividends declared to stockholders

-

-

-

-

(8,918)

-

(8,918)

Balance, March 31, 2019

12,126

$
12

$
9,805

$
(46)

$
143,176

$
(30,879)

$
122,068

Three months ended March 31, 2018
Balance, January 1, 2018, as reported

12,103

$
12

$
4,967

$
(160)

$
103,762

$
-

$
108,581
Cumulative effect adjustments from changes

in accounting standards

-

-

-

-

(2,018)

-

(2,018)
Balance January 1, 2018, as adjusted

12,103

12

4,967

(160)

101,744

-

106,563
Net income

-

-

-

-

12,222

-

12,222
Share-based compensation

16

-

805

-

-

-

805
Options exercised by executives and directors

14

-

62

-

-

-

62
Net shares repurchased for employee taxes

(3)

-

(215)

-

-

-

(215)
Treasury stock from cashless options

9

-

750

-

-

(750)

-
Other comprehensive loss

-

-

-

(84)

-

-

(84)
Cash dividends declared to stockholders

-

-

-

-

(5,723)

-

(5,723)

Balance, March 31, 2018

12,139

$
12

$
6,369

$
(244)

$
108,243

$
(750)

$
113,630


	Three months ended March 31, 2020
	Number of Shares Issued		Common Stock		Additional Paid-In Capital		Accumulated Other Comprehensive Income		Retained Earnings		Treasury Stock		Total

Balance, December 31, 2019	12,272	$	12	$	-	$	25	$	168,788	$	(63,993)	$	104,832

Net income	-		-		-		-		18,477		-		18,477
Share-based compensation	7		-		981		-		-		-		981
Net shares repurchased for employee taxes	(5)		-		(487)		-		-		-		(487)
Treasury stock retired from stock repurchases	(489)		-		-		-		(63,993)		63,993		-
Other comprehensive income	-		-		-		45		-		-		45
Cash dividends declared to stockholders	-		-		-		-		(13,099)		-		(13,099)
Balance, March 31, 2020	11,785		12		494		70		110,173		-		110,749


	Three months ended March 31, 2019
	Number of Shares Issued		Common Stock		Additional Paid-In Capital		Accumulated Other Comprehensive Income (Loss)		Retained Earnings		Treasury Stock		Total

Balance, December 31, 2018	12,117	$	12	$	8,802	$	(173)	$	131,344	$	(30,879)	$	109,106

Net income	-		-		-		-		20,750		-		20,750
Share-based compensation	-		-		990		-		-		-		990
Options exercised by executives and directors	10		-		269		-		-		-		269
Net shares repurchased for employee taxes	(1)		-		(256)		-		-		-		(256)
Other comprehensive income	-		-		-		127		-		-		127
Cash dividends declared to stockholders	-		-		-		-		(8,918)		-		(8,918)
Balance, March 31, 2019	12,126		12		9,805		(46)		143,176		(30,879)	$	122,068

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

Table of ~~operations or cash flows. The Company's policy for releasing disproportionate income tax effects from accumulated other comprehensive income utilizes the portfolio approach.~~ Contents

Recently Issued Accounting Pronouncements –Pending Adoption

In ~~February 2016,~~December 2019, the FASB issued ASU ~~2016-02,~~ ~~Leases~~2019-12, Income Taxes (Topic ~~842)~~~~, which requires~~740): Simplifying the Accounting for Income Taxes, to simplify the accounting for income taxes. The standard eliminates certain exceptions related to the approach for intraperiod tax allocation, the methodology for calculating income taxes in an ~~entity~~interim period and the recognition of deferred tax liabilities for outside basis differences related to ~~recognize~~changes in ownership of equity method investments and foreign subsidiaries. The standard also simplifies aspects of accounting for franchise taxes and enacted changes in tax laws or rates and clarifies the accounting for transactions that result in a ~~right-of-use asset (“ROU”) asset~~step-up in the tax basis of goodwill and ~~a lease liability on~~allocating consolidated income taxes to separate financial statements of entities not subject to income tax. This ASU is effective for fiscal years beginning after December 15, 2020, with early adoption permitted. Upon adoption, the ~~balance sheet~~Company must apply certain aspects of this standard retrospectively for all leases, including operating leases, and also requires disclosures about the amount, timing and uncertainty of cash flows arising from leases. Subsequent to the issuance of Topic 842, the FASB clarified the guidance through several ASUs; hereinafter the collection of lease guidance is referred to as “ASC 842”.

~~On January 1, 2019, the Company adopted ASC 842 using the~~periods presented while other aspects are applied on a modified retrospective ~~method for all lease arrangements at~~basis through a cumulative-effect adjustment to retained earnings as of the beginning of the ~~period~~fiscal year of adoption. ~~Results for reporting periods beginning January 1, 2019 are presented under ASC 842, while prior period amounts were not adjusted and continue to be reported in accordance with~~Management is currently evaluating the effect that the provisions of ASU 2019-12 will have on the Company’s ~~historic accounting under ASC 840, Leases.~~condensed consolidated financial statements.

Coronavirus Aid, Relief and Economic Security Act ("CARES Act")

On March 27, 2020, the President of the United States signed into law the CARES Act. The ~~standard had a~~CARES Act, among other things, includes provisions relating to refundable payroll tax credits, deferment of employer side social security payments, net operating loss carryback periods, alternative minimum tax credit refunds, modifications to the net interest deduction limitations and technical corrections to tax depreciation methods for qualified improvement property. There was no material impact on the Company’s ~~Consolidated Condensed Balance Sheets, but did not~~condensed consolidated financial statements for the three months ended March 31, 2020. Management is currently evaluating the impact of the CARES Act will have ~~a significant impact~~ on the Company’s condensed consolidated ~~net earnings and cash~~

~~Table of Contents~~

~~flows. The most significant impact was the recognition of ROU assets and lease liabilities~~financial statements for operating leases. For leases that commenced before the effective date of ASC 842, the Company elected the permitted practical expedients to not reassess the following: (i) whether any expired or existing contracts contain leases; (ii) the lease classification for any expired or existing leases; and (iii) initial direct costs for any existing leases. The Company also elected to exclude leases with a term of 12 months or less in the recognized ROU assets and lease liabilities.

As a result of the cumulative impact of adopting ASC 842, the Company recorded ROU assets of $11.9 million, net of $686 thousand of accrued rent, and lease liabilities of $12.6 million as of January 1, 2019, primarily related to office and warehouse space and certain equipment, based on the present value of the future ~~lease payments on the date of adoption.~~periods.

The Company determines if an arrangement is a lease at inception. The ROU assets represent the Company’s right to use an underlying asset for the lease term and lease liabilities represent an obligation to make lease payments arising from the lease. ROU assets and lease liabilities are recognized at the lease commencement date based on the present value of lease payments over the lease term. As most of the Company’s leases do not provide an implicit interest rate, the Company uses its incremental borrowing rate based on the information available at commencement date in determining the present value of lease payments. The ROU asset also consists of any prepaid lease payments and lease incentives received. The lease terms used to calculate the ROU asset and related lease liability include options to extend or terminate the lease when it is reasonably certain that the Company will exercise that option. Lease expense for operating leases is recognized on a straight-line basis over the lease term as an operating expense. See Note 5 “LEASES” for additional information about this adoption.

2. INVENTORIES

Inventories consist principally of packaged meal replacements held in the Company’s warehouses. Inventory is stated at the lower of cost or net realizable value, utilizing the first-in, first-out method. The cost of finished goods includes the cost of raw materials, packaging supplies, direct and indirect labor and other indirect manufacturing costs. On a quarterly basis, management reviews inventory for unsalable or obsolete inventory.

Inventories consisted of the following (in thousands):


	March 31, 2019		December 31, 2018


					March 31, 2020		December 31, 2019

Raw materials	$	10,535	$	11,156	$	10,186	$	10,880
Packaging		1,813		1,563		3,166		4,109
Non-food finished goods		4,078		2,391		4,639		4,421
Finished goods		28,739		25,509		32,041		31,314
Reserve for obsolete inventory		(1,908)		(1,731)		(2,149)		(1,953)
Total	$	43,257	$	38,888	$	47,883	$	48,771

3. EARNINGS PER SHARE

Basic earnings per share (“EPS”) computations are calculated utilizing the weighted average number of shares of the Company’s common stock outstanding during the periods presented. Diluted EPS is calculated utilizing the weighted average number of shares of the Company’s common stock outstanding adjusted for the effect of dilutive common stock equivalents.

