Cover
Cover - shares | 3 Months Ended | |
Mar. 31, 2023 | Apr. 24, 2023 | |
Cover [Abstract] | ||
Document Type | 10-Q | |
Document Quarterly Report | true | |
Document Period End Date | Mar. 31, 2023 | |
Document Transition Report | false | |
Entity File Number | 001-31573 | |
Entity Registrant Name | Medifast, Inc. | |
Entity Incorporation, State or Country Code | DE | |
Entity Tax Identification Number | 13-3714405 | |
Entity Address, Address Line One | 100 International Drive | |
Entity Address, City or Town | Baltimore | |
Entity Address, State or Province | MD | |
Entity Address, Postal Zip Code | 21202 | |
City Area Code | 410 | |
Local Phone Number | 581-8042 | |
Title of 12(b) Security | Common Stock, par value $0.001 per share | |
Trading Symbol | MED | |
Security Exchange Name | NYSE | |
Entity Current Reporting Status | Yes | |
Entity Interactive Data Current | Yes | |
Entity Filer Category | Large Accelerated Filer | |
Entity Small Business | false | |
Entity Emerging Growth Company | false | |
Entity Shell Company | false | |
Entity Common Stock, Shares Outstanding | 10,887,193 | |
Entity Central Index Key | 0000910329 | |
Current Fiscal Year End Date | --12-31 | |
Document Fiscal Year Focus | 2023 | |
Document Fiscal Period Focus | Q1 | |
Amendment Flag | false |
CONDENSED CONSOLIDATED STATEMEN
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED) - USD ($) shares in Thousands, $ in Thousands | 3 Months Ended | |
Mar. 31, 2023 | Mar. 31, 2022 | |
Income Statement [Abstract] | ||
Revenue | $ 348,983 | $ 417,600 |
Cost of sales | 102,593 | 115,314 |
Gross profit | 246,390 | 302,286 |
Selling, general, and administrative | 192,879 | 247,199 |
Income from operations | 53,511 | 55,087 |
Other expense | ||
Interest expense | (181) | (95) |
Other expense | (1) | (16) |
Total other (expense) income | (182) | (111) |
Income from operations before income taxes | 53,329 | 54,976 |
Provision for income taxes | 13,361 | 13,195 |
Net income | $ 39,968 | $ 41,781 |
Earnings per share | ||
Basic (in usd per share) | $ 3.68 | $ 3.62 |
Diluted (in usd per share) | $ 3.67 | $ 3.59 |
Weighted average shares outstanding | ||
Basic (in shares) | 10,864 | 11,557 |
Diluted (in shares) | 10,899 | 11,638 |
Cash dividends declared per share (in usd per share) | $ 1.65 | $ 1.64 |
CONDENSED CONSOLIDATED STATEM_2
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED) - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2023 | Mar. 31, 2022 | |
Statement of Comprehensive Income [Abstract] | ||
Net income | $ 39,968 | $ 41,781 |
Other comprehensive income, net of tax: | ||
Foreign currency translation | 9 | 30 |
Unrealized losses on investment securities | 0 | (14) |
Other comprehensive income (loss), net of tax | 9 | 16 |
Comprehensive income | $ 39,977 | $ 41,797 |
CONDENSED CONSOLIDATED BALANCE
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED) - USD ($) $ in Thousands | Mar. 31, 2023 | Dec. 31, 2022 |
Current Assets | ||
Cash and cash equivalents | $ 123,748 | $ 87,691 |
Inventories | 96,896 | 118,856 |
Prepaid expenses and other current assets | 9,674 | 16,237 |
Total current assets | 230,318 | 222,784 |
Property, plant and equipment - net of accumulated depreciation | 55,960 | 57,185 |
Right-of-use assets | 17,091 | 18,460 |
Other assets | 13,709 | 12,456 |
Deferred tax assets | 4,528 | 5,328 |
TOTAL ASSETS | 321,606 | 316,213 |
Current Liabilities | ||
Accounts payable and accrued expenses | 113,300 | 134,690 |
Income taxes payable | 13,031 | 428 |
Current lease obligations | 5,411 | 5,776 |
Total current liabilities | 131,742 | 140,894 |
Lease obligations, net of current lease obligations | 18,964 | 20,275 |
Total liabilities | 150,706 | 161,169 |
Stockholders' Equity | ||
Common stock, par value $0.001 per share: 20,000 shares authorized; 10,887 and 10,928 issued and 10,887 and 10,873 outstanding at March 31, 2023 and December 31, 2022, respectively | 11 | 11 |
Additional paid-in capital | 19,030 | 21,555 |
Accumulated other comprehensive income | 33 | 24 |
Retained earnings | 151,826 | 139,852 |
Less: treasury stock at cost, 0 and 54 shares at March 31, 2023 and December 31, 2022, respectively | 0 | (6,398) |
Total stockholders' equity | 170,900 | 155,044 |
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY | $ 321,606 | $ 316,213 |
CONDENSED CONSOLIDATED BALANC_2
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED) (Parenthetical) - $ / shares | Mar. 31, 2023 | Dec. 31, 2022 |
Statement of Financial Position [Abstract] | ||
Common stock, par value (in usd per share) | $ 0.001 | $ 0.001 |
Common stock, authorized (in shares) | 20,000,000 | 20,000,000 |
Common stock, issued (in shares) | 10,887,000 | 10,928,000 |
Common stock, outstanding (in shares) | 10,887,000 | 10,873,000 |
Treasury stock at cost (in shares) | 54,000 |
CONDENSED CONSOLIDATED STATEM_3
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2023 | Mar. 31, 2022 | |
Operating Activities | ||
Net income | $ 39,968 | $ 41,781 |
Adjustments to reconcile net income to cash provided by operating activities | ||
Depreciation and amortization | 2,974 | 2,444 |
