Delaware
|
13-3714405
|
|
(State
or other jurisdiction
of
organization)
|
(I.R.S.
employer
Identification
no.)
|
Class
|
|
Outstanding at May
10, 2010
|
Common
stock, $.001 par value per share
|
|
15,409,601
shares
|
Part
I - Financial Information:
|
||
Item
1 – Financial Statements
|
||
Condensed
Consolidated Balance Sheets as of March 31, 2010 (unaudited) and December
31, 2009 (audited)
|
3
|
|
Condensed
Consolidated Statements of Income (unaudited) for the Three Months Ended
March 31, 2010 and 2009
|
4
|
|
Condensed
Consolidated Statements of Changes in Stockholders’ Equity (unaudited) for
the Three Months Ended March 31,2010
|
5
|
|
Condensed
Consolidated Statements of Cash Flows (unaudited) for the Three Months
Ended March 31, 2010 and 2009
|
6
|
|
Notes
to Unaudited Condensed Consolidated Financial Statements
|
7
|
|
Item
2 - Management’s Discussion and Analysis of Financial Condition And
Results of Operations
|
13
|
|
Item
3 – Quantitative and Qualitative Disclosures about Market
Risk
|
18
|
|
|
||
Item
4 – Controls and Procedures
|
18
|
|
Part
II - Other Information:
|
||
Item
1 – Legal Proceedings
|
19
|
|
Item
1A – Risk Factors
|
19
|
|
Item
5 – Other Information
|
19
|
|
Item
6 - Exhibits
|
21
|
(Unaudited)
|
(Audited)
|
|||||||
March 31, 2010
|
December 31, 2009
|
|||||||
ASSETS
|
||||||||
Current
assets
|
||||||||
Cash
and cash equivalents
|
$ | 20,814,000 | $ | 10,604,000 | ||||
Accounts
receivable-net of allowance for sales returns and doubtful accounts of
$100,000
|
1,101,000 | 676,000 | ||||||
Inventory
|
13,586,000 | 11,232,000 | ||||||
Investment
securities
|
7,181,000 | 5,699,000 | ||||||
Deferred
compensation
|
- | 641,000 | ||||||
Prepaid
expenses and other current assets
|
2,491,000 | 5,334,000 | ||||||
Note
receivable - current
|
46,000 | 46,000 | ||||||
Deferred
tax asset
|
83,000 | 100,000 | ||||||
Total
current assets
|
45,302,000 | 34,332,000 | ||||||
Property,
plant and equipment - net
|
24,716,000 | 23,237,000 | ||||||
Trademarks
and intangibles - net
|
3,815,000 | 4,104,000 | ||||||
Note
receivable, net of current assets
|
112,000 | 112,000 | ||||||
Other
assets
|
243,000 | 379,000 | ||||||
TOTAL
ASSETS
|
$ | 74,188,000 | $ | 62,164,000 | ||||
LIABILITIES
AND STOCKHOLDERS' EQUITY
|
||||||||
Current
liabilities
|
||||||||
Accounts
payable and accrued expenses
|
10,621,000 | 4,967,000 | ||||||
Income
taxes payable
|
759,000 | 22,000 | ||||||
Current
maturities of long-term debt
|
796,000 | 796,000 | ||||||
Total
current liabilities
|
12,176,000 | 5,785,000 | ||||||
Other
liabilities
|
||||||||
Long-term
debt, net of current portion
|
5,245,000 | 5,444,000 | ||||||
Deferred
tax liability
|
1,464,000 | 1,360,000 | ||||||
Total
liabilities
|
18,885,000 | 12,589,000 | ||||||
Stockholders'
Equity:
|
||||||||
Preferred
stock, $.001 par value (1,500,000 authorized, no shares issued and
outstanding)
|
- | - | ||||||
Common
stock; par value $.001 per share; 20,000,000 shares authorized; 15,403,941
issued and 15,036,103 outstanding at 3/31/10 and 15,398,941 issued and
15,031,103 shares outstanding at 12/31/09
|
16,000 | 16,000 | ||||||
