OWINGS MILLS, Md. - March 12, 2015 // PRNewswire // - Medifast, Inc. (NYSE: MED), a leading United States manufacturer and provider of clinically proven weight-loss and healthy living products and programs, today reported financial results for the fourth quarter and fiscal year ended December 31, 2014.
"In 2014 we took decisive action and set future strategic direction to better position our business for long-term profitability and growth," said Michael C. MacDonald, Medifast Chairman and Chief Executive Officer. "We are confident that the strategic actions we've undertaken will help to drive future growth in revenue and continue to deliver increased operational efficiencies as we enhance long-term shareholder value."
Income from continuing operations was $2.6 million, or $0.21 per diluted share, compared to $7.2 million, or $0.53 per diluted share, for the fourth quarter of 2013. Adjusted income from continuing operations for the fourth quarter 2014 was $4.6 million, or $0.38 per diluted share as compared to $7.2 million, or $0.53 per diluted share, for the fourth quarter of 2013. Adjusted income from continuing operations excludes expenses associated with a franchise loan default guaranteed by Medifast and extraordinary legal and advisory expenses resulting from recent 13D filings. Adjusted income from continuing operations is a non-GAAP financial measure. Please refer to the financial tables in this press release for a reconciliation of all non-GAAP financial measures.
For the fourth quarter, Medifast net revenue decreased 11% to $62.3 million from net revenue of $70.3 million in the fourth quarter of 2013. As a result of the closure and sale of the Medifast Corporate Weight Control Centers, the Company re-evaluated its segment reporting and will no longer provide segment disclosure other than sales per channel which reflects how the business is run.
Revenue in the direct sales channel, Take Shape for Life, decreased 12% to $45.7 million in the fourth quarter of 2014 compared to $51.7 million in the same period last year. The Company ended the fourth quarter with approximately 9,300 active Health Coaches and the average revenue per Health Coach per month for the quarter was $1,401 compared to $1,477 in the fourth quarter of 2013. The calculation of active Health Coaches was impacted by one less commission cycle in the fourth quarter of 2014 compared to the fourth quarter of the prior 2 years, accounting for a difference of approximately 600 active Health Coaches.
The Company's Medifast Direct channel revenue decreased 19% to $11.4 million, compared to $14.0 million in the fourth quarter of 2013. This marks the second consecutive quarterly improvement in the rate of decline.
Revenue in the Franchise Weight Control Centers channel increased 6% to $3.8 million from $3.6 million in the fourth quarter of last year. This increase was driven by the conversion of corporate owned centers to Franchise Centers partially offset by a 10% decline in revenues from all other Franchise centers. There was an average of 65 franchise centers per month in operation in the fourth quarter 2014 compared to 38 centers last year and there were 73 franchise centers in operation as of December 31, 2014 compared to 41 centers last year.
In the fourth quarter, the Wholesale channel revenue increased 40% to $1.4 million, compared to $1.0 million in the same period last year. The increase in this channel was driven by incremental resources focused on the growth of the channel.
Gross profit for the fourth quarter of 2014 was $45.0 million, compared to $51.9 million in the fourth quarter of 2013. The Company's gross profit as a percentage of net revenue decreased 170 basis points to 72.2% versus 73.9% in the fourth quarter of 2013. The decrease in gross profit margin was the result of sales mix and increased product costs driven primarily by a reduction in manufacturing volumes.
Sales and marketing expense decreased $0.3 million in the fourth quarter of 2014 compared to the fourth quarter of 2013, primarily driven by a favorable variance in Take Shape For Life event expense, partially offset by a $0.2 million increase in advertising expense. The Company continues to focus on efficiency improvements and balancing sales and marketing expense in an effort to drive profitability.
Selling, general and administrative expenses ("SG&A") decreased $1.1 million to $40.8 million compared to $41.9 million in the fourth quarter of 2014. As a percentage of net revenue, SG&A expense was 66% versus 60% in the fourth quarter of 2013. Adjusted SG&A expense, excluding the aforementioned items in the fourth quarter of 2014, was 61%.
The fourth quarter 2014 effective tax rate was 37.9% compared to 26.3% in the fourth quarter of 2013. The increase in the effective tax rate in 2014 over 2013 was a result of tax benefits realized in 2013 related to prior years and the fourth quarter 2014 impact of an inability to utilize certain tax deductions.