Non-cash lease expense | 1,369 | 1,619 |
Share-based compensation | 606 | 2,275 |
Amortization of premium on investment securities | 0 | 11 |
Deferred income taxes | 800 | 0 |
Change in operating assets and liabilities: | ||
Inventories | 21,960 | (8,929) |
Prepaid expenses and other current assets | 6,563 | 3,107 |
Other assets | (887) | (6,632) |
Accounts payable and accrued expenses | (21,897) | (6,084) |
Income taxes payable | 12,603 | 14,081 |
Net cash flow provided by operating activities | 64,059 | 43,673 |
Investing Activities | ||
Sale and maturities of investment securities | 0 | 1,245 |
Purchase of property and equipment | (2,115) | (3,009) |
Net cash flow used in investing activities | (2,115) | (1,764) |
Financing Activities | ||
Options exercised by directors | 105 | 0 |
Net shares repurchased for taxes | (3,236) | (1,459) |
Cash dividends paid to stockholders | (19,163) | (16,660) |
Stock repurchases | (3,602) | (10,000) |
Net cash flow used in financing activities | (25,896) | (28,119) |
Foreign currency impact | 9 | 30 |
Increase in cash and cash equivalents | 36,057 | 13,820 |
Cash and cash equivalents - beginning of the period | 87,691 | 104,183 |
Cash and cash equivalents - end of period | 123,748 | 118,003 |
Supplemental disclosure of cash flow information: | ||
Income taxes (refunded) paid | (46) | 62 |
Dividends declared included in accounts payable | $ 18,653 | $ 19,663 |
CONDENSED CONSOLIDATED STATEM_4
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (UNAUDITED) - USD ($) shares in Thousands, $ in Thousands | Total | Common Stock | Additional Paid-In Capital | Accumulated Other Comprehensive Income | Retained Earnings | Treasury Stock |
Balance (in shares) at Dec. 31, 2021 | 11,594 | |||||
Balance at Dec. 31, 2021 | $ 202,474 | $ 12 | $ 12,018 | $ 111 | $ 190,333 | $ 0 |
Increase (Decrease) in Stockholders' Equity [Roll Forward] | ||||||
Net income | 41,781 | 41,781 | ||||
Share-based compensation (in shares) | 18 | |||||
Share-based compensation | $ 2,275 | 2,275 | ||||
Options exercised by directors (in shares) | 0 | |||||
Net shares repurchased for employee taxes (in shares) | (8) | |||||
Net shares repurchased for employee taxes | $ (1,459) | (1,459) | ||||
Treasury stock from stock repurchases | (10,000) | (10,000) | ||||
Treasury stock retired from stock repurchases (in shares) | (51) | |||||
Treasury stock retired from stock repurchases | 0 | (10,000) | 10,000 | |||
Other comprehensive income | 16 | 16 | ||||
Cash dividends declared to stockholders | (19,063) | (19,063) | ||||
Balance (in shares) at Mar. 31, 2022 | 11,553 | |||||
Balance at Mar. 31, 2022 | $ 216,024 | $ 12 | 12,834 | 127 | 203,051 | 0 |
Balance (in shares) at Dec. 31, 2022 | 10,928 | 10,928 | ||||
Balance at Dec. 31, 2022 | $ 155,044 | $ 11 | 21,555 | 24 | 139,852 | (6,398) |
Increase (Decrease) in Stockholders' Equity [Roll Forward] | ||||||
Net income | 39,968 | 39,968 | ||||
Share-based compensation (in shares) | 69 | |||||
Share-based compensation | $ 606 | 606 | ||||
Options exercised by directors (in shares) | 4 | 4 | ||||
Options exercised by directors | $ 105 | 105 | ||||
Net shares repurchased for employee taxes (in shares) | (30) | |||||
Net shares repurchased for employee taxes | (3,236) | (3,236) | ||||
Treasury stock from stock repurchases | (3,602) | (3,602) | ||||
Treasury stock retired from stock repurchases (in shares) | (84) | |||||
Treasury stock retired from stock repurchases | 0 | (10,000) | 10,000 | |||
Other comprehensive income | 9 | 9 | ||||
Cash dividends declared to stockholders | $ (17,994) | (17,994) | ||||
Balance (in shares) at Mar. 31, 2023 | 10,887 | 10,887 | ||||
Balance at Mar. 31, 2023 | $ 170,900 | $ 11 | $ 19,030 | $ 33 | $ 151,826 | $ 0 |
SUMMARY OF SIGNIFICANT ACCOUNTI
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | 3 Months Ended |
Mar. 31, 2023 | |
Accounting Policies [Abstract] | |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Basis of Presentation - The accompanying unaudited condensed consolidated financial statements of Medifast, Inc. and its wholly-owned subsidiaries (“Medifast,” the “Company,” “we,” “us,” or “our”) included herein have been prepared in accordance with generally accepted accounting principles in the United States of America (“GAAP”) for interim reporting and pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”). Accordingly, certain information and notes that are normally required by GAAP have been condensed or omitted. However, in the opinion of management, all adjustments consisting of normal, recurring adjustments considered necessary for a fair presentation of the financial position and results of operations have been included and management believes the disclosures that are made are adequate to make the information presented not misleading. The condensed consolidated balance sheet at December 31, 2022 has been derived from the 2022 audited consolidated financial statements at that date included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2022 (“2022 Form 10-K”). The results of operations for the three months ended March 31, 2023 are not necessarily indicative of