10-Q 1 med-20220930.htm 10-Q med-20220930
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2022
OR
o 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)
Delaware13-3714405
(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)
Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading SymbolName of each exchange on which registered
Common Stock, par value $0.001 per shareMEDNew York Stock Exchange
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 x No o
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 x No o
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. o
Indicate by checkmark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes o No x
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 October 26, 2022 was 10,926,989.

Medifast, Inc. and Subsidiaries
Index
1

MEDIFAST, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
(U.S. dollars in thousands, except per share amounts & dividend data)
Three months ended September 30,Nine months ended September 30,
2022202120222021
Revenue$390,398 $413,395 $1,261,332 $1,148,253 
Cost of sales107,549 106,338 354,515 298,942 
Gross profit282,849 307,057 906,817 849,311 
Selling, general, and administrative234,693 251,886 754,610 679,907 
Income from operations48,156 55,171 152,207 169,404 
Other income (expense)
Interest expense(261)(94)(519)(138)
Other income (expense)(17)115 (37)112 
(278)21 (556)(26)
Income from operations before income taxes47,878 55,192 151,651 169,378 
Provision for income taxes11,723 13,210 34,601 39,370 
Net income$36,155 $41,982 $117,050 $130,008 
Earnings per share - basic$3.30 $3.59 $10.37 $11.07 
Earnings per share - diluted$3.27 $3.56 $10.30 $10.98 
Weighted average shares outstanding
Basic10,964 11,692 11,290 11,739 
Diluted11,042 11,785 11,369 11,840 
Cash dividends declared per share$1.64 $1.42 $4.92 $4.26 
The accompanying notes are an integral part of these condensed consolidated financial statements.
2

MEDIFAST, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED)
(U.S. dollars in thousands)
Three months ended September 30,Nine months ended September 30,
2022202120222021
Net income$36,155 $41,982 $117,050 $130,008 
Other comprehensive income (loss), net of tax:
Foreign currency translation123 63 $300 $130 
Unrealized losses on investment securities (16)$(21)$(49)
123 47 $279 $81 
Comprehensive income$36,278 $42,029 $117,329 $130,089 
The accompanying notes are an integral part of these condensed consolidated financial statements.
3

MEDIFAST, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
(U.S. dollars in thousands, except par value)
September 30,
2022
December 31,
2021
ASSETS
Current Assets
Cash and cash equivalents$69,710 $104,183 
Inventories145,279 180,043 
Investment securities 5,361 
Income taxes, prepaid150 945 
Prepaid expenses and other current assets14,445 16,334 
Total current assets229,584 306,866 
Property, plant and equipment - net of accumulated depreciation58,107 56,131 
Right-of-use assets19,819 24,457 
Other assets12,691 6,468 
Deferred tax assets6,150 4,404 
TOTAL ASSETS$326,351 $398,326 
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
 Accounts payable and accrued expenses$148,129 $163,309 
       Revolving credit facility
  
 Current lease obligations6,126 6,523 
Total current liabilities154,255 169,832 
 Lease obligations, net of current lease obligations21,574 26,020 
Total liabilities175,829 195,852 
Stockholders' Equity
Common stock, par value $0.001 per share: 20,000 shares authorized;
10,929 and 11,594 issued and 10,928 and 11,593 outstanding
at September 30, 2022 and December 31, 2021, respectively
11 12 
Additional paid-in capital18,617 12,018 
Accumulated other comprehensive income391 111 
Retained earnings 131,503 190,333 
Total stockholders' equity150,522 202,474 
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY$326,351 $398,326 
The accompanying notes are an integral part of these condensed consolidated financial statements.
4

MEDIFAST, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(U.S. dollar in thousands)
Nine months ended September 30,
20222021
Operating Activities
Net income$117,050 $130,008 
Adjustments to reconcile net income to cash provided by operating activities
Depreciation and amortization 8,026 3,767 
Non-cash lease expense4,7403,508 
Share-based compensation8,1036,613 
Amortization of premium on investment securities14 70 
Deferred income taxes(1,746) 
Change in operating assets and liabilities:
Inventories34,764 (76,222)
Income taxes, prepaid795  
Prepaid expenses and other current assets1,889 (5,094)
Other assets(8,545)(3,393)
Accounts payable and accrued expenses (22,259)42,747 
Net cash flow provided by operating activities142,831 102,004 
Investing Activities
Sale and maturities of investment securities5,267 5,145 
Purchase of property and equipment(7,617)(22,585)
Net cash flow used in investing activities(2,350)(17,440)
Financing Activities
Options exercised by executives and directors 811 
Net shares repurchased for taxes(1,504)(1,867)
Cash dividends paid to stockholders(53,698)(46,845)
Stock repurchases
(120,048)(46,000)
Net cash flow used in financing activities(175,250)(93,901)
Foreign currency impact296 130 
Decrease in cash and cash equivalents(34,473)(9,207)
Cash and cash equivalents - beginning of the period104,183 163,723 
Cash and cash equivalents - end of period$69,710 $154,516 
Supplemental disclosure of cash flow information:
Income taxes paid$33,906 $41,302 
Dividends declared included in accounts payable$19,395 $17,351 
The accompanying notes are an integral part of these condensed consolidated financial statements.
5