Additional
paid-in capital
|
29,352,000 | 28,456,000 | ||||||
Accumulated
other comprehensive income
|
90,000 | 159,000 | ||||||
Retained
earnings
|
29,165,000 | 24,264,000 | ||||||
Less:
cost of 367,838 and 367,838 shares of common stock in
treasury
|
(3,320,000 | ) | (3,320,000 | ) | ||||
Total
stockholders' equity
|
55,303,000 | 49,575,000 | ||||||
TOTAL
LIABILITIES AND STOCKHOLDERS' EQUITY
|
$ | 74,188,000 | $ | 62,164,000 |
Three Months Ended March 31,
|
||||||||
2010
|
2009
|
|||||||
Revenue
|
$ | 60,585,000 | $ | 34,605,000 | ||||
Cost
of sales
|
14,817,000 | 8,979,000 | ||||||
Gross
Profit
|
45,768,000 | 25,626,000 | ||||||
Selling,
general, and administration
|
37,567,000 | 21,610,000 | ||||||
Income
from operations
|
8,201,000 | 4,016,000 | ||||||
Other
income/(expense)
|
||||||||
Interest
income/ (expense), net
|
28,000 | (5,000 | ) | |||||
Other
expense
|
(15,000 | ) | (35,000 | ) | ||||
13,000 | (40,000 | ) | ||||||
Income
before provision for income taxes
|
8,214,000 | 3,976,000 | ||||||
Provision
for income taxes
|
(3,313,000 | ) | (1,491,000 | ) | ||||
Net
income
|
$ | 4,901,000 | $ | 2,485,000 | ||||
Basic
earnings per share
|
$ | 0.35 | $ | 0.19 | ||||
Diluted
earnings per share
|
$ | 0.33 | $ | 0.17 | ||||
Weighted
average shares outstanding -
|
||||||||
Basic
|
13,908,144 | 13,284,431 | ||||||
Diluted
|
14,671,187 | 14,494,898 |
Par Value
|
Additional
|
Accumulated
|
||||||||||||||||||||||||||
Number
|
$0.001
|
Paid-In
|
Retained
|
other comp
|
Treasury
|
|||||||||||||||||||||||
of Shares
|
Amount
|
Capital
|
Earnings
|
income/(loss)
|
Stock
|
Total
|
||||||||||||||||||||||
Balance,
December 31, 2009
|
15,398,941 | $ | 16,000 | $ | 28,456,000 | $ | 24,264,000 | $ | 159,000 | $ | (3,320,000 | ) | $ | 49,575,000 | ||||||||||||||
Vesting
of share-based compensation to executives and directors
|
610,000 | 610,000 | ||||||||||||||||||||||||||
Shares
issued
|
5,000 | 100 | 0 | 100 | ||||||||||||||||||||||||
Fair
value adjustment for stock compensation tax benefit
|
286,000 | 286,000 | ||||||||||||||||||||||||||
Net
change in unrealized gain on investments, net of
taxes
|
(69,000 | ) | (69,000 | ) | ||||||||||||||||||||||||
Net
income
|
4,901,000 | 4,901,000 | ||||||||||||||||||||||||||
Balance,
March 31, 2010
|
15,403,941 | $ | 16,100 | $ | 29,352,000 | $ | 29,165,000 | $ | 90,000 | $ | (3,320,000 | ) | $ | 55,303,100 |
Three Months Ended March 31,
|
||||||||
2010
|
2009
|
|||||||
Cash
flows from operating activities:
|
||||||||
Net
income
|
$ | 4,901,000 | $ | 2,485,000 | ||||
Adjustments
to reconcile net income to net cash provided by operating activities from
continuing operations:
|
||||||||
Depreciation
and amortization
|
$ | 1,398,000 | $ | 1,229,000 | ||||
Realized
loss (gain) on investment securities
|
14,000 | (21,000 | ) | |||||
Common
stock issued for services
|
- | 52,000 | ||||||
Vesting
of share-based compensation
|
610,000 | 429,000 | ||||||
Deferred
income taxes
|
105,000 | (110,000 | ) | |||||
Changes
in assets and liabilities which provided (used) cash:
|
||||||||
Accounts
receivable
|
(425,000 | ) | (126,000 | ) | ||||