results that may be expected for the fiscal year ending December 31, 2023. The accompanying unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto, which are included in the 2022 Form 10-K. Presentation of Financial Statements - The unaudited condensed consolidated financial statements included herein include the accounts of the Company. All significant intercompany accounts and transactions have been eliminated. Reclassification - Certain amounts reported for prior periods have been reclassified to be consistent with the current period presentation. No reclassification in the condensed consolidated financial statements had a material impact on the presentation. Use of Estimates - The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and reported amounts of revenue and expenses during the reporting period. Actual results could differ materially from those estimates. Recently Issued Accounting Pronouncements The Company has not adopted any new accounting standards during the three months ended March 31, 2023. There are no recently issued accounting pronouncements that are expected to have a material effect on the Company’s financial position, results of operations, cash flows, or disclosures. |
INVENTORIES
INVENTORIES | 3 Months Ended |
Mar. 31, 2023 | |
Inventory Disclosure [Abstract] | |
INVENTORIES | INVENTORIES Inventories consist principally of raw materials, non-food finished goods and packaged meal replacements held in the Company’s warehouses and outsourced distribution centers. Inventories are 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 inventories for unsalable or obsolete inventories. Inventories consisted of the following (in thousands): March 31, 2023 December 31, 2022 Raw materials $ 12,932 $ 12,670 Packaging 4,296 3,611 Non-food finished goods 7,032 8,738 Finished goods 78,825 97,675 Reserve for obsolete inventory (6,189) (3,838) Total $ 96,896 $ 118,856 |
EARNINGS PER SHARE
EARNINGS PER SHARE | 3 Months Ended |
Mar. 31, 2023 | |
Earnings Per Share [Abstract] | |
EARNINGS PER SHARE | 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. The following table sets forth the computation of basic and diluted EPS (in thousands, except per share data): Three months ended March 31, 2023 2022 Numerator: Net income $ 39,968 $ 41,781 Denominator: Weighted average shares of common stock outstanding 10,864 11,557 Effect of dilutive common stock equivalents 35 81 Weighted average shares of common stock outstanding 10,899 11,638 Earnings per share - basic $ 3.68 $ 3.62 Earnings per share - diluted $ 3.67 $ 3.59 |
SHARE-BASED COMPENSATION
SHARE-BASED COMPENSATION | 3 Months Ended |
Mar. 31, 2023 | |
Share-Based Payment Arrangement [Abstract] | |
SHARE-BASED COMPENSATION | SHARE-BASED COMPENSATION Stock Options The Company has issued non-qualified and incentive stock options to employees and non-employee 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, 2023 generally vest over a period of 3 years and expire 10 years from the date of grant. The exercise price of these options ranges from $26.52 to $66.68. Due to the Company’s lack of option exercise history on the date of grant, 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. The dividend yield is computed as the annualized dividend rate at the grant date divided by the strike price of the stock option. For the three months ended March 31, 2023 and 2022, the Company did not grant stock options. The following table is a summary of our stock option activity (in thousands, except per share data): Three months ended March 31, 2023 2022 Awards Weighted-Average Exercise Price Awards Weighted-Average Exercise Price Outstanding at beginning of period 33 $ 54.98 32 $ 54.98 Exercised (4) 27.18 — — Forfeited — — — — Outstanding at end of the period 29 $ 58.65 32 $ 54.98 Exercisable at end of the period 29 $ 58.65 28 $ 52.76 As of March 31, 2023, the weighted-average remaining contractual life for both the outstanding stock options and exercisable stock options was 4.3 years with an aggregate intrinsic value of $1.3 million. The compensation expense calculated under the fair value method for stock options was fully recognized as of March 31, 2023. For the three months ended March 31, 2023, the Company received $0.1 million in cash proceeds from the exercise of stock options. The total intrinsic value for stock options exercised during the three months ended March 31, 2022 was $0.3 million. Restricted Stock The Company has issued restricted stock to employees and non-employee directors generally with vesting terms up to 5 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 (in thousands, except per share data): Three months ended March 31, 2023 2022 Shares Weighted-Average Grant Date Fair Value Shares Weighted-Average Grant Date Fair Value Outstanding at beginning of period 60 $ 187.94 43 $ 183.51 Granted 67 102.83 29 175.66 Vested (22) 163.81 (18) 149.95 Forfeited — 190.76 — — Outstanding at end of the period 105 $ 138.33 54 $ 190.20 The Company withheld approximately 9 thousand shares and 8 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, 2023 and 2022, respectively. The