MEDIFAST, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY (UNAUDITED)
(U.S. dollars in thousands)
Nine months ended September 30, 2022
Number of
Shares Issued
Common StockAdditional Paid-In
Capital
Accumulated Other
Comprehensive Income
Retained
Earnings
Treasury StockTotal
Balance, December 31, 202111,594 $12 $12,018 $111 $190,333 $ $202,474 
Net income— — — — 41,781 — 41,781 
Share-based compensation18 — 2,275 — — — 2,275 
Net shares repurchased for taxes(8)— (1,459)— — — (1,459)
Treasury stock from stock repurchases— — — — — (10,000)(10,000)
Treasury stock retired from stock repurchases(51)— — — (10,000)10,000  
Other comprehensive income— — — 16 — — 16 
Cash dividends declared to stockholders— — — — (19,063)— (19,063)
Balance, March 31, 202211,553 $12 $12,834 $127 $203,051 $ $216,024 
Net income— — — — 39,113 — 39,113 
Share-based compensation1 — 2,865 — — — 2,865 
Net shares repurchased for taxes— — (20)— — — (20)
Treasury stock from stock repurchases— — — — — (90,038)(90,038)
Treasury stock retired from stock repurchases(535)(1)— — (90,038)90,038 (1)
Stock repurchases, not yet settled— — (15,679)— (4,331)— (20,010)
Other comprehensive income— — — 141 — — 141 
Cash dividends declared to stockholders— — — — (18,598)— (18,598)
Balance, June 30, 202211,019 $11 $ $268 $129,197 $ $129,476 
Net income— — — — 36,155 — 36,155 
Share-based compensation1 — 2,963 — — — 2,963 
Net shares repurchased for taxes— — (25)— — — (25)
Treasury stock from stock repurchases— — — — — (20,010)(20,010)
Treasury stock retired from stock repurchases(91)— — — (20,010)20,010  
Settlement of accelerated share repurchase agreement— — 15,679 — 4,331 — 20,010 
Other comprehensive income— — — 123 — — 123 
Cash dividends declared to stockholders— — — — (18,170)— (18,170)
Balance, September 30, 202210,929 $11 $18,617 $391 $131,503 $ $150,522 
The accompanying notes are an integral part of these condensed consolidated financial statements.
6

Nine months ended September 30, 2021
Number of
Shares Issued
Common StockAdditional Paid-In
Capital
Accumulated Other
Comprehensive Income
Retained
Earnings
Treasury StockTotal
Balance, December 31, 202011,822 $12 $7,842 $41 $154,351 $(5,000)$157,246 
Net income— — — — 41,063 — 41,063 
Share-based compensation13 — 2,198 — — — 2,198 
Options exercised by executives and directors11 — 481 — — — 481 
Net shares repurchased for taxes(7)— (1,807)— —  (1,807)
Treasury stock from stock repurchases— — — — — (7,500)(7,500)
Other comprehensive income— — — 62 — — 62 
Cash dividends declared to stockholders— — — — (16,852)— (16,852)
Balance, March 31, 202111,839 $12 $8,714 $103 $178,562 $(12,500)$174,891 
Net income— — — — 46,963 — 46,963 
Share-based compensation10 — 1,697 — 142 — 1,839 
Options exercised by executives and directors3 — 221 — — — 221 
Net shares repurchased for taxes— — (26)— — — (26)
Other comprehensive loss— — — (28)— — (28)
Treasury stock from stock repurchases— — — — — (12,230)(12,230)
Treasury stock retired from stock repurchases(114)— — — (23,383)23,383  
Cash dividends declared to stockholders— — — — (16,941)— (16,941)
Balance, June 30, 202111,738 $12 $10,606 $75 $185,343 $(1,347)$194,689 
Net income— — — — 41,982 — 41,982 
Share-based compensation1 — 2,269 — — — 2,269 
Options exercised by executives and directors3 — 109 — — — 109 
Net shares repurchased for employee taxes(1)— (34)— — — (34)
Other comprehensive Income— — — 47 — — 47 
Treasury stock from stock repurchases— — — — — (26,270)(26,270)
Treasury stock retired from stock repurchases(123)— — — (27,617)27,617 — 
Cash dividends declared to stockholders— — — — (16,553)— (16,553)
Balance, September 30, 202111,618 $12 $12,950 $122 $183,155 $ $196,239 
The accompanying notes are an integral part of these condensed consolidated financial statements.
7

