Company Quick10K Filing
Medifast
Price99.89 EPS6
Shares12 P/E17
MCap1,216 P/FCF19
Net Debt-81 EBIT89
TEV1,135 TEV/EBIT13
TTM 2019-09-30, in MM, except price, ratios
10-Q 2020-03-31 Filed 2020-05-06
10-K 2019-12-31 Filed 2020-03-02
10-Q 2019-09-30 Filed 2019-11-08
10-Q 2019-06-30 Filed 2019-08-02
10-Q 2019-03-31 Filed 2019-05-02
10-K 2018-12-31 Filed 2019-03-01
10-Q 2018-09-30 Filed 2018-11-07
10-Q 2018-03-31 Filed 2018-05-04
10-K 2017-12-31 Filed 2018-03-16
10-Q 2017-09-30 Filed 2017-11-08
10-Q 2017-06-30 Filed 2017-08-09
10-Q 2017-03-31 Filed 2017-05-10
10-K 2016-12-31 Filed 2017-03-16
10-Q 2016-09-30 Filed 2016-11-09
10-Q 2016-06-30 Filed 2016-08-09
10-Q 2016-03-31 Filed 2016-05-10
10-K 2015-12-31 Filed 2016-03-15
10-Q 2015-09-30 Filed 2015-11-09
10-Q 2015-06-30 Filed 2015-08-10
10-Q 2015-03-31 Filed 2015-05-11
10-K 2014-12-31 Filed 2015-03-16
10-Q 2014-09-30 Filed 2014-11-10
10-Q 2014-06-30 Filed 2014-08-11
10-Q 2014-03-31 Filed 2014-05-12
10-K 2013-12-31 Filed 2014-03-17
10-Q 2013-09-30 Filed 2013-11-12
10-Q 2013-06-30 Filed 2013-08-09
10-Q 2013-03-31 Filed 2013-05-10
10-K 2012-12-31 Filed 2013-03-15
10-Q 2012-09-30 Filed 2012-11-09
10-Q 2012-06-30 Filed 2012-08-09
10-Q 2012-03-31 Filed 2012-05-10
10-K 2011-12-31 Filed 2012-03-15
10-Q 2011-09-30 Filed 2011-11-09
10-Q 2011-06-30 Filed 2011-08-09
10-Q 2011-03-31 Filed 2011-05-10
10-K 2010-12-31 Filed 2011-04-01
10-Q 2010-09-30 Filed 2010-11-09
10-Q 2010-06-30 Filed 2010-08-09
10-Q 2010-03-31 Filed 2010-05-10
10-K 2009-12-31 Filed 2010-03-31
8-K 2020-06-15
8-K 2020-05-05
8-K 2020-03-19
8-K 2020-03-04
8-K 2020-02-26
8-K 2020-02-04
8-K 2020-01-13
8-K 2019-12-13
8-K 2019-12-03
8-K 2019-11-20
8-K 2019-11-07
8-K 2019-09-12
8-K 2019-08-01
8-K 2019-06-12
8-K 2019-05-01
8-K 2019-03-13
8-K 2019-02-26
8-K 2019-01-14
8-K 2018-12-11
8-K 2018-11-06
8-K 2018-09-06
8-K 2018-08-02
8-K 2018-07-24
8-K 2018-06-15
8-K 2018-06-14
8-K 2018-06-13
8-K 2018-05-03
8-K 2018-03-15
8-K 2018-03-06
8-K 2018-02-28
8-K 2018-01-09

MED 10Q Quarterly Report

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Item 4. Controls and Procedures
Part II Other Information
Item 1. Legal Proceedings
Item 1A. Risk Factors
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Item 6. Exhibits
EX-31.1 med-20200331xex31d1.htm
EX-31.2 med-20200331xex31d2.htm
EX-32.1 med-20200331xex32d1.htm

Medifast Earnings 2020-03-31

Balance SheetIncome StatementCash Flow
0.30.20.20.10.10.02012201420172020
Assets, Equity
0.20.10.10.0-0.0-0.12012201420172020
Rev, G Profit, Net Income
0.10.10.0-0.0-0.1-0.12012201420172020
Ops, Inv, Fin

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Table of Contents

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2020

OR

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to .