total fair value of restricted stock awards vested during the three months ended March 31, 2023 and 2022 was $2.4 million and $3.2 million, respectively. Market and Performance-based Share Awards The Company has issued market and performance-based share awards to certain key executives who were granted deferred shares and may earn between 0% and 250% of the target number depending upon both the Company’s total stockholder return (“TSR”) and the Company’s performance against predetermined performance goals over a three-year performance period after the date of grant. Market and performance-based share awards that are tied to the Company’s TSR are valued using the Monte Carlo method and are recognized ratably as expense over the award’s performance period. The fair value of the performance-based share awards is equal to the market price of the Company’s common stock on the date of grant adjusted by expected level of achievement over the performance period. Expense for performance-based share awards is amortized ratably over the performance period. In the event that management determines that the Company will not reach the lower threshold of the predetermined performance goals established in the grant agreement, any previously recognized expense is reversed in the period in which such a determination is made. As of March 31, 2023, management determined that the market and performance-based share awards granted in 2022 would not reach the lower threshold of the predetermined performance goal resulting in a $1.4 million decrease in the Company’s share-based compensation expense for the three months ended March 31, 2023. Share-based compensation expense for all types of awards granted is recorded in selling, general, and administrative expense in the accompanying Condensed Consolidated Statements of Income. The total expense during the three months ended March 31, 2023 and 2022 as follows (in thousands): Three months ended March 31, 2023 2022 Shares Share-Based Compensation Expense Shares Share-Based Compensation Expense Options and restricted stock 134 $ 1,226 86 $ 1,087 Market and performance-based share awards granted in 2023 47 79 — — Market and performance-based share awards granted in 2022 25 (1,388) 25 79 Performance-based share awards granted in 2021 15 640 15 640 Performance-based share awards granted in 2020 4 49 26 469 Total share-based compensation 225 $ 606 152 $ 2,275 The Company withheld approximately 21 thousand shares of the Company’s common stock to cover minimum tax liability withholding obligations upon the vesting of shares of market and performance-based share awards for the three months ended March 31, 2023. No market and performance-based share awards vested and no shares were withheld to cover minimum tax liability withholding obligations for the three months ended March 31, 2022. The total fair value of market and performance-based share awards vested during the three months ended March 31, 2023 and 2022 was $5.3 million and $0, respectively. The total income tax benefit recognized in the accompanying Condensed Consolidated Statements of Income for restricted stock awards was $0.1 million and $0.5 million for the three months ended March 31, 2023 and 2022, respectively. There was $11.7 million of total unrecognized compensation cost related to restricted stock awards as of March 31, 2023, which is expected to be recognized over a weighted-average period of 2.4 years. There was $10.5 million of unrecognized compensation costs related to the 91 thousand market and performance-based shares presented in the table above as of March 31, 2023, which is expected to be recognized over a weighted-average period of 2.2 years. |
LEASES
LEASES | 3 Months Ended |
Mar. 31, 2023 | |
Leases [Abstract] | |
LEASES | LEASES 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 did not have any finance leases as of March 31, 2023 and 2022, respectively, or for the three-month periods then ended, respectively. Our leases relating to office and warehouse space have lease terms of 19 months to 122 months. Our leases relating to equipment have lease terms of 24 months to 203 months, with certain of them having automatic renewal clauses. The Company’s warehouse agreements also contain 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 are recognized as expenses when they are incurred. The operating lease expense was $1.5 million and $1.8 million for the three months ended March 31, 2023 and 2022, respectively. Supplemental cash flow information related to the Company’s operating leases was as follows (in thousands): Three months ended March 31, 2023 2022 Cash paid for amounts included in the measurements of lease liabilities Operating cash flow used in operating leases $ 1,804 $ 1,756 Right-of-use assets obtained in exchange for lease obligations Operating leases $ — $ 103 As of March 31, 2023, the weighted average remaining lease term was 4 years, 7 months and the weighted average discount rate was 2.00%. The following table presents the maturity of the Company’s operating lease liabilities as of March 31, 2023 (in thousands): 2023 (excluding the three months ended March 31, 2023) $ 4,440 2024 5,693 2025 5,825 2026 4,160 2027 2,553 Thereafter 2,858 Total lease payments $ 25,529 Less: imputed interest (1,154) Total $ 24,375 |
