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Medifast Diversified Business Model Drives Strong Revenue and Earnings Growth for the Third Quarter of 2008

Take Shape For Life Sales Increase by 99% Year-over-Year; Represents 50% of


Diluted EPS Increases by 57% for the Quarter

3rd Consecutive Quarter of 25% Revenue Growth

OWINGS MILLS, Md., Nov. 6 /PRNewswire-FirstCall/ -- Medifast, Inc. (NYSE: MED) announced today third quarter financial results for the period ended September 30, 2008.

Financial highlights included:

-- Third quarter revenues increased 25% compared to 2007;

-- Diluted EPS for the quarter increased 57% to $0.11 versus $0.07 year-


-- Direct sales segment, Take Shape for Life, increased sales 99% year-


-- Medifast Weight Control Centers quarterly revenues increased 77%

-- Current ratio of 2.5 to 1

-- 36th consecutive quarter of profitability

For the third quarter Medifast reported revenue of $27.3 million, a 25% increase from $21.8 million in the third quarter of 2007. The Company reported net income of $1.5 million, or $0.11 per basic share and $0.11 per fully diluted share, compared with $1 million, or $0.07 per basic and diluted share in the third quarter of 2007.

For the nine months ended September 30, 2008, Medifast reported revenue of $80 million, an increase of 25% from $64 million for the nine months ended September 30, 2007. The Company reported net income of $4.5 million, or $0.34 per basic share and $0.32 per fully diluted share, versus $3.2 million, or $0.25 per basis share and $0.24 per fully diluted share, in 2007.

"We are extremely pleased with the financial results of the third quarter, particularly the positive trending we are continuing to see into the months of September and into October as this is a sign that we can expect to experience continued growth in the near and long-term future," commented Michael S. McDevitt, Chief Executive Officer of Medifast, Inc. "The results are a direct reflection of the strategic business plan that the board and management team of Medifast laid out to offer the clinically proven Medifast program via multiple distribution channels. This strategic plan has given us the ability to increase sales and market share when many in our industry are having difficulties."

Mr. McDevitt continued, "Revenues in our direct sales segment, Take Shape for Life, grew 99% year-over-year; and represented 50% of overall third quarter revenues. The growth in this segment correlates directly to the increase in health coaches, which has increased significantly every quarter this year. The number of active health coaches in the third quarter of 2008 grew 94% to approximately 3,200 compared to 1,650 for the same time period in 2007, and up from 2,800 at the end of the second quarter of 2008. Trending in this segment continued to show accelerated growth in the month of September and into October. The initiatives and messaging implemented in the past year positioning the Medifast program as a clinically proven, cost effective way to lose weight in a short period of time continues to gain traction as evidenced by the continued growth. Additionally, as individuals look for means to supplement their income during this difficult economic environment, Medifast represents a unique opportunity to deliver a value proposition that focuses on improving the quality of life of their family, friends and associates."

"We continue to experienced strong revenue growth in our Medifast Weight Control Centers segment," continued Mr. McDevitt. "Revenue during the quarter increased 77% versus last year's comparable quarter. The sales growth is due to the expansion of the clinic model as well as increased brand awareness in the markets in which we operate due to increased targeted advertising spend. At the end of the quarter, we had twenty operational Medifast Weight Control Centers versus ten at the end of the third quarter of 2007 with our first franchise center opening in the Baltimore market in the past few weeks."

"During the quarter," Mr. McDevitt concluded, "Medifast Direct Response experienced a 15% decrease in revenues on a planned 15% reduction in advertising dollars spent. We continue to adjust to the purchasing trends of the consumer to allocate our ad spend in areas where we believe we can achieve the greatest return on our investment."

"As we have commented, we believe that the strategic business decision to provide our customers the clinically proven Medifast weight loss program through our four unique support channels is creating the flexibility in our business to increase sales and capture market share in this difficult economic environment."

Gross margins increased to a record 76.1% from 74.7% for the third quarter of 2008 compared with a year ago. The gross margins improved due to efficiencies gained from new machinery purchases, changes in shipping rules, and a price increase during the month of July.

The Company's balance sheet remains strong with stockholders' equity of $37 million and working capital of $12.1 million as of September 30, 2008. The current ratio was 2.5 to 1.

2008 Full-Year Guidance

Management expects to be able to meet or exceed previously issued guidance for revenue growth for full-year 2008 in the range of 8-10%; and diluted earnings per share growth in the range of 30-35% for the year ended December 31, 2008.