Table of Contents

The following table sets forth the computation of basic and diluted EPS (in thousands, except per share data):


	Three months ended March 31,
	2019		2018


					Three months ended March 31,
					2020		2019

Numerator:
Net income	$	20,750	$	12,222	$	18,477	$	20,750


Denominator:
Weighted average shares of common stock outstanding		11,880		12,030		11,772		11,880
Effect of dilutive common stock equivalents		360		109		52		360
Weighted average shares of common stock outstanding		12,240		12,139		11,824		12,240


Earnings per share - basic	$	1.75	$	1.02	$	1.57	$	1.75


Earnings per share - diluted	$	1.70	$	1.01	$	1.56	$	1.70

The calculation of diluted EPS excluded ~~826~~1,413 and ~~4,690~~826 antidilutive options outstanding for the three months ended March 31, ~~2019~~2020 and ~~2018,~~2019, respectively. The calculation ~~for~~of diluted EPS also excluded 14,940 and 1,198 antidilutive restricted stock awards for the three months ended March 31, 2020 and 2019, ~~and 2018 also excluded 1,198 and 0 antidilutive restricted stock awards,~~ respectively. ~~EPS is computed independently for each of the quarters presented; accordingly, the sum of the quarterly earnings per common share may not equal the year-to-date total computed.~~

4. SHARE-BASED COMPENSATION

Stock ~~Options:~~Options

The Company has issued non-qualified and incentive stock options to employees and nonemployee directors. The fair value of these options are estimated on the date of grant using the Black-Scholes option pricing model, which requires estimates of the expected term of the option, the risk-free interest rate, the expected volatility of the price of the Company’s common stock, and dividend yield. Options outstanding as of March 31, ~~2019~~2020 generally vest over a period of three years and expire ten years from the date of grant. The exercise price of these options ranges from $26.52 to ~~$171.68.~~$171.68. Due to the Company’s lack of option exercise history, the expected term is calculated using the simplified method defined as the midpoint between the vesting period and the contractual term of each option. The risk free interest rate is based on the U.S. Treasury yield curve in effect on the date of grant that most closely corresponds to the expected term of the option. The expected volatility is based on the historical volatility of the Company’s common stock over the period of time equivalent to the expected term for each award. For the three months ended March 31, 2020 and 2019, the Company did not grant stock options. ~~For the three months ended March 31, 2018, the weighted average input assumptions used were as follows:~~


	~~2018~~
~~Expected term (in years)~~	~~6.4~~
~~Risk-free interest rate~~	~~2.64%~~
~~Expected volatility~~	~~33.31%~~
~~Dividend yield~~	~~2.88%~~

~~Table of Contents~~

The following table is a summary of our stock option activity:


	Three months ended March 31,
	2019			2018
	Shares	Weighted-Average Exercise Price		Shares	Weighted-Average Exercise Price
(shares in thousands)

							Three months ended March 31,
							2020			2019
							Awards	Weighted-Average Exercise Price		Awards	Weighted-Average Exercise Price
(awards in thousands)
Outstanding at beginning of period	107	$	49.26	106	$	31.18	97	$	52.51	107	$	49.26
Granted	-		-	51		66.68
Exercised	(10)		27.86	(21)		28.87	-		-	(10)		27.86
Outstanding at end of the period	97	$	52.51	136	$	44.79	97	$	52.51	97	$	52.51
Exercisable at end of the period	53	$	40.97	60	$	29.94	72	$	46.86	53	$	40.97

As of March 31, ~~2019,~~2020, the weighted-average remaining contractual life for outstanding stock options was ~~7.86~~6.86 years with an aggregate intrinsic value of ~~$7.4~~$1.3 million ~~for outstanding stock options~~ and the weighted-average remaining contractual life for exercisable stock options was ~~7.10~~6.50 years with an aggregate intrinsic value of $4.6 million for exercisable options. For the three months, ended March 31, 2019, the Company did not grant stock options. The weighted-average grant date fair value of options granted during the three months ended March 31, 2018 was $17.79.$1.3 million. The unrecognized compensation expense calculated under the fair value method for ~~shares~~stock options expected to vest as of March 31, ~~2019~~2020 was ~~$0.8~~$0.4 million and is expected to be recognized over a weighted average period of ~~3.10~~2.56 years. ~~The~~For the three months ended March 31, 2020,

Table of Contents

there was no exercise activity of stock options. For the three months ended March 31, 2019, the Company received ~~$269 thousand and $62 thousand~~$0.3 million in cash proceeds from the exercise of stock ~~options during the three months ended March 31, 2019 and 2018, respectively.~~options. Upon exercising of stock options, the Company withheld ~~shares for employee taxes of~~ 1 thousand ~~and 3 thousand~~shares of the Company’s common stock to cover minimum tax liability withholding obligations for the three months ended March 31, ~~2019 and 2018, respectively.~~2019. The total intrinsic value for stock options exercised during the three months ended March 31, 2019 ~~and 2018~~ was $1.0 ~~million and $1.4 million, respectively.~~million.

Restricted ~~Stock:~~Stock

The Company has issued restricted stock to employees and nonemployee directors generally with vesting terms up to five years after the date of grant. The fair value of the restricted stock is equal to the market price of the Company’s common stock on the date of grant. Expense for restricted stock is amortized ratably over the vesting period. The following table summarizes our restricted stock activity:


	Three months ended March 31,
	2019			2018
	Shares	Weighted-Average Grant Date Fair Value		Shares	Weighted-Average Grant Date Fair Value

							Three months ended March 31,
							2020			2019
							Shares	Weighted-Average Grant Date Fair Value		Shares	Weighted-Average Grant Date Fair Value
(shares in thousands)
Outstanding at beginning of period	57	$	50.55	129	$	32.15	46	$	98.28	57	$	50.55
Granted	27		130.59	16		66.68	29		100.68	27		130.59
Vested	(21)		33.92	(69)		28.35	(21)		66.73	(21)		33.92
Forfeited							(3)		105.29	-		-
Outstanding at end of the period	63	$	90.60	76	$	42.99	51	$	112.43	63	$	90.60

The Company withheld 5 thousand and 1 thousand shares of the Company’s common stock to cover minimum tax liability withholding obligations upon the vesting of shares of restricted stock for the three months ended March 31, 2020 and March 31, 2019, respectively. The total fair value of restricted stock awards vested during the three months ended March 31, 2020 and 2019 ~~and 2018~~ was ~~$2.8~~$2.2 million and ~~$4.8~~$2.8 million, respectively.

The total share-based compensation charged against income was ~~$990 thousand and $805 thousand~~$1.0 million during the three months ended March 31, ~~2019~~2020 and ~~2018,~~2019, respectively. The total costs of the options and restricted stock awards charged against income was ~~$672 thousand and $580 thousand~~$0.7 million during the three months ended March 31, 2020 and 2019, respectively. Included for the three months ended March 31, 2020 and ~~2018,~~2019 was $0.2 million and $0.1 million, respectively, for 16,637 and 19,244 performance-based contingent shares for certain key executives granted in 2019, respectively. Also included for the three months ended March 31, ~~2019 and 2018~~2020 was ~~$76 thousand and $73 thousand, respectively,~~$0.1 million for ~~63,300~~25,738 performance-based contingent shares for certain key ~~executives. Included~~executives granted in 2020. Additionally, included for the three months ended March 31, 2019 was $0.1 million for 63,300 performance-based deferred shares in expense for certain key executives, and ~~2018 was $152 thousand~~$0.2 million in expense for 210,000 performance-based contingent shares granted to our ~~CEO that will vest based~~Chief Executive Officer (“CEO”), respectively. These 273,300 performance-based shares were fully vested on ~~the achievement of certain Company performance targets. Included for the~~

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~~three months ended March~~December 31, ~~2019 was $90 thousand for 19,244 performance-based contingent shares for certain key executives.~~2019.

The total income tax benefit recognized in the Condensed Consolidated Statements of Income for restricted stock awards was ~~$833 thousand~~$0.2 million and ~~$917 thousand~~$0.8 million for the three months ended March 31, 2020 and 2019, ~~and 2018,~~ respectively.