Inventory
|
(2,354,000 | ) | 1,493,000 | |||||
Prepaid
expenses & other current assets
|
632,000 | 110,000 | ||||||
Deferred
compensation
|
509,000 | 80,000 | ||||||
Other
assets
|
136,000 | (2,000 | ) | |||||
Income
taxes
|
2,947,000 | 40,000 | ||||||
Accounts
payable and accrued expenses
|
5,656,000 | (297,000 | ) | |||||
Net
cash provided by operating activities
|
14,129,000 | 5,362,000 | ||||||
Cash
Flow from Investing Activities:
|
||||||||
Purchase
Sale of investment securities, net
|
(1,417,000 | ) | (51,000 | ) | ||||
Purchase
of property and equipment
|
(2,589,000 | ) | (722,000 | ) | ||||
Net
cash (used in) investing activities
|
(4,006,000 | ) | (773,000 | ) | ||||
Cash
Flow from Financing Activities:
|
||||||||
Repayment
of long-term debt, net
|
(199,000 | ) | (64,000 | ) | ||||
Increase
in line of credit
|
- | 15,000 | ||||||
Decrease
in note receivable
|
- | 34,000 | ||||||
Excess
tax benefits from share-based payment arrangements
|
286,000 | - | ||||||
Purchase
of treasury stock
|
- | (102,000 | ) | |||||
Net
cash provided by (used in) financing activities
|
87,000 | (117,000 | ) | |||||
NET
INCREASE IN CASH AND CASH EQUIVALENTS
|
10,210,000 | 4,472,000 | ||||||
Cash
and cash equivalents - beginning of the period
|
10,604,000 | 973,000 | ||||||
Cash
and cash equivalents - end of period
|
$ | 20,814,000 | $ | 5,445,000 | ||||
Supplemental
disclosure of cash flow information:
|
||||||||
Interest
paid
|
$ | 27,000 | $ | 37,000 | ||||
Income
taxes
|
$ | - | $ | 985,000 |
|
1.
|
Basis
of Presentation
|
|
2.
|
Presentation
of Financial Statements
|
2010
|
2009
|
|||||||
Raw
Materials
|
$ | 3,467,000 | $ | 3,900,000 | ||||
Packaging
|
2,816,000 | 2,628,000 | ||||||
Finish
ed Goods
|
7,303,000 | 4,704,000 | ||||||
$ | 13,586,000 | $ | 11,232,000 |
As of March 31, 2010
|
As of December 31, 2009
|
|||||||||||||||
Gross Carrying
|
Accumulated
|
Gross Carrying
|
Accumulated
|
|||||||||||||
Amount
|
Amortization
|
Amount
|
Amortization
|
|||||||||||||
Customer
lists
|
$ | 8,567,000 | $ | 6,315,000 | $ | 8,567,000 | $ | 6,086,000 | ||||||||
Non-compete
agreements
|
$ | 840,000 | $ | 840,000 | $ | 840,000 | $ | 840,000 | ||||||||
Trademarks,
patents, and copyrights
|
||||||||||||||||
finite
life
|
1,622,000 | 986,000 | 1,622,000 | 926,000 | ||||||||||||
infinite
life
|
927,000 | - | 927,000 | - | ||||||||||||
Total
|
$ | 11,956,000 | $ | 8,141,000 | $ | 11,956,000 | $ | 7,852,000 |
2010
|
2009
|
|||||||
Customer
lists
|
$ | 229,000 | $ | 365,000 | ||||
Trademarks
and patents
|
60,000 | 60,000 | ||||||
Total
Trademarks and Intangibles
|
$ | 289,000 | $ | 425,000 |
2010
|
2009
|
|||||||
Numerator:
|
||||||||
Net
income
|
$ | 4,901,000 | $ | 2,485,000 | ||||
Denominator:
|
||||||||
Weighted
average shares of common stock outstanding
|
13,908,144 | 13,284,431 | ||||||
Effect
of dilutive common stock equivalents
|
763,043 | 1,210,467 | ||||||
Weighted
average diluted common shares outstanding
|
14,671,187 | 14,494,898 | ||||||
EPS
|
||||||||
Basic
|
$ | 0.35 | $ | 0.19 | ||||
Diluted
|
$ | 0.33 | $ | 0.17 |
|
8.
|
Estimates
|
|
9.
|
Deferred
Compensation Plan
|
10.