Third Quarter 2008 Conference Call

The Company will hold a conference call and web cast to discuss the results on Thursday, November 6, at 11:00 a.m. ET. Interested parties can access the call by dialing (866) 524-3160 or (412) 317-6760 or can listen via a live Internet web cast, which can be found at in the section marked "Investor Relations". A replay of the call is available via web cast at until February 7, 2009 or by playback at (877) 344-7529 or (412) 317-0088 through December 8, 2008. Please use account #425067 for the replay.

About Medifast:

Medifast (NYSE: MED) is the leading easy-to-use, clinically proven portion-controlled weight loss program. Medifast has been recommended by 15,000 physicians and used by over one million customers. Medifast is committed to enriching lives by providing innovative choices for lasting health. Medifast programs have been proven effective through studies by major university teaching hospitals. The company sells its products and programs via four unique distribution channels: 1) the web and national call centers, 2) national network of physicians, 3) medically supervised Medifast Weight Control Centers, and 4) the Take Shape For Life direct-selling division, a network of health coaches. Medifast was founded in 1980 and is located in Owings Mills, Maryland. For more information, log onto

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 Associates 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's 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.



September 30, 2008 December 31, 2007

(Unaudited) (Audited)


Current assets:

Cash and cash equivalents $2,091,000 $2,195,000

Accounts receivable-net of allowance

for doubtful accounts of $100,000 482,000 493,000

Inventory 11,755,000 9,181,000

Investment securities 1,139,000 1,439,000

Deferred compensation 687,000 814,000

Prepaid expenses and other current

assets 2,884,000 2,727,000

Prepaid income tax 757,000 -

Note receivable - current 180,000 180,000

Deferred tax asset 100,000 100,000

Total Current Assets 20,075,000 17,129,000

Property, plant and equipment - net 20,969,000 17,031,000

Trademarks and intangibles - net 5,972,000 7,356,000

Deferred tax asset, net of current

portion 897,000 897,000

Note receivable, net of current

portion 1,113,000 1,212,000

Other assets 350,000 99,000

TOTAL ASSETS $49,376,000 $43,724,000


Current liabilities

Accounts payable and accrued

expenses $4,592,000 $4,279,000

Income taxes payable - 592,000

Line of credit 3,131,000 1,599,000

Current maturities

of long-term debt 257,000 264,000

Total Current liabilities 7,980,000 6,734,000

Long-term debt, net of current

liabilities 4,377,000 4,570,000

Total liabilities 12,357,000 11,304,000

Stockholders' equity:

Common stock; par value

$.001 per share; 20,000,000

authorized; 14,332,210 and

13,709,098 shares issued and

outstanding, respectively 14,000 14,000

Additional paid-in capital 29,870,000 26,953,000

Accumulated other comprehensive

income (209,000) 321,000

Retained earnings 14,304,000 9,818,000

43,979,000 37,106,000

Less: cost of 286,478 and 270,534

shares of common stock in treasury,

respectively (2,013,000) (1,971,000)

Less: unearned compensation (4,947,000) (2,715,000)

Total Stockholders' Equity 37,019,000 32,420,000


STOCKHOLDERS' EQUITY $49,376,000 $43,724,000




Three Months Ended Nine Months Ended

September 30, September 30,

2008 2007 2008 2007

Revenue $27,281,000 $21,846,000 $79,987,000 $63,975,000

Cost of sales 6,522,000 5,523,000 19,299,000 15,944,000

Gross Profit 20,759,000 16,323,000 60,688,000 48,031,000

Selling, general, and

administration 18,363,000 14,766,000 53,820,000 43,116,000

Income from operations 2,396,000 1,557,000 6,868,000 4,915,000

Other income/(expense)

Interest expense,

net (50,000) (159,000) (159,000) (284,000)


income/(expense) 5,000 2,000 (1,000) 90,000

(45,000) (157,000) (160,000) (194,000)

Income before

provision for income

taxes 2,351,000 1,400,000 6,708,000 4,721,000

Provision for income

tax (expense) (802,000) (446,000) (2,222,000) (1,486,000)

Net income $1,549,000 $954,000 $4,486,000 $3,235,000

Basic earnings per

share $0.12 $0.07 $0.34 $0.25

Diluted earnings per

share $0.11 $0.07 $0.32 $0.24

Weighted average

shares outstanding -

Basic 13,179,527 12,982,730 13,139,520 12,939,562

Diluted 14,178,031 13,683,809 14,138,024 13,640,641

Contact: Brendan Connors Lytham Partners, LLC

Vice President - Finance Joe Diaz Robert Blum

Joe Dorame


SOURCE Medifast, Inc.
Copyright©2008 PR Newswire.
All rights reserved

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