There was ~~$4.9~~$4.7 million of total unrecognized compensation cost related to restricted stock awards as of March 31, ~~2019,~~2020, which is expected to be recognized over a weighted-average period of ~~2.28~~2.41 years. There was ~~$3.1~~$3.8 million of unrecognized compensation cost related to the ~~292,544 performance based contingent~~42,375 performance-based shares discussed above as of March 31, ~~2019,~~2020, which is expected to be recognized over ~~a weighted-average period of 2.42~~2.40 years.

5. LEASES AND CONTINGENCIES

Operating Leases

The Company has operating leases for office and warehouse space and certain equipment. In certain of the Company’s lease agreements, the rental payments are adjusted periodically based on defined terms within the lease. The Company

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did not have any finance leases as of March 31, 2020 and 2019, ~~and~~respectively, or for the three-month ~~period~~periods then ~~ended.~~ended, respectively.

Our leases relating to office and warehouse space have terms of 6336 months to 122 months. Our leases relating to equipment have lease terms of 60 to 203 months, with some of them having clauses relating to automatic renewal.

The Company’s warehouse agreement also contains non-lease components, in the form of payments towards variable logistics services and labor charges, which the Company is obligated to pay based on the services consumed by it. Such amounts are not included in the measurement of the lease liability but will be recognized as expense when they are incurred.

For the three months ended March 31, 2020 and 2019, respectively, the operating lease expense was ~~$662 thousand.~~$0.8 million and $0.7 million, respectively.

Supplemental cash flow information related to the Company’s operating leases were as follows (in thousands):


	Three months ended March 31,
	2019


			Three months ended March 31,
			2020		2019

Cash paid for amounts included in the measurements of lease liabilities
Operating cash flow from operating leases	$	663	$	906	$	663


Right-of-use assets obtained in exchange for lease obligations
Operating leases	$	1,490	$	-	$	1,490

As of March 31, ~~2019,~~2020, the weighted average remaining lease term was ~~5.5~~4.3 years and the weighted average discount rate was ~~3.9%~~3.7%.

The following table presents the maturity of the Company’s operating lease liabilities as of March 31, ~~2019~~2020 (in thousands):

2019 (excluding the three months ended March 31, 2019)

$
2,191
2020

2,951
2021

2,985
2022

2,641
2023

1,633
Thereafter

2,685
Total lease payments

$
15,086
Less: imputed interest

(1,536)
Total

$
13,550


2020 (excluding the three months ended March 31, 2020)	$	2,730
2021		3,670
2022		3,154
2023		1,665
2024		1,234
Thereafter		1,452
Total lease payments	$	13,905
Less: imputed interest		(1,097)
Total	$	12,808

Other Contingencies

On or about April 30, 2020 the Company became aware that one of its products may contain undeclared traces of milk. The sale of this product occurred during the first quarter of 2020 and the first part of the second quarter of 2020. The Company has initiated a recall of the specific lots of this product that were impacted and notified the U.S. Food and Drug Administration, as required. The Company has considered the impact of the recall to our first quarter results and has concluded that the effects are immaterial to the financial statements. The Company will continue to monitor the effects of the recall and are prepared to record any necessary adjustments during the second quarter of 2020 as facts and circumstances become more concrete.

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As previously disclosed in our 2018 Form 10-K and under the previous lease accounting standard, future minimum lease commitments under non-cancelable operating leases with terms in excess of one year would have been as follows (in thousands):

2019

$
1,496
2020

1,528
2021

1,562
2022

1,222
2023

1,155
Thereafter

2,582
Total minimum lease payments

$
9,545

6. ACCUMULATED OTHER COMPREHENSIVE ~~LOSS~~INCOME

The following table sets forth the components of accumulated other comprehensive income, ~~(loss),~~ net of tax where applicable (in thousands):

March 31, 2019

December 31, 2018

Foreign currency translation

$
(1)

$
(2)
Unrealized losses on marketable securities

(45)

(171)
Accumulated other comprehensive loss

$
(46)

$
(173)

7. FINANCIAL INSTRUMENTS

Certain financial assets and liabilities are accounted for at fair value, which is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The following fair value hierarchy prioritizes the inputs used to measure fair value:

Level 1 – Quoted prices are available in active markets for identical assets or liabilities as of the reporting date. Active markets are those in which transactions for the asset or liability occur in sufficient frequency and volume to provide pricing information on an ongoing basis.

Level 2 – Pricing inputs are other than quoted prices in active markets included in Level 1, which are either directly or indirectly observable as of the reporting date. Level 2 includes those financial instruments that are valued using models or other valuation methodologies.

Level 3 – Pricing inputs include significant inputs that are generally less observable from objective sources. These inputs may be used with internally developed methodologies that result in management’s best estimate of fair value from the perspective of a market participant.

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The following tables represent cash and the available-for-sale securities adjusted cost, gross unrealized losses and fair value by significant investment category recorded as cash and cash equivalents or investment securities (in thousands):


	March 31, 2020
		Cost		Unrealized Gains		Accrued Interest		Estimated Fair Value		Cash & Cash Equivalents		Investment Securities

Cash	$	64,065	$	-	$	-	$	64,065	$	64,065	$	-

Level 1:
Certificate of deposit		20,000		-		-		20,000		20,000		-
Money market accounts		6,605		-		-		6,605		6,605		-
Government & agency securities		2,831		73		11		2,915		-		2,915
		29,436		73		11		29,520		26,605		2,915

Level 2:
Municipal bonds		11,516		13		149		11,678		-		11,678

Total	$	105,017	$	86	$	160	$	105,263	$	90,670	$	14,593

March 31, 2019

Cost

Unrealized Losses

Accrued Interest

Estimated Fair Value

Cash & Cash Equivalents

Investment Securities

Cash

$
39,714

$
-

$
-

$
39,714

$
39,714

$
-

Level 1:

Certificate of deposit

60,000

-

-

60,000

60,000

-
Money market accounts

2,128

-

-

2,128

2,128

-
Government & agency securities

2,833

(48)

11

2,796

-

2,796

64,961

(48)

11

64,924

62,128

2,796

Level 2:

Municipal bonds

15,667

(61)

183

15,789

-

15,789

Total

$
120,342

$
(109)

$
194

$
120,427

$
101,842

$
18,585

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	December 31, 2018
		Cost		Unrealized Losses		Accrued Interest		Estimated Fair Value		Cash & Cash Equivalents		Investment Securities


													December 31, 2019
														Cost		Unrealized Gains		Accrued Interest		Estimated Fair Value		Cash & Cash Equivalents		Investment Securities

Cash	$	35,436	$	-	$	-	$	35,436	$	35,436	$	-	$	36,593	$	-	$	-	$	36,593	$	36,593	$	-


Level 1:
Certificate of deposit		40,000		-		-		40,000		40,000		-		35,000		-		-		35,000		35,000		-
Money market accounts		5,928		-		-		5,928		5,928		-		5,381		-		-		5,381		5,381		-
Government & agency securities		2,835		(72)		-		2,763		-		2,763		2,832		2		-		2,834		-		2,834
		48,763		(72)		-		48,691		45,928		2,763

														43,213		2		-		43,215		40,381		2,834

Level 2:
Municipal bonds		16,791		(164)		280		16,907		-		16,907		12,610		34		226		12,870		-		12,870


Total	$	100,990	$	(236)	$	280	$	101,034	$	81,364	$	19,670	$	92,416	$	36	$	226	$	92,678	$	76,974	$	15,704

The Company had no0 realized ~~loss~~losses or gains for the three months ended March 31, ~~2019~~2020 and ~~2018,~~2019, respectively. As of March 31, ~~2019~~2020 and ~~2018,~~2019, gross unrealized losses and gains related to individual securities that had been in a continuous loss position for 12 months or longer were not significant. The maturities of the Company’s investment securities generally range up to 53 years for municipal bonds and for government and agency securities.