Commission File Number: 001-31573

Medifast, Inc.

(Exact name of registrant as specified in its charter)

Delaware

    

13-3714405

(State or other jurisdiction of incorporation or organization)

(I.R.S. Employer Identification No.)

100 International Drive

Baltimore, Maryland 21202

Telephone Number: (410) 581-8042

(Address of Principal Executive Offices, Zip Code and Telephone Number, Including Area Code)

Indicate by checkmark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).

Yes No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer

Accelerated filer

Non-accelerated filer

Smaller reporting company

Emerging growth company

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

Indicate by checkmark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes No

Securities registered pursuant to Section 12(b) of the Act:

Title of each class:

    

Trading Symbol

    

Name of each exchange on which registered:

Common Stock, par value $0.001 per share

Preferred Stock Purchase Rights

MED

New York Stock Exchange

New York Stock Exchange

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

The number of shares of the registrant’s common stock outstanding at April 29, 2020 was 11,780,970.

Table of Contents

Medifast, Inc. and subsidiaries

Index

Part 1 – Financial Information

    

Item 1 – Financial Statements

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

2

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

3

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

4

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

5

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

20

Item 4 – Controls and Procedures

20

Part II – Other Information

Item 1 – Legal Proceedings

21

Item 1A – Risk Factors

21

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

22

Item 6 – Exhibits

22

1

Table of Contents

MEDIFAST, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)

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

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.

2

Table of Contents

MEDIFAST, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED)

(in thousands)

Three months ended March 31,

2020

2019

Net income

$

18,477

$

20,750

Other comprehensive income, net of tax:

Foreign currency translation

(4)

1

Unrealized gains on investment securities

49

126

Other comprehensive income

45

127

Comprehensive income

$

18,522

$

20,877

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

3

Table of Contents

MEDIFAST, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)

(in thousands, except par value)

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.

4

Table of Contents

MEDIFAST, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

(in thousands)

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.

5

Table of Contents

MEDIFAST, INC. AND SUBSIDIARIES

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

(in thousands)

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.

6

Table of Contents

MEDIFAST, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation - The accompanying unaudited condensed consolidated financial statements of Medifast, Inc. and its wholly-owned subsidiaries (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, 2019 has been derived from the audited consolidated financial statements at that date.

The results of operations for the three months ended March 31, 2020 are not necessarily indicative of results that may be expected for the fiscal year ending December 31, 2020. The accompanying unaudited condensed consolidated financial statements should be read in conjunction with the 2019 audited consolidated financial statements and notes thereto, which are included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2019 (“2019 Form 10-K”).

Presentation of Financial Statements - The unaudited condensed consolidated financial statements included herein include the accounts of the Medifast, Inc. and its wholly-owned subsidiaries. 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.

Accounting Pronouncements Adopted in 2020

In August 2018, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2018-15, Intangibles-Goodwill and Other-Internal-Use Software (Subtopic 350-40), which addresses the accounting for implementation costs associated with a hosted service. The standard provides amendments to align the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software (and hosting arrangements that include an internal use software license).

On January 1, 2020, the Company adopted this ASU. The Company capitalized $1.9 million during the quarter ended March 31, 2020 as a result of adoption, principally related to the configuration and development of the Company’s new hosted enterprise resource planning tool (“ERP”).

In June 2016, the FASB issued ASU 2016-13, Financial InstrumentsCredit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, which institutes a new model for recognizing credit losses on financial instruments that are not measured at fair value. On January 1, 2020, the Company adopted this ASU. There was no material impact on the Company's condensed consolidated financial statements.

7

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Recently Issued Accounting Pronouncements –Pending Adoption

In December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 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 interim period and the recognition of deferred tax liabilities for outside basis differences related to 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 step-up in the tax basis of goodwill and 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 Company must apply certain aspects of this standard retrospectively for all periods presented while other aspects are applied on a modified retrospective basis through a cumulative-effect adjustment to retained earnings as of the beginning of the fiscal year of adoption. Management is currently evaluating the effect that the provisions of ASU 2019-12 will have on the Company’s 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 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 condensed consolidated financial statements for the three months ended March 31, 2020. Management is currently evaluating the impact of the CARES Act will have on the Company’s condensed consolidated financial statements for the future periods.