ACCUMULATED OTHER COMPREHENSIVE
ACCUMULATED OTHER COMPREHENSIVE INCOME | 3 Months Ended |
Mar. 31, 2023 | |
Accumulated Other Comprehensive Income (Loss), Net of Tax [Abstract] | |
ACCUMULATED OTHER COMPREHENSIVE INCOME | ACCUMULATED OTHER COMPREHENSIVE INCOMEAccumulated other comprehensive income, net of tax, was comprised of $33 thousand of foreign currency translation as of March 31, 2023 and $24 thousand of foreign currency translation as of December 31, 2022. |
DEBT
DEBT | 3 Months Ended |
Mar. 31, 2023 | |
Debt Disclosure [Abstract] | |
DEBT | DEBT Credit Agreement On April 13, 2021, the Company and certain of its subsidiaries (collectively, the “Guarantors”) entered into a credit agreement (the “Credit Agreement”) among the Company, the Guarantors, the lenders party thereto and Citibank, N.A., in its capacity as administrative agent. On May 31, 2022, the Credit Agreement was amended to increase the borrowing capacity and convert the interest rate to be based on Secured Overnight Financing Rate (“SOFR”), from London Inter-Bank Offered Rate (LIBOR) (the “Amended Credit Agreement”). The Amended Credit Agreement provides for a $225.0 million senior secured revolving credit facility with a $20.0 million letter of credit sublimit. The Amended Credit Agreement also provides for an uncommitted incremental facility that permits the Company, subject to certain conditions, to increase the senior secured revolving credit facility by up to $100.0 million . The Amended Credit Agreement matures on April 13, 2026. The Company’s obligations under the Amended Credit Agreement are guaranteed by the Guarantors. The obligations of the Company and the Guarantors are secured by first-priority liens on substantially all of the assets of the Company and the Guarantors, subject to certain exceptions. Under the Amended Credit Agreement, the Company will pay to the administrative agent for the account of each revolving lender a commitment fee on a quarterly basis based on amounts committed but unused under the revolving facility from 0.20% to 0.40% per annum depending on the Company’s Total Net Leverage Ratio (as defined in the Amended Credit Agreement). The Company is also obligated to pay the administrative agent customary fees for credit facilities of this size and type. Revolving borrowings under the Amended Credit Agreement bear interest at a rate per annum equal to (i) the Term SOFR Rate for the interest period plus the Applicable Rate (as defined in the Amended Credit Agreement) based on the Company’s Total Net Leverage Ratio or (ii) the Alternate Base Rate (as defined in the Amended Credit Agreement) as in effect from time to time plus the Applicable Rate based on the Company’s Total Net Leverage Ratio. As of March 31, 2023, the Applicable Rate for Term SOFR Loans is 1.25% per annum and the Applicable Rate for ABR Loans is 0.25% per annum. SOFR based loans also include a Credit Spread Adjustment based on the duration of the borrowing. The Amended Credit Agreement contains affirmative and negative covenants customarily applicable to senior secured credit facilities, including covenants that, among other things, limit or restrict the ability of the Company and its subsidiaries, subject to negotiated exceptions, to incur additional indebtedness and additional liens on their assets, engage in mergers or acquisitions or dispose of assets, pay dividends or make other distributions, voluntarily prepay other indebtedness, enter into transactions with affiliated persons, make investments and change the nature of their businesses. The Amended Credit Agreement also contains customary events of default, subject to thresholds and grace periods, including, among others, payment default, covenant default, cross default to other material indebtedness and judgment default. In addition, the Amended Credit Agreement requires the Company to maintain a Total Net Leverage Ratio of no more than 2.75 to 1.00 and an Interest Coverage Ratio of at least 3.50 to 1.00. The Company has no borrowings outstanding under the Amended Credit Agreement as of March 31, 2023. |
SUMMARY OF SIGNIFICANT ACCOUN_2
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies) | 3 Months Ended |
Mar. 31, 2023 | |
Accounting Policies [Abstract] | |