8. SUBSEQUENT EVENTS

The global spread of the novel coronavirus (“COVID-19”), which has been declared by the World Health Organization to be a “pandemic,” has spread to many countries and is impacting worldwide economic activity. Many governments have implemented policies intended to stop or slow the further spread of the disease, such as social distancing and shelter-in-place orders, resulting in the temporary closure of schools and non-essential businesses, and these measures may remain in place for a significant period of time. During the first quarter of 2020, the impact of COVID-19 on the Company’s business was most pronounced in March. While the duration and severity of this pandemic is uncertain, the Company currently expects that its results of operations in the second quarter of 2020 will have the most significant impact of the effects of COVID-19, and that subsequent periods may also be negatively impacted. The extent to which the COVID-19 pandemic ultimately impacts the Company’s business, financial condition, results of operations, cash flows, and liquidity may differ from management’s current estimates due to inherent uncertainties regarding the duration and further spread of the outbreak, its severity, actions taken to contain the virus or treat its impact, and how quickly and to what extent normal economic and operating conditions can resume.

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Item 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

Note Regarding Forward-Looking Statements

This report contains information that may constitute “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Generally, the words “believe,” “expect,” “intend,” “estimate,” “anticipate,” “project,” “will,” and similar expressions, which are not historical in nature, identify forward-looking statements. However, the absence of these words or expressions does not necessarily mean that a statement is not forward-looking. All statements that address operating performance, events or developments that we expect or anticipate will occur in the future, including statements relating to future operating results, are forward-looking statements. Management believes that these forward-looking statements are reasonable as and when made. However, caution should be taken not to place undue reliance on any such forward-looking statements because such statements speak only as of the date when made. We undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law. In addition, forward-looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially from our historical experience and our present expectations or projections. These risks and uncertainties include, but are not limited to, those described in our ~~2018~~2019 Form ~~10‑K,~~10-K, this Form 10-Q and those described from time to time in our future reports filed with the SEC.

The following discussion should be read in conjunction with the unaudited condensed consolidated financial statements and related notes appearing elsewhere herein.

Overview

~~We are a leading~~Medifast is the company behind one of the fastest-growing health and wellness ~~company that empowers people to transform their lives one healthy habit~~communities called OPTAVIA^®, which offers Lifelong Transformation, One Healthy Habit at a ~~time. Through our rapidly growing community~~Time^®. Reflecting the success of ~~independent wellness coaches, we seek~~its approach to ~~enrich the lives of our clients through programs that promote healthy living and through the manufacture and distribution of our proprietary~~ health and wellness ~~products. We believe we are building~~for its clients, Medifast has consistently grown revenue ahead of peers and competitors. Of equal importance, our business model is expected to deliver long-term growth. Medifast has redefined direct selling by combining the ~~most trusted, transparent~~best aspects of the model, while eliminating those dimensions that have typically challenged other companies. Medifast is often compared to diet and ~~effective direct-sales health and wellness community in the world.~~ weight loss-only companies or to multi-level marketing companies, but our model is very different. The company supports clients through independent OPTAVIA Coaches, majority of whom were clients first.

Our operations are ~~primarily~~ conducted through our wholly owned subsidiaries, Jason Pharmaceuticals, Inc.,OPTAVIA LLC, Jason Enterprises, Inc., Jason Properties, LLC, Medifast Franchise Systems, Inc., Medifast Nutrition, Inc., Seven Crondall Associates, LLC, Corporate Events, Inc.,OPTAVIA (Hong Kong) Limited, ~~and~~OPTAVIA (Singapore) PTE. ~~LTD.~~ LTD and OPTAVIA Health Consultation (Shanghai) Co., Ltd.

~~Since our founding, we~~OPTAVIA is a highly effective lifestyle solution for people for whom diets alone have ~~been an innovator in~~failed. Habits of Health^®, the ~~development of nutritional weight-management~~approach developed by OPTAVIA Co-founder and independent OPTAVIA Coach, Dr. Wayne Scott Andersen, combines clinically proven plans with scientifically developed products and ~~programs.~~the ongoing support of Coaches. We sell a variety of weight loss, weight management and healthy living products all based on our proprietary formulas under the Medifast^®,OPTAVIA,®, Thrive by Medifast, Optimal Health byTake Shape for Life, and Flavors of Home^®~~, and Essential 1~~ brands. Our ~~meal replacement~~product line includes more than ~~150~~170 consumable options, including, but not limited to, bars, bites, pretzels, puffs, cereal crunch, drinks, hearty choices, oatmeal, pancakes, pudding, soft serve, shakes, smoothies, soft bakes, and soups. The Thrive by Medifast and Optimal Health byTake Shape for Life lines include a variety of specially formulated bars, shakes, and smoothies for those who are maintaining their weight for long-term healthy living. We identify opportunities to expand our product line by regularly surveying our clients and studying industry and consumer trends. This allows us to introduce new, high quality products that meet consumer demand.

Our nutritional products are formulated with high-quality ~~low-calorie, and low-fat~~ ingredients. Products include individually portioned, calorie- and carbohydrate-controlled meal replacements that share a similar nutritional footprint and provide a balance of protein and good carbohydrates. Our meal replacements are also fortified to contain vitamins and minerals, as well as other nutrients essential for good health.

~~In March 2018, we announced a change in how~~ We offer our business is managed, operating performance is reviewed and resources are allocated. As a result, beginning in the first quarter of 2018, we changed how we report financial performance to align with changes in the way we now manage the business and now operate and report as a single salesOPTAVIA clients exclusive OPTAVIA-branded nutritional products,

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~~segment,~~or “Fuelings,” and also offer a variety of other weight loss, weight management, and healthy living products under other brands. OPTA~~VIA. We previously disclosed entity-wide financial information for multiple segments (e.g.~~ ~~OPTA~~VIA ~~Medifast Direct, Franchise Medifast Weight Control Centers~~Fuelings come in a variety of flavors that appeal to a broad variety of tastes. Our products are nutrient-dense, portion-controlled, nutritionally interchangeable and ~~Medifast Wholesale). Although we have one reportable segment we continue~~simple to ~~market our products and programs through our Medifast Direct ecommerce platform and our Franchise Medifast Weight Control Center channels.~~use.

OPTAVIA encompasses our community ofOPTAVIA Coaches, ourOPTAVIA health and wellness programs, and our proprietaryOPTAVIA-branded products. TheOPTAVIA ~~Integrated Coaching Model~~integrated coaching model is centered around providing focused, individualized attention to our clients. OurOPTAVIA Coaches provide the support and encouragement for clients to successfully learn and adopt a more healthy lifestyle. This clinically-proven ~~model~~plan translates into better client results when compared to programs that leave individuals to adopt and maintain healthy habits on their own. Our clients receive personalized attention from ourOPTAVIA Coaches who share, educate, motivate and pass along their passion for healthy living. We believe this personal, direct-sales and service strategy is optimal for activating and supporting our clients. In a clinical study published in Obesity Science and Practice in 2018, the OPTAVIA model’s effectiveness was validated when its meal plan was combined with education and support from Coaches.

OurOPTAVIA Coaches are independent contractors, not employees, who support our clients and market our products and services primarily through word of mouth, email ~~direct mail~~ and via social media channels such as Facebook, Instagram, Twitter orand Zoom. As direct-sales entrepreneurs,OPTAVIA Coaches market our products to friends, family and other acquaintances with whom they have established strong relationships.

The entrepreneurial success of ourOPTAVIA Coaches is the key to our success. We are focused on scaling ourOPTAVIA Integrated Coaching Model by offering economic incentives that are attractive to independent entrepreneurs and reflective of the new “gig ~~economy”.~~economy.” Our successful clients frequently become enthusiastic health and wellness advocates themselves and choose to becomeOPTAVIA Coaches. This process of clients becomingOPTAVIA Coaches underpins our growth.

As we previously disclosed, global expansion is an important component of our long-term growth strategy. In July 2019, we commenced our international operations, entering into the Asia Pacific markets of Hong Kong and Singapore. Our decision to enter these markets was based on industry market research that reflects a dynamic shift in how health care is being prioritized and consumed in those countries.