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 (“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, 2021 has been derived from the 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, 2021 (“2021 Form 10-K”).
The results of operations for the three and nine months ended September 30, 2022 are not necessarily indicative of results that may be expected for the fiscal year ending December 31, 2022. 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 2021 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.
Accounting Pronouncements Adopted in 2022
In March 2020, the FASB issued Accounting Standards Update (“ASU”) 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting, which provides optional guidance for a limited time to ease the potential burden in accounting for reference rate reform. The new guidance provides optional expedients and exceptions for applying accounting principles under GAAP to contracts, hedging relationships and other transactions affected by reference rate reform if certain criteria are met and to other derivative instruments if there is a change to the interest rates used for discounting, margining or contract price alignment. These amendments are effective immediately and may be applied prospectively to contract modifications made and hedging relationships entered into or evaluated on or before December 31, 2022. We adopted Topic 848 beginning in the first quarter of fiscal 2022 without any material impact on the Company's financial position and results of operations.
2. 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.
The Company donated inventory with an aggregate cost of $1.1 million and $10.5 million to Ukrainian refugees and those in need in Ukraine, increasing selling, general and administrative (“SG&A”) expenses during the three and nine months ended
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September 30, 2022. The donations were made to two 501(c)(3) organizations that are coordinating the distribution throughout refugee camps in Europe and in Ukraine.
Inventories consisted of the following (in thousands):
September 30, 2022December 31, 2021
Raw materials$11,989$15,196
Packaging3,0783,641
Non-food finished goods10,45515,991
Finished goods122,227152,687
Reserve for obsolete inventory(2,470)(7,472)
Total$145,279$180,043
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.
The following table sets forth the computation of basic and diluted EPS (in thousands, except per share data):
Three months ended September 30,Nine months ended September 30,
2022202120222021
Numerator:
Net income$36,155 $41,982 $117,050 $130,008 
Denominator:
Weighted average shares of common stock outstanding10,964 11,692 11,290 11,739 
Effect of dilutive common stock equivalents78 93 79 101 
Weighted average shares of common stock outstanding11,042 11,785 11,369 11,840 
Earnings per share - basic$3.30 $3.59 $10.37 $11.07 
Earnings per share - diluted$3.27 $3.56 $10.30 $10.98 
The calculation of diluted EPS excluded 10 thousand and 0 thousand antidilutive restricted stock awards for the three months ended September 30, 2022 and 2021, respectively, and 3 thousand and 0 thousand antidilutive restricted stock awards for the nine months ended September 30, 2022 and 2021, respectively. EPS is computed independently for each of the periods presented above, and accordingly, the sum of the quarterly earnings per common share may not equal the year-to-date total computed.
4. SHARE-BASED COMPENSATION
Stock Options
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 September 30, 2022 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 $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
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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 nine months ended September 30, 2022 and 2021, the Company did not grant stock options.
The following table is a summary of our stock option activity (in thousands, except per share data):
Nine months ended September 30,
20222021
AwardsWeighted-Average Exercise PriceAwardsWeighted-Average Exercise Price
Outstanding at beginning of period33 $54.98 61 $48.19 
Exercised  (16)49.69 
Outstanding at end of the period33 $54.98 45 $47.66 
Exercisable at end of the period28 $52.76 35 $42.00 
As of September 30, 2022, the weighted-average remaining contractual life for outstanding stock options was 55 months with an aggregate intrinsic value of $1.8 million and the weighted-average remaining contractual life for exercisable stock options was 53 months with an aggregate intrinsic value of $1.5 million. The unrecognized compensation expense calculated under the fair value method for stock options expected to vest as of September 30, 2022 was less than $0.1 million and is expected to be recognized over a weighted-average period of 4 months. For the nine months ended September 30, 2022, there was no exercise activity of stock options. For the nine months ended September 30, 2021, the Company received $0.8 million in cash proceeds from the exercise of stock options. The total intrinsic value for stock options exercised during the nine months ended September 30, 2021 was $3.3 million.
Restricted Stock
The Company has issued restricted stock to employees and non-employee 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 (in thousands, except per share data):
Nine months ended September 30,
20222021
SharesWeighted-Average Grant Date Fair ValueSharesWeighted-Average Grant Date Fair Value
Outstanding at beginning of period44 $183.51 50 $116.06 
Granted38 176.60 21 266.99 
Vested(19)156.16 (26)116.62 
Forfeited(1)186.53 (3)166.02 
Outstanding at end of the period62 $187.83 42 $183.04 
The Company withheld approximately 8 thousand and 7 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 nine months ended September 30, 2022 and 2021, respectively. The total fair value of restricted stock awards vested during the nine months ended September 30, 2022 and 2021 was $3 million and $7 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
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(“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.
Share-based compensation expense is recorded in selling, general, and administrative expense in the accompanying Condensed Consolidated Statements of Income. The total expenses during the three months ended September 30, 2022 and 2021 are as follows (in thousands):
Three months ended September 30,
20222021
SharesShare-Based Compensation ExpenseSharesShare-Based Compensation Expense
Options and restricted stock90 $1,392 89 $1,116 
Market and performance-based share awards granted in 202225 438   
Performance-based share awards granted in 202115 654 14 309 
Performance-based share awards granted in 202026 479 26 479 
Performance-based share awards granted in 2019  16 365 
Total share-based compensation156 $2,963 145 $2,269 