|
Fair
Value Measurements
|
|
Level
1
|
Valuation
is based upon quoted prices for identical instruments traded in active
markets.
|
|
Level
2
|
Valuation
is based upon quoted prices for similar instruments in active markets,
quoted prices for identical or similar instruments that are not active,
and model-based valuation techniques for which all significant assumptions
are observable in the market.
|
|
Level
3
|
Valuation
is generated from model-based techniques that use significant assumptions
not observable in the market. These unobservable assumptions
reflect our own estimates of assumptions that market participants would
use in pricing the asset or liability. Valuation techniques
include use of option pricing models, discounted cash flow models and
similar techniques.
|
Level
I
|
Level II
|
Level III
|
Total
|
|||||||||||||
Investment
securities
|
$ | 7,181,000 | - | - | $ | 7,181,000 | ||||||||||
Cash
equivalents
|
20,814,000 | - | - | 20,814,000 | ||||||||||||
Total
Assets
|
$ | 27,995,000 | $ | - | $ | - | $ | 27,995,000 | ||||||||
Liabilities
|
6,041,000 | - | 6,041,000 | |||||||||||||
Total
Liabilities
|
$ | - | 6,041,000 | $ | - | $ | 6,041,000 |
11.
|
Share
Based Compensation
|
Shares
|
Weighted
Average
Exercise Price
|
|||||||
Outstanding
at beginning of year
|
10,000 | $ | 3.83 | |||||
Options
exercised
|
- | - | ||||||
Options
forfeited or expired
|
- | - | ||||||
Outstanding
at March 31, 2010
|
10,000 | $ | 3.83 | |||||
Options
exercisable atMarch 31, 2010
|
10,000 | $ | 3.83 |
Shares
|
Weighed-Average
Grant Date Fair Value
|
|||||||
Unvested
at January 1, 2010
|
1,204,378 | $ | 5.57 | |||||
Granted
|
5,000 | 21.14 | ||||||
Vested
|
(107,770 | ) | 5.66 | |||||
Forfeited
|
- | - | ||||||
Unvested
at March 31, 2010
|
1,101,608 | 5.64 |
Three Months Ended March 31,
2010
|
||||||||||||||||
Medifast
|
All Other
|
Eliminations
|
Consolidated
|
|||||||||||||
Revenues,
net
|
$ | 54,729,000 | $ | 5,856,000 | $ | 60,585,000 | ||||||||||
Cost
of Sales
|
13,630,000 | 1,187,000 | 14,817,000 | |||||||||||||
Selling,
General and Administrative Expenses
|
31,749,000 | 4,420,000 | 36,169,000 | |||||||||||||
Depreciation
and Amortization
|
1,139,000 | 259,000 | 1,398,000 | |||||||||||||
Interest
(net) and Other
|
10,000 | (23,000 | ) | (13,000 | ) | |||||||||||
Provision
for income taxes
|
3,313,000 | - | 3,313,000 | |||||||||||||
Net
income
|
$ | 4,888,000 | $ | 13,000 | $ | 4,901,000 | ||||||||||
Segment
Assets
|
$ | 52,627,000 | $ | 21,564,000 | $ | 74,191,000 | ||||||||||
Three Months Ended March 31,
2009
|
||||||||||||||||
Medifast
|
All Other
|
Eliminations
|
Consolidated
|
|||||||||||||
Revenues,
net
|
$ | 31,659,000 | $ | 2,946,000 | $ | 34,605,000 | ||||||||||
Cost
of Sales
|
8,294,000 | 685,000 | 8,979,000 | |||||||||||||
Selling,
General and Administrative Expenses
|
17,745,000 | 2,637,000 | 20,382,000 | |||||||||||||
Depreciation
and Amortization
|
990,000 | 238,000 | 1,228,000 | |||||||||||||
Interest
(net) and Other
|
0 | 40,000 | 40,000 | |||||||||||||
Provision
for income taxes
|
1,491,000 | - | 1,491,000 | |||||||||||||
Net
income (loss)
|
$ | 3,139,000 | $ | (654,000 | ) | $ | 2,485,000 | |||||||||
Segment
Assets
|