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, 2020

December 31, 2019

Raw materials

$

10,186

$

10,880

Packaging

3,166

4,109

Non-food finished goods

4,639

4,421

Finished goods

32,041

31,314

Reserve for obsolete inventory

(2,149)

(1,953)

Total

$

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.

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

Three months ended March 31,

2020

2019

Numerator:

Net income

$

18,477

$

20,750

Denominator:

Weighted average shares of common stock outstanding

11,772

11,880

Effect of dilutive common stock equivalents

52

360

Weighted average shares of common stock outstanding

11,824

12,240

Earnings per share - basic

$

1.57

$

1.75

Earnings per share - diluted

$

1.56

$

1.70

The calculation of diluted EPS excluded 1,413 and 826 antidilutive options outstanding for the three months ended March 31, 2020 and 2019, respectively. The calculation of diluted EPS also excluded 14,940 and 1,198 antidilutive restricted stock awards for the three months ended March 31, 2020 and 2019, respectively.

4. SHARE-BASED COMPENSATION

Stock 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, 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. 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.

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

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

97

$

52.51

107

$

49.26

Exercised

-

-

(10)

27.86

Outstanding at end of the period

97

$

52.51

97

$

52.51

Exercisable at end of the period

72

$

46.86

53

$

40.97

As of March 31, 2020, the weighted-average remaining contractual life for outstanding stock options was 6.86 years with an aggregate intrinsic value of $1.3 million and the weighted-average remaining contractual life for exercisable stock options was 6.50 years with an aggregate intrinsic value of $1.3 million. The unrecognized compensation expense calculated under the fair value method for stock options expected to vest as of March 31, 2020 was $0.4 million and is expected to be recognized over a weighted average period of 2.56 years. For the three months ended March 31, 2020,

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

Restricted 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,

2020

2019

Shares

Weighted-Average Grant Date Fair Value

Shares

Weighted-Average Grant Date Fair Value

(shares in thousands)

Outstanding at beginning of period

46

$

98.28

57

$

50.55

Granted

29

100.68

27

130.59

Vested

(21)

66.73

(21)

33.92

Forfeited

(3)

105.29

-

-

Outstanding at end of the period

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 was $2.2 million and $2.8 million, respectively.

The total share-based compensation charged against income was $1.0 million during the three months ended March 31, 2020 and 2019, respectively. The total costs of the options and restricted stock awards charged against income was $0.7 million during the three months ended March 31, 2020 and 2019, respectively. Included for the three months ended March 31, 2020 and 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, 2020 was $0.1 million for 25,738 performance-based contingent shares for certain key 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 $0.2 million in expense for 210,000 performance-based contingent shares granted to our Chief Executive Officer (“CEO”), respectively. These 273,300 performance-based shares were fully vested on December 31, 2019.

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

There was $4.7 million of total unrecognized compensation cost related to restricted stock awards as of March 31, 2020, which is expected to be recognized over a weighted-average period of 2.41 years. There was $3.8 million of unrecognized compensation cost related to the 42,375 performance-based shares discussed above as of March 31, 2020, which is expected to be recognized over 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, respectively, or for the three-month periods then ended, respectively.

Our leases relating to office and warehouse space have terms of 36 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 $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,

2020

2019

Cash paid for amounts included in the measurements of lease liabilities

Operating cash flow from operating leases

$

906

$

663

Right-of-use assets obtained in exchange for lease obligations

Operating leases

$

-

$

1,490

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

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

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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6. ACCUMULATED OTHER COMPREHENSIVE INCOME

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

March 31, 2020

December 31, 2019

Foreign currency translation

$

(5)

$

(1)

Unrealized gains on investment securities

75

26

Accumulated other comprehensive income

$

70

$

25

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.

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

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December 31, 2019

Cost

Unrealized Gains

Accrued Interest

Estimated Fair Value

Cash & Cash Equivalents

Investment Securities

Cash

$

36,593

$

-

$

-

$

36,593

$

36,593

$

-

Level 1:

Certificate of deposit

35,000

-

-

35,000

35,000

-

Money market accounts

5,381

-

-

5,381

5,381

-

Government & agency securities

2,832

2

-

2,834

-

2,834

43,213

2

-

43,215

40,381