The global spread of the novel coronavirus (“COVID-19”), which has been declared by the World Health Organization to be a “pandemic,” has spread to many countries and is impacting worldwide economic activity. Many governments have implemented policies intended to stop or slow the further spread of the disease, such as social distancing and shelter-in-place orders, resulting in the temporary closure of schools and non-essential businesses, and these measures may remain in place for a significant period of time. Because the Company sells products that are essential to the daily lives of consumers, the COVID-19 pandemic has not had a material impact to our consolidated operating results in the current quarter. However, the impact of COVID-19 on the Company’s business was most pronounced in March. The extent to which our operations and business trends will be impacted by, and any unforeseen costs will result from, the outbreak will depend largely on future developments, which are highly uncertain and cannot be accurately predicted. These developments include, among other things, new information that may emerge concerning the severity of the outbreak and health implications, future actions by government authorities to contain the outbreak or treat its impact, and changes in consumer behavior resulting from the outbreak and such government actions. We ~~offer~~continue to actively monitor the impact of COVID-19 and related developments and expect it will more significantly impact our reported results for the second quarter of fiscal 2020 and may potentially do so in subsequent periods.

Importantly, our manufacturing facility remains fully operational to date and we have not experienced any meaningful disruption to our world-wide supply chain. Additionally, nutritional supplements and health foods have been designated critical/essential infrastructure in the U.S. and, as such, we have continued to actively manufacture and distribute our products in our markets around the world. While our manufacturing and distribution employees continue to work on site, they are following additional health and safety guidelines. In response to the public health crisis posed by COVID-19, we have taken numerous actions, including:

●

successfully implementing a work-from-home plan for all non-essential employees to comply with guidelines from government and health officials;

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●

changing this year’s OPTAVIA convention from a live event in July to a virtual event which will take place in July;

●

employing incentives and promotions to help OPTAVIA Coaches adjust to the adverse effect of overall economic conditions and the nationwide actions taken to control the spread of the virus

The Company’s priorities during the COVID-19 pandemic are protecting the health and safety of our employees and their families, OPTAVIA ~~clients exclusive~~ ~~OPTAVIA-branded nutritional~~Coaches; maximizing the availability of products that help consumers with their needs; and the use of our employees’ talents and our resources to help society meet and overcome the current challenges. The Company will continue to proactively respond to the situation and may take further actions that alter the Company’s business operations as may be required by governmental authorities, or ~~“Fuelings”~~that the Company determines are in the best interests of its employees, OPTAVIA coaches and ~~also offer a variety~~consumers.

For additional information on risk factors that could impact our results, please refer to “Risk Factors” in Part II, Item 1A of ~~other weight loss, weight management, and healthy living products under other brands.~~ ~~OPTA~~VIA Fuelings come in a variety of flavors that appeal to a broad variety of tastes. Our products are nutrient-dense, portion controlled, nutritionally interchangeable and simple to use. They are formulated with high-quality, low-calorie, and low-fat ingredients.this Form 10-Q.

Critical Accounting Policies and Estimates

Our unaudited condensed consolidated financial statements are prepared in accordance with ~~United States generally accepted accounting principles.~~GAAP. Our significant accounting policies are described in Note 1 to the unaudited condensed consolidated financial statements included in this report.

The preparation of our financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenue and expenses during the reporting period. Management develops, and changes periodically, these estimates and assumptions based on historical experience and on various other factors that are believed to be reasonable under the circumstances. Actual results may differ from these estimates under different assumptions or conditions.

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Overview of Results of Operations

Our product sales accounted for 98% of our revenues for the three months ended March 31, 2020 and 2019, ~~and 2018,~~ respectively.

The following tables reflect our income statements (in thousands, except percentages):


	Three months ended March 31,
	2019		2018		$ Change		% Change


								Three months ended March 31,
								2020		2019		$ Change		% Change

Revenue	$	165,876	$	98,596	$	67,280	68.2%	$	178,461	$	165,876	$	12,585	7.6%
Cost of sales		40,729		23,788		(16,941)	-71.2%		43,221		40,729		(2,492)	-6.1%
Gross profit		125,147		74,808		50,339	67.3%		135,240		125,147		10,093	8.1%


Selling, general, and administrative		100,432		60,125		(40,307)	-67.0%		111,707		100,432		(11,275)	-11.2%


Income from operations		24,715		14,683		10,032	68.3%		23,533		24,715		(1,182)	-4.8%


Other income (expense)
Interest income, net		312		249		63	25.3%		110		312		(202)	-64.7%
Other income (expense)		(6)		(1)		(5)	500.0%
		306		248		58	23.4%

Other expense									(19)		(6)		(13)	216.7%
									91		306		(215)	-70.3%

Income from operations before income taxes		25,021		14,931		10,090	67.6%		23,624		25,021		(1,397)	-5.6%


Provision for income tax		4,271		2,709		(1,562)	-57.7%		5,147		4,271		(876)	-20.5%


Net income	$	20,750	$	12,222	$	8,528	69.8%	$	18,477	$	20,750	$	(2,273)	-11.0%


% of revenue
Gross profit		75.4%		75.9%					75.8%		75.4%
Selling, general, and administrative costs		60.5%		61.0%					62.6%		60.5%
Income from operations		14.9%		14.9%					13.2%		14.9%
Income from operations before income taxes									13.2%		15.1%

Revenue: Revenue increased ~~$67.3~~$12.6 million, or ~~68.2%~~7.6%, to $178.5 million for the three months ended March 31, 2020 from $165.9 million for the three months ended March 31, 2019 from $98.6 million for the three months ended March 31, 2018. This is the eighth consecutive quarter of year-over-year revenue growth and the ninth consecutive quarter of sequential revenue improvement.2019. The total number of active earning OPTAVIA Coaches for the three months ended March 31, ~~2019~~2020 increased to ~~27,200~~32,600 from ~~16,700~~27,200 for the corresponding period in ~~2018,~~2019, an increase of ~~62.9%~~19.9%. The ~~quarterly~~average revenue per active earning OPTAVIA Coach ~~increased 10.2%~~decreased 8.3% to $5,333 for the three months ended March 31, 2020 from $5,817 for the three months ended March 31, ~~2019 from $5,278 for the three months ended March 31, 2018. This growth~~2019. The $12.6 million increase in revenue resulted ~~in part~~ from business initiatives ~~accelerating new~~ ~~OPTAVIA Coach conversions and new~~which drove more clients ~~starting~~to be on our plans, aided by the ongoing transition of clients to higher priced OPTA~~VIA branded~~VIA-branded products. OPTAVIA-branded products represented ~~73%~~79% of consumable units sold for the three months ended March 31, ~~2019~~2020 compared to ~~58%~~73% for the corresponding period in ~~2018.~~2019.

Costs of sales: Cost of sales increased ~~$16.9~~$2.5 million, or ~~71.2%~~6.1%, to ~~$40.7~~$43.2 million for the three months ended March 31, ~~2019~~2020 from the corresponding period in ~~2018.~~2019. The increase in cost of sales was primarily driven by an increase in product sales.

Gross profit: For the three months ended March 31, 2020, gross profit increased $10.1 million, or 8.1%, to $135.2 million from the corresponding period in 2019. As a percentage of sales, gross margin increased 40 basis points to 75.8% for the three months ended March 31, ~~2019 was primarily driven by increased product sales.~~

~~Gross profit:~~ ~~For the three months ended March 31, 2019, gross profit increased $50.3 million, or 67.3%, to $125.1 million~~2020 from ~~the corresponding period in 2018. As a percentage of sales, gross margin decreased 50 basis points to~~ 75.4% ~~for the three months ended March 31, 2019 from 75.9%~~ for the corresponding period in ~~2018.~~2019. The ~~decrease~~increase in gross margin percentage for the quarter was ~~driven by higher obsolescence and shipping costs.~~

the result of our price increase taken mid-year 2019 coupled with a reduction of sales discounts realized during the first quarter of 2020 as compared to the corresponding period in 2019.