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The total expenses during the nine months ended September 30, 2022 and 2021 are as follows (in thousands):
Nine months ended September 30,
20222021
SharesShare-Based Compensation ExpenseSharesShare-Based Compensation Expense
Options and restricted stock90 $3,789 89 $3,175 
Market and performance-based share awards granted in 202225 950   
Performance-based share awards granted in 202115 1,941 14 666 
Performance-based share awards granted in 202026 1,423 26 1,329 
Performance-based share awards granted in 2019  16 1,443 
Total share-based compensation156 $8,103 145 $6,613 
The total income tax benefit recognized in the accompanying Condensed Consolidated Statements of Income for restricted stock awards was $0.4 million and $0.1 million for the three months ended September 30, 2022 and 2021, respectively, and $1.2 million and $2.3 million for the nine months ended September 30, 2022 and 2021, respectively.
There was $7.6 million of total unrecognized compensation cost related to restricted stock awards as of September 30, 2022, which is expected to be recognized over a weighted-average period of 23 months. There was $7.9 million of unrecognized compensation costs related to the 66 thousand market and performance-based shares presented in the table above as of September 30, 2022, which is expected to be recognized over a weighted-average period of 23 months.
5. 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 September 30, 2022 and 2021, respectively, or for the nine-month periods then ended, respectively.
Our leases relating to office and warehouse space have lease terms of 18 months to 126 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 $1.7 million and $1.4 million for the three months ended September 30, 2022 and 2021, respectively, and $5.2 million and $3.8 million for the nine months ended September 30, 2022 and 2021, respectively.
Supplemental cash flow information related to the Company’s operating leases was as follows (in thousands):
Nine months ended September 30,
20222021
Cash paid for amounts included in the measurements of lease liabilities
Operating cash flow used in operating leases$5,413 $3,175 
Right-of-use assets obtained in exchange for lease obligations
Operating leases$103 $9,745 
As of September 30, 2022, the weighted average remaining lease term was 60 months and the weighted average discount rate was 2.1%.
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The following table presents the maturity of the Company’s operating lease liabilities as of September 30, 2022 (in thousands):
2022 (excluding the nine months ended September 30, 2022)
$1,787 
20236,241 
20245,693 
20255,825 
20264,160 
Thereafter5,412 
Total lease payments$29,118 
Less: imputed interest(1,418)
Total $27,700 
6. ACCUMULATED OTHER COMPREHENSIVE INCOME
The following table sets forth the components of accumulated other comprehensive income, net of tax where applicable (in thousands):
September 30,
2022
December 31,
2021
Foreign currency translation$391 $90 
Unrealized gains on investment securities 21 
Accumulated other comprehensive income$391 $111 
7. FINANCIAL INSTRUMENTS
Certain financial assets and liabilities are accounted for at fair value, which is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The following fair value hierarchy prioritizes the inputs used to measure fair value:
Level 1 – Quoted prices are available in active markets for identical assets or liabilities as of the reporting date. Active markets are those in which transactions for the asset or liability occur in sufficient frequency and volume to provide pricing information on an ongoing basis.
Level 2 – Pricing inputs are other than quoted prices in active markets included in Level 1, which are either directly or indirectly observable as of the reporting date. Level 2 includes those financial instruments that are valued using models or other valuation methodologies.
Level 3 – Pricing inputs include significant inputs that are generally less observable from objective sources. These inputs may be used with internally developed methodologies that result in management’s best estimate of fair value from the perspective of a market participant.
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The following tables present the Company’s cash and financial assets that are measured at fair value on a recurring basis for each of the hierarchy levels (in thousands):
September 30, 2022
CostUnrealized GainsAccrued InterestEstimated Fair
Value
Cash & Cash
Equivalents
Investment
Securities
Cash$69,710 $— $— $69,710 $69,710 $— 
Level 1:
Money market accounts — —   — 
Total$69,710 $ $ $69,710 $69,710 $ 
December 31, 2021
CostUnrealized GainsAccrued InterestEstimated Fair
Value
Cash & Cash
Equivalents
Investment
Securities
Cash$94,824 $— $— $94,824 $94,824 $— 
Level 1:
Money market accounts9,359 — — 9,359 9,359 — 
Government & agency securities1,401 12 — 1,413 — 1,413 
10,760 12 — 10,772 9,359 1,413 
Level 2:
Municipal bonds3,880 9 59 3,948 — 3,948 
Total$109,464 $21 $59 $109,544 $104,183 $5,361 
The Company had no realized gain or loss for the three months ended September 30, 2022. The company had a realized loss of $0.2 million for the nine months ended September 30, 2022. There was no realized gain or losses for the three and nine months ended September 30, 2021.
8. 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.
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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 September 30, 2022, 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 September 30, 2022.