Basis of Presentation | Basis of Presentation - The accompanying unaudited condensed consolidated financial statements of Medifast, Inc. and its wholly-owned subsidiaries (“Medifast,” the “Company,” “we,” “us,” or “our”) included herein have been prepared in accordance with generally accepted accounting principles in the United States of America (“GAAP”) for interim reporting and pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”). Accordingly, certain information and notes that are normally required by GAAP have been condensed or omitted. However, in the opinion of management, all adjustments consisting of normal, recurring adjustments considered necessary for a fair presentation of the financial position and results of operations have been included and management believes the disclosures that are made are adequate to make the information presented not misleading. The condensed consolidated balance sheet at December 31, 2022 has been derived from the 2022 audited consolidated financial statements at that date included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2022 (“2022 Form 10-K”). The results of operations for the three months ended March 31, 2023 are not necessarily indicative of results that may be expected for the fiscal year ending December 31, 2023. The accompanying unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto, which are included in the 2022 Form 10-K. |
Presentation of Financial Statements | Presentation of Financial Statements - The unaudited condensed consolidated financial statements included herein include the accounts of the Company. All significant intercompany accounts and transactions have been eliminated. |
Reclassification | Reclassification - Certain amounts reported for prior periods have been reclassified to be consistent with the current period presentation. No reclassification in the condensed consolidated financial statements had a material impact on the presentation. |
Use of Estimates | Use of Estimates - The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and reported amounts of revenue and expenses during the reporting period. Actual results could differ materially from those estimates. |
Recently Issued Accounting Pronouncements | Recently Issued Accounting Pronouncements The Company has not adopted any new accounting standards during the three months ended March 31, 2023. There are no recently issued accounting pronouncements that are expected to have a material effect on the Company’s financial position, results of operations, cash flows, or disclosures. |
INVENTORIES (Tables)
INVENTORIES (Tables) | 3 Months Ended |
Mar. 31, 2023 | |
Inventory Disclosure [Abstract] | |
Schedule of Inventories | Inventories consisted of the following (in thousands): March 31, 2023 December 31, 2022 Raw materials $ 12,932 $ 12,670 Packaging 4,296 3,611 Non-food finished goods 7,032 8,738 Finished goods 78,825 97,675 Reserve for obsolete inventory (6,189) (3,838) Total $ 96,896 $ 118,856 |
EARNINGS PER SHARE (Tables)
EARNINGS PER SHARE (Tables) | 3 Months Ended |
Mar. 31, 2023 | |
Earnings Per Share [Abstract] | |
Schedule of the Computation of Basic and Diluted EPS | The following table sets forth the computation of basic and diluted EPS (in thousands, except per share data): Three months ended March 31, 2023 2022 Numerator: Net income $ 39,968 $ 41,781 Denominator: Weighted average shares of common stock outstanding 10,864 11,557 Effect of dilutive common stock equivalents 35 81 Weighted average shares of common stock outstanding 10,899 11,638 Earnings per share - basic $ 3.68 $ 3.62 Earnings per share - diluted $ 3.67 $ 3.59 |
SHARE-BASED COMPENSATION (Table
SHARE-BASED COMPENSATION (Tables) | 3 Months Ended |
Mar. 31, 2023 | |
Share-Based Payment Arrangement [Abstract] | |
Schedule of Stock Option Activity | The following table is a summary of our stock option activity (in thousands, except per share data): Three months ended March 31, 2023 2022 Awards Weighted-Average Exercise Price Awards Weighted-Average Exercise Price Outstanding at beginning of period 33 $ 54.98 32 $ 54.98 Exercised (4) 27.18 — — Forfeited — — — — Outstanding at end of the period 29 $ 58.65 32 $ 54.98 Exercisable at end of the period 29 $ 58.65 28 $ 52.76 |
Schedule of Restricted Stock Activity | The following table summarizes our restricted stock activity (in thousands, except per share data): Three months ended March 31, 2023 2022 Shares Weighted-Average Grant Date Fair Value Shares Weighted-Average Grant Date Fair Value Outstanding at beginning of period 60 $ 187.94 43 $ 183.51 Granted 67 102.83 29 175.66 Vested (22) 163.81 (18) 149.95 Forfeited — 190.76 — — Outstanding at end of the period 105 $ 138.33 54 $ 190.20 |
Schedule of Share-based Compensation Expense | The total expense during the three months ended March 31, 2023 and 2022 as follows (in thousands): Three months ended March 31, 2023 2022 Shares Share-Based Compensation Expense Shares Share-Based Compensation Expense Options and restricted stock 134 $ 1,226 86 $ 1,087 Market and performance-based share awards granted in 2023 47 79 — — Market and performance-based share awards granted in 2022 25 (1,388) 25 79 Performance-based share awards granted in 2021 15 640 15 640 Performance-based share awards granted in 2020 4 49 26 469 Total share-based compensation 225 $ 606 152 $ 2,275 |
LEASES (Tables)
LEASES (Tables) | 3 Months Ended |
Mar. 31, 2023 | |
Leases [Abstract] | |
Schedule of Supplemental Cash Flow Information | Supplemental cash flow information related to the Company’s operating leases was as follows (in thousands): Three months ended March 31, 2023 2022 Cash paid for amounts included in the measurements of lease liabilities Operating cash flow used in operating leases $ 1,804 $ 1,756 Right-of-use assets obtained in exchange for lease obligations Operating leases $ — $ 103 |
