Medifast Announces Third Quarter Results; Company Posts 20th Consecutive Quarter Of Profitability
OWINGS MILLS, Md., Nov. 15 /PRNewswire-FirstCall/ -- Medifast, Inc. announced today third quarter financial results for the period ended September 30, 2004. The company reported revenue of $7.3 million, a 7% increase versus $6.8 million in the year-earlier period. The company reported pre-tax income of $521,000 compared to $687,000 in the third quarter of 2003. The company reported net income of $391,000, or $0.04 per basic share ($0.03 per diluted share), versus $520,000, or $0.05 per basic share ($0.04 per diluted share) in the 2003 third quarter. Net income was impacted by a higher share count as a result of the conversion of preferred stock into common stock, increased insurance costs and the affect of several hurricanes in Florida, which significantly reduced revenue from its Hi-Energy Clinic business.
The company reported revenue of $21.4 million for the nine months ended September 30, 2004, a 10% increase compared to $19.5 million reported for the nine-month period ended September 30, 2003. Domestic sales increased 23% to $21.2 million during the 2004 period. Income from Operations was $2.4 million, a decrease of 28% compared to $3.1 million for the 2003 nine-month period, due to increased sales costs and declines in international revenue. The company reported net income of $1.7 million, or $0.16 per basic share ($0.14 per diluted share), versus $2.0 million, or $0.22 per basic share ($0.18 per diluted share) in the year-earlier period. Net income was impacted by a higher share count as a result of the conversion of preferred stock into common stock. Medifast ended the third quarter with $3.1 million in cash and cash equivalents. The company had stockholders' equity of $18.8 million and working capital of $10.6 million on September 30, 2004, compared with $15.1 million and $9.4 million at September 30, 2003, respectively. The third quarter of 2004 marked the Company's 20th consecutive quarter of profitability.
"Despite many factors beyond our control, we reported another solid quarter of operating results," said Brad MacDonald, Medifast's Chairman and Chief Executive Officer. "Our Hi-Energy Clinics were adversely affected by the multiple hurricanes that impacted the Florida Panhandle region, which resulted in the temporary closure of Medifast's corporately owned Hi-Energy Clinics in Florida, Mississippi and Arkansas and affected approximately 20% of the clinics which the company licenses to third parties in the southeastern United States. This also delayed the launch of new corporate clinics in the area, adversely affected our marketing programs as well as reduced revenue from the clinics that license our products. In addition, we were negatively impacted by rising insurance costs due to industry-wide increases in the weight loss industry. However, our Health Advisors continue to post strong results, as the growing number of Advisors, combined with innovative offerings such as our 'Tasting Party Plans,' continue to attract new customers. Recently, we have begun to see a substantial increase in sales from our Internet distribution strategy. The redesign of our website, along with new marketing programs, have generated additional traffic and resulted in increased Internet sales, which carry highly attractive margins. While our US business remains strong, we have still received only nominal orders internationally, as the conflict in Iraq continues to delay key product launches in the Middle East and Far East. We are uncertain when foreign sales activity is likely to increase.
"Since we believe that opportunities in the US are significant, we continue to invest aggressively in developing the infrastructure necessary to support our growth during 2005," continued MacDonald. "We have restructured the operations in our Consumers Choice Division, and now believe that we are positioned to capitalize on the potential for the UTI Test Stick, and a reformulated Menopause Relief that incorporated a new and revolutionary time- release formula using Solae soy isoflavines. We have also invested in supporting growth in our Take Shape for Life division, as we now have the capacity to produce $200 million of product at our plants. While the hurricanes delayed the rollout of many of our Hi-Energy Clinics in Florida, we believe that a combination of the new corporate clinics in both Orlando and Dallas along with growing licensees in the region will provide an important source of future revenue. Our investments in new products are yielding results, as the response to our new Maintain by Medifast(TM) product line has been strong. The line of low-glycemic shakes, bars and soups is backed by an ongoing clinical study in which participants achieved a weight loss of up to 2 pounds per week by incorporating the products into a 1,200- to 1,500-calorie- per-day meal plan. We continue to enhance our corporate infrastructure, as we seek to reduce production costs through the ownership of our own facilities. Our strong balance sheet, innovative product mix and rapid growth in our Take Shape for Life and Hi-Energy Clinics leaves us confident that we will return to rapid growth in 2005."
2004 Financial Guidance
For the fourth quarter, the company expects to report revenue of $7 million to $8 million and to generate Income from Operations of $450,000 to $800,000, or $0.04 to $0.07 per diluted share. The company expects revenue to increase from its Hi-Energy Clinics, as activity in Florida begins to return to more customary levels. The company also expects continued growth from its Take Shape for Life division and strong sales from the Maintain by Medifast(TM) product line. The fourth quarter is typically the slowest period for the weight loss management industry.