9. ACCELERATED SHARE REPURCHASE (“ASR”) PROGRAM
In the second quarter of fiscal 2022, the Company entered into an ASR agreement with JPMorgan Chase, National Association ("JPMorgan Chase") to purchase shares of its common stock from JPMorgan Chase for an aggregate purchase price of $100.0 million. Pursuant to the ASR program, the Company received an initial delivery of approximately 480 thousand shares of common stock based on the closing price of the common stock on May 31, 2022. Approximately 91 thousand additional shares of the Company's common stock were delivered upon termination of the agreement on August 8, 2022. The final number of shares delivered to the Company under the ASR agreement was based on the average of the daily volume-weighted average trading prices of the Company’s common stock during the term of the ASR program, less a discount.

Item 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Note Regarding Forward-Looking Statements
Certain information in this report contains “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (the “Act”). These forward-looking statements generally can be identified by use of phrases or terminology such as “intend,” “anticipate,” “expect” or other similar words or the negative of such terminology. Similarly, descriptions of Medifast's objectives, strategies, plans, goals or targets contained herein are also considered forward-looking statements. These statements are based on the current expectations of our management and are subject to certain events, risks, uncertainties and other factors. These risks and uncertainties include, but are not limited to, those described in our 2021 Form 10-K and those described from time to time in our future reports filed with the SEC. Although Medifast believes that the expectations, statements and assumptions reflected in these forward-looking statements are reasonable, it cautions readers to always consider all of the risk factors and any other cautionary statements carefully in evaluating each forward-looking statement in this report. All of the forward-looking statements contained herein speak only as of the date of this report.
The following discussion should be read in conjunction with the unaudited condensed consolidated financial statements and related notes appearing elsewhere herein.
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Overview
Medifast is the global company behind one of the fastest-growing health and wellness communities, OPTAVIA®, which offers Lifelong Transformation, One Healthy Habit at a Time®. Reflecting the success of our holistic approach to health and wellness, we have consistently grown annual revenue over the past five years. Of equal importance, we expect our differentiated model to continue to deliver growth in the foreseeable future.
Our OPTAVIA brand offers a highly competitive and effective lifestyle solution centered on developing new healthy habits through smaller, foundational changes called micro-habits. The program is built around four key components:
Independent OPTAVIA Coaches: Provide individualized support and guidance to customers on the path to optimal health and wellbeing.
OPTAVIA Community: A Community of like-hearted people providing each other with real-time connection and support.
The Habits of Hea