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Selling, general and administrative: Selling, general and administrative (“SG&A”) expenses were ~~$100.4~~$111.7 million for the three months ended March 31, ~~2019,~~2020, an increase of ~~$40.3~~$11.3 million, or ~~67.0%~~11.2%, as compared to ~~$60.1~~$100.4 million from the corresponding period in ~~2018. This~~2019. The $11.3 million increase was primarily ~~the result of increased~~ ~~OPTAVIA commission expense. In addition, SG&A expenses increased as~~ a result of ~~increased consulting~~higher OPTAVIA commission expense, incremental professional service costs ~~related to information technology projects,~~in connection with the Schedule 13D filing, increased salaries and benefits and ~~increased credit card fees resulting from higher sales.~~severance. As a percentage of sales, SG&A expenses were ~~60.5%~~62.6% as compared to ~~61.0%~~60.5% for the three months ended March 31, 2020 and 2019, respectively. Non-GAAP adjusted SG&A expenses increased $5.7 million to $106.1 million and ~~2018, respectively.~~Non-GAAP adjusted SG&A as a percentage of revenue decreased 100 basis points year-over-year to 59.5%. Non-GAAP adjusted SG&A excludes expenses in connection with the Schedule 13D filing of $4.6 million and severance costs of $1.0 million resulting from organizational change related to the departure of the Company's CFO for the three months ended March 31, 2020. SG&A expenses included research and development costs of ~~$654 thousand~~$0.5 million and ~~$421 thousand~~$0.7 million for the three months ended March 31, 2020 and 2019, ~~and 2018,~~ respectively.

~~OPTAVIA~~

OPTAVIA commission expense, which is variable ~~based upon product sales,~~expense, increased ~~$31.2~~$5.7 million, or ~~more than 83.5%~~8.3%, to $74.3 million for the three months ended March 31, ~~2019~~2020 from $68.6 million for the corresponding period in ~~2018. This~~2019. The increase was primarily the result of increased product ~~sales and number of active earning~~ ~~OPTAVIA Coaches.~~sales. As OPTAVIA revenue increased as a portion of the Company’s total sales mix, the commission rate as a percentage of revenue increased ~~340~~20 basis points to ~~41.3%~~41.6% for the first quarter of ~~2019~~2020 compared to ~~37.9%~~41.4% for the first quarter last year. This is an outcome of the success we are experiencing with our OPTAVIA ~~Integrated Coach Model.~~ integrated coach model.

Income from operations:For the three months ended March 31, ~~2019,~~2020, income from operations ~~increased $10.0~~decreased $1.2 million to ~~$24.7~~$23.5 million from ~~$14.7~~$24.7 million for the corresponding period in ~~2018 primarily~~2019 as ~~a result of~~ increased gross ~~profits partially~~profit was offset by increased SG~~&A expenses.~~&A. Income from operations as a percentage of sales was 13.2% and 14.9% for the three months ended March 31, 2020 and 2019, respectively. Non-GAAP adjusted income from operations increased $4.4 million to $29.1 million and ~~2018, respectively.~~non-GAAP adjusted income from operations as a percentage of revenue increased 140 basis points year-over-year to 16.3%.

~~Interest income, net:~~

Other income: For the three months ended March 31, 2020 and 2019, other income (including interest income), was $0.1 million and ~~2018, interest~~$0.3 million, respectively.

Income from operations before income taxes: Income from operations before income taxes was ~~$312 thousand and $249 thousand, respectively.~~

~~Other income (expense):~~ ~~For~~$23.6 million for the three months ended March 31, ~~2019 and 2018, other income (expense) was an expense of $6 thousand and $1 thousand, respectively.~~

~~Income from operations before income taxes:~~ ~~Income from operations before income taxes was~~2020 as compared to $25.0 million for the three months ended March 31, 2019, a decrease of $1.4 million. Income from operations before income taxes as ~~compared~~a percentage of sales decreased to ~~$14.9 million~~13.2% for the three months ended March 31, ~~2018, an increase of $10.1 million. Pre-tax profit as a percentage of sales was~~2020 from 15.1% for the three months ended March 31, ~~2019 and 2018, respectively.~~2019.

Provision for income tax: For the three months ended March 31, ~~2019,~~2020, the Company recorded $5.1 million in income tax expense, an effective rate of 21.8%, as compared to $4.3 million in income tax expense, an effective rate of 17.1%, ~~as compared to $2.7 million in income tax expense, an effective rate of 18.1%,~~ for the three months ended March 31, ~~2018.~~2019. The ~~decrease in the~~ effective tax rate was ~~driven~~negatively impacted by ~~a 2.4% decrease relating to the discrete accounting for taxes associated with share-based compensation offset by a 3.5% benefit from the net operating loss due to~~an increase in state ~~apportionment. The Company anticipates a full year~~income tax rate and a decrease in tax benefit of ~~21.5% to 22.5% in 2019.~~stock compensation.

Net income: Net income was $18.5 million, or $1.56 per diluted share, for the three months ended March 31, 2020 as compared to $20.8 million, or $1.70 per diluted share, for the three months ended March 31, ~~2019 as compared to $12.2~~2019. The period-over-period changes were driven by the factors described above. Non-GAAP adjusted net income was $22.9 million, or ~~$1.01~~$1.93 per diluted share for the three months ended March 31, ~~2018.~~2020.

Non-GAAP Financial Measures

In an effort to provide investors with additional information regarding our results as determined by GAAP, we disclose various non-GAAP financial measures in our quarterly earnings press release and other public disclosures. The ~~period-over-period changes were driven by~~following GAAP financial measures have been presented on an as adjusted basis: SG&A expenses, income from operations, net income and diluted earnings per share. Each of these as adjusted financial measures excludes the ~~factors described above.~~impact of certain amounts as further identified below and have not been calculated in accordance with GAAP. A reconciliation of each of these non-GAAP financial measures to its most comparable GAAP financial measure is included below. These non-GAAP financial measures are not intended to replace GAAP financial measures.

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We use these non-GAAP financial measures internally to evaluate and manage the Company’s operations because we believe they provide useful supplemental information regarding the Company’s on-going economic performance. We have chosen to provide this information to investors to enable them to perform more meaningful comparisons of operating results and as a means to emphasize the results of on-going operations.

The following tables reconcile the non-GAAP financial measures included in this report (in thousands):


	Three months ended March 31,
	2020		2019

Selling, general, and administrative	$	111,707	$	100,432
Adjustments
Professional services for 13D Filing		4,608		-
Incremental severance costs		998		-
Non-GAAP Adjusted selling, general, and administrative	$	106,101	$	100,432


	Three months ended March 31,
	2020		2019

Income from operations	$	23,533	$	24,715
Adjustments
Professional services for 13D Filing		4,608		-
Incremental severance costs		998		-
Non-GAAP Adjusted income from operations	$	29,139	$	24,715


	Three months ended March 31,
	2020		2019

Net income	$	18,477	$	20,750
Adjustments, net of tax
Professional services for 13D Filing		3,604		-
Incremental severance costs		781		-
Non-GAAP Adjusted net income	$	22,862	$	20,750

Diluted earnings per share (1)	$	1.56	$	1.70
Impact for adjustments (1)		0.37		-
Non-GAAP Adjusted diluted earnings per share (1)	$	1.93	$	1.70

(1) The weighted-average diluted shares outstanding used in the calculation of these non-GAAP financial measures are the same as the weighted-average shares outstanding used in the calculation of the reported per share amounts.

Liquidity and Capital Resources

The Company had stockholders’ equity of ~~$122.1~~$110.7 million and working capital of ~~$92.4~~$79.4 million at March 31, ~~2019~~2020 as compared with ~~$109.1~~$104.8 million and ~~$85.2~~$74.8 million at December 31, ~~2018,~~2019, respectively. The ~~$13.0~~$5.9 million net increase in ~~stockholder’s~~stockholders’ equity reflects ~~$20.8~~$18.5 million in net income for the three months ended March 31, ~~2019~~2020 offset by ~~$8.9~~$13.1 million for declared dividends paid to ~~our~~holders of the Company’s common stock ~~holders~~ as well as the other equity transactions described in the “Condensed Consolidated Statements of Changes in Stockholders’ Equity” included in our condensed consolidated financial statements included in this report. The Company declared a dividend of ~~$9.1~~$13.1 million, or ~~$0.75~~$1.13 per share, to common stockholders as of March ~~29, 2019~~31, 2020 that will be paid in the second quarter of ~~2019.~~2020. While we intend to continue the dividend program and believe we will have sufficient liquidity to do so, we can provide no assurance that we will be able to continue to declare and pay dividends. The Company’s cash, cash equivalents, and investment securities increased from ~~$101.0~~$92.7 million at December 31, ~~2018~~2019 to ~~$120.4~~$105.3 million at March 31, ~~2019.~~

2020.