$ | 35,575,000 | $ | 17,922,000 | $ | 53,497,000 |
Three
Months Ended March 31,
|
||||||||||||||||
2010
|
2009
|
$
Change
|
%
Change
|
|||||||||||||
Revenue
|
$ | 60,585,000 | $ | 34,605,000 | $ | 25,980,000 | 75 | % | ||||||||
Cost
of sales
|
14,817,000 | 8,979,000 | 5,838,000 | 65 | % | |||||||||||
Gross
Profit
|
45,768,000 | 25,626,000 | $ | 20,142,000 | 79 | % | ||||||||||
Selling,
general, and administration
|
37,567,000 | 21,610,000 | $ | 15,957,000 | 74 | % | ||||||||||
Income
from operations
|
8,201,000 | 4,016,000 | 4,185,000 | 104 | % | |||||||||||
Other
income/(expense)
|
||||||||||||||||
Interest
income (expense), net
|
28,000 | (5,000 | ) | $ | 33,000 | 660 | % | |||||||||
Other
income/(expense)
|
(15,000 | ) | (35,000 | ) | $ | 20,000 | 57 | % | ||||||||
13,000 | (40,000 | ) | 53,000 | 133 | % | |||||||||||
Income
before provision for income taxes
|
8,214,000 | 3,976,000 | $ | 4,238,000 | 107 | % | ||||||||||
Provision
for income tax (expense)
|
(3,313,000 | ) | (1,491,000 | ) | (1,822,000 | ) | 122 | % | ||||||||
Net
income
|
$ | 4,901,000 | $ | 2,485,000 | $ | 2,416,000 | 97 | % | ||||||||
% of revenue
|
||||||||||||||||
Gross
Profit
|
75.5 | % | 74.1 | % | ||||||||||||
Selling,
general, and administration
|
62.0 | % | 62.4 | % | ||||||||||||
Income
from Operations
|
13.5 | % | 11.6 | % |
Net Sales by Segment for the Three Months Ended March 31,
|
||||||||||||||||
2010
|
2009
|
|||||||||||||||
Segments
|
Sales
|
% of Total
|
Sales
|
% of Total
|
||||||||||||
Medifast
|
$ | 54,729,000 | 90 | % | $ | 31,659,000 | 91 | % | ||||||||
All
Other
|
5,856,000 | 10 | % | 2,946,000 | 9 | % | ||||||||||
Total
Sales
|
$ | 60,585,000 | 100 | % | $ | 34,605,000 | 100 | % |
Net
Profit by Segment for the Three Months Ended March 31,
|
||||||||||||||||
2010
|
2009
|
|||||||||||||||
Segments
|
Profit
|
% of Total
|
Profit
|
% of Total
|
||||||||||||
Medifast
|
$ | 4,888,000 | 100 | % | $ | 3,139,000 | 126 | % | ||||||||
All
Other
|
13,000 | 0 | % | (654,000 | ) | -26 | % | |||||||||
Total
Net Profit
|
$ | 4,901,000 | 100 | % | $ | 2,485,000 | 100 | % |
Period
|
Total Number of Shares
Purchased
|
Average Price Paid
per Share
|
Total Number of Shares
Purchased as Part of Publicly
Announced Plans or Programs
|
Maximum Number of Shares
that May Yet Be Purchased
Under the Plans or Programs
|
||||||||||||
January
1 - January 31, 2010
|
- | - | - | 365,000 | ||||||||||||
February
1 - February 28, 2010
|
- | - | - | 365,000 | ||||||||||||
March
1 - March 31, 2010
|
- | - | - | 365,000 |
BY:
|
/S/
MICHAEL S. MCDEVITT
|
May
10, 2010
|
|
Michael
S. McDevitt
|
|||
Chief
Executive Officer and Chief Financial Officer
|
|||
(principal
executive officer and principal financial officer)
|
Exhibit
Number
|
Description
of Exhibit
|
|
31.1
|
Certification
of Chief Executive Officer pursuant to Item 601(b)(31) of Regulation S-K,
as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of
2002.
|
|
31.2
|
Certification
of Chief Financial Officer pursuant to Item 601(b)(31) of Regulation S-K,
as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of
2002.
|
|
32.1
|
Certification
of Chief Executive Officer and Chief Financial Officer pursuant to Section
906 of the Sarbanes-Oxley Act of
2002
|