For the fiscal year ended December 31, 2014, Medifast net revenue was $285.3 million from net revenue of $324.1 million in 2013. The Take Shape For Life sales channel accounted for approximately 73%, the Medifast Direct channel accounted for 20%, the Medifast Franchise Weight Control Centers channel accounted for 5%, and the Medifast Wholesale Physicians channel accounted for 2% of total revenue.
Income from continuing operations for 2014 decreased $6.1 million to $21.0 million, or $1.65 per diluted share based on approximately 12.8 million shares, compared to $27.1 million, or $1.96 per diluted share for the comparable period last year based on approximately 13.8 million shares outstanding. Adjusted income from continuing operations for 2014 was $24.1 million, or $1.89 per diluted share, as compared to $27.1 million, or $1.96 per diluted share in 2013.
In the fourth quarter of fiscal 2014 the Company announced the plan by a subsidiary to close 34 corporate-owned Medifast Weight Control Centers by December 31, 2014. The Company also announced that in addition to the closures, its subsidiary entered into agreements to sell the assets of 17 corporate-owned Medifast Weight Control Centers to existing business partners, which would then be transitioned to the franchise model. The Company previously transitioned 24 corporate owned centers to the franchise model earlier in the year. For fiscal 2014, corporate-owned Medifast Weight Control Centers had revenues of $22.5 million with a loss from discontinued operations, net of tax, of $7.8 million or a $0.62 loss per diluted share.
The Company's balance sheet remains strong with stockholders' equity of $80.5 million and working capital of approximately $55.0 million as of December 31, 2014. Cash, cash equivalents, and investment securities decreased $15.2 million to $52.6 million compared to $67.8 million at December 31, 2013. The Company remains free of interest bearing debt.
The Company has authorization to repurchase a total of 1.2 million shares.
The Company expects first quarter 2015 net revenue from continuing operations to be in the range of approximately $70.0 to $73.0 million and earnings per diluted share from continuing operations in the range of $0.33 to $0.35 per diluted share.
For fiscal year 2015, the Company expects revenue from continuing operations to be in the range of $285 to $300 million and earnings per diluted share from continuing operations in the range of $1.85 to $1.95 per diluted share. The fiscal year 2015 guidance assumes a 33% to 34% effective tax rate.
Both quarterly and fiscal year guidance exclude potential future expenses resulting from 13D filings.
The conference call is scheduled to begin at 4:30 p.m. ET on March 12, 2015. The call will be broadcast live over the Internet hosted at the Investor Relations section of Medifast's website at www.MedifastNow.com, and will be archived online through March 26, 2015. In addition, listeners may dial (877) 870-4263.
A telephonic playback will be available from 7:30 p.m. ET, March 12, 2015, through March 26, 2015. Participants can dial (877) 344-7529 to hear the playback and enter passcode 10061315.
Medifast (NYSE: MED) is the leading easy-to-use, clinically proven weight-loss program. The company sells its products and programs via four unique distribution channels: 1) the Web and national call centers, 2) the Take Shape For Life personal coaching division, 3) Medifast Weight Control Centers, and 4) a national network of physicians. Medifast was founded in 1980 and is located in Owings Mills, Maryland. For more information, log onto www.MedifastNow.com.
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Please Note: This release contains "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended, Section 21E of the Securities Exchange Act of 1934, as amended, and the Private Securities Litigation Reform Act of 1995. These forward-looking statements generally can be identified by use of phrases or terminology such as "intend" 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. Medifast believes this release should be read in conjunction with all of its filings with the United States Securities and Exchange Commission and cautions its readers that these forward-looking statements are subject to certain events, risks, uncertainties, and other factors. Some of these factors include, among others, Medifast's inability to attract and retain independent Health Coaches and Members, stability in the pricing of print, TV and Direct Mail marketing initiatives affecting the cost to acquire customers, increases in competition, litigation, regulatory changes, and its planned growth into new domestic and international markets and new channels of distribution. 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 release, as well as those set forth in its latest Annual Report on Form 10-K and Quarterly Report on Form 10-Q, and other filings filed with the United States Securities and Exchange Commission, including its current reports on Form 8-K. All of the forward-looking statements contained herein speak only as of the date of this release.
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SOURCE Medifast, Inc.
Medifast (NYSE: MED) is the leading easy-to-use, clinically proven provider of weight-loss and healthy living products and programs.