Schedule of Maturity of Company's Operating Lease Liabilities | The following table presents the maturity of the Company’s operating lease liabilities as of March 31, 2023 (in thousands): 2023 (excluding the three months ended March 31, 2023) $ 4,440 2024 5,693 2025 5,825 2026 4,160 2027 2,553 Thereafter 2,858 Total lease payments $ 25,529 Less: imputed interest (1,154) Total $ 24,375 |
INVENTORIES (Details)
INVENTORIES (Details) - USD ($) $ in Thousands | Mar. 31, 2023 | Dec. 31, 2022 |
Inventory Disclosure [Abstract] | ||
Raw materials | $ 12,932 | $ 12,670 |
Packaging | 4,296 | 3,611 |
Non-food finished goods | 7,032 | 8,738 |
Finished goods | 78,825 | 97,675 |
Reserve for obsolete inventory | (6,189) | (3,838) |
Total | $ 96,896 | $ 118,856 |
EARNINGS PER SHARE - Computatio
EARNINGS PER SHARE - Computation of Basic and Diluted EPS (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands | 3 Months Ended | |
Mar. 31, 2023 | Mar. 31, 2022 | |
Numerator: | ||
Net income | $ 39,968 | $ 41,781 |
Denominator: | ||
Weighted average shares of common stock outstanding (in shares) | 10,864 | 11,557 |
Effect of dilutive common stock equivalents (in shares) | 35 | 81 |
Weighted average shares of common stock outstanding (in shares) | 10,899 | 11,638 |
Earnings per share - basic (in usd per share) | $ 3.68 | $ 3.62 |
Earnings per share - diluted (in usd per share) | $ 3.67 | $ 3.59 |
EARNINGS PER SHARE - Narrative
EARNINGS PER SHARE - Narrative (Details) - shares shares in Thousands | 3 Months Ended | |
Mar. 31, 2023 | Mar. 31, 2022 | |
Restricted Stock | ||
Anti-dilutive awards | 13 | 0 |
SHARE-BASED COMPENSATION - Narr
SHARE-BASED COMPENSATION - Narrative (Details) - USD ($) $ / shares in Units, $ in Thousands | 3 Months Ended | |
Mar. 31, 2023 | Mar. 31, 2022 | |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||
Share-based compensation, shares authorized under stock option plans, exercise price range, lower range limit (in usd per share) | $ 26.52 | |
Share-based compensation, shares authorized under stock option plans, exercise price range, upper range limit (in usd per share) | $ 66.68 | |
Awards granted (in shares) | 0 | 0 |
Weighted-average remaining contractual life of options outstanding | 4 years 3 months 18 days | |
Weighted-average remaining contractual life of options exercisable | 4 years 3 months 18 days | |
Aggregate intrinsic value of options outstanding | $ 1,300 | |
Aggregate intrinsic value of options exercisable | 1,300 | |
Proceeds from stock options exercised | 100 | |
Intrinsic value of options exercised | $ 300 | |
Decrease in share-based payment arrangement, expense | $ (606) | $ (2,275) |
Stock Options | ||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||
Award vesting period | 3 years | |
Award expiration period | 10 years | |
Restricted Stock | ||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||
Award vesting period | 5 years | |
Shares withheld for employee taxes | 9,000 | 8,000 |
Share-based compensation arrangement, fair value of awards vested | $ 2,400 | $ 3,200 |
Shares vested in period | 22,000 | 18,000 |
Total income tax benefit recognized related to restricted stock awards | $ 100 | $ 500 |
Unrecognized compensation costs | $ 11,700 | |
Compensation cost recognition weighted average period | 2 years 4 months 24 days | |
Shares granted in period | 67,000 | 29,000 |
Performance-Based Shares | ||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||
Performance period | 3 years | |
Unrecognized compensation costs | $ 10,500 | |
Compensation cost recognition weighted average period | 2 years 2 months 12 days | |
Shares granted in period | 91,000 | |
Performance-Based Shares | Minimum | ||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||
Additional shares earned (percent) | 0% | |
Performance-Based Shares | Maximum | ||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||
Additional shares earned (percent) | 250% | |
Market and performance-based share awards | ||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||
Shares withheld for employee taxes | 21,000 | 0 |
Share-based compensation arrangement, fair value of awards vested | $ 5,300 | $ 0 |
Shares vested in period | 0 | |
Market and performance-based share awards | Granted In 2022 | ||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||
Decrease in share-based payment arrangement, expense | $ 1,388 | $ (79) |
SHARE-BASED COMPENSATION - Stoc
SHARE-BASED COMPENSATION - Stock Options Activity (Details) - $ / shares shares in Thousands | 3 Months Ended | |
Mar. 31, 2023 | Mar. 31, 2022 | |
Awards | ||
Shares, Outstanding at beginning of period (in shares) | 33 | 32 |
Shares, Exercised (in shares) | (4) | 0 |
Shares, Forfeited (in shares) | 0 | 0 |
Shares, Outstanding at end of the period (in shares) | 29 | 32 |
Shares, Exercisable at end of the period (in shares) | 29 | 28 |
Weighted-Average Exercise Price | ||
Weighted-Average Exercise Price, Outstanding at beginning of period (in usd per share) | $ 54.98 | $ 54.98 |
Weighted-Average Exercise Price, Exercised (in usd per share) | 27.18 | 0 |