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Net cash provided by operating activities ~~increased $14.7~~decreased $6.0 million to $26.7 million for the three months ended March 31, 2020 from $32.7 million for the three months ended March 31, 2019 ~~from $18.0~~as a result of a $2.3 million decrease in net income and changes in operating assets and liabilities.

Net cash provided by investing activities was $0.7 million for the three months ended March 31, ~~2018 primarily~~2020 as ~~a result of increased~~compared to net ~~income and an increase in accounts payables.~~

~~Net~~ cash used in investing activities ~~was~~of $3.4 million for the three months ended March 31, ~~2019 as compared to $86 thousand for the three months ended March 31, 2018.~~2019. This change resulted from ~~an increase~~a $4.2 million decrease in cash used in capital expenditures for the three months ended March 31, ~~2019~~2020 from the corresponding period in ~~2018.~~2019.

Net cash used in financing activities increased ~~$2.8~~$4.9 million to $13.7 million for the three months ended March 31, 2020 from $8.8 million for the three months ended March 31, ~~2019 from $6.0 million for the three months ended March 31, 2018.~~2019. This increase was primarily due to a $4.4 million increase in cash dividends paid to stockholders.

In pursuing its business strategy, the Company may require additional cash for operating and investing activities. The Company expects future cash requirements, if any, to be funded from operating cash flow and financing activities.

The Company evaluates acquisitions from time to time as presented.

Item 3. Quantitative and Qualitative Disclosures about Market Risk

Market risk is the potential loss arising from adverse changes in market rates and prices, such as interest rates and a decline in the stock market. The Company does not enter into derivatives, foreign exchange transactions or other financial instruments for trading or speculative purposes.

The Company is exposed to market risk related to changes in interest rates and market pricing impacting our investment portfolio. Its current investment policy is to maintain an investment portfolio consisting of municipal bonds, U.S. money market securities, and high-grade corporate securities, directly or through managed funds. Its cash is deposited in and invested through highly rated financial institutions in North America. Its marketable securities are subject to interest rate risk and market pricing risk and will fall in value if market interest rates increase or if market pricing decreases. If market interest rates were to increase and market pricing were to decrease immediately and uniformly by 10% from levels at March 31, ~~2019,~~2020, the Company estimates that the fair value of its investment portfolio would decline by an immaterial amount and therefore it would not expect its operating results or cash flows to be affected to any significant degree by the effect of a change in market conditions on our investments.

There have been no material changes to our market risk exposure since December 31, ~~2018.~~2019.

Item 4. Controls and Procedures

Management, including our Chief Executive Officer and Interim Chief Financial Officer, conducted an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures, as defined in Rules ~~13a‑15(e)~~13a-15(e) and ~~15d‑15(e)~~15d-15(e) under the Securities Exchange Act of 1934, as amended, as of March 31, ~~2019.~~2020. Our disclosure controls and procedures are designed to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported accurately and on a timely basis. Based on this evaluation performed in accordance with the criteria established in the 2013 Internal Control – Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission, our management concluded that the Company’s disclosure controls and procedures are effective at the reasonable assurance level as of the end of the period covered by this report.

Changes in Internal Control over Financial ~~Reporting:~~Reporting

There have been no material changes in our internal control over financial reporting (as defined in Rules ~~13a‑15(f)~~13a-15(f) and ~~15d‑15(f)~~15d-15(f) under the Act) during the fiscal quarter ended March 31, ~~2019~~2020 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. ~~We implemented additional internal controls to ensure we properly assessed and accounted for the impact of the new accounting standard related to leases on our~~

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~~financial statements which became effective on January 1, 2019. There were no significant changes to our internal control over financial reporting related to the adoption of the new standard.~~

Part II Other Information

Item 1. Legal Proceedings

The Company is, from time to time, subject to a variety of litigation and similar proceedings that arise out of the ordinary course of its business. Based upon the Company’s experience, current information and applicable law, it does not believe that these proceedings and claims will have a material adverse effect on its results of operations, financial position or liquidity. However, the results of legal actions cannot be predicted with certainty. Therefore, it is possible that the Company’s results of operations, financial condition or cash flows could be materially adversely affected in any particular period by the unfavorable resolution of one or more legal actions.

Item 1A. Risk Factors

There have been no material changes to the risk factors set forth in Part I, Item 1A of the ~~2018~~2019 Form ~~10-K.~~10-K except:

The global outbreak of the COVID-19 virus is adversely impacting, and will continue to adversely impact, our business.

The global outbreak of COVID-19 may have a significant adverse impact on our business as well as on the business environment and the markets in which we operate. This global health crisis has also had a significant adverse effect on overall economic conditions and we expect consumer demand to continue to be negatively impacted due to changes in consumer behavior and confidence and health concerns. The situation remains dynamic and subject to rapid and possibly significant change, and accordingly the magnitude and duration of the negative impact to our business from the COVID-19 pandemic cannot be predicted with certainty.

The widespread health crisis also could adversely affect the economies and financial markets in the countries in which we operate, resulting in an economic downturn that could affect consumer demand for our products and services. Our customer purchasing patterns can be influenced by economic factors. The precise impact on our business from the disruption of financial markets and the weakening of overall economic conditions cannot be predicted with certainty. Uncertainties regarding the economic impact of COVID-19 have resulted in, and are likely to continue to result in, sustained impact on the economy. Our business is particularly sensitive to reductions in discretionary consumer spending, which may be adversely impacted by a recession or fears of a recession, volatility and declines in the stock market and increasingly pessimistic consumer sentiment due to perceived or actual economic and/or health risks. Consumers may shift purchases to lower-priced or other perceived value offerings during economic downturns. Prolonged unfavorable economic conditions, including as a result of COVID-19, and any resulting recession or slowed economic growth, may have an adverse effect on our financial condition and results of operations.

Individually and collectively, the consequences of the COVID-19 pandemic could adversely impact our business, financial condition, results of operations, cash flows and liquidity. The extent to which the COVID-19 pandemic ultimately impacts the Company’s business, financial condition, results of operations, cash flows, and liquidity may differ from management’s current estimates due to inherent uncertainties regarding the duration and further spread of the outbreak, its severity, actions taken to contain the virus or treat its impact, and how quickly and to what extent normal economic and operating conditions can resume. The extent to which the COVID-19 pandemic adversely affects the Company’s business, financial condition, results of operations, cash flows and liquidity, it may also have the effect of heightening the risks related to the other risk factors described in our Annual Report on Form 10-K for fiscal 2019.

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Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

Issuer Purchases of Equity Securities


2020	Total Number of Shares Purchased ⁽¹⁾	Average Price Paid per Share		Total Number of Shares Purchased as Part of a Publicly Announced Plan or Program	Maximum Number of Shares that May Yet Be Purchased Under the Plans or Programs ⁽²⁾
January 1 - January 31	-	$	-	-	2,368,587
February 1 - February 29	4,718		101.59	-	2,368,587
March 1 - March 31	-		-	-	2,368,587

(1)	4,718 shares of common stock were surrendered by employees to the Company to cover minimum tax liability withholding obligations upon the vesting of shares of restricted stock.

(2)	At the outset of the quarter ended March 31, 2020, there were 2,368,587 shares of the Company's common stock eligible for repurchase under the repurchase authorization dated September 16, 2014 (the "Stock Repurchase Plan").

2019

Total Number of Shares Purchased (1)

Average Price Paid per Share

Total Number of Shares Purchased as Part of a Publicly Announced Plan or Program

Maximum Number of Shares that May Yet Be Purchased Under the Plans or Programs
January 1 - January 31

-

$
-

-

664,817
February 1 - February 28

1,124

127.07

-

664,817
March 1 - March 31

-

-

-

664,817

(1) Shares of common stock were surrendered by employees to the Company to cover minimum tax liability withholding obligations upon the vesting of shares of restricted stock and upon exercise of options previously granted to such employees.

The Company ~~in accordance with, and as part of,~~did not make any stock repurchases for the ~~Stock Repurchase Plan implemented a Rule 10b5-1 repurchase plan to facilitate repurchases of the~~

~~Company’s common stock under the Stock Repurchase Plan.~~three months ended March 31, 2020. As of ~~December~~March 31, ~~2018,~~2020, there were ~~664,817~~2,368,587 shares of the Company’s common stock eligible for repurchase under the Stock Repurchase Plan. There can be no assurances as to the amount, timing or prices of repurchases, which may vary based on market conditions and other factors. The Stock Repurchase Plan does not have an expiration date and can be modified or terminated by the Board of Directors at any time.