2005 Financial Guidance
The company expects to generate revenue of $32 million to $34 million and Income from Operations of $3.3 million to $3.8 million. Medifast expects continued growth from its Take Shape for Life division and expansion of its Hi-Energy Clinics into new markets in the southeast portion of the U.S. The guidance does not assume a significant increase in international sales.
The company will hold a conference call and webcast today at 4:30 pm eastern time. Interested participants should call (877) 740-8078 when calling within the United States or (706) 679-8404 when calling internationally. Please refer to conference code 2150559. There will be a playback available as well. To listen to the playback, please call (800) 642-1687 when calling within the United States or (706) 645-9291 when calling internationally. The replay will be available until December 15, 2004.
The webcast may be accessed via the company's web site at http://www.medifastdiet.com/. Interested parties should go to the section marked "Investor Relations" to listen to the call. The webcast can be accessed until December 15, 2004.
This release contains forward-looking statements, which may involve known and unknown risks, uncertainties and other factors that may cause Medifast's actual results and performance in future periods to be materially different from any future results or performance suggested by these statements. Medifast cautions investors not to place undue reliance on forward-looking statements, which speak only to management's expectation on this date.
MEDIFAST, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS September 30, 2004 December 31, 2003 (Unaudited) (Audited) ASSETS Current assets: Cash $472,000 $2,524,000 Accounts receivable - net of allowance for doubtful accounts of $55,000 1,126,000 641,000 Inventory 4,093,000 2,988,000 Investment securities 2,610,000 3,983,000 Deferred compensation 448,000 321,000 Prepaid expenses and other current assets 3,742,000 936,000 Deferred tax asset - 596,000 Total Current Assets 12,491,000 11,989,000 Property, plant and equipment - net 8,308,000 7,449,000 Trademarks and intangibles 4,433,000 4,419,000 Other assets 63,000 375,000 TOTAL ASSETS $25,295,000 $24,232,000 LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable and accrued expenses $1,110,000 $1,714,000 Dividends payable 58,000 58,000 Deferred tax liability 33,000 - Line of credit - 55,000 Current maturities of long-term debt 656,000 764,000 Total current liabilities 1,857,000 2,591,000 Long-term debt, net of current portion 4,631,000 4,564,000 Total Liabilities 6,488,000 7,155,000 Stockholders' Equity: Series B Convertible Preferred Stock; par value $1.00; 600,000 shares authorized; 300,614 and 403,734 shares issued and outstanding, respectively 301,000 404,000 Series C Convertible Preferred Stock; stated value $1.00; 1,015,000 shares authorized; 200,000 and 267,000 shares issued and outstanding, respectively 200,000 267,000 Common stock; par value $.001 per share; 15,000,000 authorized; 10,986,466 and 10,482,609 shares issued and outstanding, respectively 11,000 10,000 Additional paid-in capital 20,394,000 20,120,000 Accumulated comprehensive loss (86,000) (25,000) Accumulated deficit (1,321,000) (3,016,000) 19,499,000 17,760,000 Less cost of common stock treasury; 86,000 and 83,863 shares, respectively (692,000) (683,000) Total Stockholders' Equity 18,807,000 17,077,000 TOTAL LIABILITIES & STOCKHOLDERS' EQUITY $25,295,000 $24,232,000 MEDIFAST, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF INCOME Three Months Ended Nine Months Ended September 30 September 30 2004 2003 2004 2003 (Unaudited) (Audited) (Unaudited) (Audited) Revenue 7,268,000 $6,775,000 21,442,000 $19,539,000 Cost of sales 1,886,000 1,925,000 5,182,000 5,236,000 Gross Profit 5,382,000 4,850,000 16,260,000 14,303,000 Selling, general, and administration 4,855,000 4,149,000 13,832,000 11,187,000 Income from operations 527,000 701,000 2,428,000 3,116,000 Other income/(expense) Interest expense (4,000) (31,000) (79,000) (95,000) Other income (expense) (2,000) 17,000 (9,000) 26,000 Income before provision for income taxes 521,000 687,000 2,340,000 3,047,000 Provision for income tax benefit (expense) (130,000) (167,000) (628,000) (1,072,000) Net income 391,000 520,000 1,712,000 1,975,000 Less: Stock dividend on preferred stock - 9,000 18,000 39,000 Net income attributable to shareholders $391,000 $511,000 $1,694,000 $1,936,000 Basic earnings per share $0.04 $0.05 $0.16 $0.22 Diluted earnings per share $0.03 $0.04 $0.14 $0.18 Weighted average share outstanding - Basic 10,982,578 9,872,120 10,774,663 8,953,569 Diluted 12,412,265 11,863,185 12,118,790 11,076,550Medifast, Inc.
CONTACT: Jeremy Hunt, Investor Relations Specialist, Medifast, Inc.,+1-410-504-8196; or Ken Sgro, CEOcast, Inc. for Medifast, +1-212-732-4300
Web site: http://www.medifastdiet.com/