Weighted-Average Exercise Price, Forfeited (in usd per share) | 0 | 0 |
Weighted-Average Exercise Price, Outstanding at beginning of period (in usd per share) | 58.65 | 54.98 |
Weighted-Average Exercise Price, Exercisable at end of the period (in usd per share) | $ 58.65 | $ 52.76 |
SHARE-BASED COMPENSATION - Rest
SHARE-BASED COMPENSATION - Restricted Stock Activity (Details) - Restricted Stock - $ / shares shares in Thousands | 3 Months Ended | |
Mar. 31, 2023 | Mar. 31, 2022 | |
Shares | ||
Outstanding at beginning of period (in shares) | 60 | 43 |
Granted (in shares) | 67 | 29 |
Vested (in shares) | (22) | (18) |
Forfeited (in shares) | 0 | 0 |
Outstanding at end of period (in shares) | 105 | 54 |
Weighted-Average Grant Date Fair Value | ||
Outstanding at beginning of period (in usd per share) | $ 187.94 | $ 183.51 |
Granted (in usd per share) | 102.83 | 175.66 |
Vested (in usds per share) | 163.81 | 149.95 |
Forfeited (in usd per share) | 190.76 | 0 |
Outstanding at beginning of period (in usd per share) | $ 138.33 | $ 190.20 |
SHARE-BASED COMPENSATION - Summ
SHARE-BASED COMPENSATION - Summary of Performance-based Share Awards (Details) - USD ($) shares in Thousands, $ in Thousands | 3 Months Ended | |
Mar. 31, 2023 | Mar. 31, 2022 | |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||
Shares | 225 | 152 |
Share-Based Compensation Expense | $ 606 | $ 2,275 |
Options and restricted stock | ||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||
Shares | 134 | 86 |
Share-Based Compensation Expense | $ 1,226 | $ 1,087 |
Market and performance-based share awards | Granted In 2023 | ||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||
Shares | 47 | 0 |
Share-Based Compensation Expense | $ 79 | $ 0 |
Market and performance-based share awards | Granted In 2022 | ||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||
Shares | 25 | 25 |
Share-Based Compensation Expense | $ (1,388) | $ 79 |
Performance-based share awards | Granted In 2021 | ||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||
Shares | 15 | 15 |
Share-Based Compensation Expense | $ 640 | $ 640 |
Performance-based share awards | Granted In 2020 | ||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||
Shares | 4 | 26 |
Share-Based Compensation Expense | $ 49 | $ 469 |
LEASES - Narrative (Details)
LEASES - Narrative (Details) - USD ($) $ in Millions | 3 Months Ended | |
Mar. 31, 2023 | Mar. 31, 2022 | |
Lessee, Lease, Description [Line Items] | ||
Operating lease expense | $ 1.5 | $ 1.8 |
Weighted average remaining lease term | 4 years 7 months | |
Weighted average discount rate | 2% | |
Minimum | Operating Lease Arrangement for Real Estate | ||
Lessee, Lease, Description [Line Items] | ||
Lease term | 19 months | |
Minimum | Operating Lease Arrangement for Equipment | ||
Lessee, Lease, Description [Line Items] | ||
Lease term | 24 months | |
Maximum | Operating Lease Arrangement for Real Estate | ||
Lessee, Lease, Description [Line Items] | ||
Lease term | 122 months | |
Maximum | Operating Lease Arrangement for Equipment | ||
Lessee, Lease, Description [Line Items] | ||
Lease term | 203 months |
LEASES - Supplemental Cash Flow
LEASES - Supplemental Cash Flow Information (Details) - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2023 | Mar. 31, 2022 | |
Leases [Abstract] | ||
Operating cash flow used in operating leases | $ 1,804 | $ 1,756 |
Operating leases | $ 0 | $ 103 |
LEASES - Future Minimum Lease C
LEASES - Future Minimum Lease Commitments (Details) $ in Thousands | Mar. 31, 2023 USD ($) |
Lessee, Operating Lease, Liability, Payment, Due [Abstract] | |
2023 (excluding the three months ended March 31, 2023) | $ 4,440 |
2024 | 5,693 |
2025 | 5,825 |
2026 | 4,160 |
2027 | 2,553 |
Thereafter | 2,858 |
Total lease payments | 25,529 |
Less: imputed interest | (1,154) |
Total | $ 24,375 |
ACCUMULATED OTHER COMPREHENSI_2
ACCUMULATED OTHER COMPREHENSIVE INCOME (Details) - USD ($) $ in Thousands | Mar. 31, 2023 | Dec. 31, 2022 |
Accumulated Other Comprehensive Income (Loss), Net of Tax [Abstract] | ||
Foreign currency translation | $ 33 | $ 24 |
DEBT (Details)
DEBT (Details) - Credit Agreement | 3 Months Ended | |
Apr. 13, 2021 USD ($) | Mar. 31, 2023 USD ($) | |
Debt Instrument [Line Items] | ||
Maximum total net leverage ratio | 2.75 | |
Minimum interest coverage ratio | 3.50 | |
SOFR | ||
Debt Instrument [Line Items] | ||
Basis spread on variable rate (as a percent) | 1.25% | |
Base Rate | ||
Debt Instrument [Line Items] | ||
Basis spread on variable rate (as a percent) | 0.25% | |
Minimum | ||
Debt Instrument [Line Items] | ||
Commitment fee (as a percent) | 0.20% | |
Maximum | ||
Debt Instrument [Line Items] | ||
Commitment fee (as a percent) | 0.40% | |
Line of Credit | ||
Debt Instrument [Line Items] | ||
Borrowings outstanding | $ 0 | |
Revolving Credit Facility | ||
Debt Instrument [Line Items] | ||
Maximum borrowing capacity | $ 225,000,000 | |
Letter of Credit | ||
Debt Instrument [Line Items] | ||
Maximum borrowing capacity | 20,000,000 | |
Uncommitted Incremental Facility | ||
Debt Instrument [Line Items] | ||
Maximum borrowing capacity | $ 100,000,000 |