~~Table of Contents~~

Item 6. Exhibits


Exhibit Number		Description of Exhibit
~~Exhibit Number~~		~~Description of Exhibit~~

3.1		Restated and Amended Certificate of Incorporation of Medifast, Inc. (incorporated by reference to Exhibit 3.1 of the Company’s Current Report on Form ~~8‑K~~8-K (File No. ~~001‑31573)~~001-31573) filed February 27, 2015).

3.2		Amended and Restated Bylaws of Medifast, Inc. (incorporated by reference to Exhibit 3.1 to the Company’s Amendment No. 1 Current Report on Form ~~8‑K~~8-K (File No. ~~001‑31573)~~001-31573) filed on December 4, 2019).

10.1		Separation Agreement dated March 31, 2020 (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K/A (File No. 001-31573) filed on April ~~6, 2015)~~3, 2020).

31.1		Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2		Certification of Interim Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32.1		Certification of Chief Executive Officer and Interim Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

101		The following financial statements from Medifast, Inc.’s Quarterly Report on Form ~~10‑Q~~10-Q for the quarter ended March 31, ~~2019~~2020 filed May ~~2, 2019,~~6, 2020, formatted in Inline XBRL (eXtensible Business Reporting Language): (i) Condensed Consolidated Statements of Income, (ii) Condensed Consolidated Statements of Comprehensive Income, (iii) Condensed Consolidated Balance Sheets, (iv) Condensed Consolidated Statements of Cash Flows, (v) Condensed Consolidated Statements of Changes in Stockholders’ Equity, and (vi) Notes to the Condensed Consolidated Financial Statements (filed herewith).

104		Cover Page Interactive Data File - The cover page interactive data file does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.

In accordance with SEC Release No. ~~33‑8238,~~33-8238, Exhibit 32.1 is being furnished and not filed.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized.

Medifast, Inc.


By:	/s/ DANIEL R. CHARD
	Daniel R. Chard
	Chief Executive Officer
	(Principal Executive Officer)

Dated:	May ~~2, 2019~~6, 2020


	/s/ ~~TIMOTHY G. ROBINSON~~JOSEPH P. KELLEMAN
	~~Timothy G. Robinson~~Joseph P. Kelleman
	Interim Chief Financial Officer
	(Principal Financial ~~and Accounting~~ Officer)

Dated:	May ~~2, 2019~~6, 2020

2123


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


Large accelerated filer ☒⌧	Accelerated filer ☐◻	Non-accelerated filer ☐◻	Smaller reporting company ☐
Emerging growth ~~company☐~~company ☐


Part 1 – Financial Information
~~Part 1 – Financial Information:~~


Item 1 – Financial Statements


Condensed Consolidated Statements of Income (unaudited) for the Three Months Ended March 31, ~~2019~~2020 and ~~2018~~2019		2

Condensed Consolidated Statements of Comprehensive Income (unaudited) for the Three Months Ended March 31, ~~2019~~2020 and ~~2018~~2019		3

Condensed Consolidated Balance Sheets (unaudited) as of March 31, ~~2019~~2020 and December 31, ~~2018~~2019		4

Condensed Consolidated Statements of Cash Flows (unaudited) for the Three Months Ended March 31, ~~2019~~2020 and ~~2018~~2019		5

Condensed Consolidated Statements of Changes in Stockholders’ Equity (unaudited) for the Three Months Ended March 31, ~~2019~~2020 and ~~2018~~2019		6

Notes to Condensed Consolidated Financial Statements (unaudited)		7

Item 2 – Management’s Discussion and Analysis of Financial Condition and Results of Operations		14

Item 3 – Quantitative and Qualitative Disclosures about Market Risk		18 20

Item 4 – Controls and Procedures		18 20

Part II – Other Information

Item 1 – Legal Proceedings		19 21

Item 1A – Risk Factors		19 21

Item 2 – Unregistered Sales of Equity Securities and Use of Proceeds		19 22

Item 6 – Exhibits		20 22


		March 31,		December 31,
		2019		2018

ASSETS
Current Assets
Cash and cash equivalents	$	101,842	$	81,364
Accounts receivable-net of doubtful accounts of $270 and $394 at
March 31, 2019 and December 31, 2018, respectively		631		1,011
Inventory		43,257		38,888
Investment securities		18,585		19,670
Prepaid expenses and other current assets		4,995		4,586
Total current assets		169,310		145,519

Property, plant and equipment - net		23,343		19,747
Right-of-use asset		12,864		-
Other assets		941		1,183
Deferred tax assets		3,612		2,980


TOTAL ASSETS	$	210,070	$	169,429

LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Accounts payable and accrued expenses	$	74,452	$	60,323
Current lease obligation		2,443		-
Total current liabilities		76,895		60,323

Lease obligation, less current lease obligation		11,107		-
Total liabilities		88,002		60,323

Stockholders' Equity
Common stock, par value $.001 per share: 20,000 shares authorized;
12,126 and 12,117 issued and 11,898 and 11,868 outstanding
at March 31, 2019 and December 31, 2018, respectively		12		12
Additional paid-in capital		9,805		8,802
Accumulated other comprehensive loss		(46)		(173)
Retained earnings		143,176		131,344
Less: Treasury stock at cost, 193 shares at March 31, 2019 and December 31, 2018, respectively		(30,879)		(30,879)
Total stockholders' equity		122,068		109,106

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY	$	210,070	$	169,429


	Three months ended March 31, 2019
	Number of Shares Issued		Common Stock		Additional Paid-In Capital		Accumulated Other Comprehensive Loss		Retained Earnings		Treasury Stock		Total

Balance, December 31, 2018	12,117	$	12	$	8,802	$	(173)	$	131,344	$	(30,879)	$	109,106
Net income	-		-		-		-		20,750		-		20,750
Share-based compensation	-		-		990		-		-		-		990
Options exercised by executives and directors	10		-		269		-		-		-		269
Net shares repurchased for employee taxes	(1)		-		(256)		-		-		-		(256)
Other comprehensive income	-		-		-		127		-		-		127
Cash dividends declared to stockholders	-		-		-		-		(8,918)		-		(8,918)

Balance, March 31, 2019	12,126	$	12	$	9,805	$	(46)	$	143,176	$	(30,879)	$	122,068

	Three months ended March 31, 2018
Balance, January 1, 2018, as reported	12,103	$	12	$	4,967	$	(160)	$	103,762	$	-	$	108,581
Cumulative effect adjustments from changes
in accounting standards	-		-		-		-		(2,018)		-		(2,018)
Balance January 1, 2018, as adjusted	12,103		12		4,967		(160)		101,744		-		106,563
Net income	-		-		-		-		12,222		-		12,222
Share-based compensation	16		-		805		-		-		-		805
Options exercised by executives and directors	14		-		62		-		-		-		62
Net shares repurchased for employee taxes	(3)		-		(215)		-		-		-		(215)
Treasury stock from cashless options	9		-		750		-		-		(750)		-
Other comprehensive loss	-		-		-		(84)		-		-		(84)
Cash dividends declared to stockholders	-		-		-		-		(5,723)		-		(5,723)

Balance, March 31, 2018	12,139	$	12	$	6,369	$	(244)	$	108,243	$	(750)	$	113,630


2019 (excluding the three months ended March 31, 2019)	$	2,191
2020		2,951
2021		2,985
2022		2,641
2023		1,633
Thereafter		2,685
Total lease payments	$	15,086
Less: imputed interest		(1,536)
Total	$	13,550



2019	$	1,496
2020		1,528
2021		1,562
2022		1,222
2023		1,155
Thereafter		2,582
Total minimum lease payments	$	9,545


2019	Total Number of Shares Purchased (1)	Average Price Paid per Share		Total Number of Shares Purchased as Part of a Publicly Announced Plan or Program	Maximum Number of Shares that May Yet Be Purchased Under the Plans or Programs
January 1 - January 31	-	$	-	-	664,817
February 1 - February 28	1,124		127.07	-	664,817
March 1 - March 31	-		-	-	664,817

March 31, 2020

December 31, 2019

Foreign currency translation

Unrealized gains on investment securities

Accumulated other comprehensive income